Apollo Tyres Ltd. - Project Report on Working Capital Management

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EXECUTIVE SUMMARY

Working Capital Management is significant in financial management due to the fact

that it plays a vital role in keeping the wheel of the business running. Every business

requires capital, without which it cannot be promoted. It holds exceptional

importance in the case of a manufacturing company. It also covers various concepts

like inventory management, cash management, credit policy etc. This study is

undertaken to find out the efficiency and effectiveness of the working capital

management in the company and to provide useful feedbacks.

Apollo Tyres Ltd is one of the largest tyre manufacturing companies across the

world. The company started its production of tyres way back in the year 1977. It

holds 2nd position in India and 14th position in the world. The company currently has

9 plants in India, South Africa and Zimbabwe. Apollo Tyres exports its products to

Africa, the Middle East, South America, Asia-Pacific and Europe.

This project titled ‘A STUDY ON WORKING CAPITAL MANAGEMENT AT APOLLO

TYRES LTD’ is a deliberate and systematic endeavour to study the working capital

management system in the Indian tyre giant.

Under this study analysis has been done for the last five years from 2003-2004 to

2007-2008. Various secondary sources like annual report of the company, journals,

theoretical texts, publications in the web, financial inputs from the management staff

etc. were utilised to undertake the study. The study is mostly made from the financial

analysis tools like ratio analysis, cash conversion cycle, schedule of changes in

working capital position etc. The limitation of these tools may reflect in the results of

this study also.

The study tries to compare the working capital management in the company and

other competitors in Indian market to know the efficiency and shortcomings of the

system. Analysis has been done by comparing the industrial ratios with the ratios

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recorded by the company. This project also tries to study about the components in

the current asset to know the level of consistency over the years.

From the study it is found that the overall working capital management system is

very efficient paring few drawbacks. The company showed high consistency in most

of the areas of working capital and also met the industrial average and even

surpassed them in some cases. It is found that the company’s performance in some

areas is commendable and a few areas require more attention.

It is suggested that the company should reinforce some aspects like cash

management to consolidate its liquidity position. Minor adjustments in the inventory

management system are needed for the more efficient utilisation of the inventory.

The company’s Debtors management is found to be highly efficient. This can be

understood by seeing the average collection period which is twice faster than the

industrial average.

The company should rectify the shortcomings in its working capital management

system with utmost care to achieve global standards and thereby becoming

Benchmark Company in this particular sector.

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COMPANY PROFILE

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INDUSTRY PROFILE

The origin of tyre industry in India dated back to 1926 when Dunlop Rubber Ltd set

up the first tyre factory in West Bengal. MRF followed the suit in 1946. Since then the

Indian tyre industry has grown rapidly. Transportation industry and tyre industry go

hand in hand as the two are inter-dependent. Transportation industry has

experienced 10% growth rate year after year with an absolute level of 870 billion

tonne freight with an extensive road accounts for over 85% of all freight movement in

India.

Tyre industry consumes over 60% of the total rubber production with respect to

Indian economy. But in actuality only just around 52% of the tyre is natural rubber.

Remaining 48% consist of synthetic rubber, carbon, chemicals, etc.

The Indian Tyre Industry produced 736 lakh units of tyres (11 lakh tonnes) garnering

Rs. 19,000 crores in FY 07. MRF Ltd. was the market leader (22% market share)

followed closely by Apollo Tyres Ltd. (21%). The other major players were JK Tyre &

Industries Ltd (18%) and Ceat Ltd. (13%). The industry tonnage production

registered a 5 year CAGR of 9.69% between FY 02-07

.

The tyre industry in India is classified under 4 categories based on the year of

commencement of production namely

1. 1st Generation Companies:-which included Dunlop and FireStone.

2. 2nd Generation Companies:-which included MRF, CEAT, GoodYear, and

Premier.

3. 3rd Generation Companies:-which included Apollo, Vibrant, Modi Rubber, and

J.K.Tyres.

4. 4th Generation Companies:-includes the companies started after 1970 and

also which are yet to start production.

RANKING OF TYRE COMPANIES (In India)

RANK COMPANIES

1 MRF TYRES LTD

2 APOLLO TYRES LTD

3 J.K. TYRES LTD

4 CEAT TYRES LTD

5 MODI RUBBERS LTD

6 BIRLA TYRES LTD

7 GOODYEAR INDIA LTD

8 VIKRANT TYRES LTD

MARKET SHARE OF VARIOUS COMPANIES

COMPANY TRUCK CAR

APOLLO 28 10

MRF 16 25

JK 17 18

CEAT 12 14

VIKRANT 11 1

GOODYEAR 5 12

OTHERS 11 20

18%

13%

11%

5%10%

Market Share

RANKING OF TYRE COMPANIES (In India)

APOLLO TYRES LTD

MODI RUBBERS LTD

GOODYEAR INDIA LTD

VIKRANT TYRES LTD

RKET SHARE OF VARIOUS COMPANIES

CAR FARM LCV

10 21 19

25 24 20

18 15 19

14 8 15

7 2

12 23 2

20 2 23

22%

21%

18%

Market Share

MRF

Apollo

JK Tyres

CEAT

Goodyear

Vikrant

Others

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Corporate Overview

Apollo Tyres Limited (Apollo Tyres) is a tyre manufacturing company, incorporated in

1975. In 1977, the first plant was commissioned at Perambra

2006, it acquired Dunlop Tyres International, South Africa and Zimbabwe. It

manufactures tyres, tubes and flaps for commercial and passenger vehicles.

tyres Ltd is the first Indian multinational tyre corporation. It is India’s largest and

ranked 17th*in the world. It is the first Indian tyre company to cross the US$ 1 billion

revenue mark in 2006-07. Three decades of manufacturing expertise and marketing

innovation. It is the market leader in heavy commercial and light commercial tyres

India and fastest growing in passenger vehicle tyres

exporter of passenger vehicle tyres

Vision

“A significant player in the global tyre industry and a brand of choice,

providing customer delight and

Values

C –Care For Customers

R – Respect For Associates

E – Excellence Through Teamwork

A – Always Learn

T – Trust Mutually

E – Ethical Practices

Corporate Objectives

Employee Satisfactio

Customer Delight

Revenue Growth

Operating Margin Improvements

COMPANY PROFILE


irst plant was commissioned at Perambra, Thrissur,


manufactures tyres, tubes and flaps for commercial and passenger vehicles.



07. Three decades of manufacturing expertise and marketing

market leader in heavy commercial and light commercial tyres

wing in passenger vehicle tyres. Apollo tyres

exporter of passenger vehicle tyres from India.


providing customer delight and continuously enhancing stakeholder value”

Care For Customers

Respect For Associates

Excellence Through Teamwork

Ethical Practices

Employee Satisfaction

Operating Margin Improvements

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Thrissur, Kerala. In


manufactures tyres, tubes and flaps for commercial and passenger vehicles. Apollo



07. Three decades of manufacturing expertise and marketing

market leader in heavy commercial and light commercial tyres in

ltd is the biggest


continuously enhancing stakeholder value”

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1.2 Key Facts

Apollo Tyres Ltd has been pioneer in the implementation of ‘Six Sigma’

among all the tyre companies in India

7th fastest growing tyre manufacturing company in the world

1st tyre company to obtain ISO 9001 Certification for all its operations

Apollo Tyres Ltd is in the list of top 15 tyre manufacturing companies in the

world in terms of revenue(14th rank)

Has about 2400 exclusive dealers

The R&D centre is functioning at Baroda plant in Gujarat

Tube manufacturing is done on the Pune plant, Maharastra. Tubes for the

entire requirement of all plants are produced here and balance requirement is

met from outside. Flaps are also purchased from outside.

1.3 Corporate Timeline

1975 Inception

1976 Registered as a company

1977 First plant commissioned in Perambra (Cochin, Kerala)

1991 Second plant commissioned in Limda (Baroda, Gujarat )

1995 Acquired Premier Tyres in Kalamassery (Cochin, Kerala)

1996 Exclusive tubes plant commissioned in Ranjangaon (Pune,

Maharashtra)

2000 Exclusive radial capacity established in Limda

2000 Established Apollo Tyres Health Care Clinic for HIV-AIDS awareness

and prevention in Sanjay Gandhi Transport Nagar, Delhi

2003 Expansion of passenger car radial capacity to 6,600 tyres/day

2004 Production of India 's first H-speed rated tubeless passenger car radial

tyres

2004 Support in setting up India 's first Emergency Medical Service in Baroda,

Gujarat

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2005 Apollo Tyres Health Care Clinics in Udaipur in Rajasthan and Kanpur in

Uttar Pradesh

2006 Expansion of passenger car radial capacity to 10,000 tyres/day

2006 Expansion of passenger car range to include 4x4 and all-terrain tyres

2006 Acquired Dunlop Tyres International in South Africa and Zimbabwe

2006 Opening of Apollo Tyres Health Care Clinic in Ukkadam, Tamil Nadu

2006 Launch of DuraTread, treading material and solutions

2006 Launch of India's first range of ultra-high performance V and W-speed

rated tyres

2007 Launch of Regal truck and bus radial tyres

2007 Launch of DuraTyre, retreaded tyres from Apollo

2007 Launch of the Apollo Tennis Initiative and Mission 2018

2009 Apollo Tyres completes 100 per cent acquisition of Vredestein Banden

BV

Business Focus

Major Segments:

The Group's principal activities are to manufacture and sell automobiles tyres .Apollo

Tyres product range includes truck and bus tyres; light truck tyres; farm tyres;

passenger car tyres, off-the-road, earthmover and industrial radials. The company

has five manufacturing plants in India, two in Kerala, one in Gujarat, one in Haryana

and one in Tamil Nadu. It also has two manufacturing facilities in South Africa and

two in Zimbabwe. The Group exports its products to South America, Pakistan,

South-East Asia, Middle East Countries and Africa.

Products and Services:

Key product brands of the company include Apollo, Dunlop, India Tyres,

Kaizen, Regal Tyres, Novex, Master Steel, Milestone, Tyfoon, Velocity etc.

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The company has a strong R&D centre at Vadodara that develops and

promotes the evolution of new technologies.

In FY07, the company launched some new products, including the Acelere

Sportz and Aspire brands.

In FY07, Apollo Tyres passenger car radial tyre manufacturing capacity

increased from 210,000 tyres per month to 300,000 tyres per month.

The company has a network of over 4,000 dealerships in India, of which over

2,500 are exclusive outlets. In South Africa, it has over 900 dealerships, of

which 190 are Dunlop Zones.

Apollo Tyres exports to Africa, the Middle East, South America, Asia-Pacific,

and Europe.

Competitors

Sl No. COMPANIES

1 MRF TYRES LTD

2 J.K. TYRES LTD

3 CEAT TYRES LTD

4 MODI RUBBERS LTD

5 BIRLA TYRES LTD

6 GOODYEAR INDIA LTD

7 VIKRANT TYRES LTD

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Capital Structure

Period Instrument Authorised

Capital

Rs. Crs

Issued

Capital

Rs. Crs

Paid Up

Share

Nos.

Face

value

Capital

2007-2008 Equity Share 73 48.84 488444770 1 48.84

2006-2007 Equity Share 73 46.40 46402477 10 46.40

2005-2006 Equity Share 48 38.34 38337977 10 38.34

2004-2005 Equity Share 48 38.34 38337977 10 38.34

2003-2004 Equity Share 48 38.34 38337977 10 38.34

During the year 2007- 2008, the company has allotted 24.42 million equity shares of

Re.1/- each at a premium of Rs.28.30 to Promoters on conversion of 2.442 million

warrants. The Company's share capital as on 31st March, 2008 has increased from

Rs.464.02 million to Rs.488.44 million after the said allotment. Subsequently,

promoters have exercised last tranch of their option for conversion of 1.558 million

warrants into 15.58 million shares on 18th April, 2008, thereby, increasing share

capital to Rs.504.02 million.

The face value of equity shares of the Company has been split from 1 equity share

of Rs.10/- each into 10 equity shares of Re.1/- each w.e.f. 27th August, 2007, in

pursuance of the resolution passed in the Annual General Meeting held on 26 July,

2007.

Ownership Structure

Stake holding Pattern Percentage

Promoters 39.35%

Public 26.38%

FII/ NRI/Foreign Body Corporate 14.76%

Government of Kerala/Travancore/Titanium Products Ltd. 1.98%

Financial Institutions/Banks/Mutual Funds 17.53%

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Financial Performance

Rs. Crores

2007-2008 2006-2007 2005-2006 2004-2005 2003-2004

Sales & other Income 4,256.21 3,777.31 3003.30 2,676.62 2319.87

Net Profit 219.30 113.42 78.17 67.63 70.42

Dividend 25.20 20.88 17.25 17.25 17.25

Manufacturing Facilities

Plants in India

Sl.No. LOCATION PRODUCTS & FACILITIES

1 APOLLO TYRES LTD, PERAMBRA, KERALA BIAS

2 APOLLO TYRES LTD, KALAMASSERY, KERALA BIAS

3 APOLLO TYRES LTD, BARODA, GUJARAT RADIALS & BIAS, R & D

4 APOLLO TYRES LTD, KUNDLI, HARYANA RETREADING

5 APOLLO TYRES LTD, CHENNAI, TAMIL NADU RADIALS

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Plants Abroad

Sl No. LOCATION PRODUCTS & FACILITIES

1 APOLLO TYRES, LADYSMITH,SOUTH AFRICA RADIAL CAR

2 APOLLO TYRES, DURBAN,SOUTH AFRICA RADIAL S &BIAS

3 APOLLO TYRES, BULAWAYO,ZIMBABWE RADIALS & BIAS

4 APOLLO TYRES, HARARE,ZIMBABWE RETREADING

Subsidiaries

SL No. Subsidiaries

1 Apollo (Mauritius) Holding Pvt. Ltd. (AMHPL)

2 Apollo (South Africa) Holding Pty. Ltd. (ASHPL)(Subsidiary through AMHPL)

3 Dunlop Tyres International Pty. Ltd. (DTIPL)(Subsidiary through AMHPL)

4 Dunlop Africa Marketing (UK) Ltd.(DAMUK)(Subsidiary through DTIPL)

5 Dunlop Zimbabwe Ltd. (DZL)(Subsidiary through DAMUK)

6 Radun Investment (Pvt.) Ltd.(Subsidiary through DAMUK)

7 AFS Mining (Pvt.) Ltd.(Subsidiary through DZL)

8 Apollo Tyres AG, Switzerland (AT AG)

9 Apollo Tyres GmbH , Germany (AT GmbH)(Subsidiary through AT AG)

10 Apollo Tyres Kft., Hungary (AT Kft)(Subsidiary through AT AG)

11 Apollo Tyres Pte Ltd, Singapore ( AT PL)(Subsidiary through AMHPL)

Research, Design & Development

Global R&D centre in Limda [Baroda]

Dedicated FEA [Finite Element Analysis] cell

Tie-ups with premier institutes in India [IIT Mumbai and IIT Kharagpur] and

leading international universities in Germany [Leipzig and Leibniz].

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Panel o f international tyre technologists working on compounding and tyre

design.

Partners in the best raw material sources from across the world –Lanxess,

Bekaert, Degussa to name a few –have development agreements with each

Rigorous testing of UHP & 4x4 passenger vehicle tyres in world-class testing

facilities.

Key Partnerships

Apollo tyres relationship with the automakers have both expanded as well as

improved over the year. It added General Motors India to the list of customers.

All the major automakers in India now actively look at Apollo Tyres Ltd. as a

partner in their journeys. The last financial year has been a watershed year in

ATL's march towards being a significant global player.

Apollo Tyres strategic acquisition of Dunlop South Africa made it the first

Indian tyre company to have a transnational footprint.

A very important milestone was the initiation of direct exports by Apollo tyres

to its International customers across Europe.

Distribution Network

Aiming to make the most of ongoing growth in the promising world tyre

market, Apollo Tyres is expanding its operations by fortifying local production

capacity, product line ups and depth into the market.

With over 120 sales & service stock points, 5 zonal offices, 18 state offices

and 11 redistribution centres, Apollo Tyres is poised to penetrate its presence

to the farthest corners of the country.

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A 4,032 strong dealership network along with 2138 Apollo Tyre Worlds, 194

Apollo Radial Worlds and 61 Apollo Pragati Kendras, ensures that Apollo

Tyres is never very far from its consumers.

The over 3000 exclusive Apollo Tyre World and Apollo Tyre Radial outlets

have initiated a quick response mechanism by enabling prompt product

delivery and after sales service to customers throughout the country.

SWOT Analysis

Strengths

Apollo Tyres has continued to maintain its lead in the market within the

dominant segment of truck and bus tyres within the Indian tyre industry.

The Company has established a state-of-the-art plant in Baroda.

Quick response to changes in market conditions and product profiles has

resulted in superior product innovation and technical expertise.

The Company's marketing initiatives have resulted in a strong brand recall,

even in the price sensitive tyre market. Aiding these efforts is an extensive

distribution network.

The sourcing of raw materials to a global presence through the acquisition of

Dunlop Tyres International (Pty) Ltd in South Africa.

Economies of transportation cost are a constant benefit to the company on

account of proximity to the natural rubber growing belt.

With a move into the international arena, Apollo Tyres can also follow and

maintain global quality standards and international process and system

certifications.

Weakness

Apollo Tyres has no presence in the two and three wheeler segments.

The capital intensive nature of the business in this segment also has its

drawbacks.

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Opportunities

The national thrust in road infrastructure and construction of expressways and

national highways presents a range of opportunities for the tyre industry.

Creation of road infrastructure has given, and will increasingly give, a

tremendous fillip to surface transportation in the coming years.

The tyre industry will continue to play an important role in this dynamic and

evolving situation.

Apollo's leadership position in the commercial vehicle segment will enable the

company to leverage new and related business opportunities.

The company have already started leveraging these opportunities to its

benefit with its new product segments like Truck/Bus Radial (TBR), Off-The-

Road (OTR) tyres, retreading and allied automotive services.

Growth within India also supports the Company's aim to be a leader in the

global industry and partake in overseas markets like Europe.

Threats

There is a need to prepare for imports from neighbouring countries at

competitive prices, which have been rising in the recent past.

The ever present challenge of raw material price volatility

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ORGANISATION PROFILE

Apollo Tyres Ltd., Perambra, Thrissur

Organisational Details

Name APOLLO TYRES LTD

Place Perambra, Thrissur District (50km north of Kochi, Kerala)

Year of Inception 1976

Land Area 97 acres

Building Area 69500 Sq. Mt

Head Office New Delhi

Registered Office Kochi, Kerala

Present Capacity 309 MT per day

Product Range TRUCK, LCV, REAR TRACTORS, FARM RADIALS,

PASSENGER & ADV TYRES

No of Staffs 2790

Employee Pattern

Management Staffs 270

Permanent Staffs 1819

Workmen Trainees 248

Contract Workmen 453

Total 2790

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Milestones of Apollo tyres, Perambra

YEAR DESCRIPTIONS

1972 Company licence was obtained by Mr. Mathew T. Marattakalam,

Jacob Thomas and Associates

1974 Company was taken over by Dr. Raunaq Singh and his associates

1975 April 13th ,foundation stone of Perambra plant was laid

1976 Apollo tyres was registered with registered office at Kochi

1977 Plant was commissioned with 49 tons per day capacity

1982 Started manufacturing of passenger car radial tyres

2005 The plant completed 30 years on April 13th

Highlights

Single largest truck tyre plant in India

Fastest growing plant in Apollo family

Known as the mother plant

Continuous expansion

Total employee involvement

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DESIGN OF THE STUDY

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Design of the study

Objectives of the study:

Primary Objectives

To analyse the firm’s working capital management and to gauge its effect on cash

flow and value

Secondary Objectives

Ascertain the liquidity of Apollo Tyres Ltd

Ascertain the efficiency of Apollo Tyres Ltd

Ascertain the creditworthiness of Apollo Tyres Ltd

Ascertain the profitability of Apollo Tyres Ltd

Scope of the study

This study assess the working capital investments, evaluates working capital

investments and working capital components of Apollo Tyres Ltd.

Methodology

This research assesses the overall working capital management of the company

taking into account the financial data for the accounting period of last 5 years. Ratio

analysis, Cash Conversion Cycle, Schedule of Changes in working capital is used for

this purpose.

Formulation of research problem

The research problem in this project is to study the investment of the firm in the

working capital, whether they are reasonable, in other words, is the firm over or

underinvested in working capital.

Period of study

The period covered for the completion of the project is 8 weeks.

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Source of data

1. Primary Data:

It has been obtained through interviews with the officials of the company.

2. Secondary Data

Secondary data which is used in this study are:

o Annual Report.

o Published documents.

o Various Journals.

o Websites.

Research design

Research design used for the study was descriptive analysis type and it involves

observation of ideas from the standard texts and journals, websites and other related

materials to get a hold on the theories.

Tools of data analysis

The tools used for the study are Ratio analysis, Cash Conversion Cycle, and

Schedule of changes in working capital.

Limitations of the study

The study is based on secondary data drawn from the secondary sources connected

to the topic. So errors are possible. And the study only covers the accounting

period of last five years and current year was excluded on account of non availability

of data. So the current position of the firm was not taken into consideration.

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FINANCIAL ANALYSIS

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Working capital management

Introduction

In a perfect world, there would be no necessity for current assets and liabilities

because there would be no uncertainty, no transaction costs, information search

costs, scheduling costs, or production and technology constraints. The unit cost of

production would not vary with the quantity produced. Borrowing and lending rates

shall be same. Capital, labour, and product market shall be perfectly competitive and

would reflect all available information, thus in such an environment, there would be

no advantage for investing in short term assets.

However the world we live is not perfect. It is characterized by considerable amount

of uncertainty regarding the demand, market price, quality and availability of own

products and those of suppliers. There are transaction costs for purchasing or selling

goods or securities. Information is costly to obtain and is not equally distributed.

There are spreads between the borrowings and lending rates for investments and

financings of equal risks. Similarly each organization is faced with its own limits on

the production capacity and technology. It can employ there are fixed as well as

variable costs associated with production goods. In other words, the markets in

which real firm operated are not perfectly competitive.

These real world circumstances introduce problem’s which require the necessity of

maintaining working capital. For example, an organization may be faced with an

uncertainty regarding availability of sufficient quantity of crucial imputes in future at

reasonable price. This may necessitate the holding of inventory, current assets.

Similarly an organization may be faced with an uncertainty regarding the level of its

future cash flows and insufficient amount of cash may incur substantial costs. This

may necessitate the holding of reserve of short term marketable securities, again a

short term capital asset. In corporate financial management, the term Working

capital management” (net) represents the excess of current assets over current

liabilities.

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Working Capital

In simple words working capital is the excess of current Assets over current

liabilities. Working capital has ordinarily been defined as the excess of current assets

over current liabilities. Working capital is the heart of the business. If it is weak

business cannot proper and survives. It is therefore said the fate of large scale

investment in fixed assets is often determined by a relatively small amount of current

assets. As the working capital is important to the company is important to keep

adequate working capital with the company. Cash is the lifeline of company. If this

lifeline deteriorates so the company’s ability to fund operation, reinvest do meet

capital requirements and payment. Understanding Company’s cash flow health is

essential to making investment decision. A good way to judge a company’s cash flow

prospects is to look at its working capital management. The company must have

adequate working capital as much as needed by the company. It should neither be

excessive or nor inadequate. Excessive working capital cuisses for idle funds laying

with the firm without earning any profit, where as inadequate working capital shows

the company doesn’t have sufficient funds for financing its daily needs working

capital management involves study of the relationship between firm’s current assets

and current liabilities. The goal of working capital management is to ensure that a

firm is able to continue its operation. And that is has sufficient ability to satisfy both

maturing short term debt and upcoming operational expenses. The better a company

managers its working capital, the less the company needs to borrow. Even

companies with cash surpluses need to manage working capital to ensure that those

surpluses are invested in ways that will generate suitable returns for investors.

The primary objective of working capital management is to ensure that

sufficient cash is available to:

Meet day to day cash flow needs.

Pay wages and salaries when they fall due

Pay creditors to ensure continued supplies of goods and services.

Pay government taxation and provider of capital – dividends and

Ensure the long term survival of the business entity

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Need for working capital

The prime objective of the company is to obtain maximum profit thought the

business. The amount of profit largely depends upon the magnitude of sales.

However the sale does not convert into cash instantaneously. There is always a time

gap between sale of goods and receipt of cash. The time gap between the sales and

their actual realization in cash is technically termed as operating cycle. Additional

capital required to have uninterrupted business operations, and the amount will be

locked up in the current assets. Regular availability of adequate working capital is

inevitable for sustained business operations. If the proper fund is not provided for the

purpose, the business operations will be effected and hence this part of finance to be

managed well.

Working Capital Cycle (Graph)

receivables

SALES

OVERHEADS

Etc.

PAYABLES

INVENTORY

CASH

Equity & loan

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Each component of working capital (namely inventory, receivables and payables)

has two dimensions Time and Money. When they come to managing working capital,

Time is Money. If you can get money to move faster around the cycle (collect monies

due from debtors more quickly) or reduce the amount of money tied up (i.e., reduce

inventory level 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 will have additional free money available to support

addition sales growth or investment. Similarly, if you can negotiate improved terms

with suppliers e.g. get longer credit or an increased credit limits, you festively create

freed finance to help fund future sales

A perusal of operational cycle reveals that the cash invested in operations are

recycled back in to cash. However it takes time to reconvert the cash. Cash flows in

cycle into around and out of a business it the business’s lifeblood and every

manager’s primary task to help keep it flowing and to use the cash flow to generate

profits. The shorter the period of operating cycle, the larger will be the turnover of the

funds invested in various purposes.

Determinants of working capital

Working capital requirements of a concern depends on a number of factors, each of

which should be considered carefully for determining the proper amount of working

capital. It may be however be added that these factors affect differently to the

different units and these keeps varying from time to time. In general, the

determinants of working capital which re common to all organization’s can be

summarized as under:

Nature of business

Need for working capital is highly depends on what type of business, the firm in.

there are trading firms, which needs to invest a lot in stocks, ills receivables, liquid

cash etc. public utilities like railways, electricity, etc., need much less inventories and

cash. Manufacturing concerns stands in between these two extends. Working capital

requirement for manufacturing concerns depends on various factor like the products,

technologies, marketing policies.

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Production policies

Production policy of the organization effects the working capital requirements very

much. Seasonal industries, which produces only in specific season requires more

working capital. Some industries which produces round the year but sale mainly

done in some special seasons are also need to keep more working capital.

Size of business

Size of business is another factor to determines the need for working capital

Length of operating cycle

Operating cycle of the firm also influence the working capital . longer the orating

cycle, the higher will be the working capital requirement of the organization.

Credit policy

Companies; follows liberal credit policy needs to keep more working capital with

them. Efficiency of debt collecting machinery is also relevant in this matter. Credit

availability form suppliers also effects the company’s working capital requirements. A

company doesn’t enjoy a liberal credit from its suppliers will have to keep more

working capital

Business fluctuation

Cyclical changes in the economy also influence the level of working capital. During

boom period, the tendency of management is to pile up inventories of raw materials

and finished goods to avail the advantage of rising prices. This creates demand for

more capital. Similarly, during depression when the prices and demand for

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manufactured goods. Constantly reduce the industrial and trading activities show a

downward termed. Hence the demand for working capital is low.

Current Asset Policies

The quantum of working capital of a company is significantly determined by its

current assets policies. A company with conservative assets policy may operate with

relatively high level of working capital than its sales volume. A company pursuing an

aggressive amount assets policy operates with a relatively lower level of working

capital.

Fluctuations of supply and seasonal variations

Some companies need to keep large amount of working capital due to their irregular

sales and intermittent supply. Similarly companies using bulky materials also

maintain large reserves of raw material inventories, this increase the need for

working capital. Some companies manufacture and sell goods only during certain

seasons. Working capital requirements of such industries will be higher during

certain season of such industries period.

Other factors

Effective co ordination between production and distribution can reduce the need for

working capital. Development in transportation and communication means helps to

reduce the working capital requirement.

Working Capital Concepts

There are two thoughts that currently accepted about working capital. They are

Gross working capital concept & Net working capital concept.

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Gross working capital concept

This thought says that total investment in current assets is the working capital of the

company. This concept does not consider current liabilities at all. Reasons given for

this concept:

1) When we consider fixed capital as the amount invested in fixed assets. Then

the amount invested in current assets should be considered as working

capital.

2) Current asset whatever may be the sources of acquisition, are used in

activities related to day to day operations and their forms keep on changing.

Therefore they should be considered as working capital.

Net working capital

It is narrow concept of working capital and according to this, current assets minus

current liabilities forms working capital. The excess of current assets over current

liabilities is called as working capital. This concept lays emphasis on qualitative

aspect which indicates the liquidity position of the concern/enterprise. The reasons

for the net working capital method are:

1) The material thing in the long fun is the surplus of current assets over current

liability

2) Financial health can easily be judged by with this concept particularly from the

view point of creditors and investors.

3) Excess of current assets over current liabilities represents’ the amount which

is not liable to be returned and which can be relied upon to meet any

contingency.

4) Inter-company comparison of financial position may be correctly done

particularly when both the companies have the same amount of current

assets.

29

If the current assets are higher than current liability it is considered the financial

position of the company is sound. If both current assets and liabilities are equal, the

company has resorted to short term funds for financing the working capital and long

term sources of funds have been used to finance the acquisition of fixed assets. It

does not indicate the financial soundness for the company. If the current assets are

lesser than current liabilities there is negative working capital which indicates

financial crisis.

Net working capital concept is more reasonable than the gross working capital

concepts. The balance sheet of the company includes group of liabilities such as

bank overdraft, creditors, bills payables, outstanding expenses etc. if it is not deduct

from current assets , the concern may consider itself quite secured: while the reality

is may be that the concern has very little working capital or has no working capital.

Therefore it is reasonable to define working capital as the excess of current assets

over current liabilities.

Kinds of working capital

Working capital can be put in two categories:

1) fixed or permanent working capital

2) fluctuating or temporary working capital

Fixed or permanent working capital

The volume of investment in current assets an change over a period of time. But

always there is minimum level of current assets that must be kept in order to carry on

the business. This is the irreducible minimum amount needed for maintaining the

operating cycle. It is the investment in current assets. This is permanently locked up

in the business and therefore known as permanent working capital.

30

Variable/temporary working capital

It is the volume of working capital which is needed over and above the fixed working

capital in order to meet the unforced market changes and contingencies. In other

words any amount over and about the permanent level of working capital is variable

or fluctuating working capital. This type of working capital is generally financed from

shorter source of finance such as bank credit because this amount is not

permanently required and is usually paid back during off season or after the

contingency.

Sources of working capital

The company can choose to finance its current assets by

1. Long term sources

2. Short term sources

3. A combination of the two

Long term sources

Long term sources of permanent working capital include equity and preference

shares, retained earnings, debentures and other long term debts from public

deposits and financial institution. The long term working capital needs should meet

through long term means of financing. Financing through long term means provides

stability, reduces risk or payment and increases liquidity of the business concern.

Various types of long term sources of working capital are summarized as follow

Issue of shares

It is the primary and most important sources of regular or permanent working capital.

Issuing equity shares as it does not create and burden on the income of the concern.

Nor the concern is obliged to refund capital should preferably raise permanent

working capital.

31

Retained earnings

Retain earning accumulated profits are a permanent sources of regular working

capital. It is regular and cheapest. It creates not charge on future profits of the

enterprises.

Issue of debentures

It creates a fixed charge on future earnings of the company and the company is

obliged to pay interest. Management should make wise choice in procuring funds by

issue of debentures.

Long term debt

Company can raise fund from accepting public deposits, debts from financial

institution like banks, corporations etc. the cost is higher than the other financial

tools.

Other sources consist of the sale of idle fixed assets, securities received from

employees and customers are examples of other sources of finance.

Short term sources of temporary working capital

Temporary working capital is required to meet the day to day business expenditures.

The variable working capital would finance from short term sources of funds and only

for the period needed. It has the benefits of low cost and establishes closer

relationships with banker.

32

Some sources of temporary working capital:

Commercial bank

A commercial bank constitutes a significant source for short term or temporary

working capital. This will be in the form of short term loans, cash credit, and overdraft

and though discounting the bills of exchanges.

Public deposits

Most of the companies in recent years depend on these sources to meet their short

term working capital requirements ranging from six month to three years.

Various credits

Trade credit, business credit papers and customer credit are other sources of short

term working capital. Credit from suppliers, advances from customers, bills of

exchanges, promissory notes, etc helps to raise temporary working capital

Reserves and other funds

Various funds of the company like depreciation fund. Provision for tax and other

provisions kept with the company can be used as temporary working capital.

The company should meet its working capital needs through both long term and

short term funds. It will be appropriate to meet at least 2/3 of the permanent working

capital equipments form long term sources, whereas the variables working capital

should be financed from short term sources. The working capital financing mix

should be designed in such a way that the overall cost of working capital is the

33

lowest, and the funds are available on time and for the period they are really

required.

Sources of Additional Working Capital

Sources of additional working capital include the following:

1. Existing cash reserves

2. Profits(when you secure it as cash)

3. Payables(credit from suppliers)

4. New equity or loans from shareholder

5. Bank overdrafts line of credit

6. Long term loans

If the firm have insufficient working capital and try to increase sales, it can easily

over stretch the financial resources of the business. This is called overtrading. Early

warning signs include

1. Pressure on existing cash

2. Exceptional cash generating activities. offering high discounts for clear

cash payment

3. Bank overdraft exceeds authorized limit

4. Seeking greater overdrafts or lines of credit

5. Partly paying suppliers or other creditor

6. Management pre occupying with surviving rather than managing.

Adequate Working Capital

As stated about keeping adequate working capital is the mantas towards the

success of financial management. The term adequate working capital refuters to the

amount of working capital to be kept with the organization to met its daily operations.

Large investment in fixed assets is not sufficient to run a business successfully. But

34

adequate working capital is equally important. Without working capital fixed assets

are like a gun, which cannot shoot, as there are no cartridges.

It is said that “Inadequate working capital is a disastrous: where as redundant

working capital is a criminal waste.” It is clear that the company can’t invest all its

funds in current assets to increase working capital and at the same time it requires to

keep sufficient funds with it. So a proper leverage between both ends is needed to

assure proper running of the business. It needs to keep adequate working capital

with it, neither less nor more than needed.

(a) advantages of adequate working capital

Adequate working capital provides certain benefits to the company they are:

Increase in debt capacity and goodwill

Adequate working capital represents the financial soundness of the company. If one

company is financially sound it would be able to pay its creditors timely and properly.

It will increase company’s goodwill. It crests confidence among investors and

creditors. Thus a firm with adequate working capital can raise requisite funds from

market, borrow short term credit form banks, and purchases inventories of raw

material etc., for the smooth operations of its business.

Increase in production inefficiency

With adequate working capital the firm can smoothly carryout research and

development actives and thus adds to its production efficiency.

35

Exploitation of favourable opportunities

In the presence of adequate working capital, a company can avail the benefits of

favourable opportunities. Adequate working capital will help the company to have

bulk purchases, seasonal storage of raw material etc., which would reduce the cost

of production, thus adds to its profit.

Meeting contingencies adverse changes

A company can easily face certain business and economic crises a company having

adequate working capital can successfully meet contingencies such as business

oscillations, financial crisis arising from heavy losses etc.,

Available cash discount

Maintenance of adequate working capital enables a company to avail the advantage

of cash discount by making cash payment for to the suppliers of raw materials and

merchandise. Obviously it will reduce the cost of production and increase the profit of

the company.

Solvency and efficiency fixed assets.

It helps to maintain the solvency of the company. So that payments could be made in

time as and when they fall due. Likewise, adequate working capital also increases

the efficiency for fixed assets insofar as their proper maintenance depends upon the

availability of funds.

Attractive dividend to shareholders

It enables the company to offer attractive dividend to the shareholders so that sense

of security and confidence will increase among them. It also increases the market

values of its shares.

36

(b) Dangers of Inadequate Working Capital

Having inadequate working capital les to so many of dangers as it doesn’t fulfil its

purpose. Some are given below:

Loss of goodwill and creditworthiness

As the firm fails to on or its current liabilities it loses it goodwill and creditworthiness

among its creditors. Consequently, the firm finds it difficult to procure the requisite

funds for its business operations on easy terms, which ultimately results in reduced

profitability as well as production interruption.

Firm can’t make use of favourable opportunities

The firm fails to undertake the profitable projects, which not only prevent the firm

from availing the benefits of favourable opportunities but also stagnate it’s growth.

Adverse effects of credit opportunities

The firm also fails to avail the attractive credit opportunities but also stagnate its

growth

Operational inefficiencies

It leads the company to operating inefficiencies, as day to day commitments cannot

be met.

37

Effects on financial capacity

Inadequacy of working capital also weakness the shock absorbing capacity of the

firm because it cannot meet the contingencies arising from business oscillations,

financial losses, due to shortage of working capital.

Non achievement of profit target

The firm cannot implement operational plans due to unavailability of fund which will

lead to non achievement of profit margin.

Dangers of redundant working capital

As the inadequate working capital is dangerous to the firm, redundant working

capital also brings hazardous condition in to the company. Let us discuss the

dangers of redundant working capital to the company.

Low rate of return on capital

Excessive or redundant working capital implies the presence of idle funds that earn

no profit to the firm. So it cannot earn a proper rate of return on its total investments,

whereas profits are distributed on its total investment, whereas profits are distributed

on the whole of its capital.

Decline in capital and efficiency

Since the rate of return on capital is low the company tempts to make some

adjustment to inflate profit to increase the dividend. Sometimes this unearned

dividend paid out of the company’s capital to keep up the show of prosperity by

window dressing of accounts. Certain provision, such as provision for depreciation,

repairs and renewals are into made. This leads to decline in operating efficiency of

the firm.

38

Loss of goodwill and confidence

Lower rate of return leads to lower dividend available to share holder. This leads to

down fall in market value of the company’s share and markets the shareholder lose

their confident in company.

Evils of over capitalization

Excessive working capital is often responsible for giving birth to the situation of

overcapitalization in the company with all its evils. Over capitalizations is not only

disastrous to the smooth survival of the company but also interests of those

associated with the company.

Destruction of turnover ratio

It destructs the control over turnover ratio which is commonly used in the conduct of

an efficient business.

It is evident from the foregoing discussion that a company must have adequate

working capital pursuant to its requirements. It should neither be excessive not

inadequate. Both situations are dangerous. While inadequate working capital

adversely affects the business operations and profitability, excessive working capital

remains idle and earns no profits for the company. So company must assure its

working capital is adequate for its operations.

39

Blueprint for a good working capital management policy

General Action

Set the planning standards for stock days, debtor days and creditor days. Having set

planning standards and keep to them. Impress on staff that these targets are just

important operating budgets and standards cost. Instil an understanding amongst the

staff that working capital management produces profits.

Action on Stocks

Keep stock levels as low as possible, consistent with not running out of stock and not

ordering stock in uneconomically small quantities. “Just In Time” stock management

is fine, as long as it is “Just In Time” and never fails to deliver on time. Consider

keeping stock in supplier’s warehouses drawing on its as needed and saving

warehousing cost.

Action on Debtors /customers

Assess all significant new customers for their ability to pay. Take references,

examine accounts and ask around. Try not to take on new customers who would be

poor payers. Re assess all significant customers periodically. Stop supplying existing

customers who are poor payers, you may lose sales, but you are after quality of

business rather than quantity of business. Sometimes poor paying customers

suddenly (and magically!!) find cash to settle invoices if their supplies are being cut

off. If customers can’t pay/won’t pay let your competitor have them and give the

competitor a few more problems.

Consider factoring sales invoices the extra cost may be worth it in terms of quick

payment of sales revenue, less debtor administration and more time to carry out your

business (rather than spend time chasing debts).

40

Consider offering discounts for prompt settlement of invoices, but only if the

discounts are lower than the costs of borrowing the money owed from other sources.

Action on creditors

Do not pay invoices too early take advantage of credit offered by suppliers, it’s free!!

Only pay early if the supplier is offering a discount. Even then, consider this to be an

investment.

Establish a register of creditors to ensure that creditors are paid on the correct date

not earlier and not later.

THE CONCEPT OF ZERO WORKING CAPITAL

In today’s world of intense global competition, working capital management is

receiving increasing attention from managers striving for peak efficiency the goal of

many leading companies today, is zero working capital. Proponent of the zero

working capital concept claims that a movement toward this goal not only generates

cash but also speeds up production and helps business make more timely deliveries

and operate more efficiently. The concept has its own definition of working capital:

inventories+ receivables- payables. The rational here is (I) that inventories and

receivables are the keys to making sales, but (II) that inventories can be financed by

suppliers through account payables.

Companies use about 20% of working capital for each sales. So, on average,

working capital is turned over five times per year. Reducing working capital and thus

increasing turnover has two major financial benefits. First, money freed up by

reducing inventories or receivables, by increasing payables, results in a onetime

contribution to cash flow. Second, a movement toward zero working capital

permanently raises a company’s earnings.

41

The most important factor in moving toward zero working capital is increased speed.

If the production process is fast enough, companies can produce items as they are

ordered rather than having to forecast demand and build up large inventories that

are managed by bureaucracies. The best companies delivery requirements. This

system is known as demand flow or demand based management. And it builds on

the just in time method of inventory control.

Clearly it is not possible for most firms to achieve zero working capital and infinitely

efficient production. Still, a focus on minimizing receivables and inventories while

maximizing payables will help a firm lower its investment in working capital and

achieve financial and production economies.

Estimation of Working Capital

As discussed above a number of factors are responsible for determining the amount

of working capital required by affirm let us know discuss the various methods/

technique used in assessment of firm’s working capital requirements. These

methods are.

Estimation of components of working capital method

This method is based on the basic definition of working capitalizes, excess of current

assets over the current liabilities, in other worked the amount of different constituent

of the working capital such as debtors, cash inventories , creditors etc are estimated

separately and the total amount of working capital requirement is worked out

accordingly.

Percent sales method

This is the most simple and widely used method in combination with other scientific

methods. According to this method a ratio is determined for estimating the future

working capital requirement this is the generally based on the past experience of

management as the ratio varies from industry to industry. For example if the past

42

experience shows that the amount of working capital has been 20% of sales and

projected amount of sales for the next year is Rs. 10 Lakhs, the required amount of

working capital shall be Rs. Two Lakhs.

As seen from above the above method is merely an estimation based on past

experience. Their fore a lot depends on the efficiency of decision maker, which may

not be correct in all circumstances. Moreover the basic assumptions regarding linear

relationship between sales and the working capital may not hold well in all the cases.

Therefore this method is not dependable and not universally acceptable. At best, this

method gives a rough idea about the working capital.

Operating Cycle Approach

The need of working capital arises mainly because of them gap between the

production of goods and their actual realization after sales. This gap is technically

referred as the “operating cycle” or the “cash cycle” of the business. If it were

possible to complete the entire job instantaneously, there would be no need for

current asset (working capital). But since it is not possible, every business

organization is forced to have current asset and hence operating cycle. It may be

divided into four stages.

1. Raw materials and stores storage space.

2. Work in process stage.

3. Finished goods inventory stage.

4. Debtor’s collection stage.

43

Purchase of Sale of Goods Collection of

Raw Materials on credit Accounting

On Credit Receivables

Average Age of Accounts Receivables

Inventory (AAI) Period (ARP)

Accounts

Payable Period

(APP)

Receipt of Payments to

Invoice Suppliers

Operating Cycle (OC)

Cash Conversion cycle (CCC)

Operating Cycle and Cash Cycle

There is an invisible time lag between the sale of goods and receipt of cash. There

is, therefore, a need for working capital. In other words, sufficient working capital is

necessary to sustain sales activity. The operating cycle concept penetrates to the

heart of working capital management in a more dynamic form. The time that elapses

to convert raw materials into cash is known as operating cycle. In other words the

time that elapses between the purchase of raw materials and the collection of cash

for sale is referred to as the operating cycle.

The operating cycle involves the following procedure:

a) Conversion cash into raw materials

b) Conversion of raw materials into work-in-process

c) Conversion of work-in-process into finished goods

d) Conversion of finished goods into sales(Debtors and Cash)

44

e) Conversion of debtors into cash

Cash Conversion Cycle

The amounts of time a firm’s resources are tied up calculate by subtracting the

average payment period from the operating cycle.

CCC = OC – APP

OC = Operating Cycle

APP= Accounts Payable Period

OC = AAI + ARP

AAI = Average Age of Inventory

ARP = Average Collection Period

AAI = Average Inventory

Cost of Goods Sold / 365

ARP= Average Accounts Receivables

Annual Sales/ 365

APP = Average Accounts Payable

Cost of Goods Sold / 365

45

ANALYSIS OF DATA

46

Operating Cycle

In days

PERIOD AAI ARP OC2007-2008 46.57 15.39 61.962006-2007 45.89 18.29 64.182005-2006 49.22 20.16 69.382004-2005 43.41 19.02 62.432003-2004 40.63 15.36 55.99

The time that elapsed to convert raw materials into cash is known as operating cycle.

Operating Cycle (OC) = AAI + ARP

During the year 2005-2006, the operating cycle period increased by a great extend

to 69.38 days from the previous year’s figure of 62.43 days. But now the operating

cycle period has decreased in the last two years which is a good sign for the

company. This means that the time elapsed to convert raw materials into cash

becoming lesser.

Both the Average Age of Inventory and the Average Collection period should be

reduced to improve the Operating cycle period.

0.00

10.00

20.00

30.00

40.00

50.00

60.00

2007-2008

AVERAGE AGE OF INVENTORY

0.00

5.00

10.00

15.00

20.00

25.00

2007-2008

AVERAGE RECEIVABLES PERIOD

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

45.00

50.00

2007-2008

ACCOUNTS PAYABLE PERIOD

2006-2007 2005-2006 2004-2005 2003-2004

AVERAGE AGE OF INVENTORY

2006-2007 2005-2006 2004-2005 2003-2004

AVERAGE RECEIVABLES PERIOD

2006-2007 2005-2006 2004-2005 2003-2004

ACCOUNTS PAYABLE PERIOD

47

DAYS

DAYS

DAYS

48

Cash Conversion Cycle

In days

Cash Conversion Cycle (CCC) is the time length between the payment for suppliers

of the raw materials and collection of cash for sales.

CCC = AAI + ARP – APP

As the operating cycle period increased by a great extend to 69.38 days from the

previous year’s figure of 62.43 days during the year 2005-2006, likewise the CCC

increased from 16.35 days to 27.26 days during that year. But now the Operating

Cycle period as well as CCC has shown a decreasing trend in the last two years

which is a good sign for the company.

Both the Average Age of Inventory and the Average Collection Period should be

reduced to improve the CCC period. Average Collection Period should be minimised

by implementing attractive credit policy that allows prompt payment by the debtors.

Also the Accounts Payable Period should be maximised by utilising the credit period

allowed by creditors to the maximum extend.

PERIOD AAI ARP APP CCC2007-2008 46.57 15.39 42.92 19.042006-2007 45.89 18.29 37.72 26.462005-2006 49.22 20.16 42.12 27.262004-2005 43.41 19.02 46.08 16.352003-2004 40.63 15.36 43.58 12.40

Statement of Working Capita

The graph mainly shows an increasing trend in the amount of working capital, expec

for the year 2006-2007 when it

0

100

200

300

400

500

600

2003 -2004

Particulars 2003

Current AssetsInventories 262.66Sundry Debtors 120.41Cash and Bank Balances

106.35

Other Current AssetsLoans and Advances 157.89Total 647.36

Current LiabilitiesCurrent Liabilities 310.59ProvisionsTotal 338.91Working Capital(A-B) 308.45

Statement of Working Capital

The graph mainly shows an increasing trend in the amount of working capital, expec

2007 when it fell sharply by 132.81 crores.

2004 -2005 2005 -2006 2006 -2007 2007

WORKING CAPITAL

2003-04 2004-05 2005-06 2006

262.66 330.12 419.42120.41 156.52 175.14106.35 110.43 231.36

0.05 0.02 0.21157.89 146.46 184.39647.36 743.55 1,010.53

310.59 380.14 388.6328.32 28.83 52.05

338.91 408.97 440.67308.45 334.58 569.86

49

The graph mainly shows an increasing trend in the amount of working capital, expect

2007 -2008

2006-07 2007-08

451.95 513.29203.06 155.13172.00 265.85

13.914 12.84193.71 178.68

1,034.63 1125.80

542.20 565.8355.38 93.09

597.58 658.91437.05 466.89

50

COMPONENTS OF TOTAL CURRENT ASSETS

Interpretation:

Important facts can be drawn about the company’s current asset from the above

figure:

The current assets consists of 42-44% of inventory in almost all years under

study

There has been a steep decrease in the debtors to 14% during the year 2007-

2008, which was otherwise hovering around 18-20% in the past years.

Cash and Bank balances showed high fluctuations during the years, lowest

being 15% and the highest being 24%

Other current assets are less than 1% in almost all the years

There has been a steady decrease in the loans and advances which was 24%

in the 2003- 2004 now down to 16%

51

RATIO ANALYSIS

INDUSTRIAL AVERAGE OF SOME IMPORTANT RATIOS*

*source: zen money

*The ratios of 4 major players namely MRF Tyres, Apollo Tyres, Ceat and JK tyres are taken for calculating the industrial

average. These companies altogether holds around 74% share of Indian Market.

RATIOS Yearly Average 5 Years Average

2003 -2004 2004 -2005 2005 -2006 2006 -2007 2007 -2008

CURRENT RATIO 1.91 1.86 1.68 1.59 1.61 1.73

QUICK RATIO 1.25 1.19 1.03 0.93 0.86 1.05

AVG COLLECT PERIOD

47.47 46.19 43.73 38.05 36.17 42.32

INV HOLDING PERIOD

41.89 40.69 39.77 39.14 46.05 41.51

WC TURNOVER RATIO

6.54 8.75 8.03 9.89 9.70 8.58

YEAR CURRENT ASSETS2003 -20042004 -20052005 -20062006 -20072007 -2008

This ratio measures the solvency of the company in the short

are those assets which can be converted into cash within a year. Current liabilities

and provisions are those liabilities that are payable within a year.

Current Assets, Lo

Current

A current ratio 2:1 indicates a highly solvent position. A current ratio of 1.33:1 is

considered by banks as the minimum acceptable level for providing working capital

finance. The constituents of the c

themselves for evaluation of a company’s solvency position. A very high current ratio

will have adverse impact on the profitability of the organisation. A high current ratio

0.00

0.50

1.00

1.50

2.00

2.50

2003 -2004 2004

CURRENT RATIO

CURRENT RATIOCURRENT ASSETS CURRENT LIABS

647.36 338.91743.55 408.97

1010.51 440.671,034.63 597.581,125.80 658.91

This ratio measures the solvency of the company in the short-term. Current assets


and provisions are those liabilities that are payable within a year.

Current Assets, Loans and Advances

Current Liabilities and Provisions



finance. The constituents of the current assets are as important as the current assets



2004 -2005 2005 -2006 2006 -2007 2007 -2008

CURRENT RATIO

52

RATIO1.911.822.291.731.71

term. Current assets




urrent assets are as important as the current assets



RATIO

53

may be due to the piling up of inventory, inefficiency in the collection of debtors, high

balances in cash and bank accounts without proper investment etc.

Interpretation:

The current ratio in the year 2005-2006 is more than 2:1 which may not be

favourable due to various reasons like 1) there may be slow moving stocks or the 2)

cash lying idle because of insufficient investment. Even though the Company is now

maintaining a healthy current ratio average it is showing a decreasing trend except

for the year 2005 -2006. This indicates that there has been deterioration in the

liquidity position of the firm.

Industry Comparison:

Apollo tyres maintain a healthy current ratio when compared to the industrial average

ratio which is 1.91, 1.86, 1.68, 1.59, 1.61 for the respective years. Some years it is

almost the same and in one year the ratio is better than the industrial average ratio.

YEAR 2003 -20042004 -20052005 -20062006 -20072007 -2008

This ratio is used as the measure of the company’s ability to meet its current

obligation since bank overdraft is secured by the inventories, the other current assets

must be sufficient to meet other current liabilities.

Current Assets, Loans and Advance

Current Liabilities and Provisions

A quick ratio of 1:1 indicates a highly solvent position. The ratio serves as

supplement to the current ratio in analysing liquidity.

Interpretation:

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

2003 -2004 2004

QUICK RATIO

QUICK RATIOQUICK ASSETS QUICK LIABS

384.70 338.91413.43 408.97591.10 440.67582.68 597.58612.51 658.91



must be sufficient to meet other current liabilities.

Current Assets, Loans and Advances - Inventories

Current Liabilities and Provisions – Bank overdraft


supplement to the current ratio in analysing liquidity.

2004 -2005 2005 -2006 2006 -2007 2007 -2008

QUICK RATIO

54

RATIO1.141.011.340.980.93



Inventories

Bank overdraft


RATIO

55

The Quick ratio in the year 2005-2006 is 1.34:1 which is very higher than the

standard quick ratio which is 1:1. Even though the company is now maintaining a

healthy quick ratio average, it is showing a decreasing trend except for the year 2005

-2006. The company must take necessary steps to step up the ratio to 1:1 which

indicates highly solvent position. The quick ratio of the company in the last year

2007-08 is 0.93:1, this indicates that the concern may be able to meet its short-term

obligations.


The quick ratio of the company, when compared to industrial average ratio which is

1.25, 1.19, 1.03, 0.93, 0.86 for the respective years, shows that, in last three years

the company have surpassed the industrial average ratio. This is a highly

commendable performance.

ABSOLUTE LIQUIDITY RATIO

YEAR

2003 -2004

2004 -2005

2005 -2006

2006 -2007

2007 -2008

This is the ratio of absolute liquid assets to quick liabilities. However, for calculation

purposes, it is taken as ratio of absolute liquid assets to current liabilities. Absolute

liquid assets include cash in hand, cash at bank

investments.

The acceptable norm for this ratio is 50% or 0.5:1 or 1:2

liquid assets are considered adequate to pay Rs.2 worth current liabilities.

0.00

0.10

0.20

0.30

0.40

0.50

0.60

2003 -2004 2004




CASH CURRENT LIABS

106.35 338.91

110.43 408.97

231.36 440.67

172.00 597.58

265.85 658.91

ratio of absolute liquid assets to quick liabilities. However, for calculation


liquid assets include cash in hand, cash at bank and short-term or tempora

Absolute Liquid Assets

Current Liabilities

acceptable norm for this ratio is 50% or 0.5:1 or 1:2. i.e. Re. 1 worth absolute


2004 -2005 2005 -2006 2006 -2007 2007 -2008


56

RATIO

0.31

0.27

0.53

0.29

0.40

ratio of absolute liquid assets to quick liabilities. However, for calculation


term or temporary

. i.e. Re. 1 worth absolute


RATIO

57

Interpretation:

The absolute liquidity ratio in the year 2005-2006 is very healthy .53:1 which is

higher than the standard. But the years 2003-04, 2004-2005, 2006-07 shows a very

poor ratios of .31,.27,.29 respectively. The absolute liquidity ratio of 2007-2008

shows an increasing trend in the absolute liquidity ratio which is a good sign. The

company should improve its absolute liquidity ratio.

DEBTORS TURNOVER RATIO

YEAR

2003 -2004

2004 -2005

2005 -2006

2006 -2007

2007 -2008

Debtors turnover which measures whether the amount or resources tied up in

debtors is reasonable and whether the company has been efficient in converting

debtors into cash. The higher the ratio, the better the position

Debtors velocity indicates the number of times the debtors are turned over during a

year. Generally the higher the value of debtors turnover the more efficient is the

management of debtors / sales or more liquid are the debtors. Similarly, low debtors

turnover implies inefficient management of debtors or sales and less liquid debtors.

But a precaution is needed while interpreting a very high debtors turnover ratio

0.00

5.00

10.00

15.00

20.00

25.00

30.00

2003 -2004




SALES AVG. ACC REC

2,314.31 81.07

2,656.81 138.46

3,002.12 165.83

3,774.34 189.10

4,246.98 179.09

turnover which measures whether the amount or resources tied up in


The higher the ratio, the better the position

Credit Sales

Average Debtors

y indicates the number of times the debtors are turned over during a



efficient management of debtors or sales and less liquid debtors.


2004 -2005 2005 -2006 2006 -2007 2007 -2008


58

TIMES

28.55

19.19

18.10

19.96

23.71

turnover which measures whether the amount or resources tied up in


y indicates the number of times the debtors are turned over during a



efficient management of debtors or sales and less liquid debtors.


TIMES

59

because a very high ratio may imply a firm’s inability due to lack of resources to sell

on credit there by losing sales and profits.

Interpretation:

Even though the company could not repeat the debtors turnover ratio of the year

2003-2004 which is 28.55 times, it is showing an increasing trend in the debtors

turnover ratio from the year 2005 -2006 to 2007- 2008. Which is 18.10, 9.96, 23.71

respectively. This indicates that management of debtors is becoming more and more

efficient / more liquid are the debtors.

AVERAGE COLLECTION PERIOD

YEAR

2003 -2004

2004 -2005

2005 -2006

2006 -2007

2007 -2008

Average Collection Period measures how long it will take to collect amounts from the

debtors.

The actual collection period can be compared with the stated credit terms of the

company. If it is longer than those terms, then this indicates inefficiency in collecting

debts.

The average collection period ratio represents the average number of days for which

a firm has to wait before its receivables are converted into cash. It measures the

0.00

5.00

10.00

15.00

20.00

25.00

2003 -2004



AVG COLLECTION PERIOD

DAYS DTR

365 28.55

365 19.19

365 18.10

365 19.96

365 23.71


No of Working days

Debtors Turnover Ratio





2004 -2005 2005 -2006 2006 -2007 2007 -2008


60

DAYS

12.78

19.02

20.17

18.29

15.39






DAYS

61

quality of debtors. Generally, the shorter the average collection period the better is

the quality of debtors as a short collection period implies quick payment by debtors.

Similarly, a higher collection period implies as inefficient collection performance

which in turn adversely affect the liquidity or short term paying capacity of a firm out

of its current liabilities. Moreover, longer the average collection period the larger are

the chances of bad debt.

Interpretation:

Even though the company could not repeat the average collection period of the year

2003-2004 which is 12.78 days, it is showing an decreasing trend in the average

collection period from the year 2005 -2006 to 2007- 2008. Which is 20.17, 18.29,

15.39 days respectively. This indicates that the credit policies of the company is

good or prompt payment from the side of debtors.


One important fact found when compared with the industrial average period which is

47.47, 46.19, 43.73, 38.05, 36.17 days for the respective years, is that the

company’s average collection period is lesser than 50% of industrial average in

almost all years. Even though lesser time taken for collection of debt is a desirable

because the company get quick payments from its debtors, the company should

reassess its credit policy because it may lose its customers owing to the attractive

credit period offered by its competitors.

INVENTORY TURNOVER RATIO

YEAR

2003 -2004

2004 -2005

2005 -2006

2006 -2007

2007 -2008

A considerable amount of a company’s capital may be tied up in the financing of raw

materials, work in progress and finished goods. It is important to ensure that the level

of stocks is kept as low as possible, consistent with the need to fulfil

in time.

Average Inventory = (opening stock + closing stock)

0.00

2.00

4.00

6.00

8.00

10.00

12.00

2003 -2004




SALES AVG. INVENTORY TIMES

2,314.31 239.57

2,656.81 296.39

3,002.12 374.77

3,774.34 435.68

4,246.98 482.63



as low as possible, consistent with the need to fulfil

Sales

Average Inventory

Average Inventory = (opening stock + closing stock)

2004 -2005 2005 -2006 2006 -2007 2007 -2008


62

TIMES

9.66

8.96

8.01

8.66

8.80



as low as possible, consistent with the need to fulfil customer orders

/ 2

TIMES

63

The inventory turnover ratio measures how many times a company’s inventory has

been sold during the year. If the inventory turnover ratio has decreased from past it

means that either inventory is growing or sales are dropping.

In addition to that, if a firm has a turnover that is slower than for its industry, then

there may be obsolete goods on hand, or inventory stocks may be high. Low

inventory turnover has impact on the liquidity of the business.

Interpretation:

The company is maintaining a consistent inventory turnover ratio in almost all the

years under study. This indicates efficient management of inventory because more

frequently the stocks are sold and the lesser amount of money is required to finance

the inventory.

INVENTORY HOLDING RATIO

YEAR

2003 -2004

2004 -2005

2005 -2006

2006 -2007

2007 -2008

It is the average time taken for clearing the stocks.

dividing the number of days by inventory turnover.

Interpretation:

The company is maintaining a consistent inventory

years under study, which is

management of inventory because more frequently stocks are disposed off or sold.

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

45.00

50.00

2003 -2004




DAYS AVG. INVENTORY

365 9.66

365 8.96

365 8.01

365 8.66

365 8.80

It is the average time taken for clearing the stocks. This period is calculated by

dividing the number of days by inventory turnover.

Days in a year

Inventory Turnover Ratio

The company is maintaining a consistent inventory holding ratio

years under study, which is averaging around 42.5 days. This indicates efficient


2004 -2005 2005 -2006 2006 -2007 2007 -2008


64

DAYS

37.78

40.74

45.57

42.15

41.48

This period is calculated by

holding ratio in almost all the

averaging around 42.5 days. This indicates efficient


DAYS

65


From the comparison with industrial average period which is 41.89, 40.69, 39.77,

39.14, 46.05 days for the respective years, it is found that the company is having

higher inventory holding period in some years. But in the last year the bettered its

inventory holding period and was lesser than the industrial average.

YEAR AVG. INVENTORY2003 -20042004 -20052005 -20062006 -20072007 -2008

The level of inventory in a

which measures how much has been tied up in inventory.

of inventory to the current asset.

Interpretation:

The company is maintaining

under study. This indicates that the company’s wealth is not unnecessarily tied up in

the inventory.

0.34

0.35

0.36

0.37

0.38

0.39

0.40

0.41

0.42

0.43

0.44

2003 -2004 2004

INVENTORY RATIO

INVENTORY RATIOAVG. INVENTORY CURRENT ASSETS

239.57 647.36296.39 743.55374.77 1010.51435.68 1,034.63482.63 1,125.80

The level of inventory in a company may be assessed by the use of inventory ratio,

which measures how much has been tied up in inventory. This ratio shows the ratio

of inventory to the current asset.

Inventory x 100

Current Assets

company is maintaining a consistent inventory ratio under almost all the period

. This indicates that the company’s wealth is not unnecessarily tied up in

2004 -2005 2005 -2006 2006 -2007 2007 -2008

INVENTORY RATIO

66

RATIO0.370.400.370.420.43

company may be assessed by the use of inventory ratio,

This ratio shows the ratio

nt inventory ratio under almost all the period

. This indicates that the company’s wealth is not unnecessarily tied up in

RATIO

WORKING CAPITAL TURNOVER RATIO


YEAR

2003 -2004

2004 -2005

2005 -2006

2006 -2007

2007 -2008

Working capital turnover ratio indicates the velocity of the utilisation

capital. This ratio indicates the number of times the working capital is turned over in

the course of a year. This ratio measures the efficiency with which the working

capital is being used by a firm. A higher ratio indicates efficient util

capital. And a low ratio indicates otherwise. But a very high working capital turnover

ratio is not a good situation for any firm and hence care must be taken while

interpreting the ratio. This ratio can at best be used by making of comp

trend analysis for different firms in the same industry and for various periods. This

ratio can be calculated as:

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00

2003 -2004

WORKING CAPITAL TURNOVER



SALES NET W C TIMES

2,314.31 308.45 7.50

2,656.81 334.58 7.94

3,002.12 569.85 5.27

3,774.34 437.05 8.64

4,246.98 466.89 9.10

Working capital turnover ratio indicates the velocity of the utilisation



capital is being used by a firm. A higher ratio indicates efficient utilisation of working



interpreting the ratio. This ratio can at best be used by making of comp


2004 -2005 2005 -2006 2006 -2007 2007 -2008

WORKING CAPITAL TURNOVER

67

TIMES

7.50

7.94

5.27

8.64

9.10

Working capital turnover ratio indicates the velocity of the utilisation of net working



isation of working



interpreting the ratio. This ratio can at best be used by making of comparative and


TIMES

68

Sales

Net Working Capital

Interpretation:

The graph shows an increasing trend in the working capital turnover ratio except for

the year 2005- 2006 where it recorded the lowest of 5.27. It indicates the efficient

utilisation of working capital by the firm.


The comparison of industrial average which is 6.54, 8.75, 8.03, 9.89, 9.70 times for

the respective years, shows that the industrial average showed a steep increase in

the ratio during the year 2004-2005, but the company showed a steady ratio during

this year. In the year 2005-2006 the company’s working capital turnover ratio was

below par. And in the last two years both the industry as well as the company

improved their performance.

CREDITORS TURNOVER RATIO

YEAR CREDIT PURCHASES2003 -20042004 -20052005 -20062006 -20072007 -2008

Creditors’ turnover ratio indicates the number of times the accounts payable rotate in

a year. It signifies the credit period enjoyed by the firm in paying

Accounts payable include trade creditors and bills payable. This ratio shows the

relationship between net credit purchases for the whole year and accounts payable.

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

2003 -2004 2004



CREDITORS TURNOVER RATIOCREDIT PURCHASES AVG. ACC PAYABLE

1,193.16 257.001,425.37 314.611,844.16 320.732,258.03 358.122,384.96 444.79


a year. It signifies the credit period enjoyed by the firm in paying



Net Credit Purchase

Average Trade Creditors

2004 -2005 2005 -2006 2006 -2007 2007 -2008


69

RATIO4.644.535.756.315.36


a year. It signifies the credit period enjoyed by the firm in paying its creditors.



TIMES

70

Interpretation:

The Creditors turnover ratio indicates the promptness in making payment of credit

purchases. The ratio signifies that the creditors are being paid promptly, thus

enhancing the credit worthiness of the company.

The creditors turnover ratio of cycle of the company shows that company utilises the

credit period given by the suppliers to the maximum extend.

71

SCHEDULE OF CHANGES IN WORKING CAPITAL POSITION

It is prepared in order to measure the increase / decrease in the working capital over

a period of time. It is necessary to prepare this schedule. This schedule is prepared

with the help of only current assets and current liabilities.

Compare each current asset in previous year, with that in current year. Similarly,

compare each current liability in the previous year with that in the current year. The

difference is recorded for each individual current asset and current liability. This

process will be repeated till all accounts relating to all current assets and current

liabilities in two Balance Sheets are gone through and differences are properly

recorded. The two columns showing the changes in current assets and current

liabilities are balanced. The balancing figure represents either an increase or

decrease in working capital. It must be remembered that schedule of changes in

working capital is prepared only from accounts appearing in the Balance Sheet.

Increase in Current Assets and Decrease in Current Liabilities:

The acquisition of current assets and repayment of current liabilities will result in

funds out flow. The funds may be applied to finance an increase in stock, debtors

etc. or to reduce trade creditors, bank over draft, bills payable etc.

Decrease in Current Assets and Increase in Current Liabilities:

The reduction in current assets e.g. stock or debtors balance will result in release of

funds to be applied elsewhere. Short term funds raised during the period by any

increase in the current liabilities like trade creditors, bank over draft and tax dues,

means that these sources have more at the end of the year than at the beginning.

72

Schedule of changes in working capital position(02-03 to 03-04)

Particulars 2002-03 2003-04 Increase (+)

Decrease (-)

Current AssetsInventories 216.48 262.66 46.18

Sundry Debtors 74.37 120.41 46.04

Cash and Bank Balances

97.61 106.35 8.74

Other Current Assets 0.75 0.05 0.70Loans and Advances 117.76 157.89 40.13

Total 506.97 647.36

Current LiabilitiesCurrent Liabilities 221.44 310.59 89.15

Provisions 20.78 28.32 7.54Total 242.22 338.91

(A-B) 264.75 308.45 141.09 97.39Increase/ Decrease 43.70 43.70

308.45 308.45 141.09 141.09

The statement shows that there is a net increase in working capital in the year 2003-

2004 of Rs.43.70 Crores.

73

Schedule of changes in working capital position (03-04 to 04-05)


Decrease (-)


Sundry Debtors 120.41 156.52 36.11


106.35 110.43 4.08


Total 647.36 743.55




334.58 334.58 107.65 107.65



74



Decrease (-)


Sundry Debtors 156.52 175.14 18.62


110.43 231.36 120.93


Total 743.55 1,010.53




569.86 569.86 266.98 266.98



75



Decrease (-)


Sundry Debtors 175.14 203.06 27.91


231.36 172.00 59.36


Total 1,010.53 1,034.63




569.86 569.86 216.26 216.26

The statement shows that there is a net decrease in working capital in the year

2006-2007 of Rs.132.80 Crores. This year showed a rare case of net decrease in the

working capital.

76



Decrease (-)


Sundry Debtors 203.06 155.13 47.92Cash and Bank Balances

172.00 265.85 93.85


Total 1,034.63 1125.80

Current Liabilities

Current Liabilities 542.20 565.83 23.62


(A-B) 437.05 466.89 155.19 125.36

Increase/ Decrease 29.84 29.84

466.89 466.89 155.19 155.19



77

FINDINGS, SUGGESTIONS AND

CONCLUSIONS

78

FINDINGS

1. In the last two years the Operating Cycle period as well as Cash Conversion

Cycle has shown a decreasing trend, which is a good sign for the company. It

indicates that the time taken for the conversion of cash is becoming less and

less.

2. When compared with the various industrial average ratios, the company is

showing a very healthy trend over the last five years. Also the quick ratio of

the company showed an admirable consistency and was higher than the

industrial average over the last three years.

3. Company is maintaining a healthy current ratio which is at par with industrial

ratio. But it is showing a decreasing trend except for the year 2005 -2006.

This indicates that there has been deterioration in the overall liquidity position

of the firm.

4. The quick ratio in the year 2005-2006 was much higher than the standard

quick ratio which is 1:1. The quick ratio of the company in the last year 2007-

08 is 0.93:1, this indicates that the concern may be able to meet its short-term

obligations.

5. The absolute liquidity ratio in the year 2005-2006 was very healthy and higher

than the standard ratio. But during other years it recorded very poor ratios.

The absolute liquidity ratio of 2007-2008 shows an increasing trend, which is

a good sign.

6. It is found that the cash and bank balances of the company are fluctuating

highly over the period of study. The company should improve its cash

management to avoid these fluctuations.

79

7. The company could not repeat the Debtors turnover ratio of the year 2003-

2004 which is 28.55 times. But it is showing an increasing trend during the

last three years. This indicates that management of debtors is becoming more

and more efficient / more liquid are the debtors.

8. The company’s the average collection period is much lower when compared

to the industrial average, which is below 50% of the industrial average. This

indicates that the credit policies of the company is good or prompt

paymentfrom the side of debtors.

9. The company is maintaining a consistent inventory turnover ratio, inventory

holding ratio and inventory ratio in almost all the years under study. This

indicates efficient management of inventory because more frequently the

stocks are sold and the lesser amount of money is required to finance the

inventory.

10.The working capital turnover ratio shows an increasing trend in the last two

years. It also meets the industrial average. The overall trend indicates the

efficient utilisation of working capital by the firm.

11.The statement shows that there is a net increase in working capital in almost

all years except 2006-2007, where it recorded a net decrease. This year

showed a rare case of net decrease in the working capital.

12.From the overall analysis of working capital for the last five years, it is found

that, even though the company has failed to attain the standard ratios in some

years, it is managing its working capital effectively.

80

SUGGESTIONS

1. The Average Age of Inventory of the company should be reduced to improve

the CCC period. Average Age Inventory can be minimised by using various

inventory management techniques like ‘Just In Time’ method.

2. The Accounts Payable Period can be maximised by utilising the credit period

allowed by creditors to the maximum extend.

3. The company must take necessary steps to step up the quick ratio to 1:1

which indicates highly solvent position.

4. The company should give more emphasis on the cash management as the

absolute liquidity ratios of almost all years are below standards. Cash budgets

are very useful for cash management.

5. Set the planning standards for stock days, debtor days and creditor days.

Having set planning standards, keep to them.

6. Impress on staff that these targets are just important operating budgets and

standards cost. Instil an understanding amongst the staff that working capital

management produces profits.

7. Keep stock levels as low as possible, consistent with not running out of stock

and not ordering stock in uneconomically small quantities.

8. “Just in Time” stock management is good, as long as it is “Just in Time” and

never fails to deliver on time. Consider keeping stock in supplier’s

warehouses drawing on its as needed and saving warehousing cost.

9. Assess all significant new customers for their ability to pay. Take references,

examine accounts. Try not to take on new customers who would be poor

payers. Re assess all significant customers periodically.

81

10. Stop supplying existing customers who are poor payers, the company may

lose sales, but after all it is the quality of business rather than quantity of

business that matters.

11.Consider offering discounts for prompt settlement of invoices, but only if the

discounts are lower than the costs of borrowing the money owed from other

sources.

12.Take advantage of credit offered by suppliers and do not pay invoices too

early. Only pay early if the supplier is offering a discount.

82

CONCLUSION

Apollo tyres ltd is one of the major players in tyre manufacturing sector in India. It

has captured almost 21% of share in the Indian market behind the market leader

who holds 22% of market share.

From the overall analysis, it can be seen that the company’s working capital

management is highly efficient and has met the industrial average and the standard

ratios. The comparison with the industrial average helped in understanding the

efficiency of the working capital management. It also helped to know the

shortcomings of the company in some areas. The company should take necessary

actions to overcome these drawbacks and should further strengthen the working

capital management.

The company should aim at creating a ‘benchmark’ in the working capital

management along with other aspects under the financial management to attain

higher position.

83

Bibliography & Webliography

Author Title of the book Other Details

Sudhindra Bhat Financial Management

Principles and Practice

2nd Edition, Excel Books, ISBN -

978-81-7446-586-3

Aswath

Damodaran

Corporate Finance

Theory and Practice

2nd Edition, Wiley India (P) Ltd.,

New Delhi, 2008

Shashi K. Gupta,

R.K. Sharma

Accounting

And

Financial Management

Kalyani Publishers, Noida, 2003

Company documents

Apollo Tyres Ltd. Annual Reports 07- 08, 06-07, 05-06,

04-05, 03-04

Websites

www.apollotyres.com

www.zenmoney.com

Documents

Apollo Tyres Ltd. - Project Report on Working Capital Management