CHAPTER-1

INTRODUCTION
OF THE STUDY

1
 INTRODUCTION

CASH

Cash is the important current asset for the operation of the business. Cash is a medium of
exchange to purchase the goods and services and to discharge the liabilities. Cash is the
basic input needed to keep the business running on a continuous basis; it is also the
ultimate output expected to be realized by selling the service or product manufactured by
the firm. The firm should keep sufficient cash, neither more nor less. Cash shortage will
disrupt the firm’s manufacturing operations while excessive cash will simply remain idle,
without contributing anything towards the firm’s profitability. Thus a major function of
the financial manager is to maintain a sound cash position.

Cash is the money which a firm can disburse immediately without any restriction. The
term cash includes coins, currency and cheques held by the firm, and balances in its bank
accounts. Sometimes near cash terms, such as marketable securities or bank time deposits,
are also included in cash. The basic characteristic of near cash asset is that they can
readily be converted into cash. Generally, when a firm has excess cash, it invests it in
marketable securities. This kind of investment contributes some profit to the firm.

CASH MANAGEMENT

It is a summary of firm’s cash receipts and cash payments during period of time.

The purpose of cash flow statement is to report a firm’s cash inflows and outflows, during
a period of time, segregated into three categories: operating, investing and financing
activities.

The statement of cash flow explains changes in cash and cash equivalent such as treasure
bill and the activities that increase and decrease cash. The cash flow statement may be
presented using either a direct method (which is encouraged by financial accounting
standards board) or an “Indirect Method” (which is likely to be the method followed by

2
good majority of firms).

The only difference between the direct and indirect method of presentation concern the
reporting of operating activities; the investing and financing activities section would be
identical under either method.

Under the direct method, operating cash flow reported directly by major classes of operating
cash receipts (from customers) and payment (to suppliers and employees). A separate indirect
reconciliation of Net income to Net cash flow from operating activities must be provided.

Operating Activities:

It shows impact of transactions not defined as investigation or financing activities. These cash
flows are generally the cash effects or transaction that enter into the determination of net income.
Thus, we see items that not all statement users might think of as operating flows-items such as
dividends and interest received, as well as interest paid.

Investing Activities:

It shows impact of buying and selling fixed assets or equity securities of other entities.

Financing Activities:

It shows impact of all cash transactions with shareholders and the borrowing and repaying
transactions with lenders.

CASH FLOW MANAGEMENT

Cash flow management is a process of monitoring, analyzing, and adjusting one’s business cash
flows. The most important aspect of cash flow management is avoiding extended cash shortages,
caused by having too great a gap between cash inflows and outflows. Therefore, one needs to
perform a cash flow analysis on a regular basis, and use cash flow forecasting so that one can
take the steps necessary to head off cash flow problems.

3
 Cash management involves the efficient collection, disbursement and temporary investment
of cash. The treasurer department of a company is usually responsible for the firm’s cash
management system. A cash budget, instrumental in the process, tell us how much cash we
likely to have it, and for how long.

In cash flow management, I studied many statements like as follows: Cash flow Statement,
Cash Budget.

CASH MANAGEMENT SYSTEM

With timely information reporting a firm can generate significant income by properly managing
collections, disbursement cash balance and cash equivalents investment.

Collection Disbursement

Cash

Cash

Control through Information Report

4
OBJECTIVES

 Cash and non-cash investing and financing transaction.

 A manager can assess the reason for differences between net income and net cash flow
from operating activities.

 It is also helpful for a company to generate future net cash inflows from operations to pay
debts, interest and dividends.

 It gives indication to a company’s need for external financing.

 A cash flow statement is straight forward and easy to understand.

 It gives a strong indication of how viable the company will be over time.

 The extent of success or failure of cash planning can be known by comparing the actual
cash statement with the budgeted cash flow statement and remedial measures can be
taken.

 It discloses the volume and the speed at which cash flows in different segments of the
business.

5
CHAPTER-2
COMPANY
PROFILE

6
HISTORY OF ESCORTS

The genesis of Escorts goes back to 1944 when two brothers, Mr. H. P. Nanda and Mr. Yudi

Nanda, launched a small agency house, Escorts Agents Ltd. in Lahore. Over the years, Escorts

has surged ahead and evolved into one of India's largest conglomerates. In this journey of six

decades, Escorts has had the privilege of being associated with some of the world leaders in the

engineering manufacturing space like Minneapolis Moline, Massey Ferguson, Goetz, Mahle,

URSUS, CEKOP, Ford Motor Company, J C Bam ford Excavators, Yamaha, Claas, Carraro,

Lucky Gold star, First Pacific Company, Hughes Communications, Jeumont Schneider, and

Dynapac. These valued relationships be it technological or marketing, are its highly cherished

experiences treasures, which have helped inculcate best in class manufacturing practices and to

emerge as a technologically independent world class engineering organization.

Trusted leaders in the business with over 20 years of experience in supply chain, warehousing,
distribution, logistics and handling sensitive and heavy equipment

 Pan- Indian presence and growing network.

 Strong presence in 'Challenging Regions' - Bihar, Assam, North East India, North Bengal,
West Bengal and Kerala.

 Qualified and highly experienced team with the experience of managing SMEs, MNCs and
large corporations.

 Operational experience in -Telecom, FMCG, Retail, Chemicals, Pharmaceuticals and E-

Commerce

7
 BOARD OF DIRECTORS

Managing Director &Chairman Mr. Rajan Nanda

Joint Managing Directors Mr. Nikhil Nanda

Directors Dr. M.G.K. Menon

Dr. S.A. Dave

Dr. P.S. Pritam

Mr. S.C. Bhargava

Sr. Vice President-

Law & Company Secretary Mr. G.B. Mathur

Exec. Vice President &

Group Chief Financial Officer Mr. R.K.Budhiraja

8
 OUTLINE ORANISATION – ESCORTS GROUP

Chairman & Managing Director – Sh. Rajan Nanda

Secretariat

Flagship Operating Division

Escorts Limited Faridabad

Agri Machinery Engineering International

Business

Corporate Center Faridabad Escorts Research Institute of Farm

Center, Faridabad Mechanization,
Bangalore

Personnel Finance Project Escorts Heart Research Escorts Medical

Institute, New Delhi Center, Faridabad

Administration and Law Export and

Security Communication

Associates Companies Subsidiary Companies

Escorts Employees Welfare Trust

Faridabad

9
 MISSION

For an Enterprise business mission embodies of its endeavor, which acts as a guiding light
for continuous development & growth.

Mission of ESCORTS is:

Engineering Changes through core competency for greater synergy reinforcing bonds with
customers & establishing powerful symbiotic relationship with international allies, preparing
global market. The company wants to make a lasting difference to its shareholders, its
customers, its business associates, its employee and the country as a whole. The company
also gives better quality and better technology to customer and treats every customer as
“special” to build respect for, and loyalty to, Escorts.

QUALITY POLICY

We shall strive to continuously improve to meet the ever – rising expectation of our
customers at the lower cost. Each one of us must fulfill the need of our customer, both
internal and external with the highest degree of commitment thereby creating a quality
organization geared to ensure total customer satisfaction and the sustained health and
prosperity of our business.

Customer Orientation: To fulfill the requirement of our internal and external customer.

Process Orientation: To optimize and harmonize interrelated process rather than individual
function.

Preventive Behavior: To prevent the mistake to happen.

BACKGROUND AND BUSINESS

10
The Escorts Group, with Escorts Limited as its flagship company, is among India’s
leadingcorporations operating in the diverse field of agri machinery, construction & material

handling equipment, automotive & railway ancillaries information technology and financial
services. The group has 15 modern manufacturing facilities & an extensive marketing
network spread across the country. The genesis of Escorts goes back to 1944 when two
brothers, Mr. H.P. Nanda and Mr. Yudi Nanda, launched a small agency house, Escorts
Agents Ltd., in Lahore. The company’s principal activities were trading and representing
leading overseas manufacturers for the sale of their products in India. One of its dealerships
was for the “Massey Ferguson” brand of tractors.

In December 1959, Escorts agents ltd. was converted into a public limited company and was
renamed as Escorts Limited (EL). In January 1960, EL decided to set up manufacturing
facilities for making tractors in India under the “Escorts” brand name in the 25-40
Horsepower categories. EL promoted Escorts Tractors Limited in 1969 as joint venture with
Ford Motor Company of USA for the manufacturing of ‘Ford’ series of tractors. The tractors
manufactured were in the 45-50 HP range and ETL became the market leader in this segment
with a share of above 50%. Consequent to FMC’s disposal of tractors operations to Ford New
Holland, USA, Ford new holland acquired the shares of FMC in ETL. Following an
agreement in 1995 to end the joint venture association, EL acquired the entire stake of ford
new holland in August 1995, making escorts tractors ltd. a subsidiary of Escorts Ltd.

Over the years, Escorts has sured ahead and evolved into one of India’s largest
conglomerates. Till 1993-94, all these activities were being carried out in various divisions of
EL. EL undertook a major restructuring exercise between 94-98 spinning off the divisions
into separate companies.

The restructuring exercise comprised consolidation of the agri-machinery business by

merger of ETL with EL and having off various divisions into separate companies. Bi-wheeler
division was spun off to Escorts Yamaha Motors Ltd., construction equipment division to
Escorts construction equipment Ltd., telecommunication equipment division to Escorts
communication Ltd., EL booked gains of Rs. 2091 million over the four year period 1994-95

11
to 1997-98 though the sale of these the sale of these divisions. The main products of Escorts
group currently comprise of agri-machinery, information technology, health care, financial

services, railway components, auto components, construction and material handling

equipment.

SUBSIDIARIES

Escorts Asset Management Ltd.

Escorts Automotive Ltd.

Escorts Class Ltd.

Escorts Construction Equipment Ltd.

Escorts Heart Institute and Research Centre Ltd

Escorts Hospital and Research Centre Ltd.

Escorts Securities Ltd.

Escorts Telecommunication Ltd.

Esconet Services ltd.

Cellnext Solutions Pvt. Ltd.

I Serv India Solutions Pvt. Ltd.

Escosoft Technologies Ltd.

Escosoft Technologies (USA) Ltd.

Escosoft Technologies (UK) Pvt. Ltd.

Escosoft Singapore Pvt. Ltd.

E-Soft (Mauritius) Holdings Ltd.

Escotel Mobile Communication Ltd.

12
 Escotel Telecommunication Ltd.

Escorts Agri-machiner

BANKERS OF ESCORTS

IDBI BANK.

ABN AMRO BANK N.V.

BANK OF BARODA.

CITIBANK, N.A.

DEUTSCHE BANK AG.

HONGKONG & SHANGHAI BANKING CORPORATION LIMITED.

HDFC BANK LIMITED.

PUNJAB NATIONAL BANK.

STATE BANK OF INDIA.

BRAND AND PRODUCTS

Escorts AMG has three recognized and well-accepted tractor brands, which are on distinct and
separate technology platforms.

FARMTRAC:

World Class Premium tractors, with single reduction and epicyclical reduction transmissions
from 34 to 75 HP.

POWERTRAC:

Utility and Value-for-money tractors, offering straight-axle and hub-reduction tractors from 34
to 55 HP. India’s No.1 economy range engineered to give spectacular diesel economy.

ESCORT:
13
Economy tractors having hub-reduction transmission and twin-cylinder engines from 27 to 35
HP. Pioneering brand of tractors introduced by Escorts with unbeatable advantages.

Various FARMTRAC Models are:

- FT HERO

- FT CHAMPION

- FT 50 EPI

- FT 60 etc.

Various POWERTRAC Models are:

14
- PT 434

- PT 445

- PT 455

Various ESCORTS Models are:

- Escort Jawan MPT

- Escorts 335 Josh

15
16
 CHAPTER-3
REVIEW
OF
LITERATURE

CASH

Cash is the important current asset for the operation of the business. Cash is a medium of
exchange to purchase the goods and services and to discharge the liabilities. Cash is the basic
input needed to keep the business running on a continuous basis; it is also the ultimate output
expected to be realized by selling the service or product manufactured by the firm. The firm

17
should keep sufficient cash, neither more nor less. Cash shortage will disrupt the firm’s
manufacturing operations while excessive cash will simply remain idle, without contributing
anything towards the firm’s profitability. Thus a major function of the financial manager is to
maintain a sound cash position.

Cash is the money which a firm can disburse immediately without any restriction. The term
cash includes coins, currency and cheques held by the firm, and balances in its bank
accounts. Sometimes near cash terms, such as marketable securities or bank time deposits,
are also included in cash. The basic characteristic of near cash asset is that they can readily
be converted into cash. Generally, when a firm has excess cash, it invests it in marketable
securities. This kind of investment contributes some profit to the firm.

CASH MANAGEMENT

Meaning:

It is a summary of firm’s cash receipts and cash payments during period of

time.

The purpose of cash flow statement is to report a firm’s cash inflow and outflows, during a
period of time, segregated in to three categories: operating, investing and financing
activities.

The statement of cash flow explains changes in cash and cash equivalent such as treasure bill
and the activities that increase and decrease cash. The cash flow statement may be presented
using either a direct method (which is encouraged by financial accounting standards board)

or an “Indirect Method (which is likely to be the method followed by good majority of

firms).

18
 The only difference between the direct and indirect method of presentation concern the
reporting of operating activities; the investing and financing activities section would be
identical under either method.

Under the direct method, operating cash flow reported directly by major classes of operating
cash receipts (from customers) and payment (to suppliers and employees). A separate indirect
reconciliation of Net income to Net cash flow from operating activities must be provided.

Operating Activities:-

It shows impact of transactions not defined as investigation or financing activities. These

cash flows are generally the cash effects or transaction that enter into the determination of net
income.

Thus, we see items that not all statement users might think of as ‘operating’ flows-items such
as dividends and interest received, as well as interest paid.

Investing Activities :-

It shows impact of buying and selling fixed assets or equity securities of other entities.

Financing Activities:-

It shows impact of all cash transactions with shareholders and the borrowing and repaying
transactions with lenders.

NATURE OF CASH MANAGEMENT

Cash management is concerned with the managing of:

(i) Cash flows into and out of the firm,

(ii) Cash flows within the firm, and
(iii) Cash balances held by the firm at a point of time by financing deficit or investing
surplus cash.

It can be represented by a cash management cycle. Sales generate cash which has to be disbursed
out. The surplus cash has to be invested while deficit this cycle at a minimum cost. At the same
time, it also seeks to achieve liquidity and control. Cash management assumes more importance

19
than other current assets because cash is the most significant and the least productive asset that a
firm’s holds. It is significant because it is used to pay the firm’s obligations.

However, cash is unproductive. Unlike fixed assets or inventories, it does not produce goods for
sale. Therefore, the aim of cash management is to maintain adequate control over cash position
to keep the firm sufficiently liquid and to use excess cash in some profitable way.

Cash management is also important because it is difficult to predict cash flows accurately,
particularly the inflows, and there is no prefect coincidence between the inflows and outflows of
cash. During some periods, cash outflows will exceed cash inflows, because payments for taxes,
dividends, or seasonal inventory buildup. At other times, cash inflow will be more than cash
payments because there may be large cash sales and debtors may be realized in large sums
promptly.

Further, cash management is significant because cash constitutes the smallest portion of the total
current assets, yet management’s considerable time is devoted in managing it. In recent past, a
number of innovations have been done in cash management techniques.

An obvious aim of the firm these days is to manage its cash affairs in such a way as to keep cash
balance at a minimum level and to invest the surplus cash in profitable investment opportunities.

In order to resolve the uncertainty about cash flow prediction and lack of synchronization
between cash receipts and payments, the firm should develop appropriate strategies for cash
management. The firm should evolve strategies for cash management.

20
 CASH MANAGEMENT SYSTEMS

CASH FLOW MANAGEMENT

Cash flow management is a process of monitoring, analyzing, and adjusting one’s business cash
flows. The most important aspect of cash flow management is avoiding extended cash shortages,
caused by having too great a gap between cash inflows and outflows. Therefore, one needs to
perform a cash flow analysis on a regular basis, and use cash flow forecasting so that one can
take the steps necessary to head off cash flow problems.

21
Cash management involves the efficient collection, disbursement and temporary investment of
cash. The treasurer department of a company is usually responsible for the firm’s cash
management system. A cash budget, instrumental in the process, tell us how much cash we likely
to have it, and for how long.

In cash flow management I studied many statements like as follows:

Cash flow Statement, Cash Budget

VARIOUS STEPS OF CASH FLOW MANAGEMENT

Cash management is also important because it is difficult to predict cash flows accurately,
particularly the inflows, and there is no prefect coincidence between the inflows and outflows of
cash. During some periods, cash outflows will exceed cash inflows, because payments for taxes,
dividends, or seasonal inventory buildup. At other times, cash inflow will be more than cash
payments because there may be large cash sales and debtors may be realized in large sums
promptly.
Further, cash management is significant because cash constitutes the smallest portion of the total
current assets, yet management’s considerable time is devoted in managing it. In recent past, a
number of innovations have been done in cash management techniques. An obvious aim of the
firm these days is to manage its cash affairs in such a way as to keep cash balance at a minimum
level and to invest the surplus cash in profitable investment opportunities.
In order to resolve the uncertainty about cash flow prediction and lack of synchronization
between cash receipts and payments, the firm should develop appropriate strategies for cash
management. The firm should evolve strategies for cash management.
The firm should evolve strategies regarding the following four facets of cash management:-

 CASH PLANNING:

Cash inflows and outflows should be planned to project cash surplus or deficit for each period of
the planning period. Cash budget should be prepared for this purpose.

22
 MANAGING THE CASH FLOWS

The firm should decide about the properly managed. The cash inflows should be accelerated
while, as far as possible, the cash outflows should be decelerated.

 OPTIMUM CASH LEVEL:

The firm should decide about the appropriate level of cash balances. The cost of excess cash
and danger of cash deficiency should be matched to determine the optimum level of cash
balances.

 INVESING SURPLUS CASH:

The surplus cash balances should be properly invested to earn profits. The firms should decide
about the division of such cash balances between alternative short-term investment
opportunities such as bank deposits, marketable securities, or inter-corporate lending.

MOTIVES FOR HOLDING CASH:

The firm’s need to hold cash has been attributed to the following three motives. The firm has to
take care of these three motives which they have maintained to raise the standard of their
company.
Also they have to list their company’s name in the Securities Exchange Board Of India, that’s
why they have maintained their motives.
Those three motives have been discussed below:-
 The transactions motive,
 The precautionary motive,
 The speculative motive

1. TRANSACTION MOTIVE
The transactions motive requires a firm to hold cash to conduct its business in the ordinary
course. The firm needs cash primarily to make payments for purchases, wages and salaries,
other operating expenses, taxes, dividends etc. The need to hold cash would not arise if there
were perfect synchronization between cash receipts and cash payments, i.e., enough cash is

23
 received when the payment has to be made. But cash receipts and payments are not perfectly
synchronized. For those periods, when cash payments exceed cash receipts, the firm should
maintain some cash balance to be able to make required payments.
For transactions purpose, a firm may invest its cash in marketable securities. Usually, the firm
will purchase securities whose maturity corresponds with some anticipated payments, such as
dividends or taxes in the future.
Notice that the transactions motive mainly refers to holding cash to meet anticipated payments
whose timing is not perfectly matched with cash receipts.

2. PRECAUTIONARY MOTIVE

The precautionary motive is the need to hold cash to meet contingencies in the future. It
provides a cushion or buffer to withstand some unexpected emergency. The precautionary
amount of cash depends upon the predictability of cash flows. If cash flows can be predicted
with accuracy, less cash will be maintained for an emergency. The amount of precautionary
cash is also influenced by the firm’s ability to borrow at short notice when the need arises.
Stronger the ability of the firm to borrow at short notice, less the need for precautionary

balance. The precautionary balance may be kept in cash and marketable securities. Marketable
securities play an important role here. The amount of cash set aside for precautionary reasons is
not expected to earn anything; the firm should attempt to earn some profit on it. Such funds
should be invested in high-liquid and low-risk marketable securities. Precautionary balances
should, thus, be held more in marketable securities and relatively less in cash.

3. SPECULATIVE MOTIVE

The speculative motive relates to the holding of cash for investing in profit-making opportunity
to make profit may arise when the security prices change. The firm will hold cash, when it is
expected that interest rates will rise and security prices will fall. Securities can be purchased
when the interest rate is expected to fall; the firm will benefit by the subsequent fall in interest
rates and increase in security prices. The firm may also speculate on materials prices. If it is
expected that materials prices will fall, the firm can postpone materials purchasing and make
purchases in future when price actually falls. Some firms may hold cash for speculative
purposes. By and large, business firms do not engage in speculations. Thus, the primary

24
motives to hold cash and marketable securities are the transactions and the precautionary
motives.

ADVANTAGES OF CASH FLOW MANAGEMENT

A Cash flow analysis is an important financial tool for the management. Its chief advantages
are as follows:

1. Helps in efficient cash management:

Cash flow analysis helps in evaluating financial policies and cash position.
Cash is the basis for all operation and hence a projected cash flow statement will enable the
management to plan and co-ordinate the financial operations.

2. Helps in internal financial management:

Cash flow analysis information about funds, which will be available from operations. This

will helps the management in repayment of long-term debt, dividend policies etc.

3. Discloses the movement of cash:

Cash flow statement discloses the complete picture of cash movement. The increase in and
decrease of cash and the reasons therefore can be known. It discloses the reasons for low cash
balance in spite of heavy operation profits on for heavy cash balance in spite of low profits.

4. Discloses success or failure of cash planning:

The extent of success or failure of cash planning is known by comparing the projected cash
flow statement with the actual cash flow statement and necessary remedial measures can be
taken.

IMPORTANCE OF CASH MANAGEMENT

25
Cash management assumes more important than other current assets because cash is the most
significant and the least productive asset that a firm holds. It is significant because it is used to
pay the firms obligations. However cash is unproductive. Unlike fixed assets or inventories, it
does not produce goods for sale. Therefore, the aim of cash management is to maintain
adequate control over cash position to keep the firm sufficiently liquid and to excess cash in
some profitable way.

Cash management is also important because it is difficult to predict cash flow accurately,
particularly the inflows and there is no perfect coincidence between the inflows or outflows of
cash. During some periods, cash outflows will exceed cash inflows, because payments for
taxes, dividends, or seasonal inventory build-up. At other times, cash inflows will be more
than cash payments because there will be large cash sales and debtors may be realized in large
sums promptly.

Further, cash management is significant because cash constitutes the smallest portion of the
total current assets, yet management’s considerable time is devoted in managing it. In recent
past, a number of innovations have been done in cash management techniques. An obvious
aim of the firm these days is to manage its cash affairs in such a way as to keep cash balance
at a minimum level and to invest the surplus cash in profitable investment opportunities.

In order to resolve the uncertainty about cash flow prediction and lack of synchronization
between cash receipts and payments, the firm should develop appropriate strategies for cash
management. The firm should evolve strategies for cash management.

OBJECTIVES

 Cash and non-cash investing and financing transaction.

 A manager can assess the reason for differences between net income and net
cash flow from operating activities.

 It is also helpful for a company to generate future net cash inflows from
rations to pay debts, interest and dividends.

 It gives indication to a company’s need for external financing.

26
 CASH MANAGEMENT

Cash Flow
Receivable Statement Bank
Management
1) Cash flow from
1) Average collection operating activities, 1) Reconciliation
Period,
2) Cash flow from
2) Credit Policy, financing activities,

3) Factoring Cost of 3) Cash flow from

collecting debt, investing activities.

4) Discounting policy.

Payable Cash
Management Forecasting

1) Credit policy of 1) Cash

suppliers forecasting
technique

27
 CASH PLANNING

Cash flows are inseparable parts of the business operations of firms. A firm needs cash to
invest in inventory, receivable and fixed assets and to make payment for operating expenses in
order to maintain growth in sales and earnings. It is possible that firm may be making
adequate profits, but may suffer from the shortage of cash as its growing needs may be
consuming cash very fast.

The ‘poor cash’ position of the firm cash is corrected if its cash needs are planned in advance.
At times, a firm can have excess cash may remain idle. Again, such excess cash outflows.
Such excess cash flows can be anticipated and properly invested if cash planning is resorted
to.

Cash planning is a technique to plan and control the use of cash. It helps to anticipate the
future cash flows and needs of the firm and reduces the possibility of idle cash balances
( which lowers firm’s profitability ) and cash deficits (which can cause the firm’s failure).

Cash planning protects the financial condition of the firm by developing a projected cash
statement from a forecast of expected cash inflows and outflows for a given period. The
forecasts may be based on the present operations or the anticipated future operations. Cash
plans are very crucial in developing the overall operating plans of the firm.

Cash planning may be done on daily, weekly or monthly basis. The period and frequency of
cash planning generally depends upon the size of the firm and philosophy of
management. Large firms prepare daily and weekly forecasts. Medium-size firms usually
prepare weekly and monthly forecasts. Small firms may not prepare formal cash forecasts
because of the non availability of information and small-scale operations.

But, if the small firms prepare cash projections, it is done on monthly basis. As a firm grows
and business operations become complex, cash planning becomes inevitable for its continuing
success.

28
 COLLECTION AND DISBURSEMENT

Cash collection systems aim to reduce the time it takes to collect the cash that is owed to the
firm (for example, from its customers). The time delays are categorized as mail float,
processing float, and bank float. Obviously, an envelope mailed by a customer containing
payment to a supplier firm does not arrive at its destination instantly. Likewise, the moment the
firm receives payment it is not deposited in its bank account. And finally, when the payment is
deposited in the bank account oftentimes the bank does not give immediate availability to the
funds. These three "floats" are time delays that add up quickly, requiring the firm in the
meantime to find cash elsewhere to pay its bills. Cash management attempts to decrease the
time delays in collection at the lowest cost. A collection receipt point closer to the customer,
such as a lock box, with an outside third-party vendor to receive, process, and deposit the
payment (check) will speed up the collection.

For example, if a firm collects $10 million each day and can permanently speed up collections
by five days, at 6 percent interest rates, then annual before-tax profits would increase by $3
million. The techniques to analyze this case would utilize data involving where the customers
were; how much and how often they pay; the bank they remit checks from; the collection sites
the firm has (their own or a third-party vendor); the costs of processing payments; the time
delays involved for mail, processing, and banking; and the prevailing interest rate that can be
earned on excess funds.

Once the money has been collected, most firms then proceed to concentrate the cash into one
center. The rationale for such a move is to have complete control of the cash and to provide
greater investment opportunities with larger sums of money available as surplus. There are
numerous mechanisms that can be employed to concentrate the cash, such as wire transfers,
automated clearinghouse transfers, and checks. The tradeoff is between cost and time.

Disbursement is the opposite of collection. Here, the firm strives to slow down payments. It
wants to increase mail delays and bank delays, and it has no control over processing delay.

29
 CONTROL OF DISBURSMENT

A) STRETCHING ACCOUNTS PAYABLE

A firm should pay its accounts payables as late as possible without damaging its credit standing.
It should, however, take advantages of the cash discount available on prompt payment.

B) CENTRALIZED DISBURSEMENT

One procedure for rightly controlling disbursements is to centralize payables in to a single

account, presumably at the company’s headquarters. Such an arrangement would enable a firm to
delay payments and can serve cash for several reasons. Firstly, it increases transit time. Secondly,
if a firm has a centralized bank account, a relatively smaller total cash balances will be needed.

C) BANK DRAFT

Unlike an ordinary cheque, the draft is not payable on demand. When it is presented to the
issuer’s bank for collection, the bank must present it to the issuer for acceptance. The funds then
are deposited by the issuing firm to cover payments of the draft. But suppliers prefer cheques.
Also, bank imposes a higher service charge to process them since they require special attention,
usually manual.

D) PLAYING THE FLOAT

The amount of cheques issued by the firm but not paid for by the bank is referred to as the
“payment float”. The differences between “payment float” and “collection float” are the net float.
So, if a firm enjoys a positive “net float”, it may issue cheques even if it means having an ever
drown account in its books. Such an action is referred to as “playing the float”, within limits a firm
can play this game reasonably safely.
Thus management of cash becomes essential and it should be seen to, that neither excessive nor
inadequate cash balances are maintained.

30
OTHER FACTORS THAT AFFECT THE SIZE OF CASH BALANCE

There are many factors that affect the size of the cash balance, and hence is discussed below in
detail:-

1) AVAILABILITY OF SHORT-TERM CREDIT

To avoid holding unnecessary large balances of cash, most firms attempt to make arrangements
at borrow money is case of unexpected needs. With such an agreement, the firm normally pays
interest only during the period that the money is actually used.

2) MARKET RATES

If money will bring a low return a firm may choose not to invest it. Since the loss or profit is
small, it may not be worth the trouble to make the loan. On the other hand, if interest rates are
very high, every extra rupee will be invested.

3) VARIATION IN CASH FLOWS

Some firms experience wide fluctuation in cash flows as a routine matter. A firm with steady
cash flows can maintain a fairly uniform cash balance.

4) COMPENSATING BALANCE

If a firm has borrowed money from a bank, the loan agreement may require the firm to maintain
a minimum balance of cash in its accounts. This is called compensating balance. In effect this
requires the firm to use the services of bank a guaranteed deposit on which it pays no interest.
The interest free deposit is the bank’s compensation for its advice and assistance.

CASH FLOW ANALYSIS

The cash flow analysis is done with the help of cash flow statement. A cash flow statement is a
statement depicting changes in cash position from one period to another. It is an important
planning tool.

31
Cash flow statement gives a clear picture of the source of cash, the uses of cash and the net
changes in cash. The primary purpose of cash flow statement is to show that as to where from
the cash to be acquired and where to use them.

UTILITY OF CASH FLOW ANALYSIS

A Cash flow analysis is an important financial tool for the management. Its chief advantages
are as follows.

1. HELPS IN EFFICIENT CASH MANAGEMENT

Cash flow analysis helps in evaluating financial policies and cash position. Cash is the
basis for all operation and hence a projected cash flow statement will enable the
management to plan and co-ordinate the financial operations
Properly. The management can know how much cash is needed from which source it will
be derived, how much can be generated, how much can be utilized.

2. HELPS IN INTERNAL FINANCIAL MANAGEMENT

Cash flow analysis information about funds, which will be available from operations. This
will helps the management in repayment of long-term debt, dividend policies etc.

3. DISCLOSES THE MOVEMENT OF CASH

Cash flow statement discloses the complete picture of cash movement. The increase in and
decrease of cash and the reasons therefore can be known. It discloses the reasons for low
cash balance in spite of heavy operation profits on for heavy cash balance in spite of low
profits.

4. DISCLOSES SUCCESS OR FAILURE OF CASH PLANNING

The extent of success or failure of cash planning be known by comparing the projected cash

32
flow statement with the actual cash flow statement and necessary remedial measures can be
taken.

DETERMINING THE OPTIMUM CASH BALANCE

One of the primary responsibilities of the financial manager is to maintain a sound liquidity
position of the firm so that the dues are settled in time. The firm needs cash to purchase raw
materials ad pay wages and other expenses as well as for paying dividend, interest and taxes.

The test of liquidity is the availability of cash to meet the firm’s obligations when they
become due. A firm maintains the operating cash balance for transaction purposes. It may
also carry additional cash as a buffer or safety stock. The amount of cash balance will
depend on the risk-return trade-off. If the firm maintains small cash balance, its liquidity
position weakens, but its profitability improves as the released funds can be invested in
profitable opportunities (marketable securities).

When the firm needs cash, it can sell its keeps high cash balance, it will have a strong
liquidity position but its profitability will be low. The potential profit foregone on holding
large cash balance is an opportunity cost to the firm. The firm should maintain optimum –
just to enough, neither too much nor too little – cash balance.

CASH FLOW IS SERVED AS OXYGEN IN BUSINESS LIFE

“Cash flow is the oxygen that brings your business to life.

As surely as you cannot live without air, a business will grind to a halt if starved for
cash.”

Cash Management is concerned with the management of collections and disbursement of

cash, determination of optimum level of cash and investment of surplus cash into securities.
Cash management includes management of cash inflow, cash outflow, estimation of cash
requirement, ascertaining cost of managing cash, techniques of managing cash.

33
Cash management also includes management of cash as well as cash equitant i.e. Bank
accounts etc. Cash management is done because all the transactions in the business in done
in cash, so there is need for estimation of cash in future for smooth running of the business.
So cash management is very important for every organization. If at any time, because of a
lack of cash, a corporation fails to pay an obligation when it is due, the corporation is
insolvent. Insolvency is the primary reason firms go bankrupt. Obviously, the prospect of
such dire consequence compels companies to manage their cash with care.

Moreover, efficient cash management means more than just preventing bankruptcy. It
improves the profitability and reduces the risk the firm is exposed to. A successful business
rests on sound recordkeeping practices and solid cash flow. Without good records it is
impossible to determine the financial condition or profitability of a business.

Similarly, in order to survive a small business must achieve a positive cash flow in the long
term. This Financial Guide provides the basic information the owner of a small business
need to establish good recordkeeping practices in your business and to minimize cash flow
probe.

CASH CYCLE

The cash cycle refers to the process by which cash is used to purchase materials from
Which are produced goods, which are then sold to customers?

Cash cycle=Average age of firm’s inventory + Days to collect its accounts receivables -
Days to pay its accounts payable.

The cash turnover means the numbers of times firm’s cash is used during each year.

The higher the cash turnover, the less cash the firm requires. The firm should, therefore, try
to maximize the cash turnover.

34
 CASH OUTFLOW

For cash management, the control of cash outflows, which is directly related to organizational
arrangements for budget execution, can pose more difficulties than the control of cash inflows.
However, issues related to cash management should not be confused with issues related to the
distribution of responsibilities for accounting control and administration of the payment system.
The major purpose of controlling cash outflows is to ensure that there will be enough cash until
the date payments are due and to minimize the costs of transactions, while keeping cash outflows
compatible with cash inflows and fiscal constraints. The first condition for ensuring that cash
outflows fit fiscal constraints is good budget preparation and budget implementation covering
both cash and obligations. However, during budget implementation, cash outflows must also be
regulated through cash plans to smooth cash outflows.

CASH INFLOW

It is necessary to minimize the interval between the time when cash is received and the time it is
available for carrying out expenditure programs. Collected revenues need to be processed
promptly and made available for use. When tax collection is done by the tax administration
offices (or by Treasury offices) the administrative organization of these offices may have to be
reviewed and their equipment modernized.

Commercial banks by virtue of the banking sector infrastructure are often able to collect
revenues more efficiently than tax offices, which should therefore focus instead on tracking
taxpayers. When revenues are collected by commercial banks, arrangements must be defined to
foster competition and ensure prompt transfer of collected revenues to government accounts.
Systems of bank remuneration through float, which consists of authorizing the banks to keep the
revenues collected for a few days, present inconveniences. Stringent rules to ensure prompt
transfers must be established. Moreover, bank remuneration through fees is more transparent and
promotes competitive bidding. An appropriate system of penalties for taxpayers is also an
important element in avoiding delays in revenue collection.

35
 DAILY CASH FLOW REPORT

The Daily Cash Flow report is prepared with an objective to keep incessant check on the cash
flows of the firm, which includes both inflow and outflow cash. The cash flows are planned to
project cash surplus or deficit for each period i.e daily, monthly, quarterly, semi-annual & annual
basis.

The framework of report highlights all the effects, which lead to cash surplus or deficit. It is a
measure, which calculates the details of daily transaction in terms of sale and purchase, which
further includes the means through which they take place.

At Escorts-AMG, the daily cash flow report is designed in a format suiting their requirements.
The sales of tractors is their primary goal which includes exports as well. The bills are presented
for desired collection from various channels i.e dealers, stockiest, distributors through which the
tractors are supplied in the market. Besides tractors they also deal in engines, backend,
implements which are included in the category of other receipts.

The receipts are other than collections as they aren’t generated through sales. Next come the
payments, which are made in discharge of financial obligation towards various suppliers, bank
payments, excise duty, salary & wages etc.

Through the various collections, receipts and payment, we are now in a position to derive the
surplus or deficit which is the result of above transactions. The surplus balance shows that the
collections & receipts are more than payments and vice-a-versa in case of deficit.

Though surplus is an indicator of sound financial position and deficits the other way round, but
excess surplus is also not considered healthy which has reasons to it like inventory pile up and so
on.

The last component of the cash flow report is the outstanding debtors, which is calculated by
subtracting billing & collection from opening o/s of debtors in domestic, export and other
categories. This way the day to day cash transactions are maintained through the cash flow report
which leads to proper functioning of an organization’s resources both men & material.

36
CASH BUDGET

A forecast of estimated cash receipts and disbursements for a specified period of time. A cash
budget is arrived at through a projection of future cash receipts and cash disbursements of the
firm over interval of time, it reveals the timing and amount of expected cash inflows and
outflows over the period. With this the firm will be able to determine its future cash needs, and
exercise control over the cash and liquidity of the firm. Though the cash budget may be prepared
almost any interval of time, its monthly projection are most common. In short, we can say that
cash budget is a forecast of a firms future cash flows arising from collection and disbursement,
usually on a monthly basis.

The key to the accuracy of most cash budgets is the sales forecast. This forecast can be either
internal or external analysis, in internal approach, sales representatives are asked to project sales
for the forthcoming period, We can then consolidate these sales estimates for the product line.
The estimates for the various product lines are then combined in to an overall sales estimate for
the firm.

The basic problem with an internal approach is that it can be too myopic, often significant trends
in the economy and in the industry are overlooked. Many companies use an external analysis as
well, in external approach economic analysts make forecast of the economy and of industry sales
for several years to come. They may use regression analysis to estimate the association between
industry sales and the economy in general.

After these basic predictions of business conditions and the industry are made. The next step is to
estimate the market share by individual products, price that are likely to prevail and the expected
reception of new product. By this way we can prepare an external forecast.

For Effective Cash Budget:

 A decision to obtain long term financing should be based on long-range funds requirement.

 On the basis of cash budget the manager should be able to plan to invest excess funds in cash
equivalents.

37
 A firm may be able to delay its capital expenditure or its payment for purchase, Purpose
of cash budget should be to determine the timing and magnitude of prospecting financing
needs so that the most appropriate method of financing can be arranged,

BANK RECONCILIATION

Bank reconciliation involves comparing the company’s record of transactions and balances to
the bank’s record of transactions and balances. The company should go through every
transaction in their account and make sure the company and the bank agree on the transaction.

It’s important to go through the process of bank reconciliation. If the company doesn’t, than it
is taking few risks. Without bank reconciliation, the company may not have a clear idea of
how much cash is available in their accounts. They might bounce Cheques and incur overdraft
charges.

Without bank reconciliation, the company also expose yourself to risk. People may be stealing
from the company’s account. If they never look through each transaction, they’ll never know
about it. If they don’t notify the bank quickly enough, they may be out of luck. The same goes
for bank mistakes. With regular bank reconciliation the company can find problems quickly
and make them go away.

Bank reconciliation can be done manually, in excel & there’s electronic bank reconciliation as
well.

Though the manual way for handling company’s large bank accounts is not appropriate, it is
helpful when there are less transactions. But still it important for any manager to learn it as it
is the basic form of doing it.

For reconciling the company’s record of transaction with the bank balances , there are three
essential requirements :

 Bank book

 Bank statement

38
  Bank reconciliation statement of preceding month

DECISION AREAS

A. CREDIT POLICIES

The credit policy of a firm provides the framework to determine whether or not to extend credit
to a customer and also how much credit to extend. It has two broad dimensions, the first is credit
standard and second is the credit analysis.

Credit standards represent the basic criteria for the extension of credit to customers. The trade-
off with reference to credit standards covers collection costs, average collection period, level of
bad debts losses and level of sales. With a relaxed credit standard the collection costs, bad debts
expenses and sales goes up and in reverse case vice-versa happens.

The second aspect of credit policy is credit analysis. It begins with obtaining credit information
of the customers and ends up with the analysis of the obtained credit information. Information
can be collected either internally or externally. Internal source of credit information is derived
from the records of the firm.

The analysis of credit information should cover both qualitative as well as quantitative aspects.
The quantitative aspect is based on the available financial statements whereas qualitative aspects
cover the quality of management.

B. CREDIT TERMS

The second decision area in accounts receivable management is the credit terms. After the credit
standard have been establish and the credit worthiness of the customers is assessed, the
management of a firm must determine the terms and conditions on which trade credit will be
made available.

Credit terms have three components: credit period, cash discount and cash discount period.

Credit period is the duration of time for which trade credit is extended whereas cash discount is
the amount by which the over the due amount will be reduced thus benefiting the customer. The

39
credit terms like the credit standard affect the profitability as well as the cost of the firm
therefore a firm should determine the credit terms on the basis of cost-benefit trade-off.

C. COLLECTION POLICIES

The collection policies refer to the procedures followed to collect account receivable when
after expiry of the credit period they become due. This policy covers two aspects: first is the
degree of effort to collect the overdue and second is the type of collection efforts.

Escort Limited has a zero debt credit policy. However it is giving the following facilities to
its dealers to promote the sales, as liberal credit policy has a direct impact on sales.

D. CHANNEL FINANCE FACILITIES

The company arranges these facilities with various bankers for the company dealers to
support their cash needs. The goods are sold on credit against hundis. Hundis can be drawn
for 50 or 75 or 90 days subject to qualifying criteria of bank.

E. CREDIT FACILITIES

Escort provides thirty days interest free credit to the dealers. For this in respect of all hundis
the company bears 30 days interest and the remaining cost of interest, delayed payment
charges are borne by the dealers.

F. PENALTY ON BOUNCING OF HUNDIES / CHEQUES

Bouncing of hundis / cheques drawn in favor of the company is viewed very strongly and
usually following actions are taken.

 Tractor supplies are suspended and restored only after all dues are cleared.

 All charges debited by the bank such as collection charges, penal interest are debited
to the dealer.

 The bank extending channel financing policy have clearly stated that if a dealer has
two or more bouncing he will be black listed and his limit will be withdrawn with

40
immediate effect. Company also makes sales to such dealers only against letter of
credit or demand draft.

CHAPTER-4
RESEARCH
METHODOLOGY

41
MEANING OF RESEARCH

Research is a process in which the researchers wish to find out the end result for a given
problem and thus the solution helps in future course of action. The research has been defined
as “A careful investigation or enquiry especially through search for new facts in branch of
knowledge.”
Knowledge of research not only helps one to look at the available information, but this
knowledge also helps in other ways.
Research comprises defining and redefining problems, formulating hypothesis or suggested
solutions, collecting, organizing and evaluating data, making deductions and reaching
conclusions.
Research compromises “creative work undertaken on a systematic basis in order to increase
the stock of knowledge, including knowledge of man, culture and society, and the use of this
stock of knowledge to devise new applications.”

MEANING OF RESEARCH METHODOLOGY

Research methodology is a way to systematically solve the research problem. The research
methodology included various methods and techniques for conducting a research. “Marketing
Research is a systematic design, collection, analysis, and reporting of data and finding
relevant solution to a specific marketing situation or problem.”
Sciences define research as “ the manipulation of things, concepts or symbols for the purpose
of generalizing to extend, correct or verify knowledge, whether that knowledge aids in
construction of theory or in practice of an art.
Research is thus, an original contribution to the existing stock of knowledge marketing for its
advancement, the purpose of research is to discover answers to the questions through the
application of scientific procedure.
My research project has a specified framework for collecting the data in an effective manner.
Such framework is called “Research Design”.

42
 Following things will be concluded in the Research Methodology:

A) OBJECTIVES OF THE STUDY

Research is an organized enquiry carried out to provide information for solving problems. The
present study is being contemplated with the following specific objectives:

1) To study the cash position of ESCORTS LIMITED.

2) To analysis the cash inflow of two years of ESCORTS LIMITED.
3) To analysis the outflow of two years of ESCORTS LIMITED
4) To study net cash flow from operating activity.
5) To study net cash flow from investing activity.
6) To study net cash flow from financing activity..
7) To study the change the current assets of the company in two years.
8) To study the investment change in two years of ESCORTS LIMITED.
9) To study cash in hand and cash at bank position of two years of ESCORTS LIMITED.

B) SCOPE OF THE STUDY

The research in the field of Finance of any organization comes under the scope of business
research. The scope of this study is being discussed below:-
 To study the cash inflows and cash outflows of the organization.
 It helps in determining the net cash flows from investing activities.
 It helps in determining the net cash flows from financing activities.
 It helps in determining the net cash flows from operating activities.
 It helps in studying the trends of cash in the organization

C) RESEARCH DESIGN:
A research design is a framework or blueprint for conducting the research project. It gives details
of the procedures necessary for obtaining the information needed to structure or solve research
problem.
Mainly there are three types of research design discussed below:-
1) EXPLORATORY STUDY
An exploratory study is undertaken when no information is available on how similar problems

43
or research issues have been solved in the past. In such cases, extensive interviews have to be
undertaken with many people to understand and handle the problem.

2) DESCRITIVE STUDY

A descriptive study is undertaken in order to ascertain and be able to describe the characteristics
of the variable of interest in a situation. Descriptive study are also undertaken to understand the
characteristics of organizations that follow certain common practices.

3) HYPOTHESIS TESTING

Studies that involve in hypothesis testing usually explain that the difference among groups or the
independence of two or more factors (variables) in a situation.
The research design used in this project is Descriptive in nature. The procedure used in this
research use facts or information already available, and analyze these to make a critical
evaluation of the performance.

D) DATA COLLECTION
Data collection is the process of gathering and measuring information on variables of interest, in
an established systematic fashion that enables one to answer stated research questions, test
hypothesis, and evaluate outcomes.
The data collection component of research is common to all fields of study including physical
and social sciences, humanities, business etc. While methods vary by discipline, the emphasis on
ensuring accurate and honest collection remains the same.
The goal for all data collection is to capture quality evidence that then translates to rich data
analysis and allow the building of a convincing and credible answer to questions that have been
posed.

Mainly two data are being obtained in the collection of Data, and that two are discussed below:-
1. Primary data,

2. Secondary data

44
PRIMARY DATA :-

The primary data are those which are collected a fresh and for first time. Primary data is also
called basic data or original data.
Primary data refers to information obtained first hand by the researcher on the variables of
interest for the specific purpose of the study.
Data are collected through personal interviews and discussion with Finance Executive.
Data are collected through personal interviews and discussion with Material Planning- Deputy
Manager.

These are the sources of primary data collection:-

(1) Observation method
(2) Interview method
(3) Schedules and questionnaire method
(4) Internet.

SECONDARY DATA :-

Secondary data analysis saves time that would otherwise be spent collecting data and,
particularly in the case of quantitative data, provides larger and higher-quality databases that
would be unfeasible for any individual researcher to collect on their own.

In addition, analysts of social and economic change consider secondary data essential, since it is
impossible to conduct a new survey that can adequately capture past change and/or
developments. The secondary data means data that are already available in various reports,
diaries, letters, books, periodicals etc.

The secondary data are those, which have been used previously for any research and now used
for second time.

E) LIMITATIONS OF THE STUDY

 The study is restricted only to Escorts Ltd. Being a case study, the findings cannot be
generalized,

45
 The study takes into account only the quantitative data and the qualitative aspects were not
taken into account,
 Quicken software is no longer enough for business to keep track of financial results,
 Most of the time my guide and supervisors were not on their seats, this create a lot of
problems for me to finding the correct interpretation as they were busy in their day to day
activities and not able to talk and discuss the matter with me.
 I am just student of BBA still there is a lot to be learning of skill to handle the firm
efficiently.

46
 CHAPTER-5

DATA ANALYSIS
&
INTERPRETATION

47
ANALYSIS OF CASH FLOWS FROM DIFFERENT ACTIVITIES OF THE
ESCORTS AGRI MACHINERY GROUP

CASH FLOW FROM OPERATING ACTIVITIES

YEAR AS ON 31 MARCH, 2017 AS ON 31 MARCH, 2018

CASH FLOW FROM OPERATING
629582 727168
ACTIVITIES
(AMOUNT IN RS.)

INTERPRETATION

 Cash flow from operating activities on 31 march 2017 is 629582.

 Cash flow from operating activities on 31 march 2018 is 727168.
 It means that cash flow from operating activities of the company are increasing from the
previous year.

48
 CASH FLOW FROM INVESTING ACTIVITIES

YEAR AS ON 31 MARCH,2017 AS ON 31 MARCH,2018

CASH FLOW FROM INVESTING

(337955) (474328)
ACTIVITIES
(AMOUNT IN RS.)

INTERPRETATION

 Cash flow from investing activities on 31 march 2017 is (337955).

 Cash flow from investing activities on 31 march 2018 is (474328).
 It means that cash flow from financing activities of the company are decreasing from the
previous year, this show there is no improvement during these 2 years
.

49
 CASH FLOW FROM FINANCING ACTIVITIES

YEAR AS ON 31 MARCH, 2017 AS ON 31 MARCH, 2018

CASH FLOW FROM FINANCING
(209536) (321454)
ACTIVITIES
(AMOUNT IN RS.)

INTERPRETATION

 Cash flow from financing activities on 31 march 2017 is (209536).

 Cash flow from financing activities on 31 march 2018 is (321454).
 It means that cash flow from financing activities of the company are decreasing from the
previous year. Thus there is no improvement from the past 2 years.

50
 ANALYSIS OF CURRENT ASSETS OF ESCORTS AGRI MACHINERY
GROUP

YEAR AS OF MARCH 31,2017 AS OF MARCH 31,2018

CURRENT ASSETS 5002606 5151800

(AMOUNT IN RS.)

INTERPRETATION
 Current assets of the company on 31 march 2017 is 5002606.
 Current assets of the company on 31 march 2018 is 5151800.
 It means the company’s current assets increases from the previous year.

ANALYSIS OF CURRENT INVESTMENT OF ESCORTS AGRI

MACHINERY GROUP

51
 YEAR AS ON MARCH 31,2017 AS ON 31 MARCH,2018

CURRENT INVESTMENT 373324 388792

(AMOUNT IN RS.)

INTERPRETATION
 Current investment of the company on 31 march 2017 is 373324.
 Current investment of the company on 31 march 2018 is 388792.
 It means the company’s investment increases from the previous year.

ANALYSIS OF CASH AND CASH EQUIVALENTS OF ESCORTS

AGRI MACHINERY GROUP

52
 YEAR AS ON 31 MARCH,2017 AS ON 31 MARCH,2018

CASH & CASH EQIVALENTS 765242 697964

(AMOUNT IN RS.)

INTERPRETATION
 Cash and it’s equivalents of the company on 31 march 2017 is 767242.
 Cash and it’s equivalents of the company on 31 march 2018 is 697964.
 It means the company cash and its equivalents decreases from the previous year.

ANALYSIS OF CURRENT LIABILITIES OF ESCORTS AGRI

MACHINERY GROUP

53
 YEAR AS OF 31 MARCH, 2017 AS OF 31 MARCH,2018

CURRENT LIABILITIES 3720859 3795394

(AMOUNT IN RS.)

INTERPRETATION
 Current liability of the company on 31 march 2017 is 3720859.
 Current liability of the company on 31 march 2018 is 3795394.
 It means the company’s borrowings increases from the previous year.

54
 ANALYSIS OF ANNUAL ASSETS OF ESCORTS AGRI MACHINERY
GROUP

YEAR AS ON 31 MARCH,2017 AS ON 31 MARCH,2018

ANNUAL TOTAL ASSETS 9663917 10106603

(AMOUNT IN RS.)

INTERPRETATION
 Total assets of the company on 31 march 2017 is 9663917.
 Total assets of the company on 31 march 2018 is 3795394.
 It means the total assets increases from the previous year.

55
ANALYSIS OF TOTAL LIABILITIES OF ESCORTS AGRI MACHINERY
GROUP

YEAR AS ON 31 MARCH,2017 AS ON 31 MARCH,2018

ANNUAL TOTAL LIABILITIES 9663917 10106603

(AMOUNT IN RS.)

INTERPRETATION
 Annual liability of the company on 31 march 2017 is 9663917.
 Annual liability of the company on 31 march 2018 is 10106603.
 It means the company’s total liability increases from the previous year.

56
 CHAPTER-5
CONCLUSION
&
SUGGESTIONS

57
 CONCLUSION

The Cash Management Analysis done on the financial position of the company has provided a
clear view on the activities of the company. The use of the accounting and financial management
helped in this study to find out the financial soundness of the company.

This project was very useful for the judgment of the financial status of the company from the
management point of view. This evaluation proved a great deal to the management to make a
decision on the regulation of the funds to increase the sales and bring profit to the company.
Before I conclude I wish to convey my thankfulness in regard to the training given to me in
ESCORTS AGRI MACHINERY GROUP. It gave me extreme satisfaction and practical
knowledge of the financial activities carried out in the company. The kindness, attention, and
immense co-operation extended to me buy all the officials in the company made my project easy
and comfortable.

It was a good idea and good chance to expose to the work environment that we will have to face
and practice after we graduate.

As a result of the training now I am more confident to enter the employment world and build my
future career.

58
 SUGGESTIONS

 The cash management of the company is failed to strengthen the cash position so the
company so required to take steps to improve the cash position by concentrating on
receivables, inventories avoiding too much on borrowings.

 The company should change the behaviour of spending its funds so that it would yield more
cash inflows than the outflows.

 The company may try to improve its working capital position through long term sources. It
will create free flow of funds. So that the cash management and the company performance
will be in a good position.

 The cash balance indicate high liquidity position of a company, ESCORTS AGRI
MACHINERY GROUP maintain cash including bank balance is at an optimum level and it
is enough to meet day to day requirement.

 ESCORTS AGRI MACHINERY GROUP should try to match their Cash with the cost of
their services. In case of surplus Cash, it should be invested either in securities or should be
used to repay borrowings.

 The company followed an aggressive policy of financing working capital should try to
finance 50% of their working capital using long term source and improve their status.

 The company should try to follow a matching policy for financing current Assets (i.e.) using
both long term and short-term sources of finances.

59
 CHAPTER-7
BIBLIOGRAPHY

60
 BIBLIOGRAPHY

BOOKS

Financial Management- S.K Gupta

Management Accountancy-D K GOEL

Cost and Management Accountancy, S.N. MAHESHWARI

Financial Management and Policy, JAMES C. VAN HORNE

WORLD WIDE WEB

www.escortsagri.com

www.economictimes.com

www.planware.com

www.icraindia.com

Other than Web

M.I.S of the company

Annual Reports

61
CHAPTER-8
ANNEXURE

62
 1st April 2016-31st March 2017 1st April 2017-31st March 2018

Operating income 2,012.00 2,092.04

Material consumed 1,470.66 1,540.01

Manufacturing expenses 47.68 50.79

Personnel expenses 202.63 204.02

Selling expenses 114.57 118.63

Administrative expenses 69.12 57.45

Expenses capitalized - -

Cost of sales 1,904.66 1,970.90

Operating profit 107.34 121.14

Other recurring income 0.04 20.85

Adjusted PBDIT 107.38 141.99

Financial expenses 55.93 89.78

Depreciation 42.87 44.97

Other write offs - 3.32

Adjusted PBT 8.58 3.92

Tax charges 47.13 -10.89

Adjusted PAT -38.55 14.81

Non-recurring items 17.56 -21.25

Other non-cash adjustments 32.86 -

Reported net profit 11.87 -6.44

Earnings before appropriation -133.59 -145.46

Equity dividend - -

Preference dividend - -

Dividend tax - -

Retained earnings -133.59 -145.46

63
 PROFIT AND LOSS ACCOUNT

BALANCE SHEET
1st April 2016-31st March 2017 1st April 2017-31st March 2018

Equity share capital 90.71 83.69

Share application money - -

Preference share capital - -

Reserves & surplus 645.49 563.38

Secured loans 422.63 414.04

Unsecured loans 14.44 31.10

Total 1,173.27 1,092.21

Gross block 1,415.93 1,436.96

Less : revaluation reserve 466.46 471.90

Less : accumulated depreciation 593.41 583.24

Net block 356.06 381.82

Capital work-in-progress 14.43 13.40

Investments 425.79 425.13

Current assets, loans & advances 1,131.98 1,325.61

Less : current liabilities & provisions 776.14 1,069.68

Total net current assets 355.84 255.93

Miscellaneous expenses not written 11.00 15.93

Total 1,163.12 1,092.21

Book value of unquoted investments 494.53 493.87

Market value of quoted investments 1.98 3.31

Contingent liabilities 168.40 318.74

64
Number of equity shares outstanding
907.09 836.94
(Lakhs)

CASH FLOW STATEMENT

PARTICULAR MARCH (2015) MARCH (2014)
CASH FLOW FROM OPERATING ACTIVITIES
NET PROFIR BEFORE TAX 26.14 -17.33

Adjustment for:
1) Provision for doubtful debts & advances 16.36 1.89
2) Gain on sale of long term investment (1.22)
3) Gain on sale of asset (4.8) (0.13)
Depreciation 42.87 44..97
Assets w/off 11.64 8.08
Interest expense 62.2 72.22
Dividend income 0.04 -0.02
Interest income 12.93 -20.82
Operating profit before change in working capital 141.52 87.64
Adjustment for:
a) Trade & receivable (65.36) (168.61)
b) Money in Escorts account 20.09
c) Inventory (43.68) 13.79
d) Trade payable 58.02 67.05
e) Misc. expenditure (3.21) (7.5)

Operating profit after change in working capital (34.14) (95.27)

Cash generated from operating activities 107.38 (7.63)
Less-Direct taxes/refunds (6.25) (17.85)
NET CASH FLOW FROM OPERATING 101.13 (25.48)
ACTIVITIES
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of fixed assets (7.5) 0.86
Proceeds from sale of fixed. Assets 14.26 (30.95)
Loss on sale of investment (30.64)
Movement in loan & advances (3.9) (16.27)
Sale of investment (0.66) 32.33
Short term deposits with schedule banks 8.58 (2.31)
Interest received 3.21 20.7
Dividend received (0.04) 0.02

65
NET CASH FLOW FROM INVESTING 16.69 4.38
ACTIVITIES

CASH FLOW FROM FINANCING ACTIVITIES

Proceeds from share capital & securities premium 40.32 114.44
Proceeds/repayment from long- term borrowings 234.09 80.6

Less: repayment of long term borrowing (41.68) (0.54)

Proceed/repayment from short-term borrowing (46.83) (146.82)
Interest paid (66.27) (77.4)
NET CASH USED IN FINANCING ACTIVITIES (114.46) -23.72
Net increase / decrease in cash & cash equivalents (30.03) (44.82)
OPENING CASH BALANCE 60.83 105.65
CLOSING CASH BALANCE 30.8 60.83

66