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CHAPTER- 1 INTRODUCTION

1.1 INTRODUCTION ABOUT THE STUDY

RECEIVABLES MANAGEMENT
Accounts receivables constitute a significant portion of the total current assets of the business. Receivables are accounts representing owed to the firm as a result of sale of goods and services in the ordinary course of business. Management of accounts receivables may be defined as the process of making decisions relating to the investment of funds in these assets which will result in maximizing the overall returns in the investment of the firm. The firm credit policy consists of two interrelated activities as granting of credit and collection receivables. Both of three aspects affect the composition of working capital. More credit policy implies higher level of credit sales. This in turn results in higher levels of account receivables. More stringent collection policies simply are reduction in outstanding services. The objective of receivables management is to promote sales and profits until that point is reached where the return on investment. In further funding of receivables is less than the cost of funds raised to finance that additional credit.

Accounts receivable also known as Debtors, is money owed to a business by its clients (customers) and shown on its Balance Sheet as an asset. It is one of a series of accounting transactions dealing with the billing of a customer for goods and services that the customer has ordered. Accounts receivable represent money owed by entities to the firm on the sale of products or services on credit. In most business entities, accounts receivable is typically executed by generating an invoice and either mailing or electronically delivering it to the customer, who, in turn, must pay it within an established timeframe, called credit terms

2 The accounts receivable departments use the sales ledger, this is because a sales ledgernormallyrecords

The accounts receivable team is in charge of receiving funds on behalf of a company and apply it towards the current pen balances on a company. Collections and cashiering teams are part of the accounts receivable department. While the collections department goes after the debtor the cashiering teams applies the monies received.

A well-designed, thoughtful and innovative Receivables Management process with balanced operating parameters, effective automation and an empowered team will reduce credit risk, improve on-time payments, enhance customer experience and recover more from the bad-debt provision than the competition. The key is to balance credit control with customer acquisition, and collections with customer service. With the right approach, aged debt and bad debt can be significantly reduced along with substantial savings in operating costs.

There are many challenges to the performance of the Receivables Management functions. The approach taken to improve performance is often systems-led, i.e. where Service Providers acquire and integrate new tools to aid customer and service decision, credit-risk-exposure, collections, debt management and recovery practices. However, a systems-led approach alone can lead to a fragmented and ineffective process, and such an approach is critically affected by the integrity of the data. To avoid these pitfalls, business owners need to consider operational re-engineering or transformation simultaneously, along with a plan to equip their resources to leverage the new processes and systems to the max. A good starting point is to review real needs and then design the approach to optimize current investments as well as considering potential new technologies. There are many projects that fail to capitalize on existing technology investments or operational capability in favor of new systems in the belief that will be the panacea for all related problems. In reality, many system vendors simply cannot stretch their limited domain expertise to ensure that a complete approach is taken with all projects, so unless

3 the client takes a lead in defining appropriate operations that are quite different to their previous incarnation, the result is often disappointment (little or no operational performance improvement) and contractual dispute. In many cases, carefully planned and executed changes to existing technology, organization and operations will produce good results. Where new technologies are needed, undertaking the review of real needs first will usually reduce cost, time to delivery and project risk.

Methods using in account receivables

Companies have two methods available to them for measuring the net value of account receivables, which is generally computed by subtracting the balance of an allowance account from the accounts receivable account. The first method is the allowance method, which establishes a contra-asset account, allowance for doubtful accounts, or bad debt provision, that has the effect of reducing the balance for accounts receivable. The amount of the bad debt provision can be computed in two ways, either (1) by reviewing each individual debt and deciding whether it is doubtful (a specific provision); or (2) by providing for a fixed percentage (e.g. 2%) of total debtors (a general provision). The change in the bad debt provision from year to year is posted to the bad debt expense account in the income statement. The second method is the direct write-off method. It is simpler than the allowance method in that it allows for one simple entry to reduce accounts receivable to its net realizable value. The entry would consist of debiting a bad debt expense account and crediting the respective account receivable in the sales ledger. The two methods are not mutually exclusive, and some businesses will have a provision for doubtful debts, writing off specific debts that they know to be bad (for example, if the debtor has gone into liquidation.) Keys to collecting debt legally and successfully include preparing a policy and procedure manual and a credit application form. A measured approach to debt collection is better in the long run than immediately going to a collection agency or court. Consumer credit laws affect preliminary debt collection methods, while the Truth-inLending Act regulates the amount of interest that can be charged on overdue payments.

4 . The longer an account goes unpaid, the more difficult it becomes to collect. However, there are two different types of accounts that historically take longer to collect. Accounts that are owed by the state or federal government usually take 60-90 days to pay. Medical accounts will vary depending on the type of insurance the patient has. You may want to wait or call to check the status of the account before deciding on further activity. It is important to note that unless it is a worker's compensation claim, most all other insurance companies have an agreement between the client and the insurance company, not the patient and the doctor. Client/patients should be making payment arrangements on their medical/dental accounts whether insurance pays or not.

That being said, the biggest problem with any business and their collection department is that in many small businesses, there is no collection department. They are relying on the accounts receivable clerk to also act as the collector and they are already busy getting invoices out and keeping up with customer payments. There has never been a set procedure regarding credit policy. Many businesses "shoot from the hip" and just hope people pay them on time.

Local collection/credit bureaus usually offer free services to help businesses establish reasonable credit policy. It should be a free service. They will, of course, expect that you will use their resources when the time arises. Another issue is that businesses don't understand their state's Check Law. So, they may not be following proper procedure for accepting checks. Your local County Attorneys office should be able to give you a training session or at least proper information. No account, with the exception of the government or certain medical claims should be hanging around uncollected for more than 90 days. By 120 days very serious measures should have been taken. After the original billing goes out, a notice should be sent once the due date has past. Notices should be sent out at 30/60/90 days. During this time, phone calls should be attempted to reach the party. If no arrangements are made and there has been no response, then there are a few options to take: Send out a Pre-collect notice with options

5 Turn it over to a collection agency Take it to court yourself

Pre-collect notice: Pre-collect is an interesting concept. For a very small fee per account a collection agency will send a notice to the "debtor" (if they don't pay, they cease being called "client") basically saying, "Hey, we're monitoring this account, make arrangements to pay or we'll take the account over." The client has the chance to pay the business directly or if they don't, then they've made that choice. You can add options to call and make special arrangements or to seek out credit counseling to help pay the bill. But, if they don't respond at this point, don't waste your time.

Collection Agencies: There is a place for collection agencies. You do not have time to mess with an account that isn't paying. As we said before, take action no later than 120 days out. Generally, a collection agency does nothing but collect past due accounts for businesses. They are considered by law third party collectors. This means they must follow state and federal laws in the collection of a debt. One of the laws they must follow is the Fair Debt Collection Practices Act or FDCPA. When you are attempting to collect your own accounts, but have yet to turn them over, you are considered a first party collector. Depending on your state, you may have certain laws to follow. If you or the collection agency break the law in the collection of a debt, the debtor may sue. Make sure you understand the laws of your state when you begin to collect your accounts. Your attorney should be able to research this for you. When you turn the account over to collections, you have "sold" the account to them. We do not recommend you pay any fees up front, but rather choose an agency who will collect on a contingency basis. If they do manage to collect an account, they receive up to 50% of the money. So, if someone owes you $500 and it is collected by the agency, you would receive a check for $250. The account would then be considered paid in full. An agency may decide to sue the debtor and all costs for this would be covered by the agency. Sometimes the agency will garnish a debtor's pay check until the debt is paid in

6 full. Most agencies worth their salt have a representative that works directly with you to explain their procedures. As with any business, it is important to check the collection agency out with the Better Business Bureau, Secretary of State or other area businesses who may be able to shed light on their credibility. Do not use a collection agency from out of state. Stick to the locals.

Take it to court yourself: You should understand what is expected when you use the legal system. You may hire your own attorney or go to court by yourself, depending on the amount of the debt. Always be completely prepared before you walk into court. Be professional. Do not become angry with the debtor. You would be surprised at what some businesses have done to the debtor because they were upset. It is time consuming, so unless you or one of your staff is trained in this area, you may want to use a collection agency instead. But, with some proper training and organization, you will be able to manage quite nicely on your own (as always, consider the time involved and the trade-off for more productive activities, such as generating new business, that you could be pursuing.)

Much of the nastiness of collection can be removed by having a clear policy and procedure set in your credit department. Take the time to do that and you should easily have 98% of your clients paying on time. If you don't set clear policy, you will soon regret it. The person who is "selling" the product, should NOT be the person "collecting" the debt. It's too much of a conflict. If you're a very small business and do not have separate personnel, you may just want to use a collection agency if all other attempts within that first 120 days fail.

Tips For Collecting Accounts Receivables The payoff from making a sale is completed when cash comes in the door. An effective debt collection strategy can help small businesses streamline this process. Most businesses experience, at one time or another, customers who are delinquent in payment. Here are a few tips for ensuring that collection of accounts receivable.

Establishing a collection system Before a sale is ever made, every business should have a system in place that manages the collections process. This system should include several departments within a small business including: Management. Managers are responsible for implementing and overseeing the debt collection process. Important decisions and changes should be made by management regarding the collections process. Accounting. The accounting department is responsible for the day-to-day tasks of the collections process. Accounting alerts customers to outstanding balances and the methods available for payment. Sales. At the point of the sale, the sales team should reveal the firm's collection process as well as penalties for late payment and any actions that will be taken by the firm if payment is not submitted promptly. A good first step is to create an accounts receivable aging report which tracks the payment status of all of your customers. This report categorizes customers according to their payment status. Depending on the firms terms, the report can classify a customer's payment status as due within 30 days, overdue 0 to 30 days, 30 to 60 days, 60 to 90 days, and past 90 days. This creates a report that is easy to analyze based on payment status. The report should also include the amount due so that accounting can identify which accounts are the highest collection priorities. Managing the Collections Process Using a receivables aging report, accounting and management can determine which accounts are current and past due, as well as how late past due accounts are. Of course, the most delinquent accounts should be addressed immediately. The longer past due accounts are delinquent, the lower the chances of collection. It is recommended that customers are contacted, either by phone or email, on the first day an account is past due.

8 Management should decide who will be the contact person for communicating with past due account holders. Good communication skills are a high priority for this task. For very small businesses, the owner may need to handle this responsibility personally. For larger businesses, a member of customer service might be best suited so that management and accounting can focus on their tasks. Ideally, reminders will suffice for debt collection of outstanding receivables. As every business owner knows, problems will arise. A customer may be delinquent because they are dealing with cash flow issues. In a case like this, offering a payment plan could be the best option since getting paid a little at a time is better than collecting nothing at all. By working with clients, they may be grateful and long-term business partnerships could be forged. If this option is enacted, put the plan in writing and structure it so the debt is a priority of the customer.

Putting Your Foot Down If an account is severely delinquent and management feels as if payment is not coming, legal notifications in the form of past due notices and dunning letters should be issued. If there is no response from repeat customers, any services and shipments to the customer should be halted. The goal, of course, is to collect what is owed to your company. It is good business sense to not want to alienate customers. Make sure such notifications are professional and courteous. Past due accounts receivable represent real money that belongs to you. Build, monitor, and maintain a debt collection department within your business to get the cash that belongs to you.

Payment terms An example of a common payment term is Net 30, which means that payment is due at the end of 30 days from the date of invoice. The debtor is free to pay before the

9 due date; businesses entities can offer a discount for early payment. Other common payment terms include Net 45, Net 60 and 30 days end of month. Booking a receivable is accomplished by a simple accounting transaction; however, 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. Since not all customer debts will be collected, businesses typically estimate the amount of and then record an allowance for doubtful accounts[3] which appears on the balance sheet as a contra account that offsets total accounts receivable. When accounts receivable are not paid, some companies turn them over to third party collection agencies or collection attorneys who will attempt to recover the debt via negotiating payment plans, settlement offers or pursuing other legal action. Outstanding advances are part of accounts receivable if a company gets an order from its customers with payment terms agreed upon in advance. Since billing is done to claim the advances several times, this area of collectible is not reflected in accounts receivables. Ideally, since advance payment occurs within a mutually agreed-upon term, it is the responsibility of the accounts department to periodically take out the statement showing advance collectible and should be provided to sales & marketing for collection of advances. The payment of accounts receivable can be protected either by a letter of credit or by Trade Credit Insurance.

Accounts Receivable Age Analysis The Age Analysis Printout, also known as the Debtors Book is divided in categories for current , 30 days , 60 days , 90 days , 120 days , 150 days and 180 days and over due.

10 Bookkeeping On a company's balance sheet, accounts receivable is the money owed to that company by entities outside of the company. The receivables owed by the company's customers are called trade receivables. Account receivables are classified as current assets assuming that they are due within one year. To record a journal entry for a sale on account, one must debit a receivable and credit a revenue account. When the customer pays off their accounts, one debits cash and credits the receivable in the journal entry. The ending balance on the trial balance sheet for accounts receivable is usually a debit.

Accounts Receivable Outsourcing Management

For a company that sells on credit, the accounts receivable financing portfolio is one of the largest assets. However, often accounts receivable management area of asset is not given due importance or care. In a survey carried out among companies, more than 40 percent revealed that they do not follow through on policies, procedures, or performance targets. It was found that most of those companies do not have enough work forces to focus on this issue. To outsource the task of accounts receivable management is an ideal option for firms selling on credit.

Advantages of accounts receivable management services: Increased recoveries Reduction in bad debt Fewer delinquencies Utilization of advanced technology Consistency Unapplied credits eliminated Increased cash flow Reduced operating costs Better control over accounts receivable management Improved customer services

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INVENTORY MANAGEMENT
Another component of current asset is inventory. The term inventory refers to the stock pile of the product of a firm is offering for sakes and the components that make up the product. In other words inventory is composed of assets that will be sold in future in the normal course of business operation the assets that the firm stores as inventory are raw material, work in progress and finished goods. Inventory management like the management of other current assets should related to the overall object of the firm. Efficient management of inventory would ultimately result in maximization of owners wealth. If the cash requirements have to be minimized, the inventory has to be minimized; the inventory has to be turned over as quickly as possible, avoiding stock costs and might result in closing down the production or lead to loss of sales. Efficient inventory management consist of two counter balancing objectives which is minimizing investment in inventory and meeting the demand for the product by efficient organizing the production and sales operation. The firm should minimize investment in inventory then lower is the costs of firm, but larger inventory facilities the smooth functioning. .

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1.2 ABOUT THE INDUSTRY

History of Soap in India During the British rule in India, Lever Brothers England introduced modern soaps by importing and marketing them in India. However, North West Soap Company created the first soap manufacturing plant in India, which was situated in the city of Meerut, in the state of Uttar Pradesh. In 1897, they started marketing cold process soaps.* During World War I, the soap industry floundered, but after the war, the industry flourished all over the country. Mr. Jamshedji Tata set up India's first indigenous soap manufacturing unit when he purchased OK Coconut Oil Mills at Cochin Kerala around 1918. OK Mills crushed and marketed coconut oil for cooking and manufactured crude cold process laundry soaps that were sold locally. It was renamed The Tata Oil Mills Company and its first branded soaps appeared on the market in the early 1930s. Soap became a necessity for the money.

*Cold process soaps are manufactured by mixing all ingredients (soap base, perfume, fillers, actives, etc.) in a large pot and heating them up to 70 degrees while they are stirred manually. Once the mixture is ready, the soap is plodded based on its size with the logo by a machine. In a machine made soap, the mixing process is called milling and this is done by a rotary operated machine and not manually. Overview of the Indian Soap Category Soap is a product that many people might take for granted or consider rather ordinary, but for some, lathering up can be a treasured part of a morning or nightly routine. Scented or unscented, in bars, gels, and liquids, soap is a part of our daily lives. In the United States, soap is a $1.390 million (US$)* industry with over 50 mass market brands. But in some markets the sales potential for soap is only beginning to be realized.

13 At the end 2000, soap was a $1.032 million (US$)* business in India. IFF's marketing experts offer the following overview of this growing category. India is a vast country with a population of 1,030 million people. Household penetration of soaps is 98%. People belonging to different income levels use different brands, which fall under different segments (see table below), but all income levels use soaps, making it the second largest category in India (detergents are number one). Rural consumers in India constitute 70% of the population. Rural demand is growing, with more and more soap brands being launched in the discount segment targeting the lower socio-economic strata of consumers.

Brand Positioning Then and Now Soap manufacturers originally targeted their products to the lowest income strata in urban as well as rural areas, positioning their brands as a way to remove dirt and clean the body. For some brands, that positioning persists even today with a focus on removal of body odor and keeping the user healthy. However, soap positionings are moving towards skin care as a value-added benefit Consumer Use Today Toilet soaps are always used in the bar formthere is no other form in the Indian marketand they are used in the bath. Showers are a distant dream for 70% of Indias population, who live in the villages where there is not even a regular supply of drinking water. In the urban areas, people bathe by using a bucket of water, mug, and a bar of soap. In villages, they usually bathe by the river bank or village ponds. Although most of the urban houses have a shower facility, showers are seldom used because of the scarcity of water

14 Consumer Preferences Consumer preferences are varied and are more regionally specific. India is divided into four regions: North, East, West, and South. Consumers in the North prefer pink colored soaps, which have floral profiles. Here the fragrance preference is for more sophisticated profiles reflecting their lifestyles. Freshness soaps with lime and citrus notes are also popular preferences as the climate in the North is very hot and citrus/lime scented soaps are seen to be refreshing. The East is not a big soap market; hence no particular preference skews. Consumers in the West exhibit preferences for strong, impactful fragrances and somewhat harsher profiles compared to the North. Preferences are more for the pink soaps with floral fragrances, primarily rose, which are positioned on the beauty platform. In the South, the skew is towards specific soap segments like the Herbal/Ayurvedic profiles and also the Sandal profiles. Consumers here do not exhibit high brand loyalty and are ready to experiment and try out new brands. Hence, most fast moving consumer goods companies tend to launch their new brands in these markets, which they call test launch markets. Marketing Soap is primarily targeted towards women, as they are the chief decision-makers in terms of soap purchase. Medicated positionings like germ killing

About 75% of soap can be bought through these different types of outlets: Kirana Store: This is the most common source for buying soap, which usually forms a part of the months grocery list (which is purchased from these Kirana Stores). Consumers exhibit loyalty to these stores, which is largely dependent on proximity to consumers .Pan-Beedi Shops: These are really small shops, almost like handcarts, and they are primarily set up to dispense cigarettes and chewing tobacco. However, one would find such a shop at every corner and they are the main sources of soap purchase for the lower socio-economic classes. Department Store: In India, there are very few

15 department stores and the Indianised version of department stores are called Sahakari Bhandars. It is still a fairly new concept. However, department stores have good display counters and this is the only place where consumers get a first hand experience of shopping and choosing from available options. Here soap prices are also discounted below the retail prices. Indian Soap Industry Soaps are categorized into men's soaps, ladies' soaps and common soaps. There are few specialty soaps like the Glycerine soaps, sandal soaps, specially flavored soaps, medicated soaps and baby soaps. Specialty soaps are high valued which enjoy only a small share of the market in value terms. The market is growing at 7% a year. This means that the incremental demand generation is 5% over and above the population growth. With increasing awareness of hygienic standards, the market for the Soaps could grow at a rate higher than 8% annually. Interestingly, 60% of the market is now sourced from the rural sector. This means that the variance between the two segments is not very large. Since upper-end market focus is the urban areas, margins come from the urban sector. Soap is a product for many people and the lathering up can be a treasured part of a morning or nightly routine. Whether it might be scented or unscented, in bars, gels, and liquids, soap is a part of our daily lives. In the United States, soap is a $1.390 million (US$) industry with over 50 mass market brands. But in Indian markets the sales potential for soap is only beginning to be realized. At the end of the year 2000, soap was a $1.032 million (US$) business in India. India is a country with a population of 1,030 million people. With the household penetration of soaps is 98%. People belonging to different income levels use different brands, which fall under different segments, but all income levels use soaps, making it the second largest category in India. Rural consumers in India constitute 70% of the population. Rural demand is growing, with more and more soap brands being launched in the discount segment targeting the lower socio-economic strata of consumers. Soap manufacturers originally targeted their products to the lowest income strata in urban as well as rural areas, positioning their brands as a way to remove dirt and clean the body. For some brands, that positioning persists even today with a focus on removal of body

16 odor and keeping the user healthy. However, soap positionings are moving towards skin care as a value-added benefit. Soap is primarily targeted towards women, as they are the chief decision-makers in terms of soap purchase and for Medicated positionings like germ killing and antibacterial are marketed to families. About 75% of soap can be bought through the different types of outlets .This is the most common source for buying soap, which usually forms a part of the months grocery list. Pan-Beedi Shops: These are really small shops, almost like handcarts, and they are primarily set up to dispense cigarettes and chewing tobacco. Total annual soap sales by companies marketing their brands at national or state levels is estimated at 14,000 tonnes of a total soap market considered to be about 126,000 tonnes.

Market Capitalization Today in the Indian economy the popular segments are 4/5ths of the entire soaps market. The penetration level of toilet soaps is 88.6%. Indian per capita consumption of soap is at 460 Gms per annum, while in Brazil it is at 1,100 grams per annum. In India, available stores of soaps are five million retail stores, out of which, 3.75 million retail stores are in the rural areas. 70% of India's population resides in the rural areas and around 50% of the soaps are sold in the rural markets.

Size of the Industry The Indian Soap Industry includes about 700 companies with combined annual revenue of about $17 billion. Major companies in this industry include divisions of P&G, Unilever, and Dial. The Indian Soap Industry is highly concentrated with the top 50 companies holding almost 90% of the market. The market size of global soap and detergent market size was estimated to be around 31M tonne in 2004, which is estimated to grow to 33M tonne in the coming years. Toilet soaps account for more than 10% of the total market of soap and detergents. In Asia, the countries like China and India are

17 showing rapid growth in the toilet soap section. Market share of body wash was estimated to be around 2% in 2004 and is showing signs of healthy growth in these markets. Indias soap market is Rs 41.75 billion. Indian Soap Industry volume is Rs 4,800-crore. For the purpose of gaining a competitive edge, Indian companies are now relaunching their brands with value-additions to woo consumers across India. For instance, Hindustan Lever Ltd (HLL) has recently launched a host of toilet soap brands which include Lifebuoy, Lux, Breeze and Lirilwith value additions. Also is in the process of rolling out Ayush ayurvedic soap. The aim is to meet the evolving needs of customers Top Leading Companies In the Rs 4,800-crore Indian toilet soaps market, the lead players include: HLL Godrej Consumer Products Ltd Colgate Palmolive Ltd and Wipro Consumer Care

Employment opportunities In Indian Soap Industry the entry of new players in the 6,500-crore toilet soaps industry is expected to bring about a new twist in the "Indian soap opera". ITC Ltd has started investing in aggressive brand-building and product development projects to promote its brands, Fiama De Wills, Vivel and Superia. Godrej Consumer Products Ltd and Wipro Consumer Care Lighting are established players in the Industry which are beefing up their research projects and advertising plans to take on new rivals. With increasing competition, the Indian Soap Industry is expected to register a healthy growth this fisca. The sector registered a 15% value growth. GCPL is hiking its advertising budget by 20% to gain high visibility for its brands

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Total Contribution to the economy / sales In terms of market share for Indian Soap Industry the data indicates that HLL had a market share of 64 % in the soap market, followed by Nirma at 16.8 % and Godrej at 4.4%. Nirmas market share was in the northern region was 21 %. The largest contributor to the toilet soaps market in Indian market is Hindustan Lever with the total contribution to the economy & enjoys almost a two-thirds share, with the second ranked Nirma Soaps placed at a distantly low share of 16.8%. Lux and Lifebuoy have held the sway of the market for almost fifty years

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1.3 ABOUT THE COMPANY

Ashique chemical and cosmetics is a private ltd company, which is manufacturing toilet soaps ,washing soaps and detergents. it started in 1996 at sulthan bathery, wayanad district, Kerala. Over two eventful decades the THAI GROUP had become leading conglomerate in kerala with wide business interest in areas ranging from soap, detergents, shampoos and garments. PRODUCT AND SERVICES OFFERED BY THE COMPANY Body care product Plantation Dress care product Mineral Agro product from plantation division Distribution and marketing Garments Transportation and engineering division Research and developments Building minertals Diesel filling station

20 ADMINISTRATION The ashique chemicals and cosmetics private limited is one of the branches of thai group of companies. its administration rests with its board of directors ,pc chairman of the company.

BOARD OF DIRECTORS

ASHIQUE THAHIR

SAKINA THAHIR

P.C THAHIR

THAI GROUPS AND ITS BRANCHES

Ashique Exports Ashique Chemicals and cosmetics Private Ltd,Wayanad Cube India Rubbers, Cochin Jraworld Mining Industries (P) Ltd, Thirunelveli Aysha Plantation wayanad Thaimala Plantation, Wayanad Aghin Roadways, Coimbatore Kanhirandy traders,wayanad Aysha associates, Calicut A.A Associates, Mysore

21 Aghin Enterprise, Malappuram Augira Multimedia, Thalauri

PRODUCT PROFILE The main brands of product produced in the manufacturing in the manufacturing unit at ashique chemicals and cosmetics private limited are at poothicaud,sulthan bather,wayanad. WASHING SOAP

BRAND NAME GOLD 916 GOLD 916 GOLD 916 SUPER WASH555 SUPER WASH 555 AA BAR LEXO 160

QUANTITY 1 GKG 500 GM 250 GM 600 GM 250 GM 600 GM 150 GM

PRICE(RS) 35 18 9.50 16 7.50 16.50 5.50

22 TOILET SOAP BRAND NAME GLADYS LEXUS GOLD LEXUIS GOVERNOR IVA INTERNATIONAL CAMILA OILUM OLIVA PRIME BODY MEDI PALM QUALITY 100 gm 125 gm 120 gm 100 gm 75 gm 100 gm 100 gm 150 gm 100 gm PRICE 10 13 13 10.50 10 11 13 11 10

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CHAPTER-II MAIN THEME OF THE PROJET

2.1OBJECTIVES OF THE STUDY The main objectives of the present study is to study the cash management system of Ashque exporters Pvt. ltd..

The secondary objectives are To study the To assesry s the receivable management system of Ashque exporters Pvt. ltd. To find out the duration of the Operating Cycle of Ashque exporters Pvt. ltd. and to study the movement of various components involved in the operating cycle. To review the existing practices at Ashque exporters Pvt. ltd. in the area of inventory management by ABC analysis To put forward constructive suggestions for the improvement of the existing system of receivable management and to reduce investment on inventories wherever possible and suggestion for effective management of raw material inventory so as to improve effectiveness of control of raw material inventories.

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2.2 SCOPE OF THE STUDY:

The study aims at assessing the cash receivable management system of Ashque exporters Pvt. ltd. The liquidity and solvency position of the firm is analyzed using liquidity and turnover ratios. The net working capital of the company for 3 years from 2007 to 2010 is also analyzed.

A keen analysis of the operating cycle of the company is also made considering the various components of receivables management. In addition to these, the ABC analysis for Inventory is done for effective control of raw material Inventory.

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2.3 LIMITATION OF THE STUDY The study is limited for a period of three years from 2007-08 to 2009-10. The study is entirely based on quantitative data involving numerical figures and no qualitative factors are taken into consideration for the purpose of the study. ABC analysis was conducted with respect to raw material inventory of Fasteners Division as Padi only.

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2.4 RESEARCH METHODOLOGY

RESEARCH DESIGN The collected data were presented in tables and these tables were analyzed systematically. Ratio analysis, operating cycle are the vital tools used to study the working capital performance of Sundram Fasteners Ltd. ABC analysis is the tool used to study the raw material inventory of Ashique exporters Pvt. ltd,. A chart and various diagrams are used to explain the analysis clearly. It is an undisputed truth that graphs and diagrams render any complicated discussion and any intricate subject very simple to any casual reader of the thesis.

DATA COLLECTION The study is based on secondary source of data. Secondary data have been mainly obtained from annual reports, records and books of Ashique exporters Pvt. ltd. The secondary data were also collected from audited financial statements periodicals and other records maintained by Ashique exporters Pvt. ltd,

PERIOD OF STUDY Data of 3 financial years are used for the purpose of study. The 3 years of study ranges from 2007- 2008 to 2009 2010.

27 2.5 REVIEW OF LITERATURE "An excellent reference tool on how to manage the accounts receivable process for any company. The use of real-life examples makes the concepts easy to understand. I recommend the book to anyone who wants to improve cash flow .

Michael E. Beaulieu, Senior Vice President, Finance Cardinal Health "Rather than simply explaining how to get the greatest return from an investment in accounts receivable, John G. Salek reveals how companies shoot themselves in the foot when management sets policies and procedures without consideration of the impact on cash flow. Accounts Receivable Management Best Practices isn't just for credit and collection professionals who often spend more time cleaning up process errors and other corporate 'garbage,' instead of managing risk. It should be required reading for C-level executives, the sales staff, operations managers, and anybody else whose job impacts the order-to-cash cycle."

David Schmidt, Principal, A2 Resources Coauthor of Power Collecting: Automation for Effective Asset Management "Enhancing a company's competitive profile is all about giving enough customers the right product, at the right price, at the right time. This author's real-world approach to accomplishing this goal through the prism of receivables management makes this book a must-read for those companies looking to make their mark as an organization that cares about its customers as well as their own need ,

Bruce C. Lynn, Managing Director The Financial Executives Consulting Group, LLC "I have worked with John Salek since 1992, both as his client and as a project manager working with his organization. His knowledge of receivables management . . . the technology, the processes, and the formula for success . . . are unsurpassed in the field." Stephen L. Watts, Manager, Global Receivables (retired) General Electric Medical Systems

28

CHAPTER-III ANALYSIS AND INTERPRETATION

3.1 TOOLS USED FOR ANALYSING RECIEVEBLS A receivable management analysis can adopt the following tools for analysis of the financial statement. These are also termed as methods of receivable management analysis. Current ratio The current ratio is calculated by dividing current assets by current liabilities.

Current Asset Current Ratio = -----------------------Current Liabilities As a conventional rule, current ratio of 2:1 or more is considered satisfactory. It is based on the logic that the higher the current ratio the more the firms ability to meet its current obligations. Even though current ratio is a good measure of firms liquidity, it is only a test of quantity and not quality. Liabilities are not subject to any fall in value; they have to be paid. But current assets can decline in value. Quick ratio This ratio establishes the relationship between quick or liquid assets and current liabilities. An asset is liquid if it can be converted into cash immediately or reasonably soon without a loss of value. Current Assets Inventory Quick Ratio = ----------------------------------------Current Liabilities Generally quick ratio of 1:1 is considered to represent a satisfactory current financial condition. The quick ratio remains as an important index of the firms liquidity and is a more absolute test than the current ratio.

29

Cash ratio Since cash is a most liquid asset, the financial analyst may examine this ratio for his purpose of study. Trade investment or marketable securities are equivalent of cash and therefore they may be included in the computation in the computation of cash ratio. Cash + Marketable securities Cash Ratio = -------------------------------------Current Liabilities Inventory turnover ratio Inventory turnover or stock turnover ratio indicates the efficiency of the firms inventory management. Every firm has to maintain a certain level of inventory of finished goods so as to be able to meet the requirement of the business. But the inventory should neither be too high nor too low. The ratio indicates the number of times the stock has been turned over during the period and evaluates the efficiency with which a firm is able to manage its inventory.

Debtors turnover ratio When the firm extends credit to its customers, book debts are created in the firms accounts. Book debts are expected to be converted into cash over a short period and therefore are included in Current assets. The liquidity position of the firm depends on the quality of debtors to a great extend.

Current asset turnover ratio Assets are used to generate sales. Therefore a firm should manage its assets efficiently to maximize sales. The relationship between sales and current assets is called current asset turnover ratio. Sales Current Assets Turnover Ratio = --------------------------Current Asset

30 A firms ability to produce a large volume of sales for a given amount current assets is the most important aspects of its operating performance. Unutilized or underutilized assets increase the firms need for costly financing as well as expenses for maintenance and upkeep.

Cash to current asset ratio Cash to current asset ratio is calculated by dividing cash by current assets and expressed in percentages. Cash is compared with current assets first to know the proportion of cash in current assets. A high proportion of cash to total assets directly affects the profitability of the firm because large amount of cash is kept as unproductive assets. The lower proportion may lead to higher profitability of the firm. Even though cash is an unproductive asset it cannot be reduced below a certain limit, because in all firms there would be certain contingencies to be met. There is no standard or fixed norm for this ratio. Cash Cash to current asset ratio = ----------------------Current Assets

Receivables to current assets ratio This ratio is calculated by dividing the receivables by current assets and expressed in percentage. If the ratio is very high it indicates that a higher amount is invented in accounts receivable. It may be due to liberal credit policy. A lower ratio is preferable. Receivables Receivables to Current Assets Ratio= -------------------------Current Assets Inventory to current assets ratio Inventory is an idle resource and has to be managed with care so that the profitability is not unduly affected. Proper inventory management should ensure a continuous supply of materials to facilitate uninterrupted production and keep sufficient stock of raw materials to facilitate uninterrupted production and keep sufficient also

31 ensure that the selling operation is made as smooth as possible by maintaining sufficient finished goods. All these would mean the inventory should be kept at reasonable level. Too much inventory resulting in certain explicit cost such as handling cost and storage cost, spoilage cost and interest on capital inventories. Under investment in inventory also leads for extra planning and leads to increase in ordering costs. Hence it may be correctly said that there can be neither over investment nor under investment in inventory . Therefore there should be an optimum or ideal investment in inventory as it is essential to improve the profitability. Inventory to current assets ratio is calculated as follows:

Inventory Inventory to current asset ratio = --------------------------- x 100 Current Assets Inventory holding expressed as weeks of consumption Inventory holding shows for how many weeks the inventory will last by the Company. Average Inventory Inventory Holding = --------------------------------- x 52 Consumption Average credit period given to the customers Total outstanding at the end of the period Average credit period = ----------------------------------------------------------------Average sales per day

Average period of credit availed from the suppliers Sundry creditors for purchase Average period of credit availed from suppliers=-------------------------------------------Average daily purchase

32 3.2 OPERATING CYCLE ANALYSIS The Operating Cycle of a firm begins with the acquisition of raw materials and ends with the collection of receivables. It may be divided into four stages. 1) Raw materials and stores storage stage 2) Work in process stage 3) Finished goods inventory stage 4) Debtors collection stage

Duration of operating cycle The duration of operating cycle is equal to the sum of the durations of each of these stages less the credit period allowed by the suppliers of the firm. In symbols: O=R+W+F+DC Where O = duration of operating cycle R = raw materials and stores storage period W = Work in progress period F = Finished goods storage period D = Debtors collection period C = Creditors payment period

3.3 ABC ANALYSIS Usually a firm has to maintain several types of inventories. It is not desirable to keep the same degree of control on all the items. The firm should pay maximum attention to those items whose value is the highest. The firm should, therefore, classify inventories to identify which items should receive the most effort in controlling. The firm should be selective in its approach to control investment in various types of inventories. This analytical approach is called the ABC analysis and tends to measure

the significance of each item of inventories in terms of its value. The high-value items are classified as Aitems and would be under the tightest control. C-items represent relatively least value and would be under simple control. B- Items fall in between these

33 two categories and require reasonable attention of management. The ABC analysis

concentrates on important items and is also known as control by importance and exception (CIE). As the items are classified in the importance of their relative value, this approach is also known as proportional value analysis (PVA).

The following steps are involved implementing the ABC analysis: Classify the items of inventories, determining the expected use in units and the price per unit for each item.

Determine the total value of each item by multiplying the expected units by its units price.

Rank the items in accordance with the total value, giving first rank to the item with highest total value and so on.

Compute the ratios (percentage) of number of units of each item to total units of all items and the ratio of total value of all items.

Combine items on the basis of their relative value to form three categories A, B and C.

34 3.1 RATIO ANALYSIS 3.1.1 Current Ratio Current Asset Current Ratio = -----------------------Current Liabilities Table 3.1.1 showing current ratio Year 2007-08 2008-09 2009-10 Current Assets 481,578,045 546,550,939 752,554,512 Current Liabilities 86,461,028 140,673,268 117,076,223 Ratio 5.57 3.89 6.43

Figure 3.1.1 showing current ratio Current Ratio 8 6 4 2 0 2007-08 2008-09 2009-10

INTERPRETATION This ratio indicates the extent to which short term creditors are safer in terms of liquidity of the current assets. Thus, higher the value of the current ratio, more liquid the firm is and more ability it has to pay the bills. However a current ratio of 2:1 is considered generally satisfactory. As per the study the current ratio varies from 3.89 TO 6.43.

35

3.1.2 Quick Ratio Current Assets Inventory Quick Ratio = ----------------------------------------Current Liabilities

Table 3.1.2 showing quick ratio Year 2007-08 2008-09 2009-10 Liquid Assets 343,579,061 395,072,866 507,311,125 Current Liabilities 86,461,028 140,673,268 117,076,223 Ratio 3.97 2.81 4.33

Figure 3.1.2-showing quick ratio Quick Ratio 5 4 3 2 1 0 2007-08 2008-09 2009-10

INTERPRETATION

The quick ratio of 1:1 is considered satisfactory. The quick ratio during the period of study is highly satisfactory which varies from 2.81 to 4.33.

36

3.1.3 Cash Ratio Cash + Marketable securities Cash Ratio = -------------------------------------Current Liabilities

Table 3.1.3 showing cash flow Year 2007-08 2008-09 2009-10 Cash 527,834 804,625 461,050 Current Liabilities 86,461,028 140,673,268 117,076,223 Ratio (%) 0.61 0.57 0.39

Figure 3.1.3- showing cash flow

Cash Ratio(%) 0.8 0.6 0.4 0.2 0 2007-08 2008-09 2009-10

INTERPRETATION The cash ratio varies from 0.39% to 0.61%. The cash ratio started decreasing in the succeeding years. The cash ratio of the company reveals that the company is exercising control over holding of cash unproductively and has brought down the cash ratio over the last three years.

37

3.1.4 Inventory Turnover Ratio Cost of goods sold Inventory Turnover Ratio = ----------------------------Average Inventory Table 3.1.4 showing inventory turnover ratio Year 2007-08 2008-09 2009-10 Cost of goods sold 1,259,984,656 1,459,635,192 1,774,789,342 Average Inventory 110,501,149 110,922,822 154,898,182 Ratio (times) 11.46 13.16 11.40

Figure 3.1.4 -showing inventory turnover ratio Inventory Turnover Ratio (times) 13.5 13 12.5 12 11.5 11 10.5 2007-08 2008-09 2009-10

INTERPRETATION

This ratio indicates that how many times the inventories are converted in to sales and then to cash. Higher the ratio, more efficient the utilization of working capital. The company is having a reasonable rate of inventory turnover, but still it can be improved.

38

3.1.5 Debtors Turnover Ratio Sales Debtors Turnover Ratio = --------------------------Sundry Debtors

Table 3.1.5 showing debtors turn over ratio

Year 2007-08 2008-09 2009-10

Sales 1,216,612,247 1,489,671,901 1,836,654,260

Sundry Debtors 330,543,659 381,496,282 483,890,658

Ratio (times) 3.68 3.9 3.8

Figure 3.1.5 showing debtors turn over ratio

Debtors Turnover Ratio 4 3.9 3.8 3.7 3.6 3.5 2007-08 2008-09 2009-10

INTERPRETATION This ratio shows how many times debtors are turned over in a year. A higher turnover ratio indicates prompt payment by debtors while a lower turnover ratio indicates the inefficiency of credit collection. Even though the ratio shows a consistent position, it indicates that credit collection can be improved.

39

-s 3.1.6 Current Asset Turnover Ratio Sales Current Assets Turnover Ratio = --------------------------Current Asset

Table 3.1.6-showing Current Asset Turnover Ratio

Year 2007-08 2008-09 2009-10

Sales 1,216,612,247 1,489,671,901 1,836,654,260

Current Asset 481,578,045 546,550,939 752,554,512

Ratio 2.53 2.73 2.44

Figure 3.1.6 -showing Current Asset Turnover Ratio

Current Asset Turnover Ratio 2.8 2.7 2.6 2.5 2.4 2.3 2.2 2007-08 2008-09 2009-10

INTERPRETATION

The Current asset turnover ratio varies between 2.44 to 2.73. The ratio was high in 2008-09 which is shown as 2.73 in the table. It means the company could generate a sale of Rs 2.73 for one rupee investment in current assets that year. The ratio was lowest for the year 2009-10 (value is 2.44). So the company has to improve the current asset turn over.

40

3.1.7 Cash to Current Assets Ratio Cash Cash to current asset ratio = ----------------------Current Assets

Table 3.1.7 showing Cash to Current Assets Ratio

Year 2007-08 2008-09 2009-10

Cash 527,834 804,625 461,050

Current Assets 481,578,045 546,550,939 752,554,512

Ratio (%) 0.11 0.15 0.06

Figure 3.1.7 -showing Cash to Current Assets Ratio

Cash to current asset ratio 0.2 0.15 0.1 0.05 0 2007-08 2008-09 2009-10

INTERPRETATION It is observed from the table, that the ratio varies between 0.06 to 0.15 %. For all the years the cash to current assets ratio is low and the proportion of cash in the current assets is lower. Since the company is not earning any return from idle cash, the companys policy of reducing the cash to current ratio is good.

41 3.1.8 Receivables to Current Assets Ratio Receivables Receivables to Current Assets Ratio= -------------------------Current Assets

Table 3.1.8- showing receivables to Current Assets Ratio \

Year 2007-08 2008-09 2009-10

Receivables 330,543,659 381,946,282 483,890,658

Current Assets 481,578,045 546,550,939 752,554,512

Ratio(%) 68.64 69.88 64.30

Figure 3.1.8 -showing receivables to Current Assets Ratio \

Receivables To Current Assets Ratio 72 70 68 66 64 62 60 2007-08 INTERPRETATION This ratio shows how much is the share of receivables in the total current asset. The ratio varies from 64.3 % to 69.88 %. Since the companys funds are blocked in receivables, they should try to reduce the debtors by making prompt collection. From the figure it is clear that the company has been following a liberal credit policy as the ratio is very high in all three years. 2008-09 2009-010

42

3.1.9 Inventory to Current Assets Ratio Inventory Inventory to current asset ratio = --------------------------- x 100 Current Assets

Table 3.1.9 -showing Inventory to Current Assets Ratio

Year 2007-08 2008-09 2009-10

Inventory 137,998,984 151,478,073 245,243,387

Current Assets 481,578,045 546,550,939 752,554,512

Ratio (%) 28.66 27.72 32.59

Figure 3.1.9- showing Inventory to Current Assets Ratio

Inventory to current asset ratio 34 32 30 28 26 24 2007-08 2008-09 2009-10

INTERPRETATION From the table we can observe that percentage varies from 27.72% to 32.59%. All the ratios are less than 50% of the total current assets. The company is maintaining a moderate amount of investment in inventory.

43 3.4 AVERAGE CREDIT PERIOD GIVEN TO CUSTOMERS Total Outstanding on the end of the period Average Credit Period = -------------------------------------------------------------------Average Sales per day

Table 3.4-showing average credit period given to customers

Year 2007-08 2008-09 2009-10

Total Outstanding 330,543,659 381,946,282 483,890,658

Average Sales per Average Credit day Period (days) 3,333,184 99 4,081,293 5,031,929 94 96

Figure 3.4 showing average credit period given to customers 100 98 96 94 92 90 2007-08 2008-09 2009-10 Average Credit Period (days)

INTERPRETATION The credit period given to the customers varies from 94 to 99 days. The funds are blocked by giving more credit period. So they should try to reduce the credit period by making prompt collection.

44

3.5 AVERAGE PERIOD OF CREDIT AVAILED FROM SUPPLIERS Sundry creditors for purchase Average period of credit availed from suppliers= ----------------------------------------Average daily purchase

Table 3.5- showing average period of credit availed from suppliers Year 2007-08 2008-09 2009-10 Sundry creditors for Average purchase purchase 50,641,020 1,106,232 96,892,175 33,405,138 1,326,436 1,903,563 daily Average Credit Period (days) 46 73 18

Figure 3.5- showing average period of credit availed from suppliers

Average period of credit availed from suppliers 80 60 40 20 0 2007-08 2008-09 2009-10

INTERPRETATION The Average period of credit availed from suppliers varies from 18 to 73 days. In the year 2002-03 the company enjoyed a maximum credit period of 73 days. In the year 2003-04 the Average period of credit availed from suppliers is 18 which are too low. The sharp reduction in the average period of credit between the years 2002-03 and 2003-04 (from 73 days to 18 days) clearly indicates a shift in policy of the company. The company has reduced the credit period enjoyed from the supplier. It is likely that they achieved a price reduction though their strategy.

45

3.6 ANALYSIS OF WORKING CAPITAL The following table shows the working capital of the Ashique exporters from 2007 to 20010. Table 3.6 showing analysis of working capital Year Current Asset Current Liabilities 2007-08 2008-09 2009-10 481,578,045 546,550,939 752,554,512 86,461,028 140,673,268 117,076,223 Net Capital 395,117,017 405,877,671 635,478,289 Working

Figure 3.6- showing analysis of working capital Net Working Capital 800,000,000 600,000,000 400,000,000 200,000,000 0 2007-08 2008-09 2009-10

INTERPRETATION There has been a substantial increase in working capital over the three years period under review. The net working capital has increased by Rs 240 millions during this period. However the analysis of various financial ratios indicates that the increase has been necessitated by increase in sales and not due to inefficient management of working capita

3.2 OPERATING CYCLE ANALYSIS OF ASHIQUE EXPORTERS

Table 3.2.1 Formula 2007-08 No. of days 2009-10 No. of days

SI.No

Components

1.

Raw materials and stores storage period (R)

Average stock of raw materials and stores -----------------------------------------------------------Average raw materials consumption per day

39.65

47.13

2.

Work-In-process storage period (W)

Average Work-in-process goods inventory ---------------------------------------------------Average cost of goods sold per day

17.24

18.66

3.

Finished goods storage period (F)

Average finished goods inventory ---------------------------------------------------Average cost of goods sold per day

7.31

6.71

4.

Debtors Collection Period(D)

Average book debts ---------------------------------------Average credit sales per day

86.09

84.85

5.

Creditors payment period (C)

Average trade creditors -------------------------------------------------Average credit purchases per day R+W+F+D-C

54.85

33.75

46

6.

OPERATING CYCLE

95.44

123.6

47 INTERPRETATION From the above table, it can be seen that the operative cycle has increased from 95.44 days to 123.6 days- an increase of nearly 28 days. It can also be seen from the table this is as primarily a result of reduction in credit period enjoyed from suppliers and from 54.75 days to 33.75 days, a reduction of 21 days. As stated earlier, the reduction in the credit enjoyed from supplier is likely to be result of deliberate strategy to make prompt payment and obtain a com messmate price reduction.

48 3.3 INVENTORY CONTROL OF EXPORTERSFOR THE YEAR 2007-10 RAW MATERIALS IN ASHIQU

3.3.1- showing inventory control of raw material Part Number 418502300 319502300 418501400 416011200 418511200 311702100 416010700 319502100 311721300 418931300 418501630 311702300 111720770 418701300 311701200 311931200 411151000 418511300 311701400 311702600 311151300 311700900 311930900 311781650 418931200 311701150 Issue Quantity 960.75 1096.903 355.514 504.768 233.429 212.703 213.127 198.394 176.471 138.802 130.28 167.658 124.093 116.386 149.161 135.854 151.494 117.622 113.058 89.396 140.75 95.565 95.593 97.47 66.646 79.759 Issue Value Cumulative Cumulative Item value value % No. 33717797.66 33717797.66 16.81751 1 29399675.75 63117473.41 31.48126 12255018 75372491.41 37.59372 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Item % 1.818182 3.636364 5.454545 7.272727 9.090909 10.90909 12.72727 14.54545 16.36364 18.18182 20 21.81818 23.63636 25.45455 27.27273 29.09091 30.90909 32.72727 34.54545 36.36364 38.18182 40 41.81818 43.63636 45.45455 47.27273

11656624.67 87029116.08 43.40773 6964225.93 6085733.55 5325131.12 5241735.7 4901291.04 4834220.85 4548383.07 4507569.52 4451495.65 4329924.38 4126246.25 3715215.83 3666011.36 3457625.5 3149526.81 2943530.26 2776694.38 2734786.81 2627823.95 2595919.02 2486336.03 2388974.17 93993342.01 46.88129 100079075.6 49.91669 105404206.7 52.57272 110645942.4 55.18715 115547233.4 57.63178 120381454.3 60.04296 124929837.3 62.31156 129437406.9 64.55981 133888902.5 66.7801 138218826.9 68.93975 142345073.1 70.9978 146060289 72.85085

149726300.3 74.67936 153183925.8 76.40392 156333452.6 77.97482 159276982.9 79.44297 162053677.3 80.82791 164788464.1 82.19195 167416288 83.50264

170012207.1 84.79741 172498543.1 86.03752 174887517.3 87.22908

49 Part Number 418501900 311781400 31151000 311781300 411681650 411151300 418701650 418701200 311701900 418502000 311702500 418511100 411781500 418701730 411150900 418510900 418702000 418702400 411101100 311700800 418931630 418702600 411150800 418701100 416011100 411150700 311150900 411061000 416011300 Issue Quantity 59.85 72.956 95.252 71.208 74.866 63.99 45.216 42.694 48.736 39.75 48.328 31.471 30.14 18.17 29.042 22.421 15.99 14.86 16.116 11.502 8.13 7.71 11.056 6.5 8.184 2.15 0.838 5.466 1.459 Issue Value 2150732.16 1944659.35 1922316.34 1891096.31 1844749.42 1602837.26 1588659.69 1505064.01 1409804.24 1406875.22 1269153.29 866200.11 795822.99 742562.98 725318.24 636405.75 628222.75 531996.69 409596.85 330090.13 319415.67 275921.13 266260.35 239963.33 204593.31 59342.15 16030.41 12536.4 8477.23 Cumulative Cumulative Item value value % No. 177038249.4 88.3018 27 178982908.8 89.27175 180905225.1 90.23055 182796321.4 91.17377 184641070.8 92.09388 186243908.1 92.89333 187832567.8 93.68571 189337631.8 94.4364 190747436 95.13957 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 Item % 49.09091 50.90909 52.72727 54.54545 56.36364 58.18182 60 61.81818 63.63636 65.45455 67.27273 69.09091 70.90909 72.72727 74.54545 76.36364 78.18182 80 81.81818 83.63636 85.45455 87.27273 89.09091 90.90909 92.72727 94.54545 96.36364 98.18182 100

192154311.3 95.84128 193423464.6 96.4743 194289664.7 96.90634 195085487.7 97.30327 195828050.6 97.67364 196553368.9 98.03541 197189774.6 98.35283 197817997.4 98.66617 198349994.1 98.93152 198759590.9 99.13581 199089681 99.30045

199409096.7 99.45977 199685017.8 99.59739 199951278.2 99.73019 200191241.5 99.84988 200395834.8 99.95193 200455177 99.98152

200471207.4 99.98952 200483743.8 99.99577 200492221 100

50 Figure 3.3.1-showing ABC analysis

ABC Analysis
120

100
Cumulative Value%

60

40

20
A class Items B class Items C class Items

Cumulative Value %
0 0 20 40 60 Item % 80 100 120

80

INTERPRETATION From the graph drawn above we classify items as A class, B class and C class items as per the change in slope of the curve. There are 11 A class items, 28 B class items and 16 C class items. The opening balance and closing balance for A class items, B class items and C class items are shown in the tables below.

51 Table 3.3.2 showing class a item CLASS A ITEMS Part Number 418502300 319502300 418501400 416011200 418511200 311702100 416010700 319502100 311721300 418931300 418501630 TOTAL OB 59859.02 0 0 0 0 0 74386.13 0 24410.35 284888.22 0 443543.72 CB 1599481.6 1385955.57 2292592.9 465957.36 1622052.92 347591.21 297512.16 147693.35 1972021.35 531566.05 66260.7 10728685.2

Table 3.3.3-showing class b item CLASS B ITEMS Part Number 311702300 111720770 418701300 311701200 311931200 411151000 418511300 311701400 OB 0 0 61904.18 0 0 0 0 0 CB 2720620.77 2110119.78 234085.36 66605.92 2123222.22 91015.49 113424.58 175212.91

52

311702600 311151300 311700900 311930900 311781650 418931200 311701150 418501900 311781400 31151000 311781300 411681650 411151300 418701650 418701200 311701900 418502000 311702500 418511100 411781500 TOTAL

1066219.48 0 97906.27 0 0 0 0 0 0 0 0 0 0 56505.62 0 440640.34 0 221228.39 0 0 1944404.3

111799.8 1476031.38 53205.44 1973072.96 1315843.06 126457.12 28052.21 442475.28 1284595.37 477066.75 2144978.4 61846.73 55249.98 247482.97 259968.52 80576.64 22206.15 319191.84 124355.7 91483.29 18330246.6

53 Table 3.3.4-showing class c item CLASS C ITEMS Part Number 418701730 411150900 418510900 418702000 418702400 411101100 311700800 418931630 418702600 411150800 418701100 416011100 411150700 311150900 411061000 416011300 TOTAL OB 0 0 0 0 0 0 158088.25 0 0 0 0 0 0 0 0 0 158088.25 CB 24316.07 30352.77 34975.95 23573.05 203208.8 118465.64 381642.42 23573.11 1484997.6 60014.68 313014.2 128309.94 60722.2 181729.01 29234.98 616065.78 3714196.2

54

3.3.5 INVENTORY HOLDING EXPRESSED AS WEEKS OF CONSUMPTION FOR A CLASS, B CLASS AND C CLASS ITEMS. Table 3.3.5.-showing inventory holding expressed as weeks of consumption CLASS A B C Average Inventory 5,586,114 10,137,325 1,936,142 Consumption 124,929,837 70,155,650 4,664,170 Inventory holding(weeks) 2.33 7.51 21.59

Figure 3.3.5- showing inventory holding expressed as weeks of consumption

Inventory holding(weeks) 25 20 15 10 5 0 21.59

7.51 2.33 A B C

INTERPRETATION The Inventory holding of A class items are 2.33 weeks which is satisfactory. For B class items are 7.51 which is moderate and for C class item are 21.59 weeks which is it can be safely increased, without affective inventory control. With out changing the over all inventory holding period 13.03 weeks we can increase the inventory holding of C class items by increasing the average inventory of C class items. To keep the over all inventory holding period (13.03 weeks) a constant, we should reduce the inventory holdings of A class items or B class items. Since A class item Inventory holding is already low, we can reduce B class items average inventory.

55

CHAPTER-IV

FINDINGS, RECOMMENDATION,CONCLUSION AND SCOPE FOR FUTURE WORK

4.1 FINDINGS
Debtors turn over ratio of the company shows an increasing trend, which indicates that receivables management of the company is efficient due to increase in current asset. Current assets position of the firm is satisfactory. Since there is an increase in the current assets of the firm. The quick ratio during the period of study is highly satisfactory which varies from 2.81 to 4.33. The quick ratio is more favorable in 2009-2010 The company has been following a liberal credit policy as the ratio is very high in all three years. The credit period given to the customers varies from 94 to 99 days. The funds are blocked by giving more credit period. So they should try to reduce the credit period by making prompt collection. Inventory turnover ratio of the company is in a fluctuating level and it shows high value thus, inventory management of the company is effective. Debtors turnover ratio of the company in a fluctuating level and it shows high value thus, the debtors management of the company is good. Cash to current assets ratio increases from (0.06 to 0.15) because of effective cash management of company.

56 Ratio shows how much is the share of receivables in the total current asset. The ratio varies from 64.3 % to 69.88 %. Since the companys funds are blocked in receivables, they should try to reduce the debtors by making prompt collection ineffective. The operating cycle analysis shows that the operational ability of the company. ABC analysis shows the proper inventory management of the company.

57

4.2 SUGGESTIONS
For maintaining the ideal current ratio, the company should reduce the current liabilities. The company should maintain proper cash budget to estimate cash requirements. The company should take effort to maintain cash management. The analysis shows that the company maintained better inventory system. To the same level The company should adopt more scientific methods for receivables management. A detailed investigation of the concern would help the company for a better management of debtors. The company has to review its credit policies to increase its profitability.

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4.3 CONCLUSION
The Ashiqu exporters Pvt. Ltd has been serving the state for more than 10 years. It has contributed much to the industrial development of the state and is providing employment to hundreds of people. Company is providing their products to local and foreign market over the last few years the company has made an indelible mark in the soap industry. The study conducted to measures the financial performance of the company has observed that the receivable management of the company is satisfactory. Further improvement has to be made. I wish all very best for the company and I once again express my gratitude to the entire person who helped me to complete the project work