A project report on

A STUDY ON THE EVALUATION OF EFFICIENCY OF RECEIVABLES MANAGEMENT AT SUZUKI MOTOR CYCLE INDIA PVT. LTD.,
(APPLE AUTO AGENCY PVT. LTD.)

Submitted in partial fulfillment of the requirements of the Master of Business Administration Degree Course of

SRI VENKATESWARA UNIVERSITY

By S.N.Madhulika (Reg. 2011-13 )

Under the guidance of

Prof. Balaji Prasad

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SRI VENKATESWARA UNIVERSITY TIRUPATI

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CONTENTS
Chapter No. I II III IV V VI Introduction Research Design Company Profile Analysis and Interpretation Findings Recommendation and conclusion Annexure Bibliography Content Page No.

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CHAPTER - I
A) Industrial Background Automobile industry The Indian automobile industry is the tenth largest in the world with an annual production of approximately 2 million units. Indian auto industry, promises to become the major automotive industry in the upcoming years and the industry experts are hopeful that it will touch 10 million units mark. Indian automobile industry is involved in design, development, manufacture, marketing, and sale of motor vehicles. There are a number of global automotive giants that are upbeat about the expansion plans and collaboration with domestic companies to produce automobiles in India. The major car manufacturers in India are Maruti Udyog, Hyundai Motors India Ltd., TVS, Hero Honda, Yamaha, Bajaj, etc. The heavy motors including buses, trucks, auto rickshaws and multi-utility vehicles are manufactured by Tata-Telco, Eicher Motors, Bajaj, Mahindra and Mahindra etc. Quick Facts: First Indian to own a car in India was Jamshedji Tata. First women to drive a car in India was Mrs. Suzanne RD Tata.

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 The Passenger car and motorcycle segment in the Indian auto industry is growing by 8-9 percent. Commercial vehicle will grow by 5.2 percent. The first automobile in India was rolled in 1897 in Bombay. India is a potential emerging auto market. Motorcycles contribute 80% of the two-wheeler industry. Unlike the USA, the Indian passenger vehicle market is dominated by cars (79%). India is the largest two-wheeler manufacturer in the world. Indias motorcycle segment will grow by 8-9 percent in the coming years, 11. India is the fifth largest commercial vehicle manufacturer in the world. 12. India has the number on global motorcycle manufacturer. 13. In Asia, India is the fourth largest car market. Used Car Market The new chapter in the automobile industry is that of used cars. The massive demand of used cars indicates that cars are becoming increasingly popular. Those who cant afford the luxury cars and their high prices are opting for used cars. In todays time, customers are conscious and diligently investing on car dealership. Car buyers are investing heavily a lot of time for both to sell a car and buy car. Theres also a number of car websites that have offering detailed information on new car prices, used cars, car reviews, Chevrolet cars, Jaguar cars and Luxury cars.

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Market Share At present major Indian, European, Korean, Japanese automobile Companies are holding significant market shares. In commercial vehicle, Tata Motors dominates over 60% of the Indian commercial vehicle market. Tata Motors is the largest medium and heavy commercial vehicle

manufacturer. Among the two-wheeler segment, including scooters and mopedsmotorcycles have major share in the market. Hero Honda contributes 50% motorcycles to the market in which Honda holds 46% share in scooter and TVS makes 82% of the mopeds in the country. In the three wheeler industry in India, Piaggio holds 40% of the market share. Bajaj is the leader by making 68% of the three-wheelers. Car manufacturers in India dominate the passenger vehicle market by 79%. Maruti Suzuki is the largest car producer in India and has 52% share in passenger cars and is a complete monopoly in multipurpose vehicles. In utility vehicles Mahindra holds 42% share. Hyundai and Tata Motors is the second and third car producer in India. A history of the Motorcycle For most people, the word motorcycle automatically conjures up images and feelings of power, speed, and an undeniable conquest of the

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road. Whether or not they have ridden a motorcycle, people generally feel a certain envy of motorcycle riders as they rip past on the highway with the wind rushing through their hair. The motorcycle certainly has a mystique about it that has made it an important part of American culture, in existence for nearly as long as its four-wheeled counterpart, the automobile, the motorcycle has developed from a simple, steam-powered bicycle to the streamlined, powerful machine of today. From steam to Gasoline By the late 1860s in both Europe and America, the steam engine had become the premier method of mobilization and mechanization for most machines. Already well entrenched as a powerful propellant in the locomotive industry, steam power as first applied to two-wheeled bicycles in 1869 (Walker 2006). Two engineers, Frenchman Pierre Michaux and American Sylvester Howard Roper, each created separate models of steam-driven cycle in that year. Michauxs model featured a single-cylinder engine with a cylindrical boiler to generate steam, while Ropers machine boasted two cylinders with a charcoal-fired boiler. Although both bikes were certainly impressive for their time, steam engines proved to be impractically large for two-wheeled machines, and they were quickly abandoned as a potential power source for motorcycles.

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During the early pioneering days of the motorcycle, engineers, experimented with a variety of other power sources for the machine, including compressed air, mechanized clockwork, and hydrogen gas.

However, it would not be until the application of the internal combustion engine powered by gasoline, by German engineer Gottlieb Daimler in 1885, that the motorcycle would become truly viable (Walker 2006). Thus, Daimler is generally credited with the creation of the first, true motorcycle. In addition to a gasoline-powered engine, his machine also boasted a primitive two-speed transmission that was the first of its time. With the

implementation of the internal combustion engine and the invention of the inflatable tire in the 1890s (a feature that greatly increased the shock absorption of the motorcycle), the development of the motorized twowheeler was well on its way (Walker 2006). Power and Speed Advance the Motorcycle While early experimentation on the motorcycle was generally isolated to German and French designs, American and British engineers were quick to catch up in the early decades of the twentieth century. As motorcycles became increasingly more viable, dozens of manufactures entered the marketplace with their own unique concepts and designs. While singlecylinder engines and single-speed transmissions were the norm for most early motorcycles, innovative manufacturers quickly began experimenting

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with advanced technology, including overhead valves, variable gears and clutches. In fact, many of the features commonly found in todays motorcycles were originally conceived of in the early 1900s, but their use was curbed by the high cost of production and the unavailability of materials (Walker 2006). Even in the early years of the motorcycle, there was a genuine interest in using the machine not only for transportation, but for racing and sport as well. This interest in motorcycle racing by both athletes and spectators necessarily resulted in demands for more powerful, versatile, and

comfortable machines. By the first decade of the 1900s, these demands had become major considerations for leadings designers, including the American giants Indian and Harley-Davidson (Mancini 1999). Engineers began

experimenting with twin-cylinder engines (also known as V-twins) and even four-cylinder engines to increase power. While the speed and power that could be produced by four cylinders were tantalizing, the machines were not quite ready for this innovation, and the two-cylinder engine eventually became standard on most motorcycles, however, by the outbreak of World War I in 1914, the motorcycle had rapidly progressed from a some what primitive machine just a few decades earlier to a dependable, speedy, and relatively inexpensive means of transportation.

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Motorcycle Take Off In the decades following World War I, populations in Europe and America gained a new understanding of the mechanical world. While armies had begun the conflict with cavalry units and horses, motorized tanks and airplanes had become common sights by the end of the fighting. This new understanding of mechanization greatly impacted the motorcycle industry, and sales for the powerful two-wheeler boomed in the 1920s. Notable marques like Moto Guzzi, BMW, and Triumph began producing their first motorcycles during this decade and experienced resounding success,

especially in Europe (Mancini 1999). In America, the motorcycle encountered a large amount of competition with the car, but sales remained relatively stable throughout the 1920s. However, the Great Depression in the 1930s would force several manufacturers out of the business, and those that survived did so only by the skin of their teeth. While the 1930s proved to be a tough decade for motorcycle manufacturing, the industry experienced a boom in sales after World War II that would last throughout the 1950s. In Europe, consumers desired a method of cheap transportation while they recovered from the reeling effects of the war, and the motorcycle industry was happy to oblige. Scooters and mopeds with small, lightweight engines thrived in Europe throughout the 1950s, but the more affluent Americans clamored for large-capacity

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roadsters and dirt bikes (Walker 2006). Motorcycle sales reached their peak during the era, but European manufacturers generally dominated the market. Only Harley-Davidson was able to survive as an American motorcycle manufacturer. Throughout the 1940s and 1950s, a number of advances were made in motorcycle technology, including improved suspension, dual seats and sidecars, and even push-button ignition on some models. However, the early engineering pioneers were beginning to grow old, and the motorcycle was facing increasing competition from the car, as a growing standard of living allowed many consumers to purchase an automobile for the first time. The vibrant motorcycle industry in the West would also soon face serious competition from rising Japanese manufacturers in the 1960s. Competition Increase and the Motorcycle Improves As motorcycles from European and American manufacturers enjoyed commercial success in the West during the 1940s and 1950s, Japanese manufacturers were busy creating their own booming domestic market. By the dawn of the 1960s, leading Japanese manufacturers including Honda, Suzuki and Yamaha were ready to take on the world with their sophisticated bikes. Sales for Japanese motorcycles in the West were initially quite slow, as consumers were not used to the differently designed machines. However, the superior technology and strong performance of the

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Japanese models outmatched anything produced by European or American manufactures, and the motorcycles were soon embraced by consumers (Walker 2006). As the introduction of Japanese marques led to new innovations in the motorcycle industry, enthusiasm for motorcycle racing also served to improve the two-wheeler. Racing required more powerful engines, superior handling, and more reliable braking, and motorcycle manufacturers were eager to provide such desirable features. By 1970, Honda had unveiled its revolutionary four-cylinder, four-stroke engine that prompted an age of superbikes (Walker 2006). Hondas competitors at first tried to counter the engine with higher-performance two-stroke engines, but the power was not comparable. Eventually, all of the Japanese manufacturers, as well as leading European manufacturers, would be forced to outfit their models with more powerful engines. This power would only increase in the 1980s and 19902, as motorcycles became an ever-more important symbol of speed and freedom on the road. Present and Future of Motorcycles In the twenty-first century, motorcycles are not longer seen primarily as a mode of transportation, but more as a status symbol of lifestyle and luxury. Modern-day motorcycles feature innovations that would never have been dreamed of in the early days of the motorized two-wheeler, and the

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technology is becoming increasingly computerized. The industry is now strictly delineated into a variety of bikes for different purposes, and customers can choose between sports bikes, off-road bikes, scooters, superbikes, and even customized bikes, depending upon their preferences (Walker 2006). While the future of motorcycle design will likely bring several new innovations, safety is certain to become a key concern. Engineers are currently experimenting with leg protectors and air bags on their new models. It seems the sky is the limit for how far the motorcycle can go on technological improvements. However, regardless of the changes and innovations to cone, the powerful two-wheeler will likely always remain the ultimate symbol of freedom, speed, and passion on the road. a) Theoretical Literature Financial management is that managerial activity which is concerned with the planning and controlling of the firms financial resources. It was a branch of economics till 1890, and as a separate discipline, it is of recent origin. Still, it has not unique body of knowledge of its own, and draws heavily on economics for its theoretical concepts even today. In general financial management is the effective & efficient utilization of financial resources. It means creating balance among financial planning, procurement of funds, profit administration & sources of funds.

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The present age is the age of industrialization. Large industries are being established in every country. It is very necessary to arrange finance for building, plant and working capital, etc. for the established of these industries. How much capital will be required, from what sources this much of finance will be collected and how will it be invested, is the matter of financial management. Working capital in simple terms means the amount of funds that a company requires for financing its day-today operations. Finance manager should develop sound techniques of managing current assets. Working capital is the excess of current assets over current liabilities. If current assets are equal to current liabilities then working capital will be zero and in case current liabilities are more than current assets, the working capital will be called negative working capital. The working capital emphasis on how much current assets have been financed out of long terms funds. Working Capital - Current Assets Current Liabilities Working capital management is concerned with the problems that arise in attempting to manage the current assets, the current liabilities and the interrelationship that exists between them. The term current assets refer to those assets which in the ordinary course of business can be, or will be, converted into cash within one year without undergoing a diminution in value and without disrupting the operations of the firm. The major current assets are

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1. 2. 3. 4. 5. 6.

Cash Marketable securities Accounts receivable Inventories Prepaid expenses Advances Current liabilities are those liabilities which are intended, at their

inception to be paid in the ordinary course of business, within a year, out of the current assets or earning of the concern. The basic current liabilities are 1. 2. 3. 4. 5. 6. 7. Accounts payable Bills payable Bank overdraft Outstanding expenses Sundry creditors Provision for tax Other provisions against the liabilities payable within a period of 12 months.

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Some of the decisions taken in working capital management are: An adequate supply of raw materials Cash to meet the operation payments. The ability to grant credit to customers. The capacity to wait for market for its finished products. Investment in various current assets. Appropriate sources of fund to finance current assets. Proportion of long term and short term funds to finance current assets. WORKING CAPITAL CONCEPTS There are two concepts of working capital Gross concepts Net concepts

Gross working capital concept Simply called as working capital refers to the firms investment in current assets are the assets which can be converted into cash within an accounting year and include cash short term securities, debtors, bill receivable and stock. Networking capital concept Networking capital refers to the differences between current assets and current liabilities. Current liabilities are those claims of outsiders which are expected to mature for payment within an accounting year. Networking

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capital can be positive or negative. A negative working capital means a negative liquidity and may prove to be harmful for the company. It occurs when current liabilities are in excess if current assets. It may be due to mismanagement of current assets. OBJECTIVES OF WORKING CAPITAL MANAGEMENT To minimize the amount of capital employed in financing the current assets. This will also lead to an improvement in Return on Capital Employed. To manage the current assets in such a way that the marginal return on investment in these assets is not less than the cost of capital acquired to finance them. This will ensure the maximization of the value of business unit. To maintain a proper balance between the amount of current assets & the current liabilities in such a way that a firm is always able to meet its financial obligations whenever due. This will ensure smooth working of the unit without any production held ups due to paucity of funds. The needs & problems for every business are different but generally the following factors must be considered while determining the requirement of working capital. Nature of business Business fluctuations Production policy Credit policy Availability of raw material and bank credit Turnover of inventories Operating efficiency

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1.1

Working capital Cycle

Equity & Loan

Cash Payables Overheads

Receivables

Inventory

Sales

Each component of working capital (namely inventory, receivables and payables) has two dimensions TIME and MONEY. When it comes to manage working capital TIME IS MONEY. If you can get money to move faster around the cycle (collect money due from debtors more quickly) or reduce the amount of money tied up (e.g. 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 consequences, you could reduce the cost of bank interest or you will have additional free money available to support addition sales

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growth or investment. Similarly, if you can negotiate improved terms with suppliers e.g. get longer credit or an increased credit limit; you festively create free finance to help fund future sales. A perusal of operational cycle reveals that the cash invested in operations are recycled back into cash. However it takes time to reconvert the cash. Cash flows in cycle into around and out of a business it is the businesss lifeblood and every managers 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. Advantages of adequate working capital Adequate working capital provides certain benefits to the company, the 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 companys goodwill. It crests confidence among investors and creditors. Thus a firm with adequate working capital can raise requisite funds form market, borrow short term credit from banks, and purchases inventories of raw material etc. for the smooth operations of its business.

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Increase in production inefficiency With adequate working capital the firm can smoothly carryout research and development actives and thus adds to its production efficiency. 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 purchase, seasonal storage of raw material etc., which would reduce the cost of production, thus adds to its profit. Available cash discount Maintenance of adequate working capital enables a company to avail the advantage of cash discount by making cash payment 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 increase the efficiency for fixed assets as their proper maintenance depends upon the availability of funds.

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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. Dangers of inadequate Working Capital Having inadequate working capital lets to so many of dangers as it doesnt fulfill its purpose. Some are given below. Loss of good will and creditworthiness As the firm fall 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 cant make use of favourable opportunities The firm fails to undertake the profitable projects, which not only prevent the fir from availing the benefits of favourable opportunities but also stagnate its growth. Adverse effects of credit opportunities The firm also fails to avail the attractive credit opportunities but also stagnate its growth.

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Operation inefficiencies It leads the company to operating inefficiencies, as day to day commitments cannot be met. Effects on financial capacity Inadequacy of working capital also weakens 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? ESTIMATION OF WORKING CAPITAL MANAGEMENT As discussed above a number of factors are responsible for

determining the amount of working capital required by a firm. Let us now discuss the various methods/technique used in assessment of firms working capital requirements. These methods are: 1. Estimation of components of working capital method This method is based on the basic definition of working capital, excess of current assets over the current liabilities. In other words 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.

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2. 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 fro 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 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 lacks, the required amount of working capital shall be Rs.2 lacks. As seen from above this method is merely an estimation based on past experience. Therefore 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. 3. Operating cycle approach The need of working capital arises mainly because of the gap between the production of goods and their actual realisation 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

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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 stage. 1. Raw materials and stores storage space. 2. Work in process stage. 3. Finished goods inventory stage. 4. Debtors collection stage. Duration of operating cycle The duration o the operating cycle is equal to sum of the duration of these stages less the credit period allowed by the suppliers of the firm. In symbol OC = R+W+F+D-C OC = Duration of the Operation Cycle R = Raw materials and storage space periods W = Work to process period. F = Finished goods storage periods C = Creditors collection period

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Introduction to Receivable Management Accounts Receivable (A/R) is one of a series of accounting transactions dealing with the billing of customers who owe money to a person, company or organization for goods and services that have been provide to the customer. In most business entitles this is typically done by generating an invoice and mailing or electronically delivering it to the customers, who in turn must pay it within an established time frame called credit or payment terms. An example of a common payment term is Net 30, meaning payment is due in the amount of the invoice 30 days from the date of invoice. Other common payment terms include Net 45 and Net 60 but could in reality be for any time period agreed upon by the vendor and the customer. While booking a receivable is accomplished by a simple accounting transaction, the process of maintaining and collecting payments on the accounts receivable subsidiary account balances can be a full time

proposition. Depending on the industry in practice, accounts receivable payments can be received upto 10-15 days after the due date has been reached. These types of payment practices are sometimes developed by industry standards, corporate policy, or because of the financial condition of the client.

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On a companys balance sheet, accounts receivable is the amount that customers owe to that company. Sometimes called trade receivable, they are classified as current as current assets assuming that they are due within one year. To record a journal entry for a sale on account, one must debit a receivable and credit a revenue account. When the customer pays off their accounts, one debits cash and credits the receivable in the journal entry. The ending balance on the trial balance sheet for accounts receivable is always debit. Business organizations which have become too large to perform such tasks by hand (or small ones that could but prefer not to do them by hand) will generally use accounting software on a computer to perform this task. Associated issues include recognizing receivable, valuing accounts receivable, and disposing of accounts receivable. Accounts receivable departments use the sales ledger. Accounts receivable is more commonly known as Credit Control in the UK, where most companies have a credit control department. Other types of accounting transactions include accounts payable, payroll, and trial balance. Since not all customer debts will be collected, business typically record an allowance for bad debts which is subtracted from total accounts

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receivable. When accounts receivable are not paid, some companies turn the over to third part collection agencies or collection attorneys who will attempt to recover the debt via negotiating payment plans, settlements offers or legal action. Outstanding advances are part of accounts receivable if a company get an order from its customers with payment terms agreed in advances. Since no billing is being done to claim the advances several times this area of collectible is not reflected in accounts receivables. Ideally, since advance payment is mutually agreed term, it is the responsibility of the accounts department to take out periodically the statement showing advance

collectible and should be provided to sales and marketing for collection of advances. The payment of accounts receivable can be protected either by letter of credit or by Trade Credit Insurance. Companies can use their accounts receivable as collateral when obtaining a loan (asset-based lending) or sell through factoring (finance). Pools or portfolios of accounts receivable can be sold in the capital markets through a securitization. Credit Standards represent the minimum criterion for the extension of credit to customers. o The trade off with respect to credit standards cover: Collection cost

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Average collection period/investment in receivables Bad debts Level of sales

Credit Terms is defined as the stipulations under which goods are sold on credit o The credit terms have three components: Credit period Cash discount Cash discount period

Collection policies refer to the procedure followed to collect the receipts when they become due after expiry of credit period. Book keeping for Accounts receivable Companies have two methods available to them for measuring the net value of account receivables, which is computed by subtracting the balance of an allowance account from the accounts receivable account. The first method is the allowance method, which established a liability account, allowance for doubtful accounts, or bad debt provision, that has the effect of reducing the balance for accounts receivable. The amount of the bad debt provision can be computed in two ways either by reviewing each

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individual debt and deciding whether it is doubtful (a specific provision) or by providing far a fixed percentage, say 2%, of total debtors (a general provision). The change on the bad debt provision form year to year is posted to the bad debt expense account in the income statement. The second method, known as the direct write-off method, is simpler than the allowance method in that it allows for one simple entry to reduce accounts receivable to its net realizable value. The entry would consist of debiting a bad debt expense account and crediting the respective account receivable in the respective account receivable in the sales ledger. The two method are not mutually exclusive, and some business will have a provision for doubtful debts and will also write off specific debts that they know to be bad (for example, if the debtor has gone into liquidation). For tax reporting purposes, a general provision for dab debts is not an allowable deduction from profit a business can only get relief for specific debtors that have gone bad. However, for financial reporting purposes, companies may choose to have a general provision against in line with their past experience of customer payments I order to avoid over stating debtors in the balance sheet. DEFINITION

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Money which is owed to a company by a customer for products and services provided on credit. This is treated as a current asset on a balance sheet. A specific sale is generally only treated as an account receivable after the customer is sent an invoice. Management of receivable Receivable are assets which are created as a result of the sale of goods or services in the ordinary course of business. These are known as accounts receivables, trade receivables or customer receivables. A firm, therefore, carries receivables for its customers for some period, which depends upon the requirements of the customers at one end and creditsanctioning capacity of the firm at the other. An analytical framework has been developed to provide insight into the process of creation and the main determinants of accounts receivables. The framework should be used for decision-making purposes and managerial functions in the are of accounts receivable. CHARACTERISTICS OF MAINTAINING RECEIVABLES

1. Expansion of Sales: Though it is a good policy to affect cash sales to

the maximum possible extent, it may not always be possible to do so.

2. Increased Profit: As a result in sales, profits rise. This is ordinary so

because the marginal contribution effected by an increase in sales is greater than the additional costs associated with such increase as also with the administration of the credit policy.

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3. Level of Sales: The most important factor in determining the volume

of receivables is the level of a firms credit sales. With an increase in the size of sales, it may be decide to bring about a proportionate increase in the magnitude of receivables.

4. Terms of Trade: The size of receivables is closely linked with a firms

trade terms, which include the period of credit, the rate of discount, etc. the pressure of competition always tends to constrain a firm to offer credit terms which are at least as generous as those offered by competitors. The terms of credit thus become almost customary.

5. Grant of Credit: Size of receivable depend upon the polices and

practices of the firm in determining which customers are to be granted credit.

6. Paying Habits of Customers: These too are capable of influencing a

firms policy with regard to receivables.

7. Collection Policies: The vigour with which a firm collects its dues
from customers affects its policies in regard to receivable, for, if the amounts, when they are due, are not collected, a firm suffers some financial difficulties, if not losses.

8. Credit Policy: Risks of loss and the burden involved in the typing up
of funds are considered while determined a credit policy.

9. Operating Efficiency :
firms credit policy.

The degree of operating efficiency in billing,

record keeping and other functions also exercise some influence on a

10. The Volume of Credit Sales: The tendency to credit expansion is

usually related to the volume of credit sales.

11. Credit Collection: Individual firms setup their own well organized
credit collection departments.

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Advantages of Receivables 1. It is an interesting fact that business enterprises have little or no understanding of this method of borrowing or how simply their accounts receivables may be employed as a source of borrowing cash. 2. The assignment of accounts receivables furnishes additional

operating cash, and there is no need for diluting the equity and control of owners. Moreover, small and medium size corporations find it difficult to raise additional cash through security issues. 3. Accounts receivables financing is of a revolving nature and provides a continuous source of operating cash. 4. It is flexible because borrowing under it may be continued throughout its life or used only temporarily to meet a constant need. 5. With a wise use of debt capacity, as in the employment of accounts receivables, a firm will have more cash with which to take advantage of any profitable opportunities which may develop. 6. It enables businessmen to protect and improve a firms credit rating, for the latter is in a position to pay bills on due dates. TOOLS OF ANALYSIS Aging of accounts receivable The general ledger Account Receivable usually contains only summary amounts and is referred to as a control account. The details for the control account-each credit sale for every customer-is found in the subsidiary ledger

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for Accounts Receivable. The total amount of all the details in the subsidiary ledger must be equal to the total amount reported in the control account. The detailed information in the accounts receivable subsidiary ledger is used to prepare a report known as the aging of accounts receivable. The report directs managements attention to accounts that are slow to pay. It is also useful in determining the balance amount needed in the account allowance for doubtful accounts. The aging of accounts receivable report is typically generated by sorting unpaid sales invoices in the subsidiary ledger-first by customer and then by the date of the sales invoices. If a company sells merchandise (or provides services) and allows customers to pay 30 days later, this report will indicate how much will indicate how much of its accounts receivable is past due. It also report how far past due the accounts are. With the click of a mouse, most accounting software will provide the aging of accounts receivable report. For example, Gem Merchandise Co., software looks at each of its customers accounts receivable activity and compares the date of each unpaid sales invoice to the date of the report. If we assume the report is date August 31 and that Gems credit terms are net 30 days, any unpaid sales invoices with an August date will be classified as current. Any unpaid invoices with a date of June are classified as 30-60 days past due, and so on.

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TREND ANALYSIS The procedure by which the time related factors that influence the values observed in the time series are identified and segregated is called Time series Analysis. The general long term movement, which increases or decreases in the time series values over an extended period of years, is called Trend or Secular Trend. It is a set of observation taken at specified time interval, usually at Equal Intervals from a sufficiently long period of time. They help in making estimates of futures. The estimates made for the future period is forecasts. This is the best method for obtaining the trend values. It provides a convenient basis for obtaining the line of best fit in a series. Line of the best fit is a line from which the sum of the deviation of various points on either side in zero. Further the sum of the squares of these deviations would be the least as compared to the sum of squares of the deviations obtained by using other lines. For this reason the sum of squares of the deviations of various points from the line of the Best Fit is the least. The straight line trend has an equation of the type Y = a+bX Where Y Estimated values of the trend X Deviation in time period a & b Constraints

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Merits This method gives the trend values for the entire time period. It can be used forecast future trend because trend line establishes a functional relationship between the values and the time. This method is a completely objective method. RATIO ANALYSIS Ratio: The term ration refers to the numerical or quantitative relationship between two figures. A ratio is the relationship between two figures, and obtained by dividing the former by the latter. Ratios are designed to show how one number is related to another. It is worked out by dividing one number by another. Percentage If 100 multiply the quotient obtained, the unit of expression is termed as percentage. Ratio can be expressed in two ways Times Percentage Times When another divides one value, the unit used to express the quotient is termed as Time.

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CURRENT RATIO: Current Ratio is expresses relationship between current assets and current liabilities. It is the most common ratio for measuring liquidity. Being related to working capital analysis, it is also called the working capital ratio. Formula

Current Ratio =
QUICK RATIO

Current Assets Current Liabilitie s

Quick ratio is also known as liquid ratio or acid test ratio or near money ratio. It is the ratio between quick or liquid assets and quick liabilities. Formula

Liquid Ratio =
DEBTORS TURNOVER RATIO

Liquid Assets Current Liabilitie s

This is also called Debtor Velocity or Receivable Turnover. A firm sells goods on credit and cash basis. When the firm extends credits to its customers, book debts (Debtors or Account Receivable) are created in the firms account. Debtors expected to be converted into cash over short period and thus included in current assets. A debtor includes the amount of Bills Receivable and Book Debts at the end of accounting period. It is most essential that a reasonable quantitative relationship not been able to collect

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within a reasonable time its funds are unnecessarily locked up in receivables. In such case short term loans have to be arranged for paying off its current liabilities. The liquidity position of the firm depends on the quality of debtors to a great extent. The purpose of this ratio is to measure the liquidity of the receivables or to find out the period over which receivables remain uncollected. Financial analysts to judge the liquidity of a firm use two ratios. They are Debtors turnover ratio Debt collection period ratio Formula

Debtors Turnover Ratio =

DEBIT COLLECTION PERIOD

Net Sales Sundry Debtors

This ratio indicates the extent to which the debts have been collected in time. It gives the average debt collection period. The ratio is very helpful to the lenders because it explains to them whether their borrowers are collection money within a reasonable time. An increase in the period will result in greater blockage of funds in debtors. Formula

Debt collection period =

Days in the year Debtors Turnover Ratio

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(A)

Statement of the problem The project deals in Debtors Management at SUZUKI MOTORCYCLE

INDIA PVT., LTD., (Apple Auto Agency Pvt. Ltd.,). Debtors Management is one of the most important aspects of the organization, as it deals with the management of the outstanding of the organization. The profit of the company mainly depends on the accounts receivables. Therefore it needs a careful analysis and proper management. Debtors occupy an important position in the structure of current assets of a firm. They are the outcome of rapid growth of trade credit granted by the firms to their customer. Trade credit is the most prominent force of modern business. It is considered as a marketing tool acting as a bridge for the movement of goods through production and distribution stages to customers. (B) Objectives / Benefits of the study Focus on improvement in Company Receipts and Cash Inflows from Debtors. Appreciate the essential features of a legally binding contract. Understand the issues involved in pursuing slow payers and debtor recovery. Ensure Credit Management is seen as a positive influence in Customer Relations.

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Evaluate the efficiency of credit management department. To analyse the receivable management performance of SUZUKI MOTOR CYCLE INDIA PVT., LTD., (Apple Auto Agency Pvt. LTD).

(C)

Scope of the Study Receivables means Collecting the debt owed to the company, by the

customers arising from the sale of goods or services in the ordinary course of business money owned by customers / individuals / corporation to another entity in exchange for goods and services that have been delivered or used by not yet paid for receivable usually come in the form of operating lines of credit and are usually due within a relatively short time period. The sale of goods on credit is an essential part of any modern and competitive economic system like India. Credit sale and therefore receivables are treated as marketing tools to aid the sale of goods. The study aims at analyzing the debtors and outstanding or amount of its company. It is hoped that this study will help the company in reducing its investment in Accounts Receivables. (D) Need for the Study Business activity is dynamic in character and subject to wide fluctuations. Most firms treat account receivables as marketing tool to promote sales and profits. Every firm has a set of credit terms and policies

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under which goods are sold on credit and every policy has a cost and benefit associated with it. This project attempts as to how to manage the accounts receivable and the impact of it. In a competitive environment sometimes the firms are compelled and sometimes the firms desire to adopt liberal credit policies for pushing up the sales and the factoring has been done. So a careful analysis of various aspects of the credit policy is required. That is why Appraisal of Receivables Management is done. (E) Research Design used Analytical Research: Used facts or information already available and analyzed those facts to make a critical evaluation of the Receivable Management. (F) Data Collection Method Nature of Data: The data collected is secondary in nature. This is due to the nature of analysis, which only calls for secondary data. Source of Data: The source of data is the various years balance sheet, profit and loss account and statements provided by SUZUKI MOTORCYCLE INDIA PVT. LTD., (Apple Auto Agency Pvt. LTD). They were used for the analysis and for preparing reports. The records maintained by the company where referred to get the required information.

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The data is collected through the secondary source like: Annual Reports of the Company. Office manuals of the department (G) Limitations of the study The arrangements are informal. As creditors can change their mind at any time. Study is limited only to SUZUKI MOTORCYCLE INDIA PVT. LTD., (Apple Auto Agency Pvt. LTD.) It has always not been possible to get the full information. Since the study is based only on secondary data, so the reliability of the information may not be ensured. (H) Research Design used:

Analytical Research: Used facts or information already available and analyzed those facts to make a critical evaluation of the Receivable Management. (I) Data Collection Method

Nature of Data: The data collected is secondary in nature. This is due to the nature of analysis, which only calls for secondary data.

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Source of Data: The source of data is the various years balance sheet, profit and loss account and statements provided by KSIC LTD. They were used for the analysis and for preparing reports. The records maintained by the company where referred to get the required information. The data is collected through the secondary sources like: Annual Reports of the Company. Office manuals of the department. (J) Plan of Analysis The study would be inducted in Bangalore city. Data has been collected by ageing analysis done by KSIC Ltd., which is of secondary data. The analysis has been carried out by plotting the values on graphs and seeing which variable is causing problem. And calculate the value by use of ratio analysis. By this we come to know how the effective is the collection period. (K) Chapter Scheme

Chapter-I General Introduction A) Industrial Background B) Theoretical Literature

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Chapter II: Research Design a. b. c. d. e. f. g. h. i. Statement of the problem Objective of the study Scope of the study Need/Purpose of the Study Research Design Research Method Sampling Limitation Chapter Scheme

Chapter-IV: Company Profile Chapter V: Data Analysis and Interpretation Chapter-VI: Findings Chapter-VII: Recommendation and Conclusion Annexure Bibliography

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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 diversity 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. In 1952 when due to financial problems Suzuki ventured into developing clip on engines to bicycle frames. The first model was called the Power Free (36 cc) and the follow-up model was the Diamond Free (60 cc). Suzuki produced its first motorcycle in 1954 called the Colleda (90 cc). Suzuki built small capacity bikes during 50s and 60s and had only small export success until the introduction of the X6 (T20 super six), which gave Suzuki much name credibility. In 1962 using MZs technology, Suzuki wins the newly created 50 CC class in the World Championship. The company will win the class every year until 67 and win the 125 cc class twice in that period, too. With a well-established name Suzuki dared enter the big bike market and in 1967 Suzuki introduced T500. Which was known as the Titan in America and the Cobra in England? The name changed over the years to GT 500 due to many improvements but it was purely the sharp price and good reliability, which kept the GT in production until 1977.

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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. The GT750 wasnt a very impressive machine and also couldnt match the other bikes in the market at the time. Once again the production kept going based on its demand for good price and reliability. In 1974 the RE5 is the first Japanese motorcycle with a rotary engine. It cost a fortune to develop and, while not bad, its a commercial disaster. After two years, the company abandons the project, and there are rumors the tooling was dumped into the sea so that Suzuki managers would never have to see it again. 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. The GS out preformed every other bike in this category and had a frame to match its power. The only thing, which could be said against the very popular and successful GS 1000, was its dull looks. The GS1000 was redesigned and new models based on the same original success bike were introduced. The GSX1000 in 1980 and the GSX1100 Katana in 1982. The later bike was a huge success due to it powerful performance, funky style, low weight and good pricing. In 1983. the RG250 is Suzukis first ever race replica. This bike features the AL-BOX,

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square aluminum frame, 16-inch tire and Anti Nose Dive Forks (ANDF) at the front. In 1985 The RG500 Gamma features the same square Four cylinder layout as the as the factory Grand Prix bikes. Other racy features are the square-tube aluminum frame and the removable cassette-type

transmission. 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. The GSX-R750 was super fast, which wasnt hard to understand since there were hardly any changes to its racetrack design. Both on the street and in the race track the bike was a huge success. In 1986 the GSX-R100 was also added to the line. In 1996 Suzuki calls the new GSX-R750 the turning-point model thanks to its twin-spar frame instead of the older double-cradle frame. The engine is also redesigned and featured 3-piece crankcases, chrome-plated cylinders and a side-mount cam chain as well as Suzuki Ram Air Direct (SRAD) system. 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, with a dodgy rotary vane damping system in the rear shock. Suzuki equipped the TL1000R

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with a steering damper, but it was still prone to headshake and customers approached it wit caution, if at all. In 1999 Mat Mladin wins the AMA Super bike Championship, beginning a run of unprecedented dominance. Mladin will win five more times, and Suzuki will win 8 of the next 9 titles. With sport bikes getting more 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 super sport market. The SV 650 features an aluminum-alloy truss frame and a liquid cooled 90 o V-Twin DOHC 4-Value engine. Suzuki calls the Hayabusa the ultimate aerodynamic sport bike. Its powered by a 1298 cc liquid-cooled DOHC in-line 4-cylinder engine that becomes the darling of land-speed racers. The name means peregrine falcon in Japanese. The GSX style and line didnt change much over all the years with improvements being made to the bike. A small fluke in design made Suzuki lose its performance lead with the GSX-R1100. But the GSX-R750 has remained a hit up until today. May be still hurt by losing the performance edge with the GSX-R1100 redesign in the 1990s. Suzuki introduced the GSX1300R (Hayabusa) in 1999. This sent the Honda Blackbird packing and became the worlds fastest production bike at a whopping 190 mph (307 km/h).

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In 2001 Suzuki introduced an upgrade GSX-R750 engine and created the GSX-R1000 (998 CC), which is a super bike with outstanding

performance. In 2003 the GSX-R1000 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 4-Store 449 cc engine, which features the Suzuki Advanced Sump System (SASS). Troy Corser gives Suzuki its first and only (so far) World Super bike Championship. In 2006 The M109R, Suzukis flagship V-Twin Cruiser is powered by a 1783cc V-Twin engine with 112 mm bore and 90.5mm stroke. It has the largest reciprocating pistons in any production passenger car or motorcycle. 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 to-ranked power output in the naked category. SUZUKI MOTOR CYCLES 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.

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Suzuki Motor Corporation (SMC), a global giant of motorcycle manufacturing is headquartered in Japan. It hold major stake in its Indian subsidiary, Suzuki Motorcycle India Private Limited (SMIL). SMIL was set up after Suzukis re-entry 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 (SMIPL) is the latest entry into the already crowded Indian two-wheeler segment with players like Hero Honda, Bajaj Auto, Honda, and TVS. SMIPL have started their Indian operations with a 125-cc mass-market motorcycle. It has made an initial investment of Rs.200 crores to start their Indian operations. Company sources have revealed that Suzuki would follow up this 125 CC bike with a high performance 150-cc sibiling sometime next year. And for the budget segment, another 100cc bike is expected in the first quarter of 2006. Mass market is the initial aim with plans to enter all the segments rapidly. They have their facilities located in Gurgaon. Suzuki had launched bike by diwali, which is the auspicious time for buying a new vehicle in Indian families. Their setup in Gurgaon 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

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dealership around the country and are going to establish 4,000 5,000 sq.ft showroom and service stations to provide services to the customers. The parent company happens to be one of the largest manufactures of two wheelers in the world with more than 20 lakh bikes sold per annum. They are popular for their range of high performance road machines, lightweight super bikes, dirt bikes, street bikes, and motor cross and fun bikes globally. COMPANY PROFILE Plant area and production capacity: Thy have installed their manufacturing plant in Gurgaon (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. Chairman: Mr. Katsumi Takata Personnel over the years Year 2010-2011 Total number of employees 490

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Main products Motor cycles and Scooters Mission of Suzuki The core philosophy of SUZUKI is to provide VALUE-PACKED PRODUCTS. Since the founding of SUZUKI Motor Corporation, the

Organisations 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 inception 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 by utilizing 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 teamwork. Strive for individual excellence through continuous improvement

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Growth Report It has reported a growth of 47.66% in sales in the month of November09 at 14745 units compared to 9986 units same month last year. It has sold 14806 units in December09 listing a strong growth of 61% over its sales in December08 despite recession. This increase of sales is attributed to the tremendous response from the new product GS150R and ACCESS 125. It has reported 93% growth in sales during the month January 2010. It has sold 20441 units in January10 listing a strong growth of 93$ over its sale in January09. It has sold 21752 in March10 listing an impressive growth of 76% over its sales in March09. This increase of sales in attributed to the tremendous response from the new product GS150R and ACCESS125. It has great plants for the coming year and this is only beginning. Their objective is to offer quality products and customer satisfaction to consumers. This growth momentum will further accelerate in coming months. FACILITIES 1. Environment The philosophy of keeping environment first is properly percolated downwards. To comply with all applicable legislations and setting standards

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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. The biggest testimony of Suzukis commitments towards environment first is seen at Gurgaon which is built to be a Zero discharge plant. SMIPL have embraced Natural light optimization system and water harvesting systems besides several other measures to create better and cleaner environment around us. All packaging material used by Suzuki is recycleable. A constant flow of internal communication on environment related issues not only creates awareness amongst employees but also helps in inculcating an environment friendly value system. Shop Floor Safety Measures SMIPL have safety guards / safety curtains to ensure Operator safety on machines. Company has also installed robots through out the facilities to reduce the ergonomic stress on workers. There are gas detection systems installed to eliminate any gas related accident and fire detection system for immediate information about any fire related incident. SMIPL have fire fighting system (Manual & automatic) for immediate handling of any fire related accident. They have a fire tender (capacity 4500 liters water and 500 liters capacity foam).

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Company try to maintain zero accident record through regular safety audit, frequent training for staff, line associates and contractors. They organize different safety programs and competitions to encourage employee awareness and involvement. 3. Environmental Utility 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. They keep updating all these standards of health and welfare of employees through a team of well qualified personnel in the R&D laboratory. 4. Quality Control It has four main sections as follows: Tested by SMC Japan with their international quality standards Final (Vehicle) Inspection Market Quality

5. Parts Inspection The non conformities in the parts being procured may lead to production loss & degradation of the quality of the final output and life of the product. To ensure the product, the dimensional, material,

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aesthetic & performance inspection for the special process are carried out on the individual parts before they are declared fit for the assembly. For carrying out the inspection activities effectively, we have the latest & sophisticated machines installed in the inspection area. 6. Final (Vehicle) Inspection: Safety related parameters such as braking; clutch operation and other functional defects of the vehicle. Emission related parameters for checking the conformance of the exhaust gases with the emission rules. Functional & aesthetic parameters are also checked.

7. Market Quality To act upon the customers feedback received from the service department for the up gradation of the product. To resolve the quality issues being received from the market by visiting the suppliers & taking the corrective & taking the corrective & preventive measures for the same. Monitoring for the effectiveness of the measures taken for the particular problems through the cut off engine / frame numbers.

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8. Work Culture They believe that future growth and prosperity of every employee depends on the companys growth and prosperity. Organizational and individual discipline. Continual improvement in quality and productivity. Cost consciousness Customer satisfaction (both internal and external) Long term goals Respect for laws, human beings and society

9. Employee Development Companys growth is based on enchantment of technical and

behavioral skills of the employees. They continually identify the performance gaps and new skills required keeping into the companys growth in focus. They believe that employees are the most important assets of an organization. For enhancement of technical and behavioral skills of the employees they organize regular training programmers. Teams from Japan often come to the organization to impart training. Their focus is to create a healthy Environment where individual employee can achieve maximum satisfaction.

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SUZUKI WARRANTY POLICY SUZUKI Motorcycle Indian Private Limited, (SMIPL) offers warranty for all models manufactures in its Gurgaon plant and sold through its authorized dealers. Suzuki Motorcycle India Private Limited reserves the right either to replace or repair, at their authorized dealer, free of cost, those parts which may be found on examination to have manufacturing defect within 2 years from the date of sale (or) first 30,000 kms whichever occurs earlier of its operation. If any of the free or paid service is not done as per schedule, the warranty tends to stand void. Parts of the vehicle have been subjected to misuse, accident, and negligent treatment, use of bad quality parts which are not manufactured (or) not recommended for use by SMIPL on their motorcycles. Parts of the motorcycle getting rusted or their plating or painting coming off due to atmospheric condition like Sea Breeze and Industrial Pollution. Motorcycle used for any Competition (i.e) Rallies (or) Races, if its used for any commercial purposes like Hiring etc. SMIPL undertakes no liability in the matter of any consequential loss (or) damage caused due to failure of the parts. Parts repaired (or) replaced under this warranty are warranted only for the original warranty period of Suzuki motorcycles. Consumables like Engine

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Oil, TFF Oil, Grease, used for the warranty repair are not covered under application of the warranty. Apple Auto Agency Private Limited Suzuki-Apple Auto Agency Pvt. Ltd., was set up in Bangalore on 31st March,2005 as a dealership company to buy, sell, stock, display, deal 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, garage or repair shops for the purpose of undertaking, clearing, servicing and repairing of vehicles. The authorized capital of the Company is Rs.25,00,000 divided into 25000 Equity Shares of Rs.100 each. The First Directors of the Company are Sri C. Chandra Sekhar, Smt. N. Sobha 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.

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3.1 Service Procedure

WASHING THE BIKE

MECHANICS / ENGINEER (BIKE WISE) SUPERVISOR SPARE PART REOUICISON SPARE PART DEPARTMENT

FITTING OF SPARE PARTS & COMPLETE FOR THEIR PROCESS

TESTING ON ROAD

DELIVERY TO THE CUSTOMER

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Table 4.1 Table showing the trend analysis of the sales for the different years (in crores) Year 2009 2010 2011 Sales Amount 9.3929 12.2930 18.0744

Interpretation The sales amount has increased in the year 2009 from the previous year i.e. Rs. 9.4929 crores. The sales amount again increased in 2010 to Rs.12.2930 crores. The sales amount in the year 2011 has increased to 18.0744 crores.

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GRAPH 4.1

SHOWS SALES AMOUNT

SALES AMOUNT
20 18 16 14 12 10 8 6 4 2 0 2009 2010 2011
Sales Amount

Inference The trend in the above graph is the increasing trend. It shows that there is continuous increase in the amount of sales in the various years.

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2)

Current Ratio The Current Ratio is a financial ratio that measures whether or not a

firm has enough resources to pay its debts over the next 12 months. It compares a firms current assets to its current liability. It is expressed as follows. Ideal Ratio: The Ideal Ratio of 2:1 is considered to be satisfactory.

Calculation of Current Ratio Current Ratio = Current Assets Current Liabilities

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Analysis

Table 4.2 Table showing the current ratio Current Ratio Particulars Current Assets Current Liabilities Current Ratio 2011 8066373 17081358 0.47 2010 7882072 6484285 1.21 (Amount in Rupees) 2009 4173421 8180137 0.51

Interpretation This table shows the current ratio of the company. In the year 2011 the current ratio is 0.47, in the year 2010 it is 1.21 &in the year 2009 it is 0.51. The current ratio is lower in the year 2011 as compare to the year 2010 & 2009. In the year 2011 the ratio is 0.47 which is 0.74 times lower than the ratio of the year 2010. Similarly it is 0.04 times greater than the year 2009.

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GRAPH 4.2

SHOWS CURRENT RATIO

CURRENT RATIO
1.4

1.2

0.8
Current Ratio

0.6

0.4

0.2

0 2009 2010 2011

Inference This graphs shows the current ratio of the company. The ratio is higher in the year 2010 as compare to the graph of the year 2011 & 2009.

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3)

Liquid Ratio Liquid ratio is also termed as Liquidity Ratio, Acid Test Ratio or

Quick Ratio. It is the ratio of liquid assets to current liabilities. The true liquidity refers to the ability of a firm to pay its short term obligations as and when they become due. Ideal Ratio: The Ratio of 1:1 is considered to ideal.

Calculation of Liquid Ratio Liquid Ratio = Liquid Assets Current Liabilities

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Analysis

Table 4.3 Table showing the Liquid ratio Liquid Ratio Particulars Liquid Assets Current Liabilities Liquid Ratio 2011 2519422 17081358 0.14 2010 4677749 6484285 0.72 (Amount in Rupees) 2009 695825 8180137 0.08

Interpretation

This table shows the liquid ratio of the company. In this table in the
year 2009 the liquid ratio is 0.08, in the year 2010 it is 0.72 and in the year 2011 it is 0.14. In the year 2010 the Liquid Ratio is 0.72 which increased from 2009 by 0.64 & from the year 2011 decreased by 0.58.

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GRAPH 4.3

SHOWS LIQUID RATIO

LIQUID RATIO

0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 2009 2010 2011
Liquid Ratio

Inference From the above ratio it is clear that current assets are more than current liability in all the three years. This shows that the company is not well concerned about their current asset management.

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4)

Debtors Turnover Ratio Debtors Turnover Ratio or account receivables turnover ratio indicates

the velocity of debt collection of a firm. In simple words it indicates the number of times average debtors (receivables) are turned over during a year. Significance / Uses: Debtors Turnover Ratio or Account Receivable Turnover Ratio indicates the number of times the debtors are turned over a year. The higher the value of Debtors Turnover the more efficient is the management of debtors or more liquid the debtors are. Similarly, low debtors turnover ratio implies inefficient

management of debtors or less liquid debtors. Calculation of Debtors Turnover Ratio

Debtors Turnover Ratio =

Net Sales Sundry Debtors

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Analysis

Table 4.4 Table Showing Debtors Turnover Ratio Debtors Turnover Ratio Particulars Net Sales Sundry Debtors Debtors Ratio Turnover 2011 180744421 3310521 54.59 2010 122930200 4675883 26.29 (Amount in Rupees) 2009 94929062 5347235 17.75

Interpretation This table shows the Debtors Turnover Ratio. In this table the Debtors Turnover Ratio is higher in the year 2011 as compare to the year 2010 & 2009. We can see that there is continuous increase in the Debtors Turnover Ratio from the year 2009 to 2011.

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GRAPH 4.4

SHOWING DEBTORS TURNOVER RATIO

DEBTORS TURNOVER RATIO

60

50

40

30

Liquid Ratio

20

10

0 2009 2010 2011

Inference This graph shows the Debtors Turnover Ratio. In this graph we can see that the Debtors Turnover Ratio is higher in the year 2011 as compare to the year 2010 & 2009. Because of the higher the value Debtors Turnover the more efficient is the management of debtors or more liquid the debtors are.

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5)

Working Capital Turnover Ratio It is directly related to sales, current assets. It indicates the velocity of

the utilization of networking capital. This ratio indicates the number of times the working capital is turnover in the course of the year. Working capital = Current Assets Current liabilities Significance / Uses: A high working capital turnover ratio shows the efficient utilization of working capital in generating sales. A low ratio, on the other hand, may indicate excess of net working capital. This ratio thus shows whether working excess is efficiently utilized or not. This ratio is considered better than stock turnover ratio as it shows the utilization of the entire working capital whereas stock turnover ratio indicates only the turnover of stock which is only a part of the working capital. Calculation of Working Capital Turnover Ratio

Working Capital Turnover Ratio =

Net Sales Net Working Capital

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Analysis

Table 4.5 Table Showing Working Capital Turnover Ratio Working Capital Turnover Ratio Particulars Working Capital Net Sales Working Capital turnover ratio 2011 42229089 180744421 4.28 2010 20850642 122930200 5.89 (Amount in Rupees) 2009 12353558 94929062 7.68

Interpretation

This table shows the Working Capital turnover Ratio, and from the
table we can see that it is 7.68 times for the year 2009 and it is decreased in the continuous two year.

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GRAPH 4.5

SHOWING DEBTORS TURNOVER RATIO

WORKING CAPITAL TURNOVER RATIO

8 7 6 5 4 3 2 1 0 2009 2010 2011

Working Capital Turnover Ratio

Inference A higher working capital turnover shows that there is low investment in working capital and there is more profit. Here the company working capital is continuously decrease from 2009 to 2011. The working capital turnover ratio is higher in the year 2009.

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6)

Net Profit Ratio It establishes a relationship between net profit and sales. It indicates

the firms capability to face adverse economic conditions such as price competition, low demand etc. Significance / Uses: Net profit Margin Ratio measures the overall efficiency of production, administration, selling, financing and pricing and tax management. Net Profit Margin Ratio provides a valuable understanding of the cost and profit structure of the firm and enables us to identify the sources of the efficiency or inefficiency. The ratio indicates the quantum of profit earned by a concern, and indicates the firms capacity to face adverse economic conditions such as price competition, low demand etc. Calculation of Net Profit Ratio

Net Pr ofit Ratio =

Net Pr ofit X 100 Sales

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Analysis

Table 4.6 Showing Net Profit Ratio Net Profit Ratio Particulars Net Profit (PAT) Net Sales Net Profit Ratio 2011 2379644 180744421 1.31 2010 1543892 122930200 1.25 (Amount in Rupees) 2009 291153 94929062 0.30

Interpretation

This table shows the Net Profit Ratio and from the table we can see
that there is increase in net profit in the year 2011 as compare to the year 2010 & 2009.

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GRAPH 4.6

SHOWING NET PROFIT RATIO

NET PROFIT RATIO

1.40

1.20

1.00

0.80
NET PROFIT RATIO

0.60

0.40

0.20

0.00 2009 2010 2011

Inference Higher is the profit better is the profitability. The ratio is favourable in year 2010 & 2011. But in the year 2009 the company net profits is fallen down as compared to 2010 & 2011.

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7)

Current Assets Turnover Ratio A balance sheet account that represents the value of all assets that are

reasonably expected to be converted into cash within one year in the normal course of business. Current assets include cash, account receivables, inventory, marketable securities, prepaid expenses and other liquid assets that can be readily converted to cash. Current Assets Turnover Ratio shows the productivity of the companys current assets. Significance / Uses: A higher Current Assets Turnover Ratio indicates the frequent use of current assets in sales and marketing efforts. It shows the productivity of the Companys current assets.

Calculation of Current Assets Turnover Ratio Current Assets Turnover Ratio = Net Sales Current Assets

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Analysis

Table 4.7 SHOWING CURRENT ASSETS TURNOVER RATIO Current Assets Turnover Ratio Particulars Current Assets Net Sales Current Assets Turnover Ratio 2011 8066373 180744421 22.40 2010 7882072 122930200 15.59 (Amount in Rupees) 2009 4173421 94929062 22.74

Interpretation

This table shows the current assets turnover ratio. In the year 2009 it
was 22.74 but in the year 2010 it was 15.59 which is decreased by 7.15. In the year 2011 it was 22.40 which is increase from 2010 by 6.81.

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GRAPH 4.7

SHOWING CURRENT ASSETS TURNOVER RATIO

CURRENT ASSETS TURNOVER RATIO

25

20

15

10

0 2009 2010
CURRENT ASSETS TURNOVER RATIO

2011

Inference In the year 2009 the current assets turnover ratio is the highest. In the year 2009, 2010 & 2011 the current assets turnover ratio is 22.74, 15.59 & 22.40 respectively.

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8)

Inventory Turnover Ratio Inventory Turnover Ratio, is simply the turnover of the company

divided by its stocks. It should always be compared against the average price of the ratio of the sector. Significance / Uses:

A low Inventory Turnover Ratio suggests poor sales and / or high investment in inventory, which is non-profitable and risky.

A high ratio implies either strong sales or inefficient buying.

Calculation of Inventory Turnover Ratio Inventory Turnover Ratio = Net Sales Inventory

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Analysis

Table 4.8 SHOWING INVENTORY TURNOVER RATIO Inventory Turnover Ratio Particulars Net Sales Inventory Inventory Turnover Ratio 2011 180744421 5546951 32.58 2010 122930200 3204323 38.63 (Amount in Rupees) 2009 94929062 3477596 27.29

Interpretation

This table shows the Inventory Turnover Ratio. In this table we can
see that the Inventory Turnover Ratio is higher in the year 2010 as 38.63 but it decrease in the year 2011 by 6.05 times.

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GRAPH 4.8

SHOWING INVENTORY TURNOVER RATIO

INVENTORY TURNOVER RATIO

40 35 30 25 20 15 10 5 0 2009 2010
INVENTORY TURNOVER RATIO

2011

Inference This graph shows the Inventory Turnover Ratio. In this graph the Inventory Turnover Ratio is higher in the year 2010 as compare to the year 2009 & 2010.

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FINDINGS
1. The credit sales are increasing constantly from last the year. 2. Compare to the ideal ratio with the companys current ratio the companys position is not satisfactory but the current ratio is fluctuating every year so the management has to take initiative action on the current asset and liabilities. 3. The liquid ration of the company is very low then the ideal liquid ratio all the three year its below the ideal level so that company have to take necessary step to increase investment in quick assets of the concern. 4. The Debtors Turnover Ratio is higher in the year 2011 as compare to the year 2009 & 2010. We can see that DTR constantly increasing for the next two year also. 5. The working capital turnover ratio is falling down from the year 2009 to 2011 which shows that working capital has not been efficiently managed by the management of the company. 6. There is a dramatic change in the net profit of the company in the year 2009 it nearest to 0.4 and then sharply move more then the 1.2 and above it so, result in net profit ratio every year it consequently increasing. 7. The current assets turnover ratio is stable for the 2009 and 2011 it is fall down in the year 2010, hence the company has try to make it stable for increase operation efficiency of the company. 8. The inventory Turnover Ratio is continuously increasing from 2009 to 2011. Inventory turnover ratio shows that operation efficiency is very good and try to maintain it and make it better inventories techniques.

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CONCLUSION
From the above study it is revealed that the company overall performance is good in all the three year. The companys operating profit has increased which is good sign for the Company. The working capital of the company is continuously decreased which further effect on the profitability of company. Finally the company is doing a great financial management and it is beneficial for the company in the future. By adopting the above suggestions the organization can improve its credit collection period. In taking into consideration the balance sheets, profit and loss account, changes in working capital from 2009 to 2011, the current financial position of Apple Auto Agency Pvt. Ltd., is very healthy. The company should also look forward to expand the business and also diversification of the product line.

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RECOMMENDATIONS
9. The sales are increasing constantly every year that the good image of the Company, so that the company has to put more eyes on his brand so that the sales increase more sharply than the past years. 10. The sales values for the various years are in an increasing trend and I would suggest continuing the good work and try to still increase the sales values as much as possible. 11. As there are many sundry debtors, Apple Auto Agency Pvt. Ltd., has to keep a better overlook on the debtors. They need increase the efficiency of collecting the receivables. 12. In the year 2009 and 2010 there is an increase in inventories but in the year 2010 and 2011 there is a decrease in the inventories therefore it is advisable to keep more inventories rather than taking advances from customers and ordering the inventory. 13. The excess cash and bank balance could be invested in some profitable portfolio or utilize that to expand the business. 14. The tie-up with ICICI Bank is very much profitable to the company when it comes to credit facility, but indirectly the amount of interest is also more. It is better to do cash payments directly to the suppliers as much as possible.

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BALANCE SHEET OF AAAPL FOR THE YEAR 2009-2011.

Particulars Source of funds Share Capital Share Application pending allotment Reserves & Surplus Total Loan funds Secured loans Unsecured loans Deferred tax liability Total Total Applications of funds Fixed assets Less: Accumulated depreciation Net block Current Assets & Loans & Advances Closing stock Sundry debtors Cash & Bank Balances Deposits Loans & advances TDS Total (A) Less: Current Liabilities &

2011

2010

2009

9,50,000 money 22,24,301 28,50,674 60,24,975

9,50,000 22,24,301 14,02,621 45,76,922

3,00,000 18,02,830 503.298 26,06,128

60,12,851 9,20,500 69,33,351

69,65,163 Nil 69,65,163

60,32,294 Nil 6,179 60,38,473 86,44,601

12,95,83,260 1,15,42,085

86,43,471 38,51,517 48,91,954

59,18,707 22,74,695 36,44,013

57,07,372 12,68,192 44,39,180

55,46,951 33,10,521 1,21,05,626 21,95,943 19,88,691 -2,51,47,731

32,04,323 46,75,883 53,23,547 10,55,516 1,07,339 -1,43,357

34,77,596 53,47,235 24,37,897 9,53,500 1,37,330 -1,23,53,558

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Particulars Provision Advances from Customer Sundry Creditors Trade Sundry creditors Expenses Duties & Taxes Provisions for Income Tax

2011

2010

2009

1,07,26,166 6,02,900 14,96,430 33,24,271 9,31,591 Nil

25,38,998 4,18,687 5,77,527 22,89,073 6,60,000 Nil 64,84,285 78,82,072

(43,33,433) (8,36,695) (10,19,251) (18,26,258) (99,000) (65,500) (81,80,137) 41,73,421

Total (B) Net Current Assets (A-B) Preliminary expenditure to the extent not written off or adjusted Total

1,70,81,358 80,66,373

16,000

32,000

1,29,58,327 1,15,42,085

86,44,601

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Profit & Loss Account of the year ended 31.3.2009 Particulars Income Sales and service charges Other income Total Expenditure Operating Expenses Administrative Expenditure Financial Expenditure Depreciation Preliminary Expenditure written off Total Profit before Tax Less: Provision for Taxation Less: Provision for finge benefit tax Provision for deferred tax liability Balance carried to Balance Sheet 8,77,77,806 84,10,890 10,28,998 7,09,058 16,000 9,79,42,752 3,15,915 99,000 65,500 6,179 1,45,236 9,49,29,062 33,29,605 9,82,58,667 31.3.2009

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Profit & Loss Account of the year ended 31.3.2010 Particulars Income Sales and service charges Other income Total Expenditure Operating Expenses Administrative Expenditure Financial Expenditure Depreciation Preliminary Expenditure written off Total Profit before Tax Less: Provision for Taxation Less: Provision for finge benefit tax Provision for deferred tax liability Balance carried to Balance Sheet 11,31,05,763 97,90,041 8,76,860 10,06,503 16,000 12,47,95,167 15,43,892 6,60,000 NIl Nil 8,83,892 12,29,30,200 34,08,859 12,63,39,859 31.3.2010

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Profit & Loss Account of the year ended 31.3.2011 Particulars Income Sales and service charges Other income Total Expenditure Operating Expenses Administrative Expenditure Financial Expenditure Depreciation Preliminary Expenditure written off Total Profit before Tax Less: Provision for Taxation Less: Provision for finge benefit tax Provision for deferred tax liability Balance carried to Balance Sheet 16,69,10,187 13,75,09,576 8,69,676 15,76,822 0 18,31,07,642 23,79,644 9,31,591 NIl Nil 14,48,053 18,07,44,421 47,42,865 18,54,87,286 31.3.2011

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BIBLIOGRAPHY Books

15. PRASANNA CHANDRA, Financial Management, Tata McGraw-Hill

Publishing Company Limited, New Delhi, year of publication 2002, no. of edition 5th.

16. P.V. KULKARNI and B.G.SATYAPRASAD, Financial Management,

Himalaya Publishing House, Mumbai, year of publication 2005, no. of edition 13th. 17. Financial Management by SHASHI.K.GUPTA & R.K. SHARMA 18. Shashi. K. Gupta & R.K. Sharma Kalyani Publisher Management Accounting (B.Com 2003 edition) Annual Reports i. ii. iii. iv. Annual report of AAPL; for the year 2009-2010. Annual report of AAPL; for the year 2008-2009. Annual report of AAPL; for the year 2007-2008. Annual report of AAPL; for the year 2006-2007.

Websites: www.google.com www.wikipedia.com www.suzukimotocycles.co.in

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