AN ANALYSIS ON CASH MANAGEMENT AT STANDARD POLYMERS, PUDUCHERRY

LIST OF TABLES Table No. 5.1 5.2 5.3.1 5.3.2 5.3.3 5.3.4 5.3.5 5.3.6 5.4.1 5.4.2 5.4.3 5.4.4 5.4.5 5.4.6 5.4.7 5.4.8 5.4.9 5.4.10 5.4.11 5.4.12 5.4.13 5.4.14 5.4.15 5.4.16 5.4.17 5.4.18 Name of the Table Cash from operation Cash flow statement Inventories Sundry debtors Cash/bank Loans & Advances Current liabilities Current Assets Current Asset to Fixed Asset Current Asset to Total Asset Net working capital Ratio Inventories to Current Asset Ratio Sundry Debtors to Current Asset Ratio Loans & Advances to Current Asset Ratio Cash to Current Asset Ratio Cash to Working Capital Ratio Cash to Sales Ratio Cash Ratio Current Ratio Liquidity Ratio Super Quick Ratio Working Capital Turnover Ratio Inventory Turnover Ratio Debtors Turnover Ratio Debt Collection Period Cash Interval Measure Ratio Page No. 29 30 31 32 33 34 35 36 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55

LIST OF CHARTS

Table No. No. 5.4.1 5.4.2 5.4.3 5.4.4 5.4.5 5.4.6 5.4.7 5.4.8 5.4.9 5.4.10 5.4.11 5.4.12 5.4.13 5.4.14 5.4.15 5.4.16 5.4.17 5.4.18

Name of the Charts

Page

Current Asset to Fixed Asset Current Asset to Total Asset Net working capital Ratio Inventories to Current Asset Ratio Sundry Debtors to Current Asset Ratio Loans & Advances to Current Asset Ratio Cash to Current Asset Ratio Cash to Working Capital Ratio Cash to Sales Ratio Cash Ratio Current Ratio Liquidity Ratio Super Quick Ratio Working Capital Turnover Ratio Inventory Turnover Ratio Debtors Turnover Ratio Debt Collection Period Cash Interval Measure Ratio

38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55

CONTENTS

CHAPTER LIST OF TABLES LIST OF CHARTS

TITLES

PAGE NO

INTRODUCTION PROFILE OF THE COMPANY NEED FOR THE STUDY

1 2 9

II III IV V

REVIEW OF LITERATURE OBJECTIVES OF THE STUDY RESEARCH METHODOLOGY DATA ANALYSIS AND INTERPRETATION FINDINGS OF THE STUDY, SUGGESTION AND RECOMMENDATIONS

10 27 28 29 56 58 59 60 61 62

VI

VII VIII

CONCLUSION SCOPE FOR THE FUTHER STUDY LIMITATION OF THE STUDY BIBILIOGRAPHY

CHAPTER I

CASH MANAGEMENT

1.1 INTRODUCTION:
Cash is the important current asset for the operations of the business. Cash is the basic input needed to keep the business running on a continuous basis; it is also the ultimate output expected to be realized by selling the service or product manufactured by the firm. The firm should keep sufficient cash, neither more nor less. Cash shortage will disrupt the firms manufacturing operations while excessive cash will simply remain idle, without contributing anything towards the firms profitability. Thus, a major function of the financial manager is to maintain a sound cash position. Cash is the money which a firm can disburse immediately without any restriction. The term cash includes coins, currency and cheques held by the firm, and balances in its bank accounts. Sometimes near-cash items, such as marketable securities or bank times deposits, are also included in cash. The basic characteristic of near-cash assets is that they can readily be converted into cash. Generally, when a firm has excess cash, it invests it in marketable securities. This kind of investment contributes some profit to the firm.

1.2 STANDARD POLYMERS

HISTORY/ MILESTONE:
Standard polymer is its original form and structure was founded and started in the year 1990 by its founder Mr. Francis, father of the present inactive partner Mr. Marie susai raj. The company was then manufacturing only mono-layer films and printed pouches for ordinary hand-packing of day-to-day selling commodities. The company faced problems in the initial two years in achieving its turnover targets. It then gradually picked up when bulk orders from tamilnadu dairy sectors could be established. The company possessed a monolayer extrudsion plant and a flexo-graphic printer. Slitting and pouching were done by manual processes. Contemporarily another company under the name Mylon plastics was functioning. It was founded and run by the present production manager Mr. Natarajans father, who was a thorough knowledged person in industrial sector. Before having started his own venture, he was a depute of Pondicherry government and was entrusted to investigate the possibilities of enhancing the industrial infrastructure of Pondicherry. He could gain lot of experience in this field during his service, which motivated him to start an industry of his own. The industry he chose was packing industry, where packing materials like multi-layer polythene films and pouches made from these films for packing of food products were in great demand. He was also convinced about the increasing future potential for the demand of this type of packing and hence his decision to start this industry. The company was then engaged in the manufacture of multi-layer polythene films and 2-4 colour printed pouches. In the year 2004 mylon plastics was facing financial problems to run the company further. The aiding Bank was unwilling to forward funds for the maintenance and functioning of the company. So there arose a compulsion, when mylon plastics have to seek financing partners. It was also decided for the fusion of both the companies. i.e., Mylon plastics and standard polymers. Things were re-organized in deputation and functional responsibilities of personals.

PROFILE OF M/S STANDARD POLYMERS

M/s. Standard polymers private limited can be declared as a medium scale industry and as it stands today was organized and re-established in the year 2005 with five partners, among whom three are active and the rest two are inactive. The three active partners have taken charge and handling of the departments. Mr. T. Chandrasekaran - Administration, Purchase & Overall incharge. Mr. Natarajan Mr. Senthil Kumar - Production and Human Resources. - Marketing and Sales.

Mr. Marie Susai Raj and Mr. Selvanayagam and other miscellaneous duties.

Todays profile of M/s Standard Polymers private limited posses a picture of a well established and progressively functioning company. The company with a production volume of 60 tonnes a month in the year 2004 has reached a capacity of 160 metric tones as per today. The production takes place in three shifts and even then the volume of pending orders has raised to its brim. The company is capable of manufacturing packing covers of high standards for industrial packing. The present financial turnover ranges upto two crores a month. The companys merits are well exposed and its reputation respectfully recognized by its customers and Bankers. The major customers are;

MRF Ltd., Kerala, Tiruvothiyur and Pondicherry. Parrys confectionery Limited. Nutrine confectionary company (P) Limited. Winner Dairy (P) Limited.

SNP Dairy milk, Madurai. Aiswariya Milk products, Virudhachalam. Sarva Seva dairy federation Limited. (Seva Milk). Sarva seva dairy federation (Sarvodaya Milk). G.K Dairy, Thanjavur (District) Kurichi. Balaji Oil Milk, Vanur (Lion Brand Double groundnut oil). South India flour mills Limited, Chennai. S.M Detergents (P) Limited, Coimbatore. Kovilpatti lakshmi roller flour mills Limited, Gangaikondan. Meenakshni foods India private Limited, Chennai. Vega marketing (P) Limited, Dindugal.

COMPANYS LOCATION AND INFRASTRUCTURE

The company with its subsidiary units of production. Administration and other facilities are placed together in a complex, located at Odiampet, a village lying on the outskirts of Pondicherry and about 12 Kms form Pondicherry centre. The company is situated amidst agricultural lands and well accessible by that road. Bus service from and to Pondicherry is available twice a day. The complex is well planned and placed in an area of about 2.5 acres of land. The administrative premises face the road side and its architectural design presents a well established company. The frontage upto road is gardened with flower plants and greenery. Also a parking area inside the premises is provided. The production units are placed behind and adjoining the administration buildings. Housings for production units are well designed to comply with factory requisites. The housings are spacy for the installation of machines and free movements of the workers. Adequate numbers of windows provide free circulation of air and facilitate for adequate light and ventilation. Access to different units is also not complicated. Vehicle approaches for the purposes of loading and unloading area unhindered. The backyard is empty and large enough to accommodate further buildings. Plantation of many trees all around gives enough shade and flow of pleasant breeze, not only for the employees but also for those visiting the complex. Water availability is from Bore-wells, installed in the premises itself. Power supply is tapped from the electrical mains running along the road.

OBJECTIVES / FUTURE PLANS OF STANDARD POLYMERS

It was understand during our conversations with the Managing Director that the company in the present circumstances requires neither to alter nor to advance the existing production technology and structure. The technology adopted fulfills the requirements of todays packing industry. The company is able to manufacture even the most sophisticated forms of packing covers. The volume of continuing orders, in spite of competitors tends not to decrease. The company has adopted itself to suit the size, organization structure and production capacity. The continuing monthly turnover of Rs. 1 crore and above and the increasing demand for its products puts M/s Standard Polymers in a comfortable position of maintaining the company without much hazards. The quality of products is in par with high standards and well accepted by its customers. There is no scarcity in the availability of raw-material. Accordingly there is no

necessity in seek of other technologies. Though shortage of labour force arises now and then, the management is able to master this problem through labour agencies. In accordance to Indian labour laws and in consideration of huge manpower, there is also no necessity to go in for further automatisation. Only in consideration of increasing demand, the administration has decided to put up another production unit, whose housing is under construction. Precisely speaking, the company aims at maintaining its reputation of serving its customers to their satisfaction and free the company at the earliest from its existing financial encumbrance.

SHARE CAPITAL AND BANKERS

Both the companies, Mylon Plastics and previous standard polymers were re-organized and formed into one company, which is todays Standard Polymers. The funds invested for the establishment was 3 crores, composing of; a) partner share of 1 crore and b) bank finance of further 2 crores Besides, the company when established possessed Rs. 2 crores in machineries, buildings and others as capital asset. The share capital of Rs. 25, 00,000 of each partnership is constituted of 25,000 equity share of Rs. 100 each, with powers to increase, classify, divide, subdivide and consolidate the same with the power of attaching such rights of preferential, deferred or otherwise as the case may be, determined from time to time. The Bank for business activities of M/s Standard Polymers is Indian Overseas Bank at Reddiearpalayam, Puducherry.

ORGANISATION STRUCTURE

General Executives

Administrative

Sales

Production

Accounts

Auditor Manager Salesman Data Entries Human Resource Collection Supervisor Security
3 Extruder operators 3 printer operators 3 Slitter operators

Supervisor

Cashier

Helpers

1.3 NEED FOR THE STUDY

The importance of Cash management in any industrial concern cannot be overstressed. Under the present inflationary condition, management of Cash is perhaps more important than even management of profit and this requires greatest attention and efforts of

the finance manager. It needs vigilant attention as each of its components require different types of treatment and it throws constant attention on exercise of skill and judgment, awareness of economic trend etc, due to urgency and complicacy the vital importance of Cash. The anti-inflationary measure taken up by the Government, creating a tight money condition has placed working capital in the most challenging zone of management and it requires a unique skill for its management. Today, the problem of managing Cash has got the recognition of separate entity, so its study and management is of major importance to both internal and external analyst to judge the current position of the business concerns. Hence, the present study entitled An Analysis on Cash Management has been taken up.

CHAPTER II REVIEW OF LITERATURE

Meaning:
Cash is the money which a firm can disburse immediately without any restriction. The term cash includes coins, currency and cheques held by the firm, and balances in its bank accounts. Sometimes near-cash items, such as marketable securities or bank times deposits, are also included in cash. The basic characteristic of near-cash assets is that they can readily be converted into cash.

FACETS OF CASH MANAGEMENT:

Cash management is concerned with the managing of: (i) Cash flows into and out of the firm, (ii) Cash flows within the firm, and (iii) Cash balances held by the firm at a point of time by financing deficit or investing surplus cash. It can be represented by a cash management cycle. Sales generate cash which has to be disbursed out. The surplus cash has to be invested while deficit this cycle at a minimum cost. At the same time, it also seeks to achieve liquidity and control. Cash management assumes more importance than other current assets because cash is the most significant and the least productive asset that a firms holds. It is significant because it is used to pay the firms obligations. However, cash is unproductive. Unlike fixed assets or inventories, it does not produce goods for sale. Therefore, the aim of cash management is to maintain adequate control over cash position to keep the firm sufficiently liquid and to use excess cash in some profitable way. Cash management is also important because it is difficult to predict cash flows accurately, particularly the inflows, and there is no prefect coincidence between the inflows and outflows of cash. During some periods, cash outflows will exceed cash inflows, because payments for taxes, dividends, or seasonal inventory build up. At other times, cash inflow will be more than cash payments because there may be large cash sales and debtors may be realized in large sums promptly. Further, cash management is significant because cash constitutes the smallest portion of the total current assets, yet managements considerable time is devoted in managing it. In recent past, a number of innovations have been done in cash management techniques. An obvious aim of the firm these days is to manage its cash affairs in such a way as to keep cash balance at a minimum level and to invest the surplus cash in profitable investment opportunities. In order to resolve the uncertainty about cash flow prediction and lack of synchronization between cash receipts and payments, the firm should develop appropriate strategies for cash management. The firm should evolve strategies for cash management. The firm should evolve strategies regarding the following four facets of cash management.

Cash planning: Cash inflows and outflows should be planned to project cash surplus or deficit for each period of the planning period. Cash budget should be prepared for this purpose.

Managing the cash flows: The firm should decide about the properly managed. The cash inflows should be accelerated while, as far as possible, the cash outflows should be decelerated.

Optimum cash level: the firm should decide about the appropriate level of cash balances. The cost of excess cash and danger of cash deficiency should be matched to determine the optimum level of cash balances.

Investing surplus cash: The surplus cash balances should be properly invested to earn profits. The firms should decide about the division of such cash balances between alternative short-term investment opportunities such as bank deposits, marketable securities, or inter-corporate lending.

MOTIVES FOR HOLDING CASH

The firms need to hold cash may be attributed to the following three motives: The transactions motive The precautionary motive The speculative motive

TRANSACTION MOTIVE The transactions motive requires a firm to hold cash to conduct its business in the ordinary course. The firm needs cash primarily to make payments for purchases, wages and salaries, other operating expenses, taxes, dividends etc. The need to hold cash would not arise if there were perfect synchronization between cash receipts and cash payments, i.e., enough cash is received when the payment has to be made. But cash receipts and payments are not perfectly synchronized. For those periods, when cash payments exceed cash receipts, the firm should maintain some cash balance to be able to make required payments. For transactions purpose, a firm may invest its cash in marketable securities. Usually, the firm will purchase securities whose maturity corresponds with some anticipated payments, such as dividends or taxes in the future. Notice that the transactions motive mainly refers to holding cash to meet anticipated payments whose timing is not perfectly matched with cash receipts.

PRECAUTIONARY MOTIVE The precautionary motive is the need to hold cash to meet contingencies in the future. It provides a cushion or buffer to withstand some unexpected emergency. The precautionary amount of cash depends upon the predictability of cash flows. If cash flows can be predicted with accuracy, less cash will be maintained for an emergency. The amount of precautionary cash is also influenced by the firms ability to borrow at short notice when the need arises. Stronger the ability of the firm to borrow at short notice, less the need for precautionary balance. The precautionary balance may be kept in cash and marketable securities. The amount of cash set aside for Marketable securities play an important role here.

precautionary reasons is not expected to earn anything; the firm should attempt to earn some profit on it. Such funds should be invested in high-liquid and low-risk marketable securities. Precautionary balances should, thus, be held more in marketable securities and relatively less in cash.

SPECULATIVE MOTIVE The speculative motive relates to the holding of cash for investing in profit-making opportunity to make profit may arise when the security prices change. The firm will hold cash, when it is expected that interest rates will rise and security prices will fall. Securities can be purchased when the interest rate is expected to fall; the firm will benefit by the subsequent fall in interest rates and increase in security prices. The firm may also speculate on materials prices. If it is expected that materials prices will fall, the firm can postpone materials purchasing and make purchases in future when pric4e actually falls. Some firms may hold cash for speculative purposes. By and large, business firms do not engage in speculations. Thus, the primary motives to hold cash and marketable securities are: the transactions and the precautionary motives.

CASH PLANNING

Cash flows are inseparable parts of the business operations of firms. A firm needs cash to invest in inventory, receivable and fixed assets and to make payment for operating expenses in order to maintain growth in sales and earnings. It is possible that firm may be making adequate profits, but may suffer from the shortage of cash as its growing needs may be consuming cash very fast. The poor cash position of the firm cash is corrected if its cash needs are planned in advance. At times, a firm can have excess cash may remain idle. Again, such excess cash outflows. Such excess cash flows can be anticipated and properly invested if cash planning is resorted to. Cash planning is a technique to plan and control the use of cash. It helps to anticipate the future cash flows and needs of the firm and reduces the possibility of idle cash balances ( which lowers firms profitability ) and cash deficits (which can cause the firms failure). Cash planning protects the financial condition of the firm by developing a projected cash statement from a forecast of expected cash inflows and outflows for a given period. The forecasts may be based on the present operations or the anticipated future operations. Cash plans are very crucial in developing the overall operating plans of the firm. Cash planning may be done on daily, weekly or monthly basis. The period and frequency of cash planning generally depends upon the size of the firm and philosophy of management. Large firms prepare daily and weekly forecasts. Medium-size firms usually prepare weekly and monthly forecasts. Small firms may not prepare formal cash forecasts because of the non-availability of information and small-scale operations. But, if the small firms prepare cash projections, it is done on monthly basis. As a firm grows and business operations become complex, cash planning becomes inevitable for its continuing success.

OTHER FACTORS THAT AFFECT THE SIZE OF CASH BALANCE

1. Availability of short-term credit: To avoid holding unnecessary large balances of cash, most firms attempt to make arrangements at borrow money is case of unexpected needs. With such an agreement, the firm normally pays interest only during the period that the money is actually used.

2. Money market rates: If money will bring a low return a firm may choose not to invest it. Since the loss or profit is small, it may not be worth the trouble to make the loan. On the other hand, if interest rates are very high, every extra rupee will be invested. 3. Variation in cash flows: Some firms experience wide fluctuation in cash flows as a routine matter. A firm with steady cash flows can maintain a fairly uniform cash balance.

4. Compensating balance: If a firm has borrowed money from a bank, the loan agreement may require the firm to maintain a minimum balance of cash in its accounts. This is called compensating balance. In effect this requires the firm to use the services of bank a guaranteed deposit on which it pays no interest. The interest free deposit is the banks compensation for its advice and assistance.

CASH MANAGEMENT BASIS STRATEGIES

The management should, after knowing the cash position by means of the cash budget, work out the basic strategies to be employed to manage its cash.

CASH CYCLE:
The cash cycle refers to the process by which cash is used to purchase materials from which are produced goods, which are them sold to customers. Cash cycle=Average age of firms inventory +Days to collect its accounts receivables -Days to pay its accounts payable. The cash turnover means the numbers of times firms cash is used during each year. 360 Cash turnover = ---------------Cash cycle

The higher the cash turnover, the less cash the firm requires. The firm should, therefore, try to maximize the cash turn.

MANAGING COLLECTIONS:
a) Prompt Billing: By preparing and sending the bills promptly, without a time log between the dispatch of goods and sending the bills, a firm can ensure earlier remittance.

b) Expeditious collection of cheques: An important aspect of efficient cash management is to process the cheques receives very promptly. c) Concentration Banking: Instead of a single collection center located at the company headquarters, multiple collection centers are established. The purpose is to shorten the period between the time customers mail in their payments and the time when the company has use of the funds are then to a concentration bank usually a disbursement account. d) Lock-Box System: With concentration banking, a collection center receives remittances, processes them and deposits them in a bank. The purpose is to lock-box system is to eliminate the time between the receipt of remittances by the company and their deposit in the bank. The company rents a local post office box and authorizes its bank in each of these cities to pick up remittances in the box. The bank picks up the mail several times a day and deposits the cheque in the companys accounts. The cheques are recorded and cleared for collection. The company receives a deposits the cheque in the companys accounts. The cheques are recorded and cleared for collation. The company receives a deposit slip and a lift of payments. This procedure frees the company from handling a depositing the cheques.

CONTROL OF DISBURSMENT
a) Stretching Accounts Payable A firm should pay its accounts payables as late as possible without damaging its credit standing. It should, however, take advantages of the cash discount available on prompt payment.

b) Centralized Disbursement One procedure for rightly controlling disbursements is to cenrealise payables in to a single account, presumably at the companys headquarters. Such an arrangement would enable a firm to delay payments and can serve cash for several reasons. Firstly, it increases transit time. Secondly, if a firm has a centralized bank account, a relatively smaller total cash balances will be needed. c) Bank Draft Unlike an ordinary cheque, the draft is not payable on demand. When it is presented to the issuers bank for collection, the bank must present it to the issuer for acceptance. The funds then are deposited by the issuing firm to cover payments of the draft. But suppliers prefer cheques. Also, bank imposes a higher service charge to process them since they require special attention, usually manual. d) Playing the float The amount of cheques issued by the firm but not paid for by the bank is referred to as the payment float. The differences between payment float and collection float are the net float. So, if a firm enjoys a positive net float, it may issue cheques even if it means having an ever drown account in its books. Such an action is referred to as playing the float, within limits a firm can play this game reasonably safely. Thus management of cash becomes essential and it should be seen to, that neither excessive nor inadequate cash balances are maintained.

CASH FLOW ANALYSIS

The cash flow analysis is done with the help of cash flow statement. A cash flow statement is a statement depicting changes in cash position from one period to another. It is an important planning tool. Cash flow statement gives a clear picture of the source of cash, the uses of cash and the net changes in cash. The primary purpose of cash flow statement is to show that as to where from the cash to be acquired and where to use them.

UTILITY OF CASH FLOW ANALYSIS

A Cash flow analysis is an important financial tool for the management. Its chief advantages are as follows. 1. Helps in efficient cash management Cash flow analysis helps in evaluating financial policies and cash position. Cash is the basis for all operation and hence a projected cash flow statement will enable the management to plan and co-ordinate the financial operations properly. The management can know how much cash is needed from which source it will be derived, how much can be generated, how much can be utilized. 2. Helps in internal financial management Cash flow analysis information about funds, which will be available from operations. This will helps the management in repayment of long-term debt, dividend policies etc., 3. Discloses the movements of Cash Cash flow statement discloses the complete picture of cash movement. The increase in and decrease of cash and the reasons therefore can be known. It discloses the reasons for low cash balance in spite of heavy operation profits on for heavy cash balance in spite of low profits.

4. Discloses success or failure of cash planning The extent of success or failure of cash planning be known by comparing the projected cash flow statement with the actual cash flow statement and necessary remedial measures can be taken.

DETERMINE THE OPTIMUM CASH BALANCE

One of the primary responsibilities of the financial manager is to maintain a sound liquidity position of the firm so that the dues are settled in time. The firm needs cash to purchase raw materials and pay wages and other expenses as well as for paying dividend, interest and taxes. The test of liquidity is the availability of cash to meet the firms obligations when they become due. A firm maintains the operating cash balance for transaction purposes. It may also carry additional cash as a buffer or safety stock. The amount of cash balance will depend on the risk-return trade-off. If the firm maintains small cash balance, its liquidity position weakens, but its profitability improves as the released funds can be invested in profitable opportunities (marketable securities). When the firm needs cash, it can sell its keeps high cash balance, it will have a strong liquidity position but its profitability will be low. The potential profit foregone on holding large cash balance is an opportunity cost to the firm. The firm should maintain optimum just to enough, neither too much nor too little cash balance. How to determine the optimum cash balance if cash flows are predictable and if they are not predictable.

Optimum cash balance under certainty BAUMOLS MODEL

The Baumol model of cash management provides a formal approach for determining a firms optimum cash balance under certainty. It considers cash management similar to an inventory management problem. As such, the firm attempts to minimize the sum of the cost of holding cash (inventory of cash) and the cost of converting marketable securities to cash.

The baumols model makes the following assumptions:

The firm is able to forecast its cash needs with certainty. The firms cash payments occur uniformly over a period of time. The opportunity cost of holding cash is known and it does not change over time. The firm will incur the firm sells securities and starts with a converts securities to cash.

Cash balance

C/2

Average Time 0 T1 T2 T3

Baumols model for cash balance

Cost trade-off: Baumols model

Optimum Cash Balance under uncertainty: The Miller-Orr Model

The limitation of the Baumol model is that it does not allow the cash flows to fluctuate. Firms in practice do not use their cash balance uniformly nor are they able to predict do not use their cash inflows and outflows. The Miller-Orr model overcomes this shortcoming and allows for daily cash flow variation. It assumes that net cash flows are normally distributed with a zero value of mean and a standard deviation. The MO model provides for two control limits-the upper control limit and the lower control limit as well as a return point. If the firms cash flows fluctuate randomly and hit the upper limit, then it buys sufficient marketable securities to come back to a normal level of cash balance (the return point). Similarly, when the firms cash flows wander and hit the lower limit, it sells sufficient marketable securities to bring the cash balance back to the normal level (the return point)

1. The Latest Trends in North American Cash Management

Steve Wilder, Senior Vice President and JPMorgan Chase Treasury Services Western Hemisphere Corporate and Financial Institutions Sales Executive

The

Drive

towards

Efficiency,

Transparency,

Standardization and Integration

Fragmentation is a key driver of corporate inefficiency. This has long been the case in the movement of paper checks and related remittance documents within the U.S. payments system, and the flow of goods, trade-related documents and funds within the broader global supply chain. As corporate treasurers pursue end-to-end automation for treasury and supply-chain activities, they understand that to achieve straight-through processing and the subsequent optimization of working capital globally they must integrate the payment and information components of a transaction. Based on this drive for efficiency, three interrelated trends are shaping North Americas cash management landscape today. First, corporate treasurers and their banks are driving the convergence towards electronic payments to better integrate money and information flows. Second, there is a parallel convergence in international trade towards open account, electronic payment and the automation of information flows, as treasury pushes to integrate the physical and financial supply chains. On both fronts, solutions are emerging to digitize paper wherever it persists. Third, as companies continue to expand globally and information and money flows follow treasury is focused on standardizing processes and strengthening internal controls. The objective is to create transparency across a range of business activities to manage risk and ensure financial reporting integrity in compliance with SarbanesOxley.

2. CASH MANAGEMENT AND CAPITAL BUDGETING PRACTICES

Virginia department of transportation Richmond, Virginia.

Our review has found that Transportation has made significant progress or completed most of the recommendations made in our 2002 special report. Complete implementation of these changes will take at least four to five years. Over the last two years, Transportations management has started not only implementing recommendations, but more importantly begun implementing a change in the corporate and cultural structure of the organization. The success of change with Transportation will depend on whether a true structural change in organization takes place. The measure of success will require a substantial long-term commitment by management to not only making the change, but to prevent backsliding into Transportations old approaches.

In some ways, the accomplishments to date are the easy part of change. The harder part lays ahead in funding and implementing new systems, continuing to make the changes to get closer to capital budgeting process, and overcoming Transportations corporate and cultural structure to improve project management. The success of this effort is highly dependent on management guidance and direction, and current management has demonstrated their dedication towards this effort. If any management change occurs, it is essential that they have the same commitment; otherwise, progress may be negatively impacted. Transportation is restoring fiscal accountability by implementing several budgetary and financial changes, including adopting a debt management policy and model. Additionally, they are establishing a methodology to identify statewide transportation priorities and developing project management policies. Transportation has completed several budgetary and financial changes, including attempts to make the Six-Year Improvement Program a realistic management tool and reduce the projects with a deficit status. However, to ensure accurate matching on cash inflows and outflows, Transportation must begin estimating the cost of projects by fiscal year. Transportation does not currently have sufficient controls and processes in place to manage the rate at which they spend funds. For major projects, Transportation has begun assigning a project management team that follows a project from its inception to its completion. However, it is still too early in the process to determine if the policies put into place will provide Transportation with better project management. However, the actions to date are those considered best practices in both the private and public for large organizations. Maintenance is still an area of concern at Transportation. The growing maintenance requirements and the limited ability to budget on a needs-based approach increases the risk of inappropriately applied funding. Once the asset management system is fully implemented a needs-based approach will be possible and Transportation will be able identify and prioritize maintenance projects.

3. Ms. Katherine M. Landmann Controller Washington University in St. Louis Campus.

This final report presents the results of our audit of the cash management procedures used by Washington University in St. Louis (University) to control the funds paid by the Payment Management System (PMS) during the three years ended June 30, 2000. We found that the University did not have adequate policies and procedures in place to monitor daily cash balances and to precisely calculate interest earned on positive daily cash balances. In monitoring the daily cash balances, the University did not consider (1) outstanding checks and (2) overhead costs as incurred. In addition, the University did not use the appropriate interest rates when calculating the interest remitted to the Federal government. We determined that the amount of excess interest remitted by the University was comparable to the amount of interest that should have been remitted if appropriate procedures had been used. We believe that this occurrence was a coincidence due to off setting factors in the Universitys calculation of the amount to be remitted. We are recommending that the University revise its written policies and procedures to effectively monitor the daily cash balance and to accurately compute the Federal remittance. We made four specific recommendations for improving the Universitys cash management procedures. The University concurred with two and is still evaluating the third. However, they did not accept our fourth recommendation. The Universitys response is included in its entirety as Appendix A.

4.

Cash Management by Enid Beverly Jones

It is a Financial Overview for School Administrators is a succinct overview of public school finance, presenting concepts of importance to both site-based and central-office leaders. A pragmatic blend of theoretical concepts and factual information provides readers with an excellent synopsis of public school finance.
The economics and politics of education are discussed in the context of human capital and the role of public education in the United States as an investment in human capital. Author Enid Jones, who is an associate professor of school finance at Fayetteville State University, stresses the importance of investment in human capital and its necessity for an educated, productive workforce. The chapter on adequacy and equity provides an understanding of the two concepts so frequently debated in school finance. As more states struggle with funding issues, this subject matter is timely and useful. Cash Management seems intended for use nationwide with information on basic school business procedures, including budgeting and financing of school facilities. The use of lay terminology and relevant examples make the book valuable both in graduate school classes on educational leadership and in the hands of practicing administrators.

(Cash Management: A Financial Overview for School Administrators, by Enid Beverley Jones, Scarecrow Press, Lanham, Md., 2001)

CHAPTER III

OBJECTIVES OF THE STUDY Primary Objective:

To analyze the cash management of Standard Polymers.

Secondary Objective:
To find out the liquidity position of the concern through ratio analysis. To study the growth of standard polymers in terms of cash flow statement. To make suggestion and recommendation to improve the cash position of standard polymers.

CHAPTER-IV RESEARCH METHODOLOGY

4.1 RESEARCH
Research is a process in which the researchers wish to find out the end result for a given problem and thus the solution helps in future course of action. The research has been defined as A careful investigation or enquiry especially through search for new facts in branch of knowledge

4.2 RESEARCH DESIGN

The research design used in this project is Analytical in nature the procedure using, which researcher has to use facts or information already available, and analyze these to make a critical evaluation of the performance.

4.3 DATA COLLECTION

Primary Sources 1. Data are collected through personal interviews and discussion with FinanceExecutive. 2. Data are collected through personal interviews and discussion with Material Planning- Deputy Manager. Secondary Sources 1. From the annual reports maintained by the company. 2. Data are collected from the companys website. 3. Books and journals pertaining to the topic.

4.4 TOOLS USED IN THE ANALYSIS Cash flow statement Trend analysis Ratio analysis.

4.5 Period of study

The present study has taken into account Five years viz., 2002-2003 to 2006-2007.

CHAPTER V

DATA ANALYSIS & INTERPRETATION

5.1 CALCULATIONS OF FUNDS FROM OPERATION AND CASH FROM OPERATION FOR THE YEAR ENDED (Rs in Thousand)
Particulars Net Profit Depreciation during the year FFO(FLO) ADD: Sundry debtors Prepaid Expenses Sundry creditors Outstanding liabilities Bank O/D LESS: Stock Bank O/D Outstanding liabilities Sundry Debtors Sundry Creditors CFO(CLO) 9854229 342963 1516020 1497634 567073 2950464 767131 9562393 334244 910746 1699354 8950797 1755576 1106913 736292 43200 4731130 1009534 2950464 1710210 10643203 91841 10801353 293962 1881243 2623459 2098945 2200701 2003-2004 621082 1260161 2004-2005 1183275 1440184 2005-2006 478738 1620207 2006-2007 400470 1800231

5.2 CASH FLOW STATEMENT

Inflow Opening balance 2003-2004 14564 2004-2005 64678 2005-2006 104545 2006-2007 63582

Cash from operation Increase in loan funds Sales of Asset Increase capital Total Outflows Cash outflow from operation Purchase of Asset Decrease funds Decrease in in in share

9854229

342963

1516020 2410798

8950797

797244 2800000 9868793 1204885 6831363 9014379

9776411 loan 27704 900340 200000 64678 9868793 104545 1204885

6767781

7004825 1731144

share

capital Closing balance Total

63582 6831363

278410 9014379

Inference:
This table shows that the cash flow statements of STANDARD POLYMERS are to be efficient. The cash inflow of the company is to be increased for year after year. The fund from operation is also to differ from every year. The company should increase their share capital from 2006-2007 for Rs. 28, 00,000. Its must be used as efficient for the next year for decrease their loan amount.

5.3 TREND ANALYSIS Y = a + bX Where a = Y n ; b = XY X2

5.3.1 INVENTORIES
Inventories YEAR 02 03 03 04 04 05 05 06 06 07 TOTAL a X -2 -1 0 1 2 X2 4 1 0 1 4 10 = 1, 42, 09,108 5 b = 61, 86,505 10 = 6, 18,650.5 (Rs in lakhs) Y 27,76,072 12,78,438 18,45,511 36,01,087 47,08,000 1,42,09,108 = XY (Rs in lakhs) -55,52,144 -12,78,438 0 36,01,087 94,16,000 61,86,505

2, 84,182.6

Inference:
This table indicates that the volume of inventory has been increased every year. Its must be increased for the last year 11, 06,913. Inventories value in 2008 will be about

21, 40,134.1 5.3.2 SUNDRY DEBTORS

Sundry YEAR X X2 Debtors (Rs) 02 03 03 04 04 05 05 06 06 07 TOTAL -2 -1 0 1 2 4 1 0 1 4 10 Y 20,69,513 28,05,805 25,11,842 1,20,74,236 1,29,84,982 3,24,46,378 XY (Rs) -41,39,026 -28,05,805 0 1,20,74,236 2,59,69,964 3,10,99,369

a =

3, 24, 46,378 5

64, 89,275.6

= 3, 10, 99,369 10

31, 09,936.9

Inference:
This table shows that the Sundry Debtors has been more every year. It must be increased more than 6 times from the beginning of the period of the study. Sundry Debtors

value in 2008 will be about 1, 58, 19,086.3.

5.3.3 CASH / BANK

Cash / Bank YEAR 02 03 03 04 04 05 05 06 06 07 TOTAL X -2 -1 0 1 2 X2 4 1 0 1 4 10 (Rs) Y 14,564 64,679 61,858 63,582 2,78,410 4,83,093 XY (Rs) -29,128 -64,679 0 63,582 5,56,820 5,26,593

4, 83,093 5

96,618.6

5, 26,593 10

52,659.3

Inference:
The cash value of the STANDARD POLYMERS has been increased and the estimated it should be decreased for the previous year. Cash value in 2008 will be about

254596.5.

5.3.4 LOANS & ADVANCES

Loans YEAR X X2 Advances (Rs) 02 03 03 04 04 05 05 06 06 07 TOTAL -2 -1 0 1 2 4 1 0 1 4 10 Y 1,00,065 8,26,377 3,60,138 27,70,937 5,62,837 46,20,354 & XY (Rs) -2,00,130 -8,26,377 0 27,70,937 11,25,674 28,70,104

46, 20,354 5

9, 24,070.8

28, 70,104 10

2, 87,010.4

Inference:

The table indicates that the loans and advances of STANDARD POLYMERS will be reduced from the year 2006-2007. Loans & Advances value in 2008 will be about

17, 85,102.

5.3.5 CURRENT LIABILITIES

Current YEAR X X2 Liabilities (Rs) 02 03 03 04 04 05 05 06 06 07 TOTAL -2 -1 0 1 2 4 1 0 1 4 10 Y 22,58,576 57,45,442 38,56,338 1,44,73,102 1,25,88,203 3,89,21,661 XY (Rs) -45,17,152 -57,45,442 0 1,44,73,102 2,51,76,406 2,93,86,914

3, 89, 21,661 5

77, 84,332.2

2, 93, 86,914 10

29, 38,691.4

Inference:
The table shows that the companys current liability will be increased from the every year.

Current Liabilities value in 2008 will be about 1, 66, 00,406.4.

5.3.6 CURRENT ASSET

Current asset X YEAR 02 03 03 04 04 05 05 06 06 07 TOTAL -2 -1 0 1 2 X2 4 1 0 1 4 10 (Rs) Y 21,27,277 41,48,921 59,74,933 1,85,09,842 2,03,50,240 5,11,11,213 XY (Rs) -42,54,554 -41,48,921 0 1,85,09,842 4,07,00,480 5,08,06,947

5,11,11,213 5

1,02,22,242.6

5,08,06,947 10

50,80,694.7

Inference:
This table shows that the current asset of the company will be grown at 9times. When compared to the beginning of the period of study its must be increased. Current Asset value in 2008 will be about 2, 54,64,326.7.

RATIO ANALYSIS:
Ratio Analysis is a powerful tool of financial analysis. A Ratio is defined as the indicated quotient of two mathematical expressions and as the relationship between two or more things. In financial analysis, a ratio is used as a benchmark for evaluating the financial position and performance of a firm.

Ratio helps to summarize large quantities of financial data and to make qualitative judgment about the firms financial performance.

5.4 RATIO ANALYSIS

5.4.1 Current Assets to Fixed Assets Ratio

The formula for the ratio is

Current Assets Fixed Assets

Current Assets to Fixed Assets Ratio

Increase/ YEAR 2002 03 2003 04 2004 05 2005 06 2006 07 . Inference: The level of Current Assets can be measured by using this Current Asset to Fixed Assets Ratio. The level has been fluctuating every year. RATIO 0.94:1 0.72:1 1.55:1 1.28:1 1.62:1 Decrease -0.22 0.82 -0.27 0.34

1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 '02-'03 '03-'04 '04-'05 '05-'06 '06-'07

Curre nt As se t to Fixed As se t Ratio

5.4.2 Current Assets to Total Assets Ratio

The formula for the ratio is

Current Assets Total Assets

Current Assets to Total Assets Ratio

Increase/ YEAR 2002 - 03 2003 - 04 2004 - 05 2005 - 06 2006 - 07 RATIO 0.26:1 0.48:1 0.62:1 0.59:1 0.59:1 Decrease 0.22 0.14 -0.03

Inference:
The Table shows the Current Assets to Total Assets ratio of the company, which registered a fluctuating trend throughout the study period. This ratio varied from 0.26 to 0.48 times during the study. There is no change for last year.

0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 '02-'03 '03-'04 '04-'05 '05-'06 '06-'07 Current Assets to Total Assets Ratio

5.4.3 Net Working Capital Ratio

The formula for the ratio is Net Working Capital Net Assets

Net Working Capital Ratio

Increase/ YEAR 2002 03 2003 04 2004 05 2005 06 2006 07 RATIO 0.27:1 0.12:1 0.15:1 0.21:1 0.22:1 Decrease - 0.15 0.03 0.06 0.01

Inference:
Net Working Capital is used as a measure of a firms liquidity and the firms potential reservoir of funds. It can also be relate to net assets. The Net Working Capital Ratio from the table shows a fluctuating trend and the average Net Working Capital Ratio is 0.21 times of Net Working Capital to Net Assets. Hence it shows that STANDARD POLYMERS has an average liquidity position.

0.3 0.25 0.2 0.15 0.1 0.05 0 '02-'03 '03-'04 04-'05 '05-'06 '06-'07 Net Working Capital Ratio

5.3.4 Inventories to Current Assets Ratio

The formula for the ratio is Inventories Current Assets

Inventories to Current Assets Ratio

Increase/ YEAR 2002 03 2003 04 2004 05 2005 06 2006 07 RATIO 1.30:1 0.31:1 0.31:1 0.19:1 0.23:1 Decrease -0.99 -0.12 0.04

Inference:
From the table it is known that the Inventories to Current Assets Ratio also register a fluctuating trend during the entire study period. The average ratio is 0.31 times and thus it is found that the investment in inventories (being one of the important Current Assets) is kept at the considerable level.

1.4 1.2 1 0.8 0.6 0.4 0.2 0 '02-'03 '03-'04 '04-'05 '05-'06 '06-'07 Inventories to Current Assets Ratio

5.4.5 Sundry Debtors to Current Assets Ratio

The formula for the ratio is Sundry Debtors Current Assets

Sundry Debtors to Current Assets Ratio

Increase/ YEAR 2002 03 2003 04 2004 05 2005 06 2006 07 RATIO 0.97:1 0.68:1 0.42:1 0.65:1 0.63:1 Decrease -0.29 - 0.26 0.23 -0.02

Inference:
From the table the Sundry Debtors to Current Assets Ratio shows a fluctuating trend throughout the study period from 2002-03 to 2006-07. The average ratio is 0.65 times. Hence it implies the credit policy followed by STANDARD POLYMERS is moderate.

1 0.8 0.6 0.4 0.2 0 Sundry Debtors to Current Assets Ratio

'02-'03 '03-'04 '04-'05 '05-'06 '06-'07

5.4.6 Loans and Advances to Current Assets Ratio

The formula for the ratio is Loans and Advances Current Assets

Loans and Advances to Current Assets Ratio

Increase/ YEAR 2002 03 2003 04 2004 05 2005 06 2006 07 RATIO 0.02:1 0.19:1 0.06:1 0.15:1 0.02:1 Decrease 0.17 -0.13 0.09 - 0.13

Inference:
From the table it is noted that the Loans and Advances to Current Assets Ratio have registered a fluctuating trend. It implies that a quarter positions of the Current Assets are kept in for Loans and Advances; thereby it is found that STANDARD POLYMERS value of Loans and Advances is considerable.

0.2 0.15 0.1 0.05 0 Loans & Advances to Current Assets Ratio

'02-'03 '03-'04 '04-'05 '05-'06 '06-'07

5.4.7 Cash to Current Assets Ratio

The formula for the ratio is Cash Current Assets

Cash to Current Assets Ratio

Increase/ YEAR 2002 03 2003 04 2004 05 2005 06 2006 07 RATIO 0.006:1 0.015:1 0.01:1 0.003:1 0.013:1 Decrease 0.09 -0.14 - 0.007 0.01

Inference:
The table shows the details of Cash to Current Assets Ratio and registered a fluctuating trend throughout the study period from 2002-03 to 2006-07. Hence we find that STANDARD POLYMERS had maintained a moderate level of cash in proportion to Current Assets.

0.016 0.014 0.012 0.01 0.008 0.006 0.004 0.002 0 '02-'03 '03-'04 '04-'05 '05-'06 '06-'07

Cas h to Curre nt As s e ts Ratio

5.4.8 Cash to Working Capital Ratio

The formula for the ratio is Cash Working Capital

Cash to Working Capital Ratio

Increase/ YEAR 2002 03 2003 04 2004 05 2005 06 2006 07 RATIO 0.11:1 0.04:1 0.03:1 0.07:1 0.06:1 Decrease - 0.07 - 0.01 0.04 -0.01

Inference:
The Cash to Working Capital Ratio registered a fluctuating trend during the study period this is noted from the table. It was 0.11 times in 2004-05, which sharply increased to 0.04 times in the next year and later for the following years it is fluctuating. Hence it is found that 4% of the Working Capital ratio is managed by using the cash & bank balance available in the company. The policy regard financing the Working Capital in STANDARD POLYMERS can be said as aggressive policy.

0.12 0.1 0.08 0.06 0.04 0.02 0 '02-'03 '03-'04 '04-'05 '05-'06 '06-'07 Cas h to Work ing Capital Ratio

5.4.9 Cash to Sales Ratio

The formula for the ratio is Cash Sales

Cash to Sales Ratio

Increase / YEAR 2002 03 2003 04 2004 05 2005 06 2006 07 RATIO 0.0007:1 0.0026:1 0.0028:1 0.0069:1 0.0064:1 Decrease 0.0019 0.0002 0.0041 - 0.0005

Inference:
This is one of the important ratios of controlling cash. A study of cash to sales ratio will provide a deep insight into the cash balances held in the concerns. Evident from the table shows Cash to Sales registered a fluctuating trend throughout the study period.

0.007 0.006 0.005 0.004 0.003 0.002 0.001 0 '02-'03 '03-'04 '04-'05 '05-'06 '06-'07 Cash to Sales Ratio

5.4.10 Cash Ratio

The formula for the ratio is Cash Current liabilities

Cash Ratio
Increase / YEAR 2002 03 2003 04 2004 05 2005 06 2006 07 RATIO 0.0064:1 0.0112:1 0.0160:1 0.0044:1 0.0221:1 Decrease 0.0048 0.0048 -0.0116 0.0177

Inference:
From the table it is noted that the cash position of the STANDARD POLYMERS is satisfactory. It is found that the cash required to meet out the current liabilities is maintained at a normal level.

0.025 0.02 0.015 0.01 0.005 0 '02-'03 '03-'04 '04-'05 '05-'06 '06-'07 Cash Ratio

5.4.11 Current Ratio

The formula for the ratio is Current Assets Current liabilities

Current Ratio
Increase / YEAR 2002 03 2003 04 2004 05 2005 06 2006 07 RATIO 0.94: 1 0.72: 1 1.55: 1 1.27: 1 1.62: 1 Decrease -0.22 0.83 -0.28 0.35

Inference:
This ratio is an indicator of the firms commitment to meet its short term liabilities. From the table it is clear that the Current Ratio of STANDARD POLYMERS has been fluctuating from the starting of the study period, later for last year it has been increasing; hence the Current Ratio is quite satisfactory. Thus the Current Ratio shows that the company has sufficient funds to meet its shortterm obligations.

1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0

Current Ratio

'02-'03 '03-'04 '04-'05 '05-'06 '06-'07

5.4.12 Liquidity Ratio

The formula for the ratio is Liquid Assets Current liabilities

Liquidity Ratio
Increase /

Inference:
This helps management solvency. ratio the to The

YEAR 2002 03 2003 04 2004 05 2005 06 2006 07

RATIO 0.94: 1 0.50: 1 1.07: 1 1.03: 1 1.24: 1

Decrease

measure short-term ideal liquid ratio is 1:1

-0.44 0.57 -0.04 0.21

From the table it is clear that STANDARD POLYMERS liquid ratio is more than the ideal ratio during the starting of the study period and later in 2004 - 05 it had reduced slightly, yet for the rest of the period current liabilities were fully secured by liquid assets because the liquid assets were more than the current liabilities and hence the companys liquidity is satisfactory.

1.4 1.2 1 0.8 0.6 0.4 0.2 0 '02-'03 '03-'04 '04-'05 '05-'06 '06-'07 Liquidity Ratio

5.4.13 Super Quick Ratio

The formula for the ratio is Super Quick Assets Quick liabilities

Super Quick Ratio

Increase / YEAR 2002 03 2003 04 2004 05 2005 06 2006 07 RATIO 0.65:1 0.32:1 0.58:1 0.62:1 0.64:1 Decrease -0.33 0.26 0.04 0.02

Inference:
Super Quick Ratio is the healthy measure of the firms liquidity position. From the table 4.21 it is noted that the liquidity of STANDARD POLYMERS had a steep slope in between during the year 2003-04, yet it was able to have a slow increase in the rest of the study period and able to maintain its position. Hence it shows that STANDARD POLYMERS is able to meet its current obligations (liabilities).

0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 '02-'03 '03-'04 '04-'05 '05-'06 '06-'07 Supe r Quick Ratio

5.4.14 Working Capital Turnover Ratio

The formula for the ratio is sales Working Capital

Working Capital Turnover

Increase / YEAR 2002 03 2003 04 2004 05 2005 06 2006 07 RATIO 12.36: 1 17.70: 1 11.55: 1 31.55: 1 5.45: 1 Decrease 5.34 -25.15 20.00 -26.15

Inference:
This ratio indicates whether Working Capital has been effectively utilized in making sales or not. From the table it is noted that Working Capital had some fluctuation in the middle of the study period, yet the company was able to increase it in the later years. Hence the turnover indicates that STANDARD POLYMERS had utilized its Working Capital efficiently and the company can also try to work on this to get more effective values.

35 30 25 20 15 10 5 0 '02-'03 '03-'04 '04-'05 '05-'06 '06-'07 Working Capital turnover Ratio

5.4.15 Inventories Turnover Ratio

The formula for the ratio is Cost of Goods Sold Average Stock

Inventories Turnover
YEAR 2002 03 2003 04 2004 05 2005 06 2006 07 RATIO 1.36: 1 1.02: 1 1.02: 1 1.02: 1 1.53: 1 Increase / Decrease -0.34 0 0 0.51

Inference:
This ratio indicates whether investment in inventory is efficiently used or not and whether the investment is within proper limits. From the table it is found that the Inventory turnover Ratio of STANDARD POLYMERS had some fluctuations in the starting of the study period then it had a growth in it. Hence the efficiency of inventory control in STANDARD POLYMERS shows a satisfactory position.

1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0

Inventories tor Ratio

'02'03

'03'04

'04- '05'05 '06

'06'07

5.4.16 Debtors Turnover Ratio

The formula for the ratio is Sales Sundry Debtors

Debtors Turnover
Increase / YEAR 2002 03 2003 04 2004 05 2005 06 2006 07 RATIO 7.84: 1 8.54: 1 8.49: 1 3.30: 1 3.26: 1 Decrease 0.70 -0.05 -5.19 -0.04

Inference:
This is one of the techniques employed by the company with regard to the collection of the receivables through effective management of collection policy with the help of factoring services. From the table it shows that the Debtors turnover Ratio had satisfactory increase in the starting of the study period. However, in middle of the study period it had slight fluctuations, the company was able to raise it in the next year.

9 8 7 6 5 4 3 2 1 0

Debtors turnover Ratio

'02-'03 '03-'04 '04-'05 '05-'06 '06-'07

5.4.17 Debt Collection Period Ratio

The formula for the ratio is Days in a Month Sundry Debtors turnover

Debt Collection Period Ratio

Increase / YEAR 2002 03 2003 04 2004 05 2005 06 2006 07 RATIO 46.5 42.7 81.29 110.6 111.9 Decrease -3.8 39.79 29.31 1.3

Inference:
This ratio indicates the extent to which the debts have been colleted in time. It gives the average debt collection period. STANDARD POLYMERS use this ratio to find out whether their borrowers are paying on time. From the table it is found that throughout the study period the collection period is fluctuating and is within the average.

120 100 80 60 40 20 0 '02-'03 '03-'04 '04-'05 '05-'06 '06-'07 Debt Collection Period Ratio

5.4.18 Cash Interval Measure Ratio

The formula for the ratio is Current Assets Inventories Avg. Daily Operating Exp.

Cash Interval Measure Ratio

Increase / YEAR 2002 03 2003 04 2004 05 2005 06 2006 07 RATIO 135.14 104.27 136.44 144.72 146.13 Decrease -30.89 32.17 8.28 1.41

Inference:
This ratio examines the firms ability to meet its regular cash expenses. The defensive interval measures the time period for which a firm can operate on the basis of present liquid assets without resorting to the next years revenue. This ratio of STANDARD POLYMERS, from the table shows that the company can meet its operating cash requirements within a period of 105 to 146 days without resorting to next years income.

160 140 120 100 80 60 40 20 0 '02-'03 '03-'04 '04-'05 '05-'06 '06-'07 Debt Collection Period Ratio

CHAPTER VI 6.1 FINDINDS

The cash management of STANDARD POLYMER has been working well in the organization. The Funds from operations of a company has been increased from year by year. The cash from operations has been find that it used as efficient. The cash inflow and outflow of cash flow statement have a cash balance will be increased 4.2 times when compared to last year balance. Current Ratio shows that the company has sufficient funds to meet its short-term obligations. The companys Liquidity Ratio shows a satisfactory trend. Super Quick Ratio shows that STANDARD POLYMER is able to meet its current obligations (liabilities).. The efficiency of inventory control in STANDARD POLYMER shows a satisfactory position.. The Cash Ratio shows that the cash required to meet out the current liabilities is maintained at a normal level hence, it shows that STANDARD POLYMER follows an average policy.

 Interval Measure Ratio shows that the company can meet its operating cash requirements within a period of 105 to 146 days without resorting to next years income. The Current Assets to Total Assets Ratio implies that STANDARD POLYMER is maintaining a considerable level of Current Assets in proportion to Total Assets. The average Cash to Current Assets is maintained at 0.009 times. Hence, it is found that the company had maintained a moderate level of cash in proportion to Current Assets. The average ratio of Inventories to Current Assets is 0.46 times and thus it is found that the investment in inventories. The average ratio of Sundry Debtors to Current Assets is 0.67 times. Hence it implies that the credit policy followed by STANDARD POLYMERS is moderate. The loans and Advances to Current Assets ratio of the company imply that a quarter positions of the Current Assets are kept in for loans and advances, which is considerable. The policy regard financing the Working Capital in STANDARD POLYMER can be said as Aggressive policy according to the Cash to Working Capital Ratio. The average cash to sales ratio is 0.004 times and which indicates that only 0.4% of sales has been maintained as cash with the business.

6.2 SUGGESTIONS & RECOMMENDATIONS

STANDARD POLYMER should try to match their Cash with the sales. In case of surplus Cash, it should be invested either in securities or should be used to repay borrowings. The company should try to prepare a proper ageing schedule of debtors. This will help them to reduce the bad debts and speed up collection efforts. The company should be prompt in making payments so as to enjoy cash discount opportunities The company should determine the optimum cash balance to be kept. The company followed an aggressive policy of financing working capital should try to finance 50% of their working capital using long term source and improve their status. The current Ratio of 2:1 is considered normally satisfactory. STANDARD POLYMER should try to improve the current ratio. So it should invest large amount in current ratio, in order to maintain liquidity and solvency position of the concern. The company should try to follow a matching policy for financing current Assets (i.e.) using both long term and short-term sources of finances.

CHAPTER VII

CONCLUSION
The Cash Management Analysis done on the financial position of the company has provided a clear view on the activities of the company. The use of the ratio analysis, trend analysis, Cash Flow Statement and other accounting and financial management helped in this study to find out the financial soundness of the company. This project was very useful for the judgment of the financial status of the company from the management point of view. This evaluation proved a great deal to the management to make a decision on the regulation of the funds to increase the sales and bring profit to the company. Before I conclude I wish to convey my thankfulness in regard to the training given to me in STANDARD POLYMER. It gave me extreme satisfaction and practical knowledge of the financial activities carried out in the company. The kindness, attention, and immense co-operation extended to me buy all the officials in the company made my project easy and comfortable. Really it was a very pleasant experience in STANDARD POLYMER.

CHAPTER VIII 8.1 SCOPE OF THE STUDY

It helps to take short term financial decision. It indicates the cash requirement needed for plant or equipment expansion programmes. To find strategies for efficient management of cash. It helps to arrange needed funds on the most favourable terms. It helps to meet routine cash requirement to finance the transaction. It reveals the liquidity position of the firm by highlighting the various sources of cash and its uses.

8.2 LIMITATIONS OF THE STUDY

The study is restricted only to STANDARD POLYMERS. Being a case study, the findings cannot be generalized. The study does not take into account the inflation. The study takes into account only the quantitative data and the qualitative aspects were not taken into account

BIBILIOGRAPHY

BOOKS:

S.N. Maheshwari, Financial management, Eleventh Edition 2006, Sultan Chaqnd & Sons, Educational Publishers. New Delhi. I.M Pandey, Financial management, Ninth Edition, Vikas publishing house pvt Ltd. M.Y Khan- P.K Jain, Management Accounting, Third edition, Tata Mc Graw-Hill Publishing co. Ltd B.L. Gupta, Management of Liquidity and Profitability, Arihant Publishing House, Jaipur.

WEBSITE:

www.financeindia.org www.fao.org