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In 1948, when independent India was one year old, Ashok Leyland was born. We were Ashok Motors then, assembling Austin cars at the first plant, at Ennore near Chennai. In 1950 started assembly of Leyland commercial vehicles and soon local manufacturing under license from British Leyland. With British Leyland participation in the equity capital, in 1954, the Company was rechristened Ashok Leyland. Since then Ashok Leyland has been a major presence in India's commercial vehicle industry. These years have been punctuated by a number of technological innovations which went on to become industry standards. This tradition of technological leadership was achieved through tieups with international technology leaders and through vigorous in-house R&D. Ashok Leyland vehicles have built a reputation for reliability and ruggedness. The 375,000 vehicles we have put on the roads have shared the additional pressure placed on road transportation in independent India. The share of goods movement by road rose from 12% in 1950 to 60% in 1995. In passenger transportation, the jump is equally dramatic: from 25% to 80%. At 60 million passengers a day, Ashok Leyland buses carry more people than the entire Indian rail network. In the populous Indian metros, four out of the five State Transport Undertaking (STU) buses come from Ashok Leyland. Some of them like double decker and vestibuled buses are unique models from Ashok Leyland, tailor-made for high density routes. In 1987, the overseas holding by LRLIH (Land Rover Leyland International Holdings Limited) was taken over by a joint venture between the Hinduja Group, the Non-Resident Indian transnational group and IVECO Fiat SPA, part of the Fiat Group and Europe's leading truck manufacturer. Global Standards, Global Markets The blue-print prepared for the future reflected the
global ambitions of the Company, captured in four words: Global Standards, Global Markets (Liberalisation and globalisation were not yet in the air). Buoyed by the backing of the two international giants, Ashok Leyland embarked on a major product and process technology Up gradation to world-class standards of technology. In the journey towards global standards of quality, Ashok Leyland reached a milestone in 1993 when it became the first in India's automobile industry to win the ISO 9002 certification. The more comprehensive ISO 9001 certification came in 1994. 1994 was also the year, when international technology changed the way India perceived trucks. The year when a new breed of world class trucks- technologically Page | 2
superior and eco-friendly - rolled out on Indian roads. From our state-of the-art manufacturing Plant at Hosur, near Bangalore. They carried the name Cargo. Cargo brought with it, a new set of values and an unmatched basket of benefits, ushering in a change.
Achieving leadership in the medium/heavy duty segments of the domestic commercial vehicle market and a significant presence in the world market through transport solution that best anticipate customer needs, with the highest value-to-cost ratio
• • • • Identifying with the customer Being the lowest cost manufacturer Global benchmarking our products, processes and people
The origin of Ashok Leyland can be traced to the urge for self-reliance, felt by independent India. Pandit Jawaharlal Nehru, India's first Prime Minister persuaded Mr. Raghunandan Saran, an industrialist, to enter automotive manufacture. In 1948, Ashok Motors was set up in what was then Madras, for the assembly of Austin Cars. The Company's destiny and name changed soon with equity participation by British Leyland and Ashok Leyland commenced manufacture of commercial vehicles in 1955.
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Since then Ashok Leyland has been a major presence in India's commercial vehicle industry with a tradition of technological leadership, achieved through tie-ups with international technology leaders and through vigorous in-house R&D.
Access to international technology enabled the Company to set a tradition to be first with technology. Be it full air brakes, power steering or rear engine busses, Ashok Leyland pioneered all these concepts. Responding to the operating conditions and practices in the country, the Company made its vehicles strong, over-engineering them with extra metallic muscles. "Designing durable products that make economic sense to the consumer, using appropriate technology”, became the design philosophy of the Company, which in turn has moulded consumer attitudes and the brand personality.
Ashok Leyland vehicles have built a reputation for reliability and ruggedness. The placed on road transportation in independent
00,000 vehicles we have put on the roads have considerably eased the additional pressure
In the populous Indian metros, four out of the five State Transport Undertaking (STU) buses come from Ashok Leyland. Some of them like the double-decker and vestibule buses are unique models from Ashok Leyland, tailor-made for high-density routes . In 1987, the overseas holding by Land Rover Leyland International Holdings Limited Page | 4
(LRLIH) was taken over by a joint venture between the Hinduja Group. o. utilizing ecofriendly processes in their various plants. Ashok Leyland aims to expand its operations to penetrate into overseas markets. In the journey towards global standards of quality. Newly formed in June 2009. Furthermore. QS 9000 in 1998 and ISO 14001 certification for all vehicle manufacturing units in 2002. The more comprehensive ISO 9001 certification came in 1994. The company says negotiation is progressing on land acquisition. Ashok Leyland bought a majority stake in the Czech based. Ashok Leyland reached a major milestone in 1993 when it became the first in India's automobile history to win the ISO 9002 certification. Ashok Leyland embarked on a major product and process up gradation to match world-class standards of technology.Avia. This is part of a series of articles peeking into clean car industries and car manufacturers of China. following a joint venture with John Deere. captured in four words: Global Standards. This was at a time when liberalisation and globalisation were not yet in the air. they are one of the companies showing the strongest commitment to environmental protection. the Hinduja Group is 100% holder ofLRLIH). South Korea and Germany. the company will expand its product offers into construction equipment. (Since July 2006. Ashok Leyland is also paying close attention to the environment. The venture is scheduled to start rolling out wheel loaders and backhoe loaders in October 2010. r. The blueprint prepared for the future reflected the global ambitions of the company. in 2008 the joint venture sold 518 LCVs in Europe despite tough economic conditions.. Included in the company’s plans is to acquire smaller car manufacturers in China and in other developing countries. Ashok Leyland maintains an R&D group that aims to uncover ways to make their vehicles more fuel efficient and reduce emissions. It has also become the first Indian auto company to receive the latest ISO/TS 16949 Corporate Certification (in July 2006) which is specific to the auto industry. the John Deere partnership is a 50/50 split between the companies. Aside from the full expansion planned for the company. Even as they thrust into different directions. this will give Ashok Leyland a channel into the competitive European market. and the production plans are in place. Page | 5 . Among many other goals. the Non-Resident Indian transnational group and IVECO. In October 2006. Called Avia Ashok Leyland Motors s. In fact. India. Global Markets. According to the company.
Page | 6 . Ashok Leyland’s partnership with Nissan is also focusing on vehicle. The company is also already discussing the wide-scale use of Hythane engines with the Indian government.In fact. This work will help generate valuable data and garner insight that will guide further development.) which is a blend of natural gas and around 20% of hydrogen. Hydrogen helps improve the efficiency of the engine but the CNG aspect makes sure that emissions are at a controlled level. and the vehicles will have a 5% improvement on fuel efficiency. with more than 5. In the coming years. Ashok Leyland has developed Hythane engines. In 2002 it developed the first hybrid electric vehicle. The clinic checks vehicles for emission levels. The H-CNG concept is now in full swing. Ashok Leyland successfully developed a 6-cylinder. Ashok Leyland is also developing electric batteries and bio-fuel modes. When it comes to the development of environmentally friendly technologies. recommends remedies and offers tips on maintenance and care. and technology development listed under three joint ventures. The buses and trucks are set to feature a new electronic shift-by-wire transmission technology as well as electronic-controlled engine management for greater fuel efficiency. they have already released buses with quiet engines and low pollutant emission based on the CNG technology.500 of the technology’s vehicles running around Delhi. the joint ventures will focus on producing trucks with diesel engines that meet Euro 3 and Euro 4 emission standards. In association with the Australian company EDEN ENERGY. Hythane engines may be expected in the near future. even before laws were placed on car emissions. A 4-cylinder 4-litre 63 KW engine is also being developed for H-CNG blend in a joint R&D program with MNRE (Ministry of New and Renewable Energy) and Indian Oil Corporation. but these may not be brought to the United States as yet. Ashok Leyland focuses on improving fuel efficiency without affecting automotive power. Ashok Leyland was already producing low-emission vehicles. Ashok Leyland also has some hybrid trucks and buses in store for its market. power train. Ashok Leyland has also launched a mobile emission clinic that operates on highways and at entry points to New Delhi. 6-liter 92 kW BS-4 engine which uses Hythane (H-CNG. Back in 1997. With impressive investment.
5%. Gear Box.200 buses under the Jawaharlal Nehru National Urban Renewal Mission scheme are yet to be delivered of the 5. The company has also steadily gained market share. to Rs223 crore. HOSUR: UNIT 1 Page | 7 . even as sales rose by 139%. Higher volume growth. and cost reduction were key reasons for margin expansion.Ashok Leyland Ltd’s March quarter results were expected to be impressive.000 sq m and together employs over 11. ENNORE Spread over 135 acres.500 personnel. Analysts believe that its Uttarakhand plant is expected to deliver 22. at 15% compared with over 30% in FY2010.000 vehicles in fiscal 2011. three plants at Hosur (called Hosur I and Hosur II. Besides. over the year-ago period. The total covered space at these seven plants exceeds 650. along with a Press shop).200 crore proposed for expansion plans over the next two years. The plant manufactures a wide range of vehicles and house production facilities for important aggregates such as Engines. it plans to invest Rs800 crore in joint ventures. from 21-22% in the first quarter of 2010 to 28-29% in the fourth quarter. Axles and other key in-house components. it has orders on hand from state transport undertakings for another 2. the assembly plants at Alwar. with Rs1.the mother plant at Ennore near Chennai. the southern market. But what impressed was its net profit growth of 317%. MANUFACTURING PLANTS Ashok Leyland has seven manufacturing plants . The rest of India (mainly north and west) grew by 40% during the year. a better product mix due to higher sales of multi-axle vehicles and tractor trailers. mainly to increase output of engines and new generation cabs. its estimate for volume growth in 2011 is conservative. Bhandara and state-of-the-art facility at Pantnagar. Ashok Leyland Ennore is a highly integrated Mother Plant accounting for over 40% ALL production. traditionally its stronghold. Ashok Leyland’s operating profit margin rose to 13% compared with 10. One concern is that it is not yet a strong player in the eastern market.000-25. Around 1.098 ordered. Besides. has grown by only 15% in volume terms in 2010. Besides. in its first full year of operation. The firm is investing to increase its capacity. as its monthly vehicle output reports had indicated a 138% jump in volumes.000 buses.
55 panels and their variants. including CNG buses. PANTNAGAR: Page | 8 . Marine Gear Box. At 800 m above sea level. Spread over 236 acres. The facility is spread over 103 acres and is innovatively laid out. Built with an investment of Rs 1350 million. The other bay is 17m high ALWAR: Established in 1982. Laid out with an eye for the future. Hosur-I is the engine-manufacturing center within the Ashok Leyland production system.1m deep and 90m long. optimising the use of all resources.m. Apart from producing various types of diesel engines (including the engines manufactured under license from Hino of Japan) and CNG engines. Hosur II has won acclaim from several automotive experts who have visited the facility. The 210m long Press Shop consists of two bays with a 36m span in each bay. it is also the tallest in the Hosur industrial belt. situated close to the northern market. G-45 and C-45 FES . the Alwar Unit in Rajasthan is an assembly plant for a wide range of vehicles with an emphasis on passenger chassis. 7. A 60. a rainwater harvesting facility was integrated into the Shop.totally. The 24m high Press bay has an underground tunnel. The complex also houses one of the largest press facilities in India for pressing frame side members. Right at the design stage.etc. the plant also manufactures and assembles heavy duty and special vehicles. green cover. Hosur II houses finishing and assembly facilities including sophisticated painting facilities. HOSUR: UNIT 2A Ashok Leyland’s brand new Cab Panel Press Shop is an imposing addition to the industrial skyline of Hosur. HOSUR: UNIT 2 Ashok Leyland established this state-of-the-art production facility in 1994 at Hosur. to handle the end bits generated during the process of panel pressing.000-sqm lawn and the 2.000 sq. The Shop is equipped to stamp select panels for Cargo cab. In addition to catering to our present needs. Axles. The versatility of the presses can be utilised for making panels of complex shapes and profiles with appropriate tooling and dies. AGBs.Established in 1980.500 saplings planted recently in the premises will give the Shop a cool. This state-of-the-art facility is housed in a 99-acre expanse with a built up area of over 15. Right now it houses eight presses and has the provision to accommodate four more. the Press Shop can take up additional panels of new / current models. the Shop is designed and developed to be a state-of-the-art facility.
the plant is designed to be remarkably operator friendly. Managing Director. USA. Highly energy efficient.000 sq. the Pantnagar plant of Ashok Leyland is also its largest and one of the most integrated manufacturing facilities in Indian commercial vehicle industry. "The role of R&D is central in fulfilling the company-wide commitment to total customer satisfaction" states Mr. process control for high quality of output and flexibility to manage variety with quick changeovers are built into the machine and process selection. On 200.ms of built up area. Designed on lean manufacture principles. this philosophy has been translated time and again into products that seamlessly integrate international technology with local needs. The shop floors receive the maximum natural light and ventilation while the insulated high roof reduces the inside temperature by up to 8oC in the summer months BHANDARA: Ashok Leyland's Bhandara Unit houses manufacturing and assembly facilities for sophisticated synchromesh transmission and also has facilities for assembly of vehicles. The factory boasts of latest generation equipment sourced from global leaders in Japan.Set over 190 scenic acres. R. 75. it houses best in class industrial architecture combined with the latest manufacturing technologies that is also ecology sensitive as reflected in the selection of machinery and processes. At full capacity utilization. The facilities have been so designed as to accommodate further expansion in terms of capacity and future models. and adds that the increased Page | 9 . Over the years. Seshasayee.000 vehicles will roll out of the Pantnagar plant. Europe and India. RESEARCH AND DEVELOPMENT: WORLD-CLASSTECHNOLOGY To offer world-class technology that is relevant and affordable to the Indian customer is the philosophy that drives R&D at Ashok Leyland.
Together they ensure that there is a constant improvement in the life and on-road performance of every make of Ashok Leyland vehicle to hit the roads. TESTTRACKS: : Our R&D is not confined within walls. ASSOCIATES COMPANIES: Page | 10 .infrastructural and financial support expresses the company's determination to become selfreliant in R&D. It extends to the test tracks as well. as they directly impact earnings. a comprehensive test track facility (where cobble-stones are calibrated and reset periodically). Safety. Vehicle ruggedness and longevity are a prime customer concern. INNOVATIONS: Ashok Leyland product development successes have come from a keen sense of anticipation and attentiveness. Rigorous tests are carried out under stringent simulated conditions that replicate the mosttreacherouslandscapes. VALUETOTHECUSTOMER The immediate R&D priorities are to pro-actively address safety and environmental issues. The result was the implementation of CNG technology ahead of the rest promising a breath of fresh air for polluted cities. harness and adopt technologies that provide value to the customer in an atmosphere enabling creativity and innovation. durability. Powering those who "engineer tomorrows" with an enabling infrastructure has been top priority for the company. through our R&D efforts. accelerated fatigue testing rigs and rigorous durability testing facilities. Ashok Leyland makes extensive use of a modern CAD set-up. Ever conscious of this. The company initiated research into alternative fuels well before legislative debate had even begun in the country.
Ashok Leyland commenced manufacture of commercial vehicles in 1955 Page | 11 . Ashok Motors was set up for the assembly of Austin cars. to enter automotive manufacture In 1948.5 SNAPSHOT 1948 – 1987 THE FIRST FOUR DECADES: Pandit Jawaharlal Nehru persuaded Raghunandan Saran. an industrialist. With equity participation by British Leyland.• • • • • • Automotive Coaches & Components Ltd (ACCL) Lanka Ashok Leyland Hinduja Foundries IRIZAR-TVS Ashok Leyland Project Services Limited Albonair GmbH JOINT VENTURE: • • • • • Nissan Motor Company John Deere & Company Automotive Infotronics Ashley Alteams India Pvt Ltd Optare 2.
supported by product development and marketing capabilities Multi-axle vehicles. double decker and vestibuled buses. Ashok Leyland’s long-term plan to become a global player by benchmarking global standards of technology and quality was soon firmed up A state-of-the-art manufacturing base set up at Hosur to roll out international class products Anticipated growing market demand and pioneered CNG technology Production capacity up from 23. utilising in-house engine R&D capabilities Company-wide IT initiatives bring in speed of operations as well as connectivity Internal supply chain initiative . International Quality Certifications: • • first automotive manufacturer in India to receive the ISO 9002 Certification ISO 9001(1994) and QS 9000 (1998) MID 90S TILL NOWTHE EFFICIENCY PHASE: Expansion of in-house R&D infrastructure including some first in India facilities. tractor trailers. power steering Units at Ennore. infusing vital capital and technology. Access to international technology enabled the Company to introduce a host of trendsetting product innovations in the country.Project OSCARS .creates a ‘pull’ environment (rather than ‘push’) aiding in Just-in-Time culture Page | 12 .000 units in 1987 to 50. gaining and sustaining a 25% plus market share Withstood the unprecedented business depression of the early 80s. Emboldened.000 units in 1998. Hosur. Bhandara and Alwar became part of a pan-India growth plan of the Indian leadership Tie-ups with international technology majors for engine and gearbox technology Battled formidable competition. in tandem with continuous strengthening of talent pool Took in its stride the accelerated emission norms. proved its resilience – a quality that has stood the Company in good stead in subsequent trying times too Made a habit of earning profits and declaring dividends 1987 –MID 90S THE GROWTH PHASE: Transnational Hinduja Group took over the principal overseas shareholding of the Company in 1987.
high performance vehicles in line with emerging market requirements Plans for rapid expansion of capacity beyond one lakh vehicles per annum Entry into new areas that go beyond the core business of commercial vehicles. Ashok Leyland is on a ‘global’ quest: • • • Acquired the Truck Business Unit of AVIA as. Also introduced innovative customer support products that engage the customer more comprehensively (AMC. Chairman (Alternate: Y M Kale) R Seshasayee. fully built. testing and validating vehicular designs and components) ACG Ashok Leyland (Auto Components Group) targets USD 100 million in three years MANAGEMENT DETAILS: Board of Directors : : : : Dheeraj G Hinduja. • • Ashley Design and Engineering Services (ADES) in the area of engineering services (developing. Executive Vice Chairman Anil Harish D J Balaji Rao Page | 13 . 24x7 Helpline) Management Development Centre set up at Hosur EVA positive since 2002-2003: created shareholder value by registering returns higher than cost of capital THE FUTURE DIRECTION: Having made the manufacturing technology and the innards of its vehicles contemporary. reaching new customer groups – within and outside India Set up a state-of-the-art Driver Training Centre at Namakkal. aimed at employee participation and efficiency improvements. catching the winds of globalisation. Various shop floor initiatives. based in Prague Bus assembly unit in UAE Assembly unit in South Africa in the offing A whole new range of modern.. create a flexible manufacturing/assembly network tuned in to customer needs Model proliferation – products that fit customers’ unique needs Enlarged and deepened market coverage.
to enter automotive manufacture.2010) F Sahami Shardul S Shroff Dr V Sumantran Vinod K Dasari. Page | 14 . In 1948. Managing Director K Sridharan Chief Financial Officer Executive Director And Company Secretary Executive Directors : : : : : : : : : : A R Chandrasekharan Anup Bhat A K Jain Jayendra Parikh R R G Menon P G Nilsson Nitin Seth Rajive Saharia Shekhar Arora M S Krishnaswami & Rajan D eloitte Haskins & Sells Geeyes & Co. Automobiles-Trucks/Lcv Auditors : : Cost Auditors Business Operation : : Background The origin of Ashok Leyland. felt by independent India. Pandit Jawaharlal Nehru.2011) S anjay K Asher (from 21. a Hinduja group company can be traced to the urge for selfreliance.2010) Jorma Antero Halonen (from 19. India's first Prime Minister persuaded Raghunandan Saran.: : : : : : : : A K Das Jean Brunol (from 20.12. an industrialist.05.10.
) Sales Turnover Net Profit Total Assets Tata Motors 193.993 Million ( year ending Mar 2011) Market Share: Name Last Price Market Cap.Ashok Motors was set up in what was then Madras. The Company's destiny and name changed soon with equity par Financials: Total Income .872 Million ( year ending Mar 2011) Net Profit .82 35. 114065.05 Page | 15 . 6312.Rs.45 61.807.811.912.399. (Rs.42 1. for the assembly of Austin Cars.Rs. Cr.84 47.
71 631.00 4.56 297.303.14 Tata Motors (D) 102.00 442.01 36.30 6.95 3.Ashok Leyland 26.44 SML Isuzu 388.79 Page | 16 .621.45 562.44 474.14 Eicher Motors 1.688.67 75.97 11.117.20 6.555.15 893.970.
DISTRIBUTORS: Our distributors are the vital between the company and the customers and we are committed to advice and support our distributors to continuously upgrade their infrastructure.6 VALUES: CUSTOMERS: We value of customers and will constantly endeavour to fulfil their needs by proactively offering them products and service appropriate to their diverse application.2. SOCIETY: We are committed to add to the wealth and well-being of our society by enhancing the quality of life and contributing to this economic development while maintaining the highest level of environment and safety standards. SHAREHOLDERS: We value the trust reposed in us by our shareholders and strive unstintingly to ensure a fair and reasonable return on their investment. skills and capability to serve our customers better. EMPLOYEE: We consider our employee as our most valuable asset and are committed to provide full encouragement and support to them to enhance their potential and contribution to company’s business. THE FIVE ASHOK LEYLAND CORPORATE VALUES ARE: • International Page | 17 . VENDORS: Our vendors are our valued partners in our business development and we will work with them in a spirit of mutual co-operation to meet our business objectives.
. Conserve all resources such as power.7 POLICIES AND OBJECTIVES OF ASHOK LEYLAND: QUALITY POLICY: Ashok Leyland is committed to achieve customer satisfaction. by anticipating and delivering superior value to the customers in relation to their own business. to make them more robust and to enhance their effectiveness and efficiency in achieving stated objectives leading to: Superior product manufactured as also service offered by the company. through the product and services offered by the company and comply with statutory requirement. Max use of employee potential to contribute to quality and environment by progressive up gradation of their knowledge and skills as appropriate to their functions. Towards this. Set and review objectives and targets for continually improving environment. and optimise their usage through scientific methods. We follow all legal reasons. Seamless involvement from vendors and dealers in the mission of the company to address customers changing needs and protection of the environment. Provide clean working environment to employees. water. compressed air etc. 2.8 PRODUCT RANGE OF THE COMPANY INCLUDES: Page | 18 . the quality policy of Ashok Leyland is to make continual improvement in the process that constitutes the quality management system. ENVIRONMENT POLICY: We at Ashok Leyland committed personal environment measures. gas. Adopt pollution prevent technology in design and manufacturing projects.• • • • Speedy Value creator Innovative Ethical 2. oil.
• • • • Buses Trucks Engines Defence & Special Vehicles 2.Received ISO 9002 1997 .Introduced multi-axle trucks 1980 .Introduced the international concept of integral bus with air suspension 1982 . Page | 19 .10 AWARDS/ACHIEVEMENTS • In the journey towards global standards of quality.9 MILESTONES: • • • • • • • • • • • 1966 .Received ISO 14001 certification for all manufacturing units 2002 .Offered power steering in commercial vehicles 1979 .Won self-certification status for defence supplies 1993 .Introduced vestibule bus 1992 . Ashok Leyland reached a major milestone in 1993 when it became the first in India's automobile history to win the ISO 9002 certification.Launched hybrid electric vehicle 2.Launched double-decker bus 1968 .India's first CNG powered bus joined the BEST fleet 2001 .Introduced full air brakes 1967 .
making it the first auto manufacturer in India to do so. received the ISO/TS 16949 Corporate Certification. • In 2005.• The more comprehensive ISO 9001 certification came in 1994. • It has also become the first Indian auto company to receive the latest ISO/TS 16949 Corporate Certification (in July 2006) which is specific to the auto industry. all the vehicle-manufacturing units of Ashok Leyland were ISO 14001 certified for their Environmental Management System. QS 9000 in 1998 and ISO 14001 certification for all vehicle manufacturing units in 2002. received the BS7799 Certification for its Information Security Management System (ISMS). making it the first Indian commercial vehicle manufacture to do so. making it the first auto manufacturer in India to do so. • Ashok Leyland buses carry 60 million passengers a day. • It is one of the leading suppliers of defence vehicles in the world and also the leading supplier of logistics vehicles to the Indian Army. more people than the entire Indian rail network • Ashok Leyland has a near 85% market share in the Marine Diesel engines markets in India • In 2002. • In 2006. • It is the largest manufacturer of CNG buses in the world. Page | 20 .
WORKING CAPITAL MANAGEMENT Page | 21 .
the current liabilities and the inter Relationship that exist between them. marketable securities. within a year.1 INTRODUCTION: Working capital management is concerned with the problems arise in attempting to manage the current assets. These funds are known as working capital. Current liabilities ware those liabilities which intended at their inception to be paid in ordinary course of business. bill payable. will be.day expenses etc. land. or. Long terms funds are required to create production facilities through purchase of fixed assets such as plant and machinery. furniture. out of the current assets or earnings of the concern. The term current assets refers to those Assets which in ordinary course of business can be. payment of wages and other day – to. The major current assets are cash marketable securities. In simple words. The goal of working capital management is to manage firm current assets and current liabilities in such way that the satisfactory level of working capital is mentioned. The basic current liabilities are account payable. Funds.term or current assets such as cash.3. turned in to cash within one year without undergoing a diminution in value and without Disrupting the operation of the firm. bank over-draft. building. Funds are also needed for short-term purposes for the purchase of raw material. Investments in these assets represent that part of firm’s capital which is blocked on permanent or fixed basis and is called fixed capital. etc. thus. it is also known as revolving or circulating capital or short term capital. Hence. invested in current assts keep revolving fast and are being constantly converted in to cash and this cash flows out again in exchange for other current assets. DEFINITIONS OF WORKING CAPITAL: Page | 22 . account receivable and inventory. Capital required for a business can be classified under two main categories via. debtors & inventories. 1) 2) Fixed Capital Working Capital Every business needs funds for two purposes for its establishment and to carry out its dayto-day operations. and outstanding expenses. The current should be large enough to cover its current liabilities in order to ensure a reasonable margin of the safety. working capital refers to that part of the firm’s capital which is required for financing short.
Technically this is refers to opening or cash cycle. In other words it is the Net Current Assets or Net Working Capital and 3. The amount required to be invested in this current assets is always higher than the funds available from current liabilities. In other words it is the Gross working capital. Working capital is the difference between the inflow and outflow of funds. 2. it is also known as Circulating capital or Current capital for current assets are rotating in their nature. and ultimately finished goods. Cash in hand and cash at bank Bills receivables Page | 23 .2. the objective of financial decision making is to maximize the shareholders wealth. it will be required for purchasing the raw material may be available on credit basis. Therefore sufficient working capital is necessary to sustain sales activity. However some part of current assets may be financed by the current liabilities also. This is the precise reason why the needs for working capital arise 3. finished goods. Working capital represents the total of all current assets. In other words it is the net cash inflow. As really observed. These finished goods convert in to sales on credit basis in the form of sundry debtors. WIP. Working capital is defined as the excess of current assets over current liabilities provisions. Thus some amount of cash is blocked in raw material. Sundry debtors are converting into cash after expiry of credit period. There is a need for working capital in the form of current assets to deal with the problem arising out of lack of immediate realization of cash against goods sold. it is necessary to generate sufficient profits can be earned will naturally depend upon the magnitude of the sales among other things but sales cannot convert into cash. To achieve this. Then the company has to spend some amount for labour and factory overhead to convert the raw material in working in progress.2 NEED OF WORKING CAPITAL MANAGEMENT: The need for working capital gross or current assets cannot be over emphasized. and sundry debtors and day to day cash requirements. If the company has certain amount of cash.1 CONSTITUENTS OF CURRENT ASSETS: 1.
advances and deposits. Accrued or outstanding expenses. 2. Short term loans. In a narrow sense. 6. 5. Accrued incomes. of profit. The Gross Concept Is Sometimes Preferred To The Concept Of Working Capital For The Following Reasons: It enables the enterprise to provide correct amount of working capital at correct time. 4. The gross working capital concept is financial or going concern concept whereas net working capital is an accounting concept of working capital. or. 7.3. Bank overdraft. Dividends payable. Both the concepts have their own merits. 5. if it does not amt. Marketable securities. 3. 7. say: 3. Temporary investment of surplus funds. Bills payable. Prepaid expenses 8. 9. Every management is more interested in total current assets with which it has to operate then the source from where it is made available. Page | 24 . Provision for taxation. Sundry creditors. Sundry debtors Short term loans and advances. Inventories of stock as: • • • • Raw material Work in process Stores and spares Finished goods 6. 4. to app.2.2 CONSTITUENTS OF CURRENT LIABILITIES: 1. the term working capital refers to the net working. Net working capital is the excess of current assets over current liability.
This concept is also useful in determining the rate of return on investments in working capital. It suggests the need of financing a part of working capital requirement out the permanent sources of funds. 2. On the basis of concept. It is an indicator of the financial soundness of enterprises. The net working capital concept. On the basis of time. however. ON THE BASIS OF CONCEPT: Page | 25 .3 TYPES OF WORKING CAPITAL: WORKING CAPITAL MAY BE CLASSIFIED IN TWO WAYS: 1. is also important for following reasons: It is qualitative concept. of 3. 1. It indicates the margin of protection available to the short term creditors. which indicates the firm’s ability to meet to its operating expenses and short-term liabilities. It take into consideration of the fact every increase in the funds of the enterprise would increase its working capital.
As the business grow the requirements of working capital also increases due to increase in current assets. NET WORKING CAPITAL = CURRENT ASSETS – CURRENT LIABILITIES.a) Gross Working Capital b) Net Working Capital a) Gross Working Capital: Gross working capital refers to the firm’s investment I current assets. Temporary or Variable Working Capital: Page | 26 . Net working capital can be positive or negative. work. Current assets are the assets which can be convert in to cash within year includes cash. Net working capital can be positive or negative. finished goods and cash balance. 2. bills payable and outstanding expenses. Current liabilities are those claims of outsiders which are expected to mature for payment within an accounting year and include creditors.in-process. Temporary or variable working capital Permanent or Fixed Working Capital: Permanent or fixed working capital is minimum amount which is required to ensure effective utilization of fixed facilities and for maintaining the circulation of current assets. ON THE BASIS OF TIME: • • Permanent or fixed working capital. which are intended to be paid in the ordinary course of business within a short period of normally one accounting year out of the current assts or the income business. Every firm has to maintain a minimum level of raw material. Current liabilities are those liabilities. bills receivable and inventory. short term securities. This minimum level of current assets is called permanent or fixed working capital as this part of working is permanently blocked in current assets. debtors. When the current assets exceeds the current liabilities are more than the current assets. b) Net Working Capital: Net working capital refers to the difference between current assets and current liabilities.
REGULAR PAYMENT OF SALARIES. IMPORTANCE OR ADVANTAGE OF ADEQUATE WORKING CAPITAL: SOLVENCY OF THE BUSINESS: Adequate working capital helps in maintaining the solvency of the business by providing uninterrupted of production. reduces wastage and costs and enhances production and profits. EASY LOANS: Adequate working capital leads to high solvency and credit standing can arrange loans from banks and other on easy and favorable terms. REGULAR SUPPLY OF RAW MATERIAL: Sufficient working capital ensures regular supply of raw material and continuous production. The capital required to meet the seasonal need of the enterprise is called seasonal working capital. etc. Variable working capital can further be classified as seasonal working capital and special working capital. GOODWILL: Sufficient amount of working capital enables a firm to make prompt payments and makes and maintain the goodwill.Temporary or variable working capital is the amount of working capital which is required to meet the seasonal demands and some special exigencies. Special working capital is that part of working capital which is required to meet special exigencies such as launching of extensive marketing for conducting research. WAGES AND OTHER DAY TO DAY COMMITMENTS: It leads to the satisfaction of the employees and raises the morale of its employees. Temporary working capital differs from permanent working capital in the sense that is required for short periods and cannot be permanently employed gainfully in the business. increases their efficiency. CASH DISCOUNTS: Adequate working capital also enables a concern to avail cash discounts on the purchases and hence reduces cost. EXPLOITATION OF FAVORABLE MARKET CONDITIONS: If a firm is having adequate working capital then it can exploit the favourable market conditions such as Page | 27 .
QUICK AND REGULAR RETURN ON INVESTMENTS: Sufficient working capital enables a concern to pay quick and regular of dividends to its investors and gains confidence of the investors and can raise more funds in future. DISADVANTAGES OF REDUNDANT OR EXCESSIVE WORKING CAPITAL: Excessive working capital means ideal funds which earn no profit for the firm and business cannot earn the required rate of return on its investments. It may reduce the overall efficiency of the business.purchasing its requirements in bulk when the prices are lower and holdings its inventories for higher prices. Both excess as well as short working capital positions are bad for any business. Due to lower rate of return n investments. If a firm is having excessive working capital then the relations with banks and other financial institution may not be maintained. However. it is the inadequate working capital which is more dangerous from the point of view of the firm. the values of shares may also fall. It should have neither redundant or excess working capital nor inadequate nor shortages of working capital. Excessive working capital implies excessive debtors and defective credit policy which causes higher incidence of bad debts. HIGH MORALE: Adequate working capital brings an environment of securities. Redundant working capital leads to unnecessary purchasing and accumulation of inventories. confidence. ABILITY TO FACE CRISES: A concern can face the situation during the depression. Page | 28 . EXCESS OR INADEQUATE WORKING CAPITAL: Every business concern should have adequate amount of working capital to run its business operations. high morale which results in overall efficiency in a business.
work-in-progress. advertising. For studying the need of working capital in a business. To meet the selling costs as packing. Working Capital Operating Cycle: Page | 29 . There are others factors also influence the need of working capital in a business. Thus working capital is needed for the following purposes: • • • • • • For the purpose of raw material. and realization of cash. To maintain the inventories of the raw material. At maturity the amount of working capital required is called normal working capital. production and sales. To provide credit facilities to the customer. To pay wages and salaries. There is an operating cycle involved in sales and realization of cash. Greater the size of the business unit. The requirement of the working capital goes on increasing with the growth and expensing of the business till it gains maturity. stores and spares and finished stock. To incur day-to-day expenses and overload costs such as office expenses. There are time gaps in purchase of raw material and production. generally larger will be the requirements of the working capital. These expenses are called preliminary expenses and are capitalized. etc. The need for working capital arises due to the time gap between production and realization of cash from sales. The redundant working capital gives rise to speculative transactions DISADVANTAGES OF INADEQUATE WORKING CAPITAL: Every business needs some amounts of working capital. one has to study the business under varying circumstances such as a new concern requires a lot of funds to meet its initial requirements such as promotion and formation etc. The amount needed for working capital depends upon the size of the company and ambitions of its promoters. components and spares.
3. On the other hand the trading and financial firms requires less investment in fixed assets but have to invest large amt. 5.4 FACTORS DETERMINING THE WORKING CAPITAL REQUIREMENTS: 1. 2. during the busy season. LENTH OF PRDUCTION CYCLE: The longer the manufacturing time the raw material and other supplies have to be carried for a longer in the process with progressive increment of labour and service costs before the final product is obtained. of working capital along with fixed investments. So working capital is directly proportional to the length of the manufacturing process. PRODUCTION POLICY: If the policy is to keep production steady by accumulating inventories it will require higher working capital. greater is the requirement of working capital. water supply and railways because they offer cash sale only and supply services not products. SIZE OF THE BUSINESS: Greater the size of the business. 4. a firm requires larger working capital than in slack season. SEASONALS VARIATIONS: Generally. 3. and no funds are tied up in inventories and receivables. Page | 30 . NATURE OF BUSINESS: The requirements of working is very limited in public utility undertakings such as electricity.
of working capital due to rise in sales. when the business is prosperous. there is need for larger amt. 9. of working capital as compared to a firm having a low rate of turnover. optimistic expansion of business. we shall require large amt. Such firms may generate cash profits from operations and contribute to their working capital. BUSINESS CYCLE: In period of boom. Page | 31 . RATE OF GROWTH OF BUSINESS: In faster growing concern. RATE OF STOCK TURNOVER: There is an inverse co-relationship between the question of working capital and the velocity or speed with which the sales are affected. monopoly conditions. CREDIT POLICY: A concern that purchases its requirements on credit and sales its product / services on cash requires lesser amt. The dividend policy also affects the requirement of working capital. 12. of working capital. A firm maintaining a steady high rate of cash dividend irrespective of its profits needs working capital than the firm that retains larger part of its profits and does not pay so high rate of cash dividend. On the contrary in time of depression. 11. EARNING CAPACITY AND DIVIDEND POLICY: Some firms have more earning capacity than other due to quality of their products. etc. rise in prices. of working capital. sales decline. PRICE LEVEL CHANGES: Changes in the price level also affect the working capital requirements. difficulties are faced in collection from debtor and the firm may have a large amt. WORKING CAPITAL CYCLE: The speed with which the working cycle completes one cycle determines the requirements of working capital. the business contracts. 10. Generally rise in prices leads to increase in working capital.6. Longer the cycle larger is the requirement of working capital. A firm having a high rate of stock turnover will needs lower amt. of working capital and vice-versa. 8. DEBTORS CASH FINISHED GOODS RAW MATERIAL WORK IN PROGRESS 7. etc.
3. which requires long-term funds. Import policy. Management ability.5 REQUIREMENTS OF FUNDS: Funds Requirements of company Fixed Capital Working Capital Preliminary Expenses Purchase of Fixed Assets Establishment work exp. Sources of Working Capital Long-term source (Fixed working capital) capital) a) Loan from financial institution Short-term source (Temporary working a) Factoring Page | 32 .e. fixed capital.OTHERS FACTORS: Operating efficiency. which requires short-term funds. Irregularities of supply. Importance of labour. and working capital. Fixed working capital Raw materials Inventories Goods in Progress Others Every company requires funds for investing in two types of capital i. etc. Banking facilities. Asset structure.
b) Floating of Debentures discounting c) Accepting public deposits overdraft d) Issue of shares e) Cash credit f) Commercial paper b) Bill c) Bank d) Trade credit Page | 33 .
Ratio analysis Operating cycle & cash cycle Cash flow analysis Determining the Financing mix Statistical tools like graphical presentation Page | 34 .4. METHODS OF QUANTITATIVE ANALYSIS • • • • • • Calculation of net working capital requirements.com. RESEARCH METHODOLOGY OBJECTIVE OF RESEARCH • • • • • • Estimation of working capital requirement Evaluation of working capital management Evaluation of Liquidity position & working capital utilization Analysis of relationship between working capital and profitability Analysis & sources of working capital Analyzing the level of current assets with relation to current liabilities.google. COLLECTION OF DATA: • • • • Data has been collected from various sources like: Annual reports of last three years Manual of concerned departments Internet sites like www.
Page | 35 .LIMITATIONS • • • The data is mostly secondary in nature Data has been recalculated & regrouped wherever necessary In the absence of sufficient data personnel judgment have been taken on reasonable assumption. • In the absence of sufficient data in-depth study of cash. ASSUMPTION: • • • Number of days in a year is 365 days. All purchases have been taken as credit purchases. In the absence of relevant data the data from internet site is taken as the relevant information’s. Receivables and inventory management was not possible. All sales have been taken as credit sales.
WORKING CAPITAL RATIOS: Turnover Ratio: • Net Working Capital Ratio • Working Capital Turnover Ratio • Current Asset Turnover Ratio • Fixed Asset Turnover Ratio Liquidity Ratio: • Current Ratio • Acid Test Ratio • Absolute Ratio Profitability Ratio: • Gross Profit Ratio • Net Profit Ratio • Operating Profit Ratio 2.1 RATIO ANALYSIS 1.4. RECEIVABLE MANAGEMENT RATIO (DEBTORS): • Debtors Turnover Ratio • Debtors Collection Ratio 4. PAYABLE MANAGEMENT RATIO (CREDITORS): • Creditors Turnover Ratio • Creditors Collection Period Page | 36 . INVENTORY MANAGEMENT RATIO: • Inventory Turnover Ratio • Inventory Holding Period • Inventory Proportion 3.
CASH MANAGEMENT RATIO: • Cash Ratio • Cash Turnover Ratio DATA ANALYSIS AND INTERPRETATION Page | 37 .5.
7 94.433.389.2 0 79062.9 0 66.694.80 16.796.7 0 220.127.116.11 0 50.473.07.5 0 43.1 WORKING CAPITAL ANALYSIS: 1. STATEMENT SHOWING THE SCHEDULE OF CHANGES IN WORKING CAPITAL: FOR THE YEAR 2006-2007 (Rs in Lakhs) WORKING CAPITAL INCREAS DECREA E SE PARTICULAR CURRENT ASSETS Inventories Sundry debtors Cash and bank balances Loans and advances TOTAL (A) CURRENT LIABILITIES Liabilities Provisions TOTAL (B) Working Capital (AB) Increase in working capital TOTAL 2006 90.75.256.50 82.185.585 .689.7 0 36.0 0 15.30 .2 0 94.853.423. Page | 38 .5.776.739.40.241 2.032.796.793.14.90 11.9 0 2007 1.9 94.1 0 42.851 1.957.9 0 16.287. 10 52.6 0 30.9 0 INTERPRETATION: This schedule of working capital is result in increasing in need for working capital to the extent of 11.1 0 1.796.493.9 0 0 11.10 1.287.162.263.20 from the year 2006 to 2007.00 18.104.22.168 1.9 0 0 79062.00 2.60 .23.771 .65. 50 10. 50 26.
Page | 39 . All the current assets and in current liabilities is increased in other liabilities and decreased in cash and bank balance.
00 1.50 43.22.70 15.30 66312.50 TOTAL 94.1 0 52.90 2.359.771.100.10 TOTAL (B) Working Capital (A-B) Decrease in Working Capital 94.032.413. 00 27.493.137.00 1.30 33854.423.162.643. Rest of the current assets are increased Page | 40 .523.30 from the year 2007 to 2008 All the current liabilities like liabilities.00 Total (A) CURRENT LIABILITIES Liabilities Provisions 1.65.9 0 34.27.50 45.185.525.854.5 0 66312.4 0 15.455.583. 50 1.5 0 10.90 60.10 82. 60 14.90 INTERPRETATION: This schedule of working capital is result in decreasing in need for working capital to the extent of 33. provisions and in sundry debtors decreased.80 2.508.90 94.2.670.957.391.331.60 33854.185. STATEMENT SHOWING THE SCHEDULE OF CHANGES IN WORKING CAPITAL: FOR THE YEAR 2007-2008 (Rs in Lakhs) PARTICULAR CURRENT ASSETS 2007 2008 WORKING CAPITAL INCREAS DECREAS E E Inventories Sundry debtors Cash and bank balances Loans and advances 1.704.10 2.194.30 37.92.287.185.90 66.87.69.07.40 24.75. 40 1.585.
Page | 41 .
0 1 82.86.535.99 1.26 82323.27.866.13.92 TOTAL (B) Working Capital (A-B) Increase In Working Capital 42.954.331.866 .583.81 2009 1.328.92.1 7 2.43 7.193. STATEMENT SHOWING THE SCHEDULE OF CHANGES IN WORKING CAPITAL: FOR THE YEAR 2008-2009 (Rs in Lakhs) WORKING CAPITAL INCREAS DECREA E SE PARTICULAR CURRENT ASSETS 2008 1.22.535.714.36 78. 44 37.4 2 8. 58 1.391.797.694.784.6 5 3.16.8 8 42.459.2 6 TOTAL INTERPRETATION: This schedule of working capital is result in increasing in need for working capital to the extent of 42.8 5 2.213.1 1 1.57 Inventories Sundry debtors Cash and bank balances Loans and advances 10.523.99 82323. 93 60.91 36.50 TOTAL (A) CURRENT LIABILITIES Liabilities Provisions 1.3.86 6.02.525 .33.02. 41 26.808.886.535.610. 99 5. 84 34.02.3 5 3.00 58.87.413.670.11 from the year 2008 to 2009 Page | 42 .0 9 2.001.137. 44 95.5 1 45.1 1 1.56 1.808.
Rest of current assets are decreased. debtors and in liabilities. Page | 43 . provisions increased. All the current assets like inventory.
1 7 2.892.96.86 15025.17.797.4 2 8.886.822.58 1.59.694 .56 6. STATEMENT SHOWING THE SCHEDULE OF CHANGES IN WORKING CAPITAL: FOR THE YEAR 2009-2010 (Rs in Lakhs) WORKING CAPITAL INCREAS DECREA E SE PARTICULAR CURRENT ASSETS 2009 1.8 6 TOTAL INTERPRETATION: This schedule of working capital is result in increasing in need for working capital to the extent of 15.206. 44 95. 15 51.36 78.33.43 Inventories Sundry debtors Cash and bank balances Loans and advances 30.824.091.025.060.808.02.96 8.69 17.02.17.72 1.71 72.99 2.046.954.17.89 2.72 from the year 2009 to 20010 Page | 44 .86.866 .0 5 96.3 5 3.72 1. 00 22.214.171.124 8 TOTAL (B) Working Capital (AB) Increase Working Capital 15025.1 5 2.083.001.2 3 4.71 1.89 2.88 TOTAL (A) CURRENT LIABILITIES Liabilities Provisions 1.07 5. 57 36.71 97406.72 97406.73 43.808.13.408.13.1 6 10.892 .57 2010 1.561 .4.63. 41 26.320.869.
All the current assets are increased and in liabilities are decreased. Page | 45 . .
57 36.5126.96.36.199.43 .890.892 1.892.686.58 1.71 33995.1 0 107377.794.58 107377.032.7 2 79.40 1.0 5 96.315.897.724 .206.1 4 Inventories Sundry debtors Cash and bank balances Loans and advances 57.869.2 3 2011 2. 71 188.8.131.52 0 12.17.72 .20.075 3.17.18 33. 77 49.4 8 TOTAL (B) Working Capital (AB) Decrease in working capital 2.995.968 4.0 9 TOTAL (A) CURRENT LIABILITIES 4. 33 17.02.827 .939.58 from the year 20010 to 20011 Page | 46 .96.892. 10 TOTAL (Rs in Lakhs) INTERPRETATION: This schedule of working capital is result in decreasing in need for working capital to the extent of 33.892 .046.17.71 .066.6 3 44.53 Liabilities Provisions 2.34 16.03.3 3 16.952. 34 1. 15 51.1 3 33995.163. 00 1.52.1 5 3.63.360.824.521. STATEMENT SHOWING THE SCHEDULE OF CHANGES IN WORKING CAPITAL: FOR THE YEAR 2010-2011 WORKING CAPITAL INCREAS DECREA E SE PARTICULAR CURRENT ASSETS 2010 1.36.
All the current liabilities and in cash and bank. loan and advance are decreased. RATIO ANALYSIS Page | 47 . Rest of current assets are increased.
In 2009-10 net working capital is high.50 227194.40 287525.60 316561.00 213694. Except in 2007-08. WORKING CAPITAL RATIOS: TURNOVER RATIOS: CHART: 1 TABLE: 1 YEAR S 2007 2008 2009 2010 2011 CURRENT ASSETS (Rs in Lakhs) 269771.43 436724.53 CURRENT LIABILITIES (Rs in Lakhs) 175585.2.40 NET WORKING CAPITAL (Rs in Lakhs) 94185.60 102866. Page | 48 .5.99 117892.90 60331.72 352827.13 INTERPRETATION: Net working capital of Ashok Leyland Ltd is maintained balanced in all years.58 296075. In this year the net working capital is very low.71 83897.57 413968.
08 YEARS 2007 2008 2009 2010 2011 INTERPRETATION: The working capital turnover ratio of Ashok Leyland Ltd is peak position in 200708 and 2010-11.14 11.54 NET WORKING CAPITAL (Rs in Lakhs) 94185.99 117892.79 5.10 5.13 WORKING CAPITAL TURNOVER RATIO (In Times) 7.90 60331.71 595605.60 102866. Industry was slowed down due to market slowdown.05 11.71 83897.30 524883.90 711328.CHART : 2 TABLE: 2 COST OF GOODS SOLD (Rs in Lakhs) 672474. Page | 49 . But suddenly there is a dip in 2008-09 and 2009-10 In the year 2008 to 2010 Indian automobile.14 929253.
87 CURRENT ASSET (Rs in Lakhs) 269771.53 YEARS 2007 2008 2009 2010 2011 CURRENT ASSET TURNOVER RATIO (In Times) 3.57 413968.30 676147.CHART: 3 TABLE: 3 TOTAL SALES (Rs in Lakhs) 847542. So the current asset turnover ratio is decreased in 2008 to 2010 In 2011 current asset turnover ratio is increased from 1.93 to 2.82 times.40 287525.10 912832.21 799943. Page | 50 .82 INTERPRETATION: The current assets turnover ratio of Ashok Leyland Ltd in 2008 to 2010 sales of the company is decreased when compare to 2006-07 and 2007-08.14 1.93 2.60 316561.14 3.43 436724.17 2.81 1231884.
40 205479.4 287525.50 227194.58 296075.53 1.6 316561. fixed asset turnover ratio is peak in 2007 as 5.72 CURRENT RATIO ( In Times) 1.79 FIXED ASSET TURNOVER RATIO (In Times) 5.26 1.89 499175.50 439740.21 799943. LIQUIDITY RATIOS: CHART: 5 TABLE: 5 YEARS 2007 2008 2009 2010 CURRENT ASSET (Rs in Lakhs) 269771. In 2011.66 2.30 676147.39 Page | 51 . fixed asset turnover ratio is increased when compare to previous year 2010.CHART: 4 TABLE: 4 YEARS 2007 2008 2009 2010 2011 SALES (Rs in Lakhs) 847542.49 times It has been decreased in following year 2008 and 2009.47 INTERPRETATION: In Ashok Leyland Ltd.10 912832.57 481102.48 1.54 1.49 4.00 213694.81 1231884.43 CURRENT LIABILITIES (Rs in Lakhs) 175585.87 FIXED ASSET (Rs in Lakhs) 154452.44 1.57 413968.
39 to 1. In 2007 and 2009 the ratio is high.53 352827.2011 436724.23 times. In 2011 it decreased from 1.23 INTERPRETATION: The current ratio of Ashok Leyland ltd is slightly changing in all the years.40 1. Page | 52 .
00 213694.13 250144.30 165134.20 183560.73 0.58 296075.84 0.86 0.72 352827. In 2007. In 2011 it was decreased from 0. 2009 and 2010 are near to the ideal acid test ratio.61 times.CHART: 6 TABLE: 6 YEARS 2007 2008 2009 2010 2011 LIQUID ASSET (Rs in Lakhs) 162739.93 0.50 227194.84 to 0.19 CURRENT LIABILITIES (Rs in Lakhs) 175585.40 ACID TEST RATIO (In Times) 0. Page | 53 .43 215834.61 INTERPRETATION: The ideal acid test ratio is 1:1.
CHART: 7 TABLE: 7 YEAR S 2007 2008 2009 2010 2011 ABSOLUTE LIQUID ASSET (Rs in Times) 43493.12 to .15 0. But 2009.02 0. it was fall down to 0.40 287525.60 316561.72 CURRENT ASSET (Rs in Lakhs) 269771. Page | 54 .02 from 0.15 times.04 INTERPRETATION: The Absolute liquid ratio Ashok Leyland Ltd is good position in 2007 and 2008.00 8808. it was decreased from 0.43 436724.90 45137.57 413968.04 times.05 17952.16 0.36 51892. In 2011.53 ABSOLUTE LIQUID RATIO (In Times) 0.12 0.
00 18999.664.25 2.931.68 GROSS PROFIT RATIO (In %) 19.259.38 21.93.09.30.471.02 20.14 NET SALES (Rs in Lakhs) 8.00 6.66.360.60 46.PROFITABILITY RATIO: CHART: 8 TABLE: 8 GROSS PROFIT (Rs in Lakhs) 157996.664.30.70 8.70 8.471.63 NET PROFIT RATIO (In %) 5.30 191654.369.87.31 5.16 YEARS 2007 2008 2009 2010 2011 INTERPRETATION: From the table show above gross profit of the firm is satisfactory in all the years But it was recovered very soon by next year and it is still doing well The current gross profit ratio is 23.01 7.27 24.66.01 NET PROFIT (Rs in Lakhs) 44.74 12.369.70 141780.16 % CHART: 9 TABLE: 9 YEARS 2007 2008 2009 SALES (Rs in Lakhs) 8.93.34 23.60 280107.85 Page | 55 .00 6.128.80 182040.
2010 2011 7.68 42367.38 5.93 5.74 12.09.360.259.87. Page | 56 .22 INTERPRETATION: From the data given in the above table it is clear that the net profit of the company is almost maintained constant except in the year 2008-09.48 63129. Due to market slow down the net profit of the company effected. But in 2009-10 it shot up as the company recovered very fast.
INVENTORY MANAGEMENT Page | 57 .
Inventory management is the active control program which allows the management of sales. put another way. The Inventory Management will control operating costs and provide better understanding. Obviously. minimize stock holding and virtually eliminate the risks of obsolete or damaged stock. delays for customers etc. Inventory management software helps create invoices. Insufficient stocks can result in lost sales. The key issue for a business is to identify the fast and slow stock movers with the objectives of establishing optimum stock levels for each category and. arrive at the factory early that morning. For example. Nowadays. We are your source for inventory management information. This helps to minimize manufacturing costs as JIT stocks take up little space. purchases and payments. retail or product line will help to create revenue for your company. a fresh vegetable shop might turn over its entire stock every few days while a motor factor would be much slower as it may carry a wide range of rarely-used spare parts in case somebody needs them. how long each item of stock sit on shelves before being sold. inventory management software and tools A complete Inventory Management Control system contains the following components: • • • Inventory Management Definition Inventory Management Terms Inventory Management Purposes Page | 58 . average stock-holding periods will be influenced by the nature of the business. purchase orders. An inventory management software system configured to your warehouse. payment receipts and can print bar coded labels. no earlier . The key is to know how quickly your overall stock is moving or.3 Inventory Management: Managing inventory is a juggling act.5. many large manufacturers operate on a Just-In-Time (JIT) basis whereby all the components to be assembled on a particular today. thereby. Excessive stocks can place a heavy burden on the cash resources of a business. receiving lists.no later. JIT is a good model to strive for as it embraces all the principles of prudent stock management. Because JIT manufacturers hold stock for a very short time. minimize the cash tied up in stocks. they are able to conserve substantial cash.
Factors to be considered when determining optimum stock levels include: • • • • What are the projected sales of each product? How widely available are raw materials. to ensure that there is continuity between functions: • Company’s Strategic Goals • Sales Forecasting • Sales & Operations Planning • Production & Materials Requirement Planning. new opportunities due to worldwide marketing.it gets more difficult to sell the longer you keep it. try the following: • • • • Review the effectiveness of existing purchasing and inventory systems. Apply tight controls to the significant few items and simplify controls for the trivial many. Page | 59 . For better stock control. components etc.? How long does it take for delivery by suppliers? Can you remove slow movers from your product range without compromising best sellers? Remember that stock sitting on shelves for long periods of time ties up money. Inventory Management must be designed to meet the dictates of market place and support the company’s Strategic Plan. global sourcing of materials and new manufacturing technology means many companies need to change their Inventory Management approach and change the process for Inventory Control. The many changes in the market demand. Know the stock turn for all major items of inventory. Sell off outdated or slow moving merchandise . which is not working for you.• • • • Definition and Objectives for Inventory Management Organizational Hierarchy of Inventory Management Inventory Management Planning Inventory Management Controls for Inventory Inventory Management must tie together the following objectives.
• Consider having part of your product outsourced to another manufacturer rather than make it yourself. Review your security procedures to ensure that no stock "is going out the back door!" Higher than necessary stock levels tie up cash and cost more in insurance. Page | 60 . accommodation costs and interest charges.
90 711328.10 114711.15 4.01 to 4.77 6.20 to 4.71 595605.54 AVG. But from the year 2008 to 2010 the ratio was decreased from 6.01 In 2011 it was increased from 4.82 6. INVENTORY (Rs in Lakhs) 98644.75 127696.83 INTERPRETATION: During the 2007-08 the company has very high inventory ratio of 6.20 4.11 4.83 times CHART: 11 TABLE: 11 YEAR S 2007 2008 2009 2010 2011 INVENTORY TURNOVER RATIO (In Times) 6.98 4.17 INVENTORY TURNOVER RATIO (In Times) 6.01 4.07 3.42 148412.30 524883.79 INVENTORY HOLDING PERIOD (In Days) 54 59 90 92 76 DAYS 365 365 365 365 365 Page | 61 .14 929253.82 which means more capital is being locked up in the inventory.72 192357.INVENTORY MANAGEMENT RATIO: CHART: 10 TABLE: 10 YEARS 2007 2008 2009 2010 2011 COST OF GOOD SOLD (Rs in Lakhs) 672474.
INTERPRETATION: Inventory holding period was good from 2007-08 to 2008-09 But in 2009 to 2010 it was peak position In 2011 it was slowly decreased from 92 to 76 days Page | 62 .
90 53257.00 220890. There is a rapid change in the year 2010-11.1 5973.41 163824.26 26282.91 INVENTOR Y 107032.70 9408.03 FINISHE D GOODS 53257. WIP increased in first 2 years and then started decreasing but there is a rapid change in the year 2009-10 Total inventory is increasing from year to year.45 WORKING IN PROGRES S 10950.54 94841. There is rapid change in the year 201010 DEBTORS MANAGEMENT Page | 63 .95 OTHER S 4290.5 6143.34 YEARS 2007 2008 2009 2010 2011 INTERPRETATION: Raw materials consumed are increasing from year by year.24 34656.00 62550.43 58606.40 133001.12 90515.64 64588.CHART: 12 TABLE: 12 RAW MATERIA L 38533.70 11404.08 9250.10 122391.50 64651.90 42292.30 5684.
than would e achieved in the absence of a commitment of the funds to debtors. Collection costs Delinquency costs Default costs Facts affecting size off receivables: The size of a firm is determined by is: Level of sales Credit terms Collection Policies Page | 64 . This proportion will hold goods only when the margin contribution or gross margin greater than the addition cost associate with the administering the credit policy. Meeting competition To survive in the competitive market. Accordingly debtors or receivables occupy a significant role in firm’s current assets structure usually next to inventories Objectives of Maintaining Receivables: Achieving growth in sales and profits. is treated as one of the marketing tools. The above 2 objective have a single purpose. and hence maintaining of debtors. In fact. by adopting its term of trade to the industry norms. The optimum point may be considered as the point where “the return on investment in further funding of receivables is less than cost of funds raised that addition credit (i.e. most sales require the firm to maintain debtors account for customer or a group of them for some period. Because of this practical. Similarly. It has to be mentioned that the credit that is open account in the sense that no formal acknowledgement of debts obligation is required. Thus. it will usually be able to sell more goods or service then if it insists on immediate cash payment. firm have to establish credit policies similar to competitors. If a firm allows sales. which leads to debtors. involve certain costs.5. a firm will avoid of sale form customers who would by elsewhere if they did not receive the expected credit. a credit sale. Extension of credit involves cost and risk management should weigh benefit against cost. Debtors or receivables are assets accounts representing amount owed to the firm by customers from sale of goods or service. as debts owed to the firm by the customers arising from sales of goods or service in the ordering course of business. Great majority of firm does not demand immediate cash payment when goods or service are sold to their regular and credit worthy customers.4 RECEIVABLES MANAGEMENT: INTRODUCTION: The term debtors are defined. that is generate larger flow of operating revenue and hence profit. an addition sale normally results in higher profits for the firm. They are: Cost of financing debtors. cost of capital”) Cost of Maintaining Receivables: Credit sales.
The working requirements of a business are. Size of Receivables: An analysis of the percentage of receivables in relation assets indicates the recovery efficiency of the company of the company. Credit investigation 3. Through credit term granted by the firm to its customers/ buyer of goods Credit term available to the firm its creditors The credit term granted to customers bearing on magnitude of working capital by determining the level of level of book debts. collection procedure will differ from customer. Moreover. With the permanent but temporary defeating customers. Similarly. 1. Credit information 2. The credit evaluation procedure involves the following step. The credit sales results in higher book debts. However. Collection procedure For effective management of credit.Credit Policy: The credit policy relating to sales and purchase also affects the working capita The credit policy influences requirement of working capital in 2 ways. the % receivable in relation to sales indicates the firm credit sales requirement. Higher book debts mean more working capital. Page | 65 . and the role given to credit by a company in its dealing with creditors and debtors. the firm may not be very strict in following the collection procedures. thus affected by the term of purchase and sale. Credit limits and 4. a firm should lay down clear-cut guidelines and procedures for granting credit to individual customers and collection individual accounts. this kind of analysis reveals the overall operational efficiency of the company in relation to credit sales and their recovery. On the other need for working capital is less.
DEBTOR'S (Rs in Lakhs) 47360.50 66690.87 AVG. The debtor turnover ratio is lowest in 2009-10.RECEIVABLE MANAGEMENT RATIO (DEBTORS): CHART: 13 TABLE: 13 YEARS 2007 2008 2009 2010 2011 SALES (Rs in Lakhs) 847542.10 912832.60 44935.31 10.46 99001. The debtor turnover ratio is highest in 2007-08.16 INTERPRETATION: The debtors of Ashok Leyland Ltd as compared to the net sales of the last 5 years.81 1231884.50 37583.9 DEBTOR'S (Rs in Lakhs) 52287.08 11.42 102206. Page | 66 .785 110363.50 95797.74 DEBTOR TURNOVER RATIO (In Times) 17.81 1231884.14 8.30 676147.33 YEARS 2007 2008 2009 2010 2011 Debtor Collection Period (In Days) 23 15 52 47 35 INTERPRETATION: Receivables management in Ashok Leyland is very efficient from 2009-10 to 2010-11 debtors collection period was decreasing.21 799943.21 799943.10 912832. The debtors of our company are continuously changing as a % of sales. CHART: 14 TABLE: 14 SALES (Rs in Lakhs) 847542.30 676147.90 20.15 118521.
so avg. CREDITOR MANAGEMENT Page | 67 . Collection period is decreasing year by year. There is an increase in both debtors and sales.
How many of your suppliers have a returns policy? Are you in a position to pass on cost increases quickly through price increases to your customers? If a supplier of goods or services lets you down can you charge back the cost of the delay? Can you arrange (with confidence!) to have delivery of supplies staggered or on a justin-time basis? There is an old adage in business that if you can buy well then you can sell well. Management of your creditors and suppliers is just as important as the management of your debtors.5 MANAGING PAYABLES: Creditors are a vital part of effective cash management and should be managed carefully to enhance the cash position. and reduce dependence on a single supplier . Page | 68 .5. It is important to look after your creditors . Purchasing initiates cash outflows and an over-zealous purchasing function can create liquidity problems. which take account of stock holding and purchasing costs? Do you know the cost to the company of carrying stock? Do you have alternative sources of supply? If not. get quotes from major suppliers and shop around for the best discounts.is it tightly managed or spread among a number of (junior) people? Are purchase quantities geared to demand forecasts? Do you use order quantities. credit terms. Consider the following: • • • • • • • • • • Who authorizes purchasing in your company .slow payment by you may create ill feeling and can signal that your company is inefficient (or in trouble!).
70 184547. 2009-10 year has lowest creditor turnover ratio.50 120130.73 4.55 AVG.00 133629. 2007-08 year has highest creditor turnover ratio.49 YEARS 2007 2008 2009 2010 2011 INTERPRETATION: The creditors as a percentage of sales show the sales we are generating are from credit purchases up to what extent. CREDITOR'S (Rs in Lakhs) 85284.09 CREDTOR TURNOVER RATIO (In Times) 6. outstanding expenses or any other liability are not taken under it.08 3.09 828867.30 586109.38 546349.44 5.PAYABLE MANAGEMENT RATIO (CRETORS): CHART: 15 TABLE: 15 CREDIT PURCHASES (Rs in Lakhs) 549378. Page | 69 .10 448108.650 115313. Notes: In the figures of creditors only the creditors relating to purchases are taken Other payments relating to tax.09 4.
80 111004.20 129255.55 CREDITOR COLLECTION RATIO (In Days) 67 80 90 104 94 YEARS 2007 2008 2009 2010 2011 INTERPRETATION: If the average payment period will be longer the working capital required will be low. Page | 70 .09 828867.20 212838.38 546349.30 586109.98 CREDIT PURCHASES (Rs in Lakhs) 549378.20 156255.10 448108.CHART: 16 TABLE: 16 CREDITOR'S (Rs in Lakhs) 101371. In the year 2009-10 creditors collection period is very high 104. In the year 2006-07 creditors collection period is low 67.
CASH MANAGEMENT Page | 71 .
Cash the most liquid assets, is of vital important of the daily operations business firms. While the proportion of corporate assets in the form of cash is very small, often between 1 & 3 % its efficient management is crucial to the solvency of business in a very important sense. Cash is the focal point of fund flows in business. In view of its important, it is generally referred to as the “life blood of a business enterprise”. Need For Holding Cash: 1. Transaction Motive: Firms need cash to meet their transaction needs. The collection of cash (from sale of goods services and additional financing) is not perfectly synchronized with the disbursement of cash (for purchases of goods and service acquisition of capital assets and meeting other obligations) 2. Precautionary Motive: There may be some uncertainty about magnitude and timing of cash inflows from sale of good and service, sale of assets and insurance of purchases. Like flow on account of purchases and other obligation, to protect it against such uncertainties, a firm may require some cash balances. 3. Speculative Motive: Firms would like to tap profit-making opportunities arising from fluctuations in commodity prices, security prices, interest rates and foreign exchange rates cash-rich firm is prepared to exploit such speculative earning, may require additional liquidity, however for most firms there reserve borrowing capacity and marketable securities would suffice to meet their speculative needs. 4. Compensating Motive: Yet another motive to hold cash balance is to compensate banks for providing certain service and loans. Banks provide a variety of service to business firms, such as clearance of cheques, supply of credit information, transfer of funds, and so on. While for some of these service bank charges a commission or free, for others they seek indirect compensation usually, client are required to maintain balances of cash at the bank. Since, clients this balance cannot be utilized by the firm for transaction purposes. The banks themselves can use the amount to earn a return. Such balances are compensatory balances.
GOALS OF CASH MANAGEMENT:
Precisely speaking, the primary goals of cash management in firm to trade off between liquidity and profitability in order to maximize long-term profit, this is possible only when the firm aims at optimizing the use of funds in the working capital pool. This overall objective can be translated in the following operational goals • To specify day to day business requirements. • To provide for schedule major payment. • To face unexpected cash drains. • To seize potential opportunities for profitable long-term investments. • To meet requirement of bank relationships. • To build image of credit worthiness. • To earn on cash balances. • To minimize the operating cost by cash management.
IMPORTANCE OF CASH MANAGEMENT:
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Cash management is one of the critical areas of working capital management and greater significance because it is most liquid asset used to specify the firm’s obligations but it is sterile assets, as it does not yield anything. Therefore, financial manager maintain its liquidity position without jeopardizing. The profitability. Problem of prognosticating cash flows accurately and absence of prefect coincidence between the inflows of cash added to the significance of cash management. In view of above, at one time affirm may experience dearth of cash because payment of taxes, dividends, seasonal inventory etc, build up while other times, it may have surfeit of cash stemming out of large out of cash sales and quick collection of receivables. It is interesting to observe that in real life management spends his considerable time in managing cash, which constitute relatively small portion of firm’s current assets.
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CASH MANAGEMENT RARIO: CHART: 17 TABLE: 17
CASH & BANK (Rs in Lakhs) 2007 2008 2009 2010 2011 43493.90 45137.00 8808.36 51892.05 17952.72 CURRENT LIABILITIE S (Rs in Lakhs) 175585.50 227194.00 213694.58 296075.72 352827.40
CASH RATIO (In Times) 0.25 0.20 0.04 0.18 0.05
From the above table it is clear that cash ratio that is cash availability is decreasing from year by year. In the year 2008-09 it is just 0.04. So that cash position of the company should concern to take more important for the company.
CASH TURNOVER RATIO (In Times) 16.33 20.60 25.07 26.36 35.27
YEARS 2007 2008 2009 2010 2011
SALES (Rs in Lakhs) 847542.10 912832.30 676147.21 799943.81 1231884.87
AVG. CASH (Rs in Lakhs) 51890.75 44315.45 26972.68 30350.205 34922.385
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Cash turnover ratio is kept on increasing from the year 2006-07 to 2010-11 There is a constant growth in increase Cash management in Ashok Leyland is very efficient. From 2006-07 to 2010-11 debtors collection period was increasing.
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profit before depreciations and taxes and profit after tax.CHART: 19 LAST FIVE YEARS RECORDS INTERPRETATION: This graph shows the last five years income. Page | 76 .
Receivables turnover ratio is lowest in 2009-10. STATEMENT SHOWING THE SCHEDULE OF CHANGES IN WORKING CAPITAL: There has been decrease in the working capital for the year 2007-08. Profitability Ratio: Net profit for the year 2009 is decreased when compared to other years. Sales decreased in 2009 and gradually increased in 2011 Liquidity Ratio: In 2007. 3. 2009 and 2010 are near to the ideal acid test ratio that is 1:1. There has been decrease in the working capital for the year 2010-11.FINDINGS 1. RECEIVABLE MANAGEMENT RATIO (DEBTORS): Receivables turnover ratio is highest in 2007-08. In the year 2009-10 the creditor’s collection period are very high 104 days. From the table shown gross profit of the firm is satisfactory in all the years. PAYABLE MANAGEMENT RATIO (CREDITORS): In the year 2006-07 creditors’ collection period are low 67days. Page | 77 . But in the year 2008-09 it is the highest. it is clear that receivable to current asset ratio is low in 2007-08. 4. . That means receivables management is very efficient in that year. WORKING CAPITAL RATIOS: Turnover Ratio: Ashok Leyland Ltd is maintained balanced in all years efficiently and effectively. From the table given above. CASH MANAGEMENT RATIO: Cash is not properly managed in the year 2009 and 2011. INVENTORY MANAGEMENT RATIO: Raw materials consumed are increasing from year by year. 5. 2. 6.
Page | 78 . From the above table it is clear that percentage of cash in current assets is very less and decreasing from year by year. 7. Please take this consideration as to save valuable of life of employees. Some of the workers in factory have leg problem. Overall performance of the company is very effective. General: Inside the factory near the petrol tank. So I request you to utilize medical check-up properly. employees are smoking there.
This will significantly improve the profitability and liquidity of the company.RECOMMENDATIONS Recommendations can be use by the firm for the betterment increased of the firm after study and analysis of project report on study and analysis of working capital. Company should take control on debtor s collection period which is major part of current assets. Company should raise funds through short term sources for short term requirement of funds. I would like to recommend. in marketable securities and overall cash policy should be introduced. if any. Over all company has good liquidity position and sufficient funds to repayment of liabilities. Company has to take control on cash balance because cash is non earning assets and increasing cost of funds. Company should make a policy in respect of investment of excess cash. Company should reduce the inventory holding period with use of zero inventory concepts. which comparatively economical as compare to long term funds. Company is increasing sales volume per year which supported to company to increase the market share year by year Page | 79 . Management should develop a credit policy and proper self realization system from customers so that efficient and effective management of accounts receivable can be ensured.
It is being found that the production target of the company has been achieved in time. It is being found that components of working capital like inventory management. thereby the profit percentage of company is good. The study has been conducted on working capital ratio analysis. Working capital of the company was increasing and showing positive working capital per year. The company has a good operating cycle. Current assets components shows sundry debtors were the major part in Current assets it shows that the inefficient receivables collection management. working capital leverage. where long term funds are most costly then short term funds. To conclude Page | 80 . Working capital increased because of increment in the current assets is more than increase in the current liabilities.CONCLUTION Working capital management is important aspect of financial management. liquidity position. Positive working capital indicates that company has the ability of payments of short terms liabilities. receivables management and cash management was managing effectively. The study of working capital management in Ashok Leyland ltd has revealed that the current ration was as per the standard industrial practice but the liquidity position of the company showed an increasing trend. The company is matured one and it has contributed towards the countries growth and development and will also continue to perform and contribute to the whole nation. Current assets are more than current liabilities indicate that company used long term funds for short term requirement. It shows good liquidity position. and has sufficient funds to repay its liabilities. Company’s current assets were always more than requirement it affect on profitability of the company. working capital components which helped the company to manage its working capital efficiency and affectively.
com/Markets/Company/News/Company-News/Ashok-Leyland-Ltd http://www.scribd.com http://en.com http://www.com/company/Ashok-Leyland-Limited http://www. which helps them to control the cost and increase the profit.company has sound and effective management of working capital.com/competition/ashokleyland http://www.indiainfoline.ashokleyland.shine.wikipedia. PANDEY.com Page | 81 .oppapers.moneycontrol.allbusiness.com http://info.org/wiki/Ashok_Leyland http://www. WEBSITES: http://www.FINACIAL MANAGEMENT: Vikas Publishing House Pvt Ltd. BIBLIOGRAPHY BOOK REFENCE: T. HRISHIKESH BHATTACHARYA –WORKING CAPITAL MANAGEMENT: Prentice-Hall of India Pvt Ltd.S REDDY – MANAGEMENT ACCOUNTING: Margham Publication M.
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