INDEX CHAPTER-1

INTRODUCTION

4-11

CHAPTER-2
INDUSTRIAL PROFILE

11-17

CHAPTER-3
COMPANY PROFILE

17-55

CHAPTER-4
DATA ANALYSIS

55-86

CHAPTER-5 86-90
FINDINGS & SUGGESTIONS
1

CHAPTER-I

INTRODUCTION

INTRODUCTION WORKING CAPITAL:

Cash is the lifeline of a company. If this lifeline deteriorates, the company's ability to fund operations, reinvest and meet capital re uirements and payments also deteriorate. !nderstandin" a company's cash flo# health is essential for ma$in" investment decisions. % "ood #ay to &ud"e a company's cash flo# prospects is to loo$ at its #or$in" capital mana"ement '(C)*. (or$in" capital of a company reveals more about the financial condition of a business than almost any other calculation. It tells you #hat #ould be left if a company raised all of its short term resources, and used them to pay off its short term liabilities. +he more #or$in" capital, the less financial strain a company e,periences. (or$in" capital also "ives investors an idea of the company's underlyin" operational efficiency. )oney that is tied up in inventory or money that customers still o#e to the company can't be used to pay off any of its obli"ations. -o, if a company is not operatin" in the most efficient manner 'slo# collection* it #ill sho# up in the #or$in" capital. +his can be seen by comparin" the #or$in" capital from one period of time to another. slo# collection may si"nal an underlyin" problem in the company's operations.

DEFINITION
/

+he definition of #or$in" capital is that it is the difference bet#een an or"ani0ation1s current assets and its current liabilities. 2f more importance is its function #hich is primarily to support the day3to3day financial operations of an or"ani0ation, includin" the purchase of stoc$, the payment of salaries, #a"es and other business e,penses, and the financin" of credit sales. It1s a measure of both a company's efficiency and its short3term financial health. +he better a company mana"es its #or$in" capital, the less the company needs to borro#. Even companies #ith cash surpluses need to mana"e #or$in" capital to ensure that those surpluses are invested in #ays that #ill "enerate suitable returns for investors. +here are t#o concepts of #or$in" capital. +hey are 4 5ross #or$in" capital and 4 Net #or$in" capital +he term "ross #or$in" capital, also referred to as #or$in" capital means the total current assets. +he term net #or$in" capital can be defined in t#o #ays6 +he most common definition of net #or$in" capital is the difference bet#een the current assets and the current liabilities. +he alternate definition of N(C is that portion of current assets #hich is financed #ith lon" term funds. -ince the current liabilities represent the sources of short term funds, as lon" as current assets e,ceed current liabilities, the e,cess must be financed #ith lon" term funds. +he net #or$in" capital, as a measure of li uidity is uite useful for internal control. +he net #or$in" capital helps in comparin" the li uidity of the same firm over time.

+herefore6

C !!"#$ A%%"$% - C !!"#$ L&'(&)&$&"% * W+!,&#- C'.&$')

% positive #or$in" capital means that the company is able to pay off its short3term liabilities. % ne"ative #or$in" capital means that a company currently is unable to meet its short3term liabilities #ith its current assets 'cash, accounts receivable, inventory*. )ana"ement must ensure that a business has sufficient #or$in" capital. +oo little of the #or$in" capital #ill result in cash flo# problems hi"hli"hted by an or"ani0ation e,ceedin" its a"reed overdraft limit, failin" to pay suppliers on time, and bein" unable to claim discounts for prompt payment. In the lon" run, a business #ith insufficient #or$in" capital #ill be unable to meet its current obli"ations and #ill be forced to cease tradin" even if it remains profitable on paper. 2n the other hand, if an or"ani0ation ties up too much of its resources in #or$in" capital it #ill earn a lo#er than e,pected rate of return on capital employed. %"ain this is not a desirable situation. %s it is said that #or$in" capital is the difference bet#een the current assets and the current liabilities, the mana"ement of the company has to mana"e their current assets and current liabilitie

N""/ +0 $1" %$ /2
8

(or$in" capital mana"ement is one of the $ey areas of financial decision3ma$in". It is si"nificant because, the mana"ement must see that an e,cessive investment in current assets should protect the company from the problems of stoc$3out. position of the firm. +he "oal of #or$in" capital mana"ement is to mana"e the firm current assets and current liabilities in such a #ay that a satisfactory level of #or$in" capital is maintained. If the firm cannot maintain a satisfactory level of #or$in" capital, it is li$ely to become insolvent and may be even forced into ban$ruptcy. Current assets #ill also determine the li uidity

O34ECTI5ES OF THE STUDY

+o study the e,istin" #or$in" capital mana"ement system. +o find the li uidity position of the current assets and current liabilities of the company. +o e,amine feasibility of present system of mana"in" #or$in" capital. +o understand ho# the company finances its #or$in" capital +o analy0e the financial performance of the company #ith reference to #or$in" capital.
9

 +o "ive some su""estions to the mana"ement based on the information studied.

METHODOLOGY

+he study of (or$in" Capital mana"ement is based on primary as #ell as secondary data.

+he primary data #as "athered throu"h personal interaction #ith the director of the company.

+he secondary data #as collected from company1s annual reports from 2::93 2:1:, various boo$s and Internet.

LIMITATIONS
;

 Due to the busy schedule of the e,ecutives in the company, all the re uired primary data could not be collected, #hich mi"ht affect the results of the study. <ecommendations of the study are only personal opinions. =ence the &ud"ments may be biased and could not be considered as ultimate and standard solutions. -hort period of time is one of the limitations, due to #hich a detailed study could not be conducted on the topic

>

CHAPTER-II

INDUSTRIAL PROFILE

=I-+2<? 2@ +=E +(2 (=EEAE<-6

+he Critannica Encyclopedia a motorcycle as a bi$e or tricycle propelled by an internal Dcombustion en"ine 'or, less often by an electric en"ine*. +he automobile #as the reply to the 1B th Dcentury reams of self3propellin" the horse3 dra#n bi$eria"e. -imilarly, the invention of the motorcycle created the self D propellin" bicycle. +he first commercial desi"n #as three3#heeler built by +his employed a hori0ontal sin"le3 Ed#ard Cutler in 5reat Critain in 1>>7.

cylinder "asoline en"ine mounted bet#een t#o steer able front #heels and connected by a drive chain to the rear #heel. +he 1B::s sa# the conversion of many bicycles or pedal cycles by addin" small, centrally mounted spar$ i"nition en"ine en"ines. +here #as then felt the need for reliable constructions. +his led to road trial tests and competition bet#een manufacturers. +ourist +rophy '++* races #ere held on the Isle of main in 1B:; as reliability or endurance races. -uch #ere the provin" "round for many ne# ideas from early t#o3stro$e3cycle desi"ns to superchar"ed multivalent en"ines mounted on aerodynamic, bi$ebon fiber reinforced body#or$.

INEEN+I2N 2@ +(2 (=EEAE<-6

+he invention of t#o #heelers is a much3debated issue. F(ho invented the first motorcycleGH )ay seem li$e a simple uestion, FsafetyH, bicycle, i.e., bicycle #ith front and rear #heels of the same si0e, #ith a pedal cran$ mechanism to drive the rear #heel. +hose bicycles in turn described from hi"h3#heel bicycles. +he hi"h D#heelers descended from an early type of pushbi$e, #ithout pedals, propelled by the rider1s feet pushin" a"ainst the "round. +hese appeared around 1>::, used iron banded #a"on #heels, and #ere called Fbone3crushersH, both for their &arrin" ride, and their tendency to toss their riders. 5ottiieb Daimler '#ho credited #ith the buildin" the first motorcycle in 1>>8, one #heel in the front and one in the
1:

bac$, althou"h it had a smaller sprin"3loaded outri""er #heel on each side. It #as constructed mostly of #ood, the #heels #ere of the iron3banded #ooden3spoo$ed #a"on3type and it definitely had a Fbone3crusherH chassisI

@!<+=E< DEEEA2J)EN+-6
)ost of the developments durin" the early phase concentrated on three and four3#heeled desi"n since it #as comple, enou"h to "et the machines runnin" #ith out havin" to #orry about them fallin" over. +he ne,t notable t#o3#heeler thou"h #as the =ildebrand K (olf )ueller, patented in )unich in 1>B7. In 1>B8, the @rench firm of DeDion3button built and en"ine that #as to ma$e the mass production and common use of motorcycle possible. +he first motorcycle #ith electric start and a fully modem electrical system. the =ence special from the Indian )otorcycle Company astounded the industry in 1B/1. Cefore (orld (ar 1, I)C #as the lar"est motorcycle manufacturer in the #orld producin" over 2:::: bi$es per year.

INC<E%-IN5 J2J!A%<I+?6
+he popularity of the vehicle "re# especially after 1B1:, in 1B19. the Indian motorcycle company introduced the model = racer, and placed it on sale. Durin" (orld (ar 1, all branches of the armed forces in Europe used motorcycles principally for dispatchin". %fter the #ar, it en&oyed a sport vo"ue until the 5reat Depression be"an in motorcycles lasted into the late 2: th century. #ei"ht the vehicle bein" used for hi"h3speed tourin" and sport competitions. +he more sophisticated of a 128cc model. -ince then, an increasin" number of po#erful bi$es have bla0ed the roads.

=I-+2<IC%A IND!-+<? DEEEA2J)EN+-6

11

Indian is the second lar"est manufacturer and producer to t#o #heelers in the (orld. It stands ne,t only to Lapan and China in terms of the number of E produced and domestic sales respectively. +his destination #as achieved due to variety of reason li$e restrictive policy follo#ed by the "overnment of India to#ards the passen"er bi$e industry, risin" demand for personal transport, inefficiency in the public transportation system etc. +he Indian t#o3#heelers industry made a small be"innin" in the early 8:s #hen %utomobile products of India '%JI* started manufacturin" scooters in the country. !ntil 1B8>, %JI and Enfield #ere the sole producers. +he t#o D#heelers mar$et #as opened #ere opened to forei"n competition in the mid3 >:s. %nd the then mar$et leaders3Escorts and Enfield D #ere cau"ht una#are by the onslau"ht of the 1::cc bi$es of the four Indo3 Lapanese &oint ventures. (ith the availability of fuel3efficiency lo# po#er bi$es, demand s#elled, resultin" in =ero =onda Dthen the only producer of four stro$e bi$es '1::cc cate"ory*, "ainin" a top slot. +he first Lapanese motorcycles #ere introduced in the early ei"hties. +E- -u0u$i and =ero =onda brou"ht in the first t#o3stro$e and four3stro$e en"ine motorcycles respectively. +hese t#o players initially started #ith assembly of CMD Mits, and later on pro"ressed to indi"enous manufacturin". +he industry had a smooth ride in the 8:s, 9:s and ;:s #hen "overnment prohibited ne# entries and strictly controlled capacity e,pansion. +he industry sa# a sudden "ro#th in the >:s. +he industry #itnessed a steady of 17N leadin" to a pea$ volume of 1.B mn vehicles in 1BB:. In 1BB: the entire automobile industry sa# a drastic fall in demand. +his resulted in a decline of 18N in 1BB1 and >N in 1BB2, resultin" in a production loss of :.7mn vehicles. Carrin" =ero =onda, all the ma&or producers suffered from recession in @?B/ and @?B7. =ero =onda sho#ed a mar"inal decline +he reason for recession in the sector #ere the incessant rise in fuel prices, hi"h input costs and reduced purchasin" po#er due to si"nificant li$e increased production in 1BB2, due to ne# entrants coupled #ith recession in the industry resulted in companies either reportin" losses or a fall in profits.

C2NCA!-I2N6
12

+he t#o3#heelers mar$et has had a perceptible shift from a buyers mar$et to a sellers mar$et #ith a variety of choice, players #ill have compete on various fronts vi0. pricin", technolo"y product desi"n, productivity after sale service, mar$etin" and distribution. In the short term, mar$et shares of individual manufacturers are "oin" to be sensitive to capacity, product acceptance, pricin" and competitive pressures from other manufacturers. %s incomes "ro# and people "ro# and people feel the need to o#n a private means of transport, sales of t#o3#heelers #ill rise. Jenetration is e,pected to increase to appro,imately to more than 28N by 2::8. +he motorcycle se"ment #ill continue to lead the demand for t#o3#heelers in the comin" years. )otorcycle sale is e,pected to increase by 2:N yoy as compared to 1N "ro#th in the scooter mar$et and /N by moped sales respectively for the ne,t t#o years. +he four3stro$e scooters #ill add ne# dimension to the t#o3#heeler se"ment in the comin" future. +he %sian continent is that lar"est user of the t#o3#heelers in the #orld. +his is due to poor road infrastructure and lo# per capita income, restrictive policy on bi$e industry. +his is due to oli"opoly bet#een top five players in the se"ment, compared to thirsty manufacturers in the bi$e industry. =ero =onda motors A+d., is one of the leadin" companies in the t#o3#heeler industry. %t present it is the mar$et leader in the motorcycle se"ment #ith around 7;N the mar$et share durin" @? 2::: D:1. Durin" the year, company posted a 71.18N yoy rise in turnover to <s./1, 9>9.8mn in motorcycles #hich driven by a /8.1;N yoy rise in )otorcycle sales volumes. +he company has emer"ed as one of the most successful players, much ahead of its competitions an account of its superior and reliable product uality complemented #ith e,cellent mar$etin" techni ues. +he company has been consistently addressin" the "ro#in" demand for motorcycles and has been cumulative customer base of over 7 million customers, #hich is e,pected to reach 8min mar$ #ith rural and semi3urban se"ment bein" the ne# class of consumers.

1/

CHAPTER-3 COMPANY PROFILE

COMPANY PROFILE
17

+he =ero =onda story be"an #ith a simple vision D the vision of a mobile and an empo#ered India, po#ered by =ero =onda. +his vision #as driven by =ero =onda's commitment to customer, uality and e,cellence, and #hile doin" so, maintain the hi"hest standards of ethics and societal responsibilities. +#enty five years and 28 million t#o #heelers later, =ero =onda is closer to fulfillin" this dream. +his vision is the drivin" force behind everythin" that #e do at =ero =onda. (e understood that the fastest #ay to turn that dream into a reality is by remainin" focused on that vision. +here #ere many un$no#ns but #e $ept faith, and today, =ero =onda has been the lar"est t#o #heeler company in the #orld for ei"ht consecutive years. 2ur "ro#th has $ept compoundin". +he company crossed the ten million unit milestone over a 1B3year span. In the ne# millennium, =ero =onda has scaled this to 18 million units in &ust five yearsI In fact, durin" the year in revie#, =ero =onda sold more t#o #heelers than the second, third and fourth placed t#o3 #heeler company put to"ether. (ith =ero =onda, the domestic t#o #heeler mar$et #as able to sho# positive "ro#th durin" the year in revie#. (ithout =ero =onda, the domestic mar$et #ould have actually shrun$. 2ver the course of t#o and a half decades, and three successive &oint venture a"reements later, both partners have fine3tuned and perfected their roles as &oint venture partners. (hat the t#o partners did #as somethin" uite basic. +hey simply stuc$ to their respective stren"ths. %s one of the #orld's technolo"y leaders in the automotive sector, =onda has been able to consistently provide technical $no#3ho#, desi"n specifications and <KD innovations. +his has led to the development of #orld class, value 3 for3 money motorcycles and scooters for the Indian mar$et. 2n its part, the =ero 5roup has ta$en on the sin"ular and onerous responsibility of creatin" #orld3class manufacturin" facilities #ith robust processes, buildin" the supply chain, settin" up an e,tensive distribution net#or$s and providin" insi"hts into the mind of the Indian customer.

-ince both partners continue to focus on their respective stren"ths, they have been able to complement each other. In the process, =ero =onda is reco"ni0ed today as one of the most 18

successful &oint ventures in the #orld. It is therefore no surprise that there are more =ero =onda bi$es on this country's roads than the total population of some European countries put to"etherI +he company's meteoric "ro#th in the t#o3#heeler mar$et in India stems from an intrinsic ability to reach out and come closer to its customers, #ith every passin" year. =ero =onda's bi$es are sold and serviced throu"h a net#or$ of over /8:: customer touch points, comprisin" a mi, of dealers, service centres and stoc$ists located across rural and urban India. =ero =onda has built t#o #orld3class manufacturin" facilities at Dharuhera and 5ur"aon in =aryana, and its third and most sophisticated plant at =arid#ar has &ust completed a full year of operations. It is difficult to ima"ine that all this has happened in the span of &ust t#o and a half decadesI +he best is yet to come. Durin" the year in revie#, =ero =onda po#ered its #ay in a mar$et that, for all practical purposes, #as feelin" the full effects of the economic slo#do#n in India. (ith an economic recovery no# clearly on the bi$eds, =ero =onda is all set to ride into another summit. %s Cri&mohan Aall )un&al, the Chairman, =ero =onda )otors succinctly puts it, O(e pioneered India's t#o #heeler industry, #e've steered it throu"h difficult times. no# it is our responsibility to set the pace a"ain.''

G!+ .:

19

==)A belon"s to the )un&al "roup. Cri&mohanlal )un&al and his three brothers have founded the "roup in1B81. ==)A is a 29629 LE bet#een =ero 5roup and Lapan =onda )otors bicycle components. 2ver the years, the "roup has become the lar"est manufacturer of bicycle in the #orld. Cesides =ero =onda, there are 7 other ma&or companies in the "roup, namely the follo#in"6 =ero Cycles '1B81*, #hich is India1s leadin" manufacturer and e,porter. +he "roup #orth <-.9: Cillion is set to enter hospitality business #ith !-3based P/1 billion Ci$elson =ospitality by biddin" for four properties of I+DC hotels in Delhi3 Manish$a, Aodhi, Qutab and ?atri Nivas in order to e,plore the hu"e potential offered by the industry. Jlant location6 ==)A has the t#o plants one located at Dharuhera, =aryana near Delhi and the other at 5ur"aon, /: $ms a#ay from the e,istin" plant. +he ne# plants have installed capacity of 2 min unit1s p.a. on shift basis at each of the plants. +he company has been ta$in" initiatives to e,pand the e,istin" capacity of its plants.

M&%%&+# S$'$"6"#$:
F(e, at =ero =onda, are continuously strivin" for syner"y bet#een technolo"y, system, and human resources to provide products and services that meet the uality, performance, and price aspirations of out customers. (hile doin" so, #e maintain the hi"hest standards of ethics and societal responsibilities, constantly innovate products and processes, and develop teams that $eep the momentum "oin" to ta$e the company to e,cellence in the ne# millenniumH.

3OARD OF DIRECTORS
1;

N+7 N'6" +0 $1" D&!"8$+!% 1 2 / 7 8 9 ; > B 1: 11 12 1/ 17. 18. )r. Cri&mohan Aall )un&al )r. Ja#an )un&al )r. +oshia$i Na$a"a#a )r. -umihisa @u$uda )r. 2m Jra$ash )un&al )r. -unil Mant )un&al )r. )asahiro +a$eda"a#a )r. -atoshi )atsu0a#a '%lternate Director to )r. +a$ashi Na"ai* )r. Jradeep Dinodia 5en.'<etd.* E. J. )ali$ )r. %nal&it -in"h Dr. Jritam -in"h )s. -hobhana Chartia )r. )eleveetil Damodaran )r. <avi Nath

D"%&-#'$&+# Chairman K (hole3time Director )ana"in" Director K CE2 Loint )ana"in" Director +echnical Director Non3e,ecutive Director Non3e,ecutive Director Non3e,ecutive Director Non3e,ecutive Director Non3e,ecutive K Independent Director Non3e,ecutive K Independent Director Non3e,ecutive K Independent Director Non3e,ecutive K Independent Director Non3e,ecutive K Independent Director Non3e,ecutive K Independent Director Non3e,ecutive K Independent

PROFILE OF DIRECTORS MR7 3RI4MOHAN LALL MUN4AL )r. Cri&mohan Aall )un&al is the founder Director and Chairman of the Company and the P 2.> billion =ero 5roup. =e is the Jast Jresident of Confederation of Indian Industry 'CII*, -ociety of Indian %utomobile )anufacturers '-I%)* and #as a )ember of the Coard of the Country's Central Can$ '<eserve Can$ of India *. In reco"nition of his contribution to industry, )r. Aall #as conferred the Jadma Chushan %#ard by the !nion 5overnment. )r. Cri&mohan Aall )un&al is currently on the board of the follo#in" companies6
N+7 1 2 / 7 8 9 ; N'6" +0 C+6.'#2 =ero =onda )otors Aimited =ero Cycles Aimited =ero =onda @inlease Aimited )un&al -ho#a Aimited -unbeam %uto Aimited Easy Cill Aimited )un&al %uto Industries Aimited N'$ !" +0 O00&8" Chairman and (hole3time Director Chairman and Director Chairman and Director Chairman and Director Chairman and Director Director Director

1>

>

-hivam %utotech Aimited

Director

Brijmohan Lall Munjal - The King of he Roa! +he venerated patriarch and visionary of the =ero 5roup, )r. Cri&mohan Aall )un&al, is a first "eneration entrepreneur #ho started very small and throu"h sheer hard #or$ and perseverance has today made his t#o #heeler venture the (orld's No.1 +#o (heeler company.

T1" S$+!2 +0 $1" I#/+6&$'()" E#$!".!"#" !

2ne of the bri"htest stories of Indian entrepreneurship be"an seventy3one years a"o #hen a si,3year old boy uietly #al$ed into a ne#ly opened "uru$ul 'Indian value based school* near his home in Mamalia 'no# in Ja$istan* determined to "ain admission. of entrepreneurial achievement. Impressed by his conviction, the "uru$ul "ranted him admission instantly. +hus be"an an e,traordinary sa"a +oday, #e $no# that boy as Cri&mohan Aall )un&al, the much3venerated patriarch of the =ero 5roup, one of the lar"est corporate "roups in the country. Cri&mohan Aall's inspiration to enter the t#o3#heeler #orld came from a desire to provide the cheapest form of transport for the poorest of the poor. Jost3 partition, Cri&mohan Aall )un&al and his brothers relocated to Audhiana. +hey had to be"in from scratch. +hey set up as manufacturers of bicycle components. @rom then on there #as no loo$in" bac$. In typically modest manner, C.). )un&al accords a "reat deal of the credit for his success to his family and his team. =e traversed the road to success follo#in" these principles6

+rustin" his uncanny instincts % uni ue approach to people 3 one from the heart %head of his time, every timeI +he ideal corporate citi0enI -ho#in" others the #ay %bove all, his leadership and sa"acity has earned him "reat respect and he has

personally been responsible for $indlin" the spirit of entrepreneurship amon"st his employees #ho today constitute a family of about forty successful entrepreneurs.

1B

KEY MILESTONES OF HERO HONDA

Y"'! E9"#$ 1:83 Loint Collaboration %"reement #ith =onda )otor Co. Atd. Lapan si"ned -hareholders %"reement si"ned 1:84 =ero =onda )otors Atd. Incorporated 1:85 @irst motorcycle OCD 1::O rolled out 1:87 1::,:::th motorcycle produced 1:8: Ne# motorcycle model 3 O-lee$O introduced 1::1 Ne# motorcycle model 3 OCD 1:: --O introduced 8::,:::th motorcycle produced 1::2 <aman )un&al Eidya )andir inau"urated 3 % -chool in the memory of founder )ana"in" Director, )r. <aman Mant )un&al 1::4 Ne# motorcycle model 3 O-plendorO introduced 1,:::,:::th motorcycle produced 1::7 Ne# motorcycle model 3 O-treetO introduced =ero =onda's 2nd manufacturin" plant at 5ur"aon inau"urated 1::8 2,:::,:::th motorcycle produced 1::: Ne# motorcycle model 3 OCCRO introduced Environment )ana"ement -ystem of Dharuhera Jlant certified #ith I-2317::1 by DNE =olland <aman )un&al )emorial =ospital inau"urated 3 % =ospital in the memory of founder )ana"in" Director, )r. <aman Mant )un&al 2;;; 7,:::,:::th motorcycle produced Environment )ana"ement -ystem of 5ur"aon Jlant certified I-2317::1 by DNE =olland -plendor declared '(orld No. 1' 3 lar"est sellin" sin"le t#o3#heeler model O=ero =onda Jassport Jro"rammeO 3 C<) Jro"ramme launched

2:

2;;1 Ne# motorcycle model 3 OJassionO introduced 2ne million production in one sin"le year Ne# motorcycle model 3 OLoyO introduced 8,:::,:::th motorcycle produced 2;;2 Ne# motorcycle model 3 ODa#nO introduced Ne# motorcycle model 3 O%mbitionO introduced %ppointed Eirender -eh#a", )ohammad Maif, ?uvra& -in"h, =arbha&an -in"h and Raheer Mhan as Crand %mbassadors 2;;3 Cecomes the first Indian Company to cross the cumulative ; million sales mar$ -plendor has emer"ed as the (orld's lar"est sellin" model for the third calendar year in a ro# '2:::, 2::1, 2::2* Ne# motorcycle model 3 OCD Da#nO introduced Ne# motorcycle model 3 O-plendor SO introduced Ne# motorcycle model 3 OJassion JlusO introduced Ne# motorcycle model 3 OMari0maO introduced 2;;4 Ne# motorcycle model 3 O%mbition 1/8O introduced =ero =onda became the (orld No. 1 Company for the third consecutive year. Crossed sales of over 2 million units in a sin"le year, a "lobal record. -plendor 3 (orld's lar"est sellin" motorcycle crossed the 8 million mar$ Ne# motorcycle model 3 OCCRTO introduced

21

Loint +echnical %"reement rene#ed +otal sales crossed a record of 1: million motorcycles 2;;5 =ero =onda is the (orld No. 1 for the 7th year in a ro# Ne# motorcycle model 3 O-uper -plendorO introduced Ne# motorcycle model 3 OCD Delu,eO introduced Ne# motorcycle model 3 O5lamourO introduced Ne# motorcycle model 3 O%chieverO introduced @irst -cooter model from =ero =onda 3 OJleasureO introduced 2;;6 =ero =onda is the (orld No. 1 for the 8th year in a ro# 18 million production milestone achieved 2;;7 =ero =onda is the (orld No. 1 for the 9th year in a ro# Ne# '-plendor NX5' launched Ne# 'CD Delu,e' launched Ne# 'Jassion Jlus' launched Ne# motorcycle model '=un$' launched 2: million production milestone achieved 2;;8 =ero =onda =arid#ar Jlant inau"uration Ne# 'Jleasure' launched -plendor NX5 lauched #ith po#er start feature

22

2;;: Ne# motorcycle model 'Jassion Jro' launched Ne# 'CCR Xtreme' launched 28 million production milestone achieved CD Delu,e lauched #ith po#er start feature Ne# '5lamour' launched Ne# '5lamour @i' launched 2;1; =un$' 'Aimited Edition* launched -plendor completed 11 million production landmar$ Ne# motorcycle model 'Mari0ma 3 R)<' launched -ilver &ubilee celebrations

PROMINENT AWARDS TO THE COMPANY

Y"'! A<'!/% = R"8+-#&$&+#% 2;1; C+6.'#2 +0 $1" Y"'! a#arded by Economic +imes %#ards for Corporate E,cellence 2::>3:B. CNCC +E1> 2verdrive %#ards 2:1: >H')) +0 F'6"> $+ S.)"#/+! ND+E Jrofit Ci$e K Ci$e %#ards 2:1: D

T<+-<1"")"! M'# 0'8$ !"! +0 $1" Y"'! C#3 5&"<"!%> C1+&8" T<+-<1"")"! +0 $1" Y"'! ?K'!&@6' AMRB

3&," M',"! +0 $1" Y"'! by E+3Ri"(heels Ci$e K Ci$e of the ?ear %#ards 2::B

2/

2;;: 'T<+-<1"")"! M'# 0'8$ !"! +0 $1" Y"'!' by ND+E Jrofit Ci$e K Ci$e %#ards 2::B and Jassion Jro ad&ud"ed as CNC Eie#ers' Choice t#o3#heeler +op Indian Company under the '%utomobile 3 +#o3#heelers' sector by $1" D # = 3!'/%$!""$R+)$' C+!.+!'$" A<'!/% (on 5old in the <eader's D&-"%$ T! %$"/ 3!'#/ 2;;: in the ')otorcycles' cate"ory NDT5 P!+0&$ 3 %&#"%% L"'/"!%1&. A<'!/% 2;;: 3 t#o3#heeler cate"ory 2;;8 NDT5 P!+0&$ 3 %&#"%% L"'/"!%1&. A<'!/ 2;;8 3 =ero =onda (ins the Coveted OND+E Jrofit Cusiness Aeadership %#ard 2::>O T+.G"'! D"%&-# A<'!/% 2;;8 3 =un$ Ci$e of the ?ear %#ard NDT5 P!+0&$ 3&," I#/&' = 3&," I#/&' A<'!/% 3 ND+E FEie#ers1 Choice %#ardH to =un$ in Ci$e cate"ory I#/&'T&6"% M&#/%8'." '#/ S'9&)" R+< ? A F+!("% G!+ . 5"#$ !" B L+2')$2 A<'!/% 3 FCustomer and Crand Aoyalty %#ardH in %utomobile 't#o3#heeler* sector A%&'# R"$'&) C+#-!"%% A<'!/ 0+! R"$'&) EC8"))"#8" '-trate"ies and -olutions of business innovation and transformation* 3 Cest Customer Aoyalty Jro"ram in %utomobile cate"ory NDT5 P!+0&$ 3&," I#/&' = 3&," I#/&' A<'!/% 3 Ci$e )anufacturer of the year O9"!/!&9" M'-'@&#" 3 Ci$e )anufacturer of the year TNS 5+&8" +0 $1" C %$+6"! A<'!/%: No.1 e,ecutive motorcycle -plendor NX5

No.1 standard motorcycle CD Delu,e No. premium motorcycle CCR Xtreme

2;;7 +he ND+E Jrofit Ci$e India K Ci$e India %#ards 2::; in the follo#in" cate"ory6 2verall OCi$e of the ?earO 3 CCR X3treme

OCi$e of the ?earO 3 CCR X3treme 'up to 18: cc cate"ory*

OCi$e +echnolo"y of the ?earO 3 5lamout J5) @I O%uto +ech of the ?earO 3 5lamout J5) @I by 2verdrive )a"a0ine.

OCi$e of the ?earO 3 CCR X3treme by 2verdrive )a"a0ine. <an$ed CCR X3treme OCi$e of the ?earO 3 by C - )otorin" )a"a0ine

27

F)ost +rusted CompanyH , by +N- Eoice of the Customer %#ards 2::9. CD Delu,e rated as ONo 1 standard motorcycleO by +N- Eoice of the Customer %#ards 2::9. 2;;6 %d&ud"ed ;th +op Indian Company by (allstreet Lournal %sia '+op Indian +#o (heeler Company*. 2ne of the > Indian companies to enter the @orbes top 2:: list of #orld1s most reputed companies. No. 1 in automobile industry by +N- C+!.+!'$" S+8&') R"%.+#%&(&)&$2 A<'!/. Cest in its class a#ards for each cate"ory by TNS T+$') C %$+6"! S'$&%0'8$&+# A<'!/% 2;;66 -plendor Jlus 'E,ecutive*

CD Delu,e 'Entry*

Jleasure '5earless -cooters* -plendor K Jassion 3 +op t#o models in t#o #heeler cate"ory by E+ Crand E uity -urvey 2::9. %d&ud"ed ;th +op Indian Company by (allstreet Lournal %sia '+op Indian +#o (heeler Company*. +op Indian company in the %utomobile 3 +#o (heeler sector by Dun K Cradstreet 3 A6"!&8'# EC.!"%% C+!.+!'$" A<'!/% 2;;6. =ero =onda -plendor rated as India's most preferred t#o3#heeler brand at the A<''@ C+#% 6"! A<'!/% 2;;6. Certificate of E,port E,cellence for outstandin" e,port performance durin" 2::73:8 for t#o3 #heeler K three3 #heelers 3 Complete 'Non --I* by En"ineerin" E,port Jromotion Council. +he ND+E Jrofit Ci$e India K Ci$e India %#ards 2::9 in the follo#in" cate"ory6 Ci$e )a$er of the ?ear

Ci$e of the ?ear 3 %chiever Ci$e of the ?ear 3 %chiever 'up to 18: cc cate"ory* Ci$e of the ?ear 3 5lamour 'up to 128 cc cate"ory* ND+E Eie#ers' Choice %#ard to 5lamour in the bi$e cate"ory

28

CORPORATE SOCIAL RESPONSI3ILITY ?CSRB STAKEHOLDER TIES AT THE GRASSROOTS

=ero =onda )otors ta$es considerable pride in its sta$eholder relationships, especially ones developed at the "rassroots. +he Company believes it has mana"ed to brin" an economically and socially bac$#ard re"ion in Dharuhera, =aryana, into the national economic mainstream. %n Inte"rated <ural Development Centre has been set up on 7: acres of land alon" the Delhi3 Laipur =i"h#ay. +he Centre3complete #ith #ide approach roads, clean #ater, and education facilities for both adults and children3no# nurtures a vibrant, educated and healthy community. +he @oundation has adopted various villa"es located #ithin vicinity of the =ero =onda factory at Dharuhera for inte"rated rural development. +his includes6

Installation of deep bore hand pumps to provide clean drin$in" #ater. Constructin" metalled roads and connectin" these villa"es to the National =i"h#ay 'N= 3>*. <enovatin" primary school buildin"s and providin" hy"ienic #ater and toilet facilities. Ensurin" a proper draina"e system at each of these villa"es to prevent #ater3lo""in". Jromotin" non3conventional sources of ener"y by providin" a 8: per cent subsidy on bio"as plants.

29

KEY POLICIES

AN EN5IRONMENTALLY AND SOCIALLYD AWARE COMPANY

%t =ero =onda, our "oal is not only to sell you a bi$e, but also to help you every step of the #ay in ma$in" your #orld a better place to live in. Cesides its #ill to provide a hi"h3 uality service to all of its customers, =ero =onda ta$es a stand as a socially responsible enterprise respectful of its environment and respectful of the important issues.

=ero =onda has been stron"ly committed not only to environmental conservation pro"rammes but also e,presses the increasin"ly inseparable balance bet#een the economic concerns and the environmental and social issues faced by a business. % business must not "ro# at the e,pense of man$ind and man's future but rather must serve man$ind. EW" 6 %$ /+ %+6"$1&#- 0+! $1" 8+66 #&$2 0!+6 <1+%" )'#/ <" -"#"!'$" + ! <"')$17E % famous uote from our (orthy Chairman )r.Cri&mohan Aall )un&al. E#9&!+#6"#$ P+)&82 (e at =ero =onda are 8+66&$$"/ $+ /"6+#%$!'$" "C8"))"#8" &# + ! "#9&!+#6"#$') ."!0+!6'#8" +# ' 8+#$&# ') ('%&%, as an intrinsic element of our corporate philosophy. +o achieve this #e commit ourselves to6

Inte"rate environmental attributes and cleaner production in all our business processes and practices #ith specific consideration to substitution of ha0ardous chemicals, #here viable and stren"then the "reenin" of supply chain.

Continue product innovations to improve environmental compatibility. Comply #ith all applicable environmental le"islation and also controllin" our environmental dischar"es throu"h the principles of OalaraO 'as lo# as reasonably achievable*.

Institutionalise resource conservation, in particular, in the areas of oil, #ater, electrical ener"y, paints and chemicals. Enhance environmental a#areness of our employees and dealers U vendors, #hile promotin" their involvement in ensurin" sound environmental mana"ement.

2;

F ')&$2 P+)&82
EC8"))"#8" &# G ')&$2 &% $1" 8+!" 9') " +0 H"!+ H+#/'>% .1&)+%+.12.
(e are committed at all levels to achieve hi"h uality in #hatever #e do, particularly in our products and services #hich #ill meet and e,ceed customer's "ro#in" aspirations throu"h6

Innovation in products, processes and services. Continuous improvement in our total uality mana"ement systems. +eam#or$ and responsibility.

S'0"$2 P+)&82 H"!+ H+#/' &% 8+66&$$"/ $+ %'0"$2 '#/ 1"')$1 of its employees and other persons #ho may be affected by its operations. (e believe that the safe #or$ practices lead to better business performance, motivated #or$force and hi"her productivity. (e shall create a safety culture in the or"ani0ation by6

Inte"ratin" safety and health matters in all our activities. Ensurin" compliance #ith all applicable le"islative re uirements. Empo#erin" employees to ensure safety in their respective #or$ places. Jromotin" safety and health a#areness amon"st employees, suppliers and contractors. Continuous improvements in safety performance throu"h precautions besides participation and trainin" of employees.

sales performance hero =onda reports leadership performance #ith 8: N net profit in 2, ':>3:B defies industry trend #ith turnover 'net sales K other operatin" income*, at rs. /2:2 crore. ebidta at 1/.8> per cent

A ->;7 T+$') S')"% 2,18,:;9

A ->;8 2,7:,>;8

FY ;7-;8 12,>2,>9:

FY ;8-;: 12,9/,287

2>

WORKING CAPITAL MANAGEMENT

)ana"ement of #or$in" capital plays a very important role in the financial mana"ement of a company because maintainin" a balance of income to debt can be difficult and o#ners must be dili"ent to assure that it is $ept. -ometimes it ta$es a little assistance to maintain levels of fluidity or ma$e ma&or purchases. If #or$in" capital dips too lo#, a business ris$s runnin" out of cash. Even very profitable businesses can run into trouble if they lose the ability to meet their short3term obli"ations. (or$in" capital financin" can be used as a fast cash option to cushion the periods #hen the flo# is not ideal or readily available. Even #hen o#ners are meticulous in mana"in" #or$in" capital, findin" the ri"ht levels to remain comfortable and competitive can be difficult. T1" I6.+!$'#8" +0 G++/ W+!,&#- C'.&$') M'#'-"6"#$ (or$in" capital constitutes part of the Company1s investment in a department. %ssociated #ith this is an opportunity cost to the company. ')oney invested in one area may OcostO opportunities for investment in other areas.* If a department is operatin" #ith more #or$in" capital than is necessary, this over3investment represents an unnecessary cost to the Company @rom a department's point of vie#, e,cess #or$in" capital means operatin" inefficiencies. In addition, unnecessary #or$in" capital increases the amount of the capital char"e #hich departments are re uired to meet

O34ECTI5ES OF MANAGING WORKING CAPITAL Describe the ris$3return trade3off involved in mana"in" a firm's #or$in" capital. E,plain the determinants of net #or$in" capital. Calculate the effective cost of short3term credit. Aist and describe the basic sources of short3term credit. Describe the special problems encountered by multinational firms in mana"in" #or$in" capital. 2B

W+!,&#- 8'.&$') 6'#'-"6"#$ $',"% .)'8" +# $<+ )"9")%:

<atio analysis can be used to monitor overall trends in #or$in" capital and to identify areas re uirin" closer mana"ement +he individual components of #or$in" capital can be effectively mana"ed by usin" various techni ues and strate"ies

(hen considerin" these techni ues and strate"ies, departments need to reco"ni0e that each department has a uni ue mi, of #or$in" capital components. +he emphasis that needs to be placed on each component varies accordin" to department. @urthermore, #or$in" capital mana"ement is not an end in itself. It is an inte"ral part of the department's overall mana"ement. +he needs of efficient #or$in" capital mana"ement must be considered in relation to other aspects of the department's financial and non3financial performance. (or$in" Capital <atio

C !!"#$ A%%"$% divided by C !!"#$ L&'(&)&$&"% +he #or$in" capital ratio 'or current ratio* attempts to measure the level of li uidity, that is, the level of safety provided by the e,cess of current assets over current liabilities. +he O uic$ ratioO a derivative, e,cludes inventories from the current assets, considerin" only those assets most s#iftly reali0able. +here are also other possible refinements. +here is no particular benchmar$ value or ran"e that can be recommended as suitable for all "overnment departments. =o#ever, if a department trac$s its o#n #or$in" capital ratio over a period of time, the trends3the #ay in #hich the li uidity is chan"in"3#ill become apparent.

/:

C !!"#$ '%%"$%:
+he term current assets refer to those assets #hich in the ordinary course of business can be, or #ill be, converted into cash #ithin one year #ithout under "oin" any diminution in the value and #ithout disruptin" the operations of the firm. +he ma&or current assets are cash, cash e uivalent, mar$etable securities, accounts receivable, inventory, prepaid e,penses and other short term investments.

D"($+!%
Debtors are people or other firms #ho o#e money to the firm. +his #ill usually happen #here the firm has sold "oods #ith a period of credit. +he firm sells the "ood or service but allo#s the purchaser a period of credit to pay 3 usually a month. Durin" this month the purchaser o#es the firm the money and is therefore a debtor. If the firm has debts these are considered an asset, because #hen the debtors pay the firm #ill have converted the debt into cash in the ban$. Cecause most debts are relatively short3term they are considered current assets the amount of debtors a firm has depends on the line of business they are in.

CASH
In a business the term cash may have a broader meanin". Cash is an asset to the business and is usually considered to be one of the current assets. !nder the headin" cash on the balance sheet may be included a number of items of varyin" li uidity. % small amount may actually be cash 'or readies* held in tills or as petty cash, but the ma&ority is li$ely to be held in various ban$ accounts. =o#ever, since money in current accounts rarely earns interest, if a business has a surplus of cash it may invest it in various #ays. -ome #ill have to be in very li uid accounts so that if necessary they can "et at it very uic$ly, but some may be tied up for lon"er periods of time.

/1

I#9"#$+!2
Inventory is also a current asset #hich can be either ra# materials, finished items available for sale, or "oods in the process of bein" manufactured. Inventory is recorded as an asset on a company's balance sheet.

R'< 6'$"!&')
%n item used to produce somethin" else is called a Ora# material.O -ome ra# materials are easy to spot, but many re uire detective #or$. <a# material of a company may be imported or indi"enous. <a# material should be mana"ed in such a #ay that flo# of production is not interrupted. <eorderin" uantity and time should be estimated in a proper manner.

W+!, &# .!+8"%%

%n operation is composed of processes desi"ned to add value by transformin" inputs into useful outputs. Inputs may be materials, labor, ener"y, and capital e uipment. 2utputs may be a physical product 'possibly used as an input to another process* or a service. Jrocesses can have a si"nificant impact on the performance of a business, and process improvement can improve a firm's competitiveness.

F&#&%1"/ G++/%
D"0&#&$&+#: Commodities that #ill not under"o further processin" and are ready for sale to the final demand user, either an individual consumer or business firm. +his includes unprocessed foods such as e""s and fresh ve"etables, as #ell as processed foods such as ba$ery products and meats. +his also includes durable "oods such as automobiles, household furniture and appliances, and Nondurable "oods such as apparel and home heatin" oil. /2

P!".'&/ EC."#%"%:
In the course of every day operations, businesses #ill have to pay for "oods or services before they actually receive the product -ometimes companies decide to prepay ta,es, salaries, utility bills, rent, or the interest on their debt. +hese #ould all be pooled to"ether and put on the balance sheet under the headin" prepaid e,penses. Cy their very nature, Jrepaid E,penses are a small part of the balance sheet

C !!"#$ )&'(&)&$&"%
+he term current liabilities are those liabilities #hich are intended at the time of their inception, to be paid in the ordinary course of business, #ithin a year, out of the current assets or earnin"s of the concern. +he basic current liabilities are accounts payable, bills payable, ban$ overdraft and outstandin" e,penses and other short term debts.

C!"/&$+!%:
Creditors '%ccounts Jayable* are suppliers #hose invoices for "oods or services have been processed but #ho have not yet been paid. In other #ords, creditors are people to #hom the company o#es the money. +he term creditor is fre uently used in the financial #orld, especially in reference to short term loans, lon" term bonds, and mort"a"es. +he term creditor derives from the notion of credit. In modern %merica, credit refers to a ratin" #hich indicates the ability of a borro#er and li$elihood to pay bac$ his or her loan. In earlier times, credit also referred to reputation or trust#orthiness. C)'%%&0&8'$&+# +0 C !!"#$ A%%"$% '#/ C !!"#$ L&'(&)&$&"% +he current classification applies to those assets that #ill be reali0ed in cash, sold, or consumed #ithin one year 'or operatin" cycle, if lon"er*, and those liabilities that #ill be dischar"ed by use of current assets or the creation of additional current liabilities #ithin one year 'or operatin" cycle, if lon"er*. +he current liability section of a balance sheet is also intended to include //

obli"ations that are due on demand or #ill be due on demand #ithin one year from the balance sheet date, even thou"h li uidation may not be e,pected #ithin that period. -hort3term obli"ations shall be e,cluded from current liabilities only if the enterprise intends to refinance the obli"ation on a lon"3term basis and has the demonstrated ability to consummate the financin". +he ordinary operations of a business involve a circulation of capital #ithin the current asset "roup. Cash is e,pended for materials, labor, operatin" e,penses, and other services, and such cash e,penditures are included in the inventory value. !pon sale of the products or performance of services, the accumulated e,penditures are converted into receivables and ultimately into cash a"ain. +he avera"e period of time intervenin" bet#een the cash3to3cash conversion is the operatin" cycle of the business. (hen the business has no clear operatin" cycle, or #hen the operatin" cycle is shorter than 12 months, a 123month period should be used to se"re"ate current assets.+his concept of the nature of current assets #ould e,clude from that classification such resources as 1* cash and claims to cash that are restricted as to #ithdra#al or other use for current operations. 2* investments in securities '#hether mar$etable or not* or advances that have been made for the purpose of control, affiliation, or other business advanta"e. /* cash surrender value of life insurance. 7* depreciable assets. 8* lon"3term receivables. and 9* land. @or analytical purposes, specific recommendations of the @@-C are6 1. Jrincipal debt due #ithin 12 months, even on notes #ith monthly payments, should be included as a current liability. 2. Capital leases should be accounted for on the balance sheet, #ith the current portion of the principal due and the accrued interest sho#n as a current liability. /. Cash value of life insurance should be a non3current asset. 7. Aoans to family members should be treated based on the characteristics of the notes. '+he amount of these loans should be separately disclosed, if material.* 8. JIM certificates should be treated as current assets. 9. <etirement accounts should be sho#n as non3current assets.

/7

+he current portion of both deferred ta, assets and deferred ta, liabilities are to be recorded as current assets or current liabilities.

WORKING CAPITAL MANAGEMENT HEROHONDA LTD7 IN5ENT;RY MANAGEMENT

Inventories are lists of stoc$s3ra# materials, #or$ in pro"ress or finished "oods3#aitin" to be consumed in production or to be sold. +he total balance of inventory is the sum of the value of each individual stoc$ line. -toc$ records are needed6

+o provide an account of activity #ithin each stoc$ line. %s evidence to support the balances used in financial reports.

% department also needs a system of internal controls to efficiently mana"e stoc$s and to ensure that stoc$ records provide reliable information. Departmental financial reports sho# only the total inventory balance. %nalysts from outside the department can e,amine this balance by usin" ratio analysis or other techni ues. =o#ever, this "ives only a limited assessment of inventory mana"ement and is not ade uate for internal mana"ement. 5ood financial mana"ement necessitates the careful analysis of individual inventory lines. Inventory )ana"ement involves the control of assets bein" produced for the purposes of sale in the normal course of the company's operations. +he "oal of effective inventory mana"ement is to minimi0e the total costs 3 direct and indirect 3 that are associated #ith holdin" inventories. =o#ever, the importance of inventory mana"ement to the company depends upon the e,tent of investment in inventory.

/8

+he tas$ of inventory plannin" can be hi"hly comple, in manufacturin" environments. %t the same time, it rests on fundamental principles. +he system used for inventory must tie into the operations of the firm. Inventory plannin" and mana"ement must be responsive to the needs of the firm. +he firm should desi"n systems, includin" reports that allo# it to ma$e proper business decisions Inventory mana"ement is an important aspect of #or$in" capital mana"ement because inventories themselves do not earn any revenue. =oldin" either too little or too much inventory incurs costs. Costs of carryin" $++ 6 81 inventory are6

2pportunity cost of fore"one interest. (arehousin" costs. Dama"e and pilfera"e. 2bsolescence. Insurance.

Costs of carryin" $++ )&$$)" inventory are6

S$+8, + $ 8+%$%6 3 Aost sales. 3 delayed service.

O!/"!&#- 8+%$%6 3 @rei"ht. 3 order administration. 3 loss of uantity discounts.

)a$in" fre uent small orders can minimi0e carryin" costs but this increases orderin" costs and the ris$ of stoc$3outs. <is$ of stoc$3outs can be reduced by carryin" Osafety stoc$sO 'at a cost* and re3orderin" ahead of time. +he best orderin" strate"y re uires balancin" the various cost factors to ensure the department incurs minimum inventory costs. +he optimum inventory position is $no#n as the Economic <eorder Quantity 'E<Q*. +here are a number of mathematical models 'of varyin" comple,ity* for calculatin" E<Q. /9

%nalytical revie# of inventories can help to identify areas #here inventory mana"ement can be improved. -lo# movin" items, continual stoc$ outs, obsolescence, stoc$ reconciliation problems and e,cess spoila"e are si"nals that stoc$ lines need closer analysis and control. =o#ever, it is important to $eep an overall perspective. It is not cost3effective to closely mana"e a lar"e number of lo# value inventory lines, nor is it necessary. % usual feature of inventories is that a small number of hi"h value lines account for a lar"e proportion of inventory value. +he O>:U2:O rule 'J%<E+2* predicts that >:N of the total value of inventory is represented by only 2:N of the number of inventory items. +hose hi"h value lines need reasonably close mana"ement. +he remainin" >:N of inventory lines can be mana"ed usin" Obroad3brushO strate"ies. +he overall mana"ement philosophy of an or"ani0ation can affect the #ay in #hich inventory is mana"ed. @or e,ample, OLust in +imeO 'LI+* production mana"ement or"ani0es production so that finished "oods are not produced until the customer needs them 'minimi0in" finished "oods carryin" costs*, and ra# materials are not accepted from suppliers until they are needed. 'Aar"e or"ani0ations have the po#er to insist that suppliers hold stoc$s of ra# materials and thereby pass the carryin" cost bac$ to the supplier*. +hus, LI+ inventory strate"ies reduce bottlenec$s and stoc$ holdin" costs.In summary6

+here is a trade3off to be made bet#een carryin" costs, orderin" costs, and stoc$ out costs. +his is represented in the Economic <eorder Quantity 'E<Q* model. Inventories should be mana"ed on a line3by3line basis usin" the >:U2: rule. %nalytical revie# can help to focus attention on critical areas. Inventory mana"ement is part of the overall mana"ement strate"y.

A %2%$"6 0+! "00"8$&9" &#9"#$+!2 6'#'-"6"#$ &#9+)9"% $1!"" % (%2%$"6% #'6")2: 1. Economic order uantity'E2Q* 2. <eorder point /. -toc$ level

/;

COST ASSOCIATED WITH IN5ENTORIES

+he effective mana"ement of inventory involves a trade off bet#een havin" too little and too much inventory. In achievin" this trade off, the @inance )ana"er should reali0e that costs may be closely related. +o e,amine inventory from the cost side, five cate"ories of costs can be identified of #hich three are direct costs that are immediately connected to buyin" and holdin" "oods and the last t#o are indirect costs #hich are losses of revenues that vary #ith differin" inventory mana"ement decisions.

T1" 0&9" 8+%$% +0 1+)/&#- &#9"#$+!&"% '!":

17 )aterial Costs of Inventory6 +hese are the costs of purchasin" the "oods includin" transportation and handlin" costs. 27 2rderin" Costs6 %ny manufacturin" or"ani0ation has to purchase materials. In that event, the orderin" costs refer to the costs associated #ith the preparation of purchase re uisition by the user department, preparation of purchase order and follo#3up measures ta$en by the purchase department, transportation of materials ordered for, inspection and handlin" at the #arehouse for storin". %t times even demurra"e char"es for not liftin" the "oods in time are included as part of orderin" costs. <ead more about orderin" costs 3. Carryin" Costs6 +hese are the e,penses of storin" "oods. 2nce the "oods have been accepted, they become part of the firm's inventories. +hese costs include insurance, rentUdepreciation of #arehouse, salaries of store$eeper, his assistants and security personnel, financin" cost of money loc$ed3up in inventories, obsolescence, spoila"e and ta,es.

/>

47 Cost of funds tied up #ith Inventory6 (henever a firm commits its resources to inventory, it is usin" funds that other#ise mi"ht be available for other purposes. +he firm has lost the use of funds for other profit ma$in" purposes. +his is its opportunity cost. (hatever the source of funds inventory has a cost in terms of financial resources. E,cess inventory represents an unnecessary cost. % =E<2=2ND% lab does not follo# any particular inventory mana"ement techni ue. It ma$es use of the #ei"hted avera"e pricin" techni ue to calculate the price of the inventory. +hey have various cate"ories of inventories and they maintain different reorder levels for different products. +he monthly calculation of the inventory throu"h #ei"hted avera"e method of the chemical products of the company is sho#n in the anne,ure. CASH MANAGEMENT 5ood cash mana"ement can have a ma&or impact on overall #or$in" capital mana"ement. +he $ey elements of cash mana"ement are6

Cash forecastin". Calance mana"ement. %dministration. Internal control. 5ood cash mana"ement re uires re"ular forecasts. In order for these

C'%1 F+!"8'%$&#-.

to be materially accurate, they must be based on information provided by those mana"ers responsible for the amounts and timin" of e,penditure. Capital e,penditure and operatin" e,penditure must be ta$en into account. It is also necessary to collect information about impendin" cash transactions from other financial systems, such as creditors and payroll.

3')'#8" M'#'-"6"#$6 +hose responsible for balance mana"ement must ma$e decisions
about ho# much cash should at any time be on call in the Departmental Can$ %ccount and ho# much should be on term deposit at the various terms available.

/B

+here are various types of mathematical model that can be used. 2ne type is analo"ous to the E<Q inventory model. Ainear pro"rammin" models have been developed for cash mana"ement, sub&ect to certain constraints. +here are also more sophisticated techni ues.

A/6&#&%$!'$&+#. Cash receipts should be processed and ban$ed as

because6

uic$ly as possible

+hey cannot earn interest or reduce overdraft until they are ban$ed. Information about the e,istence and amounts of cash receipts is usually not available until they are processed.

(here possible, cash floats 'mainly petty cash and advances* should be avoided. If, on revie#, the only reason that can be put for#ard for their e,istence is that O#e've al#ays had themO, they should be discontinued. +here may be situations #here they are useful, ho#ever. @or e,ample, it may be desirable for peripheral parts of departments to meet ur"ent local needs from cash floats rather than local ban$ accounts.

I#$"!#') C+#$!+). Cash and cash mana"ement is part of a department's overall internal
control system. +he main internal cash control is invariably the ban$ reconciliation. +his provides assurance that the cash balances recorded in the accountin" systems are consistent #ith the actual ban$ balances. It re uires re"ular clearin" of reconcilin" items. +he $ey to successful cash mana"ement is milestones6
o o o

Capital is provided to e,ecute a business plan Cash use must trac$ "ro#th in enterprise value Enterprise value is measured by milestones, not the fiscal calendar

Cash mana"ement is not cost control

o o

Cost control is a reactive measure usin" crude tools e.". N cuts Cost control often depletes value 'e.". by usin" people as accountin" chips*

CREDITORS MANAGEMENT
7:

Creditors are the businesses or people #ho provide "oods and services in credit terms. +hat is, they allo# us time to pay rather than payin" in cash. +here are "ood reasons #hy #e allo# people to pay on credit even thou"h literally it doesn't ma$e senseI If #e allo# people time to pay their bills, they are more li$ely to buy from your business than from another business that doesn't "ive credit. +he len"th of credit period allo#ed is also a factor that can help a potential customer decidin" #hether to buy from a company or not6 the lon"er the better. Creditors #ill need to optimi0e their credit control policies in e,actly the same #ay as the debtors' turnover ratio. C<EDI+2<- +!<N2EE< <%+I26
C!"/&$+!%> T !#+9"! V %vera"e Creditors 'Cost of -alesU/98*

%s #ith the stoc$ turnover ratio, creditor values relate to the costs of ra# materials, "oods and services DE3TORS MANAGEMENT +he ob&ective of debtor mana"ement is to minimi0e the time3lapse bet#een completion of sales and receipt of payment. +he costs of havin" debtors are6

2pportunity costs 'cash is not available for other purposes*. Cad debts.

Debtor mana"ement includes both pre3sale and debt collection strate"ies.

P!"-%')" %$!'$"-&"% &#8) /":

71

2fferin" cash discounts for early payment andUor imposin" penalties for late payment. %"reein" payment terms in advance. <e uirin" cash before delivery. -ettin" credit limits. -ettin" criteria for obtainin" credit. Cillin" as early as possible. <e uirin" deposits andUor pro"ress payments.

P+%$-%')" %$!'$"-&"% &#8) /":

Jlacin" the responsibility for collectin" the debt upon the center that made the sale. Identifyin" lon" overdue balances and doubtful debts by re"ular analytical revie#s. =avin" an established procedure for late collections, such as 3 a reminder. 3 a letter. 3 cancellation of further credit. 3 telephone calls. 3 use of a collection a"ency. 3 le"al action.

O(H"8$&9"% +0 R"8"&9'()"% 6'#'-"6"#$: +o maintain an optimum level of investment in receivables. +o maintain optimum volume of sales. +o control the cost of credit allo#ed K to $eep it at the minimum possible level. +o $eep do#n the avera"e collection period. +o obtain benefit from the investment in debtors at optimum level.

D"($ C+#$!+) '#/ D"($ C+))"8$&+# P"!&+/

72

Debt control is an important part of business activity because althou"h a debt is an asset, it is not as li uid an asset as cash in the ban$. @irms have to ensure they collect their debts as efficiently as possible #ithin the terms they have set for the debt. +he only #ay #e can consider ho# efficient the firm's debt control has been is to use a ratio. +his ratio is $no#n as the /"($ 8+))"8$&+# ."!&+/.
DE3T COLLECTION PERIOD * 365IIIIIIIIIIIII ?&# /'2%B /"($ $ !#+9"! !'$&+

+he fi"ure measures 'in number of days* ho# lon" on avera"e it has ta$en the firm to collect its debts. +he hi"her the fi"ure the lon"er it has ta$en. =o#ever, the normal period for collectin" debts #ill differ bet#een industries. @or e,ample, a fi"ure of 1: days may sound very impressive, but if this #as the fi"ure for a chain of supermar$ets it #ould be hi"h. +herefore no debt is incurred and retail firms #ill tend to have very fe# debtors and a lo# debt collection period. @irms #ho do a lot of business on credit thou"h #ill have much hi"her debt collection periods.

D"($+!%> T !#+9"!
Debtors control is a vital aspect of #or$in" capital mana"ement. )any businesses need to sell their "oods on credit, other#ise they mi"ht find it difficult to survive if their competitors provide such credit facilities. this could mean losin" customers to the opposition. +he formula for debtors' turnover is6
D"($+!%> T !#+9"! V Net credit sales %vera"e debtors

Debtor1s mana"ement

W+!,&#- C'.&$') C28)"

7/

+he #ay #or$in" capital moves around the business is modeled by the <+!,&#- 8'.&$') 828)". +his sho#s the cash comin" into the business, #hat happens to it #hile the business has it and then #here it "oes. +he #or$in" capital cycle sho#s the movement of cash into and out of the business. +he components of #or$in" capital cycle are the debtors, creditors, ra# materials and cash. +he cycle starts #ith buyin" of ra# materials on credit from the suppliers. +hese suppliers become the creditors of the company. +he ra# materials under"o throu"h different value addition sta"es and are converted into finished "oods. +he finished "oods are sold to the customers on credit #ho become the debtors of the company. %t the end of the credit period the company "ets the cash from the debtors #hom they pay to the creditors and the cycle "oes on. It is must for any company to have an ideal #or$in" capital cycle. It should neither be too lon" nor too short. If the cycle is too lon" the funds "et stuc$ up #ith the debtors and prompt payment to the creditors cannot be made. % simple #or$in" capital cycle may loo$ somethin" li$e6

77

Jayment C%-= C<EDI+2<-

Collection

-upply

DEC+2<-

<%( )%+E<I%A-

-ales @INI-=ED 522D-

Jroduction (.I.J Ealue added conversion

WORKING CAPITAL FINANCING

Can$s are the main institutional sources of #or$in" capital finance in India. %fter trade credit ban$ credit is the most important source of #or$in" capital re uirement of firms in India. % ban$ considers a firm1s sales and production plans and the desirable levels of current assets in determinin" its #or$in" capital re uirements. +he amount approved by the ban$ for the firm1s #or$in" capital is called credit limit.

FORMS OF 3ANK FINANCE.

78

% firm can dra# funds from its ban$s #ithin the ma,imum credit limit sanctioned. It can dra# funds in the follo#in" forms. 4 2verdrafts 4 Cash credit 4 Cills purchasin" or discountin" 4 (or$in" capital loan 4 Aetter of credit TANDON COMMITTEE Ai$e many other activities of the ban$s, method and uantum of short3term finance that can be "ranted to a corporate #as mandated by the <eserve Can$ of India till 1BB7. +his control #as e,ercised on the lines su""ested by the recommendations of a study "roup headed by -hri Jra$ash +andon. +he study "roup headed by -hri Jra$ash +andon, the then Chairman of Jun&ab National Can$, #as constituted by the <CI in Luly 1B;7 #ith eminent personalities dra#n from leadin" ban$s, financial institutions and a #ide cross3section of the Industry #ith a vie# to study the entire "amut of Can$'s finance for #or$in" capital and su""est #ays for optimum utili0ation of Can$ credit. +his #as the first elaborate attempt by the central ban$ to or"ani0e the Can$ credit. +he report of this "roup is #idely $no#n as T'#/+# C+66&$$"" report7 )ost ban$s in India even today continue to loo$ at the needs of the corporates in the li"ht of methodolo"y recommended by the 5roup.%s per the recommendations of +andon Committee, the corporates should be discoura"ed from accumulatin" too much of stoc$s of current assets and should move to#ards very lean inventories and receivable levels. +he committee even su""ested the ma,imum levels of <a# )aterial, -toc$3in3 process and @inished 5oods #hich a corporate operatin" in an industry should be allo#ed to accumulate these levels #ere termed as inventory and receivable norms. 79

Dependin" on the si0e of credit re uired, the fundin" of these current assets '#or$in" capital needs* of the corporates could be met by one of the follo#in" methods6

F&!%$ M"$1+/ +0 L"#/&#-:

Can$s can #or$ out the #or$in" capital "ap, i.e. total current assets less current liabilities other than ban$ borro#in"s 'called )a,imum Jermissible Can$ @inance or )JC@* and finance a ma,imum of ;8 per cent of the "ap. the balance to come out of lon"3term funds, i.e., o#ned funds and term borro#in"s. +his approach #as considered suitable only for very small borro#ers i.e. #here the re uirements of credit #ere less than <s.1: lacs. +his method #ill "ive a minimum current ratio of 161 S"8+#/ M"$1+/ +0 L"#/&#-: !nder this method, it #as thou"ht that the borro#er should provide for a minimum of 28N of total current assets out of lon"3term funds i.e., o#ned funds plus term borro#in"s. % certain level of credit for purchases and other current liabilities #ill be available to fund the build up of current assets and the ban$ #ill provide the balance ')JC@*. Conse uently, total current liabilities inclusive of ban$ borro#in"s could not e,ceed ;8N of current assets. <CI stipulated that the #or$in" capital needs of all borro#ers en&oyin" fund based credit facilities of more than <s. 1: lacs should be appraised 'calculated* under this method this method #ill "ive a current ratio of 1./61. W+!,&#- C'.&$') '%%"%%6"#$ +# $1" 0+!6 )' .!"%8!&("/ (2 $1" T'#/+# C+66&$$""7 (or$in" Capital <e uirement '(C<* V WCurrent assets i.e. C% 'as per industry norms* D Current Aiabilities i.e. CAX Jermissible Can$ @inancin" WJC@Y V (C< D Jromoter1s )ar"in )oney i.e. J)) 'to be brou"ht in by the promoter* A% ."! F+!6 )' 16 J)) V 28N of WC% D CAX and thereby JC@ V ;8N of WC% D CAX A% ."! F+!6 )' 26 J)) V 28N of C% and thereby JC@ V ;8NWC%X D CA 7;

%s is apparent @ormula 2 re uires a hi"her level of J)) as compared to @ormula 1. @ormula 2 is "enerally adopted in case of ban$ financin". In cases of sic$ units #here the promoter is unable to brin" in J)) to the e,tent re uired under @ormula 2, the difference in J)) bet#een @ormulae 1 and 2 may be provided as a (or$in" Capital +erm Aoan repayable in installments over a period of time.

)E+=2D- @2< DE+E<)ININ5 JE<)I--ICAE C%NM C2<<2(IN5-

1st method 'a* 'b* 'c* 'd* 'e* Current assets'C%* Current liabilities'CA* (or$in" capital "ap 'C%3CA*'a3b* Corro#er1s contribution Jermissible ban$ finance,'c3d* 1:: 2: >: 2:'28N of c* 9:

2nd method 1:: 2: >: 28'28N :f a* 88

T1" 6'&# 0'8$+!% %"/ &# $1" "%$&6'$&+# +0 <+!,&#- 8'.&$') !"G &!"6"#$:

+he nature of business and sector3#ise norms @actors such as seasonality of ra# materials or of demand may re uire a hi"h level of inventory bein" maintained by the company. -imilarly, industry norms of credit allo#ed to buyers determine the level of debtors of the company in the normal course of business.

+he level of activity of the business Inventories and receivables are normally e,pressed as a multiple of a day1s production or sale. =ence, hi"her the level of activity, hi"her the uantum of inventory, receivables and thereby #or$in" capital re uirement of the business. -o in order to arrive at the #or$in" capital re uirement of the business for the year, it is essential to determine the level of production that the business #ould achieve. In case of #ell3established businesses, the previous year1s actual and the mana"ement pro&ections for the year provide "ood indicators. +he problems arise mainly in the case of determinin" the limit for the first

7>

time or in the initial fe# years of the business. Can$s often adopt industry standard norms for capacity utili0ation in the initial years.

S$".% &#9+)9"/ &# '!!&9&#- '$ $1" )"9") +0 <+!,&#- 8'.&$') !"G &!"6"#$:
Cased on the level of activity decided and the unit cost and sales price pro&ections, the ban$s calculate at the annual sales and cost of production. +he uantum of current assets 'C%* in the form of <a# )aterials, (or$3in3pro"ress, @inished "oods and <eceivables is estimated as a multiple of the avera"e daily turnover. +he multiple for each of the current assets is determined "enerally based on the industry norms. +he current liabilities 'CA* in the form of credit availed by the business from its creditors or on its manufacturin" e,penses are deducted from the current assets 'C%* to arrive at the (or$in" Capital <e uirement '(C<*. +he issue of computation of #or$in" capital re uirement has aroused considerable debate and attention in this country over the past fe# decades. % directed credit approach #as adopted by the <eserve Can$ of ensurin" the flo# of credit to the priority sectors for fulfillment of the "ro#th ob&ectives laid do#n by the planners. Conse uently, the uantum of ban$ credit re uired for achievin" the re uisite "ro#th in Industry #as to be assessed. Earious committees such as the T'#/+# C+66&$$"" and the C1+!" C+66&$$"" #ere constituted and studied the problem at len"th. Norms #ere fi,ed re"ardin" the uantum of various current assets for different industries 'as multiples of the avera"e daily output* and the )a,imum Jermissible Can$ @inancin" ')JC@* #as capped at a certain percenta"e of the #or$in" capital re uirement thus arrived at.

7B

N"-'$&9" W+!,&#- C'.&$')

-ome companies can "enerate cash so uic$ly they actually have a ne"ative #or$in" capital. +his is "enerally true of companies in the restaurant business ')cDonalds had a ne"ative #or$in" capital of P9B>.8 million bet#een 1BBB and 2:::*. %ma0on.com is another e,ample. +his happens because customers pay upfront and so rapidly, the business has no problems raisin" cash. In these companies, products are delivered and sold to the customer before the company ever pays for them.

% ne"ative #or$in" capital is a si"n of mana"erial efficiency in a business #ith lo# inventory and accounts receivable '#hich means they operate on an almost strictly cash basis*. In any other situation, it is a si"n a company may be facin" ban$ruptcy or serious financial trouble

8:

CHAPTER-4

DATA ANALYSIS

81

-i0e and "ro#th of current assets and liabilities and Net #or$in" capital of =E<2=2ND% durin" the period 2;;5-;6 $+2;;:-1;

?A)) '6+ #$% '!" &# C!B Y"'! C !!"#$ G!+<$ C !!"#$ G!+<$ N"$ A%%"$% 1 R'$" L&'(&)&$&"% 1 R'$" W7C ?JB ?JB 18::B; ; 19>>;/ / 2/:;9: 7 218:11 : 2:112; 2 1:: 112.8 18/.;7 17/.27 1//.BB >9299> 1:2B2:> 1188187 1/8B198 17;:2>7 1:: 11B 1/7 18; 1;: 9/>/:1 98B828 118278 : ;B:B78 87:B>> G!+<$1 +0 W7C ?JB 1:: 1:/ 1>: 12/ >7

2;;5-;6 2;;6-;7 2;;7-;8 2;;8-;: 2;;:-1;

82

Asset,libilities And Working Capital

2500000 2000000 1500000 1000000 500000 0
Year Current Assets Current Liabilities

2005-2010 Years

8/

WORKING CAPITAL TURNO5ER RATIO ?A)) '6+ #$% '!" &# C!B
Y"'! S')"% 297>;B1 /72/18/ 72288:9 /B:1/;8 7;7>/87 N"$<+!,&#- C'.&$') 9/>/:B 98B828 118278: ;B:B78 87:B>> R'$&+ 7.18 8.1B /.9B 7.B/ >.;;

2;;5-;6 2;;6-;7 2;;7-;8 2;;8-;: 2;;:-1;

Current Ratio
10 8 6 4 2 0 2005-06 2006-07 2007-08 2008-09 2009-10

Ratio

$ !#+9"! R'$&+: Debtors +urnover <atio e,presses the relationship bet#een debtors and sales. % hi"h Debtors +urnover <atio or lo# Debt collection period is indicative of sound credit mana"ement policy.

87

T'()" %1+<% D"($+!% T !#+9"! R'$&+ +0 HEROHONDA / !&#- 2;;5-;6 $+ 2;;:-1;

?A)) '6+ #$% '!" &# C!B

Y"'! N"$ C!"/&$ S')"% A9-7 D"($ R'$&+

2;;5-;6
297>;B1 89;B/1 7.9;

2;;6-;7
/:7/77> 9>22>B 7.79

2;;7-;8
/B28/28 9128B: 9.27

2;;8-;:
/9177;1 7727B> >.1;

2;;:-1;
771;9;; 7;>72 B./7

88

Debitor Turnover Ratio

10 8 6 4 2 0 2005-06 2006-07 2007-08 2008-09 2009-10

Ratio

@rom the above table, it is observed that the =E<2=2ND%1s debtor1s turnover ratio sho#s a "ood si"h. +he company noted a ma,imum ratio of B./7 in the yearD 2::B31: and the ma,imum ratio of 7.79 in the year of 2::83:9 If #e observed the above table the ratio is increasin" from 7.79 in the year 2::83:9to B./7 in the year 2::>3:Bin the year but it is decreased to 7.79 in the year 2::83:9. It sho#s a "ood si"n for the company.

89

C !!"#$ R'$&+:
It is the ratio of the current assets current liabilities this ratio is used to $no# the company1s ability to meet its current obli"ations. +he standard norm for the current ratio is 261 C !!"#$ !'$&+ * 8 !!"#$ A%%"$% K C !!"#$ )&'(&)&$&"%7 T'()" %1+<&#- 8 !!"#$ !'$&+ +0 HEROHONDA / !&#- $1" ."!&+/ 2;;5-;6 $+ 2;;:-1; ?A)) '6+ #$% '!" &# C!B
Y"'! C !!"#$ A%%"$% C !!"#$ L&'(&)&$&"% R'$&+

2;;5-;6
18::B;; >9299> 1.;7

2;;6-;7
19>>;// 1:2B2:> 1.97

2;;7-;8
2/:;9:7 1188187 1.BB

2;;8-;:
218:11: 1/8B198 1.87

2;;:-1;
2::B87; 172;>2> 1.7:

8;

Qui k Ratio
2.5 2 1.5 1 0.5 0 2005-06 2006-07 2007-08 2008-09 2009-10
It is observed that the =E<2=2ND%1s current ratioo#in" a increasin" trend.

Ratio

the company1s li uidity position is satisfactory +he current ratio increased sli"htly up to 2::;3:>. Cut in 2::>3:B it declined because of increase in current liabilities, and then it started to decrease further in2::>3:B as 1.7:. if the company maintains to increase the ratio it can meet obli"ations.

8>

F &8, R'$&+:
Quic$ ratio is relation bet#een uic$ assets and current liabilities. +he term uic$ assets, #hich can be converted into cash #ith a short notice. +his cate"ory also includes cash ban$ balances short D term investments and receivables. F &8, !'$&+ * F &8, A%%"$% K 8 !!"#$ )&'(&)&$&"% +able sho#in" uic$ ratio of =E<2=2ND% durin" the period 2::7 3 2::83:9 to 2::>3:B D 2::B31:

?A)) '6+ #$% '!" &# C!B

Y"'! C !!"#$ A%%"$% C !!"#$ L&'(&)&$&"% R'$&+

2;;5-;6
>;:78B >9299> 1.:1

2;;6-;7
B2//8/ 1:2B2:> :.>B

2;;7-;8
1:89>82 1188187 :.B1

2;;8-;:
1::8>9/ 1/8B198 :.;7

2;;:-1;
1:>2B:2 172;>2> :.;9

8B

Qui k Ratio
1.5 1 Ratio 0.5 0 2005-06 2006-07 2007-08 2008-09 2009-10

It is observed from the table that the =E<2=2ND%1s Quic$ <atio is satisfactory. +he company has noted a ma,imum ratio of 1.:1 in the year of 2::;3:> D 2::>3:B. E,cept the 2::83:9 year, the remainin" is belo# the standard of the norm 161. Cut #e observed the ratio of the company, it is decreasin" "radually. so it is a bad si"n for the company.

9:

C+6.+%&$&+# +0 8 !!"#$ A%%"$% ?')) $1" '6+ #$% '!" &# C!B

P'!$&8 )'!% I#9"#$+!2 S #/!2 D"($+!% C'%1 '#/ 3'#, L+'#% = A/9'#8"% O$1"! 8 !!"#$ A%%"$%

2;;5 L ;6 63;518 '72N* 7;81;7 '7;.1;N* 56675 '/.;;N* 1;5677 ';.:7N* --

2;;6-;7 76538; '78./2N* 656472 '/>.>;N* 355;2 '2.1N* 2:;32 '1.;1N* 2;2347

2;;7-;8 125;752 '87.2N* 5687;7 '27.97N* 25;34 '1.:>N* :338; '7.:7N* 36:731

2;;8-;: 1144247 '8/.71N* 316288 '17.;1N* 58827 '2.;7N* 1:2467 '>.B8N* 438281

2;;:-1; :26645 '79.:;N* 52336; '2/.:2N* 17636 '2.;7N* 2;4545 '1:.92N* 33:;86

A9-7 48716 3;717 4711 6738 127:4

T+$')

15;;:77 '1::N*

1688744 '1::N*

23;76;4 '1::N*

215;11; '1::N*

2;11272 '1::N*

91

PROFIT AND LOSS ACCOUNT: +he income statement is also called as income statement, it is considered to be the most useful of all financial statements. It prepared by a business concern in order to $no# the profit earned and loss sustained durin" a specified period. It e,plains #hat has happened to a business as a result of operations bet#een t#o balance sheet dates. @or this purpose it matches the revenues and cost incurred in the process of earnin" revenues and sho#s the net profit earned or loss suffered durin" a particular period. +he nature of Income #hich is a focus of the income statement can be #ell understood if business is ta$en as an or"ani0ation that uses FInputH to produce F2utputH. +he output of the "oods and services that the business provides to its customers. +he values of these outputs are 92

the "oods and services that the business provides to its customers. +he values of these outputs art the amounts paid by the customers for them. +hese amounts are called FrevenuesH in the accountin". +he inputs are the economic resources used by the business in providin" these "oods and services. +hese are termed Fe,pensesH in accountin". S$'$"6"#$% +0 .!+0&$ = )+%% 0+! $1" 2"'! "#/"/ D"8 31D 2;;5-;6 ?A)) '6+ #$ &# C! +0 ! .""%B
PART C!LAR" !"C#$%& sales and servi es sales &'ross( less* e+#ise %ut, -et sales A%%* ser.i#e n#o/es ot$er in#o/es T0TAL&A( %'(%"D!T)R%& 1aterial #osts %e#rease2in#rease in sto#3 e+#ise %ut, on sto#3s) s#ra4 sales et#.) e/4lo,ee #osts /anu5a#turin' an% ot$er e+4enses 6e4re#iation nterest /is#ellaneous e+4en%iture 7ritten o55 T0TAL&8( 4ro5it be5ore ta+&A-8( TA9AT 06e5erre% "et pro*it *or t+e ,ear Pro5it : loss a2# be'innin' o5 t$e ,ear Pro5it : loss a2# en% o5 t$e ,ear ;arnin's 4er s$are basi# : %ilute% 14 15 16 17 18 1)232)971 &93)224( 29)236 426)585 314)637 157)225 24)758 5)300 2)097)488 &49)891( -------&49)891( &420)294( &470)185( 1)737)661 &28)949( 32)655 482)580 382)604 143)832 25)793 2)759 2)778)935 157)875 ----&46)315( 111)560 &470)185( &358)625( 5.60 13 1)983)391 286)365 1)697)026 224)878 1)921)904 125)693 2)047)597 3)015)714 366)923 2)648)791 173)847 2)822)638 114)172 2)936)810 "#$e%ule 2004-05 2005-06

9/

S$'$"6"#$% +0 .!+0&$ = )+%% 0+! $1" 2"'! "#/"/ D"8 31D 2;;6-;7 ?A)) '6+ #$% &# C! +0 ! .""%B
PART C!LAR" !"C#$%& sales and servi es sales &'ross( less* e+#ise %ut, -et sales A%%* ser.i#e n#o/es ot$er in#o/es T#TA-.A/ %'(%"D!T)R%& 1aterial #osts %e#rease2in#rease in sto#3 e+#ise %ut, on sto#3s) s#ra4 sales et#.) e/4lo,ee #osts /anu5a#turin' an% ot$er e+4enses 6e4re#iation nterest /is#ellaneous e+4en%iture 7ritten o55 T#TA-.0/ (ro*it be*ore ta1.A-0/ TA9AT 0#urrent&-et o5 e+#ess 4ro.isions o5 earlier ,ear 7ritten ba#3 rs.5086&2002 nil( 6e5erre% "et pro*it *or t+e ,ear Pro5it : loss a2# be'innin' o5 t$e ,ear Pro5it : loss a2# en% o5 t$e ,ear ;arnin' 4er s$are basi# : %ilute% 14 1)737)661 15 &28)949( 32)655 16 482)580 17 382)604 143)832 18 25)793 2)759 2)778)935 157)875 ----&46)315( 111)560 &470)185( &358)625( 5.60 2)219)601 &59)818( 1)933 588)770 378)026 174)202 44)428 ---3)347)142 57)473 &86( &40)971( 16)588 &358)625( &342)037( 0.80 3)015)714 366)923 2)648)791 173)847 2)822)638 13 114)172 2)936)810 3)423)153 379)705 3)043)448 102)182 3)145)630 258)985 3)404)615 "#$e%ule 2005-06 2006-07

97

S$'$"6"#$% +0 .!+0&$ = )+%% 0+! $1" 2"'! "#/"/ D"8 31D 2;;7-;8 ?A)) '6+ #$% &# C! +0 ! .""%B
PART C!LAR" !"C#$%& sales and servi es sales &'ross( less* e+#ise %ut, -et sales A%%* ser.i#e n#o/es ot$er in#o/es T#TA-.A/ %'(%"D!T)R%& 1aterial #osts %e#rease2in#rease in sto#3 e+#ise %ut, on sto#3s) s#ra4 sales et#.) e/4lo,ee #osts /anu5a#turin' an% ot$er e+4enses 6e4re#iation nterest /is#ellaneous e+4en%iture 7ritten o55 T#TA-.0/ (ro*it be*ore ta1.A-0/ TA9AT 0#urrent&-et o5 e+#ess 4ro.isions o5 earlier ,ear 7ritten ba#3 rs.5086&2002 nil( 6e5erre% "et pro*it *or t+e ,ear Pro5it : loss a2# be'innin' o5 t$e ,ear Pro5it : loss a2# en% o5 t$e ,ear ;arnin's 4er s$are basi# : %ilute% 14 2)219)601 15 -59)818 1)933 16 588)770 17 378)026 174)202 18 44)428 ----3)347)142 57)473 &86( &40)971( 16)588 &358)625( &342)037( 0.80 3)387)645 -315)934 17)657 668)065 446)527 208)101 36)532 -----4)448)593 &29)974( -----&3)779( &33)753( &342)037( &375)790( 1.55 3)423)153 379)705 3)043)448 102)182 3)145)630 13 258)985 3)404)615 4)255)506 330)181 3)925)325 66)668 3)991)993 426)626 4)418)619 "#$e%ule 2006-07 2007-08

98

S$'$"6"#$% +0 .!+0&$ = )+%% 0+! $1" 2"'! "#/"/ D"8 31D 2;;8-;: ?A)) '6+ #$% &# C! +0 ! .""%B
PART C!LAR" !"C#$%& sales and servi es sales &'ross( less* e+#ise %ut, -et sales A%%* ser.i#e n#o/es ot$er in#o/es T#TA-.A/ %'(%"D!T)R%& 1aterial #osts %e#rease2in#rease in sto#3 e+#ise %ut, on sto#3s) s#ra4 sales et#.) e/4lo,ee #osts /anu5a#turin' an% ot$er e+4enses 6e4re#iation nterest /is#ellaneous e+4en%iture 7ritten o55 T#TA-.0/ (ro*it be*ore ta1.A-0/ Pro.ision 5or ta+ation Current Ta+ <rin'e bene5it Ta+ 6e5erre% "et pro*it *or t+e ,ear Pro5it : loss a2# be'innin' o5 t$e ,ear Pro5it : loss a2# en% o5 t$e ,ear ;arnin' 4er s$are basi# : %ilute% 14 3)387)645 15 -315)934 17)657 16 17 18 668)065 446)527 208)101 36)532 2)828)104 186)135 10)414 612)4 67 508)751 240)224 69)032 "#$e%ule 2007-08 2008-09

4)255)506 330)181 3)925)325 66)668 3)991)993 13 426)626 4)418)619

3)903)005 288)534 3)614)471 67)362 3)681)833 493)559 4)175)392

4)448)593 &29)974( ------&3)779( &33)753( &342)037( &375)790( 1.55

4)455)127 &279)735( &4000( &8056( ---&291)791( &375)790( &667)581( 13.25

99

S$'$"6"#$% +0 .!+0&$ = )+%% 0+! $1" 2"'! "#/"/ D"8 31D 2;;:-1; ?A)) '6+ #$% &# C! +0 ! .""%B
PART C!LAR" !"C#$%& sales and servi es sales &'ross( less* e+#ise %ut, -et sales A%%* ser.i#e n#o/es ot$er in#o/es T#TA-.A/ %'(%"D!T)R%& 1aterial #osts %e#rease2in#rease in sto#3 e+#ise %ut, on sto#3s) s#ra4 sales et#.) e/4lo,ee #osts /anu5a#turin' an% ot$er e+4enses 6e4re#iation nterest /is#ellaneous e+4en%iture 7ritten o55 T#TA-.0/ (ro*it be*ore ta1.A-0/ Pro.ision 5or ta+ation #urrent ta+ation 5rin'e bene5it ta+ "et pro*it *or t+e ,ear Pro5it : loss a2# be'innin' o5 t$e ,ear Pro5it : loss a2# en% o5 t$e ,ear ;arnin's 4er s$are basi# : %ilute% 14 2)828)104 15 186)135 10)414 16 612)467 17 508)751 240)224 18 69)032 3)722)053 88)800 25)085 685)159 466)859 292)689 133)955 "#$e%ule 2008-09 2009-10

3)903)005 288)534 3)614)471 67)362 3)681)833 13 493)559 4)175)392

4)748)354 330)678 4)417)676 37)428 4)455)104 386)261 4)841)365

4)455)127 &279)735( &4000( &8056( &291)791( &375)790( &667)581( 13.25

5)414)600 &573)235( ---&7)355( &580)590( &667)581( &1)248)171( 26.37

9;

3')'#8" %1""$
Calance sheet is a statement of financial position of a business at a specified moment of time. It represents all assets o#n by the business at a particular moment of time and the claim of the o#ners and outsiders a"ainst those assets at that time. It in a #ay of the financial condition of the business at that time. +he important distinct an income statement and balance sheet is that the income statement is for a period #hile balance #hich is for a particular date. Income statement is therefore a flo# report, as contrasted #ith the balance sheet #hich is a static report C+6.'!'$&9" 3')'#8" S1""$% +he comparative balance sheet analysis is the study of the same items, "roup of items and computed items in t#o or more balance sheets of the same enterprise on different dates. +he chan"es in periodic balance sheet items reflect the conduct of a business. +he chan"es can be observed by comparison of the balance sheet at the be"innin" and at the end of a period and these chan"es can help in informin" an opinion about the pro"ress of and enterprise.

9>

3')'#8" S1""$ +0 HEROHONDA 7D !&#- $1" 2"'! 2;;5-;6 MMA)) '6+ #$% '!" &# C!
200405 Amou n #$%RCE# $& &%'(# #hare Hol!er) &un!) Share Capital Reserves and Surplus !dvance share !pplicati"n !#"unt *A+ $"an %unds Secured $"ans &nsecured $"ans *B+ *A 1B+ 2 * C + APPL3CAT3$' $& &%'(# &i4e! A))e ) 'r"ss (l"c) $*SS+ !ccu#ulated Depreciati"n ,et -l"c) !DD+ Capital ."r) in pr"/ress 0includin/ Capital !dvances12 ,et %i3ed !ssets held 4"r disp"sal *(+ 3n5e) men ) *E+ (eferre! Ta4 A))e -'e *&+ Curren A))e )6 Loan) an! A!5an7e) Invent"ries Sundr5 De(t"rs 199053 4 21864 ,,098166539 0 -665. 9 ,.050 ,0 199053 4 362394 ,.5,9 ,8 200909 180000 .8090 9 ,0..8 .0 19 862 8 588836 1389 9 2 248639 0 -6.8/ .-0/0 90/., 630518 0810 -/.0/ 0 343 0 18000 0 ,-/.0 0 .58-0 25 0 -, 9 -5 0 143 4 0 66 200506 Amoun Inc/De c Amou n

"

189464 446313 144833 0 3693 856 -/855 09 -0/0 0 561630 38 1

83985 14252 3 -58538 21224 6 -856 -5685 , 0 90/., 68888 32033 6

4 32 4 58 3 10 10 0 -0 0 -0 0 12 83

9B

Cash and (an) (alances $"an and !dvances "ther current !ssets *8+ $ess+ Current $ia(ilities and 6r"visi"ns Current $ia(ilities 6r"visi"ns *H+ 'e Curren A))e ) *8 - H+ 2 *3+ 7iscellane"us *3penditure 08ritten "441 Profi an! Lo)) A77oun *9+ To al *(1E1&1319+

2483 103140 -000. 08 614498 46 23 66-,, /-005 . 2 59 /00-8 5 ,.050 ,0

566 5 1056 -5009 00 809145 53523 86,66 8 6.8.0 9 0 .586, 5 ,0..8 .0

31838 253 /,.59 9 19464 6800 ,0-// 0 ,,-,5 6 -2 59 ---56 0 .58-0

12 8 2 .9 32 15 .0 5. 10 0 ,/ -5

I#$"!.!"$'$&+# ?2;;5-;6B:

1. +he comparative balance sheet of the company durin" the year 2::83:9 records that the current assets have increased by 72/8BB Cr i.e.,/BN 2. Cecause of increase in current assets #e can say that the short D term solvency of the company is "ood. /. +he current liabilities have increased by 2:177; Cr i.e.,/:.7N 7. @i,ed assets have decreased by 18/;:> Cr i.e.,1:N 8. +he shareholders funds of the company have increased #hen compared to previous year. -o #e can say that lon"3term solvency of the company is satisfactory. ;:

9. +here is increase in #or$in" capital of 222182 Cr #hen compared to the previous year. -o #e can say that the financial position of the company is "ood.

3')'#8" S1""$ +0 HEROHONDA7 D !&#- $1" 2"'! 2;;6-;7 MMA)) '6+ #$% '!" &# C!
200506 Amoun #$%RCE# $& &%'(# #hare Hol!er) &un!) Share Capital Reserves and Surplus !dvance share !pplicati"n !#"unt *A+ 19905 34 362394 ,.5,9 210199 5 362394 ,/6/. 11146 1 0 ---/6 5 0 5 20060 Amou n Inc/De c Amou n "

;1

,8 $"an %unds Secured $"ans &nsecured $"ans *B+ *A 1B+ 2 *C+ 200909 180000 .8090 9 ,0..8 .0

89 1361 9 293101 /,9,8 0 ,89.6 69

-64 30 11310 1 /8.0-598. , -32 63 -. 6

APPL3CAT3$' $& &%'(# &i4e! A))e ) 'r"ss (l"c) $*SS+ !ccu#ulated Depreciati"n ,et -l"c) !DD+ Capital ."r) in pr"/ress 0includin/ Capital !dvances12 ,et %i3ed !ssets held 4"r disp"sal *(+ 3n5e) men ) (eferre! Ta4 A))e -'e *&+ Curren A))e )6 Loan) an! A!5an7e) Invent"ries Sundr5 De(t"rs Cash and (an) (alances $"an and !dvances "ther current !ssets *8+ $ess+ Current $ia(ilities and 6r"visi"ns Current $ia(ilities 6r"visi"ns *H+ 'e Curren A))e ) *8 H+ 2 *3+ 7iscellane"us *3penditure 08ritten *E+ 19 862 8 588836 1389 9 2 248639 163843 1 -6.8/ .-0/0 90/., 240188 4 63652 163823 2 19 3 4 183560 6 0 -8.56 06 /0 56/642325 6 1 481 6 24844 0 -51265 19 15 5 0 -90-0 5 --000 /09013486 2 -51635 -151 3 125 0 2 0 -8005 6 94880 1660 -665/ 0 ,-,-6 21 30 18 21 12 0 -, 96 /,

630518 0810 506 5 1056 0 -5009 00 809145 53523 86,66 8 6.8.0 9

65380 6564 2 35502 2313 9 0 -6880 .. 904025 125183 -0,9, 08 6595, 5

21 -31 11 8 0 -. 12 13 4 -9 .

;2

"441 Profi an! Lo)) A77oun *9+ To al *(1E1&1319+

.586, 5 ,0..8 .0

./,0. 0 ,89.6 69

-6588 -598. ,

-5 6

I#$"!.!"$'$&+# ?2;;6-;7B
1. +he comparative balance sheet of the company durin" the years 2::93:; records that the current assets have increased by 1>;;89 Cr i.e.,1/N 2. Cecause of increase in current assets #e can say that the short D term solvency of the company is "ood. /. +he current liabilities have increased by 19987: Cr i.e.,1BN 7. @i,ed assets have decreased by 1B;1;8 Cr i.e.,12N 8. +he shareholders funds of the company have increased #hen compared to previous year. -o #e can say that lon"3term solvency of the company is satisfactory. 9. +here is an increase in #or$in" capital of 212219 Cr #hen compared to the previous year. -o #e can say that the financial position of the company is "ood.

;/

3')'#8" S1""$ +0 HEROHONDA7 D !&#- $1" 2"'! 2;;7-;8 MMA)) '6+ #$% '!" &# C!
20060 Amou n #$%RCE# $& &%'(# #hare Hol!er) &un!) Share Capital Reserves and Surplus !dvance share !pplicati"n !#"unt *A+ $"an %unds Secured $"ans &nsecured $"ans *B+ *A 1B+ 2 *C+ 210199 5 362394 ,/6/. 89 1361 9 293101 /,9,8 0 ,89.6 69 220186 1 362394 ,56/, 55 32440 5498 4 80/,8 ./.85 .6 99866 5 0 / 13 8 88 -0 / -9 200 08 Amou n Inc/De c Amou n "

99866 18822 8 256 3 //500 5//86 0

APPL3CAT3$' $& &%'(# &i4e! A))e ) 'r"ss (l"c) $*SS+ !ccu#ulated Depreciati"n ,et -l"c) !DD+ Capital ."r) in pr"/ress 240188 4 63652 163823 2 19 3 4 2 33 1 1 964819 1 6889 2 8 601 33182 14 20116 26 13066 0 8 -56

;7

109 3 0includin/ Capital !dvances12 ,et %i3ed !ssets held 4"r disp"sal *(+ 3n5e) men ) *E+ (eferre! Ta4 A))e -'e *&+ Curren A))e )6 Loan) an! A!5an7e) Invent"ries Sundr5 De(t"rs Cash and (an) (alances $"an and !dvances "ther current !ssets *8+ $ess+ Current $ia(ilities and 6r"visi"ns Current $ia(ilities 6r"visi"ns *H+ 'e Curren A))e ) *8 - H+ 2 *3+ 7iscellane"us *3penditure 08ritten "441 Profi an! Lo)) A77oun *9+ To al *(1E1&1319+ 183560 6 0 -8.56 06 /0 56/6185649 3 1081 -8505 0/ /0 5,68, 1250 5 2 568 0 25034 369 31 93380 ,.006 0/ 100108 3 1540 1 --555/ --5,/ 50 .0509 0 ./.85 .6 2088 1081 ,-968 0 -.009 4853 2 -8 65 -10468 16 38 4 64348 6-880 63 -13 -29 83 22 2 .0 1 0 0

65380 6564 2 35502 20234 29032 -6880 ..

904025 125183 -0,9, 08 6595, 5 ./,0. 0 ,89.6 69

9 058 28888 -,59/ 6 /9,9, 5

11 23 -, 05

..05. 5//86 0

-0 -9

I#$"!.!"$'$&+# ?2;;7-;8B

1. +he comparative balance sheet of the company durin" the years 2::;3:> records that the current assets have increased by 91>>;1 Cr i.e.,/;N ;8

2. Cecause of increase in current assets #e can say that the short D term solvency of the company is "ood. /. +he current liabilities have increased by 128B79 Cr i.e.,12N 7. @i,ed assets have increased by 21B9> Cr. 8. +he shareholders funds of the company have increased #hen compared to previous year. -o #e can say that lon"3term solvency of the company is satisfactory. 9. +here is increase in #or$in" capital of 7B2B28 Cr #hen compared to the previous year. -o #e can say that the financial position of the company is "ood.

3')'#8" S1""$ +0 HEROHONDA 7D !&#- $1" 2"'! 2;;8-;: MMA)) '6+ #$% '!" &# C!
200 08 200809 Inc/De c

;9

Amou n #$%RCE# $& &%'(# #hare Hol!er) &un!) Share Capital Reserves and Surplus !dvance share !pplicati"n !#"unt *A+ $"an %unds Secured $"ans &nsecured $"ans *B+ *A 1B+ 2 * C + APPL3CAT3$' $& &%'(# &i4e! A))e ) 'r"ss (l"c) $*SS+ !ccu#ulated Depreciati"n ,et -l"c) !DD+ Capital ."r) in pr"/ress 0includin/ Capital !dvances12 ,et %i3ed !ssets held 4"r disp"sal *(+ 3n5e) men ) *E+ (eferre! Ta4 A))e -'e Curren A))e )6 Loan) an! A!5an7e) Invent"ries Sundr5 De(t"rs Cash and (an) (alances $"an and !dvances "ther current !ssets 220186 1 362394 ,56/, 55 32440 5498 4 80/,8 ./.85 .6 2 33 1 1 964819 1 6889 2 8 601 185649 3 1081 -8505 0/ /0 5,68,

Amou n 220186 1 362394 ,56/, 55 384509 100359 4 -.880. .95,. 58 344102 3 118 42 5 225359 8 18 512 0 ,//--0 /0 5,68,

Amou n

"

0 0 0 60102 453 2 0 5-.8, , 5-.8, , 0 31 2 22260 6 484 0 6 99911 -1081 58.5. 6 /0 5,68, 10650 5 25241 9 33 93 9908 68550

0 0 0 19 83 -5 -5

26 23 2 11 4 0 .0 0

*&+

1250 5 2 568 0 25034 93380 369 31

114424

-9 -44 13 5 10 6 19

316288 5882 19246 438281

;;

*8+ $ess+ Current $ia(ilities and 6r"visi"ns Current $ia(ilities 6r"visi"ns *H+ 'e Curren A))e ) *8 H+ 2 *3+ 7iscellane"us *3penditure 08ritten "441 Profi an! Lo)) A77oun To al *(1E1&1319+ *9+

,.006 0/ 100108 3 1540 1 --555/ --5,/ 50 .0509 0 ./.85 .6

,-50-0 119201 2 16 153 -.5965 0909/ 5 66058 .95,. 58

-50/9 / 19092 9 13082 ,0/0.6-50 5 ,9-09 5-.8, ,

-0

19 8 -8 .-

08 -5

I#$"!.!"$'$&+# ?2;;8-;:B:

1. +he comparative balance sheet of the company durin" the years 2::>3:B records that the current assets have decreased by 18;7B7 Cr i.e.,;N 2. Cecause of decrease in current assets #e can say that the short D term solvency of the company is not "ood. /. +he current liabilities have increased by 2:7:11 Cr i.e., 1>N 7. @i,ed assets have increased by 8>/8/9 Cr i.e.,1:N

;>

8. +he shareholders funds of the company have increased #hen compared to previous year. -o #e can say that lon"3term solvency of the company did not yield any increase #hen compared to previous year. 9. +here is an decrease in #or$in" capital of /918:8 Cr compared to the previous year. ;. =ence the financial position of the company is not satisfactory.

3')'#8" S1""$ +0 HEROHONDA7 D !&#- $1" 2"'! 2;;:-1;

MMA)) '6+ #$% '!" &# C!
200809 Amou n #$%RCE# $& &%'(# #hare Hol!er) &un!) Share Capital Reserves and Surplus !dvance share !pplicati"n !#"unt *A+ $"an %unds 220186 1 362394 ,56/, 55 220186 1 362394 ,56/,5 5 0 0 0 0 0 0 2009-10 Amoun Inc/De c Amou n

"

;B

Secured $"ans &nsecured $"ans *B+ *A 1B+ 2 * C + APPL3CAT3$' $& &%'(# &i4e! A))e ) 'r"ss (l"c) $*SS+ !ccu#ulated Depreciati"n ,et -l"c) !DD+ Capital ."r) in pr"/ress 0includin/ Capital !dvances12 ,et %i3ed !ssets held 4"r disp"sal *(+ 3n5e) men ) *E+ (eferre! Ta4 A))e -'e *&+ Curren A))e )6 Loan) an! A!5an7e) Invent"ries Sundr5 De(t"rs Cash and (an) (alances $"an and !dvances "ther current !ssets *8+ $ess+ Current $ia(ilities and 6r"visi"ns Current $ia(ilities 6r"visi"ns *H+ 'e Curren A))e ) *8 - H+ 2 *3+

384509 100359 4 -.880. .95,. 58 344102 3 118 42 5 225359 8 18 512 0 ,//--0 /0 5,68, 114424

318621 120268 1 -50-.0 , /-/555 6 366802 1 14 29 0 2190 3 2 0620 0 ,,6-.5 , /0 5,68,

-65888 25908 -9.-9 9 -9.-9 8 22699 8 28986 5 -62866 11689 2 0 -0905 8 0 0 21 60 2 31310 8 -41190 20695 6 120 -/056 . 33503 35160 6866. ,09,, 5

1 26 -/ 5

24 -3 62 0 -0 0 0 19 99 0 4 6 -0 3 21 5 ,6

926645 316288 5882 438281 19246 ,-50-0 119201 2 16 153 -.5965 0909/ 5 629396 1 63 231325 204544 ,0095/ 0 122551 5 202313 -/-,08 ,8 58-0,0

>:

7iscellane"us *3penditure 08ritten "441 Profi an! Lo)) A77oun To al *(1E1&1319+ *9+ 66058 .95,. 58 -,/900 , /-/555 6 58,-8 -9.-9 8 80 5

I#$"!.!"$'$&+# ?2;;:-1;B

1. +he comparative balance sheet of the company durin" the years 2::B31: records that the current assets have decreased by 318;7B; Cr i.e.,;N 2. Cecause of decrease in current assets #e can say that the short D term solvency of the company is not "ood. /. +he current liabilities have increased by 2:7:11 Cr i.e.,1>N 7. @i,ed assets have decreased by 1;B;8> Cr i.e.,;N 8. +he shareholders fund of the company is decreased #hen compared to previous year. 9. +here is a decrease in #or$in" capital of 2:2B228 Cr compared to the previous year. ;. =ence the financial position of the company is not satisfactory.

>1

R'$&+ A#')2%&%:
+he ratio analysis is one of the most po#erful tools of financial analysis. it is the process of establishin" and interpretin" various ratios 'Quantities relationship bet#een fi"ures and "roups of fi"ures*.it is #ith the help of ratios that the financial statements can be analysis more clearly and decision are made from such analyses. % ratio is simple arithmetic e,pression of the relationship of one to another. %ccordin" to accountants =andboo$s by I,en and Cedford a ratio is an e,pression of the relationship bet#een t#o numbers. uantities

T2."% +0 R'$&+%: i. Ai uidity <atios ii. Aevera"e <atios iii. Jrofitability <atios iv. %ctivity <atios

>2

&7

L&G &/&$2 R'$&+ )easures firms ability to meet its obli"ation. levera"e ratios sho# the proportions of the debt e uity in financin" the firm1s assets. activity ratios reflect the firm efficiency in utili0in" its assets, and profitability ratios measure overall performance and effectiveness of the firm.

&&7

L"9"!'-" R'$&+ +he short3term creditors, li$e ban$ers and suppliers of ra# materials, are more concerned #ith the forms current debt payin" ability. 2n the other hand, lon" term creditors li$e debenture holder1s financial institution etc. are more concerned #ith the firm1s lon" term financial stren"th. % firm should have stron" short as #ell as lon"3term financial position.

&&&7

P!+0&$'(&)&$2 R'$&+ Jrofitability refers to net result of business operation t#o types of ratios are used to measure profitability. +hese are profit mar"in ratios rate of return ratios. (hile profit mar"in ratios sho#s the relationship bet#een profit and investment. +he important profit mar"in ratios are6 >/

Gross profit Ratio, Operating profit ratio, Net profit Ratio. +he important rate of return ratios are6 Return on assets Return of capital employed, Return on shareholders equity, Return on equity share capital.

&97

A8$&9&$2 R'$&+ +hese ratios are also referred to activity ratios asset mana"ement ratios. +hey measure ho# efficiency a firm employs the assets. +hey are based on the relationship bet#een level of activity and levels of various assets. +he important turnover ratios are inventory turnover ratio, debtors1 turnover ratio, creditors1 turnover ratio, fi,ed turnover ratio, total assets turnover ratio.

C+6.'!'$&9" (')'#8" %1""$

+he comparative balance sheet analysis is the study of the trend of the same items, "roup of items and computed items in t#o or more balance sheets of the same enterprise on different

>7

dates. +he chan"es in periodic observed by comparison of the balance sheet at the end of a period and these chan"es can help in informin" an opinion about the pro"ress of and enterprise.

(hile interpretin" comparative balance sheet the interpreter is e,pected to study the follo#in" aspects.3

1. Current interpretin" comparative and li uidity position 2. Aon" term financial position /. Jrofitability of the concern

>8

CHAPTER-5

FINDINGS = SUGGESTIONS

F&#/&#-% = S --"%$&+#%

1. +he =E<2=2ND%1s net #or$in" capital is satisfactory bet#een the years 2::;3:> since it sho#s increasin" trend . but after that it is in declinin" position

>9

2. +he current ratio of =E<2=2ND% is satisfactory durin" the period of study 2::83:9 to 2::;3:>. It is increased from 1.;7 to 1.BB but after that it is declinin". /. +he avera"e uic$ ratio of =E<2=2ND% is not "ood thou"h the uic$ ratio is sho#in" ma,imum value of :.B1 in the year 2::93:;and then it is declinin" to be deal 7. @i,ed assets turnover ratio of =E<2=2ND% increased from .>7 times to 1.B8. +he company has to maintain this. 8. Inventory turnover ratio of =E<2=2ND% is also increased "radually, #ithout any fit falls up to 2::93:;. Cut in the year 2::93:;it is declined to /.:2, and a"ain it has increased to 7.:2 in the year 2::B31:. 5ood inventory mana"ement is "ood si"n for efficient mana"ement 9. +otal %ssets turnover ratio of =E<2=2ND% is not satisfactory because it is al#ays belo# one, e,cept in the year 2::B31: havin" a value of 1.:/ ;. <eturn on investment is not satisfactory. +his indicates that the company1s funds are not bein" utili0ed in a better #ay. >. <eturn on Net #orth is not satisfactory since it is decreased from 7.B8 to :.9B in the year 2::93:;, 31./7 in the year 2::;3:>, 311.91 in the year 2::;3:> and 32/.1 in the year 2::B31: B. +he =E<2=2ND%1- Net Jrofit <atio is sho#in" ne"ative profit in the year 2::;3:>. +hese event is an e,pected one because since from the previous t#o years it is sho#in" the decline sta"e in Net Jrofit <atio

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1:. +he =E<2=2ND%1- 5ross Jrofit )ar"in of =E<2=2ND% increases in decreases due to the increase in sales 11. Jrofit )ar"in of =E<2=2ND% is decreasin" and sho#in" ne"ative profit because there is increase in the price of copper 12. +he =E<2=2ND%1- Net (or$in" Capital <atio is satisfactory. 1/. +he total Debt ratio is increased from :.17 to :.8B durin" the 2::;3:> this means the company is borro#in" money from the ban$s #ell. 17. +he =E<2=2ND%1s return on +otal %ssets ratio sho#s a ne"ative si"n in the year 2::;3:> 18. +he 2peratin" <atio of =E<2=2ND% increase from 97.27 to 1:1.19 in the year 2::93 :; , 117./ in the year 2::;3:>and reached to 127.1 in the year 2::>3:B-o the company has to reduce its operatin" costs. 19. +he 2peratin" <atio of =E<2=2ND% isn1t satisfactory. Due to increase in cost of production, this ratio is decreasin". -o the has to reduce its office administration e,penses 1;. Improve position funds should be utili0ed properly. 1>. Cetter %#areness to increaser the sales are su""ested. 1B. Cost cut do#n mechanics can be employed. 2:. Cetter production techni ue can be employed.

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BIBLIOGRAPHY

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3I3LIOGRAPHY

###.evanimics.com ###.damodaram.com ###.herohonda.com ###.investopedia.com ###.valuebasedmana"ement.net 3OOKS @inancial )ana"ement (ritten Cy ).?. Mhan K J.M. Lain @inancial )ana"ement (ritten Cy Jrasanna Chandra

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@inancial )ana"ement (ritten Cy I. ). Jandey @inancial )ana"ement (ritten Cy -. N. )ahes#ari

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