nandaa project(1)

8/2/2019 Nandaa Project(1)

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CHAPTER-I


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INTRODUCTION TO THE STUDY

The term working capital refers to the amount of capital which is readily available to anorganization. That is, working capital is the difference between resources in cash or readily

convertible into cash (Current Assets) and organizational commitments for which cash will soon

be required (Current Liabilities).

Current Assets are resources which are in cash or will soon be converted into cash in "the

ordinary course of business".

Current Liabilities are commitments which will soon require cash settlement in "the ordinarycourse of business".

Thus: WORKING CAPITAL = CURRENT ASSETS - CURRENT LIABILITIES

In a department's Statement of Financial Position, these components of working capital are

reported under the following headings:

CURRENT ASSETS:

Liquid Assets (cash and bank deposits) Inventory Debtors and Receivables

CURRENT LIABILITIES:

Bank Overdraft Creditors and Payables Other Short Term Liabilities


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APPROACHES TO WORKING CAPITAL MANAGEMENT

The objective of working capital management is to maintain the optimum balance of eachof the working capital components. This includes making sure that funds are held as cash in bank

deposits for as long as and in the largest amounts possible, thereby maximizing the interest

earned. However, such cash may more appropriately be "invested" in other assets or in reducing

other liabilities.

Working capital management takes place on two levels:

Ratio analysis can be used to monitor overall trends in working capital and to identifyareas requiring closer management.

The individual components of working capital can be effectively managed by usingvarious techniques and strategies.

When considering these techniques and strategies, departments need to recognize that each

department has a unique mix of working capital components. The emphasis that needs to be

placed on each component varies according to department. For example, some departments have

significant inventory levels; others have little if any inventory.

Furthermore, working capital management is not an end in itself. It is an integral part of

the department's overall management. The needs of efficient working capital management must

be considered in relation to other aspects of the department's financial and non-financial

performance.

Financial ratio analysis calculates and compares various ratios of amounts and balances

taken from the financial statements.

The main purposes of working capital ratio analysis are:

To indicate working capital management performance; and To assist in identifying areas requiring closer management.


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Three key points need to be taken into account when analyzing financial ratios:

The results are based on highly summarized information. Consequently, situations whichrequire control might not be apparent, or situations which do not warrant significant effort

might be unnecessarily highlighted;

Different departments face very different situations. Comparisons between them, or withglobal "ideal" ratio values, can be misleading;

Ratio analysis is somewhat one-sided; favorable results mean little, whereas unfavorableresults are usually significant.

However, financial ratio analysis is valuable because it raises questions and indicates

directions for more detailed investigation.

The following ratios are of interest to those managing working capital:

working capital ratio; liquid interval measure; stock turnover; debtors ratio; creditors ratio.

WORKING CAPITAL

Current assets

Current liabilities

The working capital ratio (or current ratio) attempts to measure the level of liquidity, that is, the

level of safety provided by the excess of current assets over current liabilities.

The "quick ratio" a derivative, excludes inventories from the current assets, considering only

those assets most swiftly realizable. There are also other possible refinements.


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There is no particular benchmark value or range that can be recommended as suitable for all

government departments. However, if a department tracks its own working capital ratio over a

period of time, the trends-the way in which the liquidity is changing-will become apparent.

LIQUID INTERVAL RATIO

Liquid Assets

Average Operating Expenses

This is another measure of liquidity. It looks at the number of days that liquid assets (for

example, inventory) could service daily operating expenses (including salaries).

STOCK TURNOVER RATIO

Cost of Sales

Average Stock Level

This ratio applies only to finished goods. It indicates the speed with which inventory is sold-or,

to look at it from the other angle, how long inventory items remain on the shelves. It can be used

for the inventory balance as a whole, for classes of inventory, or for individual inventory items.

The figure produced by the stock turnover ratio is not important in itself, but the trend over time

is a good indicator of the validity of changes in inventory policies.

In general, a higher turnover ratio indicates that a lower level of investment is required to serve

the department.

Most departments do not hold significant inventories of finished goods, so this ratio will have

only limited relevance.


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DEBTOR RATIO

There is a close relationship between debtors and credit sales to third parties (that is, sales other

than to the Crown). If sales increase, debtors will increase, and conversely, if sales decrease

debtors will decrease.

The best way to explain this relationship is to express it as the number of days that credit sales

are carried on the books:

Credit sales per period x days per period

Average Debtors

Where trading terms are 30 days net cash, and customers buy from day-to-day during the 30 dayperiod and pay 30 days after a statement is rendered, a collection period of 45 days (the average

between 30 and 60 days) would be satisfactory.

If the average collection period extends beyond 60 days, debtors are holding cash that should

have flowed into the department. This means that the department is unable to satisfy pressing

liabilities or to invest that cash.

The debtor ratio does not solve the collection problem, but it acts as an indicator that an adversetrend is developing. Remedial action can then be instigated.

CREDITOR RATIO

This ratio is much the same as the debtor ratio. It expresses the relationship between credit

purchases and the liability to creditors. It can be stated as the number of days that credit

purchases are carried on the books.

Credit purchase per period x days per period

Average Creditors


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1.1 INDUSTRY PROFILE

Driving the most luxurious car has been made possible by the stiff competition in the automobile

industry in India, with overseas players gathering the same momentum as the domestic

participants. Every other day, we have been hearing about some new launches, some low cost

cars, all customized in a manner such that the common man is not left behind. In 2009, the

automobile industry is expected to see a growth rate of around 9%, with the disclaimer that the

auto industry in India has been hit badly by the ongoing global financial crisis.

The automobile industry in India happens to be the ninth largest in the world. Following Japan,

South Korea and Thailand, in 2009, India emerged as the fourth largest exporter of automobiles.

Several Indian automobile manufacturers have spread their operations globally as well, asking

for more investments in the Indian automobile sector by the Multi National Companys.

1.2.1-Potential of the Automobile industry:

In 2008, Hyundai Motors alone exported 240,000 cars made in India. Nissan Motors

plans to export 250,000 vehicles manufactured in its India plant by 2011. Similar plans are for

General Motors.

1.2.2-Turnover of Automobile Manufacturers (In USD Million):

Year in USD Million

2003-04 14,880

2004-05 16,544

2005-06 20,896

2006-07 27,011

2007-08 34,285

The figures show that the automobile sector in India has been growing robustly. The

market shares of the different types of vehicles will clearly depict the demand pattern in this

sector.

Domestic Market Share for 2008-09:

Passenger Vehicles 15.96%

Commercial Vehicles 3.95%

Three Wheelers 3.6%

Two Wheelers 76.49%


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Starting from the era when there was too slim of a variety of cars available in Indian market,

Indian automobile industry has come up a long way to have a diverse array of cars these days.

There are a number of top automobile companies running their operations in India, which again

have a range of models in different segments of cars.

However, while looking for top 10 automobile companies in India, one name that would

always lead the list is Maruti Suzuki India. Maruti Suzuki has consistently been the dominant

leader in the Indian automobile industry. However, there are also other big names like Tata

Motors, Mahindra and Mahindra, Hyundai Motors, Hindustan Motors.

During its early days, the most of the Indian car auto manufacturers banked upon foreign

technologies. But the scenario has changed over the years and currently, the Indian auto

manufacturers are using their own technology. Due to the growing pace of Indian automobile

market, a number of car manufacturers including the global leaders have locked their horns in the

Indian auto market.

After the recent setback due to the global recession, the Indian automobile market has

again started to grow up. Though the auto sales except commercial vehicles started creeping up

since the beginning of this financial year, it's only the month of September 2009 when the market

saw buoyant sales. It fuelled optimism in the industry.

The retail trade also started soaring up. The auto sales saw a 9.6% rise in the month of September

with a sale of 1,092,262 units. The passenger vehicle sales also grew by 20.32%. The two

wheeler market was also augmented by 7.67% during the same period with a total sale of

838,150 units. The same trade is applicable for the three-wheeler market, which saw a growth of

13.51% (with sale of 41,137 units) during the same period.

1.2.3-The Auto Component industry in India:

. From a small and insignificant player on the international scene till a few years ago, the

sector has made significant inroads in the global business over the last five years. This has been

possible mainly due to the rapid improving levels of quality, productivity, manufacturing

competitiveness supported by a high level of engineering skills of the large Indian workforce.

The output of the component sector has been significantly influenced by the rapid growth of the

automobile sector in recent years. The output of the automobile sector grew by 15 per cent,

which prompted a growth of 20 per cent in the auto component sector. The turnover grew to $


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6.7 billion. In the past 3 years there has been an overall growth of 24 percent in the auto

component sector.

The key indicators of performance of the auto component sector are as follows:

Investment $ 3.1 billion

Output $ 6.7 billion

Exports $ 1 billion

Employment 250,000 (direct)

Over the years, the industry has also made significant strides for improvement in quality levels

and environment standards and boasts of the highest number of companies having relevant and

globally accepted Systems Certification in the manufacturing sector of the country. This

comprises 398 companies with ISO 9000 certification; 68 companies with ISO 14001

certification; 224 companies with QS-9000 certification; 224 with TS 16949; 9 companies with

OHSAS 18001; 6 Deming Prize winning companies and one Japan Quality Medal winning

company.

The exports of the industry crossed the threshold of $ 1 billion recently. Moreover, over

the last few years, the structure of exports has also significantly changed.

From mainly being an aftermarket exporter till a few years ago, today, more than 67 percent of

the exports of auto- components are to the international companies and Tier 1 companies. This is

testimony to the rising levels in the Indian auto component industry.

The economic benefits of such high growth can be quite significant. An additional 750,000 direct

jobs could be created in this sector along with indirect employment of about 1.8 million persons

over the next ten years, in addition to creating incremental employment of about 2.55 million

persons in direct and indirect jobs, and contributing $3. 8 billion in terms of government

revenues.

For making India the most preferred destination for new large-scale investments in the

auto-component industry, the government should establish dedicated auto component parks.

With a virtuous partnership between industry and Government, the sector can emerge as a driver

for the growth of the entire manufacturing sector and help the country in fulfilling its aspirations

of emerging as a major manufacturing centre of the world.


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1.2 COMPANY PROFILE

COMSTAR AUTOMOTIVE India is a leading multinational company engaged in the design &

manufacture of Alternators and Starters for Passenger Cars and Light Commercial Vehicles.

Comstar is Tier-1 to Global OEMs including Ford, Volvo, Jaguar, Mazda, Aston Martin, TataMotors, FIAT, Ashok Leyland-Nissan and General Motors supplying advanced technology

products from its state of art manufacturing facility in Chennai. Comstar India has developed

cutting-edge go green Start-Stop technologies for the next generation micro and mild hybrid

vehicles.

COMSTAR LAUNCHES DOMESTIC AFTERMARKET OPERATIONS

Comstar India recently launched its Domestic Aftermarket operations. The range of

Starter motors and Alternators cover a wide spectrum of passenger cars and light commercial

vehicles. Comstar is an established Global Tier 1 supplier of Starter Motors and Alternators to

OEMs such as Ford, Volvo, Tata Motors, Ashok Leyland-Nissan, Aston Martin, Jaguar and

General Motors. With an annual sales volume of 11 lacs Starter motors and 10 lacs Starter kits

Comstar is the leading manufacturer of Starter motors in the country.

Comstar India was setup in 1998 to support Ford European Operations with Starter motors and

Alternators. Comstar India today has an aggressive plan to grow in the domestic market as well.

With a string of business wins and successful launches, To enable products and after sales &

services easy availability to Consumers and Car owners, Comstar has started appointing select

dealers across the country. Speaking at the launch CFO and Director Mr. Sat Mohan Gupta

stressed that to be successful, availability of parts with the shortest lead time was key.

With domestic Automobile market growing rapidly in both urban and rural areas reach

is another area that is being addressed through a national network.

Operation Director Mr. Jagannathan Palle asked the team to gear up to meet the challenging

needs of the domestic market - giving consumers quality of parts comparable to international

levelsSYSTEMS

Comstar adopts the best practice and processes / system developed and used by leading OEMs

and Global Tier-1 in the area of Business Operations, Product Development and Manufacturing.


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SAFETY

Health and safety of employees is a prime objective

Employees empowered to stop operations for safety reasons

QUALITY

Comstar strives to supply parts with the objective of Zero PPM. Comstar India has been

achieving Single digit PPM for all its Customers & Parts since 20082009.

ABOUT COMSTAR

COMSTAR India is one of the leading Tier-1 suppliers of Starter motors and Alternators for

passenger cars and light commercial vehicles. COMSTAR India primarily exports to Global

OEMs and has major customers like Ford, Volvo, Jaguar, Aston Martin, Mazda, and

International Truck. In India COMSTAR is a major supplier of Starter motors to Tata Motors,

Ford India and Ashok Leyland. COMSTAR India formerly Visteon Powertrain was setup in

1998 to supply Starters and Alternators to Ford European operations. COMSTAR India currently

supplies over 1.1 Million starter motors and 1.0 Million sub assemblies annually to OEMs

around

MISSION :

Comstar India will make its customers successful by applying its employees intellectual capital,rich experience and cost competitiveness in the design & manufacture of world class quality

products.

MILESTONES

2010 9 million Starters sold

2009 Won Business with Ashok-Leyland-Nissan

2008 Best Export performance award 2005, 2006, 2007, 2008

2007 Supply Commenced for Tata Motors

2005 Supply Commenced for Volvo

2004 Consolidation of Global (non-US based) Starter Capacity in to India

1999India plant launched, commenced production of Starters & Alternators for European

Market


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Major competitors:

TVS LUCASMajor Suppliers:

SUPER AUTO FORGE LIMITEDDIRECTOR & CFO SAT MOHAN GUPTA

Comstar today is one of the longest producers of started motor in india, producing on an

average about 1.1 million starter motors & 1.0m sub-assemblies a year. The challenge is to

ensure competitive pricing while maintaining best-in-class quality levels. It s very easy these

days to lose market share to the competition. If we dont think ahead of the OEMS customer

expectations on concurrent and collaborative engineering at the order of the day.

DIRECTOR OPERATIONS, JAGANATHAN PALLE:

The durability requirements of starter motors have got revised recently with the

emergence of micro-hybrid applications. The vehicles equipped with this system essentially

switches off the engine at stop lights thereby greatly reducing fuel consumption and because

emissions. Comstar has developed and is ready to supply European and India OEMS starter

motors that are durable up to 3,500,00 engine starts

MISSION:

Comstar India will make its customers successful by applying its employees intellectual

capital, rich experience & cost competitiveness in the design & manufacture of world class

quality products.

MANUFACTURING CAPABILITY

State of art manufacturing setup built with continual improvement philosophy and zerodefect mindset.

All parts are tested to stringent requirements of OEMS Installed capacity of 3.0 million started motors and sub assemblies and 1.0 million

alternators


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FEATURES OF COMSTAR STARTER & ALTERNATOR

STARTER MOTOR

STANDARD FEATURES

Durability : 55000 starts Permanent magnet High power to weight ratio Increased old clanking capacityHIGH RELIABILITY

Vibration & environment resistance to OEM spec High power to weight ratio Nose/ overhang pinion Pre- engaged reduction drive Plating specification meets ELV requirements

ALTERNATOR

Standard features High power density Compact length Advanced diagnostics Enclosed slip ring & brushes Dual internal coding fans Low noise Long life bearing

OPTIONAL FEATURES

Splash guard Heat shields Over running clutch pulley Regulation Enhanced durability to 150k, 250k & 350k starts


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1.3 OBJECTIVES OF THE STUDY

Primary objectives:To study on working capital management towards COMSTAR INDIA AUTOMOTIVE

PRIVATE LIMITED.

Secondary objectives:

To determine optimal level of current assets. To know how well the company manage its cash. To know the company efficiency and its credit policy. To find whether the company maintains minimum investment in inventory to

organized the profitability.

To study the changes in working capital.


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1.4 SCOPE AND NEED FOR THE STUDY

The study helps to evaluate the decision making with regard to the workingcapital of the company.

This study helps the organization to identify the area of the problem and suggestway to improve working capital of the company.

This would help to determine the unnecessary expenditure incurred by theorganization.

This would also help the organization to identify the working capital position. This study would also help to determine the pattern of raising the fund or finance

in future.

The study helps to identify the liquidity position of the Company.


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1.5 REVIEW OF LITERATURE

Working capital management involves the relationship between a firm's short-term assets

and its short-term liabilities. The goal of working capital management is to ensure that a firm is

able to continue its operations and that it has sufficient ability to satisfy both maturing short-term

debt and upcoming operational expenses. The management of working capital involves

managing inventories.

Decisions relating to working capital and short term financing are referred to as working

capital management. These involve managing the relationship between a firm's short-term assets

and its short-term liabilities. The goal of Working capital management is to ensure that the firm

is able to continue its operations and that it has sufficient cash flow to satisfy both maturing

short-term debt and upcoming operational expenses.

By definition, Working capital management entails short term decisions - generally,

relating to the next one year period - which are "reversible". These decisions are therefore not

taken on the same basis as Capital Investment Decisions (NPV or related, as above) rather they

will be based on cash flows and / or profitability.

The importance of cash flow is not new to the finance literature. Over twenty years ago,

Largay and Stickney (1980) reported that the then-recent bankruptcy of W.T. Grant, a

nationwide chain of department stores, should have been anticipated because the corporation had

been running a deficit cash flow from operations for 8 of the last 10 years of its corporate life. As

part of a study of the Fortune 500s financial management practices, Gilbert and Reichert (1995)

find that time value of money cash flow analysis is used to select projects in 91 percent of the

firms. Accounts receivable management models are used in 59 percent of these firms, while

inventory management models were used in 60 percent of the companies.

Recently, Farragher, Kleiman and Sahu (1999) find that 55 percent of firms in the S&P

Industrial index complete some form of a cash flow assessment, but did not present insights

regarding accounts receivable and inventory management, or variations of any current account

asset or liability accounts across industries.


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1.6 RESEARCH METHODOLOGY

RESEARCH DESIGN

A research design is the arrangement of conditions for collection and analysis of data in a

manner that aims to combine relevance to the research purpose with economy in procedure.

The formidable problem that follows the task of defining the research problem is the preparation

of the design of the research project, popularly known as the research design. Decisions

regarding what, where, when, how much, by what means concerning an inquiry or a research

study constitute a research design.

DATA COLLECTION

SECONDARY DATA

Secondary data means that are already available i.e. they refer to the data which have already

been collected and analyzed by someone else. Secondary data may either be published data or

unpublished data. Usually published data are available in various publications of the central,

state, local governments. Also in technical and trade journals, books, magazines and newspapers,

reports and publications of various associations connected with business and industry, banks,

stock exchanges reports prepared by research scholars universities in different fields This study

is period for the annual reports and statements of accounts extended from the years

ANALYTICAL TOOL FOR THE STUDY

During the course of research for the researcher for analysis and interpretation o data is given

below has applied various tools.

Ratios analysis Comparative balance sheet Trend Analysis


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1.7 LIMITATION OF THE STUDY

1. The employees have not respond properly to ask queries about the company because ofauditing period.

2. No comparisons with the competitors .3. Some information are not provided because of company confidential .4. Time constrain is a major limitation of the study because of many students doing inplant

training so only twice in a week visited to the company


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CHAPTER-2


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2.1 DATA ANALYSIS AND INTERPRETATION

RATIO ANALYSIS

The ratio analysis and industry analysis tools below are very useful for individuals to instantly

assess a company or industry by making two basic types of comparisons. First, the analyst can

compare a present ratio with past (or expected) ratios for the organization to determine if there

has been an improvement or deterioration or no change over time. Second, the ratios of one

organization may be compared with similar organizations or with industry averages at the same

point in time. This is a type of "benchmarking" so that one may determine whether the

organization is "average" in performance or doing better or worse than others. For the

professional, conducting such in-depth analyses is critical, allowing an analyst to make an

informed business or investment decision

DEFINITION

Ratio Analysis can be defined as the study and interpretation of relationships between various

financial variables, by investors or lenders. It is a quantitative investment technique used for

comparing a company's financial performance to the market in general. A change in these ratios

helps to bring about a change in the way a company works. It helps to identify areas where the

management needs to change


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Types of Ratios Calculated

A number of ratios are calculated by companies for evaluating their short and long term

performance and also to know liquidity and profitability.

Solvency ratios

One of many ratios used to measure a company's ability to meet long-term obligations. The

solvency ratio measures the size of a company's after-tax income excluding non-cash

depreciation expenses, as compared to the firm's total debt obligations. It provides a

measurement of how likely a company will be to continue meeting its debt obligations. Can be

defined as a ratio that indicates what proportion of a company's assets can be readily converted

into cash in the short term. Some of the liquidity ratios are:

Current ratio Quick ratio Cash position ratio Fixed assets ratio Debit equity ratio Defensive interval ratio Capital gearimg ratio


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2.1.1CURRENT RATIO = CURRENT ASSETS

CURRENT LIABILITIES

(Amount in Rs.)

Inference:

As a conventional rule, a current ratio of 2:1 is considered satisfactory. This rule is base

on the logic that in a worse situation even if the value of current assets becomes half, the firm

will be able to meet its obligation. The current ratio represents the margin of safety for creditors.

From the year 2004-05, it represents 0.70 which shows the company have not investing more

funds in current assets. Because of low orders from customers. The current ratio has been

decreasing year after year then later which shows increasing of current assets it leads to give

importance to working capital.

YEAR

CURRENT

ASSETS

CURRENT

LIABILITIES

RATIO

( Times )

2004-2005 91878864 130213271 0.70

2005-2006 133921060 179969482 0.74

2006-2007 222188771 244140969 0.91

2007-2008 298873563 157126799 1.90

2008-2009 401405549 183472224 2.18


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Chart 2.1.1 Current Ratio

0

0.5

1

1.5

2

2.5

0.70.74

0.91

1.9

2.18

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009


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2.1.2 CURRENT ASSETS TO FIXED ASSETS RATIO = Current Assets

Fixed Assets

(Amount in Rs.)

Inference:

From the table shows the ratio has been increasing trend which indicates the company

have investing the funds more in fixed assets compare with current assets to meet long term

solvency position of the firm. In the year 2007-2009 which increasing higher than normal, it

shows investing in current assets are more than fixed assets to meet current obligation.

YEAR

CURRENT

ASSETS

(Rupees)

FIXED

ASSETS

(Rupees)

RATIO

( Times )

2004-2005 91878864 242780833 0.37

2005-2006 133921060 24112958 0.55

2006-2007 222188771 247448327 0.89

2007-2008 298873563 251917301 1.18

2008-2009 401405549 268754306 1.49


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Chart 2.1.2 CURRENT ASSETS TO FIXED ASSETS RATIO

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

0.37

0.55

0.89

1.18

1.49

2004-2005

2005-2006

2006-2007

2007-2008

2008-2009


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2.1.3 LIQUID RATIO = LIQUID ASSETS____

CURRENT LIABILITIES

(Amount in Rs)

YEAR LIQUID

ASSETS

CURRENT

LIABILITIES

RATIO

2004-2005 54028253 130213271 0.41

2005-2006 89864861 179969482 0.49

2006-2007 159063195 244140969 0.65

2007-2008 195876383 157126799 1.24

2008-2009 261420537 18347224 1.42

Inference:

As a quick ratio of 1:1 is considered satisfactory as a firm can easily meet all current

claims. It is a more rigorous and penetrating test of the liquidity position of a firm. But the liquidratio has been increasing year after year which indicates a low operation of the business. A quick

assets of the company is satisfactory which indicates the company have to meet their obligations

without any major problems of their dues.


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Chart 2.1.3 LIQUID RATIO

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

0.41

0.49

0.65

1.24

1.42

2004-2005

2005-2006

2006-2007

2007-2008

2008-2009


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2.1.4 CASH TO CURRENT LIABILITIES RATIO = CASH

C.L

(Amount in Rs.)

YEAR CASH

CURRENT

LIABILITIES

RATIO

( Times )

2004-2005 2520045 130213271 0.01

2005-2006 5173136 179969482 0.02

2006-2007 10703710 244140969 0.04

2007-2008 5319326 157126799 0.03

2008-2009 5130241 18347224 0.27

Inference:

This ratio helps cash requirement to meet out the current liabilities of the company. This

ratio provides to preserve the cash and settle down the current liabilities of the company. From

the table shows the company purchase huge raw materials during the period. Still the cash

position of the company have not met the requirements to pay their dues. So the company need

to sell in cash sales and payment of creditors period to extend, which may helps to increase the

cash position.


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Chart 2.1.4 CASH TO CURRENT LIABILITIES RATIO

0

0.05

0.1

0.15

0.2

0.25

0.3

0.010.02

0.040.03

0.27

2004-2005

2005-2006

2006-2007

2007-2008

2008-2009


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66 2.1.5 DEBTORS TURN OVER RATIO= SALES

AVG.DEBTORS

(Amount in Rs.)

YEAR SALES

(Rupees)

AVG.

DEBTORS

(Rupees)

RATIO

( Times )

2004-2005 21177500 31333941 0.68

2005-2006 34741000 49348550 0.70

2006-2007 547649739 97855353 5.50

2007-2008 839943229 147593472 5.69

2008-2009 1235691223 189974333 6.50

Inference:From the table it shows that first 2 years it was low sales of the company due to decrease

in production and also low orders from customers aftermath the company planned to increase the

sales in both cash and credit. But the credit sales take part more than that of cash sales. The ratio

is increasing year after year to shows increase in sales and also the receivables from debtors in

the last three years is collected within collection period and shows increase of debtors turnover

ratio.


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Chart 2.1.5 DEBTORS TURN OVER RATIO

0

1

2

3

4

5

6

7

0.68 0.7

5.5

5.69

6.5

2004-2005

2005-2006

2006-2007

2007-2008

2008-2009


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2.1.6 DEBTORS COLLECTION PERIOD = NO. OF DAYS IN A YEAR

DEBTORS TURNOVER RATIO

(Amount in Rs.)

YEAR

NO. OF DAYS

IN A YEAR

(Rupees)

DEBTORS

TURNOVER

(Rupees)

RATIO

( Times )

2004-2005 365 31333941 1.16

2005-2006 365 49348550 7.39

2006-2007 365 97855353 3.72

2007-2008 365 147593472 2.47

2008-2009 365 189974333 1.92

Inference:

The shorter collection period is better quality of debtors. Since a short collection period

implies the prompt payment by debtors. Here, collection period decrease from 2006 to 2009. In

2004-05 to 2006 the company had bad debts due to not collecting the credit from the customers

which causes severe problem to the company. The increasing ratio shows that the company had

not collect the payments within a collection period and have bad debts, after the company change

the credit policy and reduce the collection period shows increase of current assets.


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CHART 2.1.6 DEBTORS COLLECTION PERIOD

0

100

200

300

400

500

600

537521

66.3 64.14 56.15

2004-2005

2005-2006

2006-2007

2007-2008

2008-2009


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2.1.7 CREDITOR TURN OVER RATIO = CREDIT PURCHASE

AVG.CREDITORS

(Amount in Rs.)

YEAR

PURCHASE

(Rupees)

AVERAGE

CREDITORS

(Rupees)

RATIO

( Times )

2004-2005 124995929 32642575 3.82

2005-2006 202504835 49440567 4.09

2006-2007 326361396 66626162 4.89

2007-2008 466496005 42162678 11.062008-2009 654512731 46169771 14.1

Inference:

From the table shows that it is an increasing trend, the company purchase of raw

materials from suppliers through credit which is extended year by year and maintaining good

relationship with suppliers. At the year 2004-05 the ratio has been 3.82 and in the year 2008-08 it

increased by 11.06 because of payment to creditors has been extended from the normal period

and the company have purchased more in credit, which implies increase of orders from

customers.


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Chart 2.1.7 CREDITORS TURN OVER RATIO

0

2

4

6

8

10

12

14

16

3.82 4.09

4.89

11.06

14.1

2004-2005

2005-2006

2006-2007

2007-2008

2008-2009


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2.1.8 CREDITORS COLLECTION PERIOD = NO. OF DAYS IN YEAR

AVG.CREDITORS

(Amount in Rs.)

YEAR

NO. OF

DAYS IN

YEAR

AVERAGE

CREDITORS

(Rupees)

RATIO

( Times )

2004-2005 365 32642575 1.11

2005-2006 365 49440567 7.38

2006-2007 365 66626162 5.47

2007-2008 365 42162678 8.65

2008-2009 365 46169771 7.90

Inferences:

The later collection period is better quality for creditors. Since a later collection period

implies the prompt payment by company to their suppliers. Here, collection period decrease from2005 and 2007.which implies company pay the dues to their creditors before a credit period

allowed by suppliers.


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2.1.8 CREDITORS COLLECTION PERIOD

0

1

2

3

4

5

6

7

8

9

1.11

7.38

5.47

8.65

7.9

2004-2005

2005-2006

2006-2007

2007-2008

2008-2009


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2.1.9 STOCK TURN OVER RATIO = COST OF GOODS SOLD

AVERAGE STOCK

(Amount in Rs.)

YEAR

COST OF

GOODS

SOLD

AVERAGE

STOCK

RATIO

( Times )

2004-2005 115386270 33045781 3.49

2005-2006 196299247 40953405 4.79

2006-2007 307292019 53590887 5.73

2007-2008 464696740 92361584 5.03

2008-2009 632681224 156724539 4.03

Inference:

A higher turnover ratio is always beneficial to the concern. In this the number of times

the inventory is turned over has been increasing from one year to another year. This increasing

turnover indicates immediate sales. And in turn activates production process and is responsible

for further development in the business. After that there is reducing slightly because of delay insales. This indicates a good inventory policy of the company.


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Chart 2.1.9 STOCK TURN OVER RATIO

0

1

2

3

4

5

6

3.49

4.79

5.73

5.03

4.032004-2005

2005-2006

2006-2007

2007-2008

2008-2009


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2.1.10 INVENTORIES TO CURRENT ASSET RATIO = INVENTORIES

CURRENT ASSETS

(Amount in Rs.)

YEAR

INVENTORIES CURRENT

ASSETS

RATIO

( Times )

2004-2005 37850611 18989724 1.99

2005-2006 44056199 198482590 0.22

2006-2007 63125576 254844679 0.24

2007-2008 102997180 550790864 0.18

2008-2009 139985012 670159855 0.20

Inference:

An ideal inventory to current asset ratio as 1:2 from the table it is known that there is

fluctuating trend during the entire study period. An average ratio is 0.24 in the year of 2006-07

which indicates investment in inventories is kept at the considerable level. In future the company

may maintain an ideal inventory ratio. In the year 2004-2005 the company kept their stock idleand later they plan to reduce to invest in inventories and make optimum use of it, the company

first get orders from customers and then purchase of stocks from suppliers, so now the company

position is satisfied to increase of investing in inventories


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2.1.10 INVENTORIES TO CURRENT ASSET RATIO

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

1.99

0.22 0.240.18 0.2

2004-2005

2005-2006

2006-2007

2007-2008

2008-2009


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2.1.11 WORKING CAPITAL TURNOVER RATIO = SALES

WORKING CAPITAL

(Amount in Rs)

Inference:

From the above table it is clear that working capital turnover ratio is in fluctuating trend.

From the study period the first three years the company current liabilities is more than that of

current assets because of purchase of inventories at credit and expenses are increases which

shows working capital in decreasing trend. After the company planned and increase to invest in

current assets through issuing of shares and increase the sales of the company.The sales

increased during the year but the working capital of the company for the period of 2005- 2007

has decrease trend due to reduction in production and also less investments in current assets.

Aftermath the company decided to investing funds in current assets which shows of increasing of

sales.

YEAR SALES

(Rupees)

WORKING

CAPITAL

(Rupees)

RATIO

( Times )

2004-2005 21177500 -38334407 -0.55

2005-2006 34741000 -46048422 -0.752006-2007 547649739 -21952198 -24.9

2007-2008 839943229 141746764 5.92

2008-2009 1235691223 217933325 5.57


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Chart 2.1.11 WORKING CAPITAL TURNOVER RATIO

-25

-20

-15

-10

-5

0

5

10

-0.55 -0.75

-24.9

5.92 5.67

2004-2005

2005-2006

2006-2007

2007-2008

2008-2009


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2.1.12 WORKING CAPITAL RATIO = WORKING CAPITAL

CURRENT ASSETS

(Amount in Rs.)

YEARWORKINGCAPITAL

(Rupees)

CURRENTASSETS

(Rupees)

RATIO( Times )

2004-2005 38334407 18989724 2.01

2005-2006 46048422 198482590 0.23

2006-2007 219+52198 254844679 0.08

2007-2008 141746764 550790864 2.57

2008-2009 217933325 670159855 0.32

Inference:

This ratio shows the effectiveness of working capital of the company. From the table

shows it is fluctuating of working capital ratio. It seems the company have not maintaining

adequate working capital because of insufficient investment made in current assets.


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Chart 2.1.12 WORKING CAPITAL RATIO

0

0.5

1

1.5

2

2.5

3

2.01

0.23

0.08

2.57

0.32

2004-2005

2005-2006

2006-2007

2007-2008

2008-2009


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2.2 COMPARATIVE STATEMENT:

Comparative study of financial statement is the comparison of the financial statement of the

business with the previous years financial statements and with the performance of other

competitive enterprises, so that weaknesses may be identified and remedial measures applied.

Comparative statements can be prepared for both types of financial statements i.e., Balance sheet

as well as profit and loss account. The comparative profits and loss account will present a review

of operating activities of the business. The comparative balance shows the effect of operations on

the assets and liabilities that change in the financial position during the period under

consideration.

Comparative analysis is the study of trend of the same items and computed items into or more

financial statements of the same business enterprise on different dates.

The presentation of comparative financial statements, in annual and other reports, enhances the

usefulness of such reports and brings out more clearly the nature and trends of current changes

affecting the enterprise.

While the single balance sheet represents balances of accounts drawn at the end of an accounting

period, the comparative balance sheet represent not nearly the balance of accounts drawn on two

different dates, but also the extent of their increase or decrease between these two dates. The

single balance sheet focuses on the financial status of the concern as on a particular date, the

comparative balance sheet focuses on the changes that have taken place in one accounting

period. The changes are the direct outcome of operational activities, conversion of assets,

liability and capital form into others as well as various interactions among assets, liability and

capital.


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2.2.1 COMPARATIVE STATEMENT OF COMSTAR AUTOMOTIVE PVT LTD

AS ON 31-03-04TO 31-03-05

PARTICULARS 2003-

2004

2004-

2005

ABSOLUTE

CHANGE

CHANGE

%

SOURCES OF FUNDS:

1. Share holders funds

a) Share capital 56846010 56846010 0 0.00%

b) Reserves & surplus 20086440 20086440 0 0.00%

2.LOAN FUNDS

a) Secured loans 225890980 182027162 -43863818 -2409.74%

b) Unsecured loans 51978460 44680814 -7297646 -1633.28%TOTAL 354801890 303640426 -51161464 -1684.94%

II APPLICATION OF FUNDS :

1.Fixed assets

Gross block 244467375 242780833 -1686542 -69.47%

Less: Depreciation 64509424 75008731 10499307 1399.74%

Net block 179957951 167772102 -12185849 -726.33%

2Current Assets, Loans &Advances:

a) Inventories28240952

37850611 9609659 2538.84%b) Sundry debtors 30149397 32518484 2369087 728.54%

c) Cash & bank balances 8704943 2520045 -6184898 -24542.81%

d) Loans & advances 21864527 18989724 -2874803 -1513.87%

TOTAL 88959819 91878864 2919045 317.71%

less: current liabilities &provisions

100994228 130213271 29219043 2243.94%

TOTAL -12034409 -38334407 -26299998 6860.68%

Deferred tax asset(net) 57294402 61646345 4351943 705.95%

profit and loss a/c (debit balance) 129583946 112556386 -17027560 -1512.80%

TOTAL 35480189

0

303640426 -51161464 -1684.94%


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Inference:

From the table shows the overall finance position of the company is decreasing trend, the

company have not operate efficiently and also company does not issues any shares to raise the

capital. Loan funds are decreased which shows good to the creditors are safer side because of not

obtain more loan from outsiders. Moreover the company have not obtain more funds from

outsiders which shows have not operate efficiently. The cash position of the company have

decreased because of more credit sales.


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AS ON 31-03-05 TO 31-03-06

PARTICULARS 2004-

2005

2005-

2006

ABSOLUTE

CHANGE

CHANGE%

SOURCES OF FUNDS:


a) Share capital 56846010 56846010 0 0.00%


2.LOAN FUNDS

a) Secured loans182027162 181493323

-533839 -29.41%b) Unsecured loans 44680814 37527351 -7153463 -1906.20%

TOTAL 303640426 295953124 -7687302 -259.75%

II APPLICATION OF FUNDS:

1.Fixed assets

Gross block 242780833 241102958 -1677875 -69.59%


Net block 167772102 155941395 -11830707 -758.66%


a) Inventories 37850611 44056199 6205588 1408.56%

b) Sundry debtors 32518484 66178617 33660133 5086.26%

c) Cash & bank balances 2520045 5173136 2653091 5128.59%

d) Loans & advances 18989724 18513108 -476616 -257.45%

TOTAL 91878864 133971060 42092196 3141.89%


130213271 179969482 49756211 2764.70%

TOTAL -38334407 -46048422 -7714015 1675.20%


profit and loss a/c (debitbalance)

112556386 123582764 11026378 892.23%

TOTAL 303640426 295953124 -7687302 -259.75%


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Inference:

From the table shows that net profit of the company is decreased due to increase of

operating expenses. But the overall current asset position of the company is increased due to

company increase to invest their in current assets and also at this situation the company have notinvest their funds in fixed assets, so it implies to give problem in long solvency of the company.

Still the company have reducing their loan funds its good to the outsiders are safer side. But still

the company have not issuing shares to raise the funds at the same time the liability of company

increases because of purchase of raw materials price increases.


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AS ON 31-03-06 TO 31-03-07

PARTICULARS 2005-

2006

2006-

2007

ABSOLUTE

CHANGE

CHANGE%

SOURCES OF FUNDS:


a) Share capital 56846010 71346010 14500000 2032.35%


2.LOAN FUNDS

a) Secured loans 181493323 186219185 4725862 253.78%

b) Unsecured loans 37527351 27247104 -10280247 -3772.97%TOTAL 295953124 304898939 8945815 293.40%


1.Fixed assets

Gross block 241102958 247448327 6345369 256.43%


Net block 155941395 151445476 -4495919 -296.87%


a) Inventories 44056199 63125576 19069377 3020.86%

b) Sundry debtors 66178617 129532088 63353471 4890.95%

c) Cash & bank balances 5173136 10703710 5530574 5166.97%

d) Loans & advances 18513108 18827398 314290 166.93%

TOTAL 133971060 222188771 88217711 3970.39%

less: current liabilites &provisions

179969482 244140969 64171487 2628.46%

TOTAL -46048422 -21952198 24096224 -10976.68%


profit and losss a/c (debitbalance)

123582764 111464599 -12118165 -1087.18%

TOTAL 295953124 304898939 8945815 293.40%


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Inference:

From the table shows that net profit of the company is decreased due to increase of

operating expenses and non- operating expenses. But the overall current asset position of the

company is increased due to company increase to invest their in current assets and also the

current liabilities f the company increase due to increase of raw material price. The company

issued shares and raise the capital for operate the business.


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AS ON 31-03-07 TO 31-03-08

PARTICULARS 2006-

2007

2007-

2008

ABSOLUTE

CHANGE

CHANGE%

SOURCES OF FUNDS:

1. Share holder funds

a) Share capital 71346010 56846010 -14500000 -2550.75%


2.LOAN FUNDS

a) Secured loans 186219185 129838829 -56380356 -4342.33%

b) Unsecured loans 27247104 180233996 152986892 8488.24%

TOTAL 304898939 387005275 82106336 2121.58%


1.Fixed assets

Gross block 247448327 251917301 4468974 177.40%

Less: Depreciation 96002851 107690483 11687632 1085.30%Net block 151445476 144226818 -7218658 -500.51%

2.Current Assets, Loans &Advances:

a) Inventories 63125576 102997180 39871604 3871.14%

b) Sundry debtors 129532088 165654856 36122768 2180.60%


d) Loans & advances 18827398 24902202 6074804 2439.46%

TOTAL 222188771 298873563 76684792 2565.79%


244140969 157126799 -87014170 -5537.83%

TOTAL -21952198 141746764 163698962 11548.69%

Deferred tax asset(net) 63941061 38471685 -25469376 -6620.29%

profit and loss a/c (debit balance) 111464599 62560008 -48904591 -7817.23%

TOTAL 304898939 387005275 82106336 2121.58%


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Inference:

It is noted that a cash position of the company has decrease, which a company make

invested in inventories and gives advances to their clients. A profitability of the company also

highly decreased because of increase in depreciation of fixed assets. To overall statement the

company need to increase their investments in all assets. It is noted that the current liabilities of a

company is decreases because of price of raw materials decreases and reduce the expenses made

by company. The company provide loans and advances to customers are increases and the

overall current assets are increase except of cash.


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AS ON 31-03-08 TO 31-03-09

PARTICULARS 2007-

2008

2008-

2009

ABSOLUTE

CHANGE

CHANGE%

SOURCES OF FUNDS:


a) Share capital 56846010 96346010 39500000 4099.81%


2.LOAN FUNDS

a) Secured loans 129838829 122820594 -7018235 -571.42%b) Unsecured loans 180233996 118043763 -62190233 -5268.40%

TOTAL 387005275 374809546 -12195729 -325.38%

II APPLICATION OF FUNDS:

1.Fixed assets

Gross block 251917301 268754306 16837005 626.48%


Net block 144226818 151018637 6791819 449.73%


a) Inventories 102997180 139985012 36987832 2642.27%

b) Sundry debtors 165654856 214893809 49238953 2291.32%


d) Loans & advances 24902202 41396487 16494285 3984.46%

TOTAL 298873564 401405549 102531985 2554.32%

less: current liabilites &provisions

157126799 183472224 26345425 1435.94%

TOTAL 141746764 217933325 76186561 3495.87%Deferred tax asset(net) 38471685 41268715 2797030 677.76%

profit and loss a/c (debitbalance)

62560008 17512739 -45047269 -25722.57%

TOTAL 387005275 276714779 -110290496 -3985.71%


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INFERENCE:

From the table shows that the share capital of the company is increased from previous

year to current year by issuing shares and utilize the funds to invest in fixed assets. Reserves and

surplus of the company also increase at first time in the study preserves funds to meet outunexpected expenses and also for the benefit of shareholders. A profitability of the company

again decreases because of high expenses especially of current liabilities is increasing trend.


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2.3.1 TREND ANALYSIS FOR INCOME AND EXPENDITURE

OBJECTIVE:

To find out future income of the company

The trend equation is y = a +b(x) 1

Where a = Y / N 2

b= XY / X 3

TREND ANALYSIS FOR INCOME AND EXPENDITUREDEBTORS

YEAR CAPITAL

ASSETS (Y)

X X XY

2004-2005 3251.84 -2 4 -6503.68

2005-2006 6617.86 -1 1 -6617.86

2006-2007 12953.20 0 0 0

2007-2008 16565.48 1 1 16565.48

2008-2009 21489.38 2 4 42978.76

TOTAL 60877.76 0 10 46422.7

a= 60877.76 = 12175.5525

b=46422.7= 4642.2710

y = 60877.76+46422.7x


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In the year of 2010, x = 2 then,

Yc =60877.76+46422.7 (2)

Yc = 153723.16crores

For year of 2011, x = 3 then,

Yc = 60877.76+46422.7 (3)

Yc =200145.86crores

INFERENCE:

From the above table, the income of the five years from 2003-2009 is taken as Y , from the

statistical formula for trend equation are found which is given below.

y = 60877.76+46422.7x

In order to project the income of the company for the year 2010, we can take X = 2 , then the

income of the company for the year 2011 is given below.

Yc = 153723.16crores

In order to project the income of the company for the year 2011, we can take X = 3, then the


Yc =200145.86crores


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2.3.2 TREND ANALYSIS FOR INCOME AND EXPENDITURE

OBJECTIVE:

To find out future income of the company

The trend equation is y = a +b(x) 1

Where a = Y / N 2

b= XY / X 3

TREND ANALYSIS FOR INCOME AND EXPENDITURECAPITAL ASSET

YEAR CAPITAL

ASSETS (Y)

X X XY

2004-2005 1677.72 -2 4 -3355.44

2005-2006 1559.41 -1 1 -1559.41

2006-2007 1514.45 0 0 0

2007-2008 1442.26 1 1 1442.26

2008-2009 1510.18 2 4 3020.36

TOTAL 7704.02 0 10 -452.23

a= 7704.02 = 1540.8045

b=-452.23 = -45.22310

y = 1540.804-45.223x


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In the year of 2010, x = 2 then,

Yc = 1540.804-45.223(2)

Yc = 1450.358crores

For year of 2011 , x = 3 then,

Yc = 1540.804-45.223 (3)

Yc =1405.135crores

INFERENCE:

From the above table, the income of the five years from 2003-2009 is taken as Y , from the

statistical formula for trend equation are found which is given below.

y = 1540.804-45.223x

In order to project the income of the company for the year 2010, we can take X = 2 , then the


Yc = 1450.358crores

In order to project the income of the company for the year 2011, we can take X = 3, then the


Yc =1405.135crores


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CHAPTER -III


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3.1 FINDINGS

1.

A short term solvency position of the company for the last two years is satisfactory. Thecompany had minimum investments in current assets in 2004-05 and 2005-06 and later

the company increase an investment in current assets.

2. The cash position of the company has uneven trend because of non- recovery of paymentfrom customers in the year 2004-05 and 2005-06.

3. A credit period given by the company to their customers is decreased from the normalperiod due to avoid a bad debts and also to give importance to the working capital.

4. At preceding years the company maintained minimum investment in an inventory andlater it is increased marginally because of increase orders from customers.

5. Working capital ratio is negative trend in the year of 2005-06 and 2006-07 because ofminimum investment made in current assets and reducing of cash sales. Later it is

marginally increases in positive trend because of optimum investment in current assets.

6. Cash to current liabilities ratio shows that company spent huge expenses to purchase ofraw materials.

7. The company payment to their suppliers is extended by company.


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3.2 SUGGESTIONS

1. The cash position of the company has not been properly maintained. So the company has tomake an effort to reduce an expenses and also has to maintain more cash.

2. A company has to maintain the debtors turnover ratio to avoid the bad debts.3. A company has to maintain minimum investment in inventory which shows to reduce the

unwanted expenses.

4. A company has to give importance an investing in working capital to increase the turnover ofthe company.

5. A company has to make prompt payment to their suppliers before the credit period tomaintain the relationship.

6. Company need to utilize their assets properly.


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3.3 CONCLUSION

The project report is the apex of the master of business administration course conducted by the

Anna university. The study is conducted in COMSTAR AUTOMOTIVE PVT LTD Chennai

with the title of a study on working capital management. This study was conducted mainly with

help of secondary data obtained from the unit. The company should use the minimum investment

in inventory to organized it profitability. Whether the company may invest large size of invest

large size of inventory to the concern. The efficient and production levels are decreased. So the

concern maintain the management objectives in proper way.


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BIBLIOGRAPHY

Maheswari.S.N. Financial Management, Sultan Chand & Sons, New Delhi. 7th Revised &

enlarged edition, 2002.

Reddy.T.S, Hari Prasad.Y, Management Accounting, Margham Publications, Chennai. 3rd

Edition 2005 & Reprinted, 2007.

Srinivasan.N.P, Sakthivel Murugan.M, Accounting for Management, S.Chand, New Delhi. 2008.

Company Balance Sheet from 2005-2009.

Website

www.comstar automotive pvt ltd.com

nandaa project(1)

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