Receivables MGT & Its Impact On Cash Flows Nithin Project Report

A STUDY ON RECEIVABLES MANAGEMENT AND ITS IMPACT ON CASH FLOWS
INDUSTRY PROFILE:
The art, science and engineering prowess of making metals and increasingly other advanced
materials join together and function as one.
Commercial production of welding electrodes was started in India in early 1960s. In 1970s a
number of companies with foreign collaboration or joint venture went into production. Small
scale sector entered the scene in 1980. In 1980s too, a number of organized sector units were set
up with foreign collaboration but now in special welding consumables.
Welding electrode is a delicate tool which while in use combines physical, chemical, and
metallurgical processes of the flux, core wire and parent metal to achieve a durable weld joint or
surfacing. With advent of electronically controlled welding equipments and use of gas as
shielding medium the construction of welding electrode has simplified considerably. For mass
welding jobs solid continuous welding wires find increasing application. Welding electrodes are
used in joining, surfacing and protective maintenance for varied materials and thus their variety
is large while their raw material requirement being very specific
In Welding Electrode industry there are 28 organized sector units of stick electrodes and 8
manufacturers of continuous welding wires. There are around 100 small scale units in this
industry. Stick electrodes, which can be categorized into 8 to 10 broad groups, are of around 150
varieties. Continuous welding electrodes of solid core (MlG and MAG) type and flux cored type
are manufactured in India. In stick electrode the product mix is of mild steel electrodes (about
60%), mild steel high tensile and low hydrogen low alloy (about 30%), and special type (about
10%). Indigenously produced electrodes find application in major industries like Railways,
Petrochemicals, Fertilizers, Sugar, Automobile, Nuclear Power and others.
Foreign collaborations have continued in welding electrode industry from early 1960s till date.
Initially AOL, Philips, and IOL entered the market with joint ventures with their parent
companies. GEEL and Modi Arc went ahead with technical foreign collaboration in which knowhow and machinery supplies were included. In late '80s collaborations were for specialized
welding consumables like SAW fluxes, Flux cored wires, etc.
At present there are 28 organized sector welding electrode units with installed capacity of
1054.61 million running meters in India. Out of the 28 units two units control around 40% of the
installed capacity and six units control around 60% of the installed capacity. The rest is
fragmented among 22 units. The SSI sector which entered this industry a decade ago has at
present a share of 30% of the total stick electrode production. Confirmed production data of
continuous welding electrodes is not available. In welding electrodes exports as well as imports
have been very limited. In 1991 imports were of the
order of Rs.4.10 crores and exports Rs.6.5 crores.
For majority of the electrode manufacturers the major manufacturing processes involved in
production of stick electrode are wire drawing, wire cutting to size, flux constituent grinding, dry
mixing, wet kneading, slug preparation, wire coating, brushing, printing, drying and packing.
They have similar manufacturing facilities which include major machinery like draw bench, dry
and wet flux mixers, slug press, wire feeder, extruder, baking oven, and packing machine. A few
units have very sophisticated inspection and testing facilities and observe stringent quality
control procedures.
The technology with respect to welding electrodes around the world is basically based on
extrusion press. Leading manufacturers have automated their plants by process control
equipments, and material handling equipments. They have introduced computerized batching
Plants, X-ray fluorescent testers, high speed extrusion presses, digital concentricity testers etc.
Use of such equipments is economical for them as they have very high plant capacities. Special
purpose electrode manufacturers attain their leadership by carrying out research in specific
application areas like protective maintenance, in their research centers spread world wide. In
continuous welding wires automatic drawing plants and coating plants are used.
Technology for welding electrodes imported over the last 3 decades has been fully absorbed and
adapted. Indian collaborators have been able to improvise and indigenous flux formulations and
all manufacturing machinery. However no further innovative changes have been carried out in
manufacturing machinery design.
Basic technology of welding electrode production was received from developed countries like
Sweden, Germany, USA, and UK through foreign collaborations and joint ventures. Initially
basic machines like extrusion press, wire feeder, etc. were imported with the knowhow of
electrode recipes and method of preparing flux compositions. Most of the organized sector units
who have had foreign know-how have assimilated the technology and now do not depend on
imported raw materials and equipments except for very sophisticated requirements. M/s. Advani
Orlikon Ltd. has played a lead role in technology assimilation and up-gradation as well as in
training of technical manpower. At present quite a few manufacturers have not extended their
decade long collaboration agreement. An assessment indicates that those with extended foreign
collaborations of joint ventures are more up-to-date technologically and have synergic advantage
in export market. Majority of organized sector units have quite low installed capacities to enable
them to use modern machinery set up like computerized batching plant, X-ray florescent tester,
etc.
In India, basic manufacturing technology for welding electrodes has remained same over the
years. Various electrode coating plant designs have been tried out by the Indian electrode
manufacturers. At present horizontal type (angular and right angled both) electrode coating
plants have found wide acceptance. Screw type press was also tried out but was found
commercially unviable. Indian electrode manufacturers and electrode plant manufacturers can
now develop complete stick electrode manufacturing plant as well as CO 2 wire plant. Capital
equipment in new organized sector units and all the SSI sector units are largely Indian. Electrode
quality steel shortage is felt in summer months due to power cuts at major producer plants.
In Welding Electrodes, exports as well as import have been quite limited. Exports are increasing
although the pace is slow. Imports have decreased over the years. However they are mainly for
small highly specialized application requirements. Comparison of prices and quality of welding
electrode plants of European and Indian plant manufacturers reveal that the former's prices are
quite high relative to their quality. Indian plant manufacturers can be competitive in exports if
they improve their workmanship, basic engineering and stick to delivery schedules.
Research and development activities in this sector are carried out by leading 5 private sector
companies and public sector Welding Research Institute, Tiruchy. Electrode manufacturers who
do not carry out in house research suffer from limited product range. Welding Research Institute,
Tiruchy has done considerable work in development and spread of welding electrode production
technology. Its work has specially benefitted small scale sector units. The later have received
technology for general purpose electrodes, SAW fluxes, hard facing and super hard facing
electrodes etc. and welding equipments.
COMPANY PROFILE
BACKGROUND AND INCEPTION OF THE COMPANY

ADOR FONTECH LIMITED a front-runner organization that operates on the philosophy of
'partnering' with its clients in recommending and implementing value-added reclamation, fusion,
surfacing and spraying solutions.
The Company was incorporated originally as Cosmics Electronics and Ancillaries Pvt. Ltd. on
22nd August,1974.
The name of the Company was changed to Cosmics General Engineering
Pvt.Ltd. on 7th December, 1979. On 21st October, 1988 the Company changed its name to
Cosmics Fontech Pvt.Ltd. The Company became a Public Limited Company on 17 th November,
1993.
M/s.
Cosmics Fontech Limited (CFL) is an associate Company of M/s. Advani-Oerlikon
Limited. It was set up to provide Products, Services and Solutions for Reclamation and Service
Life Improvement of vital machinery components in various industries.
The Company commenced operations on 17th December, 1979 under the name of Cosmics
General Engineering Pvt Ltd. The purpose was to provide industries a comprehensive range of
Low Heat Input Welding Alloys, Flux Cored Welding Wires, Thermal Coating Alloy Powders
and the associated equipment used with the relevant reclamation and surfacing processes.
On 21 st October 1988 obtained the certificate for change of name to Cosmics Fontech Private
Limited. The word Private was deleted from the name of the Company on 21st October 1988
under the Companies Act 1956, when the Company became a deemed public Company. On 17th
November, 1993 the Company became Cosmics Fontech Ltd., full fledged Public Limited
Company under Section 43(A).
The Company came into being in 1980. Right from its inception, it has had a focus of supplying
products, services and solutions that meet and exceed the needs of its end-users.
In the growing competitive Indian economy, the need to contain both capital and revenue costs
has to be closely monitored. Ador Fontech Limited being in life enhancement segment, the value
addition that it brings in terms of cost savings to organizations is paramount. In other words, the
company provides a positive edge both towards, the impact of business cycle and the varied
movements of the economy in general.
There is a plethora of opportunities to enhance the market share of the company and also to bring
in newer concepts related to repair and refurbishment operations. In this, the company would
endeavor to have an inside out approach to build on its strengths like consolidation of viable
business opportunities and diversified portfolios of products and solutions. Nonetheless, care
would be evinced to strike a balance between the risks and rewards of opportunities, as also
strive towards ensuring a consistent growth module.
There are quite a number of players operating both in the organized and unorganized sectors and
the gap between fabrication and repair welding is nebulous with many organizations expanding
their terrains to cover both these segments.
The company caters to the Life Enhancement if Vital Machinery Components. The domain
expertise in this sector calls for application of high level of skills covering metallurgy, chemical
and repair welding processes. There are quite a few players in this marker and competition is
keen. Nonetheless, the underlying fact is the contribution that this segment offers to the world at
large, in terms of conservation of depleting natural resources, which is substantial. Further,
industries in general are benefited by way of greater productivity, resulting from lesser
downtime. This unique predisposition, places the organization on a consistent growth platform.
The company has a wide range of products and solutions and this range is constantly being
monitored by way of additions and deletions to keep abreast with the latest in technology and
operational efficiency.
Ador Fontech limited is a front-runner organization that operates on the philosophy of
partnering with its clients in recommending and implementing best-in-class joining,
reclamation and surfacing solutions. The company is dedicated to supply of products, services
and solutions that meet and exceed the needs of the end-users. The customer-base includes
mining industries, steel and other metallurgical complexes, power plants, fertilizer and chemical
plants, oil drilling and refining sector, defence workshops and a whole range of engineering
industries.
A key strength of the Company is motivated employees with high morale and innovativeness.
The work culture provides the employees with challenging goals and joy of work. Fonetwork
also consists of a service-oriented Authorized Dealer network and suppliers both in India and
Overseas with whom win-win 'partnerships' exist. Continuous improvement in long term
relationships is considered as an investment towards the common mission of Total Customer
Satisfaction. Frequent interactions are aimed at understanding internal and external customer
needs and measurement of customer satisfaction Ador Fontechs future vision has to take into
account these rapid technological breakthroughs. There are also opportunities of strategic
alliances and mutually beneficial partnerships both globally and within our country. Collectively
the Company has a quiet confidence about the future and has a strong belief that customer focus,
quality and productivity will continuously improve in years to come.
NATURE OF THE BUSINESS CARRIED
Ador Fontech limited (ADFL) network has been situated in all over the country The primary
business of Ador Fonetch is Life enhancements of vital machinery components Ador Fontech
Limited engages in the manufacture and supply of welding consumables, equipment,
reclamation, resurfacing, and refurbishment services of metallic components. The companys
products include low heat input welding alloys; hard-facing and wear-resistant products;
welding, cutting, and welder safety equipment; and in-situ reclamation services. It also provides
thermal spray technology, products, and solutions; wear-resistant cast-wear plates; cobalt and
nickel based alloys and cast components; welding power sources and systems; arc and resistance
welding and plasma cutting equipment; welding fume extraction equipment and systems; bore
welding solutions; thermal insulation solutions; and welding spot separation and welder safety
products. The company supplies products, services and solutions that meet and exceed the needs
of end-users.. The organizations core operation is providing surfacing and reclamation services.
The company main concentrates on producing flux cored wires and electrodes products. This is
done through implementation of value- added reclamation, fusion, surfacing and coating
solutions. Considering the growth in various user industries such as steel, cement, power,
mining, metallurgical complexes, Ador Fontechs core business of recycling and life
enhancement provides an increasing window of opportunity. The company has 2 revenue
streams: Manufacturing & Trading. The customer-base includes mining industries, steel and
other metallurgical complexes, power plants, railways, road transport workshops, shipping
industries, sugar mills, cement plants, fertilizer and chemical plants, oil drilling and refining
sector, defence workshops and a whole range of engineering industries
Vision and Mission policy
Vision
Our vision is to be considered as the partner of first choice by our customer.
Mission
Mission is to partner with the customer in implement value added reclamation fusion, surfacing
and spraying solutions.
Quality policy
To shrine to delight the customer by understanding and exceeding their needs. This shall be
achieved through continual improvement of the work processes and by involvement of the
employees
SHARED VALUES
Our Shared Values are DELIGHT
Delighting customers is first & foremost.
Empowered employees who enjoy their work.
Living upto our shared values.
Innovative ideation throughout the company and continuous improvement in everything we do.
Growth is our way of life.
Honouring commitments whether made orally or in writing.
Technology as it continues its advance will be a vital enabler in the Company.s plans and
operations
PRODUCT AND SERVICES

As a result of continuous analysis and evaluation of the end-user needs, the Fon
Spectrum consists of low-heat input alloys, solid and flux-cored wires, welding and
cutting equipment, fume extraction products, in-situ machining systems, thermal spray
products and hands-on rebuilding and reclamation services. The products and services
have been categorized as follows.
FON
Low heat input welding alloy
FMA
Hard-facing and wear-resistant products
FAC
Welding, cutting and welder safely equipment
FRS
Fon reclamation services
LES
FTS
In-situ reclamation services

Thermal spray technology, products and solutions
Within the scope of the above product groups, in addition to the in-house manufacturing
program, the Company exclusively represents the following internationally well-known
brand names in India
Thermal spray technology, products and solutions
Worlds most wear-resistant cast-wear plates
Cobalt and nickel based alloys and cast components
High-tech welding power sources and systems
Arc and resistance welding and plasma cutting

equipment
Welding fume extraction equipment and systems
Flux is in the flame
Bore welding solutions
Thermal insulation solutions
Welding spot separation and welder safety products
AREA OF OPERATION
The company has 2 revenue streams: Manufacturing & Trading. The company has 3
manufacturing units: Two in Bangalore and one in Nagpur. The production takes
place in the national level. Ador Fontech limited situated in all over India. ADFL
network includes field sales

BHILAI
BOKARO
CHENNAI
CHITTORGARH
JABALPUR
JAMESHEDPUR
LUCKNOW
LUDHIANA
NAGPUR
PUNE
RAJKOT
ROURKELA
SECUNDARABAD
TRICHY
VADODARA
VISAKAPATNAM.
OWNERSHIP PATTERN
ADOR FONTECH LIMITED is public limited which started of business as Private limited
company in the year 1979. It got converted into public limited company by making public issue
on 17th November, 1993.
COMPETITORS INFORMATION:
Company
Sales
HEG
Graphite India
Esab india
Ador Welding
GEE
Panasonic.Carbo
n
Ador Fontech
Titanor com
D&H Welding
Rasi Electrodes
10290.04
11258.77
4206.28
2238.38
1217.61
303.94
1048.41
193.84
483.87
173.8
curren Change % P/E Ratio

market cap
t price
( Rs million)
362.55
-0.03
9.96
15533.6
90.1
0.33
5.95
15454.14
617.9
-6.4
15.35
10161.7
186.6
-0.43
17.58
2548.35
63
1.04
13.1
1473.07
176.15
1.03
10.88
836.88
225.6
94.65
30.8
22.95
0.33
6.35
-3.14
-5.94
6.65
358.27
18.64
12.93
INFRASTRUCTURAL FACILITIES
1. Medical Facilities only through cash
2. Training Facilities( technical training includes In-house training)
786.98
494.41
310.05
116.14
52 week
High/Low
413/116
97/31
665/295
222/107
79/33
185/92
228/85
93/41
34/13
27/14
3. Recreation Facilities (reimbursement of lunch expenses ranges varies from Rs.35 to

Rs.50 per head depending upon the position held by the employee)
4. Transport Facilities (vehicles are provided under closed motor vehicle scheme where in
Company will take deposit from the employee and company will buy the vehicle making
full payment to showroom after 4years, later WDV value it will be left to employees. In
case of four wheeler it is 5years.
5. The company is providing free transport facilities to the ward of employees.
6. Salary advances are giving to employees when necessary meet emergencies line sickness,
etc.
ACHIEVEMENTS
1980
Commencement of operations.
1983
New reclamation welding alloy developed for the Indian Railways in the H3
class
1985
Finalization of exclusive distributorship for India from SULZER METCO

(Switzerland, Singapore & USA) for thermal spray equipment and materials
1987
Launch of FONMATIC open arc FCAW wires and feeders.
1988
FONTECH training centre launched at Mumbai.
1992
Acquisition of FIST India Private Limited and merger of the same with ADFL.
Acquisition of KOSTECH India Private Limited and merger of the same with
ADFL
Number of shareholders increased from 112 to 1874 and equity capital
increased from Rs.48 lakhs to Rs.169 lakhs
1994
Equity capital increased to Rs. 225 Lakhs.
1995
Public issue successfully completed to raise the equity capital to Rs. 350 Lakhs.
1996
ISO 9002 Certification.

Launch of ARCOFON range of superior wear resistance technology wear plates.
1997 Exclusive distributorship for copper and copper alloys from BEDRA (Germany).
1998
Exclusive distributorship for GASFLUX range of products and services

Approval of special welding alloys from defence organizations for armour steel welding.
Exclusive distributorship for EUROMATE (Holland) range of welding fume extraction
equipment and systems.
1999 Exclusive distributorship for CEA (Italy) range of inverter welding equipment.
2000 Exclusive distributorship for CEPRO (Netherlands) range of world class 'welding
spot separation' products .
2002 Distributorship for Soitaab (Italy) range of cutting systems
2004 Manufacturing Unit for Low Heat Input Welding Alloys at Bangalore
WORK FLOW MODEL (END TO END)
PUCHASE OF ESSENTIAL RAW-MATERIAL
INVERT
PROCESS (Flux Mixing)
OVERLAPPING
TUBES
POONING
TESTING
REFORM TO THE FINAL FINISHED GOODS
MC KINSEYS 7S FRAME WORK:

THE 7S MODEL
The 7S model is better known as McKinseys 7S. This is because the two persons who
developed this model, Tom Peters and Robert Waterman, have been consultants at McKinsey &
Co at that time. They published their 7S Model in their article Structure Is Not Organization
(1980) and in their books The Art of Japanese Management (1981) and In Search of
Excellence (1982). The model starts on the premise that an organization is not just structure, but
consists of seven elements:
Structure
Strategy
System
Shared
values
Style
Skills
Staff
MC KINSEYS 7S FRAME WORK MODEL
These seven elements are distinguished in so called hard Ss and soft Ss. The hard elements are
feasible and easy to identify. They can be found in strategy statements, corporate plans,
organizational charts and other documentation
The four soft Ss however, are hardly feasible. They are difficult to describe since capabilities,
values and elements of corporate culture are continuously developing and changing. They are
highly determined by the people at work in the organization. Therefore it is much more difficult
to plan or to influence the characteristics of the soft elements. Although the soft factors are below
the surface, they can have a great impact of the hard structures, strategies and systems of the
organization.
Mckinseys 7S frame work of business
This is the McKinsey 7S frame work of business that have been used at the Mckinsey
consulting company:
Hard Variables:
Strategy: Plan leading to allocation of resources.
Structure: Organization reporting lines, geography etc.,
Systems: Formal and informal process use.
Soft Variables:
Staff: Demographics of personnel
Style: behavior of managers when interacting with others.
Skills: Core competencies of the firm.
Shared value: Culture, which is actually the core element to it all.
The 7-S framework of McKinsey is a management model that describes 7 factors to organize a
company in an holistic and effective way. Together these factors determine the way in which a
corporation operated. Managers should take into account all seven of these factors, to be sure of
successful implementation of a strategy. Large of small. They are all interdependent, so if you
fail to pay proper attention to one of them, this may effect all others as well. On top of that, the
relative importance of each factor may vary over time.
Origin of the 7-S Frame Work
History
The 7-S Framework was first mentioned in The Art of Japanese Management by Richard
Pascale and Anthony Athos in 1981. They had been investigating how Japanese industry had
been so successful. At around the same time that Tom peters and Robert Waterman were
exploring what made a company excellent. The Seven S model was born at a meeting of these
four authors in 1978. It appeared also in In Search of Excellence by Peters and Waterman, and
was taken up as a basic tool by the global management consultancy company McKinsey. Since
then it is known as their 7-S model.
The meaning of the 7Ss

McKinsey 7-S frame work Shared Values (also called super ordinate Goals).
The interconnecting center of McKinseys model is:
Shared Values
What does the organization stands for and what is believes in. Central beliefs and attitudes.
Compare Strategic Intent.
Strategy
Plans for the allocation of firm scarce resources, over time, to reach identified goals.
Environment, Competition, customers.
Structure
The way in which the organizations units relate to each other: centralized, functional divisions
(top-down), decentralized, a matrix, a network, a holding etc.,
Systems
The procedures, processes and routines that characterize how the work should be done: financial
systems, recruiting, promotion and performance appraisal systems, information systems.
Staff
Numbers and types of personnel within the organization
Style
Cultural style of the organization and how key managers behave in achieving the organizations
goals. Compare Management Styles.
Skills
Distinctive capabilities of personnel or of the organization as a whole. Compare core

Competences.
THE HARD Ss
STRUCTURE:
The term structure in 7s framework model refers to the organizational structure of the company.
The designs of the organizational structure is critical task to the management of an organization,
it is the skeleton of the whole organization. Organization structure refers to relatively more
durable organizational arrangements and relationship.
It prescribes the formal relationship among various positions and activities. Arrangement about
reporting how an organizational member is to communicate with other members, the various
activities performed by members is all the part of organizational structure.
Organizational structure performs four major functions:
It reduces internal uncertainty arising out of variable unpredictable, random human behavior
within the organization through control mechanisms.
It reduces external uncertainty through forecasting, research and planning in the organization.
It undertakes a wide variety of activities through devices such as departmentation,

specialization and division of labor and delegation of authority.
It enables the organization to keep its activities coordinated and to have a focus in the midst of
diversity in the pursuit of its objectives.
COPEC, Admin,
Accounts & EDP
The board of directors

Mrs. R.T. Malkani chairman
Mr.H.P Ledwani
Managing Director
Mr. N Srinivasan
Mr. Arvind Mathur
Mr. N Malkani Nagpal
COMPANY SECRETARY
Mr. Geetha D
OPERATING TEAM
Mr. H P Ledwani
Mr. M J Kurian
Mr. Muneesh Narain
Mr. P Ramachandran
Mr. Ravi Magal
Mr. Rajesh V Joshi
Mr. S V Puntambedkar
Mr. Melville ferns
REGISTERED AND CORPORATE OFFICE

Beliview, 7, Haudin Road, Bangalore 560 042.
MANUFACTURNING UNITS
S-60-61, MIDC, Hingna Industrial Estate, Nagput 440 016
No. 486,B-1, 14th cross, 3rd Main, 4th Phase, Peenya Industrial Area, Bangalore 560 058
A-288, II Stage, Peenya Industiral Estate, Bangalore 560 058
AUDITORS
Amarnath kamath and Associates
Chartered Accoutants
Carewell House, 6th Cross Muniswamappa Layout, Opp. Kemp Fort , Off Airport Road,
Bangalore 560 017
BANKERS
HDFC Bank Limited
The Bank of Nova Scotia
Finance Department:
Finance is the life blood of every organization. It involves procurement of funds and its effective
utilization in the organization to earn good rate of return. Proper accounting of the various
transactions of the company is the first foremost important activity in every organization. It
directly affects the lives of every organization, be it a private or public, financial or nonfinancial, profit seeking or not-for-profit.
Finance department structure

Managing Director
General Manager (Finance)
Deputy Manager
Assistant Manager
Accounts officers
Superintendent
Accounts assistant l/II/III
Helper
Proper accounting of the various transaction of the company is the first foremost important
activity in every organization. It directly affects the lives of every organization. Be it a private or
public financial or non financial, profit seeking or not -for- profit.
STRATEGY:
A set decisions and actions aimed at gaining a sustainable completive advantage. Hence the
company mainly follows long tem strategy. Where they need to set-up their organization all over
the country.
SYSTEM:
The term systems in the 7s framework refers to all the rules, regulation, procedures and process
both formal and informal, that compliment the organization structure to work successfully.
System and process of controlling is the measurement and correction of performance in order to
make sure that enterprise objective and the plans devised to attach them are being accomplished.
ADFL is an organization, which is systematic in doing its day-to-day work and any work for that
matter is done in a very systematic and sophisticated manner. ADFL uses SAPAD system
software which interlinks employees within the organization. Through this software employees
can excess the information depending on the designation and level of authority and
responsibilities. The various systems that exist at ADFL are as follows:
MIS System
Billing System
Quality control system
Procurement system
Mainly these organization follows SAPAD system software. This is evident from the fact that
ADFL has well-managed PURCHASE.
THE SOFT Ss
SKILL:
Waterman considers skills as one of the most crucial attributes or capabilities of an
organization. Organizations have strengths in number of areas but their key strength dominant
skills are few. These are developed over a period of time and are as result of the interaction of
number trips performing certain tasks.
Skills in the Mckinsey framework are equivalent of Seizeniks- distinctive competencies to
dominant skills or distinctive competencies of organization are part to the organizational
character.
ADFL is the company well known for its quality products and services which is evident through
state-of-the-art design and technology. It is the company which is bench marked for its quality
and customer service.
The training steps followed in ADFL is explained below:
The training needs of the employees are monitored by the HRD head in accordance with the
functional head. Head of HRD shall be responsible for organizing relevant training and
development program. Training needs for all personal are identified once in a year and are
recorded in training needs record format.
The training will divide into two categories:
Core Programs: Trainning given to each level of employee as soon as they are promoted to the
responsible levels.
Specialized Programs: provided as per the training requirements mentioned in the performance
appraisal report of the employees.
The training methods used are;
On- The-Job-training: It includes imparting skills by exposing the employee to the work
environment. It include job rotations and under study assignments.
Off- The-Job-training: It involves learning skills through simulations exercises such as case
analysis, role playing, group interaction etc.
STYLE:
ADFL work force is participative by nature. Each employee is contributing themselves at their
level best towards the companies policies, procedures, programs and growth.
In every perspective the company considered all employees in decision making planning and the
company respects the suggestions, opinions, ideas of its human resources. Employees can be
participative in plans but cannot change any acts made by the co-operative society. No superior
does have the individuals decision making unlike that of private sector companies.
STAFF:
There are bout 250 employees working for ADOR FONTECH LIMITED. It can be divided into
following categories:
Technical staff:
Technical staff comprised of the engineers, diploma holders, etc are directly involved in
production. Maintenance of machines, operating of CNC machines, repairing of machines are
look forward by the technical staff..
Non technical staff:
The main objective of non-technical staff is to carry the business of management. Post graduates,
graduates and highly qualified peoples constitute non-technical staff. The main function of nontechnical staff is to maintain paper works, computer works, planning, decision-making, etc., the
non-technical staff indirectly involved in production process.
Duties and responsibilities of the technical and non-technical staff are as follows
To respect the right of peers, sub-ordinates, superiors, etc.,
To maintain discipline in the working hours and at work place.
To follow the rules and regulations setup by the company.
To contribute for the well-being and growth of the company.
To enrich the knowledge about the job.
SHARED VALUES:
Our Shared Values are DELIGHT
Delighting customers is first & foremost.
Empowered employees who enjoy their work.
Living upto our shared values.
Innovative ideation throughout the company and continuous improvement in everything we do.
Growth is our way of life.
Honouring commitments whether made orally or in writing.
Technology as it continues its advance will be a vital enabler in the Companys plans and
operations.
SWOT ANALYSIS
SWOT analysis is a tool for auditing an organization and its environment. It is the first stage of
planning and helps marketers to focus on key issues. SWOT stands for strengths, weaknesses,
opportunities, and threats. Strengths and weaknesses are internal factors. Opportunities and
threats are external factors.
Strengths:
1. ADFL has been a market leader with brand identity- The brand and reputation of ADFL
in the markets is strong and is recognized as being professional and reliable.
2. Wide range of products- ADFL manufactures around 250 varieties of products.
3. ADFL has built a strong human resources program in the company which helps them to
hire, train and retain the best people.
4. ADFL has good cost control team which makes best effort to reduce the cost wherever
possible but not at the expense of quality, safety.
5. ADFL has well organized distribution network. It has good network of dealers who care
of distribution.
6. ADFL manufactures products at a reasonable price which has been attracting prospective
and existing customers.
Weakness:
1. Less advertisement- As ADFL customer base includes more public limited companies
like defense, railways, shipping industry.
2. Some gap in range of product for certain products.
3. ADFL does not have well established research & development department.
4. Promotion is based on seniority as result very efficient junior employee may get demotivated and may not perform to his best.
Opportunities:
1. Growing needs for life enhancement solution.

2. Comparison of prices and quality of welding electrode plants of European and Indian
plant manufacturers reveal that the former's prices are quite high relative to their quality.
This provides opportunities to expand business to European countries.
Threats:
1. Emergence of competition from foreign company in the form of joint ventures.
E.g.:- Esab India Ltd in collaboration with Esab A B Sweden.
2. Increasing competition from lower price and small-scale industries.
3. Newer technologies and new welding and thermal coating processes are evolving
4. Electrode quality steel shortage is felt in summer months due to power cuts at major
producer plants. It is met by Mini steel plants by non-rimming semi-skilled steels but
they have higher tramp elements.
5. Boundaries b/w fabrication and repair wielding.
FINANCIAL ANALYSIS
ADOR FONTECH LIMITED.
BALANCE SHEET AS ON 31st March
SCH
2008-09
AMOUNT
2007-08
AMOUNT
2006-07
AMOUNT
LIABILITIES
SHARE CAPITAL
RESERVES & SURPLUS
UNSECURED LOANS
A
B
35000000
269879840
------
35000000
193801433
-----
35000000
129305791
10275000
CURRENT LIABILITIES
PROVISIONS
GRAND TOTAL
143397889
172329451
124082669
448277729
401130884
298663460
ASSETS
FIXED ASSETS
79518706
68530226
60645908
13834838
104980
93458524
5078677
254600
73863503
403426
254600
61303934
INVENTORY
94645892
82192037
88504107
SUNDRY DEBTORS
108456348
145238769
106592476
CASH & BANK BALANCES
113597272
70115666
29681399
LOANS & ADVANCES

INTEREST ACCURED
INVESTMENTS
38119693
29715212
12575847
------
5697
5697
SUB TOTAL(2)
354819205
327267381
237359526
GRAND TOTAL(1+2)
CURRENT
LIABILITIES
PROVISIONS
448277729
401130884
298663460
143397889
172329451
124082669
CURRENT
ASSETSLOANS-ADVANCES
354819205
327267381
237359526
DEFERRED TAX ASSET

INVESTMENTS
SUB TOTAL (1)
CURRENT ASSETS-LOANSADVANCES
It
ON
WORKING CAPITAL
211421316
154937930 113276857
can be observed from the Balance sheet that company has not made public issue for the last few
years. The reserves and surplus of the company has been increasing year by year. It has not
borrowed neither short term (secured or unsecured loans), from this we can come to conclusion
that company is self sufficient (cash rich) in cash position. The debtors have been decreasing
year by year and companys cash balance is increasing. There is considerable increase in
investments by the company. It can also be observed that company has current assets more than
twice the current liability which is ideal current ratio for a company.
LEARNING EXPERIENCE:
It helps me to feel the real business environment
This training is very useful as it manifolds our confidence apart from the theoretical
knowledge.
To know the various departments effectively contribution towards the fulfillment of
organization goal.
To know about the partial aspects of the functioning of an organization.
It helps know the relation b\w various departments & co-relation of them.
Preparation of project imparts of professional skills which will be great use in future.
To know the activities of the different staff.
It helps me to know the strategies used by company to achieve its objectives.
To know about welfare facilities adopted by company.
It helps me to know about company position, its competitors.
To know the how to behave in corporate world.
In plant training helped me to know the various departments in detail so I can get the
knowledge about the organization from different aspects and to study the function of
different departments
PART- B
GENERAL INTRODUCTION
Accounts receivable consists of money due from customers as a result of an organization's
normal business operations. The management of accounts receivable is an extremely important
function since the collection of outstanding receivables represents the single most important
source of cash for all organizations selling goods on open account. Because of the impact that
accounts-receivable collections have on cash flow, it is important that responsibility for the dayto-day management of credit and collections activities be delegated to a single individual within
the organization
Because of the significance of accounts receivable it is important for management to receive
periodic reports that both measure the effectiveness of collection activities and inform or alert
management of problem accounts. Ideally, reports should be generated on a monthly basis, but
depending on the size of the receivable balance and collections staff, the issuance of such reports
may range from weekly to quarterly. This flow of information is necessary so that management
and collections staff can determine whether current credit and collections policies and procedures
are working, or whether any of the policies and procedures need to be changed to more
effectively collect outstanding receivables. Additionally, the collections staff needs information
so that collection activities can be prioritized, problem accounts isolated, and outstanding
balances collected.
ACCOUNTS RECEIVABLE MANAGEMENT:
An account receivable is the money owed to a company by a consumer for products and services
purchased on credit. This is usually treated as a current asset of accounts receivable after the
customer is sent an invoice. Accounts receivable are known by various names, such as accounts
receivable aging, accounts payable, days receivable, accounts receivable turnover and invoice
factoring. According to the experts, accounts receivable or invoice factoring is one of a series of
accounting transactions. These accounting transactions deal with the billing of customers who
owe money to a person, company or organization for goods and services purchased. If you are
seriously considering using accounts receivable as a method of obtaining a more liquid asset,
then it is wise to hire accounts receivable management specialists.
Accounts receivable management can help in a variety ways:
It can cut and maintain your average collection delay or DSO

It can lessen your direct and indirect expenses
It can considerably reduce your bad debt
It can tell you various ways to take advantage of your cashflow
It can help you capitalize on your internal resources
It can maximize your interventions on sales, service and market share.
Hiring the best accounts receivable management will clear up the common misconception that
the selling of accounts receivable is a loan. Accounts receivable are the amounts that customers
owe a business; this is clearly shown on a company's balance sheet. Some also call accounts
receivable trade receivables and try to classify them as current assets. Accounts receivable
managements main goal is to take care of all these debts and to record sales of accounts; one
must debit a receivable and credit a revenue account. Accounts receivable management also
looks into issues such as recognizing accounts receivable, valuing accounts receivable, and
disposing of accounts receivable.
CREDIT POLICY VARIABLES:

The important dimensions of a firms credit policy are:
Credit standards
Credit period
Cash discount
Collection effort
These variables are related and have a bearing on the level of sales, bad debt loss, discounts
taken by the customers, and collection expenses. For purposes of expository convenience we
examine each of these variables independently.
CREDIT STANDARDS:
A pivotal question in the credit policy of a firm is: what standard should be applied in
accepting or rejecting an account for credit granting? A firm has a wide range of choice in this
respect. At one end of the spectrum, it may decide not to extend credit for any customer, however
strong his credit rating may be. At the other end, it may decide to grant credit to all customers
irrespective of their credit rating. Between these two extreme positions lies several possibilities,
often the more practical ones.
Liberal credit standards tend to push sales up by attracting more customers. This is, however
accompanied by a higher incidence of bad debt loss, a larger investment in receivables, and a
higher cost of collection. Stiff credit standards have opposite effects. They tend to depress sales,
reduce the incidence of bad debt loss, decrease the investment in receivables, and lower the
collection cost.
CREDIT PERIOD
The credit period refers to the length of time customers are allowed to pay for their purchases. It
generally varies from 15 days to 90 days. When a firm does not extend any credit, the credit
period would obviously be zero. If a firm allows 30 days of credit, with no discount to induce
early payments, its credit terms are stated as net 30.
Lengthening of the credit period pushes sales by inducing existing customer to purchase more
and attracting additional customers. This is accompanied by a larger investment debtors and a
high incidence of bad debt loss. Shortening of the credit period would have opposite influences.
It tends to lower sales, decrease investment in debtors, and reduce the incidence of the bad debt
loss.
CASH DISCOUNT
Firm generally offer cash discount to induce customers to make prompt payments. The
percentage discount and the period during which it is available are reflected in the credit terms.
Liberalizing the cash discount policy may mean that the discount percentage is increased or the
period is lengthened. Such an action tends to enhance sales, reduce the average collection period,
and increase the cost of discount.
COLLECTION EFFORT
The collection program of the firm, aimed at timely collect of the receivables, may consist of the
following.
Monitoring the state of receivables.

Dispatch of letters to customers whose due date is approaching.
Telegraphic and telephonic advice to the customers around the due date.
Legal action against overdue accounts.
A rigorous collection program tends to decrease sales, shorten the average collection
period, reduce bad debt percentage and increase the collection expense. A lax collection
program on the other hand, would push sales up, lengthen the average period and
increase the bad debt percentage, and perhaps reduce the collection expense.
Goals of credit policy:

A firm may follow a lenient or a stringer credit policy. The firm following a lenient credit
policy tends to sell on credit to customers on very liberal terms and standards credit is granted
for longer periods over to those customers who credit worthiness is not fully known or whose
financial position is doubtful.
Traditional credit Analysis:

The traditional approach to credit analysis calls for assessing a prospective customer in terms of
the 5 Cs of credit.
Character: The willingness of the customer to honor his obligation. It reflects integrity, a moral
Attribute that is considered very important by credit managers.
Capacity: The ability of the customer to make credit obligations from the operating cash flows.
Capital: The financial reserves of the customer. If the customer has problem in meeting credit
Obligation from operating cash flow, the focus shifts to its capital.
Collateral: The security offered by the customer in the form of pledged assets.
Conditions: The general economic condition that affect the customer.
To get information on the 5 Cs, a firm may relay on the following:Financial statements:
Financial statements contain a wealth of information. A searching analysis of the customers
financial statements can provide useful insights into the credit worthiness of the customers. The
following ratio seems particularly helpful in this context:
Current ratio, acid-test ratio, debt-equity ratio. EBIT to total assets ratios and return on equity.
Bank reference:
The banker of the prospective customer may be another source of information. To ensure a
higher degree of candour, the customers banker may be approached indirectly through the bank
of the firm granting credit.
Experience of the firm:
consulting ones own experience is very important. If the firm had previous dealings with the
customer, then it is worth asking: how prompt has the customer been in making payments? How
well has the customer honored his word in the past? Where the customer is been approached for
the first time, the impression of the company sales personnel is useful.
Price and yield of securities:
For the listed companies, valuable inferences can be derived from stock market data. Higher the
price earning multiple and lower the yield on bonds, other things being equal, lower will be the
creditors.
NEED FOR STUDY

Business activity is dynamic in character and subject to wide fluctuations. Most firms treat
account receivables as marketing tool to promote sales and profits. Every firm has a set of credit
terms and policies under which goods are sold on credit and every policy has a cost and benefit
associated with it. This project attempts as to how to manage the accounts receivable and the
impact of it.
In a competitive environment sometimes the firms are compelled and sometimes the firms desire
to adopt liberal credit policies for pushing up the sales and the factoring has been done. So a
careful analysis of various aspects of the credit policy is required. That is why Appraisal of
Receivable Management is done.
STATEMENT OF PROBLEM
How to improve receivables performance of company and its impact on cash flows. Analysis of
receivables management in the company.
OBJECTIVES OF THE STUDY

1. To suggest the necessary measures.
SCOPE OF STUDY
The study is limited only to the operations of ADOR FONTECH LIMITED using data for last
three years starting from 2006-07 to 2008-09. It concentrates on receivables of ADFL and its
impact cash flows. The study aims at analyzing the debtors and outstanding of company. It is
hoped that this study will help the company in reducing its investment in Accounts Receivables.
REVIEW OF LITERATURE
MEANING OF ACCOUNTS RECEIVABLES:
Accounts receivable is one of a series of accounting transactions dealing with the billing of
customers who owe money to a person, company or organization for goods and services that
have been provided to the customer. In most business entities this is typically done by generating
an invoice and mailing or electronically delivering it to the customer, who in turn must pay it
within an established timeframe called credit or payment terms.
While booking a receivable is accomplished by a simple accounting transaction, the process of
maintaining and collecting payments on the accounts receivable subsidiary account balances can
be a full time proposition. Depending on the industry in practice, accounts receivable payments
can be received up to 10 15 days after the due date has been reached. These types of payment
practices are sometimes developed by industry standards, corporate policy, or because of the
financial condition of the client.
OBJECTIVE OF RECEIVABLE MANAGEMENT:
From creation of receivables the firm gets a few advantages & it has to bear bad debts,
administrative expenses, financing costs etc. In the management of receivables financial manager
should follow such policy through which cash resources of the firm can be fully utilized.
Management of receivables is a process under which decisions to maximize returns on the
investment blocked in them are taken.
Thus, the main objectives of management receivable are to maximize the returns on investment
in receivables & to minimize risk of bad debts etc. Because investment in receivables affects
liquidity and profitability, it is, therefore, significant to maintain proper level of receivables.
Efficient credit management helps to increase the sales of the firm.
To optimize the amount of sales.

To minimize cost of credit.
To optimize investment in receivables.
To establish a balance between profitability and risk (cost).
A business can afford to invest in its receivables unless the marginal costs and marginal profits
are the same. Although the level of receivables is affected by various external factors like
standards of industry, economic conditions, seasonal factors, rate of competition etc,
management can control its receivables. Though credit policies, credit terms, credit standards and
collection procedures.
FACTORING:
Factoring is the sale of invoices or Accounts Receivable at a discount. It is a way for the business
to generate cash and improve cash flow without taking on additional debt.
Traditionally, factoring was a financing service used by the textile and furniture industries. Today
however, factoring has become a financing standard in just about any industry that created
Accounts Receivable by extending terms to its customers.
REASONS FOR COMPANIES FACTORING THEIR RESOURCES:
Simply put, to generate cash flow. Factoring provides immediate working capital for companies
facing a short term cash constraint. Most companies that choose factoring are not currently able
to qualify for a traditional loan from their bank or companies who are growing faster than their
bank is willing to extend credit.
Due to credit policies and regulatory constraints, banks typically need to see 2 years of profits,
minimal leverage and a certain amount of cash flow for debt coverage. Companies that do not
meet these characteristics and does not have any real estate to pledge as collateral can many
times find itself on the outside looking in. However, companies with Accounts Receivable (a
current asset but not cash) can use them to generate cash for their day to day working capital
needs.
When a company sells its product or service on terms, it typically creates an invoice. This
outstanding invoice for completed work can be called an Accounts Receivable. Instead of
waiting to receive the cash when the customer remits payment, the business may decide to factor
the receivable and immediately receive the cash. In order to have instant access to funds, the
company is charged a nominal fee.
ADFL company does not go for direct factoring. Here the dealers act as factor where in they will
make payment to the company immediately when they receive the products from the company.
Dealers will receive the amount once they sell the products to the ultimate customer.
BENEFITS
Although every business is different and their reasons for Factoring may not be the same, the
following benefits are representative of most situations:
Additional cash is immediately available.

Quick and easy to set up
It is temporary (no long term contracts required) and flexible (frequency and amount of
funding is optional)
No additional debt is created as it is "Off Balance Sheet" financing
Owner avoids giving up equity or control of the company
Unlimited source of Working Capital - the funds available grows as the company's sales
grow.
THE BANKERS OF ADOR FONTECH LIMITED

HDFC Bank Limited
The Bank of Nova Scotia
Immediate cash requirement:
Immediate cash require of ADFL is met by factoring from dealers. It can be observed from the
balance sheet of the company that it has not borrowed any kinds of loans (both secured and
unsecured) loan from outsiders for last 5 years.
Bills discounting:
Bills discounting is the another sources, in addition to bank overdraft, by which the company
meets its immediate cash requirements. In this process, the company draws bills of exchange for
products on buyers, and then discounts it with its bankers for a charge. The banker will give an
account, discounting the charge of the bank from the full amount of the bill, and collects the full
amount on maturity.
The amount provided by the bank is covered within the overall credit limit. Though the banker
becomes the owner of the bill, he holds them as a security of the credit. In this case, the
transaction is between the companies and the bankers and if the dealer fails to pay the amount
within the stipulated period, the company has to pay back the money.
ADFL discounts the BILLs with its banker to meet the immediate cash requirements.
CREDIT MANAGEMENT:
Trade credit is considered as an essential tool, acting as a bridge for the movement of the
products through production and distribution stages to customers. When the firm sells its product
or services and do not receive the cash for it immediately the firm is said to have granted trade
credit to the customers. Trade credit thus, creates receivables or book debts which the firm is
expected to collect in the near future.
Receivables constitute a substantial portion of current assets of several firms. In India debtors,
after the inventories, are the major components of the current assets. They form one-third of the
current assets in India. Granting credit and creating debtor amount to the blocking of funds. The
internal between the date of the sale and the date of payments has to be financed out of the
working capital. Thus, trade debtors represent investment. As substantial amounts are tied up in
trade debtors, it needs careful analysis and proper management.
CREDIT POLICY AND PRACTICES AT ADOR FONTECH LIMITED
The sales of the company ADFL goes on cash and as well as credit terms. The trading division of
the ADFL sells its products, which it receives from the manufacturing which is located in
Bangalore (2 plants) and Nagpur on a credit period of 30-90 days, through the branches of the
company located all over the country. The branches in turn, will distribute these products to the
dealers of the company all over the country. The dealer may either pay the cash immediately or
after making receiving cash from the customers.
In certain cases like very costly products which have low market, the company will collect the
cash when the order is placed. Later company will manufacture the product and dispatch it to the
customers.
CREDIT POLICY:
The company ADFL extends a credit period of 30-90 days to its dealers. It waits for a period of
90 days for the payments from the customers.
CASH DISCOUNT
Cash discount is a reduction in payment offered to the customers to induce them to repay credit
obligation within a specified period of time, which will be less than the normal credit periods. It
is usually expressed as a percentage of sales. Cash discount terms indicate the rate of discount
and the period for which it is available. ADFL provides cash discount varying from 2% to 7% of
selling price of product depending upon the value of the product and early payment made by the
customer.
ANALYSIS OF DEALERS:
One of the main strengths of the company is it has good dealer network, spreading throughout
the country. It has around 100 dealers all over India. The company looks for the following factors
in granting the credit to its dealers.
Looks for the period of presence of the dealer in the business
Looks for the character of the dealer i.e., his willingness to pay. The moral factor is of
considerable importance in credit Evaluation.
Looks for his ability to pay. This is evaluated by his financial position and the bank
guarantee given by him.
Based on the above factors the company analyses the dealers and determine the credit limit to
them every six months, the company goes for the review of the dealers.
When a dealer is found to be regular in playing the dues within stipulated days, the company
may go for increase in credit limit for the dealer. In the small way, new dealer are taken into
consideration and given the credit. The company gives a margin of Three Percentage to its
dealers.
COLLECTION PROCEDURES
The company follows a system of centralized control and decentralized collection. The company
does not employ and collection agency for its collection activities. The trading division receives
statements of sales and outstanding daily from all the branches in the country, to initiate
appropriate actions. The sales officers are engaged in collections activity at the branch level. The
sales branch deposits the payments from the dealers in the banks, insisted by the trading division
of the company.
MONITORING BOOK DEBTS

The company classifies its debts on the number of outstanding ways in the following way.
OUTSTANDING DAYS DEBTS CATEGORY
More than 90 days
Between 45 to 90 days
Less than 45 days
Disputes
Doubtful
Good
The ADFL Company prepares the Aging schedule to monitor the control the books debts. The
monthly aging schedule is prepared according to the outstanding days classification as given
below with the corresponding due amount
Age Group (days)
0-30
31-60
61-90
>=90
% of receivables
30
40
25
5
The ADFL Company will go for the cash in advances or cash on demand terms for the
repeated promise breakers.
RESEARCH DESIGN AND METHODOLOGY

This project study is aimed at analyzing the receivable management and its impact on cash flows
with respect to Ador Fontech Limited.
RESEARCH:
Systematic and organized effort to investigate a scientific problem.

Identify the problem.
Gather information.
Analyze the data.
Take corrective action and solve the problem.
RESEARCH METHODOLOGY
It is the way to systematically solve the research problem. This study on Receivable Management
is an analytical study because the facts and information that is readily available are being used to
make critical evaluation of receivable Management and its impact on cash flows with respect to
Ador Fontech Limited.
RESEARCH DESIGN
Research design is a blue print or a planned procedure for conducting research program.
RESEARCH DESIGN USED IN THE STUDY
Analytical Research:
The researcher has to use facts or information already available and analyze those facts to make a
critical evaluation of the Receivable Management.
DATA COLLECTION METHOD:
Nature of Data
The data collected is secondary in nature. This is due to the nature of analysis, which only
call for secondary data.
Source of Data
The source of data is the various years balance sheet, profit and loss account and statements
provided by Ador Fontech Limited were used for the analysis and for preparing reports. The
records maintained by the company where referred to get the required information.
Hypothesis:
H0: There is no significant relationship between sales and profit of ADOR FONTECH
LIMITED
H1: There is significant relationship between sales and profit of ADOR FONTECH LIMITED
H0: There is no significant relationship between sales and debtors of ADOR FONTECH
LIMITED.
H1: There is significant relationship between sales and debtors of ADOR FONTECH LIMITED.
H0: There is no significant relationship between sales and bad debts of ADOR FONTECH
LIMITED.
H1: There is significant relationship between sales and debts of ADOR FONTECH LIMITED.
H0: There is no significant relationship between sales and operating cash flows of ADOR
FONTECH LIMITED.
H1: There is significant relationship between sales and operating cash flows of ADOR
FONTECH LIMITED.
LIMITATION OF THE STUDY

The study has taken into account only three years for analysis starting from 2006-07 to
2008-09.
Time and other resources have proved to be a constraint.
It has always not been possible to get the full information.
Since the study is based only on secondary data, so the reliability of information may not
be ensured.
Face to face interaction with all related officials was not possible due to their busy
schedules.
RATIOs
DEBTORS TURNOVER RATIO
This is also called Debtor Velocity or Receivable Turnover. A firm sells goods on credit and
cash basis. When the firm extends credits to its customers, book debts (Debtors or Account
Receivable) are created in the firms account. Debtors expected to be converted into cash over
short period and thus included in current assets. A debtor includes the amount of Bills Receivable
and Book Debts at the end of accounting period. It is most essential that a reasonable quantitative
relationship not been able to collect within a reasonable time its funds are unnecessarily locked
up in receivables. In such case short term loans have to be arranged for paying off its current
liabilities. The liquidity position of the firm depends on the quality of debtors to a great extent.
The purpose of this ratio is to measure the liquidity of the receivables or to find out the period
over which receivables remain uncollected.
Formula
Net Credit Sales
Debtors Turnover ratio=
Average Accounts Receivables
Where, Account receivables= Debtors + Bills Receivables
Average Account Receivable = Opening receivable + Closing receivables
2
year
200607
2007-
net credit sales
Average accounts
746629197
receivable
107376285.5
946303616
124039517
Debtors turnover ratio
6.9533
7.6290

08
200809
975483044
124673891
7.8248
Debtors turn over ratio

8
7.8
7.6
7.4
debtors turn over ratio
7.2
7
6.8
6.6
6.4
2006-07
2007-08
2008-09
Inference
AS the value of debtors turnover ratio has been increasing year by year from 6.9533,
7.6290 to 7.8248 for the year 2006-07, 2007-08 and 2008-09 respectively. Thus we can
say that the more efficient is the management of debtors or more liquid the debtors are.
DEBT COLLECTION PERIOD

This ratio indicates the extent to which the debts have been collected in time. It gives the average
debt collection period. The ratio is very helpful to the lenders because it explains to them
whether their borrowers are collection money within a reasonable time. An increase in the period
will result in greater blockage of funds in debtors.
Formula
Days in the year

Debt collection period =
Debtors Turnover Ratio
year
Days in year
200607
200708
200809
Debtors turnover
Debt collection period
ratio
(Days)
365
53
365
6.9533
7.6290
48
365
7.8248
47
INFERENCE:
It can observed that debt collection period has been declining year by year from 53, 48 to 47
days for the years year 2006-07, 2007-08 and 2008-09 respectively. Thus we can say that
collection period has been improving from year to year.
Liquidity Measurement Ratios:

Current Ratio:
The current ratio is a popular financial ratio used to test a company's liquidity by deriving the
proportion of current assets available to cover current liabilities.
The concept behind this ratio is to ascertain whether a company's short-term assets (cash,
cash equivalents, marketable securities, receivables and inventory) are readily available to pay
off its short-term liabilities (notes payable, current portion of term debt, payables, accrued
expenses and taxes). In theory, the higher the current ratio, the better it is.
Formula:
Year
2006-
Current Asset
224777982
Current Liabilities
76015607
Current Ratio
2.956997791

07
2007-
297552169
123935070
2.400871432
08
2008-
316699512
91550867
3.459273761
09
current ratio
4
3.5
3
2.5
current ratio
2
1.5
1
0.5
0
2006-07
2007-08
2008-09
Inference
Here the current ratio is has been the maximum in the year 2008-09 i.e. 3.459273761 and in
2007-08 it was 2.400871432 and in 2006-07 it was 2.956997791. Thus we can infer that the
company assets are highly liquid as company has current asset 3.45 times the current liabilities.
Debt Equity ratio:

The debt-equity ratio provides another vantage point on a company's leverage position, in this
case, comparing total liabilities to shareholders' equity, as opposed to total assets in the debt
ratio. Similar to the debt ratio, a lower the percentage means that a company is using less
leverage and has a stronger equity position.
Formula:
year
total liabilities
total share
debt equity ratio
holders equity
10275000
2006-
35000000
3.406326
07
2007-
35000000 nil
08
2008-
35000000 nil
09
debt equity ratio

4
3.5
3
2.5
debt equity ratio
2
1.5
1
0.5
0
2006-07
2007-08
2008-09
Inference:
Here we can observe that the companies Debt- equity ratio is 3.406326 for the year2006-2007
later company has not borrowed any debt. Ideal debt equity ratio is 2:1. For year 2006-07 its was
3.4606326 so company is in better position to hold debts.
Cash Flow to Debt Ratio:

The coverage ratio compares a company's operating cash flow to its total debt, which, for
purposes of this ratio, is defined as the sum of short-term borrowings, the current portion of longterm debt and long-term debt. This ratio provides an indication of a company's ability to cover
total debt with its yearly cash flow from operations.
Formula:
year
operating cash
total debt
cash flows to debt ratio
flows
2006-
73106723
10275000
07
2007-
78,677,633
nil
08
2008-
86772471
nil
09
7.11501
cash flows to debt ratio

8
7
6
cash flows to debt
ratio
5
4
3
2
1
0
2006-07
2007-08
2008-09
Inference:
The higher the ratio, the better the company's ability to carry its total debt. If it is
1.5 0r less companies ability to carry its total debt is questionable. Here it is 7.11 in
the year 2006-07, so the company has better ability to carry its debt. But in the
year 2007-08 and 2008-09 there no debts (both secured and unsecured loans).
Hence we can say company is cash rich (cash self sufficient).
Operating cash flow/sales ratio:

This ratio, which is expressed as a percentage, compares a company's operating cash flow to
its net sales or revenues, which gives investors an idea of the company's ability to turn sales into
cash.
It would be worrisome to see a company's sales grow without a parallel growth in operating cash
flow. Positive and negative changes in a company's terms of sale and/or the collection experience
of its accounts receivable will show up in this indicator.
Formula:
year
Operating cash
net sales
operating cash flows /
flows
sales ratio
2006-
73106723
746629197
0.097916
07
2007-
78677633
946303616
0.083142
08
2008-
86772471
975483044
0.088953
09
operating cash flows / sales ratio

0.1
0.1
operating cash flows /
sales ratio
0.09
0.09
0.08
0.08
2006-07
2007-08
2008-09
Inference :
The greater the amount of operating cash flow, the better.
The greater the amount of operating cash flow, the better it is for the company. Here the
operating cash flows to sales ratio is 0.097, 0.083 and0.089 for the years 2006-07, 2007-08 and
2008-09 respectively. The past three years reflect a healthy consistency in this ratio.
Cash Flow Coverage Ratios

This ratio measures the ability of the company's operating cash flow to meet
its
obligations
including its liabilities or ongoing concern costs.

The operating cash flow is simply the amount of cash generated by the company from its main
operations, which are used to keep the business funded.
The larger the operating cash flow coverage for these items, the greater the company's ability to
meet its obligations, along with giving the company more cash flow to expand its business,
withstand hard times, and not be burdened by debt servicing and the restrictions typically
included in credit agreements. A) Short term debt coverage ratio
B) Capital expenditure coverage ratio
C) Dividend coverage ratio
A) Short term debt coverage ratio
Formulas:
Year
operating cash
short term debt
Short term debt
2006-
flow
73106723
07
2007-
78677633 nil
08
2008-
86772471 nil
09
10275000
coverage ratio
7.11
Short term debt coverage ratio

8
7
6
Short term debt
coverage ratio
5
4
3
2
1
0
2006-07
2007-08
2008-09
Inference:
The larger the operating cash flow coverage for these items, the greater the company's ability to
meet its obligations
B) Capital Expenditure coverage ratio:

Formula:
Capital expenditure coverage ratio

year
operating cash
capital
flow
expenditure
2006-
73106723
07
2007-
78677633
08
2008-
86772471
09
Capital expenditure
coverage ratio
C) Dividend coverage ratio

Formula
Dividend coverage ratio
Year
Operating Cash Flow
Cash Dividends
Divedend Coverage Ratio
2006-
73106723
15963500
4.579
07
2007-
78677633
20474125
3.842
08
2008-
86772471
20474125
4.238
09
divedend coverage ratio

4.8
4.6
4.4
divedend coverage
ratio
4.2
4
3.8
3.6
3.4
2006-07
2007-08
Price/Cash Flow Ratio
2008-09
The price/cash flow ratio is used by investors to evaluate the investment attractiveness, from a
value standpoint, of a company's stock. This metric compares the stock's market price to the
amount of cash flow the company generates on a per-share basis.
Formula:
Price cash flows ratio

Year
stock price
/share
2006-07
2007-08
2008-09
operating cash flow/
price cash flows
share
ratio
72.4
108.75
73.45
2.08
2.24
2.47
price cash flows ratio

60
50
40
price cash flows ratio
30
20
10
0
2006-07
Inference
2007-08
2008-09
34.8
48.54
29.73
Price/Sales Ratio
A stock's price/sales ratio (P/S ratio) is stock valuation indicator similar to the P/E ratio. The P/S
ratio measures the price of a company's stock against its annual sales, instead of earnings. Since
earnings are subject, to one degree or another, to accounting estimates and management
manipulation, many investors consider a company's sales (revenue) figure a more reliable ratio
component in calculating a stock's price multiple than the earnings figure.
Formula:
year
2006-
stock price
net
price/ sales
/share
72.4
sales(revenue)
21.33
ratio
3.39
07
2007-
108.75
27.03
4.02
08
2008-
73.45
27.87
2.63
09
price/ sales ratio

4.5
4
3.5
3
price/ sales ratio
2.5
2
1.5
1
0.5
0
2006-07
2007-08
2008-09
FINDINGS:
SUGESSTIONS:
Management of receivables must be accorded the importance it deserves. This
responsibility should be shouldered to the senior executives.
Credit policies need to be articulated in explicit terms and revised periodically in the light
of internal and external changes.
There should be better co-ordination between sales, production and financial
departments.
Firms granting credit should examine the published statement of prospective customers
with great rigor.
References provided by the prospective customer should be consulted and necessary

follow up action should be taken.
A well defined collection program must be developed.

Receivables MGT & Its Impact On Cash Flows Nithin Project Report

Hochgeladen von

Dokumentinformationen

Originaltitel

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

Receivables MGT & Its Impact On Cash Flows Nithin Project Report

Hochgeladen von

Copyright:

Verfügbare Formate

A STUDY ON RECEIVABLES MANAGEMENT AND ITS IMPACT ON CASH FLOWS

A STUDY ON RECEIVABLES MANAGEMENT AND ITS IMPACT ON CASH FLOWS

A STUDY ON RECEIVABLES MANAGEMENT AND ITS IMPACT ON CASH FLOWS

A STUDY ON RECEIVABLES MANAGEMENT AND ITS IMPACT ON CASH FLOWS

BACKGROUND AND INCEPTION OF THE COMPANY

The name of the Company was changed to Cosmics General Engineering

Cosmics Fontech Limited (CFL) is an associate Company of M/s. Advani-Oerlikon

A STUDY ON RECEIVABLES MANAGEMENT AND ITS IMPACT ON CASH FLOWS

A STUDY ON RECEIVABLES MANAGEMENT AND ITS IMPACT ON CASH FLOWS

A STUDY ON RECEIVABLES MANAGEMENT AND ITS IMPACT ON CASH FLOWS

Vision and Mission policy

A STUDY ON RECEIVABLES MANAGEMENT AND ITS IMPACT ON CASH FLOWS

PRODUCT AND SERVICES

Low heat input welding alloy

Hard-facing and wear-resistant products

Welding, cutting and welder safely equipment

Fon reclamation services

In-situ reclamation services

Thermal spray technology, products and solutions

Worlds most wear-resistant cast-wear plates

A STUDY ON RECEIVABLES MANAGEMENT AND ITS IMPACT ON CASH FLOWS

Cobalt and nickel based alloys and cast components

High-tech welding power sources and systems

Arc and resistance welding and plasma cutting

Welding fume extraction equipment and systems

Flux is in the flame

Bore welding solutions

Thermal insulation solutions

Welding spot separation and welder safety products

A STUDY ON RECEIVABLES MANAGEMENT AND ITS IMPACT ON CASH FLOWS

network includes field sales

A STUDY ON RECEIVABLES MANAGEMENT AND ITS IMPACT ON CASH FLOWS

A STUDY ON RECEIVABLES MANAGEMENT AND ITS IMPACT ON CASH FLOWS

curren Change % P/E Ratio

A STUDY ON RECEIVABLES MANAGEMENT AND ITS IMPACT ON CASH FLOWS

3. Recreation Facilities (reimbursement of lunch expenses ranges varies from Rs.35 to

Finalization of exclusive distributorship for India from SULZER METCO

Launch of FONMATIC open arc FCAW wires and feeders.

FONTECH training centre launched at Mumbai.

Equity capital increased to Rs. 225 Lakhs.

A STUDY ON RECEIVABLES MANAGEMENT AND ITS IMPACT ON CASH FLOWS

ISO 9002 Certification.

Exclusive distributorship for GASFLUX range of products and services

WORK FLOW MODEL (END TO END)

PUCHASE OF ESSENTIAL RAW-MATERIAL

PROCESS (Flux Mixing)

A STUDY ON RECEIVABLES MANAGEMENT AND ITS IMPACT ON CASH FLOWS

REFORM TO THE FINAL FINISHED GOODS

MC KINSEYS 7S FRAME WORK:

A STUDY ON RECEIVABLES MANAGEMENT AND ITS IMPACT ON CASH FLOWS

MC KINSEYS 7S FRAME WORK MODEL

Mckinseys 7S frame work of business

A STUDY ON RECEIVABLES MANAGEMENT AND ITS IMPACT ON CASH FLOWS

Strategy: Plan leading to allocation of resources.

Structure: Organization reporting lines, geography etc.,

Systems: Formal and informal process use.

Staff: Demographics of personnel

Style: behavior of managers when interacting with others.

Skills: Core competencies of the firm.

Shared value: Culture, which is actually the core element to it all.

Origin of the 7-S Frame Work

A STUDY ON RECEIVABLES MANAGEMENT AND ITS IMPACT ON CASH FLOWS

The meaning of the 7Ss