INTRODUCTION

Trade credit arises when a firm sells in products or services on Credit and does not receive cash immediately. It is an essential marketing tool, acting for the moment of goods through production and distribution stages to customer. Affirm grants trade credit. To protect is sales form the competitors and to attract the potential customers to by its products at favorable terms. Trade creates Accounts receivable or trade debtors that the firm is expected to in the near futures. The customers from whom receivable or book debits have to be collected in the future is called trade debtors or simply as debtors and represent the firms clime or asset. A credit sale has characteristics: i) It involves an element of risk that should be carefully analyzed. Cash sales are totally risk less, but not the credit sales as the cash sales as the cash payment are yet too received. ii) It is based on economic value to the buyer, the economic value goods services passes immediately at the time of sales while the seller expects on the equivalent value to be received later on. iii) It implies futurity the buyer will make the cash payment for goods services received by him in future period.

Debtors constituted a substantial portion of customer assets several firms. For e.g.:- In India, traders Debtors after inventories are the major components of current assets. They From 1/3rd of current assets in India. Granting credit and creating Drs amount to the blocking of the firms founds. Thus trade debtors represent investment as substantial amount are tide-up in trade debtors it needs careful analysis and proper management.

Need and importance of the study

Credit risk management is one of the key areas of financial decision-making. It is significant because, the management must see that an excessive investment in current assets should protect the company from the problems of stock-out. Current assets will also determine the liquidity position of the firm. The goal of Credit risk management is to manage the firm current assets and current liabilities in such a way that a satisfactory level of working capital is maintained. If the firm cannot maintain a satisfactory level of working capital, it is likely to become insolvent and may be even forced into bankruptcy.

Scope of the study

The scope of the study is limited to collecting financial data published in the annual reports of the company every year. The analysis is done to suggest the possible solutions. The study is carried out for 4 years (2007-11).

OBJECTIVES OF THE STUDY:

1. To analysis the credit policies of Kesoram cement 2. To find out debtor turnover ratio and average collection period. 3. To suggest measures to increase profits. 4. How all areas of business are influenced by Credit Risk Management? 5. How to manage information to create a volume driven business. 6. To find out whether. It is profitable to extend credit period or reduce credit .

RESEARCH METHODOLOGY
1. The data used for analysis and interpretation from annual reports of the company. 2. That is secondary forms of data. analysis are the 3. Techniques used for calculation purpose. 4. The project is presented by using tables, graphs and with their interpretations. DDR, ACP and Increase in credit period

SOURCE OF DATA Primary data:

Primary data is collected from the Execute of the organization

Secondary data:
Secondary data obtained from the annual reports, books, magazines and websites.

LIMITATIONS
The study is based on only secondary data. The period of study was 2007-11 financial years only.

Another limitation is that of standard ratio with which the actual ratios may be compared generally there is no such ratio, which may be treated as standard for the purpose of comparison because conditions of one concern differ significantly from those of another concern.

The accuracy and correctness of ratios are totally dependent upon the reliability of the data contained in financial statements on the basis of which ratios are calculated.

Why Manage Risk?

Good risk management at a strategic level helps protect an organizations reputation, safeguard against financial loss, minimize disruption to services and increase the likelihood of achieving business objectives successfully. This also gives assurance on how an organizations business is managed and at the same time will satisfy any compliance requirements of the organization, where an internal control mechanism is established. Internal control includes:

The establishment of clear business objectives, standards, processes and procedures Clear definition of responsibilities Measurement of inputs, outputs and performance outcomes in relation to objectives Performance Management Financial controls over expenditure and budget.

What does it require?

The establishment and understanding of a risk management policy and framework The identification, assessment and judgment of threats to the achievement of clear business objectives Effecting the right action to anticipate and mitigate against risk - this includes establishing effective internal controls to counter key risks Where necessary, to take reasonable and calculated risks based on well informed management decisions

Balancing risks by design control to give reasonable assurance to contain risks and offer value for money Monitoring risks and reviewing progress Quantifying risks by assessing any potential costs or benefits arising from possible impact Reporting on the above.

How to identify risks? Step 1 - Clarity of Objectives

Be clear first of all about the overall objectives of the organisation and understand how departmental objectives are aligned to the delivery of same. Think about:

What needs to be done By when Who is accountable for delivery?

Step 2 - Identify Risks

With your objectives in mind, ask the following questions: 1. What can go wrong? 2. How and why can it happen? 3. What do we depend on for continued success? 4. What could happen? Consult with staff and others as appropriate and consider a range of possible scenarios including the best and worst cases. Be as creative with this process as possible. Consider the 'cause and effect' and scope of the risk and state as clearly as possible to avoid misunderstanding and misinterpretation. Try to quantify where possible based on what the effect might be. 5

Go back to Step 1 above and do the same for external risks by considering the relationship between the organization and its wider environment and follow the steps above. Consider potential external cause of business disruption, issues affecting relationship with partners, suppliers and any possible changes in government policy and legislation.

Step 3 - Assess Risks

Identify existing controls and their effectiveness Assess what other controls may be necessary Determine likelihood / impact - use a bespoke template:
o

Likelihood of risk occurring is used as a qualitative description of probability or frequency Impact is the outcome of the risk impacting and is expressed qualitatively or quantitatively, i.e. being a loss, injury, disadvantage or gain. NB - there may be a range of possible outcomes.

Set out a realistic timeframe for managing / mitigating risk.

Step 4 - Address Risks

This involves practical steps to managing and controlling risks. Think about:

what actions or responses are required to control risks what are the associated cost of these actions are the costs proportionate to the risk that it is controlling What information is needed to make an informed decision to accept, manage, avoid, transfer or reduce the risks Is it better to work to eliminate or innovate through taking reasonable calculated risks.

Step 5 - Review, Quantify and report Risks

Although policy may dictate a review and half yearly update should be enacted, risk owners need to regularly review to ensure there is ongoing relevant management of risks Advice should be sought where quantification / confirmation is needed, i.e. Finance or Audit Department Build into the current reporting structure via the business planning round. Where key risks need to be considered, ensure it is given priority within the agreed framework.

Risk Defined
Risk: is the actual exposure of something of human value to a hazard and is often regarded as the product of probability and loss - Source: Smith K 2001; Environmental Hazards Assessing Risk and Reducing Disaster: London: Rout ledge: 6 -7. Risk Assessment: The evaluation of a risk to determine its significance, either quantitatively or qualitatively. Risk Management: Determines the levels at which risk acceptability is set and methods of risk reduction are evaluated and applied. Resilience: The ability at every relevant level to detect, prevent and, if necessary handle disruptive challenges. Source: CCS Resilience Business Continuity: A proactive process which identifies the key functions of an organisation and the likely threats to those functions; from this information plans and procedures which ensure that key functions can continue, whatever the circumstances, can be developed.

CREDIT POLICIES:
The first decision area is credit policies;The credit policy of a firm provides the frame work to determine 7

a) whether or not to extend credit to a customer and b) How much credit to extend. The credit policy decision of firm has two broad dimensions are; credit standards and

CREDIT POLICY VARIABLES:

In establishing an optimum credit policy. The financial manager must consider the important decisions variables which influence the level of receivables. The major controllable decision variable include the following Credit standards Credit analysis Credit terms Collection policies and procedures

CREDIT STANDARDS
The term credit standards represent the basic criteria for the extension of credit to customers. The quantitative basic of establishing credit standards or factors such as credit rating, credit reference, average payment period and certain financial ratios since we are interested in illustrating the trade off between benefit and cost to the firm as a whole. We do not consider here these individual components of credit standards. To illustrate the effect,

We have divided the overall standards into a) Tight or restrictive and b) Liberal or non- restrictive i.e., to say our aim is to show what happens to the trade-off when standards are relaxed or alternatively, tighten. The trade off with reference to credit standards covers i) ii) iii) iv) The collection cost The average collection period or investment in receivables Levels of bad debts losses and Level of sales. These factors should be considered while deciding whether to relax credit standards or not.

If standards are relaxed, it means more credit will be extended while. If credit

Standards are tightened. Less credit will be extended. The implication of four factors are elaborated below

Figure. 1

COLLECTION COST:
The implication of relaxed credit standards are i) ii) iii) more credit A large credit department to service accounts receivables and related matters Increase in collection cost The effect of tightening of credit standards will be exactly the opposite. These costs are likely to be semi-variable.

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This is because up to a certain point the existing staff will be able to carry on the Increased workload but beyond that, additional staff would be required these are assumed to be included in the variable cost per unit and need not be separately identified.

INVESTMENT IN RECEIVABLE OR AVERAGE COLLECTION PERIOD

The investment in accounts receivable involves a capital cost as funds have to be arranged by the firm to finance them till customers make payment. Moreover, the higher the average accounts receivables; the higher is the capital or carrying cost. a change in the credit standards relaxation or tightening leads to a change in the level of accounts receivables either

a) Through a change in sale, b) Through a change in collection. A relaxation in credit standards as already stated, implies an increase in sales which in turn would lead to higher average accounts receivables? further relaxed standards would mean that credit is extended liberally so, that it is available to even less credit worthy. Customers who will take a longer period to pay over dues. The extension of trade credit to slow paying customers would result in a higher level of accounts receivables. A tightening of credit standards would signify A decrease in sales and lower average accounts receivables / ACP and 11

an extension of credit limited to more credit worthy customers who can promptly pay their bills and thus, a lower average level of accounts receivables.

Thus a change in sales and change in collection period together with a relaxation in Standards would produce a higher carrying cost, while changes in sales and collection period result in lower costs when credit standards are tightened. These basic reactions also occur when changes in credit terms or collection procedures are made.

BAD DEBTS EXPENSES

Another factor which is expected to be affected by changes in the credit standards is bad debts (default) expenses. They can be expected to increase with relaxation in credit standards and decreases if credit standards become more restrictive.

SALES VOLUME:Changing credit standards can also be expected to be change the volume of sales. As standards are relaxed, sales are expected to increase; conversely a tightening is expected to cause a decline in sales. The basic changes and effects on profits arising from a relaxation of credit standards are summarized in exhibit If the credit standards are tightening, the opposite effects, as shown in the brackets would follow-

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EFFECT OF STANDARDS Direction of change ITEM (Increase = I Decrease = D) 1 SALES VOLUME 2 AVG COLLECTION PERIOD 3 BAD DEBTS Table.1 Item BAD DABTS ACP SALES VOLUME COLLECTION EXPENDITURE Table. 2 Direction of change (I = increase D = decrease) D D D I Effect on profits ( positive + or Negative - ) + + I (D) I (D) I (D) Effect on profits (positive + Negative - ) + (-) - (+) - (+)

CREDIT ANALYSIS
Credit standards influence the quality of the firms customers. There are two aspects of the quality of customers The time taken by customers to repay credit obligations, The default rate. The ACP determines the speed of payment by customers. It measures the number of days for which credit sales remains outstanding. The longer the ACP, the higher the firms investment in accounts receivables.

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DEFAULT RATE - Can be measured in terms of bad debts losses ratios the proportion collected receivable. Bad debts loss ration indicates default risk. DEFAULT RISK - Is the likelihood that a customer will fail to repay the credit obligation. On the basis of past practice and experience, the financial or credit manager should be able to form a reasonable judgment regarding the chance of default. To estimate the probability of default, the financial or credit manager should consider 3 cs a) Character b) capacity and c) Conditions

CHARACTER:Refers to the customers willingness to pay the financial or credit manager should Judge whether the customer will make honest efforts to honor their credit obligation. the moral factor is considerable importance in credit evaluation in practice.

CAPACITY: Refers to the customers ability to pay can be judged by assessing the customers capital and assets which he may offer as security capacity is evaluated by the financial position of the firms as indicated by analysis of ratios and trends in firms cash and working Capital position. The financial position or credit manager should determine the real worth of assets offered as collateral (security ).

CONDITIONS:-

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Refers to the prevailing economy and other conditions which may effects the customers ability to pay. Adverse economic conditions can affect the ability or willingness of a customer to pay. An experienced financial or credit manager will be able to judge the extent and genies ness to which the customers ability to pay is effected by the economic conditions. Information on these variables may be collected from the customers themselves, their published financial statement and outside agencies which may keeping credit information about customers. A firm should use this information in preparing categories of customers according to their credit worthiness and default risk. This would be an important input for the financial or credit manager in formulating its credit standards. The firm may categorized its customers at least, in the following 3 categories: GOOD ACCOUNTS : that is financially strong customers. BAD ACCOUNTS : that is financially very weak, high risk customers.

MARGINAL ACCOUNTS : that is customers with moderate financial health and risk (falling between good and bad accounts ). The firm will have no difficulty in quickly deciding about the extension of credit to Good accounts and Rejecting the credit request of bad accounts. Most of the firms time will be taken in evaluating marginal accounts. i.e., customers who are not financially very strong but are also not so bad to be rightly rejected. A firm can expand its sales by extending credit to marginal accounts but the firms cost and bad debts losses may also increases. Therefore credit standards should be relaxed upon the point where incremental return equals incremental cost ( IR = IC ).

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Figure. 2

CREDIT TERMS:The 2nd decision area in accounts receivable management is the credit terms. After the credit standards have been established and the worthiness of the customers has been assessed the management of a firm must determine the terms and conditions on which trade credit terms. These relate to the repayment of the amount under the credit sale. Credit term is the stipulation under which the firm sells on credit to customers are called credit terms.

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These stipulations include;A) the credit period B) Cash discount B) Cash discount period A) CREDIT PERIOD;The length of time which credit is to customers is called the credit period. It is generally stated in net terms of a net date. A firms credit period may governed by the industry norms. But depending on its objective the firm can lengthen the credit period. On the other hand, the firm may lengthen its credit period if customers are defaulting to frequently and bad debts losses are building up. A firm lengthens to credit period to increases its operating profit through expanding sales however, there will be net increases in operating profit when the cost of extended credit period is less than the incremental operating profit. With increased sales and extended credit period receivable would increases.

a) incremental sales result in incremental receivables and b) excising customer will take more time to repay credit obligations i.e. the average c) Collection period will increase.

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The 2nd component of credit terms is the credit period. The expected effect of an increase in the credit period is summarized in table bellow. EFFECT OF INCRESE IN CREDIT PERIOD

Item

Direction of change I=increases D=decreases 1 1 1 Table. 3

Effect on profit +vet or vet + -

Sales volume ACP Bad debts expenses

A reduction in the credit period is likely to have an opposite effect. The above table indicates the credit period decision.

B) CASH DISCOUNT:A cash discount is a payment offered to customers to induce them to repay credit obligations with in a specified period of time which is less than the normal credit period.It is usually expressed as a percentage of sales cash discount terms indicate the rate of discount and the period for which it is available. It the customer does not avail the offer, he must make payment with in the normal credit period. Credit term would include. Rate of cash discount The cash discount period. The net credit period

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A firm uses cash discount as a tool to increases sales & accelerates collections form customers. Thus the level of receivable & associated costs may be reduced the cost involved in the discounts taken by customers. discounts are summarized in below table. The effect of decreasing cash discount will be exactly opposite. EFFECTS OF INCREASE IN CASH DISCOUNT Direction of change ITEM Effect on profits The effects of increasing the cash

( I = increase, D = decrease) ( + value, - value)

SALES VOLUME ACP BAD DEBTS EXPENSES PROFIT PER UNIT Table. 4

I D D D

+ + + -

The above table indicates cash discount decision

CASH DISCOUNT PERIOD:

Which refers to the duration during which the discount can be availed of these terms are usually written in abbreviation for instance 2/10 net 30 i.e. 2% 10 days (time available) 30 days (maxi)

COLLECTION POLICY & PROCEDURES:

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A collection policy is needed because all customers do not pay the firms bill in time, some customers are slow payers while some are non payers. The collection effort should, therefore aim at accelerating collections from slow payers and reducing bad debts losses. A collection policy should ensure prompt and regular collection. Prompt collection is needed for fast turn over or working capital keeping collection costs & bad debts within limits & maintaining collection efficiencys. Regularity in collection keeps drs alert & they tend to pay their dues promptly. The collection policy should lay down clear cut collection procedures. The collection procedures for past dues or delinquent accounts should also be establish in unambiguous terms. The slow paying customers should be handled very tactfully, some of them maybe permanent customers the collection process initiated quickly. With out giving any chance to them may antagonize them, and the firm may loss them to competitors. The accounting dept maintains the credit records and information it is responsible for collection, it should consult the sales dept before initiating an action against non paying customers similarly the sales dept must obtain past information about customers from the Accounting dept before granting credit to him. Through collection procedure should be firmly established, individual cases should be dept with on their merits. Some customers may be temporarily in tight financial position and in spite of their best intention may not be able to pay on due date this may be due to recessionary conditions, or other factors beyond the contract of the customers, such cases need special consideration. The collection procedure against them should be initiated only after they have over come their financial difficulties and do not intend to pay promptly.

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Figure. 3

CREDIT GRANTING DECISION:Once a firm has assessed the credit worthiness of a customer, it has to decide whether or not. Credit should be granted. The firm should use the NPV (net present value) rule to make the decision, if the NPV is positive, credit should be granted. If the firm chooses not to grant any credit, the firm avoids the possibility of any losses but losses the opportunity of increasing its profitability. On the other hand if it grants credit then it will benefit if the customer pays. There is some profitability that a customer will default, and then the firm may lose its investment. The expected net pay-off of the firm is the differences between the present values of net benefit and present value of the expected loss.

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CREDIT GRANTING DECISIONS

Figure. 4

CREDIT LIMIT:A credit limit is a maximum amt of credit which the firm will extend at a point it indicates the extent of risk taken by the firm by supplying goods on credit to a customer. Once the firm has taken a decision to extend credit to the applicant, the amount and duration of the credit has to be decided. The decision on the magnitude of credit will depend upon the amount of contemplated scale and the customers financial strength in case of customers who are frequent buyers of the firms goods, a credit limit can be

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establish.

This

would

avoid

the

need

to

investigate

each

order

from

thecustomers.Depending on the regularity of payment; the line of credit for a customer can be fixed on the basis of his normal buying pattern...The credit limit must be reviewed periodically. If tendencies of slow paying are found. the credit can be revised downward.

WHY DO COMPANIES GRANT IN INDIA;Companies in practice feel the necessity of granting credit reason;-

COMPETITION:Generally the higher the degree of competition, the more the credit granted by a firm however, there are exceptions such as firms in the electronics industry in India.

COMPANIES BARGAINING POWER :If A Company has higher bargaining power vis--vis its buyers, no or less credit. The company will have a string bargaining power if it has a strong product, monopoly, and brand image, large size or strong financial position.

BUYER REQUIREMENT ;In a number of business sectors buyers or dealers are not able to operate with extend credit this is particularly so, in the case of industrial products. BUYERS STATUS ;Large buyers demand easy credit terms because bulk purchasers and higher bargaining power some companies fallow a policy of not giving much credit to small retailers since it is quite difficult to collect dues from them.

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RELATIONSHIP WITH DEALERS:Companies some times extend credit to dealers to build long term relationship

with or to reward them for their loyalty. MARKETING TOOL:Credit is used as a marketing tool, particularly when a new product is launched or when a new company wants to push its week products. INDURSTRY PRACTICE:Small companies have been found guided by industry practice or norm more than the large companies. Some times companies continue givining credit because of past practice rather than industry practice. TRYNIST DELAY :This is a forced reason for extended credit in the case of a number of companies in India most companies evolved systems to minimize the impact of such delays some of them take the help of banks to control cash flows in such situations.

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The graph represents the optimum level of receivables :

Optimum level of receivables

Figure.5 NATURE OF CREDIT POLICY:A firms investment in accounts receivable depends on a) The volume of credit sales, and b) The collection period For example; if a firms credit sales are Rs. 30, 00,000 per day and customers, on an Average, take 45 days to make payment then the firms average investment in accounts receivable is: Daily credit sales x ACP 30, 00,000 x 45 = 1, 350, 00,000 The investment in receivables may be expressed in terms of cost of sales instead of 25

sales value. The volume of credit sales is a function of the firms total sales and the % of credit sales to total sales. Total sales depends on market size, firms share, product quality, intensity of competition, economic condition etc.The financial manager hardly has any control over these variables. The % of credit sales to total sales are mostly influence by the nature of the business and industry norms. For example: Car manufacture in India, until recently, was not selling cars on credit. They required the customers to make payments at the time of delivery. Some of them even asked for the payment to be made in advance this were so, because of the absence of genuine competition and a wide gap between demands for and supply of cars in India. This position changed after economic liberalization which led to intense competition. In contrast, the textile manufacture sold 2/3 rd of their total sales on credit to the wholesale dealers. The textile industry is still going through a difficult phase.

GOALS OF CREDIT POLICY:A firm may follow a Lenient or a stringent credit policy. The firm follow a lenient credit policy tend to sell on credit to customers on very liberal terms and standards, credits are granted for longer period even to those customers whose credit worthiness is not fully known or whose financial position is doubtful. A firm follow a stringent credit policy sells on credit on a highly selective basis only to those customers who have proven credit worthiness and who are financially strong. In practice firms follow credit policies ranging between stringent to lenient.

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This graph indicates cost of credit policy :

Figure. 6

COST OF CREDIT POLICY

1) If the credit policy is loose, bad debts are more. 2) If the credit policy is tight, bad debts are less. 3) If the credit policy is tight, opportunity cost is more. 4) If the credit policy is loose, opportunity cost is less-optimum credit policy.

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RESEARCH ON CREDIT MANAGEMENT

Business have receivables i.e. dues from credit customers. To increase sales, to earn more, to meet the competitors, to achieve break even volumes, to gain a foot hold in the market, to help the customers on whom the business fortune is intimately in nexus and to develop a strong brand, receivables, i.e. credit sales, are vital. Maintaining accounts receivables involves cost. Administration cost, capital cost, collection cost, and bad-debt cosset. are diverse costs involved. As in any financial decision matching costs with benefits is needed here too. And what is the optimum level of accounts receivables is to be decided. Too little of accounts receivable, that is very limited credit ales reduced sales, loss of customer to the competitors camp, reduced profit and so on. Of course no bad debt, less capital locked up in accounts receivables resulting lower capital cost etc., are benefits. But, a little more risk can be taken and profits can be inflated. Too much of accounts receivables lead to scale advantage and hence more profit can be inflated. Too much of accounts receivables lead to scale advantage and hence mire profit, but costs of added bad debts, capital cost etc. are involved. Perhaps by reducing accounts receivables costs can be steeply reduced, while benefits are not similarly decreasing.Thereforeoptimum investment in accounts receivable has to be planned and achieved.

Figure. 7

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CREDIT POLICY
Policy is a guideline to action. Policy establishes guideposts or limits for actions. Credit policy, therefore, refers to guide lines regarding credit sales, size of accounts receivables etc. Credit policy has a few variables. Credit standard, Credit period, Credit terms and collection policies are the policy variables. Credit standards refers to classification of customers on the basis of their Credit standards and stipulation of Credit eligibility of different classes of customers. The high rated customers may be extended unlimited Credit, the moderate Credit standards class may be extended a limited credit facility and the rest may not be given any Credit facility .credit period refers to how long credit is allowed. Longer credit period might help drawing more customers and viceversa. Credit terms refer to discount incentive for prompt payments by offering cash discount can be ensured. 2/30,net 45 means.2% cash discount for payment with in 30 days ,failing which full payment by the 45th day of truncation. Collection policy refers the seriousness or otherwise with which collection is dealt with, especially the delinquent customers. It may be harsh or warm. Credit policy can be liberal or stringent. Liberal credit policy adopts a lenient credit Standards ,i.e. almost all are extended credit; longer Credit period, higher cash discount for a longer entitlement period and informal and accommodative collection procedure. Stringent credit policy does the opposite. Both policies have advantages and accompanying costs .hence, choice must be exercised by individual firms after assessing the net effect of liberalizing or tightening up the Credit policy.

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LENINET VS STRINGENT CREDIT POLICY

An analysis of effects of lenient credit policies is depicted below in a table form:

Factors Sales Capital locked up Customer base Competitive edge Profit Customer goodwill Capital cost Bad debt loss Administrative cost Collection cost Discount allowed

Lenient policy More More More More More More More More More More More Talbe. 5

Stringent policy less less less less less less less less less less less

Lenient credit policy enhances benefits as well as costs. Stringent policy reduces both benefits and costs. Hence the problem of choice. Hence the need for detailed evaluation for decision-making. Evaluation needs to be done in respect of each and every credit policy variable.

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Figure. 8 The investment in accounts should be with in accepted level. To achieve this, control measures are needed so that when actual fall outside the prescribed range,

CONTROL ON CREDIT MANAGEMENT

Corrective actions can be taken. In controlling accounts receivables certain techniques are adopted. Three such techniques are described below. These are Debtors turnover ratio (DTR) Debtors turn over ratio refers to ratio of sales to accounts receivable (sundry debtors plus bills receivables). The accounts receivables may be closing figure, or average of year beginning and year-end figures or average of monthly opening and closing figures. An acceptable range for the ratio is within this band, is all right. if the 31

actual DTR is less than 5,it means more money is locked up in accounts receivables. Either sales have slumped relative to size of debtors, or debtors have risen to sales. If the ratio exceeds the upper hand, it means customers promptly pay willingly or buy over force. It is good.

Debtors velocity:
Debtors velocity refers to how much many days sales are outstanding with the customers. This is given by: accounts receivables/ per day credit sales. If fact, debtors velocity indicates the average collection period allowed, every thing is fine. If it exceeds the credit period allowed, which should be corrected. If ACP is less than credit allowed, it can be considered as good, debtors velocity can be computed ,this vary also, that: number of working days in the year/DTR.

Age of debtors:
Age of debtors refers how long debts are outstanding. Say 10% of accounts receivables is 6 months old,15% is 5 months old,25% is 4 months old,25% is 3% months old,15% is 2 months i.e., 15% is 2 months old and 10% is 1 month old. The average age of debtors comes to: 6+75+100+75+3+1=3.5 months. An ideal break up of accounts receivables can be establishes and actual position is monitored accordingly. The idle average age and actual average age of accounts receivables can be compared and control is exercised on accounts receivables.

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RESEARCH ON CREDIT MANAGEMENT

The objectives of research non credit management could be: To study the credit policies adopted across firms/ industries or in a firm/ industry. To study the extent of impact of lenient and stringent credit policies on sales, capital cost, profit, bad debts ,etc. To study the influence of different factors like credit allowed by suppliers, credit allowed by companies, etc. on credit policy. Credit Management is a branch of accountancy, and is a function that falls under the label of "Credit and Collection' or 'Accounts Receivable' as a department in many companies and institutions. They will usually deal with the credit vetting of customers, the resolution of any invoice queries or disputes, allocations of payments or cash application, internal fund movements, reconciliations and also maintaining positive working relationships with customer during the debt collection or credit review and approval process. A key requirement for effective revenue and receivables management is the ability to intelligently and efficiently manage customer credit lines or credit limits. In order to minimize exposure to bad debt, over-reserving, and bankruptcies, companies must have greater insight into customer financial strength, credit score history and changing payment patterns. Likewise, the ability to penetrate new markets and customers hinges on the ability of a company to quickly make well informed credit decisions and set appropriate lines of credit. Credit Management has evolved now from being a pure accounting function into a front-end customer facing function. It involves screening of customers and only those who are credit worthy are allowed to do business. A sound review of the financial position of the customer, and understanding of their business model is the first step in ensuring that the company does not end up selling to a customer who ends up seriously delinquent or in default. 33

Hence, before the sales function commences its business with the particular customer, the credit management role begins. Later as the customer starts dealing with the company, the accounts receivable function is used to ensure recovery as per agreed terms of credit is followed.

CREDIT ANALYSIS
Is the method by which one calculates the creditworthiness of a business or organization. The audited financial statements of a large company might be analyzed when it issues or has issued bonds. Or, a bank may analyze the financial statements of a small business before making or renewing a commercial loan. The term refers to either case, whether the business is large or small. Credit analysis involves a wide variety of financial analysis techniques, including ratio and trend analysis as well as the creation of projections and a detailed analysis of cash flows. Credit analysis also includes an examination of collateral and other sources of repayment as well as credit history and management ability. Before approving a commercial loan, a bank will look at all of these factors with the primary emphasis being the cash flow of the borrower. A typical measurement of repayment ability is the debt service coverage ratio. A credit analyst at a bank will measure the cash generated by a business (before interest expense and excluding depreciation and any other non-cash or extraordinary expenses). The debt service coverage ratio divides this cash flow amount by the debt service (both principal and interest payments on all loans) that will be required to be met. Bankers like to see debt service coverage of at least 120 percent. In other words, the debt service coverage ratio should be 1.2 or higher to show that an extra cushion exists and that the business can afford its debt requirements.

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CREDIT CONTROL:Policies aimed at serving the dual purpose of (1) increasing sales revenue by extending credit to customers who are deemed a good credit risk, and (2) minimizing risk of loss from bad debts by restricting or denying credit to customers who are not a good credit risk. Effectiveness of credit control lies in procedures employed for judging a prospect's creditworthiness, rather than in procedures used in extracting the owed money. Also called credit management. People have become increasingly dependent on credit. Therefore, it's crucial that you understand personal credit reports and your credit rating (or score). Here we'll explore what a credit score is, how it is determined, why it is important and, finally, some tips to acquire and maintain good credit.

What is a Credit Rating?

When you use credit, you are borrowing money that you promise to pay back within a specified period of time. A credit score is a statistical method to determine the likelihood of an individual paying back the money he or she has borrowed. The credit bureaus that issue these scores have different evaluation systems, each based on different factors. Some may take into consideration only the information contained in your credit report, which we look at below. The primary factors used to calculate an individuals credit score are his or her credit payment history, current debts, time length of credit history, credit type mix and frequency of applications for new credit. Because the scoring systems are based on different criteria which are weighted differently, the three major credit bureaus in the U.S. (Equifax, TransUnion, and Experian) may issue differing scores for an individual, even though the scores are based on the same credit report information. You may hear the term FICO score in reference to your credit score - the terms are essentially synonymous. FICO is an acronym for the Fair Isaacs Corporation, the creator of the software used to calculate credit scores. Scores range between 350 (extremely high risk) and 850 (extremely low risk). Here is a breakdown of the distribution of scores for the American population in 2003:

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Figure. 9

Figure. 9

What about a Credit Rating?

In addition to using credit (FICO) scores, most countries (including the U.S. and Canada) use a scale of 0-9 to rate your personal credit. On this scale, each number is preceded by one of two letters: "I" signifies installment credit (like home or auto financing), and "R"stands for revolving credit (such as a credit card). Each creditor will issue its own rating for individuals. For example, you may have an R1 rating with Visa (the highest level of credit rating), but you might simultaneously have an R5 from MasterCard if you've neglected to pay your MasterCard bill for many months. Although the "R" and "I" systems are still in use, the prevailing trend is to move away from this

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multiple rating scale toward the single digit FICO score. Nevertheless, here is how the scale breaks down.

How to manage Credit?

When you borrow money, your lender sends information to a credit bureau which details, in the form of a credit report, how well you handled your debt. From the information in the credit report, the bureau determines a credit score based on five major factors: 1) previous credit performance, 2) current level of indebtedness, 3) time credit has been in use, 4) types of credit available, and 5) pursuit of new credit. Although all these factors are included in credit score calculations, they are not given equal weighting. Here is how the weighting breaks down:

Figure. 10

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As you can see by the pie graph, your credit rating is most affected by your historical propensity for paying off your debt. The factor that can boost your credit rating the most is having a past that shows you pay off your debts fairly quickly. Additionally, maintaining low levels of indebtedness (or not keeping huge balances on your credit cards or other lines of credit), having a long credit history, and refraining from constantly applying for additional credit will all help your credit score. Although we would love to explain the exact formula for calculating the credit score, the Federal Trade Commission has a secretive approach to this formula. Credit is a Fragile Thing being aware of your credit and your credit score is very important, especially since you can harm your credit without even being aware of it.

Here's a true story of what can happen: Paul applied for a travel reward miles card, but never received any response from the credit card company. Since it was a high-limit travel card, Paul just assumed that he'd been declined and never thought about it again. More than a year later, Paul goes to the bank to inquire about a mortgage. The people at the bank pull up Paul's credit report and find a bad debt from the credit card company. According to the credit report, the company tried to collect for a year but recently wrote it off as a bad debt, reporting it asan R9, the worst score you can get. Of course, all this is news to Paul. Well, it turns out there was a clerical error, and Paul's apartment suite number was missing from the address the credit card company had on file. Paul had been approved for the card but never actually received it, and any subsequent correspondence didn't get through either.

So the credit card company still charged Paul the annual fee, which he didn't pay, because he didn't know the debt existed. The annual fee collected interest for a year until the credit card company wrote it off. In the end, after jumping though several fiery hoops, Paul was able to get the problem rectified, and the card company admitted fault and notified the credit-reporting agency. 38

The point is, even though it was a small balance due (about $150), the administration error almost got in the way of Paul getting a mortgage. Nowadays, since all data goes through computers, incorrect information can easily get onto your credit report.

Tips to Improve or Maintain a High Credit Score:

Make loan payments on time and for the correct amount. Avoid overextending your credit. Unsolicited credit cards that arrive by mail maybe tempting to use, but they won't help your credit score. Never ignore overdue bills. If you encounter any problems repaying your debt, call your creditor to make repayment arrangements. If you tell them you are having difficulty, they may be flexible.

Be aware of what type of credit you have. Credit from financing companies can negatively affect your score. Keep your outstanding debt as low as you can. Continually extending your credit close to your limit is viewed poorly. Limit your number of credit applications. When your credit report is looked at, or "hit," it is viewed as a bad thing. Not all hits are viewed negatively (such as those for monitoring of accounts, or prescreens), but most are.

Credit is not built overnight. It's better to provide creditors with a longer historical time frame to review: a longer history of good credit is favored over a shorter period of good history.

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CREDIT POLICIES:Credit policies are decided by zonal manager and credit will be given to dealers based Up on track record, history and credit worthiness of the distributors. It is depends on the management and under control of the credit controller (zonal Manager and one of the directors).

CREDIT STANDARDS:Depends on the credit market position if the position is down. The zonal manager or Credit controller is looking (i.e., to extend the credit period or limit).Credit standards are determined based on the economic conditions. If the economy is in the recession more credit will be extended and if the economy is in boom less credit will be extended.

CREDIT PERIOD:The length of time for which credit is extended to customers. Credit period = 90 days

CASH DISCOUNT PERIOD:A cash period is a reduction in payment offered to customers to induce them to repay credit obligation within a specified period of time, which will be less than the normal credit period. Cash discount period = 30 days Cash discount = 3% Credit discount = 40% on MRP

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CREDIT LIMIT:Credit limit is a maximum amount of credit which the firm will extend at a point of time. Credit limit is depending on the dealers deposit amount. The credit limit = 25, 00,000 will be given.

for example: if he deposit = 500,000

ELIGIBILITY FOR TAKING DEALERSHIP: 5 years Bank statement 2 cheques for security 1 DD for the dealer deposit amount He should have the Tin number ( wholesaler, retailer )

THREE TYPES OF CUSTOMERS:1) Builders of contractors-sales:Company is giving discount depends on the volume of goods taking by the builders.

2) Institutions-sales :Up to 6% giving.

3) ordinary dealers :Company standards discount. 41

Payment terms 30 days for every sale.

Credit Risk Management

The basic system allows us to look at expected return and particularly expected losses only, without regard to the variability of the losses over time (the volatility). A good basic system assumes: A well functioning classification (grading) system with preferably around 10 classes. The classification should be based on controllable quantitative and qualitative factors. Different classes should indicate different probabilities of default only. The typical probability of default should be estimated for each class. For each customer the estimated loss in case of default should be calculated. Normally the most important factor in this calculation would be the estimated value of possible collateral in a default situation. These two factors will give a satisfactory basis for the calculation of expected loss for the total credit portfolio. The expected loss represents a fairly good guidance for pricing, and for assessing the quality of the total portfolio. However, it does not give any indication of concentrations of risks in the portfolio. Are the losses likely to be nicely spread over time, or do we risk huge losses during a limited period of time (which means high volatility)? The advanced system builds on the same basic factors, but should include at least two additional factors: The correlation of groups of credits (such as different industries) and also

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of individual credits with the total credit portfolio of the enterprise is important in assessing the volatility of losses. Preferably the correlation with other activities of the enterprise should also be considered. Big individual credit exposures often contribute a lot to the volatility of the losses of the portfolio, especially if these credits are also somewhat weak. The latter approach gives a better basis for internal allocation of equity capital, for pricing, for calculating the maximum loss that can be expected and the need for general/unspecific loan loss reserves. Important elements of Credit Risk Management are illustrated below. The upper three boxes represent the basic system.

Figure.11

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ABOUT THE KESORAM COMPANY

Kesoram Cement Industry is one of the leading manufacturers cement in India, incorporated by the promoters of Birla Group Company. It is a dry process cement plant. The plant capacity is 8.26 lakh tones per annum; it is located at Basanthnagar in Karimnagar Dist. Of Andhra Pradesh which is 8 kms away from the Ramagundam Railway station, linking Chennai to New Delhi. The companys first unit Basanthnagar with a capacity or 2.1 lakh tones per annum. Humbolds suspension preheated system was commissioned during the year 1969. The second unit was set up in the year 1971 with a capacity 2.1 lakh tones per annum and the third unit with a capacity of2.5 lakh tones per annum went on stream in the year 1978. The coal for this company is being supplied by Singareni Collieries and the power is obtained from APSEB. The power demand for the factory is about installed in the year 1987. Kesoram Cement Industry distinguished itself all the cement factories in India by bagging the National Productivity Award Consecutively for two years i.e., for the year 1985-86 and 1986-87. The Federation of Andhra Pradesh Chamber of commerce and

industries(FAPCCI) also conferred on Kesoram Cement, an Award for Best Industrial promotion / expansion efforts in the state for the year 1984. Kesoram also bagged FAPCCI award for Best Family Planning Effort in the state for the year 1987-88. One among the industrial giants in the country today, serving the nation on industrial front, Kesoram Industries Ltd., has a chequered and eventful history dating

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back to the twenties when the Industrial House of Birla acquired it. With only a Textile Mill under its banner in 1924, it grew from strength and spread its activities to newer fields Rayon, spun pipes transparent paper, pulp, Tyres, Refectories and other products.

Cement, which plays an important role in Nation building activity, the Govt. of India, had de-licensed the cement industry in the year 1966 with a view to attract private entrepreneurs to argument the cement production. Then Kesoram decided to set up a few Cement plants in the Country. Birla supreme is popular brand of Kesoram Cement from its prestigious plant of Basanthnagar, in A.P., which has outstanding track record in performance and productivity, serving the Nation for the last two and half decades. It has proved its distinction by bagging several national awards and state awards. It also has the distinction of achieving optimum capacity utilization. Kesoram offers a choice of top quality Portland cement for light, heavy constructions and allied applications. Quality is built to every fact of the operations. As is the preference for quality, so is the demand for the product. The limestone is rich in calcium carbonate, a key factor that influences the quality of the final product. The dry process technology used in the late computerized monitoring overseas the manufacturing process. Samples are sent regularly to the bureau of Indian Standards, National Council of Construction and Building Material for certification of derived quality norms. The company has actively undertaken promotional measures for promoting their product through different media, which includes the use of hoardings, Compliment, Newspapers etc.,

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Kesoram Cement is undertaking the marketing activities extensively in the states of Andhra Pradesh, Karnataka, Tamilnadu, Kerala, Maharashtra and Gujarat. In Andhra Pradesh sales depots are located in different areas like Karimnagar, Warangal, Nizambad, Vijayawada and Nellore. In other estates it has opened around 10 depots. The market share of Kesoram Cement in the all India Cement market is 1.19% in A.P., it is a 7.05%. Kesoram cement industry is one of the leading manufacturers of cement in India Kesoram cement is a division of Kesoram Industries Limited. The latter is a 6 decades old company belonging to the house of Birlas. It is a dry process cement plant. The plant capacity is 8.26 lakh tones per annum. It is located at Basanthnagar in Karimnagar District Andhra Pradesh. The chairman of the company is Syt. B.K. BIRLA. The first unit at Basanthnagar with a capacity of 2.1 lakh tones per annum in corporating suspensions preheated system was commissioned during the year 1969. The second unit was set up in year 1991 with a capacity of 2.1 lakh tones per annum and third unit with a capacity at 2.5 lakh tones per annum went stream in the year 1978.the coal for this company is being supplied by singareni collieries and the power is obtained from APSEB. Kesoram Cement Industry distinguished it self among on the cement factories in India by bagging the National productivity Award consecutively for two years i.e., for the year 1985-86 and 87. The Federation of A.P chambers and commerce and industries (FAPCCI) also conferred on K.C. an award for the Best Industrial promotion lekpanasian Efforts in the state for the year 1984. Kesoram also bagged FAPCCI award for Best family planning effort in the state for the 1987-88. The company being a continuous process industry works around the clock and has an excellent record of performance achieving over 100% capacity utilization. Kesoram

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cement belongs to the Birla group of companies, one of the industrial giant in the Country. The company takes care of the employees welfare facilities during the work like as well as outside the work life. The company has provided housing facilities to the workers, co-operatives stores, canteen, schools, pays 20% bonus every year, conducts sports and games for republic day and Independence Day, Swimming pool, recreation clubs with facilities for Indoor and outdoor games. Family planning camps are conducted regularly with the help of the District medical and Health Authorities at the Government. The company propagates the importance of family welfare to its employees and in the neighboring villages through their medical officer and rural development officer. Not only the employees of the factory are well taken care of, but the company pays lot of attention towards the rural development activities. Twelve villages are adopted and the company has extended help in constructing temples, roads, schools, buildings, conducting training programmers to the farmers, eye surgical camps, health check up camps etc., Kesoram Cement Industry distinguished it self among on the cement factories in India by bagging the national productivity Award consecutively for two years i.e., for the year 1985-86 and 87. The Federation of A.P chambers and commerce and Industries/ Kesoram Cement is undertaking the marketing activities extensively in the states of Andhra Pradesh, Karnataka, Tamilnadu, Kerala, Maharashtra and Gujarat. In Andhra Pradesh sales depots are located in different areas like Karimnagar, Warangal, Nizambad, Vijayawada and Nellore. In other estates it has opened around 10 depots.

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The company has planted about 5 lakh trees in and around Basantnagar and near by villages there by contributing a lot for eliminating the pollution. The greenery here keeps the temperature low about 2 to 3 degrees (CG) less when compared to other areas. The company contributes about 12.5 crore rupees to the state economy and 26 crore rupees to the national economy per annum. One among the industrial giants in the country to day serving the nation on the industrial front, Kesoram industries limited. Has an acquired and eventful history dating back to the twenties when the industrial House of Birlas acquired it. With only textiles mill under its banner in 1924, it grew from strength to strength and spread its activities t newer fields like Rayon, Pulp, Transparent Paper, Spun Pipes, Refractory, Tyres and other products. Looking to wide gap between the demand and supply, of a vital commodity cement, which plays an important in National building activity the government of India de-licensed the cement industry in the year 1966 with a view to attract private entrepreneur to augment the cement production. Kesoram rose to the occasion and decide to set up a few cement plants in the country. Kesoram cement in one of the prestigious units on the renowned Kesoram industries group that is one of Indias leading industrial conglomerate, under the stewardship of Syt. B.K.Birla, the doyen of Indian Industry.

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Production Table No: 1 last 20 years production of Kesoram cement industry, Basantnagar

Year 1991-1992 1992-1993 1993-1994 1994-1995 1995-1996 1996-1997 1997-1998 1998-1999 1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

Production(in tones) 601453 643307 643663 748258 685596 731177 784555 782383 731049 746474 688605 777092 692424 727447 735012 746418 754834 1046166 1056742 1199445 1211223 Table.6

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Note; production including internal consumption also. Cement and clinker production were lower than the previous year mainly because of low dispatches of cement due to recession prevailing in cement industry with slowdown in demand during the year under review, this section had to curtail production due to accumulation of large stocks of clinker. However, sales realization during the second half of the year has improved and it is hoped that prices will stabilize at some reasonable levels

DIRECTORS OF KESORAM INDUSTREIS LTD.

Chairman: Directors: Smt.K.G. Maheshwari Sri.Pramod khaitan Sri B.K. Birla

Sri.B.P. Bajoria

Sri.P.K.Chokesy

Smt.Neeta Mukerji (Nominee of I.C.I.C.I)

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Sri.D.N.Mishra (Nominee of L.I.C)

Sri. Amitabh Ghosh (Nominee of U.T.I)

Sri.P.K.Malic

Smt.Manjushree Khaitan

Secretary: Sri.S.K.Parik

Senior Executives:

Sri.K.C.Jain(Manager of the company)

Sri.J.D.Poddar

Sri.O.P.Poddar

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Sri.P.K.Goyenka

Sri.D.Tandon Auditors: Messrs price waterhouse

Subsidiary companies of Kesoram industries Bharat General & Textile Industries Limited

KICM Investment Limited

Assam Cotton Mills Limited

Softer Estates Limited

Supreme Heritage:
Kesoram cement needs no introduction, as the name,Kesoram its synonymous with cement, rather Kesoram is a household name throughout the country today. Kesoram

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is a household name throughout the country today. Kesoram cement is one of the prestigious units of the renowned Kesoram industries group. Which is one of Indias leading industrial conglomerate, under the stewardship of Syt.B.k.Birla, the doyen of Indian industry.

Supreme Performance:
One of the largest cement plants in A.P the plant incorporates the latest technology in cement making. It is professionally managed and well-established cement manufacturing company enjoying the confidence of the consumers. Kesoram has outstand track record in performance and productivity with a quite a few national and state Awards to its credit. Birla supreme the 43 Grade cement, is widely accepted and popular in the market, commanding a premium. However to meet the specific demands of the consumers, Kesoram brought out the 53 grade BIRLA SUPREME GOLD, which has special qualities like higher fineness, quick-setting, high compressive strength and durability.

Supreme Strength: Kesoram cement has huge captive lime stone deposits which make it possible of feed high grade limestone consistently. Its natured gray color is an inborn ingredient and gives good shade. Both the products offered by Kesoram, I.e. BIRLA SUPREME 43 grade and BIRLA SUPREME GOLD 53 grade cement are outstanding much higher compressive strength and durability. 53

Supreme Process:

BIRLA SUPREME is manufactured by closed circuit cement grinding process involving high efficiency separators. This ensures uniform and high quality in cement, which in turn contributes to its superior strength and optimum setting time.

Process & Quality Control:

It has been the endeavor of Kesoram to incorporate the worlds latest technology in the plant and today has the most sophisticated, state of the art technology in its process.

X-Ray Analyzers:
Fully computerized XRF and XRD x-ray analysis keep a constant round the clock vigil on quality.

Distributed Control System:

Clinker making process is a key step in the over all cement making process. In the case of BIRLA SUPREME GOLD, the clinker making process is totally computer controlled.

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The Distributed Control System (DSC) constantly monitors the process and ensures operating efficiency. The eliminates variation and ensures consistency in the quality of the clinker.

Supreme Expertise:
The best technical teams, exclusive to Kesoram, man the plant and monitor the process, to blend the cement in just the required proportions, to make BIRLA SUPREM GOLD of rock strength.

Eco Friendly:
Kesoram has been doing its best for protecting the environment and maintain the ecological balance in the area. Appropriate pollution control equipment has been installed in the plant. Lot of afforestation measures have been taken green belts developed and lakhs of trees have been planted in and around the factory, mines township and in the near by areas. Basanthnagar has become a paradise with lush greenery, beautiful landscapes and avenues. The tree plantation is so dense that it has virtually drowned the township. Its but natural that the ambient temperature in the town ship is now less by 3-4 degree cells, compared to the near by Ramagundam, one of the hottest spots in the country. Its in the fitness of things that Kesorams senior president shri K C Jain has been recommended by the state government to the central government for the prestigious Vrishamithra National award.

ISO 9002 Certification:

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All quality systems of Kesoram have been certified under ISO9002/ISI4002 which proves the worldwide acceptance of the products. All quality systems in production and marketing of the products have been certified by B.I.S under ISO9002/IS14002.

Feathers in Kesorams cap

Kesoram has outstanding track record, achieving over 100% capacity utilization in productivity and energy conservation. It has proved its distinction by bagging several national and state awards note worthy being.

AWARDS:
Kesoram cement bagged prestigious awards including national awards for productivity technology conservation and several state awards for the year 1984, Kesoram bagged Best family planning effort in his state of the Federating of A.P chamber of commerce and industry. Also national awards for two successive years, 1985 and 1986 and national awards for mines safety for two year 1985-1986 and 1986-1987. it has also bagged in the national award for energy efficiency for three year 1989-1990 for the performance among all cement plants in India. Thus award installed by national council for cement and building material (NCCBM) is association with government of India. Kesoram bagged the prestigious A.P state productivity awards in 1987-1988 also Best Industrial Promotion Expansion Effort in the state and Yajamanyza Ratna and Best effort of an industrial unit in the state to development Rural Economy

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development programs for the year 1991 its bagged May Day Award of the government of Andhra Pradesh for the Management and the Pandit Jawaharlal Nehru Silver Rolling Trophy for the Government of Andhra Pradesh for the year 1993. During the last three years the government of Andhra Pradesh has given the following Best awards for the year 1933. Best industry relation award for 1995 environments and mineral conservation award for 1995. to keep the ecological balance they have also undertake massive tree plantation in factory and government of Indian has nominated township areas and them for VRIKSHAMITRA AWARD Best effort of an industrial unit in the state for rural development 1994-1995 presented by chief minister in march, 1996 best family welfare award 1996-1997. Kesoram cement industry has been awarded ISO14001 certificate for its effective implementation of environment schemes. For improving the standard relating to health and safety Kesoram cement industry has started implementation of OSHAS18001 which is still under progress. Kesorams Basanthnagar limestone mines won tree first prize for environment and pollution control, transport and dust suppression and welfare amenities and two second prizes for overall performance and operation and maintenance of machines. Kesoram cement industry has also won the award for workers welfare including family planning for the year 2000-01 of the federations of Andhra Pradesh chambers of commerce and industry, which was presented by the Honble Chief Minister of Andhra Pradesh Shri N. Chandra Babu Naidu.

ADVANTAGES:
Helps in designing sleeker and more elegant structures, giving greater flexibility in design concept. Due to its fine quality, super fine construction can be achieved. It gives maximum strength at minimum use for cement with water in the water cement ratio, especially the 53 grade BIRLA SUPREME GOLD. 57

 Improved durability is achieved the permeability reduces and the volumetric changes are also reduced. Better water proofing is achieving due to low heat of hydration as the shrinkage will be less which means less cracks. Better finish is achieved due to fineness and hence better workability. This plastering becomes easier with better finish. Faster construction possible as both BIRLA SUPREME GOLD achieve their high easy strength in just 24 hours and hence the form work can easily can be removed thus improving the efficiency and saving in cost and time.

KESORAM GROUP OF INDUSTRIES

a) Textiles : Kesoram Industries Ltd., 42, garden reach road, Calcutta 700 024. b) Rayon : Kesoram Rayon Triennia (po), Dist. Hoogly, West Bengal. c) Spun Pipes : Kesoram Spun Pipe & Foundries, Bansberia (po), Dist. Hoogly, West Bengal. d) Cement : Vasavadatta Cement, Sedam-585 222, Dist: Gulbargah, Karnataka. e) Cement : Kesoram cement, Basanthnagar-505 187, Dist. Karimnagar, A.P. f) Tyres : Birla Tyres, Shivam Chambers, 53, Syed Amir Ali Avenue, Calcutta-700019. 58

SWOT ANALYSIS STRENGHTS:

Cement industry is the core industry in India and it has been given prime importance by the Government. India stands second in world Population and their exists a high untapped market. The Cement industry yield high return on investment (ROI) The present level of supply and growing demand of cement clearly indicate that the prices are tending to rise.

WEAKNESS:
The per capital consumption of the cement in India is every now. The transport cost in India is very high. The cement industry is facing with acute power shortage and raw material problems. The industry is also facing major packaging problems.

OPPORTUNITIES:
The industry has tremendous potential for growth in India. In near future cement is going to replace in a large scale for the construction of road.

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 There are good prospects or exports with cement export promotion council. (CEPC) The government policies of reduction in excise duty and exempting from jute packaging may a born to the industry.

THREATS:
The surplus levels are increasing as the production of the cement is much greater than the consumption. In the present scenario of stiff competition there is a demanding trend of price. The performance of the smaller unit is badly hit by the major takeovers. The crisis situation in south East Asian Countries may create problems to the exports of the industry

Cement is the basic construction material used extensively all over the world. The per capital consumption of cement is universally acknowledged as one of the measure of the country. The per capital consumption of cement in India is estimated at approximately Rs. 57 lakh, and India is the third lowest consumer in the world. Thus there is a excellent potential growth of cement industry in India. Cement was first patented in 1824 in England. In India, the first cement plant was established by Indian cement industrial growth was continuously increased. By 1961, cement production in the country achieved self sufficiency and import of cement was stopped. In August, 1965 the Government accepted the principle to decontrol the prices and distribution of cement. A scheme of decontrol drawn and brought into effect from January, 1996 and a cement allocation and coordination organization (CACO) was formed. As the decontrol scheme did not prove to the satisfaction of the government,

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CACO was abolished and its functions over by the cement controller attached by the government Corporation of India Limited. Prices of cement are revised by the government from time to time based on studies and reports of Bureau of Industrial cost and prices. The company was incorporated at Calcutta. The main object of the company is to manufacture textiles, rayon yarn, cement, spun pipes and fire bricks. 1984-16,00,000 No. of equity shares issued in prop. 2:1 in March. 1951-8,00,000 bonus equity shares of Rs. 2.50 each issued in prop. In july, shares consolidated into Rs 15 each. 1954 - In march, 8 lakh bonus shares issued in prop,1:1. Shares then consolidated into Rs.10 each. 1956 One lakh right 2nd pref. shares offered at par. Only 10,000 shares take up. Balance offered to public. 1961 The name of the company was changed to Kesoram industries &Cotton Mills Limited on August 30, and the same has further changed to Kesoram industries limited on the 9th July, 1986. The plant for manufacture of transparent paper was set up at the same location at Tribeni in June. It has the capacity to manufacture 3,600 tpa of transparent paper. 1965 The company took on long lease one refractory unit at Kulti, West Bengal, for a period of five years. 1969 The company established its, first cement plant known as Kesoram cement at Basanthnagar, District Karimnagar, Andhra Pradesh.

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Two more cement plants were put up at the same site and the aggregate capacity of all the three cement plants is 8, 26,000tpa. 1980 There was a loss of production of 37 days in cement division due to break-down in one of the kilns. Cyclones with heavy rains and power crisis affected production. 1982 The company had to declare a lock out because of labor unrest. The lock out was lifted on 20th may, but the workmen did not return on duty as the suggestions made were not acceptable too them. After making fresh suggestions with modifications, the strike was withdrawn from 29th June. Normal working was resumed by the end of July. The company secured MRTP clearance to set up another cement unit at Sedam in Karnataka State with an annual capacity of 5 lakh tones. A new plant and equipment were being installed to improve the quality of production. Kesoram cement has set up a 15MW capacity power plant to facilitate for uninterrupted power supply for manufacturing of cement, which starts on 24th august,1977.

THE ORIGIN
The South India industries Ltd. Produced cement for the first time in India in 1904 near Chennai with a capacity of 30 tones per day. However this venture is failed. In October 1914 another enterprise, India cement company limited commissioned 100 tones per day rotary kiln at probander(Gujarat). The next couple of years saw the emergence of two factories when plants at Kant (Madhya Pradesh) and Katani (Rajasthan) were commissioned.

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The First World War gave a fillip to the cement industry and by 1918; the tree factories together were able to produce about 85,000 tones per year. In 1857, an American named David Saylor improved the mix design of limestone and clay resulting in a much more superior quality of cement. He also called his cement by the same name viz., Portland Cement.

PER CAPITA CONSUMPTION

Indias per capita consumption of cement is just over 65 kgs. An extremely low figure compared to the world avg. of over 210kgs. The experience of other developing countries like Argentina, South Korea, Brazil etc., shows that cement consumption increases as the economy grows and the purchasing power of people goes up.

PRODUCTION OF CEMENT
India ranks fourth biggest cement producing country after China, Japan and United States. In early 90s only India achieved this significant position in world cement scenario. The Indian cement industry consists of 57 companies operation about 116 large plants and around 300 mini plants having installed capacity of 109.3 million tones.

COMPOSITION OF THE CEMENT

The chemical analysis of the cement is as follows: Limestone Clay Gypsum : : : 80% 12%to 13% 6% to 9% 2% 5% Coke breeze : Addictives :

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FUNCTIONS OF CEMENT INGREDIENTS LIMESTONE

This is the important composition of cement and its proportion is to be carefully maintenance. Limestone is excess make the cement unsound and causes the cement to expand and disintegrate. On the other hand, if lime is in deficiency strength of cement is decreased and it causes cement to set quickly.

Calcium Sulphate:
his ingredient imparts color, hardness and strength to cement.

Coke Breeze:
t is a fuel, helps to burn the nudels in the kiln.

Types of Cement:
India is currently produces many variables cement like

1. Ordinary Portland cement

his is mixture of calcareous (limestone, marble,chalk,etc.,) and argillaceous (clay, shale etc.,)to which other materials like silica, alumna or iron oxide are added. There are burnt at a clinking temperature and the resulting clinker is then ground. After burning ,only gypsum or air entering agent is added.

2. Portland Blast Furnace Slag Cement

64

A fine mixture Portland cement clinker and granulated blast furnace slag makes Portland blast furnace slag makes Portland slag cement. The clinker for this form is manufactured in the same manner as for ordinary Portland cement. The granulated blast furnace slag is a non-metallic product obtained by rapidly chilling or dipping in water stream or aid. The molten slag cement to comply with the requirement under IS :4551976. It highly suitable for marine structure involving large masses o concrete such as such drams, retaining was bridge abutments, for municipal works such as sewers and structures exposed to sulfate bearing such as foundation and road.

3. Portland Pozzolana Cement

This is manufactured in two ways. Either by grinding together Portland cement clinker and pozzalana such as burnt clay or uniformly bending Portland cement and fine pozzalana used varies 10 to 25% by weight of cement. In mass concrete construction PPC concrete have show better resistance to cracking then the OPC to sulphate attack and seawater is similar to that of sulphate resisting Portland cement.

4. Rapid-Hardening Portland cement

It is from OPC, it contains a higher percentage of tri-calcium silicate and secondly, it is ore finely ground than OPC. Rapid hardening portland cement, true top its attain in 7 days. This cement is used when a structure is required to carry loads earlier that would be possible with the use of OPC for example for roads air fields and concentrate products industry.

5. High-Alumina Cement
The major ingredient in this type of cement is hydraulic calcium alumates. It hardness rapidly in one day, strength equivalent by OPC in above 28 days it is not

65

recommended for structural use, thought it has a high resistance to chemicals attack by seawater and sulphate bearing soil. It makes a good refractory concrete when used with crushed bricks .6. Oil-Well Cement

This is a specific kind of cement for use in drilling of oil wells in the space between the steel liming tubes and the well walls. It sets slowly in order to give slurry made with it, sufficient time to reach the large depths of the oils wells. However, once it seeks, develops strength rapidly and remains stable at high temperature.

7. White Cement
t is primarily used for decorative purpose and also in the manufacturing of tile. The materials are so chosen that the maximum iron oxide content is strictly limited to 1%. A variety of colors can be obtained by the addition of pigments.

8. Acid Resistance Cement

it a predominant base of silicates it is characterized by a quick set, good mechanical strength and high resistance to most acids, corrosive organic chemicals mineral soils and greases. It is used for binding and joining acid proof bricks and tiles construction of acid resistant industrial floorings.

66

Profile of the cement Industry:

In the most general sense of the word, cement is a binder, a substance which sets and hardens independently, and can bind other materials together. The word "cement" traces to the Romans, who used the term "opus caementicium" to describe masonry which resembled concrete and was made from crushed rock with burnt lime as binder. The volcanic ash and pulverized brick additives which were added to the burnt lime to obtain a hydraulic binder were later referred to as cementum, cimentum, cement and cement. Cements used in construction are characterized as hydraulic or nonhydraulic. The most important use of cement is the production of mortar and concretethe bonding of natural or artificial aggregates to form a strong building material which is durable in the face of normal environmental effects. Concrete should not be confused with cement because the term cement refers only to the dry powder substance used to bind the aggregate materials of concrete. Upon the addition of water and/or additives the cement mixture is referred to as concrete, especially if aggregates have been added.

History of the origin of cement

It is uncertain where it was first discovered that a combination of hydrated nonhydraulic lime and a pozzolan produces a hydraulic mixture (see also: Pozzolanic reaction), but concrete made from such mixtures was first used on a large scale by Roman engineersThey used both natural pozzolans (trass or pumice) and artificial pozzolans (ground brick or pottery) in these concretes. Many excellent examples of structures made from these concretes are still standing, notably the huge monolithic dome of the Pantheon in Rome and the massive Baths of Caracalla. The vast system of Roman aqueducts also made extensive use of hydraulic cement. The use of

67

structural concrete disappeared in medieval Europe, although weak pozzolanic concretes continued to be used as a core fill in stone walls and columns.

Modern cement
Modern hydraulic cements began to be developed from the start of the Industrial Revolution (around 1800), driven by three main needs:

Hydraulic renders for finishing brick buildings in wet climates Hydraulic mortars for masonry construction of harbor works etc, in contact with Development of strong concretes.

sea water.

In Britain particularly, good quality building stone became ever more expensive during a period of rapid growth, and it became a common practice to construct prestige buildings from the new industrial bricks, and to finish them with a stucco to imitate stone. Hydraulic limes were favored for this, but the need for a fast set time encouraged the development of new cements. Most famous was Parker's "Roman cement." This was developed by James Parker in the 1780s, and finally patented in 1796. It was, in fact, nothing like any material used by the Romans, but was a "Natural cement" made by burning sectarian - nodules that are found in certain clay deposits, and that contain both clay minerals and calcium carbonate. The burnt nodules were ground to a fine powder. This product, made into a mortar with sand, set in 515 minutes. The success of "Roman Cement" led other manufacturers to develop rival products by burning artificial mixtures of clay and chalk. John Smeaton made an important contribution to the development of cements when he was planning the construction of the third Eddy stone Lighthouse (1755-9) in the English Channel. He needed a hydraulic mortar that would set and develop some strength in the twelve hour period between successive high tides. He performed an exhaustive market research on the available hydraulic limes, visiting their production sites, and noted that the "hydraulicity" of the lime was directly related to the clay content of the limestone from which it was made. Seaton was a civil engineer by 68

profession, and took the idea no further. Apparently unaware of Seatons work, the same principle was identified by Louis Vic at in the first decade of the nineteenth century. Vic at went on to devise a method of combining chalk and clay into an intimate mixture, and, burning this, produced an "artificial cement" in 1817. James Frost working in Britain, produced what he called "British cement" in a similar manner around the same time, but did not obtain a patent until 1822. In 1824, Joseph Aspdin patented a similar material, which he called Portland cement, because the render made from it was in color similar to the prestigious Portland stone. All the above products could not compete with lime/pozzolan concretes because of fast-setting (giving insufficient time for placement) and low early strengths (requiring a delay of many weeks before formwork could be removed). Hydraulic limes, "natural" cements and "artificial" cements all rely upon their belite content for strength development. Belite develops strength slowly. Because they were burned at temperatures below 1250 C, they contained no alite, which is responsible for early strength in modern cements. The first cement to consistently contain alite was made by Joseph Aspdin's son William in the early 1840s. This was what we call today "modern" Portland cement. Because of the air of mystery with which William Aspdin surrounded his product, others (e.g. Vicat and I C Johnson) have claimed precedence in this invention, but recent analysis[6] of both his concrete and raw cement have shown that William Aspdin's product made at Northfleet, Kent was a true alite-based cement. However, Aspdin's methods were "rule-of-thumb": Vicat is responsible for establishing the chemical basis of these cements, and Johnson established the importance of sintering the mix in the kiln. William Aspdin's innovation was counter-intuitive for manufacturers of "artificial cements", because they required more lime in the mix (a problem for his father), because they required a much higher kiln temperature (and therefore more fuel) and because the resulting clinker was very hard and rapidly wore down the millstones which were the only available grinding technology of the time. Manufacturing costs were therefore considerably higher, but the product set reasonably slowly and developed strength quickly, thus opening up a market for use in concrete. The use of 69

concrete in construction grew rapidly from 1850 onwards, and was soon the dominant use for cements. Thus Portland cement began its predominant role. it is made from water and sand Types of modern cement Portland cement Cement is made by heating limestone (calcium carbonate), with small quantities of other materials (such as clay) to 1450C in a kiln, in a process known as calcination, whereby a molecule of carbon dioxide is liberated from the calcium carbonate to form calcium oxide, or lime, which is then blended with the other materials that have been included in the mix . The resulting hard substance, called 'clinker', is then ground with a small amount of gypsum into a powder to make 'Ordinary Portland Cement', the most commonly used type of cement (often referred to as OPC). Portland cement is a basic ingredient of concrete, mortar and most non-speciality grout. The most common use for Portland cement is in the production of concrete. Concrete is a composite material consisting of aggregate (gravel and sand), cement, and water. As a construction material, concrete can be cast in almost any shape desired, and once hardened, can become a structural (load bearing) element. Portland cement may be gray or white. Portland cement blends These are often available as inter-ground mixtures from cement manufacturers, but similar formulations are often also mixed from the ground components at the concrete mixing plant. Portland blast furnace cement contains up to 70% ground granulated blast furnace slag, with the rest Portland clinker and a little gypsum. All compositions produce high ultimate strength, but as slag content is increased, early strength is reduced, while

70

sulfate resistance increases and heat evolution diminishes. Used as an economic alternative to Portland sulfate-resisting and low-heat cements. Portland flyash cement contains up to 30% fly ash. The fly ash is pozzolanic, so that ultimate strength is maintained. Because fly ash addition allows a lower concrete water content, early strength can also be maintained. Where good quality cheap fly ash is available, this can be an economic alternative to ordinary Portland cement. Portland Pozzolana cement includes fly ash cement, since fly ash is a pozzolan, but also includes cements made from other natural or artificial pozzolans. In countries where volcanic ashes are available (e.g. Italy, Chile, Mexico, the Philippines) these cements are often the most common form in use. Portland silica fume cement. Addition of silica fume can yield exceptionally high strengths, and cements containing 5-20% silica fume are occasionally produced. However, silica fume is more usually added to Portland cement at the concrete mixer Masonry cements are used for preparing bricklaying mortars and stuccos, and must not be used in concrete. They are usually complex proprietary formulations containing Portland clinker and a number of other ingredients that may include limestone, hydrated lime, air entertainers, retarders, water proofers and coloring agents. They are formulated to yield workable mortars that allow rapid and consistent masonry work. Subtle variations of Masonry cement in the US are Plastic Cements and Stucco Cements. These are designed to produce controlled bond with masonry blocks. Expansive cements contain, in addition to Portland clinker, expansive clinkers (usually sulfoaluminate clinkers), and are designed to offset the effects of drying shrinkage that is normally encountered with hydraulic cements. This allows large floor slabs (up to 60 m square) to be prepared without contraction joints. White blended cements may be made using white clinker and white supplementary materials such as high-purity metakaolin.

71

Colored cements are used for decorative purposes. In some standards, the addition of pigments to produce "colored Portland cement" is allowed. In other standards (e.g. ASTM), pigments are not allowed constituents of Portland cement, and colored cements are sold as "blended hydraulic cements". Very finely ground cements are made from mixtures of cement with sand or with slag or other Pozzolana type minerals which are extremely finely ground together. Such cements can have the same physical characteristics as normal cement but with 50% less cement particularly due to their increased surface area for the chemical reaction. Even with intensive grinding they can use up to 50% less energy to fabricate than ordinary Portland cements. Non-Portland hydraulic cements Pozzolan-lime cements. Mixtures of ground pozzolan and lime are the cements used by the Romans, and are to be found in Roman structures still standing (e.g. the Pantheon in Rome). They develop strength slowly, but their ultimate strength can be very high. The hydration products that produce strength are essentially the same as those produced by Portland cement. Slag-lime cements. Ground is not hydraulic on its own, but is "activated" by addition of alkalis, most economically using lime. They are similar to pozzolan lime cements in their properties. Only granulated slag (i.e. water-quenched, glassy slag) is effective as a cement component. Super sulfated cements. These contain about 80% ground granulated blast furnace slag, 15% gypsum or anhydrite and a little Portland clinker or lime as an activator. They produce strength by formation of ettringite, with strength growth similar to a slow Portland cement. They exhibit good resistance to aggressive agents, including sulfate. Calcium aluminates cements are hydraulic cements made primarily from limestone and bauxite. The active ingredients are monocalcium aluminates CaAl2O4 (CaO

72

Al2O3 or CA in Cement chemist notation, CCN) and mayenite Ca12Al14O33 (12 CaO 7 Al2O3 , or C12A7 in CCN). Strength forms by hydration to calcium aluminates hydrates. They are well-adapted for use in refractory (high-temperature resistant) concretes, e.g. for furnace linings. Calcium sulfoaluminate cements are made from clinkers that include ye'elimite (Ca4(AlO2)6SO4 or C4A3 in Cement chemist's notation) as a primary phase. They are used in expansive cements, in ultra-high early strength cements, and in "low-energy" cements. Hydration produces ettringite, and specialized physical properties (such as expansion or rapid reaction) are obtained by adjustment of the availability of calcium and sulfate ions. Their use as a low-energy alternative to Portland cement has been pioneered in China, where several million tones per year are produced. Energy requirements are lower because of the lower kiln temperatures required for reaction, and the lower amount of limestone (which must be endothermic ally decarbonated) in the mix. In addition, the lower limestone content and lower fuel consumption leads to a CO2 emission around half that associated with Portland clinker. However, SO2 emissions are usually significantly higher. "Natural" Cements correspond to certain cements of the pre-Portland era, produced by burning argillaceous limestone at moderate temperatures. The level of clay components in the limestone (around 30-35%) is such that large amounts of belite (the low-early strength, high-late strength mineral in Portland cement) are formed without the formation of excessive amounts of free lime. As with any natural material, such cements have highly variable properties. Geopolymer cements are made from mixtures of water-soluble alkali metal silicates and aluminosilicate mineral powders such as fly ash and met kaolin.

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The setting of cement Cement sets when mixed with water by way of a complex series of chemical reactions still only partly understood. The component constituents slowly crystallize and the locking together of the crystals gives it strength. Carbon Dioxide is slowly absorbed to convert the Lime into insoluble calcium carbonate. After the initial setting, immersion in warm water will speed up setting. Environmental and social impacts Cement manufacture causes environmental impacts at all stages of the process. These include emissions of airborne pollution in the form of dust, gases, noise and vibration when operating machinery and during blasting in quarries, and damage to countryside from quarrying. Equipment to reduce dust emissions during quarrying and manufacture of cement is widely used, and equipment to trap and separate exhaust gases are coming into increased use. Environmental protection also includes the reintegration of quarries into the countryside after they have been closed down by returning them to nature or re-cultivating them. Climate Cement manufacture contributes greenhouse gases both directly through the production of carbon dioxide when calcium carbonate is heated, producing lime and carbon dioxide,[14] and also indirectly through the use of energy, particularly if the energy is sourced from fossil fuels. The cement industry produces about 5% of global man-made CO2 emissions, of which 50% is from the chemical process, and 40% from burning fuel. The amount of CO2 emitted by the cement industry is nearly 900 kg of CO2 for every 1000 kg of cement produced. One alternative, in certain applications, lime mortar, reabsorbs the CO2 chemically released in its manufacture, and has a lower energy requirement in production.

74

Newly developed cement types from Novacem and Eco-cement can absorb carbon dioxide from ambient air during hardening. Fuels and raw materials A cement plant consumes 3 to 6 GJ of fuel per tonne of clinker produced, depending on the raw materials and the process used. Most cement kilns today use coal and petroleum coke as primary fuels, and to a lesser extent natural gas and fuel oil. Selected waste and by-products with recoverable calorific value can be used as fuels in a cement kiln, replacing a portion of conventional fossil fuels, like coal, if they meet strict specifications. Selected waste and by-products containing useful minerals such as calcium, silica, alumina, and iron can be used as raw materials in the kiln, replacing raw materials such as clay, shale, and limestone. Because some materials have both useful mineral content and recoverable calorific value, the distinction between alternative fuels and raw materials is not always clear. For example, sewage sludge has a low but significant calorific value, and burns to give ash containing minerals useful in the clinker matrix. Cement industry In 2002 the world production of hydraulic cement was 1,800 million metric tons. The top three producers were China with 704, India with 100, and the United States with 91 million metric tons for a combined total of about half the world total by the world's three most populous states.

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DATA ANALYSIS:The calculations using in Data analysis are 1) DTR ( Debtors turnover ratio ) 2) ACP ( Average collection period ) Calculation of DTR :This measures a relationship between debtors and sales.

DTR = credit sales (or) sales Debtors

Calculation for: 2009:DTR = 154,543,132.2 598146146.2 = 2.613

Calculation for: 2010:DTR = 326,786,452.06 68,469,249.88 = 4.772

76

Calculation for: 2011:DTR = 398,664,22.01 137,884,90.32 = 2.891

Calculation for: 2012:DTR =422,553,542.21 157,296,622.53 =2.686

DTR from 2009 to 2012 are:-

YEAR 2009

DTR 2.613

2010

4.772

2011

2.891

2012

2.686

Table.7

Interpretation:

77

According to above analysis in the before last four financial years company having negative working capital and in the last financial year (2010-2011) company having still positive working capital that equals to 24 times on sales.

Calculation of ACP:The ACP calculation is compared with the firms stated credit period to judge The collection efficiency.

The ACP measures the quantity of receivables. Since, it indicates the speed of their collect ability. ACP = Debtors x 360 (or) 360 DTR

Credit sales

Calculation for: 2008:-

ACP = 360 2.613

137.77

Calculation for: 2009:-

78

ACP

= 360 4.772

75.44

Calculation for: 2010:-

ACP

= 360 2.891

124.52

Calculation for 2011:-

ACP

= 360 2.686

134.03

ACP from 2009 to 2012 is:79

YEAR 2009

ACP 137.77

2010

75.44

2011

124.52

2012

134.03

Table. 8

Interpretation:
According to above analysis in the before last four financial years company having negative working capital but in the last financial year (2010-2011) company having positive working capital that equals to 24 times on sales.

A SCENARIO ANALYSIS: -

80

Suppose credit period is extended to 100 days. Then sales may increase by 15%. If credit period is decreased to 80 days. Then sales decreases by 10%. The cost of financing is 11%.

CALCULATION OF INCREASE IN CREDIT PERIOD: 81

Calculation for 2009:-

Statement of increase in credit period

PARTICULARS A) Credit period

EXISTING 90

DAYS (+15%) 100

DAYS (- 10%) 80

B) Annual sales C Level of receivables (at sales value) (Ax / 360) D receivable (C- 44,385,808.55) E) Assume incremental profit Increment in

154,543,132.2

177724602.03

139088818.98

386357830.5

49367954

30908626.44

investment

12,8356648.03

(108180192)

25671329606

(21636038.4)

@20% (0.2xD)

Table.9

WORKING NOTES:1) Annual sales :-

82

100 days =

154,543,132.2 154,543,132.2

+ (154,543,132.2 x 15%) + 23181469.83

= 177724602.03 80 days = = 154,543,132.2 - ( 154,543,132.2 x 10%) - 15454313.22

= 154,543,132.2 = 139088818.98 2) Level of receivables : Ax/ 360:

90 days = = 154,543,132.2x 90 360 100 days =177724602.03 x 100 360 80 days =139088818.98x 80 360

= 386357830.5

= 49367954

= 30908626.44

3) Incremental investment in receivables : (C - 44,385,808.55)

83

90 days = 154,543,132.2

- 154,543,132.2

100 days =177724602.03 -49367954 = 12,8356648.03 80 days =139088818.98 30908626.44 = (108180192)

4) Assume incremental profit @ 20% (0.20 x D) : 90 days = 0 100 days = 12,8356648.03 x 20% = 25671329606 80 days = -108180192 x 20 % = (21636038.4)

Interpretation:
According to above analysis for a financial years company having positive growth in profit increments if they allows a credit period more than the existing period (90days to 100days). And when the existing credit period having a 80days credit period which is less then standard credit period shows a downfall in annual profit incrimination.

Calculations for 2010:Statement of increase in credit period

84

PARTICULARS A) Credit period B) Annual sales

EXISTING 90 326,786,452.06

DAYS (+ 15 % ) 100 375804419.87 104390116.63

DAYS (-10 %) 80 294107806.85 65357290.41

C)

Level

of

receivables (at sales 81696613.015 value) (AxB/360) D) Incremental investment receivables in (C-

22693503.615

(16339322.605)

113,197,361.215) E) Assume incremental profit 453870.722 (3267864.521) @ 20% (0.20 x D) Table.10

WORKING NOTES:1) Annual sales :90 days = 326,786,452.06 85

100 days = 326,786,452.06 =

+ (326,786,452.06 x 15%)

375804419.87 (326,786,452.06 x 10%)

80 days = 326,786,452.06 =

294107806.85

2) Level of receivables ( at sales value ) :Ax / 360 90 days = 90 x 326,786,452.06 360 = 81696613.015

100 days = 100 x375804419.87 360

= 104390116.63

80 days = 80 x 294107806.85= 65357290.41 360

3) Incremental investment in receivables :( C - 113,197,361.215) 90 days = 0

86

100 days = 104390116.63 - 81696613.015 = 22693503.615 80 days = 65357290.41 = 81696613.015

(16339322.605)

4) Assume incremental profit @ 20% (0.20x D) :90 days 100 days 80 days =0 = 22693503.61 x 20% = = 453870.722

(16339322.605 x 20%) = 3267864.521

INTERPRETATION
According to above analysis for a financial years (STATEMENT)company having positive growth in profit increments and in level of receivable , if they allows a credit period more than the existing period (90days to 100days). And when the existing credit period having a 80days credit period which is less than standard credit period shows a downfall in annual profit incrimination.

Calculation for 2011: Statement of increase in credit period PARTICULARS EXISTING DAYS (+15%) 87 DAYS (-10%)

A) Credit period 90 B) Annual sales 398,664,22.01 C) Levels of 127350940.363 7973284.42 receivables (at sales 9966605.5025 value) (Ax) D) Incremental investment receivables ( in C117384334.861 (1993321.08) 458463385.31 35879779.89 100 80

133,741,255.862) E) Assume incremental profit 23476866.9722 (23476866.97) @ 20% (0.20x D) Table.11

WORKING NOTES: -

1) Annual sales :100 days = 398,664,22.01 + (398,664,22.01 x 15 %) = 80 days = 458463385.31

398,664,22.01 - (398,664,22.01 x 10 %) = 35879779.89

2) Level of receivables (at sales value) :-

88

(Ax) / 360 90 days = 90 x 398,664,22.01 360 100 days = 100 x 458463385.31 = 360 80 days = 80 x =35879779.89 360 = 7973284.42 127350940.363 = 9966605.5025

3) Incremental investment in receivables : (C 90 days 100 days - 9966605.5025) = 0

= 127350940.363- 9966605.5025 = 117384334.861

80 days

= 7973284.42- 9966605.5025 = (1993321.08)

4) Assumed incremental profit @ 20% (0.2 x D) : 90 days = 0 100 days = 117384334.861x 20%

89

= 80 days

23476866.9722

= (1993321.08) x 20% = (23476866.97)

INTERPRETATION
According to above analysis for a financial years company having positive growth in profit increments if they allows a credit period more than the existing period (90days to 100days). And when the existing credit period having a 80days credit period which is less then standard credit period shows a downfall in annual profit increment.

Calculation for 2012: Statement of increase in credit period PARTICULARS A) Credit period EXISTING 90 DAYS (+15%) 100 DAYS (-10%) 80

90

B) Annual sales 398,664,22.01 C) Levels of 12,735,107.03 7,973,284.402 receivables (at sales 9,966,605.50 value) (Ax) D) Incremental investment receivables ( in C2768501.53 (1993321.12) 45846385.31 35879779.809

133,741,255.862) E) Assume incremental profit 553700.306 (398664.224) @ 20% (0.20x D)

91

Table.12

WORKING NOTES: 1) Annual sales :100 days = 398, 664, 22.01 + = (398, 664, 22.01 x 15 %)

45846385.31

80 days =

398, 664,22.01 - (398,664,22.01 x 10 %) = 35879779.809

2) Level of receivables (at sales value) :(Ax) / 360 90 days = 90 x 398,664,22.01 360 100 days 80 days = = 100 x 45846385.31= 360 80 x 35879779.809 = 7,973,284.402 360 3) Incremental investment in receivables : 12,735,107.03 = 9,966,605.50

92

(C 90 days 100 days

- )= = 0

9,966,605.50

=12,735,107.03 = 2768501.53

9,966,605.50

80 days

= 7,973,284.402 - 9,966,605.50 = (1993321.12)

4) Assumed incremental profit @ 20% (0.2 x D) : 90 days = 0 100 days = 2768501.53x 20% = 80 days 553700.306

= (1993321.12) x 20% = (398664.224)

INTERPRETATION
According to above analysis for a financial years (STATEMENT)company having positive growth in profit increments and in level of receivable , if they allows a credit period more than the existing period (90days to 100days). And when the existing credit period having a 80days credit period which is less than standard credit period shows a downfall in annual profit incrimination.

93

FINDINGS

Credit risk only considers about their banks risk and working capital and investment.

Majority of creditors are unable to pay credit on maturity period ,which leads in improper time management.

More credit will have equaling amount of risk associate with it. Credit period always entitled with longer term of period. Banks always considers wholly customers as risk individuals. Credit risk continues to be leading sources of problem in banks worldwide. Unsatisfactory information to create a volume driven business.

94

CONCLUSIONS: Debtors turnover ratio increasing every year from 2007 to 2010. Average collection period decreasing every year from 2007 to 2010. The scenario analysis was conducted assuming credit period to be 80 Based on the report it is concluded that credit policies are decided by Credit standards are determined based on economic conditions. Credit is 90 days and if credit is paid before that period the company Credit is 90 days and if credit is paid before that period the company

zonal manager so, powers are centralized.

will give cash discount.

will give cash discount. days and 100 days. The result should that while credit period is 100

days the company is getting profits. When the credit period is 80 days the

95

SUGGESTIONS: It is suggested to management to increase credit period to 100 days. So that company can earn profits. It is suggested to management to offer more incentives for prompt payment of credit. So that receivables are paid promptly by dealers. In management can be littlie bit liberal in credit policies so that more profits are achieved. Relaxing credit standards will enable to increases the customers. In management can be little bit liberal in credit policies so that more profits are achieved. Relaxing credit standards will enable to increases the customers. A reduction in the credit period is likely to have an opposite effect.

96

Credit limit is a maximum amount of credit which the firm will extended at a point of time.

BIBLIOGRAPHY

S. NO

AUTHOR

TITLE OF THE BOOK Financial

EDITION

PUBLISHER

YEAR

BALAN V.K Management Financial 4

ANMOL 2010 New Delhi PRAGATI 2 New Delhi TATA MCGRAW 4 HILL New Delhi 2001

GOEL B.L Management

2001

KHAN &JAIN

Financial Management

97

PRASANNA CHANDRA

Financial Management 4

TATA MCGRAW HILL New Delhi 2001

WEBSITES:

S.NO Websites 1 www.exide.com 2 www.wikipedia.com 3 www.yahoofinance.com

98