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A STUDY ON ASSET MANAGEMENT OF SHANTHIGRAM DAIRY PROMOTION AT NATHAM

OBJECTIVES OF THE STUDY


To study the assets management of the firm. To analyze the changes that has been taken place in relation to assets.

To study the cash position of the firm.


To assess the inventory level of the firm. To study the performance efficiency of the debtors through receivables management of the firm.

SCOPE OF THE STUDY


The scope is to drive meaningful application of theory for actual implementation. As the study is focus on identifying the present potential of the companys asset management methods and aims. The asset management of company can be measured through ratio analysis, correlation analysis, trend analysis and common size statement analysis. This study also gives the idea about industrial focus and efficient management of assets.

NEED FOR THE STUDY


Assets are essential that should be properly safeguarded and correctly accounted. Proper control of assets can make a substantial contribution to the efficiency of a business. The study is helpful to management in reduction of cost to manage their assets. The researcher made efforts to identify the performance of the asset management in Shantigram Dairy Promotion. The study facilitates the management to identify unprofitable operations and improve overall profitability.

RESEARCH METHODOLOGY
Research Design Analytical Research Method of Data Collection Secondary Data Period of study 01st January 2011 to 30th April 2011

Tools for Analysis


Ratio analysis, Common size statement analysis, Trend Percentage Analysis, Correlation analysis.

Data Analysis and Interpretations

RATIO ANALYSIS
1. Asset Turnover Ratio 2. Fixed Asset Turnover Ratio 3. Receivable Turnover Ratio 4. Accounts Payable Turnover Ratio 5. Inventory Turnover Ratio 6. Cash Conversion Cycle (Operating Cycle) 7. Days Inventory Outstanding (DIO) 8. Days Payable Outstanding (DPO) 9. Days Sales Outstanding (DIO)

Asset Turnover Ratio


Sales Asset turnover ratio =------------------------------Total Assets

Sales
Year 2006-07 2007-08 2008-09 2009-10 2010-11 () 61096902 76883826 102667346 136337560 153531070

Total Assets
() 8039257.07 11022527.5 13865007 14915281 16891827.85

Total Asset Turn Over Ratio (%) 7.59 6.98 7.41 9.14 9.09

INTERPRETATION:
From the above table its shows that the Assets turnover ratio during the study period. During this study period Asset

turnover ratio is in fluctuating trend ranges from 6.98


percentages in 2007-08 and 9.14 percentages in 2009-10 due to the efficiency of machinery is decreased and the sales level is increased year to year.

Receivable Turnover Ratio


Credit sales Receivable turnover ratio = --------------------------------------------Average Accounts Receivables

Year

Sales
()

Closing
Debtors( ) 2494448.88 4412345.9 6571894.92 6361720

Debtor Turnover Ratio


(%) 24.49 17.42 15.62 21.43

2006-07 61096901.97 2007-08 76883825.94 2008-09 102667345.5 2009-10 136337560

2010-11 153531069.8

7538576.6

20.36

INTERPRETATION The above table shows that the receivable turnover ratio is fluctuating trend during the study period. During the study period the debtor turnover ratio is fluctuating trend ranges from 15.62 percentages in 2008-09 and 24.49 percentages in 2006-07 due to the

company collection policy is changed for the firm maintenance.

Accounts Payable Turnover Ratio


Net Credit Purchases Accounts payable Turnover Ratio = ------------------------------------Average Creditors Net credit Average accounts Creditor Turnover

Year

purchase
()

payable
() 8162448.71 9653868.19 12478579.28 14219240 15477915.66

Ratio
(%) 8.39 8.32 7.77 9.52 9.12

2006-07 2007-08 2008-09 2009-10 2010-11

68563912.02 80338742.45 96965088.02 135368410 141142482.9

INTERPRETATION The above table shows that the creditor turnover ratios in the fluctuating trend due to fluctuating in the credit purchase and average accounts payable at cost. The lowest payables turnover ratio recorded in the year of 2008-09(7.77%) and the highest payables

turnover ratio has recorded in the year 2009-2010(9.52%) due to the


company income is increased in the year 2009-10 and 2010-11.

Inventory Turnover Ratio


Sales Inventory Turnover Ratio =--------------------------------------Inventory Sales
Year ()

Inventory
()

Inventory Turnover
Ratio (%)

2006-07 2007-08 2008-09 2009-10 2010-11

61096901.97 76883825.94 102667345.5 136337560 153531069.8

1253412.28 1399513.6 1195270.69 1599599 1517271

48.74 54.94 85.89 85.23 101.19

INTERPRETATION The above table shows that the overall inventory turnover ratio during the study period. During this study period over all

inventory turnover ratios is an increasing trend ranges from 48.74


percentages in 2006-07 and 101.19 percentages in 2010-11due to the company is concentrated to satisfy the customer level through

maintaining good inventory level .

Fixed Asset Turnover Ratio


Sales Fixed asset turnover ratio = ---------------------------------------------Fixed Assets Sales Net fixed asset Fixed Asset Turnover Ratio Year () () (%)

2006-07
2007-08 2008-09 2009-10 2010-11

61096901.97
76883825.94 102667345.5 136337560 153531069.8

1132863.23
1092765.23 1805071.98 2962784 3329646.46

53.93
70.35 56.87 46.02 46.11

INTERPRETATION
The above table shows that the fluctuating trend in the Fixed asset turnover ratio . The lowest fixed asset turnover ratio

has shown in the year 2009-10(46.02) and highest in the year


2007-08(70.35) due to the replacement of fixed asset is placed in the year of 2009-10 and the depreciation low in the year of 201011.

Days Inventory Outstanding


Average Inventory Average Age Of Inventory = --------------------------------------------------Average Daily Purchase of Inventory Average Average Daily Days Inventory Year inventory () Inventory ( ) Outstanding

2006-07
2007-08 2008-09 2009-10 2010-11

1179128
1326462.94 1297392.145 1397434.845 1558435

3434.006247
3834.283836 3274.714219 4382.463014 4156.906849

343
346 396 319 375

INTERPRETATION
The above table it shows that the fluctuating trend of average age of inventory. It indicates that the lowest age of inventory shown in the year 2006-2007(343) and highest in the year of 2008-09(396).

Days Sales Outstanding


Average Account Receivables Average Age Of Receivables = ---------------------------------------Average Daily collection of Receivables

Year
2006-07 2007-08 2008-09 2009-10 2010-11

Average Debtor () 2101183.22 3453397.39 5492097.91 6466807.5 6950147.3

Average Daily Sales ( ) 167388.77 210640.61 281280.3 373527.56 420633.068

Average Collection Period(Days) 13 17 20 18 16

INTERPRETATION
The above table it shows that the fluctuating trend of average collection period of receivables. It indicates that the

lowest in the year of 2006-07(13 days) and the highest


collection period of receivables shown in the year 2008-2009(20 days) due to the company has concentrated on current assets and the debtor level is increased year to year.

Days Payable Outstanding (DPO)


Average Account Payables Average Age Of Payables = ----------------------------------------------Average Daily Payment Average accounts payable( ) 8162448.71 9653868.19 12478579.28 14219240 15477915.66 Average daily Credit Purchase( ) 187846.3343 220106.1437 265657.7754 370872.3562 386691.7341 Average Payment Period(Days) 43 44 47 38 40

Year 2006-07 2007-08 2008-09 2009-10 2010-11

Interpretation
The above table shows that the fluctuating trend of average payment period of payables . It indicates that the lowest

in the year of 2009-10(38 days) and highest payment period of


payables shown in the year 2008-2009(47 days) due to income of company is increased in the year of 2009-2010 as compared to the

previous year.

Cash Conversion Cycle(Operating Cycle)


Operating Cycle = Number of Days in Receivables + Number of Days in Inventory Number Of Days in Number of Days Year Receivables in Inventory Cash Conversion

Cycle(Days) 2006-07
2007-08 2008-09 2009-10 2010-11

13
17 20 18 17

343
346 396 319 375

356
363 416 337 392

INTERPRETATION The above table shows that the cash conversion cycle of the firm during the study period. It indicates the fluctuating trend

appears in the operating cycle of the firm year to year. The lowest
level of operating cycle is present in the year of 2009-10(337 Days) and the highest level of the operating cycle present in the

year of 2008-09(416 Days) due to the debtors level is increased


year to year.

Findings
The Assets turnover ratio is in fluctuating trend ranges from 6.98 percentages in 2007-08 and 9.14 percentages in 2009-10. The receivable turnover ratio is fluctuating trend ranges from 15.62 percentages in 2008-09 and 24.49 percentages in 200607.

The creditor turnover ratio is in the fluctuating trend ranges


from 7.77% year of 2008-09 and 9.52% year 2009-2010. The overall inventory turnover ratio is an increasing trend ranges from 48.74 percentages in 2006-07 and 101.19 percentages in 2010-11.

The Fixed asset turnover ratio is in fluctuating trend. The lowest fixed asset turnover ratio has shown in the year 200910(46.02) and highest in the year 2007-08(70.35).

The average age of inventory is in fluctuating trend. the lowest


age of inventory shown in the year 2006-2007(343) and highest in the year of 2008-09(396).

The average collection period of receivables is in fluctuating


trend. The lowest in the year of 2006-07(13 days) and the highest collection period of receivables shown in the year 2008-2009(20 days).

The average payment period of payables is in fluctuating trend. the lowest in the year of 2009-10(38 days) and highest payment period of payables shown in the year 2008-09(47 days).

The cash conversion cycle of the firm is in fluctuating trend ranges from 337 Days is present in the year of 2009-10 and 416 Days present in the year of 2008-09.

The correlation value(r) is positive (0.7117), there is a low degree of


positive relationship exist between the two variables inventory and sales.

The fixed asset level has decreased in absolute figures in 2007(14.09) as compared to 2008(9.91) in total assets. The current

asset level has increased 85.91% to 90.09%.

The fixed asset level has increased in absolute figures in 200809(13.09%) as compared to 2007-08(9.91%) in total assets. The current asset level has decreased 90.09% to 86.98%.

The fixed asset level has increased in absolute figures in 200910(19.86%) as compared to 2008-09(13.02%) in total assets. The current asset level has decreased 86.98% to 80.14%.

The fixed asset level has decreased in absolute figures in 201011(19.86) as compared to 2010(19.81) in total assets. The current

asset level increased in the year of 2010-11(80.29%) as compared


to 2009-11 (80.14%).

The company has followed a mixed type of credit policy during the year 2006-07 to 2010-11 credit policy was most conservative.

It was moderate during 2010-11 liberal during the year 2006-07.


The receivable outstanding started going up along with the increase in sales every year. The highest percentage of receivables outstanding from the year 2006 as on 31 st march belonged to the age class 45-90 days .This percentage steadily increasing and has reached up to 78.40% in the year 2010-11.

In trend percentage analysis the fixed asset level has decreased in the year of 2007-08 and other years are continuously increased as compared to the year of 2006-07.Investments and

total asset level have increased continuously. The trend of


provision level is fluctuated. In the year of 2010-11 all items are increased except inventory level and provision.

The credit policy adopted by the company was good since the
average collection period was 15 days therefore this will help in increasing the cash balances of company.

Suggestions
The organization may increase the fixed assets reliability through purchase of high level standard machines to decrease the maintenance charges and increase the productivity. The liquidity position of the organization may improved to meet its short term obligations through increase the sales and utilizing the inventory effectively.

The organization may increase the working capital through


decrease purchase on the credit and maintain the collection policy effectively.

The company can improve the current asset through effectively utilize the cash, inventory and managing the

debtors.

Conclusion
From the critical analysis throughout the study, it is
evident that the overall asset position of the company with regards to payables management and cash management is not satisfactory. But still it is seen that the organization is more efficiently using its credit period, the longer the company stretching out the payments.

Though it is advantageous to the company it is important to


maintain smooth relationship with the creditors and debtors. Assets management is affected by increased cash flows in inventories and receivables and payables, so the company is required to plan and control these activities in such a way that there is positive cash flow

which would help the management of assets.