You are on page 1of 73

A Project Report On

RATIO ANALYSIS
At

Kirloskar pneumatic co.ltd., Pune.
In Partial Fulfillments of the Requirement for the award of

Master of Business Administration
By Chetan v. Phapale Under guidline Ptof.Yuvraj Lahoti

The Director,

Vishwakarma Institute of Management PUNE, Maharashtra.

2005 - 2007.

ACKNOWLEDGEMENT
It is a matter of great satisfaction and pleasure to present this report on Summer Training in KIRLOSKAR PNUEMATIC CO. LTD. (KPCL), Pune 411013. I take

this opportunity to owe my thanks to all those involved in my training.

I thanks to Mrs. VINEETA KAPOOR (MANAGER HRD) for given me opportunity to work at KPCL, as a FINANCE TRAINEE.

I am thankful to Mr. R.B. SHALIGRAM and Mr. R.R. TAVERGIRI for his encouragement and able guidance at every stage of my training work.

I also express my gratitude towards my project guide Mr.Y. LAHOTI (sir), who have helped me on every step in completing the training.

CERTIFICATE CERTIFICATE
This is certify that Mr.Chetan v. Phapale is a bonafide student of this Institute studying in M.B.A.

He

has

completed

project

report

Entitled

RATIO

ANALYSIS in Kirloskar pneumatic co. ltd., Pune. For the
partial fulfillment of the requirement of M.B.A. program for 20052007.

To the best of my knowledge, it is his original work. I wish him all the best in his future career and success at every step he takes in his life.

Mr. Yuvraj Lahot Dr.Shrad joshi
Project guide Director

NUMBER PARTICULAR 1 2 3 4 5 Executive summary Company profile Objective Research methodology Ratio analysis Theory Calculaion with graph Working capital Suggestion Conclusion 6 7 8 .

RITES. EIL. and are well accepted not only in India but also in the countries of South East Asia. research and development. including CNC machines. metallurgical and metrological laboratories. and the . MMD. adopting them to suit Indian conditions and continuously updating them to maintain the highest standards of quality and reliability. It was certified for ISO 9001 quality system by the Indian quality systems. West United States of America Asia. stringent quality control procedures and systems.EXECUTIVE SUMMARY INTRODUCTION: Company being established as Kirloskar Pneumatics Company Limited in 1958. to secure the ISO 9001 certification. tool room and an integrated computer system. At Kirloskar Pneumatic up to date manufacturing facilities. Europe. greal grinding machines. the Middle East. and may more. (IRQS) in February 1993 and re-certified in 1996 and again in 1999 and in 2003. Kirloskar Pneumatic has the distinction of acquiring advance technologies from world over. Bulf. Africa. Company s products are manufactured under Survey of renowned inspection agencies such as Lloyd s. made an entry with manufacture of air compressor and Pneumatic tools and soon diversified by including air conditioning and transmission equipments. in all its operations. NTPL. screw rotor machines. PDIL. IRS. DGS&D. have all been set up with the sole idea of achieving the highest standards of quality and performance. Kirloskar Pneumatic is among the first few companies in India. foundry.

Bulf. made an entry with manufacture of air compressor and Pneumatic tools and soon diversified by including air conditioning and transmission equipments. have all been set up with the sole idea of achieving the highest standards of quality and performance. tool room and an integrated computer system. the company . greal grinding machines. Europe. Kirloskar Pneumatic has the distinction of acquiring advance technologies from world over. in all its operations. adopting them to suit Indian conditions and continuously updating them to maintain the highest standards of quality and reliability. (IRQS) in February 1993 and re-certified in 1996 and again in 1999 and in 2003. metallurgical and metrological laboratories. It was certified for ISO 9001 quality system by the Indian quality systems. the Middle East. to secure the ISO 9001 certification. West United States of America.AN OVERVIEW OF COMPANY Company being established as Kirloskar Pneumatics Company Limited in 1958. DGS&D. foundry. Asia. Company s products are manufactured under Survey of renowned inspection agencies such as Lioyd s. Immediately thereafter. MMD. and are well accepted not only in India but also in the countries of South East Asia. EIL. PDIL. and may more. NTPL. research and development. stringent quality control procedures and systems. RITES. At Kirloskar Pneumatic up to date manufacturing facilities. Africa. IRS. Kirloskar Pneumatic is among the first few companies in India. and the Kirloskar Pneumatic Company Limited started with the manufacturing of Air Compressors and Pneumatic Tools. screw rotor machines. including CNC machines.

NTPC. Africa.expanded its activities in the field of Air Conditioning and Refrigeration machinery. Research and Development. Metallurgical & Metrogical Laboratories. It was certified for ISO 9001 Quality Systems by the Indian Quality Systems (IRQS) in February 1993. Kirloskar Pneumatic is held in high esteem for Process System Engineering and Turnkey Project expertise. Stringent Quality Control Procedures and Systems. up-to-date manufacturing facilities. Kirloskar Pneumatic is among the first few companies in India. have all been set up with the sole idea of achieving the highest standards of quality and performance. the Middle East. The result of its success in this area is reflected in Company s association with virtually every project and industry in the country. including CNC Machines. Screw Rotor Machines. Europe and United States of America. 1999 and most recently in 2003. PDIL. At Kirloskar Pneumatic. Foundry. EIL. MMD. DGS&D. Gulf. . West Asia. Heat Treatment Facilities. RITES and many more. IRS. West. Tool Room and an Integrated Computer System. and re-certified in 1996. and are well accepted not only in India but also in the countries of South East Asia. Company s products are manufactured under the survey of renowned inspection agencies such as. Gear Grinding Machines. Lloyd s. Further diversification in the manufacture of Hydraulic Power Transmission Equipment followed.

We are a 600 Million US Dollars engineering conglomerate driving critical industries. each led by the best engineering and managerial talent in India. Shri Shantanurao. l. In the customer's often unspoken wish for better implements lies the seed for a new invention. We are century old pioneers in our areas of specialization like power. multi-location conglomerate is built on the plinths of Experience. At Kirloskar. make us reach higher. Expertise. Quality. construction and mining. We are made up of 8 major group companies. listening to the customer and his needs is a tradition as old as the group itself. multi-product.Kirloskar in the year 1958. For it is they who drive us further.COMPANY PROFILE 1. Our multi-unit. Innovation and Values in the business. History : Kirloskar Pneumatic Company Limited was incorporated by late. we have interests in civic utility systems and in Information Technology and communication. a path-breaking industrial conc We are the Kirloskar Group of Companies. agriculture. Our best play is successful work and creation of a new industrial order where we can provide tailor made solutions to the customers. . industry and transport. oil and gas and environment protection with a range of world-class industrial products and turnkey services. and engineer better solutions. In addition to engineering.

Today. pillared by expertise can work wonders. the result is of a far higher quality than what could have been achieved by each element acting alone. It is the only way we ensure that when an endeavor is made by several different elements. that good business values.Business for us is the best service. It is not limited to our group. How do we plan to reach there? For the Kirloskar Group. which are crafted from a solid base of developing and manufacturing. engineering excellence is not an end. Where are we headed? We believe in synergy and its limitless power of unifying. customer care and a lifelong relationship. It extends to the realms of customer/collaborator relations. investor interactions and into market trends analyses and technological advances. but a journey. we are in the process of concentrating our collective energies on core industry sectors to give us a sustainable competitive edge in terms of both quality and price. Through which. steel and chemicals to the mechanic in his workshop and the . From our early agricultural implements to our hi-tech engineering products. we've been always weaving our corporate goals into our clients' expectations by providing expertise and delivering technology that they can benefit from and rely on us at globally competitive prices. Solutions. The Kirloskar Group's customer base currently ranges from heavy industries like power generation. We do work for profit but our profits are guided by the motives which suit best the customer needs. continual measurement of customer satisfaction is offered. Our policies and practices help in treating the customer as the most important part of our family. It's a commitment rather than a ritual. An array of business solutions stand testimony to the fact. generate reliable products and superior service.

inventions that were deviced from the need of the hour and went on to become signs of the time. We started with an aim of becoming the pioneers in fields in which our country needed innovation. That is why our group history can in many ways be considered a history of the economic and industrial revolution in India. We started with an aim of becoming the pioneers in fields in which our country needed innovation. In the 100 years and more that we have been in existence as a family and as an organisation. We gave India its first iron plough. Which is why our group history can in many ways can be considered a history of the economic and industrial revolution in India. The Kirloskar story Landmarks in the Kirloskar Saga The Kirloskar Story It has now been more than a century since the Kirloskar story started. The founder and the first factory village . The Kirloskar story unfolds It has now been more than a century since the Kirloskar story started. inventions that were born from the need of the hour and went on to become signs of the time. many of whom are overseas. In the 100 years and more that we have been in existence as a family and as an organisation. the one thing that remains consistent is that they all matter to us and call us for more of our service.farmer in the fields. we've been seminal to Indian agricultural and industrial development. we've been seminal to Indian agricultural and industrial development. We gave India its first iron plough. pump and engine. pump and engine. products and better solutions. Across this wide spectrum of clients.

Shamburao Jambhekar doubled as engineer and all-round healing man. an unsuccessful student. Originally intended as an essential aid to agriculture. A man who believed that an understanding of one's environment and reality was essential to the manufacture of path-breaking industrial implements. when the Kirloskar were being ousted from Belgaum to make room for a new suburb. a school drop-out flowered into an imaginative engineer. K. the founder. who admired and respected Laxmanrao Kirloskar. the plough soon became an icon of reform and revolution. planned and administered the township. Tukaram Ramoshi and Pirya Mang. A model factory-village created by Laxmanrao and his band of dedicated workers. Ramuanna.K. they found themselves in dire need of a place to live and work. Sensing this need. treasurer and odd jobs man. A highlight of the early history of the group is Kirloskarvadi. the Raja of the princely state of Aundh. Driven by his faith in human ability. became a manager. both convicted dacoits. Mangeshrao Rege was the clerk and chief accountant. Anantrao Phalnikar. Laxmanrao Kirloskar set foot on 32 acres of barren land strewn with cacti and infested with cobras. Such was our founder's faith in the human being that. offered the latter all the land he needed in Aundh state. India's first industrial township. From this steadfast belief was born the iron plough. Laxmanrao's brother. became the trusted guards of Kirloskarvadi! . Laxmanrao banded together 25 workers and their families and succeeded in transforming the barren expanse into his dream village. Two months later. the first Kirloskar product.Kulkarni. In January 1910.The Kirloskar story starts with Laxmanrao Kirloskar.

with characteristic foresight began making machine tools. The Kirloskar. KBL lends its strength and expertise to every new venture of the Kirloskar Group.the fodder cutter and the iron plough. and also the group's flagship company. from farm implements to machine tools. tradition . which competed with the British products. KBL then shifted its focus to fluid handling and control. created a new company . This company. As India's largest manufacturer of pumps and valves. The new generation -Innovation. sugarcane crushers and pumps. In the first month of production. In a display of great versatility. To power these machines. Playing a part in the War The intensified boycott of the British goods and the approaching World War threatened to stop imports of machine tools into India. benefited greatly from the patronage of yet another Raja . Mysore Kirloskar sold all of manufactured seven lathes. creation.the first Kirloskar venture at Kirloskarvadi was to become the base for all of the Kirloskar Group's subsequent enterprises. KBL also manufactured groundnut shellers. It began as the only Indian company with its own standard products . coal gas generators and electric motors were developed at Kirloskarvadi. situated in Harihar.The first Kirloskar Group Company Kirloskar Brothers Limited (KBL) . which were to usher in a new economic order in the Indian industry. This paradigm shift of sorts.the Maharaja of Mysore. diesel engines.The Mysore Kirloskar Limited.

for the country. incidentally. after arguing that factories have a longer life than human beings Shantanurao Kirloskar won a place for Kirloskar Oil Engines Ltd. and signified a bridging of the technological gap between east and west. (KOEL). Shantanurao had to face the tangle of red tape and public resistance to acquisition of land for industrial purposes. and soon after that gave India her first vertical high-speed engine. the Kirloskar Group. and for one of its premier industrial houses. Brijlal Sarda.diesel engines. This marked a turning point for the group. the eldest son of the founder travelled to Pune to initiate a new aspect of the group's activities . The KOEL factory was incorporated in 1946.The policy shifts and changes in authority were the order of the day. This collaboration. twelve months after signing an agreement of collaboration with Associated British Oil Engines Export Ltd. Shantanurao Kirloskar. was the first of its kind between an Indian and a foreign company. The altered political climate of the 1940s heralded the end of the princely patronage for enterprise. His experience of trying to secure the land for his factory in Pune was quite different from his father's in Kirloskarvadi. who reported its satisfactory running for over 4 decades. Finally. of UK.From colonialism to independence An important change. bought this first engine! . There was no benevolent ruler here to bestow acres gratis.

Kirloskar Consultants Limited (KCL) in 1963. his youngest son. under the eventual management of Shreekant Kirloskar. Kirloskar Electric Company Limited (KECL) has four plants occupying several times that acreage. the first being the making of an engine. in 1946. This task was brought to completion by Ravi Kirloskar. Collaboration with Twin Disc Inc. a lawyer who made industry his sole area of operation.services The phenomenal success of the Kirloskar name prompted entrepreneurs and businessmen of the time to approach the group for guidance and expertise. KECL's logo in the 40's The setting up of KECL and other Kirloskar companies saw a major role being played by Nanasaheb Gurjar. marine gearboxes and rail traction transmissions. Today. Way back then. Though the development of air compressors was an established activity at Kirloskarvadi. A new direction .To electric motors and pneumatics The making of the electrical motor. Today. Shantanurao's youngest son. Kirloskar Pneumatic Company Limited began the manufacture of air compressors and pneumatic tools. In collaboration with Broom and Wade of England. of the USA has taken the company into torque invertors. the authorities whom Ravi Kirloskar had approached for land were astonished by the request for 25 acres. a full-fledged plant to manufacture the same was set up at Pune in 1958. This gave birth to the concept of formalised engineering consultancy and a new company . Marking an extension of . This was the second of Laxmanrao Kirloskar's long cherished dreams. its turnkey expertise is sought in almost every major industrial project in India.

the Kirloskar Group's first foray into hospitality. in its 25 years of operation. advertising and unreal services. KCL. and air conditioning. the Group has channeled its potential in these core sectors. irrigation. It has identified and is implementing processes that would bring greater customer focus and competitiveness.Pune Industrial Hotels Limited in 1964. power. The Group aims at unlocking the strength and value in the Kirloskar brand and distribution to enhance returns for its stakeholders. the Kirloskar Group is a conglomerate with interests across a diverse range of industries. water supply. This company set up Hotel Blue Diamond in Pune and began to manage Hotel Pearl in Kolhapur. The Baker's Basket confectionery chain and the Hotel and Catering Consultancy Services (HOCON) were also set up. the Kirloskar Group has refocused and restructured its direction by concentrating on its core segment of agriculture.the group's repertoire from manufacturing to services. By consciously opting out of hospitality. Today. It is still spurred by the simple yet profound ethic born with Laxmanrao Kirloskar that where there is will there are many ways . has contributed to critical areas such as defence. roads and environment. The dawn of a new millennium To meet the changing demands of a global business environment and emerging economic trends. This paradigm shift saw the setting up of yet another service company .

These 8 companies form the core of Kirloskar group. power. (KPL) We are also proud partners in joint ventures with companies as Copeland Limited. India's leading engineering company and Copeland Corporation of the USA. (KCL) Kirloskar Ebara Pumps Limited. Kirloskar Brothers Limited. Kirloskar Copeland Limited. Also Kirloskar Ebara and Toyota Kirloskar Motors are other prestigious joint ventures. the world leader in air-conditioning and refrigeration compressors. . It is also about world class service. It is our education center for imparting knowledge to the managers of tomorrow.The Kirloskar Group Of Companies We are made up of 8 major group companies. This is a joint venture between Kirloskar Brothers Limited. construction and mining. (KBL) Kirloskar Ferrous Industries Limited. For us manufacturing is just not limited to our factory premises and our products. agriculture. (KMEF) Kirloskar Oil Engines Limited. who are players in major sectors like manufacturing. we also have interests in civic utility systems and in Information Technology and communication. (KEPL) We take equal pride in shaping capable managers and dedicated human beings at Kirloskar Institute of Advanced Management Studies. oil and gas. (KFIL) Kirloskar Middle East FZE. Each company is a renowned name in its own area of operation and is respected world wide for its services and products. In addition to engineering. industry and transport each led by the best engineering and managerial talent in India. (KOEL) Kirloskar Pneumatic Company Limited. (KPCL) Kirloskar Proprietary Limited.

while constant facility modernisation and upgradation occur in the background.000 m. And world-class processes and management practices.000 m. state-of-the-art and ISO certified. The Kirloskar Group's worldwide network consists of over 1. sq. . These include products with a high degree of specialisation for applications like pumps. And geared to roll out high precision products that are tailor made to meet customer requirements to the very last detail. Customising engineering to the needs of India's core industries means a comprehensive production infrastructure that includes process support facilities and specialised machine building competencies. alternators and compressors.200 distribution points and over 800 service points in India. Those 32 acres has expanded into 350. The Kirloskar Group's manufacturing facilities are spread over 350. Today.Kirloskar Institute of Advanced Management Studies (KIAMS) Infrastructure Production As history has it. fast and efficient after-sale service and minimum equipment downtime for the customers. engines. Over 150 company offices operate in perfect synergy across urban and rural areas in the country and abroad. sq of developed land with state of art facilities. the Kirloskar Group's operations grow to span the spectrum of world-class engineering. which demand a high level of accuracy. Laxmanrao Kirloskar banded together 25 workers and their families and went to transforming the barren expanse into his dream village. Since then a century had passed and there has been no looking back. Each plant is highly modern. the Kirloskar dream started taking shape on 32 acres of barren land strewn with cacti and infested with cobras. Then comes the sophisticated pattern shops and metal working facilities. At the base of our production infrastructure we have grey iron foundries that provide the basic raw material. Driven by the faith in human ability. This ensures easy product availability.

railways.We also train our dealers and service professionals to ensure our customers receive quality service in addition to the benefits of easy accessibility. textiles and also consumer goods industries. The Kirloskar product line consists of more than 200 series. 2. including shipbuilding.000 Cr. We at Kirloskar provide you with the widest range of products to meet all your requirements. roads and cargo. The Kirloskar ranks amongst the top engineering business houses of India. The company is also specialized in Systems Engineering and Turkey project expertise. process industries. machinery and high-precision engineering products for the transport sector. Browse through our Industry Solutions section and you'll see why we at Kirloskar claim to be the best. . We also have a major presence in auto components. Core Competences: Kirloskar Pneumatic Company Limited has a distinction of acquiring technologies from world over and adapting them to maintain highest standards of quality and reliability. We ensure that our products make your job easier and help in yielding better results. We have a group turnover of Rs. there is no sector in Indian industry that has been left unattended by a Kirloskar company. In the areas we function we provide the best choice for all your equipment and engine needs. Over 100-year-old tradition of excellence in engineering endows us with knowledge and experience to meet all the challenges that come our way 2. rubber and plastics. Thanks to our efforts in this direction. Approx. The Kirloskar Group makes equipment.

KPCL s operations are sub. At Saswad: ACR Air conditioning & refrigeration division. etc. The compression systems division compresses of Air and Gas compressors. Reverse reduction gears for marine gear engineers etc. . Transmission division. Air conditioning and Refrigeration compressors. Compression Systems and Transmission products. Business Division : The company has two major business segments viz. Where as Transmission equipment division comprises of Power transmission equipments.grouped into following three major Strategies Business Units (SUBs). At Hadapsar: ACD : TRM Air Compressor Division.3.

Rotary. Electric Screw Compressor Packages 4. Twin-Screw. Piston Compressors 3. Reciprocating.PRODUCT LINE PRODUCT LINE TRANSMISSION PRODUCTS COMPRESSION SYSTEMS AIR COMPRESSION DIVISION AIR CONDITION & REFRIGERATION Air Compressor Division (ACD): includes: 1. Vertical. Horizontal. Water-Cooled Compressors . Balanced Opposed. Centrifugal Air Compressors : 2. Reciprocating. Diesel Engine Driven Compressors 5.

Packaged Balanced Opposed Piston Compressors: 8.WRV & 4. Air Conditioning Compressors 3. Transport Air Conditioning units: Transmission Division Includes: 1. Model L4r4zU2 . Model L4 r 2 U 2 b. Kirloskar Forward / Reverse Turbo Transmission for Locomotives: Application: a.6. Refrigeration and Air XRV series: Conditioning Screw Compressors . Packaged Vertical Reciprocating Air Compressors: Air Condition & Refrigeration Compressors Includes: 1. Compressors and Expressors for Railway brake System: 7. Heavy Duty Refrigeration Compressors: 2. Model L4r2U c.

(Germany) for Forward Reverse Turbo Transmissions and Axie Drives. (USA). Kirloskar Autorailer: Design Collaborations: Voith Getriebe K.G. Reverse Reduction Hydraulic Marine gear Boxes: 3. Grasso Ltd. Multirex Reduction gear Units & Custom Built Gear Boxes: Roadrailer Division Includes: 1. (France) for Industrial Gear Boxes. Power Pack Equipment for Self Propelled Rail vehicles: 4. Holland for Air Conditioning and Refrigeration Compressors. Kirloskar roadrailer: 2.2.(USA). for Large Horse power Marine Gear Boxes in range of 1500 to 4000 HP Engrenages ET Reduteurs Citroen Messian Durand (CMD). Cooper Industries. (France). . Ateliers Et Chantiers De bretange (ACB). for Joy Centrifugal Air Compressors. for Road Railer. Wabash National Corpn.

McQuay. UAE known as Kirloskar Middle East Free Zone Limited. who is leaders in Heating. Subsidiary Companies: Kirloskar McQuay Ltd KPCL has promoted a joint venture in October 1997 with McQuay International. Ventilation & Air Conditioning world wide have shared state of art technology in Kirloskar McQuay Ltd. Entire range of HVAC Equipments . USA. This is a well represented Sales & Services setup with Warehouse facilities manned by proper Engineering Personnel to serve Middle East Market independently. in the international market and achieving approximately 10 % of the their earning from the exports. whereby covering middle east market. in middle East and far Eastern countries. Our products are well accepted not only by developing countries but also by pace setters like USA & UK. This company manufactures and market International Exposure The company has been exporting most of the products all over the world specially. Presence in Gulf Area: Kirloskar Group has been an office in Ajman.Joint ventures Companies.

Through the net profit ratio and other profitability ratio. . From the analysis of Fund Flow Statement. knowing how to manage the cash for day to day requirement. Evaluating company s performance relating to Financial Statement Analysis.-: OBJECTIVES :- To identify the financial strengths and weakness of the company. with the help of Current ratio. knowing the cash management of the company. To know the liquidity position of the company. From the analysis of working Capital Management. knowing manage the funds of company s. understand the profitability position of the company. From the analysis of Cash Flow Statement. To find out the utility of financial ratio in credit analysis and determining the financial capability of the firm.

Objectives of Financial Statements : The Objective of Financial Statement is to provide information about the financial position. b. Financial Statements are prepared for this purpose to meet the common needs of most users. performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions. METHODOLOGY Sources of Data Collection : Data for this project is collected through two sources a. Secondary Sources . Primary Sources.

-: Primary Sources:-

This data is generated specifically for the purpose of working out the project. This data means the first hand information, which is collected through various sources e.g. Questionnaires, Interviews, Schedules and Formal / Informal information.

Information relating to the project was collected during formal and informal discussions with the Deputy General Manager (Finance).

Queries arising in due course of the project brought into the notice of concerned authority and necessary explanation and solutions are adapted.

-: Secondary Sources:-

Secondary data is generated with the help of following:

Annual Report: Majority of information gathered from data exhibited in the annual reports of the company. These include annual reports of the year 2001-02, 2002-03, 2003-04 and 2004-05,

Induction Manual: Information relating to company history and profile gathered from the induction manual of KPCL.

Reference Books: Theory relating to the subject matter and various concepts taken up from various financial reference books.

CMA statement: Information relating to estimation of funds and format of reporting, taken from CMA(Credit Monitoring Arrangement) statement of the company.

Loan Agreement: Information relating to various rules and regulations for bank finance taken up from loan agreement between KPCL and consortium banks.

1. Providing information for economic decision :

The economic decisions that are taken by users of financial statements require an evaluation of the ability of an enterprise to generate cash and cash equivalents and of the timing and certainty of their generation. This ability ultimately determines the capacity of an enterprise to pay its employees and suppliers, meet interest payments, repay loans and make distributions to its owners.

2. Providing information about financial position :

The financial position of an enterprise is effected by the economic resources it controls, its financial structure, its liquidity and solvency and its capacity it adopt to changes in the environment in which it operates.

Information about the economic resources controlled by the enterprise and its capacity in the past to modify these resources is useful in predicting the ability of the enterprise to generate cash and cash equivalents in the future.

Information about financial structure is useful in predicting future borrowing needs and how future profits and cash flow will be distributed among those with an interest in the enterprise.

Information is useful in predicting how successful the enterprise is likely to be in raising further finance.

Information about liquidity and solvency is useful in predicting the ability of the enterprise to meet the financial commitments as fall due. Liquidity refers to the availability of cash in the near future after taking account of financial commitments over this period. Solvency refers to the availability of cash over the longer term to meet financial commitments as they fall due.

which is useful in order to access its investing. Providing information about performance of an enterprise : Another important objective of the financial statements is that it provides information about the performance and in particular its profitability.3. which is required in order to access potential changes in the economic resources that are likely to control in future. . Providing information about changes in financial position: The financial statements provide information concerning changes in the financial position of an enterprise. 4. financing and operating activities during the reporting period.

Ingersol rand.Product groups Screw compressors diesel driven at 10KG/CM2 Screw compressors electric motor driven at 7 to 10KG/CM2. Petrochemical. Major competitors Atlas Copco. Steel. Vertical reciprocating Major customers well drilling operation. Balanced opposed piston compressor driven at 3 to 9 KG/CM2. granites industries. ELGI Power. Textile industries. ELGI water culled. Steel Industries. Atlas copco. Textile. ELGI Cement. Atlas copco. Driven at industries. All small-scale IR. Railways brake compressor. CPT. . All railways. Cement. ELGI. Demag. 7 to 9 KG/CM2 Centrifugal compressor Driven by 7 KG/CM2 & above.

Balance Sheet Ratio Analysis Important Balance Sheet Ratios measure liquidity and solvency (a business's ability to pay its bills as they come due) and leverage (the extent to which the business is dependent on creditors' funding). Apply Ratio Analysis to Financial Statements to analyze the success. Ratio analysis may provide the all-important early warning indications that allow you to solve your business problems before your business is destroyed by them. Quick Ratio. watching especially for any unfavorable trends that may be starting. To do this compare your ratios with the average of businesses similar to yours and compare your own ratios for several successive years. and Working Capital. They include the Current Ratio. but they are only the starting point for successful financial management. . They include the following ratios: Liquidity Ratios These ratios indicate the ease of turning assets into cash.RATIO ANALYSIS The Balance Sheet and the Statement of Income are essential. failure. Ratio Analysis enables the business owner/manager to spot trends in a business and to compare its performance and condition with the average performance of similar businesses in the same industry. and progress of your business.

But whether or not a specific ratio is satisfactory depends on the nature of the business and the characteristics of its current assets and liabilities. Converting non-current assets into current assets. but that relationship is usually playing it too close for comfort. If you feel your business's current ratio is too low. such as inventory shrinkage or collectable accounts?" A generally acceptable current ratio is 2 to 1. Increasing your current assets from loans or other borrowings with a maturity of more than one year.Current Ratios The Current Ratio is one of the best known measures of financial strength. It is figured as shown below: Quick Ratio = Cash + Government Securities + Receivables / Total Current Liabilities . you may be able to raise it by: Paying some debts. The minimum acceptable current ratio is obviously 1:1. Increasing your current assets from new equity contributions. It is figured as shown below: Current Ratio = Total Current Assets / Total Current Liabilities The main question this ratio addresses is: "Does your business have enough current assets to meet the payment schedule of its current debts with a margin of safety for possible losses in current assets. Putting profits back into the business. Quick Ratios The Quick Ratio is sometimes called the "acid-test" ratio and is one of the best measures of liquidity.

Working Capital Working Capital is more a measure of cash flow than a ratio. By excluding inventories.The Quick Ratio is a much more exacting measure than the Current Ratio. Loans are often tied to minimum working capital requirements. it concentrates on the really liquid assets. with value that is fairly certain. It is calculated as shown below: Working Capital = Total Current Assets . The result of this calculation must be a positive number. A general observation about these three Liquidity Ratios is that the higher they are the better. and the pattern of accounts receivable collection lags behind the schedule for paying current liabilities.Total Current Liabilities Bankers look at Net Working Capital over time to determine a company's ability to weather financial crises. Leverage Ratio This Debt/Worth or Leverage Ratio indicates the extent to which the business is reliant on debt financing (creditor money versus owner's equity): Debt/Worth Ratio = Total Liabilities / Net Worth . could my business meet its current obligations with the readily convertible `quick' funds on hand?" An acid-test of 1:1 is considered satisfactory unless the majority of your "quick assets" are in accounts receivable. It helps answer the question: "If all sales revenues should disappear. especially if you are relying to any significant extent on creditor money to finance assets.

It provides a good opportunity to compare your company's "return on sales" with the performance of other companies in your industry. the more risky a creditor will perceive its exposure in your business. Income Statement Ratio Analysis The following important State of Income Ratios measure profitability: Gross Margin Ratio This ratio is the percentage of sales dollars left after subtracting the cost of goods sold from net sales. It measures the percentage of sales dollars remaining (after obtaining or manufacturing the goods sold) available to pay the overhead expenses of the company.Generally. The Gross Margin Ratio is calculated as follows: Gross Margin Ratio = Gross Profit / Net Sales Reminder: Gross Profit = Net Sales .Cost of Goods Sold Net Profit Margin Ratio This ratio is the percentage of sales dollars left after subtracting the Cost of Goods sold and all expenses. the higher this ratio. It is calculated before income tax because tax rates and tax liabilities vary from company to company for a wide variety of reasons. making comparisons after taxes much more difficult. The Net Profit Margin Ratio is calculated as follows: . Comparison of your business ratios to those of similar businesses will reveal the relative strengths or weaknesses in your business. except income taxes. making it correspondingly harder to obtain credit.

It is important because the more times inventory can be turned in a given operating cycle. The Inventory Turnover Ratio is calculated as follows: Inventory Turnover Ratio = Net Sales / Average Inventory at Cost Accounts Receivable Turnover Ratio This ratio indicates how well accounts receivable are being collected. Getting the Accounts Receivable Turnover Ratio is a two step process and is is calculated as follows: Daily Credit Sales = Net Credit Sales Per Year / 365 (Days) Accounts Receivable Turnover (in days) = Accounts Receivable / Daily Credit Sales . If receivables are not collected reasonably in accordance with their terms. liquidity could be severely impaired. are also derived from Balance Sheet and Statement of Income information.Net Profit Margin Ratio = Net Profit Before Tax / Net Sales Management Ratios Other important ratios. If receivables are excessively slow in being converted to cash. the greater the profit. Inventory Turnover Ratio This ratio reveals how well inventory is being managed. management should rethink its collection policy. often referred to as Management Ratios.

The ROI is calculated as follows: Return on Investment = Net Profit before Tax / Net Worth These Liquidity. . The Return on Assets Ratio is calculated as follows: Return on Assets = Net Profit Before Tax / Total Assets Return on Investment (ROI) Ratio The ROI is perhaps the most important ratio of all. and avoid the daily struggles of small business management. If the ROI is less than the rate of return on an alternative. The owner may thus determine the business's relative strengths and weaknesses.Return on Assets Ratio This measures how efficiently profits are being generated from the assets employed in the business when compared with the ratios of firms in a similar business. Profitability. In short. A low ratio in comparison with industry averages indicates an inefficient use of business assets. risk-free investment such as a bank savings account. and Management Ratios allow the business owner to identify trends in a business and to compare its progress with the performance of others through data published by various sources. Leverage. put the money in such a savings instrument. the owner may be wiser to sell the company. It is the percentage of return on funds invested in the business by its owners. this ratio tells the owner whether or not all the effort put into the business has been worthwhile.

Acid Test Ratio QUICK ASSETS Acid Test Ratio = ------------------------------QUICK LIABILITIES Particulars Q.32 1.17 1. 2001-02 12.R. Q.29 2004-05 10423. so quick ratio increased from 1.43 1.6 1. compared to previous year.47 1.L.57 7917.52 2003-04 10880.136.5 9336.80 8385.4 1.8 0. A.21 2005-06 10996.45 to 1.08 8605.52.19 1.4 0.77 8431.2 0 2001-02 2002-03 2003-04 2004-05 2005-06 AR Interpretation: A quick ratio of 1:1 or more is considered as satisfactory or of sound liquidity position. In the year 2002-03.6 0.45 2002-03 12051.T.2 1 0. quick assets and current assets decreased but the decreased rate of current liabilities is greater than the decreased rate of quick ratios. In 2003-04 and 04-05 there was a decrease in quick assets and increase in .A.39 1.

00 1.R Rs.5 2 1. so quick ratio decreased from 1.17 in 2005-06.43 2.28 3.31 12.94 12.26 2.21 in 2003-04 and 04-05 respectively.52 to 1.92 2.5 3 2.00 2004-05 5. Inventory Holding Period: 12 MONTHS Inventory Holding Period = ---------------------------------------------INVENTORY TURNOVER RATIO Particulars I.H.00 2005-06 3.H.T.26 12.29 and 1.26 12. (in Lacs) Period in Month Rs.00 2002-03 5.P .P 2001-02 6.63 4 3.30 12.29 to 1.00 2003-04 4. (In Lacs) I.current liabilities.5 1 0. And It has further decreased to 1.5 0 2001-02 2002-03 2003-04 2004-05 2005-06 I.

63. . In the year 2005-06 it is 3.Interpretation: In the year 2002-03 there was a decrease in inventory turnover ratio. This shows an increase in inventory holding period.28 that suggests that there was an increase in sales and decrease in inventory turnover ratio. In 2003-04 there was an increase in holding period and in 2004-05 it was 2.

58 2003-04 12 2.04 2005-06 12 3 4 7 6 5 4 3 2 1 0 6. so avg.8 6.59 2002-03 12 2. That shows that recovery from debtors is improving.59 5. .C.04 4 D.15 5.Debtors Collection Period: 12 MONTHS Debtors collection period = ------------------------------------------DEBTORS TURNOVER RATIO Particulars Period in month DT ratio D.C. collection period is decreasing year by year.58 5 4.4 5 2004-05 12 3 4.P in month 2001-02 12 1.P in month 2001-02 2002-03 2003-04 2004-05 2005-06 Interpretation: There is an increase in both debtors and sales.

so payment period is decreasing year by year.95 4.T.R C.50 12 10 8 6 4 2 0 10.90 2002-03 12 1.05 5.35 4.10 10.24 5.43 3.05 2003-04 12 2. .9 8.49 8. There is continuous increase in purchases and continuous decrease in creditors.07 3.P.5 cpp 2001-02 2002-03 2003-04 2004-05 2005-06 Interpretation: In case of KPCL.P 2001-02 12 1.Creditors Turnover Ratio: 12 MONTHS Creditors payment period = ------------------------------------------CREDITOR TURNOVER RATIO Particulars Period in months C.07 2005-06 12 3.35 2004-05 12 2.

41 1710. .5 0 2001-02 2002-03 2003-04 2004-05 2005-06 I.06 2003-04 587. There was a decrease in interest as well as EBIT but the decrease rate is higher than the decrease rate of EBIT.88 1.37 2002-03 852.06 to 1.35 1.16 to 1.30 2005-06 488.5 1 0.07 907.57 542. so the ratio increased from 1.98 1.42 1222.37 to 1.35 96. in the year 2003-04.50 4 3.30 to 3.Interest Coverage Ratio: EBIT Interest coverage ratio = --------------------------INTEREST Particulars INTEREST EBT EBIT I.50 in 2005-06 because EBIT has increased with a substantial amount.92 -916.30 and further it is increasing from 1.16 and in the year 2004-05 there was decrease in interest and increase in EBIT so the ratio increased from 1.16.5 3 2.00 683.07 155.R 2001-02 1458.R Interpretation: In case of KPCL. in the year 2002-03 there was a decrease in interest and increase in EBIT so ratio increased from 0.C.C.35 0.83 3.5 2 1.91 55.81 676.16 2004-05 521.

51 2005-06 4636. CAP. 2001-02 3323.Debt to Equity Ratio: TOTAL DEBTS Debt to Equity Ratio = -----------------------------------------EQUITY (SH.83 5421.T.36 2.86 2.5 1 0.12 1.08 1.58 7696.93 0.20 2003-04 3446.52 2.32 2002-03 3360.R.5 2 1.91 2004-05 3586. + R & S) Particulars Equity Total Debt D. .E.5 0 2001-02 2002-03 2003-04 2004-05 2005-06 D.39 4003.27 6599.T.63 7377.E.R.

67 26173.90 .74 17267.75 1. Reserves and Surpluses) with increasing rate so the ratio is decreasing from 2.61 1. Gross Profit Margin: GROSS PROFITS Gross Profit Margin = --------------------------. There is continuous decrease in total debt and there is continuous increase in shareholder s equity (i.74 2004-05 386. to 1.51 in 2004-05.86 in 2005-06.70 19396.x 100 SALES Particulars G/P SALES G/P Margin 2001-02 265.e.94 1.Interpretation: The D/E ratio is 1:1.53 21646.48 2005-06 1489.20 in 2002-03. In case of our organization there is an improvement in the D/E ratio year by year.32 to 2. it implies that for every rupee of outside liability.54 2002-03 339. and to 0.91 in 2003-04 and to 1.86 1.78 30365.16 4.75 2003-04 376.

so ratio of GP has decreased from 1. (percentage of increase in gross profit is lower than the percentage of increase in sales).5 2 1.75.74 and in the year 2004-05 similar to 2002-03 there was an increase in sales and a decrease in gross profit.48 and in the year 2005-06 it has shot up to 4.75 to 1.54 to 1. in the year 2003-04 there was decrease in sales and in gross profit.5 1 0.5 4.5 3 2.5 4 3. so the ratio of GP and sales has slightly decreased from 1.74 to 1.5 0 2001-02 2002-03 2003-04 2004-05 2005-06 G/P Margin Interpretation: In the year 2002-03 there was an increase in sales as well as increase in gross profit so ratio of GP increased from 1.90 .

profit (loss) margin 2001-02 (918.2002.500 4 3 2 1 0 -1 -2 -3 -4 -5 -6 2001.Net Profit Ratio: NET PROFIT (AFTER TAX & INTEREST) Net Profit Ratio = -------------------------------------------------------.20 30365. After that there is a continuous increase in PAT as well as in sales from 2002-03 to 2005-06. where there was a loss.78 26414.200505 06 N.94 0. except for 2001-02.X 100 SALES Particulars PAT Sales N. it shows a continuous increase.440 2004-05 152.31 21646.99 19396.250 2003-04 95. Therefore.61 (5.75 0.16 3. profit (loss) margin Interpretation: Net profit ratio is increasing year after year. .32) 2002-03 48.77) 17267.200302 03 04 2004.578 2005-06 1066.22 0.

T.33 15111.A (A) TOTAL C.97 2243.08 17267.56 30365.16 3.02 14895.36 14638.27 (2002-03) 4295.35 19396.38 (2003-04) 3895.Total Assets Turnover Ratio: NET SALES Total Assets Turnover ratio: ---------------------------------------AVERAGE TOTAL ASSETS Particulars TOTAL F.693 1947.12 21646.62 (2004-05) 3821.35 11287.04 29790.67 12805.59 .77 15085.27 26173.46 17032.94 1.93 (2005-06) 4486.65 30223.A (OP+CL) AVG CURRENT ASSETS (B) AVG.46 17259. TOTAL ASSETS SALES T.83 16806.49 22574.32 8441.98 1518.71 29277.A (OP+CL) AVERAGE F.61 1.86 1.54 30170.R (2001-02) 3036.14 2147.75 1.81 1910.A.

12. In the year 2002-03 there was an increase in average total assets. so the ratio decreased from 1.(2001-02) (2005-06) (2002-03) (2003-04) (2004-05) Interpretation: There is a continuous increase in sales.35 to 1.59.55 respectively. so ratio increased from 1.12 to 1. in 2003-04 and 2004-05 there is a change in average assets and decrease in average total assets.27 and from 1.27 to 1. . For the year 2005-06 ratio is 3.

97 2243.7 14 12 9.37 11.--------------------------------AVG.53 (2001-02) (2002-03) (2003-04) (2004-05) (2005-06) (2001-02) (2002-03) (2003-04) (2004-05) (2005-06) .75 11.69 1947.11 13.94 9.03 10 8 6 4 2 0 11.T.81 1910.70 30365.61 11.27 4295.49 17267.A.38 3895. FIXED ASSETS SALES F.14 2147.53 13.R (2001-02) (2002-03) (2003-04) (2004-05) (2005-06) 3036.62 3821.86 13.Fixed Assets turnover ratio: NET SALES Fixed Assets turnover ratio: .98 1518.37 19396.93 4486.03 21646. FIXED ASSETS Particulars TOTAL OF FA (OP+CL) AVG.11 26173.16 13.

11 to 13.11 and from 11. there was an increase in average fixed assets as well as in sales but the growth rate of average fixed assets was higher.37 to 9. In the year 200203. But it is slightly decreasing in 2005-06.03. so ratio decreased from 11. In the year 200304 and 2004-05 there was a decrease in average fixed assets and an increase in sales.70 respectively.Interpretation: Here we have seen there has been a continuous increase in sales. so ratio increased from 9. .03 to 11.

5 0 1.75 30170.5 1 0.T. CURRENT ASSETS C.94 30223.43 1.76 .61 22574.33 15111.36 14638.Current Assets turnover ratio: SALES Current assets turnover ratio: ------------------------------------AVG.T.16 29277. CURRENT ASSETS Particulars SALES CURRENT ASSETS AVG.04 (2004-05) 26173.02 14895.54 (2003-04) 21646.67 1.35 11287.76 2.07 1.53 1.43 C.77 15085.53 1.R (2001-02) 17267.71 (2005-06) 30365.A.R 2.5 2 1.86 29790.A.07 2.28 1.65 (2002-03) 19396.28 1.

43 in 2003-04 and to 2. but as the growth rate of sales is higher when compared to decreased rate of current assets so the ratio has decreased from 1.07 in 2005-06. the turnover ratio is moving positively during the past 4 years. Further it has increased to 1.Interpretation:A better current assets turnover ratio is always good for a firm and in case of our organization.28 in 2001-02 to 2002-03. Current assets had decreased in 2002-03 and 2004-05 and increased in 2003-04. .53 to 1.

2001-02 17.32 2005-06 30365.646.61 6846.21 4.52 2.7 6 5 4 3 2 1 0 2001-02 2002-03 2003-04 2004-05 2.T.21 4.72 2003-04 21.81 2004-05 26.16 5328.36 5.7 W.20 2.94 7074.86 6007.173.R. 2005-06 Interpretation:A high working capital turnover ratio indicates efficiency in utilization of resources and the ratio has improved from 2.C. Hence we can see that the component of working capital is consistently reducing which is considered as a positive sign from the point view of the firm .Working Capital turnover ratio NET SALES Working Capital turnover ratio = ----------------------------------NET WORKING CAPITAL Particulars Sales WORKING CAPITAL W.7 in 2005-06.R.C.75 6746.74 3.03 2002-03 19.52 in 2001-02 to 5.T.36 5.267.74 3.396.52 2.

marketable securities. In other words it is the net cash inflow . DEFINITIONS OF WORKING CAPITAL: The following are the most important definitions of Working capital: 1) Working capital is the difference between the inflow and outflow of funds. Symbolically. In other words it is the Gross working capital . 2) Working capital represents the total of all current assets. Net Current Assets = Current Assets Current Liabilities. In other words it is the Net Current Assets or Net Working Capital . it means. 3) Working capital is defined as The excess of current assets over current liabilities and provisions .WHAT IS WORKING CAPITAL? Working capital refers to the investment by the company in short terms assets such as cash. it is also known as Circulating capital or Current capital for current assets are rotating in their nature. Net current assets or net working capital refers to the current assets less current liabilities. .

GROSS WORKING GROSS WORKING CAPITAL refers to the amount of funds invested in current assets.TYPES OF WORKING CAPITAL The working capital may be classified into four main types as follows: 1) 2) 3) 4) Net Working Capital. There are two concepts as regards to working capital CAPITAL and NET WORKING CAPITAL. NET WORKING CAPITAL refers to the difference between the current assets and current liabilities. which are employed in a business. The importance of this concept lies in the fact that the company has to determine the amount and nature of the current assets to be used in meeting current liabilities. when they become due for payment. Further the amount to be used in the business for operational needs is the amount of current assets left after payment of liabilities . Gross Working Capital. Variable Working Capital. If a firm gets the highest return on its investment it should see that the management at the proper time provides the correct amount of working capital. Permanent Working Capital.

Also the importance of the factors changes for a firm over the period of time. Therefore. each having a different importance. an analysis of relevant factors should be made in order to determine the total investment in working capital. A large number of factors. The following is the description of factors that generally influence the working capital requirements of firms. Nature of Business Sales and Demand Conditions Technology and Manufacturing Policy Credit Policy Availability of Credit Operating Efficiency Price Level Changes.DETERMINANTS OF WORKING CAPITAL There are no set rules or formula to determine the working capital requirements of firms. . influence working capital needs of firms.

WORKING CAPITAL .

g. these are cash outflows and.. and MONEY.. if you can negotiate improved terms with suppliers e. Each component of working capital (namely inventory.. consider other ways of financing capital investment . Investment in such current assets is realized during the operating cycle of the firm. for fixed assets e. If you can get money to move faster around the cycle (e.. equity.g. plant. get longer credit or an increased credit limit. computers.g.g.. Similarly. you could reduce the cost of bank interest or you'll have additional free money available to support additional sales growth or investment.. As a consequence.. the business will generate more cash or it will need to borrow less money to fund working capital.. Similarly. TIME . if cash is tight. if available.loans. On contrary the investment in current asset is turned over many times a year. . leasing etc.A firm requires many years to recover initial investment in fixed assets. reduce inventory levels relative to sales). like water flowing down a plughole. they remove liquidity from the business. It can be tempting to pay cash. When it comes to managing working capital TIME IS MONEY.. receivables and payables) has two dimensions . you effectively create free finance to help fund future sales. if you pay dividends or increase drawings. remember that this is now longer available for working capital.. Therefore. If you do pay cash. collect dues from debtors more quickly) or reduce the amount of money tied up (e. vehicles etc.

fixed capital.e.REQUIREMENTS OF FUNDS Funds Requirements of company Fixed Capital Working Capital Preliminary Expenses Raw Material Purchase of Fixed Assets Inventories Establishment work exp. and working capital. . which requires short-term funds. Goods in Process Fixed working capital Others Every company requires funds for investing in two types of capital i. which requires long-term funds.

SOURCES OF WORKING CAPITAL Long-term source (Fixed working capital) a) Loan from financial institution b) Floating of Debentures c) Accepting public deposits d) Issue of shares Short-term source (Temporary working capital) a) Factoring b) Bill discounting c) Bank overdraft d) Trade credit e) Cash credit f) Commercial paper Sources of additional working capital include the following: Existing cash reserves Profits (when you secure it as cash!) Payables (credit from suppliers) New equity or loans from shareholders Bank overdrafts or lines of credit Term loans .

Late payments erode profits and can lead to bad debts. Slow payment has a crippling effect on business. Every business needs to know. who owes them money. you could experience an increased incidence of bad debt. If you don't manage debtors... how much is owed.. Have the right mental attitude to the control of credit and make sure that it gets the priority it deserves. for what it is owed. suppliers and customers. how long it is owing. Be professional when accepting new accounts. 2. Establish clear credit practices as a matter of company policy.. The following measures will help manage your debtors: 1....... and especially larger ones. in particular on small businesses that can least afford it. . of course. 3. 4.. Make sure that these practices are clearly understood by staff. they will begin to manage your business as you will gradually lose control due to reduced cash flow and.. HANDLING RECEIVABLES (DEBTORS) Cash flow can be significantly enhanced if the amounts owing to a business are collected faster.

Monitor your debtor balances and ageing schedules. Continuously review these limits when you suspect tough times are coming or if operating in a volatile sector. Consider accepting credit /debit cards as a payment option.5. 8.. Longer credit terms taken with approval. you may need to look for the following possible defects: Weak credit judgment Poor collection procedures Lax enforcement of credit terms Slow issue of invoices or statements Errors in invoices or statements Customer dissatisfaction. particularly for smaller orders Use of post-dated checks by debtors who normally settle within agreed terms ... 7. For example. Invoice promptly and clearly. 9. 12. Establish credit limits for each customer. Check out each customer thoroughly before you offer credit. 11. bank references. 6. Debtors due over 90 days (unless within agreed credit terms) should generally demand immediate attention.... Use credit agencies. Look for the warning signs of a future bad debt. and don't let any debts get too large or too old. or is already very long. If the average age of your debtors is getting longer. industry sources etc. Recognize that the longer someone owes you.. Consider charging penalties on overdue accounts.. Keep very close to your larger customers. and stick to them. 10. the greater the chance you will never get paid...

When asking for your money. There is nothing more important than getting paid for your product or service.. A customer who does not pay is not a customer.not to score points or get even. Make that call now. In difficult circumstances. Here are a few ideas that may help you in collecting money from debtors: Develop appropriate procedures for handling late payments. Their range of financial planners. Exl-Plan and Cash flow Plan. its yours and you are entitled to it.. Don't feel guilty asking for money. The act of collecting money is one. Make it your objective is to get the money . It lessens the problem.Evidence of customers switching to additional suppliers for the same goods New customers who are reluctant to give credit references Receiving part payments from debtors. .. Track and pursue late payers. Get external help if your own efforts fail. take what you can now and agree terms for the remainder. contain extensive facilities for exploring alternative payment scenarios for receivables. Don't give the debtor any excuses for not paying. which most people dislike for many reasons and therefore put on the long finger because they convince themselves there is something more urgent or important that demands their attention now. be hard on the issue . And keep asking until you get some satisfaction.but soft on the person.

and reduce dependence on a single supplier. credit terms. 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 just-in-time basis? There is an old adage in business that if you can buy well then you can sell well.is it tightly managed or spread among a number of (junior) people? Are purchase quantities geared to demand forecasts? Do you use order quantities. get quotes from major suppliers and shop around for the best discounts. 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.MANAGING PAYABLES (CREDITORS) Creditors are a vital part of effective cash management and should be managed carefully to enhance the cash position. Purchasing initiates cash outflows and an over-zealous purchasing function can create liquidity problems. Management of your creditors and suppliers is just as important as the . Consider the following: Who authorizes purchasing in your company .

Remember.slow payment by you may create ill feeling and can signal that your company is inefficient (or in trouble!). contain extensive facilities for exploring alternative payment scenarios for payables . Exl-Plan and Cash flow Plan. It is important to look after your creditors . Their range of financial planners. a good supplier is someone who will work with you to enhance the future viability and profitability of your company.management of your debtors.

many large manufacturers operate on a Just-In-Time (JIT) basis whereby all the components to be assembled on a particular today. put another way. minimize stock holding and virtually eliminate the risks of obsolete or damaged stock. Nowadays. how long each item of stock sit on shelves before being sold. 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. average stock-holding periods will be influenced by the nature of the business. delays for customers etc. no earlier . minimize the cash tied up in stocks. Obviously.INVENTORY MANAGEMENT Managing inventory is a juggling act. JIT is a good model to strive for as it embraces all the principles of prudent stock management.no later. Insufficient stocks can result in lost sales. This helps to minimize manufacturing costs as JIT stocks take up little space. thereby. Excessive stocks can place a heavy burden on the cash resources of a business. arrive at the factory early that morning. The key is to know how quickly your overall stock is moving or. 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 rarelyused spare parts in case somebody needs them. they are able to conserve substantial cash. Because JIT manufacturers hold stock for a very short time. Factors to be considered when determining optimum stock levels include: What are the projected sales of each product? . For example.

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. lines of credit. 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. Debtor concentration . which is not working for you.degree of dependency on a limited number of customers. Exl-Plan and Cash flow Plan.How widely available are raw materials. Know the stock turn for all major items of inventory. Their range of financial planners. invoice discounting etc. . accommodation costs and interest charges. Sell off outdated or slow moving merchandise . try the following: Review the effectiveness of existing purchasing and inventory systems.it gets more difficult to sell the longer you keep it. contain extensive facilities for exploring alternative stock-holding strategies Other working capital measures include the following: Bad debts expressed as a percentage of sales. For better stock control. Apply tight controls to the significant few items and simplify controls for the trivial many. Consider having part of your product outsourced to another manufacturer rather than make it yourself. Cost of bank loans.

. it is important to track them over time and to compare them with ratios for other comparable businesses or industry sectors. When planning the development of a business.Exl-Plan and Cash flow Plan . payables and inventory.can facilitate this task as they provide for the setting of targets for receivables. it is critical that the impact of working capital be fully assessed when making cash flow forecasts.Once ratios have been established for your business. Their financial planning software packages .

.

which means inventory is used in better way so it is good for the company. so more funds were blocked in debtors. Acid test ratio is more than one but it does not mean that company has excessive liquidity.33:1. . Debtors of the company were high. KPCL s ratios satisfactory. But other many small order take & completed without major order company near to goal in this year Standard current ratio is 2:1 and for industry it is 1. Working capital turnover ratio is continuously increasing that shows increasing needs of working capital. they were increasing year by year. But now recovery is becoming faster. Inventory turnover ratio is improving from 2001-02 to 2005-06. so the sales has decreased. 9 cr was not there for the first quarter of 200506.Conclusion In project period all company member give many information in this project I calculate Some ratio this ratio is useful interpreat company financial position Company in improvement stage company know in some profit from last 2 year Company make payment of more loan those taken in loss year Defence sales order of Rs.increase in ratio is beneficial for the company because as ratio increases the number of days of collection for debtors decreases. Debtors turnover ratio is improving from 2001-02 to 2005-06.

2) Company should stretch the credit period given by the suppliers. 5) Production capacity is not utilized to the full extent.SUGGESTIONS 1) Net operating cycle is increasing that means there is a need to make improvements in receivables/debtors management. 3) Company should not rely on Long-term debts and should try to repay the debts. 4) Company should try to increase Volume based sales so as to stand in the competition. .

KIRLOSKAR.BIBLOGRAPHY : 1`) 2) 3) FINANCIAL MANAGEMENT FINANCIAL MANAGEMENT WWW.Khan & Jain .COM .Satish Inamdar .

daneprairie.com. The unregistered version of Win2PDF is for evaluation or non-commercial use only.This document was created with Win2PDF available at http://www. .