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CHAPTER I
Industrial profileCom pany profile
Theoreticalbackground
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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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WORKING CAPITAL ANALYSIS
Statement showing changes in working capital of Suzuki apple auto agency
pvt.ltd during the year 2007 2008
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
CURRENT LIABILITIES:
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
Other current liabilities &
expenses
5,60,345 24,29,090 - 18,68,742
Total Current Liabilities(B): 19,05,563 58,79,860
WORKING CAPITAL(A-B)
Current assets-current liabilities
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
From the above table it observed that the working capital of the company
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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WORKING CAPITAL ANALYSIS
Statement showing changes in working capital of Suzuki apple auto agency
pvt.ltd during the year 2008 2009
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
CURRENT LIABILITIES:
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
Other current liabilities &
expenses
24,29,090 35,96,122 - 11,67,032
Total Current Liabilities(B): 58,79,860 80,15,637
WORKING CAPITAL(A-B)
Current assets-current liabilities
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
From the above table it observed that the working capital of the company
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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WORKING CAPITAL ANALYSIS
Statement showing changes in working capital of Suzuki apple auto agency
pvt.ltd during the year 2009 2010
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 -
Total Current assets(A) 1,22,16,22
8
1,42,59,01
8
CURRENT LIABILITIES:
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
Other current liabilities &
expenses
35,96,122 11,19,559 24,76,732 -
Total Current Liabilities(B): 80,15,637 58,24,285
WORKING CAPITAL(A-B)
Current assets-current liabilities
42,00,591
Net Increase in Working capital 42,34,142 - - 42,34,142
84,34,733 84,34,733 63,23,962 63,23,961
.INTERPRETATION
From the above table it observed that the working capital of the company
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
net working capital has increased to Rs.42, 34,142.
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WORKING CAPITAL ANALYSIS
Statement showing changes in working capital of Suzuki apple auto agency
pvt.ltd during the year 2010 2011
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 -
Total Current assets(A) 1,42,59,01
8
1,33,35,60
1
CURRENT LIABILITIES:
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 -
Other current liabilities &
expenses
11,19,559 8,46,915 2,72,644 -
Total Current Liabilities(B): 58,24,285 46,12,789
WORKING CAPITAL(A-B)
Current assets-current liabilities
84,34,733 87,22,812
Net Increase in Working capital 2,88,079 - - 2,88,079
87,22,812 87,22,812 15,02,125 15,02,125
.INTERPRETATION
From the above table it observed that the working capital of the company
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
net working capital has increased to Rs.2, 88,079.
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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
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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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Working Capital Management
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 Management
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
Agency Pvt. Ltd. From the year 2006 07 to 2010-11
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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Working Capital Management
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
Pvt. Ltd. From the year 2006 07 to 2010-11
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
Agency Pvt. Ltd. from the year 2006-07 to 2010-11
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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Working Capital Management
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.
Ltd. From the year 2006 07 to 2010-11
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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Working Capital Management
GRAPH 8
Graph showing Debtors Turnover Ratio of Suzuki Apple Auto Agency Pvt.
Ltd. from the year 2006-07 to 2010-11
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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Working Capital Management
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
Pvt. Ltd. From the year 2006 07 to 2010-11
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
Pvt. Ltd. from the year 2006-07 to 2010-11
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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Working Capital Management
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.
Ltd. From the year 2006 07 to 2010-11
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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Working Capital Management
GRAPH 10
Graph showing Stock Turnover Ratio of Suzuki Apple Auto Agency Pvt.
Ltd. from the year 2006-07 to 2010-11
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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Working Capital Management
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
Agency Pvt. Ltd. From the year 2006 07 to 2009-10
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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Working Capital Management
GRAPH 11
Graph showing Average Stock Turnover Ratio of Suzuki Apple Auto
Agency Pvt. Ltd. from the year 2006-07 to 2010-11
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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Working Capital Management
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
Pvt. Ltd. From the year 2006 07 to 2010-11
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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Working Capital Management
GRAPH 12
Graph showing Creditors to Inventory Ratio of Suzuki Apple Auto Agency
Pvt. Ltd. from the year 2006-07 to 2010-11
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
Agency Pvt. Ltd. From the year 2006 07 to 2010-11
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