CONTENT

Page

PREFACE
LIST OF TABLES

LIST OF FIGURES

LIST OF EXHIBITS

CHAPTER I INTRODUCTION

1.1 The Rationale of the Public -j

Sector in India

1.2 Share of the Public Sector in 4

the Indian Economy

1.3 Public Enterprises : Multiple 7

Objectives

1.4 Performance Evaluation 10

1.5 Survey of Research 18

1.6 A Perceptible Gap 23

1.7 Objectives of the Study 27

1.8 Scope, Sources of Data and 28

Methodology

1.9 Organisation of the Study 29

CHAPTER II LIQUIDITY : CONCEPT AND CONTEXT

2.1 Concept of Liquidity 32

2.2 Liquidity, Solvency and Financial 44
Flexibility

2.3 Liquidity, Profitability and 49

Growth

2.4 Importance of Liquidity 55

2.5 Motives for Holding Liquid 62

Assets
 2.6 Characteristics of Liquid 64
Assets

2.7 Level of Liquid Assets 66

2.8 , Balancing Cash and Marketable 69

Securities

2.9 Financing Pattern and Liquidity 77

2.10 Cash Flow and Liquidity 84

2.11 Liquidity Planning and Management 95

CHAPTER III LIQUIDITY SCENERIO IN PRODUCTION

ENTERPRISES IN THE PUBLIC SECTOR

3.1 Scope and Methodology 116

3.2 Towards a Comprehensive Financial 117

Goal

3.3 Financial Performance Criteria 121

3.4 Production Enterprises : -j^g

Financial Highlights

3.5 The Operating Highlights 163

3. 6 Share of the Petroleum Group 176

3.7 Specific Liquidity Scenerio in 181

PEs

CHAPTER IV EVALUATION OF LIQUIDITY

PARAMETERS IN PEs.

4.1 Scope and Methodology 200

4.2. Evolution of Liquidity Parameters 201

4.3 The Empirical Analysis 225

CHAPTER V LIQUIDITY MANAGEMENT PRACTICES

IN PEs

5.1 Objectives of the Survey 238

5.2 Sample Design 238

 5.3 Methodology 240

5.4 Description of the Sample Units 242

5.5 Objectives and Factors in 246

Liquidity Management
5.6 Liquidity Management Practices 261

5.7 Working Capital Policies and 272

Practices

CHAPTER VI LIQUIDITY AND FINANCIAL REPORTING

6.1 External Reporting System in 278

PEs

6.2 Internal Financial Reporting 314

in PEs

CHAPTER VII CONCLUSION

7.1 Summary of Liquidity Concepts 33]

and Issues
7.2 Major Findings 335V
7.3 Recommendations 347

7.4 Scope for Further Research 351

APPENDICES 352

BIBLIOGRAPHY 393
 LIST OF TABLES

Table No. Title Page

1.1 Share of the Public Sector Investment

6
Outlays in Various Plans

3.1 Target Return on Capital Employed for

Various Industry Groups in the Public 124
Sector as per the Bureau of Public
Enterprises

3.2 Resources of Production, Enterprises

in the Public Sector from 1980-81 to 133
1985-86

3.3 Loan Components of Production

Enterprises in the Public Sector from 138
1980-81 to 1985-86

3.4 Debt-Equity Ratios • of Production

Enterprises in the Public Sector from 145
1980-81 to 1985-86.

3.5 Internal Resources of Production

Enterprises in the Public Sector from 149
1980-81 to 1985-86

3.6 Number of Production Enterprises

Generating Internal Resources During 150
the Year from 1980-81 to 1985-86

3.7 Use of Funds and Fixed Capital

Formation in the Production Enterprises 15 3
from 1980-81 to 1985-86

3.8 Level of Working Capital and Working

Capital Ratios of Production 156
Enterprises from 1980-81 to 1985-86

3.9 Level of Deficit of Production

160
Enterprises from 1980-81 to 1985-86

3.10 Capacity Utilization of Production

164
Enterprises from 1980-81 to 1985-86

3.11 Profitability and Turnover of Capital 168

of Production Enterprises from 1980-81
to 1985-86
Table No. Title Page

3.12 Expenditure Pattern of Production 171

Enterprises from 1980-81 to 1985-86

3.13 Cash Flow Performance of Production 174

Enterprises from 1980-81 to 1985-86

3.14 Share of the Petroleum Group in the

Total Production Sector from 4980-81 178
to 1985-86

3.15 Net Profit/Loss After Tax Earned by

180
Production Enterprises from 1980-81
to 1985-86

3.16 Industrywise Erosion of Paid-up Capital

in Production Enterprises from 1980-81 183
to 1985-86

3.17 Indus.trywise Negative Cash Flow from

Operations of Production Enterprises 188
from 1980-81 to 1985-86

3.18 Production Enterprises (Industrywise)

showing Cash Loss and Deficit in the 195
year from 1980-81 to 1985-86

3.19 Sick Enterprises in the Production Sector as 198

on March 31, 1986

4.1 Ratios Selected along with Reasons 226

4.2 Correlation Matrix among Variables for 228

the year 1980-81

4.3 Correlation Matrix among Variables for 231

the year 1985-86

4.4 Correlation Matrix among Variables for

the Average of Six Years (1980-81 to 234
1985-86)

5.1 Stages in the Selection of Companies 243

5.2 Status of the Sample Companies 245

5.3 Objectives of Liquidity Management 248

5.4 Awareness of Liquidity Problems 25 1

5. 5 Policy Decisions at the time of 254

Liquidity Crisis

5. 6 Factors of Importance in Liquidity 257

Management
Table No. Title Page

5.7 Ratios for Measuring Liquidity Position 259

5.8 Degree of Liquidity Problems Faced 261

5.9 Techniques and Periods in Cash Flow 262

Forecasting

5.10 Critical Variables in Cash Flow 264

Forecasting

5.11 Average Variation from Forecasted 266

Figures

5.12 Causes of Variation between Actual and 267

Forecasted Figures

5.13 Causes of Cash Shortages 269

5.14 Preferences for meeting Cash Shortages 271

5.15 Preferences for Temporary Investment 271

of Excess Cash

6. 1 Ranking of Alternative Changes in the 309

Annual Reports of PEs
 LIST OF FIGURES

No. Title Page

1 Relationship between Liquidity, 55

Profitability and Growth .

2 Optimum Level of Liquid Assets 70

3 Average Cash Balance under Baumol's 72

Model

4 Fluctuations in Cash Flow under 75

Miller and Orr Model

5 Hedging Financing Policy 81

6 Conservative Financing Policy 82

7 Moderate Financing Policy 83

8 Financing Pattern and Liquidity Policy 84

9 Cash Flows under Ideal Situations 94

10 Cash Flow Management System 100

 LIST OF EXHIBITS

No. Title Page

1 Cash Based Statement of Changes 298

in Financial Position or Cash
Flow Statement

2 Cash Based Statement of Changes 299

in Financial Position with
Activities Classified

3 Statement Showing Cash Provided 300

from Operations - Reconciliation
Format

4 Statement Showing Cash Provided 301

from Operations - Direct Format