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SUBMITTED BY:

MANINDER KR. PANCHAL MBA

AL-FAHLA SCHOOL OF MGT. & TECH.


DHAUJ (FARIDABAD)

ESCORTS

ACKNOWLEDGEMENT
At the outset I would like to thank the Management of ESCORTS AGRI MACHINERY GROUP for the wholehearted co-operation and guidance extended by them, which made my summer training project possible. I am very grateful to my project guide Mr. Ashok Behl & Mr. Nitin Aggarwal [Manager-Finance Department, Escorts Limited (AMG)] for his support and suggestions, which led to the completion of this project. I would also like to thank Mr. Ajay Wadhawan, Mr. Rajesh khanna, Mr. DK Srivastava & Mr. Halder for their support and co-operation. A Special thanks to Mr. Bharat Madan [Finance Head, AMG] for providing me this opportunity to carry out the project.

MANINDER KR. PANCHAL Date: _______ Place: Faridabad

ESCORTS

EXECUTIVE SUMMARY

If development capital is what establishes a business, working capital is what keeps it going. One of the most common downfalls of business is unexpectedly high running cost. What is important is not just the size of operating costs, but the cash flows that is when money has to be paid out in relation to the stream of income arriving in. Thus Working Capital Management is of prime importance. This project is a small attempt to study the working capital management in Escorts Agri Machinery Group. The project can be divided into two sections. First is the analysis of the working capital position of the company using ratio analysis and second is the study of working capital management techniques. Ratio analysis has been done on the basis of five years data. For calculating various ratios 300 days have been taken as number of working days after deducting Sundays and holidays except for 2006-07, 2007-08 where 375 days have been taken. Reason being the company has changed its financial year from 2006-07, therefore balance sheet figures for 2007-08 comprises of 15 months. Ratios have been discussed to compare working capital performance over the years and to comment and not the absolute values. Therefore figures have not been converted into 12 months in this report. To analyze the performance, published balance sheets of Escorts Limited (not Escorts consolidated) have been used. This project report is based on financial data up to 2007-08 only. Apart from liquidity and activity ratios cash and loans & advances has been discussed separately as these two appears to be crucial in Escorts working capital analysis.

ESCORTS

EXECUTIVE SUMMARY

Working Capital Management basically comprises of Receivables Management, payables Management and Inventory Management. These three have been discussed separately along with companys policy on these areas. Escorts is maintaining the following records which is indicative of its professional approach: Maintaining proper sets of accounting records. Maintaining an accurate cashbook reconciled with the bank statement. Maintaining monthly statement showing profit performance and the working capital position. Monitoring receivables daily. Making a regular forecast of cash requirements based upon planned sales volume. Ageing of debtors/creditors with comparisons to previous months. At the end, observations/recommendations have been given.

ESCORTS

STUDENT DECLARATION

I, student of Masters in Business Administration AL-FAHLA SCHOOL OF MGT. & TECH., hereby declare that the dissertation/thesis entitle Study of Cash Flow Management of the Escort Agri Machinery Group (AMG) submitted in fulfillment of the r training; is my original work and is not submitted for the award for any other degree, fellowship or similar title or prize.

MANINDER KR. PANCHAL (MBA)

ESCORTS

TABLE OF CONTENTS
THE ESCORTS SYMBOL MISSION QUALITY POLICY ABOUT TRACTOR INDUSTRY Introduction Future of Tractor Industry Market Share Industry Performance

INTRODUCTION TO COMPANY Background and Business Financial Performance Timeline

AGRI MACHINERY GROUP Introduction Companys Future Sales Trend Products

MANAGERIAL USEFULNESS OF STUDY OBJECTIVES OF TRAINING WORKING CAPITAL RATIO ANALYSIS Liquidity Ratio Activity Ratio

TABLE OF CONTENTS
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WORKING CAPITAL MANAGEMENT Receivable Management Inventory Management Payable Management

SWOT ANALYSIS OF AGRI MACHINERY GROUP RESEARCH METHODOLOGY FINDINGS RECOMMENDATIONS LIMITATIONS BIBLIOGRAPHY ANNEXURE

ESCORTS

THE ESCORTS SYMBOL

The Escorts Symbol means more than a seen by the eye. It has been prepared with certain objectives in mind and is symbolic in more than one way. The philosophy behind Escorts and the E in the Escorts is Enterprise. The Hexagon is a symbol of productivity, precision when interposed as a nut. It symbolizes a craftsmanship, and mending productivity. The sprains super imposed on the Hexagon represent the workers and the people of the Escorts. This forms the letter E the first of Escorts a company even of the more changing unveiling the future.

MISSION
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For an Enterprise business mission embodies of its endeavor, which acts as a guiding light for continuous development & growth. Mission of ESCORTS is: Engineering Changes through core competency for greater synergy reinforcing bonds with customers & establishing powerful symbiotic relationship with international allies, preparing global market. The company wants to make a lasting difference to its shareholders, its customers, business associates, its employee and country as a whole. Company also gives better quality and better technology to customer and treats every customer as special to build respect for, and loyalty to, Escorts.

QUALITY POLICY
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We shall strive to continuously improve to meet the ever-rising Expectations of our customers at the lowest cost. Each one of us must fulfill the need of our customer, both internal and external with the highest degree of commitment thereby creating a quality organization geared to ensure total customer satisfaction and the sustained health and prosperity of our business. Customer Orientation: To fulfill the requirement of our internal and external customer. Process Orientation: To optimize and harmonize interrelated process rather than individual functions. Preventive Behavior: To prevent the mistakes to happen.

Introduction

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About Tractor Industry

Introduction

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Indias long-term economic prospects, even today, depend to a large extend on the agricultural sector, which contributes a quarter to the gross domestic project and provides livelihood to 2/3 of the population. A gradual and perceptible shift from subsistence farming to enterprise farming is harbinger of modernization of the agriculture economy and this will increase the contribution sector to the overall GDP in the time to come. The central government as well as several state governments is giving due priority to agriculture and rural developments. A tractor is a product, which has maximum utility in the agricultural sector. The tractor industry is segmented on the basis of the power of the tractor engine measured in terms of horsepower (HP). The maximum consumption is for 30-40 HP tractors. With the increase in the availability of low cost finance for longer tenures & expected to go up. The new trend observed in this sector is the shift in consumption from majority in the northern states to other parts of the country, too. The soil in the northern states is alluvial in nature and thus requires a low powered tractor for tilling it. However, states located in the western and southern parts of the country where the soil being laterite or black etc. is harder and needs high-powered tractors.

About Tractor Industry

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Tractors industry in India has passed through various phases before reaching where it is today. During 1945 to 1960 demand was met entirely through imports. There were 37000 tractors by 1960. Production began in 1961 with five manufacturers producing a total of 880 units per year. By 1965 it increased to over 5000 units per year and by 1970 annual production rose to more than 20,000 units. Six new manufacturers were established during 1971-1980. In 1971 Escorts also started local manufacturing of Ford Tractors in collaboration with Ford, UK. During 1990 annual production rose to 1,40,000 making India an exporter mainly to countries in Africa. After De-licensing of industry, production exceeded 2,55,000 units in 1997. The growth of the industry over the last three decades resulted in entry of several new entrants including all the major multinational companies. The industry now consists of 14 manufacturers with an aggregate installed capacity of approx. 4.50 Lac tractors. In the tractor industry, following are the key manufacturers: Mahindra and Mahindra Ltd., VST Industries Ltd., Eicher Ltd., Escorts Ltd., Punjab Tractors Ltd., International Tractors Ltd., Gujarat Tractors Ltd., Tractors and Farm Equipment Ltd., Hindustan Machine Tools Ltd., & Bajaj Tempo Ltd.

Future of Tractor Industry

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The tractor industry in India has been on a growth trajectory since the second half 200304, after going through a trough for consecutive years. The key factors driving this growth are increasing farm incomes, aggressive financing resulting in easy availability of low-cost credit, sharp inventory correction and strong export growth. The demand in tractor industry is expected to grow mainly due to the agricultural sector, with the expected increase in agricultural production. Also, the shift in trend for demand towards higher HP tractors is expected to continue. This will be further strengthened by the launch of several new models. In the next 2-3 year, demand for tractors is expected to increase significantly in the eastern states, where traditionally, tractor usage has been low. Exports are expected to increase significantly as several Indian players are targeting the hobby farming segment in the U.S, which is considerably large. Also, tractors of most Indian manufacturers comply with the emission standards accepted in the U.S. Most exports are likely to be through overseas partnerships or joint ventures. McKinley has also forecasted tractor population requirements of 75 lacs over the next 18 years vs. current population of 26 lacs. The extension of the 150 per cent deduction on R&D expenditure up to march 31, 2009, in the Budget 2008-09 will also benefit the industry in terms of new product development besides increase in the area under irrigation under the Bahrat Nirman Project and the micro irrigation scheme.

MARKET SHARE OF TRACTOR INDUSTRY

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For the year 2007-08

ESCORTS 7.26% 1.30% 6.63% 8.14% 1.37% 8.82% 1.36% 15.20% SONALIKA 8.00% FML
1

13.65% MAHINDRA & MAHINDRA PTL TAFE 28.17% HMT

L&T FORD NEW HOLLAND

TRACTOR INDUSTRY PERFORMANCE

OTHERS EICHER
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COMPANY
ESCORT FARMTRAC TOTAL(ESCORT + FARMTRAC) MAHINDRA & MAHINDRA PTL TAFE EICHER HMT SONALIKA BTL(FML) L&T FORD NEW HOLLAND OTHERS TOTAL INDUSTRY

2005-06
11138 18287 29425 85028 31396

2006-07
23200 32800 56000 102500 30010 52400 27700

2007-08
20950 26900 47850 98700 28040 53400 25450 4770 30920 4820 28530 23250 4520 350300

7900 32017 4464 19951 13214 8450 302435

6500 36200 5050 19720 19400 7195 362675

ESCORTS LIMITED
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Background And Business The Escorts Group, with Escorts Limited as its flagship company, is among Indias leading corporations operating in the diverse field of agri machinery, construction & material handling equipment, automotive & railway ancillaries information technology and financial services. The group has 15 modern manufacturing facilities & an extensive marketing network spread across the country. The genesis of Escorts goes back to 1944 when two brothers, Mr. H.P. Nanda and Mr. Yudi Nanda, launched a small agency house, Escorts Agents Ltd., in Lahore. The companys principal activities were trading and representing leading overseas manufacturers for the sale of their products in India. One of its dealerships was for the Massey Ferguson brand of tractors.

In December 1959, EAPL was converted into a public limited company and was renamed as Escorts Limited (EL). In January 1960, EL decided to set up manufacturing facilities for making tractors in India under the Escorts brand name in the 25-40 Horsepower categories. EL promoted Escorts Tractors Limited in 1969 as joint venture with Ford Motor Company of USA for the manufacturing of Ford series of tractors. The tractors manufactured were in

ESCORTS LIMITED

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the 45-50 HP range and ETL became the market leader in this segment with a share of above 50%. Consequent to FMCs disposal of tractors operations to Ford New Holland, USA, FNH acquired the shares of FMC in ETL. Following an agreement in 1995 to end the joint venture association, EL acquired the entire stake of NH in August 1995, making ETL a subsidiary of EL. Over the years, Escorts has sured ahead and evolved into one of Indias largest conglomerates. Till 1993-94, all these activities were being carried out in various divisions of EL. EL undertook a major restructuring exercise between 194-98 spinning off the divisions into separate companies. The restructuring exercise-comprised consolidation of the agir-machinery business by merger of ETL with EL and having off various divisions into separate companies. Biwheeler division was spun off to Escorts Yamaha Motors Ltd., construction equipment division to Escorts construction equipment Ltd., telecommunication equipment division to Escorts communication Ltd., EL booked gains of Rs. 2091 million over the four year period 1994-95 to 1997-98 though the sale of these the sale of these divisions. The main products of Escorts group currently comprise of agri-machinery, information technology, health care, financial services, railway components, auto components, construction and material handling equipment.

ESCORTS TIMELINE

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Escorts journey started in 1944 as a small agency house, Escorts Agents Ltd., in Lahore. Its principal business was trading and representing leading overseas manufacturers for the sale of their products in India. Escorts started its manufacturing operations in 1954, and since the following range of products has been introduced in the country. 1954 1960 1961 1962 1965 1969 1971 1979 1980 1985 1991 Piston rings and cylinder liners Pistons Assembly of Tractors Motorcycles and Railway couplers Agricultural tractors under Escorts brand name Agricultural tractors under Ford brand name Industrial and construction equipment Excavator loaders 100cc Motorbike Electronic PABXs Harvesters combine

ESCORTS TIMELINE
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1992 1993 1995 1996 1997 1998 1999 2004

VSAT satellite communication system Mobile communication Forklift truck Disengagement of joint venture and launch of Farmtrac Tractor. Joint venture with CARRARO for manufacturing of transmission and axles. Powertrac series of tractors were launched Joint venture with POL MOT for manufacturing of Farm Machinery. Divested Escotel Mobile Telecommunications to idea cellular TS16949 Certification for Agri Machinery Group.

2005

Divested Escorts Heart Institute and Research center (EHIRC) to Fortis Healthcare.

2006

Divested in Carraru India Ltd. Set up in new manufacturing facility in Radurapur for manufacture of new range of railway equipments.

BOARD OF DIRECTORS OF ESCORTS LIMITED

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Managing Director & Chairman Joint Managing Directors Directors Mr. Rajan Nanda Mr. Nikhil Nanda Dr. M.G.K. Menon Dr. S.A. Dave Dr. P.S. Pritam Mr. S.C. Bhargava Sr.Vice PresidentLaw & Company Secretary Exec. Vice President & Group Chief Financial Officer Mr. R.K.Budhiraja Mr. G.B. Mathur

OUTLINE ORANISATION ESCORTS GROUP

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Chairman & Managing Director Sh. Rajan Nanda


Secretariat

Flagship

Operating Division

Escorts Limited Faridabad

Agri Machinery

Engineering

International Business

Corporate Center Faridabad

Escorts Research Center, Faridabad

Institute of Farm Mechanization, Bangalore

Personnel

Finance

Project

Escorts Heart Research Institute, New Delhi

Escorts Medical Center, Faridabad

Administration and Security

Law

Export and Communication

Associates Companies Escorts Employees Welfare Trust Faridabad

Subsidiary Companies

OUTLINE ORANISATION ESCORTS LIMITED

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Chairman & Managing Director Sh. Rajan Nanda Secretriat

Corporate Office Corporate Center, Faridabad

Registered Office New Delhi

Personnel Project Administration and Security

Finance Law Export and Communication

Agri Machinery Marketing Division

Automotive Ancillaries and Railway Equipment Division

Farmtrac Division

Escorts Tractor Division

Corporate Office (Line Duties)

Functional Units (Production & Operation)

Corporate Office (Line Duties)

Functional Units Production & Operation)

BANKERS
1) IDBI BANK.

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2) ABN AMRO BANK N.V. 3) BANK OF BARODA. 4) CITIBANK, N.A. 5) DEUTSCHE BANK AG. 6) HONGKONG & SHANGHAI BANKING CORPORAYION LIMITED. 7) HDFC BANK LIMITED. 8) PUNJAB NATIONAL BANK. 9) STATE BANK OF INDIA. 10) STATE BANK OF TRAVANCORE.

\AGRI MACHINERY GROUP

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Introduction Having pioneered farm mechanization in the country, Escorts has played a pivotal role in the agricultural growth of India for over five decades. One of the leading tractor manufacturers of the country, Escorts produces tractors in the 27-75 HP range and has already sold over 6 tax tractors. Escorts Agri Machinery Group was set up in 1960 and they rolled out their batch of tractors in 1965 under the brand name of Escorts, Powertrac and Farmtrac. Escort brands of tractors is symbolic of reliability and trust and enjoy the confidence of the farming community for the last 40 years. Powertrac brand of tractors are the most fuel-efficient tractors in their respective categories that offer excellent value for the money and have helped the farmer improve their quality of life. Framtrac brands are the most powerful premium range of tractors that give maximum productivity to the farmers. Spanning these three brands, they company has a full range of tractors to cater to the domestic as well as overseas markets The company is developing state-

AGRI MACHINERY GROUP

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of-the-art highly fuel efficient engines with the assistance of AVL of Austria and have also entered into a joint venture with Carraro SPA of Italy for the manufacturing of transmission and axies. To sustain the present momentum and to realize the future goals, Escorts has invested Rs.60 crore towards strengthening new product development programs and enhancement of R&D capabilities. Additionally, Rs. 400 crore has been invested towards modernization of its manufacturing facilities bringing them to international standards, The company has one of the most comprehensive distribution networks comprising of over 500 dealership / outlets and 30 area offices spread across the country. It has a manufacturing capacity of 75000 tractors per annum. Escorts Agri Machinery Group is looking at forward and backward integration through food processing, food processing, food chains and genetic engineering. In line to their vision for becoming a major player in sub 100 HP segment by 2005 in the global markets, they have increased their vision for becoming a major regional player to major global markets, which stretch from North America to Australia covering all the continents. Despite the strict competition by other

AGRI MACHINERY GROUP

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major tractor manufacturers they have been able to gain constant volumes in the global market. Their target for this year is to export 15% of the volumes of their total production volumes. To consolidate its presence in the overseas markets, the company has ventures in the USA and Europe (Poland). It has recently acquires a majority stake in Long Agribusiness LLC, a tractor distributing company in the USA and Pol-Mot Escorts Spolka Z.O.O., Poland. Besides the USA and Poland, Escorts has strong presence in Turkey, Australia, Bangladesh, Sri Lanka, Nepal, Kenya, Tanzania, South Africa etc. though its dealers network in these countries. Escorts have very ambitious plans to expand the dealers network in other potential countries in the coming year. By the end of the next year, the Company hopes to be the largest exporter of the Indian Tractor Industry, Besides tractors, the RR6 riding type paddy transplanter, in association with Yanmar of Japan, is the first offering of Escorts to the rice planters of India.

AGRI MACHINERY GROUP

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Modernization of Agri Machinery Group R&D Center Escorts Agri Machinery Group (AMG) has invested over US $ 7.5 million in a state of the art Research and Development Center, Virtual prototypes of components and aggregate assemblies are made and assembled on computer workstations using 3D technology. The performance is checked on computers using simulation techniques thus saving a lot of time for the end-user as well as lowering development costs. The R&D Center uses advanced 3D modeling, analysis and simulation software for engines, transmission and vehicles, Physical prototypes are then extensively tested for performance, durability and reliability. Facilities include a high-technology engine laboratory featuring fully computerized test-beds with online control, data acquisition and analysis.

AGRI MACHINERY GROUP

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PRODUCTS

Escorts
E-325 Josh E-335 E-335P E-430 E-430XL E-435 E-440(6+2 & 8+2)PT E-440(6+2 & 8+2)XL E-450 E-450(8+2)PT E-450(8+2)XL

Farmtrac
F T 30 F T 35 F T 45 F T 45Live PT F T 50DB F T 50 F T 60 F T 60DB F T 60Deluxe F T 60Live PT F T 70

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MANAGERIAL USEFULNESS OF STUDY


For a fresher like me, in a big organization like Escorts Ltd. gave me a feel of the real working atmosphere. It enhanced my horizones about how the members of the organization work as a team, co-ordinating with each other, their interdependence on each other. I became aware of the synergy effect i.e., how different members in different profiles produce greater results with coordination. The usefulness of Study: In-depth knowledge of Companys workings. Familiar atmosphere of Company motivates the researcher. Awareness of difference between the bookish knowledge and the practical workings of the company. Knowledge of Companys policies. Motivates to work as a team member. To get aware of Current Position of the Company. The various designation in an organization, the respective work profiles and the interdependence among them. Synergy effect.

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MANAGERIAL USEFULNESS OF STUDY

It helps to understand how to tackle work pressure and meet dead lines. Difference between budgeted and actual performance. Time utilization. Wealth maximization. Data analysis and interpretation helps to increase capability of mind. Knowledge of Companys decisions to solve the problems.

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OBJECTIVE OF THE TRAINING


It is well known fact that we remember 20% of what we hear, we remember 40% of what we see but we remember 75% of what we do. There are two fold of the management of working capital Maintenance of working capital at appropriate level. Availability of ample funds as and when they are needed.

The present study in ESCORTS LIMITED (Agri Machinery Group) mainly focus on the above objectives as well as some other objectives which I have taken into consideration during the project training. To access the requirement of working capital of the company. To assess the changes in working capital needs over the years. How management of working capital affects the financial position of the company? Evaluate current assets and current liabilities to find out liquidity position of the To prepare the statement of working capital of the concern.

company.

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WORKING CAPITAL

Definition Working Capital refers to the cash a business requires for day-to-day, or, more specifically, for financing the conversion of raw material into finished goods, which the company sells for payment. In other words Working Capital is the money the business process consumes. The longer the process takes, the more money is consumed. Working Capital is calculated by deducting current assets from current liabilities. Current assets are resources, which are in cash or will soon be converted into cash (normally with in one year). Whereas Current liabilities are commitments, which will soon require cash settlement in the ordinary course of business. Working Capital can also be defined with an approach that encompasses all the processes surrounding accounts payable, accounts receivable and inventory and one begins to understand the potential knock-on impacts of a change in working capital practice or policy. When looking in detail at any of these three core areas, it soon becomes clear that WCM can touch all the firm buys, makes and sells.

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WORKING CAPITAL
A total approach to working capital covers all the companys activities relating to vendor, the customer and the product. Concepts of Working Capital 1. 2. Gross Working Capital Concepts Net working Capital Concepts

Gross working capital concept According to this concept, working capital means working capital which is total of the current assets of a business. Gross Working Capital = Total current assets

Net Working Capital Concept According to this concept, working capital means net working capital which is the excess of current assets over the current liabilities Net Working Capital = Current Assets Current liabilities

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WORKING CAPITAL
IMPORTANCE

The better a company manages its working capital, the less the company needs to borrow. Without adequate working capital there can be no progress. A business must expand and assert itself in a competitive world. If expansion takes place without the firm being able to cover its commitments, then over trading will be the result. Available working capital is stretched a capacity until, finally, bankruptcy or liquidation is forced upon the business. Even companies with cash surpluses need to manage working capital to ensure that those surpluses are invested in ways that will generate suitable returns for investors.

The lengths of production and sales cycle pay an important part in the over trading process. If short, and the period of credit is not excessive, then money from sales will help to replenish working capital. However the longer the total period from the buying of the raw material to the receipt of the cash from sales, the more likely is overtrading.

Working capital management can be subject to compromise and best practice is often hard to identify, pursue or benchmark. From a funding optimization perspective, however, generating extra cash from internal sources has the advantage over bank and public debt of greater opportunity and access, typically at lower cost.

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WORKING CAPITAL

In terms of the impact felt across the company in the business units and customer- facing staff, it is not the financial but the operational benefits that are most keenly felt following a reappraisal of working capital practices. The greater efficiencies in dealing with customers and suppliers greater control of and information on the processes related to ordering/ paying and delivering / getting paid- can ultimately feed into improve delivery of goods and services at lower cost. Improve working capital leads to increase shareholder value because it enables firms to generate more profit with less capital.

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RATIO ANALYSIS

Working Capital Management Performance using Ratio Analysis A ratio is defined as the indicated quotient of two mathematical expressions and as the relationship between two or more things. In financial analysis, a ratio is used as a benchmark for evaluating the financial position and performance of a firm. Ratio analysis involves comparison for a useful interpretation of the financial statements. Single ratio in itself does not indicate favorable or unfavorable condition. Therefore in this report it is compared with: Past ratios, i.e. ratios calculated from the past financial statements of the same company. Since liquidity ratios and activity ratios helps to measure the firm ability to meet current obligations and firms efficiency in utilizing its assets respectively. Those two have been used. Limitations of Ratio Analysis It is difficult to decide on the proper basis of comparison. Price level changes make the interpretation of ratio invalid. The differences in the definition of items in the balance sheet and profit & loss account The results are based on highly summarized information. Consequently situations, which

make the interpretation of ratios difficult. require control, might not be apparent or situations, which do not warrant significant effort, might be unnecessarily highlighted.

LIQUIDITY RATIOS
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Liquidity ratio measures the ability of the firm to meet its current obligations. It is necessary to strike a proper balance between high liquidity and lack of liquidity. A high degree of liquidity means that a firms fund will be unnecessarily tied up in current assets. Whereas lack of liquidity, implies failure of a company to meet its obligations due to lack of sufficient liquidity.

The ratios, which are used for the analysis of Escorts liquidity position in this report, are: Current Ratio Quick Ratio Activity Ratio

LIQUIDITY RATIOS
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CURRENT RATIO Current ratio is calculated by dividing current assets by current liabilities: Current ratio = Current Assets Current Liabilities 2004-05 Current Ratio 1.19 2005-06 1.03 2006-07 1.12 2007-08 1.16

From the above table it can be interpreted that Escorts liquidity position is not constant. As a conventional rule a current ratio of 2:1 or more is considered satisfactory because in a worse situation, even if the value of current assets become half, the firm will be able to meet its obligations. Current ratio refers to a margin of safety for creditors therefore higher the current ratio, the greater the margin of safety.

LIQUIDITY RATIOS

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QUICK RATIO Quick ratio establishes a 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. Inventories are considered to be less liquid therefore calculating quick ratio they are deducted from current assets. Quick Ratio = Current Assets inventory Current liabilities 2004-05 Quick Ratio 0.76 2005-06 0.71 2006-07 0.90 2007-08 0.99

Escorts quick ratio in the current year has decreased in comparison to previous year, yet it can be considered to be satisfactory, as it is 1:1 times of current liabilities. Although quick ratio is more penetrating test of liquidity than current ratio. Yet it should be used cautiously, as all debtors may not be liquid and cash may be immediately needed to pay operating expenses. The value of quick ratio is decreasing every year. The satisfactory level of the quick ratio is 1:1. This shows the worse situation of the company. The current liabilities are more than the quick assets.

ACTIVITY RATIOS

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Activity Ratios are used to evaluate the efficiency with which the firm manages and utilizes its assets. The ratios are called Turnover Ratios as they indicate the speed with which the firm manages and utilizes its assets.

Activity ratios, which are used to analyze Escorts effectiveness in Asset utilization, are Inventory Turnover Ratio Fixed Assets Turnover Ratio Working Capital Turnover Ratio Debtors Turnover Ratio Creditors Turnover Ratio

ACTIVITY RATIOS
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INVENTORY TURNOVER RATIO It indicates the efficiency of the firm in producing and selling its product. It is calculated by dividing sales by avg. inventory. In a manufacturing company inventory of finished goods is used to calculate inventory turnover. Inventory Turnover = Cost of goods sold Avg. Inventory 2004-05 Inventory turnover 10.36 13.07 14.42 15.10 2005-06 2006-07 2007-08

If the company is comfortably meeting the customer needs with 9.73 days inventory of finished goods, all India basis. It is a good achievement for the Escorts Limited.

ACTIVITY RATIO
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FIXED ASSETS TURNOVER RATIO A firms ability to produce a large volume of sales for a given amount of net assets is the most important aspect of its operating performance. Unutilized or underutilized assets increase the firms need for costly financing as well as expenses for maintenance and upkeep. Fixed assets turnover is calculated by dividing net sale by net fixed assets. Fixed Assets Turnover = Sales Fixed Assets 2004-05 F.A.T 1.98 2005-06 2.24 2006-07 2.29 2007-08 2.35

Escorts fixed asset turnover have increased in 2003-04. The fixed asset turnover of 2.78 implies that it is producing Rs.2.78 of sales for one rupee of capital employed. The higher the ratio, more it is satisfactory It should be interpreted very cautiously because the denominator of the ratio includes fixed asset net of depreciation. Thus old assets with lower book value may create a misleading impression of high turnover without any improvement in sales.

ACTIVITY RATIO

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DEBTORS TURNOVER RATIO Debtors turnover indicates the number of times debtors turnover each year. Higher the value of Debtors turnover, the more efficient is the management of credit. The liquidity position of the firm depends on the quality of the debtors to a great extent. Debtors Turnover = Credit Sales Avg. Debtors 2004-05 Debtors Turnover 7.62 2005-06 6.12 2006-07 4.44 2007-08 4.29

Escorts debtors turnover is quite lower. The debtors turnover ratio is high at 2003-04 . The ratio is decreasing. Also the debt collection period has its own importance. The debt collection period of Escorts was 76 days in 2003-04 but in the year 2004-05, it is increased to 95 days and it is maintained till today. This does not show the satisfactory level. The shorter the collection period, the better the quality of debtors, since a short collection period implies prompt payment by debtors. A too low collection period is also not necessarily favorable as it may indicate a very restrictive collection and credit policy. Because of the fear of bad debt loses the firm may be selling to those only whose financial conditions are sound and who are very prompt in making the payments.

ACTIVITY RATIO

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CREDITOR TURNOVER RATIO Creditors Turnover = Total Purchases Creditors 2004-05 Creditors Turn. 5.70 2005-06 3.67 2006-07 3.55 2007-08 3.45

Though the days are very high and apparently appears to substitute right collection, this extended credit has its own drawback like: High interest inbuilt in cost system. Sub-quality creditors may be accepted. Quality of material may be accepted.

The payment period of Escorts Limited is 90 days in 2074-08, which is more reasonable than previous years. This helps to make good quality product and also better relationship with suppliers.

ACTIVITY RATIO
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WORKING CAPITAL TURNOVER RATIO Working capital turnover ratio has its own significance in the business organizations. It shows the efficiency of the firm. How much sale that the company get with the utilization of the limited working capital. Working Capital Turnover = Net Sales Net Working Capital 2004-05 Working.Cap.Turn. 23.02 2005-06 113.45 2006-07 28.30 2007-08

In the case of working capital turnover ratio Escorts is significantly going very downward. This is a very dangerous point of the firm. The company should try to improve it earlier. It shows that the company requires more money to generate sales.

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Working Capital Management


Receivable Management The term receivable is defined as debt owed to the firm by customers arising from sales of goods in the ordinary course of business. The sale of goods on credit is an essential part of modern day business. The credit sales are generally made on open account in the sense that there are no formal obligations through a financial instrument. However extension of credit involves risks and cost. Management should weigh the benefits as well as the cost to determine the goal of receivable management. The benefits from receivables are the increased sales and profits anticipated because of more liberal policy. When firm extend trade credit, i.e. invest in receivables, they intend on increase the sales level. The motive of liberal credit policy can be either growth oriented or sales retention. The extension of credit has a major impact on sales, costs and profitability. Other things being equal, a relatively liberal policy and therefore higher investments in receivables will produce larger sales. However the cost will be higher with liberal policies then with more stringent measures. Therefore account receivable management should aim at a trade- of between profit and risk. The costs associated with the extension of credit and account receivables are collection cost, capital cost, delinquency cost and default cost. Collection costs are administrative costs incurred in collecting the receivables from the customers to whom credit sale has been made.

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WORKING CAPITAL MANAGEMENT

Capital Cost- The increased level of accounts receivable is an investment in assets. They have to be financed thereby involving cost. The cost on the use of additional capital to support credit sales, which alternatively could be profitably employed elsewhere, is therefore a part of the cost of extending credit or receivables.

Delinquency cost- This cost arises out of the failure of the customers to meet their obligations when payment on credit sales becomes due after the expiry of the period of credit. Blocking up of funds for an extended period and cost associated with steps that have to be initiated to collect the over dues are important components of such type of costs.

Default cost- When firms are unable to recover the over dues because of the inability of the customers, the debts are treated as bad debts and have to be write off as they cant be realized. Such costs are known as default cost

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WORKING CAPITALMANAGEMENT

Receivable management Decision areas There are three crucial decision areas in receivable management:

Credit Policies Credit terms Collection Policies

Credit Policies The credit policy of a firm provides the framework to determine whether or not to extend credit to a customer and also how much credit to extend. It has two broad dimensions, the first is credit standard and second is the credit analysis. Credit standards represent the basic criteria for the extension of credit to customers. The trade- off with reference to credit standards covers collection costs, average collection period, level of bad debts losses and level of sales. With a relaxed credit standard the collection costs, bad debts expenses and sales goes up and in reverse case vice-versa happens. The second aspect of credit policy is credit analysis. It begins with obtaining credit information of the customers and ends up with the analysis of the obtained credit information. Information can be collected either internally or externally.

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WORKING CAPITAL MANAGEMENT

Internal source of credit information is derived from the records of the firm. The analysis of credit information should cover both qualitative as well as quantitative aspects. The quantitative aspect is based on the available financial statements whereas qualitative aspects cover the quality of management.

Credit terms

The second decision area in accounts receivable management is the credit terms. After the credit standard have been establish and the credit worthiness of the customers is assessed, the management of a firm must determine the terms and conditions on which trade credit will be made available. Credit terms have three components : credit period, cash discount and cash discount period. Credit period is the duration of time for which trade credit is extended whereas cash discount is the amount by which the over the due amount will be reduced thus benefiting the customer.

The credit terms like the credit standard affect the profitability as well as the cost of the firm therefore a firm should determine the credit terms on the basis of cost-benefit trade-off.

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WORKING CAPITAL MANAGEMENT

Collection policies

The collection policies refer to the procedures followed to collect account receivable when after expiry of the credit period they become due. This policy covers two aspects : first is the degree of effort to collect the over due and second is the type of collection efforts.

Receivable Management Escort Limited has a zero debt credit policy. However it is giving the following facilities to its dealers to promote the sales, as liberal credit policy has a direct impact on sales.

Channel finance facilities The company arranges these facilities with various bankers for the company dealers to support their working capital needs. The goods are sold on credit against hundis. Hundis can be drawn for 50 or 75 or 90 days subject to qualifying criteria of bank.

WORKING CAPITAL MANAGEMENT


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Credit facilities Escort provides thirty days interest free credit to the dealers. For this in respect of all hundis the company bears 30 days interest and the remaining cost of interest, delayed payment charges are borne by the dealers.

Penalty on bouncing of hundis / cheques Bouncing of hundis/ cheques drawn in favor of the company is viewed very strongly and usually following actions are taken. Tractor supplies are suspended and restored only after all dues are cleared. All charges debited by the bank such as collection charges, penal interest are debited to the dealer.

The bank extending channel financing policy have clearly stated that if a dealer has two or more bouncing he will be black listed and his limit will be withdrawn with immediate effect. Company also makes sales to such dealers only against letter of credit or demand draft.

Cash discount on credit outstanding/ early payment incentives Cash discount of 1% is payable on tractors dispatched against funds available in the form of letter of credit or demand draft. Interest is charged/ paid at 12% per annum on outstanding/ credit balance early payment incentive.

WORKING CAPITAL MANAGEMENT

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Inventory Management Inventories are stock of the product, a company is manufacturing for sale. Inventories can exist in the form of raw material, work-in-progress, finished goods, components and supplies, whereas motive for holding inventories can be transaction motive, precautionary motive and speculative motive. Inventories constitute the most significant part of Current assets. Because of the large size of inventories maintained by firms, a considerable amount of funds is required to be committed to them. It is therefore, absolutely imperative to manage inventory efficiently and effectively in order to avoid unnecessary investment. Managing inventory is a juggling act. Excessive stock can place a heavy burden on the cash resources of a business whereas insufficient stocks can result in lost sales, delays for customers etc. The less time a company holds inventory, the lower its working capital investment will be. There is a magic threshold, beyond which the length of time the seller needs to acquire materials and make and ship a product is less than the length of time between order placement and when the customer expects to receive the product. If a business can cross that line, it can completely eliminate inventory and acquire exactly the right materials after each sale has been made.

WORKING CAPITAL MANAGEMENT

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But many companies cant operate under this model. Those that sell time- sensitive items have to have materials, if not finished products, on hand to satisfy the expectations of a customer who needs and order right a way. Many large manufactures operate on a just-intime (JIT) basis thereby all the components to be assembled on particular day, arrive at the factory early that morning, no earlier-no later. This helps to minimize manufacturing cost. Objectives The objective of inventory management is to: avoidance of over and under investment in inventories, provide the right quantity of material to the production department at the right time. Factors to be considered when determining optimum stock levels are: The projected sales of each product. Availability of raw materials, components etc. Delivery time by the suppliers and finally. Can one remove slow movers from ones product range without compromising best

sellers?

WORKING CAPITAL MANAGEMENT

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Inventory Management Techniques Inventory Management techniques include the followings: I. II. III. IV. V. VI. VII. VIII. IX. X. XI. XII. Effective and efficient purchasing, storage and issuing procedures. Setting of various levels like max., min., reorder level. Fixation of Economic Order Quantity. Establishment of inventory budgets. Min-Max plan. Two-Bin system. ABC analysis. VED analysis. XYZ analysis. Use of inventory rations. Aging Schedule of inventories. Kardex system.

WORKING CAPITAL MANAGEMENT

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Inventory Management Company policy doesnt specify any period for keeping inventory but it is generally kept for 30-90 days. However 3 days stock is considered as the minimum stock level for the item which is purchased locally (Faridabad) and 7 days stock is considered as the minimum stock level for the inventory item, which are purchased from outside. 15 days stock is considered as maximum stock level of the inventory item which are purchase locally and one month stock for the inventory item which are purchased from outside. Inventory Valuation I. II. III. IV. V. Raw material and components, stores and machinery spares are stated at lower of cost and net realizable value. Tools, jigs and dies are stated at cost or under. Work in progress, finished and trading goods are stated at lower of cost net realizable value. To determine the cost of raw material and components, weighted average cost method is used while in the case of trading FIFO method is used. Work in progress and finished goods include cost of conversion and other incurred in bringing the inventories to finished condition.

WORKING CAPITAL MANAGEMENT

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For Inventory Management Escorts has taken the following steps:

1. Business Process Re-Engineering All the manufacturing facilities are being modernized in accordance with global norms, towards this substantial investment in R&D has been made to the tune of US $ 7.5 million to incorporate state of art technology in manufacture of new models and BPR for product and process up gradation, which seeks to do away with purchasing, materials receipts and accounts payable procedures and documents and substitute them with annual contracts with few suppliers and payments for quantities received, inspected or accepted.

2. Total Quality Management Escorts Limited is following TQM. It aims at zero defect production, which has far reaching implications on inventory levels.

WORKING CAPITAL MANAGEMENT

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3. Just in Time Approach Escorts Limited, like many large manufactures operate on a just in - time (JIT) basis whereby all the components to be assembled on a particular day, arrive at the factory on same day. This help to minimize manufacturing costs as JIT stocks as discussed above take up little space, minimize stock for a very short time, they are able to conserve substantial cash, which is otherwise blocked up in inventories.

3. Vendor Reduction The company today is following the policy of reducing the number of vendors. It is trying to shrink the vendor base radically and then trying to use its clout to negotiate longer terms with the vendor. Among theses other steps taken by Escorts Management include Suggestion schemes and Centralization of funds.

WORKING CAPITAL MANAGEMENT

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Payable Management Creditors are a vital part of effective cash management and should be managed carefully to enhance the cash position. Purchasing initiates cash outflows and an over-zealous purchasing function can create liquidity problems. Ironically, some companies looking to take working capital off the balance sheet nurture slow, inefficient or even obstructive A/P process. Its one case where negligence can improve financial performance. But squeezing the vendors is a shortsighted policy. A better strategy is to shrink the vendor base radically, then use ones clout to negotiable longer terms with the vendors. Vendor rationalization is a process that can pay off in a big way. Apart from the question that who should authorize purchasing in the company should it be tightly managed or spea among a number of (junior) people? The following comes under good payable management. Purchase quantities should be geared to demand forecasts. Order quantities should be used which takes account of stock holding and purchasing costs. The cost to the company of carrying stock should be clearly defined. A Company should have alternative sources of supply. It should get quotes from Major suppliers and shop around for the best discounts, credit terms and reduce dependence on a single supplier.

WORKING CAPITAL MANAGEMENT

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Maximum Level It is the largest quantity of a particular material, which should be kept in the store at any one time. The fixation of maximum level is necessary to avoid unnecessary blocking up of capital in inventories. Minimum level The minimum level is the lowest quantitative balance of material in hand, which must be maintained at all, times so that the assembly line may not be stopped on account of non availability of materials. Re-Ordering Level It is the point at which if the material in store reaches, further supplies must be ordered. The re-ordering level is fixed somewhere between maximum and minimum level each such a way that the quantity of material represented by the difference between the reordering level and minimum level will be sufficient to meet the demands of production till the order materializes and supplies are received.

WORKING CAPITAL MANAGEMENT

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Economic order quantity It refers to the size of order, which gives maximum economy in purchasing any materials. It is also referred to as optimum or standard ordering quantity. It is fixed after taking into consideration ordering cost, stock out cost and inventory carrying cost the EOQ is determined by formula method, tabular method or graphic method. Ordering cost It is the cost of placing an order and securing the supplies. The more frequently orders are placed and fewer the quantities purchased on each order, the greater will be the ordering cost and vice versa. Stock out Cost In includes the cost of expediting purchases, obtaining rush deliveries, keeping track of back orders etc. Inventories Carrying Cost It is the cost of keeping item in stock. It includes interest on investment, obsolescence loses, storekeeping cost, insurance premium etc.

WORKING CAPITAL MANAGEMENT

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Perpetual Inventory System It is also known as automatic inventory system. It is a method of recording store balances after every receipt and issue, to facilitate regular checking and to obviate closing down for stocktaking. Min- Max Plan This is one of the oldest techniques of inventory control. According to this technique for each item of inventory the maximum and minimum levels are fixed. The maximum level lays down the limit above which an inventory item will not be kept in the stores. Two bin system In case of this technique, for each item of inventory two bins are maintained. The first bin contains such quantity of inventory, which is sufficient to meet the consumption requirement till the next order is placed and the second contains the safety stock. Order Cycling System In case of this technique the stock of each item of inventory is reviewed periodically, e.g., monthly, BI-monthly or quarterly. In case the review discloses that stock level of a particular item of inventory will not be sufficient till the next schedule that of review on the basis of probable rate of consumption, an order is placed to replenish its supply.

WORKING CAPITAL MANAGEMENT

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ABC Analysis ABC analysis is the technique of exercising selective control over inventory item the technique is based on assumption that a firm should not exercise some degree of control on all items of inventory. It should rather keep greater control over those items, which are more costly, compared to those items, which are less costly. According to this approach, the inventory items are divided into three categories: A, B and C. VED Analysis VED Analysis is of the nature of ABC analysis though it is generally used in case of spare parts. The parts are classified into three categories vital, Essential and desirable the firm keeps spare parts in stock only for lead-time, as these are those items, which are readily available in the market.

XYZ Analysis XYZ analysis is based on value of inventory in stock. It is different from ABC analysis, which is based on value of materials consumed and VED analysis, which is base on relative importance of inventory in stock.

WORKING CAPITAL MANAGEMENT

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Aging Schedule of Inventory Under this inventories are classified according to age. It helps in identifying inventories, which are moving slowly into production or sales. Kardex System Kardex System is an improvement of loose- leaf card system. In case of this technique a card is maintained for each item of materials. The cards are arranged in a metallic tray and kept in Kardex cabinets specially meant for that purpose.

SWOT ANALYSIS OF ESCORTS LIMITED

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STRENGTHS Good image in market. Ability to deliver in time. Excellent distributorship network across the India. Latest technology. Good quality standards. Better services.

WEAKNESS High prices as compared to the market. Physical distance between plant & marketing department.

OPPORTUNITIES AND THREATS The growing domestic demand for food grains and agri products promises a very good future for companys core business. We believe that India can be a major exporter of grains and other Agri products and increased demand both Domestic and Exports will call for increased yields, which besides other key inputs will result in increased Farm mechanization. Tractor density as well as the HP input per hectare is extremely low relative to International standards, tractor population today is concentrated in 10% of villages and even today 70% of our villages do not have a tractor. CRISIL INFA has estimated a growth of 7.5%-8.5% CAGR for the next five years. All this shows great potential for the growth in this industry.

RESEARCH
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METHODOLOGY

ESCORTS

RESEARCH METHODOLOGY

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Research methodology is a way to systematically solve the research problem. In it step by step methods are followed to solve a particular problem. It refers to a search for knowledge. It can also be defined as a scientific search for pertinent information on a specific topic. In fact, research is an art of scientific investment. Redman & mory defines research systematized effort to gain new knowledge. RESEARCH DESIGN Research Designs the way in which the research is carried out. It works as a blue print. Research Design is the arrangement of the conditions for the collections and analysis of data in a manner that to combine relevance to the research purpose with economy in procedure. TYPES OF RESEARCH DESIGN Exploratory Research Design Descriptive & Diagnostic Research Design Experimental Research Design

RESEARCH METHODOLOGY

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Exploratory Research Design In it, a problem is formulated for precise investigation and working and hypothesis are developed. Descriptive & Diagnostic Research Design In descriptive research design: those studies are taken which are concerned with describing the characteristics of a particular individual or a group. Experimental Research Design In it casual relationships between the variables are tested. It is also known as Hypothesis Testing Research Design

The present project is descriptive in nature. The major purpose of descriptive research is the description of the state of affairs, as it exists in present. The main characteristic of this method is that the researcher has no control over the variables. He can only report what has happened or what is happening.

RESEARCH METHODOLOGY

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SAMPLE DESIGN It is not possible for any researcher to include each and every member of the universe in his research process. So, he selects small portion of the universe, which is its true representative. This group is known as sample and this process is called sampling. Sampling Techniques can be categorized into two broad categories namely: Non-probability Sample Probability Sampling

Non-probability Sampling In it, researcher selects sample deliberately, by using his own judgement, in it every item of the universe does not have equal chances of inclusion in the sample. It can be of following type: Convenience Sampling Judgement Sampling Quota Sampling

RESEARCH METHODOLOGY

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Probability Sampling It is known as Random Sampling or Chance Sampling. In it, each population element has equal chance of selection. It can be of following types: Simple Random Sampling Stratified Sampling Cluster Sampling

In the present project, non-probability sampling has been used because sample is selected by researchers own view and every item of the universe has not equal chances of being selected. Under non-probability sampling, convenient sampling has been used because sample has been selected according to own convenience.

RESEARCH METHODOLOGY

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DATA COLLECTION The data can be of two types: Primary Data Secondary Data

Primary Data Primary data are those data, which is originally collected afresh. Secondary Data Secondary data are those data which are already collected and stored and which has been passed through statistical research. In this project, Secondary data has been collected from following sources: Annual report Books M.I.S Other material and report published by company

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FINDINGS

FINDINGS

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There has been a significant decline in volume over the years from 2001-02

to 2005-06 as can be seen in the graph below:

NET SALE IN (Cr)

C A G S N T SA H N E E LES VO M LU E

50 00 18 58 0 2005 0 6 2006 0 7 2007 0 8 Y A ER 19 86 20 30

The Net sales of Tractor has increased considerably from 2004-05 to 2007-08, This can be mainly attributed to changes in Variable and material costs and in the price. The Net sale of Tractor has increased considerably from 2004-05 to 2007-08, that is an decrease of Rs.7216 per tractor. This can be mainly attributed to changes in Variable and material costs and in the prices.

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R E C O M M E N D A T I O N

RECOMMENDATION

Loans & Advances

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Special efforts should be made to analyze loans & advances, which are between 35% to 56% of current assets. This can be classified between production / operation relation related and nonproduction / operation related. No production related cases might be financed from other sources like debenture etc. and treated separately. Inventory Inventory should be reviewed constantly to identify show / dead / obsolete item and then disposed until 2000-01 level is again achieved. Optimum level should be revised periodically, keeping in view, distance of suppliers, production lead time of supplier, transport problem if any and reliability of suppliers. This will help to avoid obsolesce and dead inventory. Debtors A study may be conducted if required by experts to pinpoint reason behind Escorts high correction period of 95 days in 2007-08 against 50 days of Mahindra & Mahindra. It is due to quality of products, quality of customer, the segment of customers marketing effort, distribution pattern or other reasons.

RECOMMENDATIONS
Creditors

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Though high payout days may be appartenly beneficial for the company. It has it very heavy long term cost like high interest cost, bad credit ratings and shyness of good quality / standard suppliers. Ratios The company should try to improve its current situation. The ratios, which are taken in this research to evaluate the companys position, are Current ratio, Quick ratio and Activity ratio. These ratios show the actual position of the company. The Quick ratio is declining since 2001-02 till now. There is a drastic declining in the working capital turnover ratio. This ratio goes to ve position in current year compared to previous. The Debts collection period is 359 days for Exporters. This shows the poor collection policy. The current ratio is 1.12 in 2006-07, which is not upto the ideal ratio. This shows that the current assets are equal to the current liabilities. Not satisfactory.

LIMITATIONS
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LIMITATIONS

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Although every effort has been in to collect the relevant information through the sources available, still some relevant information could not be gathered.

Busy Schedule of Concerned Executives: The concerned executives were having very busy schedule because of which they were reluctant to give appointment.

Time: The time duration could not provide ample opportunity to study every detail of working capital management of the company.

Unawareness: Executives were unaware of many terms related to working capital study while asking to them.

Confidential Information: As the company on account of confidential report has not disclosed some figures. Moreover, in some cases separate accounts of division are not separately maintained thereby, leading to restrictions in study.

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BIBLIOGRAPHY

BIBLIOGRAPY

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Books Financial Management- S.K Gupta Management Accountancy-D k Gole Cost and Management Accountancy, S.N.Maheshwari Financial Management And Policy, James C.Van Horne World Wide Web www.escortsagri.com www.economictimes.com www.planware.com www.icraindia.com Other than Web M.I.S of the company Annual Reports

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ANNEXURE & GLOSSARY

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ANNEXURE-1
1. GENERAL INFORMATION
NAME OF THE COMPANY: ESCORTS LIMITED, AGRI MACHINERY GROUP. REGISTERED OFFICE: 11, SCINDIA HOUSE, CONNAUGHT CIRCUS, NEW DELHI. WEBSITE: www.escortsagri.com CHAIRMAN, CEO AND SENIOR EXECUTIVE: MR. RAJAN NANDA CHIEF HUMAN RESOURSE MANAGER: MR. YASH YADAV

2. HISTORY AND CURRENT PROFILE


PROMOTERS: MR.H.P. NANDA TOTAL NO. OF EMPLOYEES: APPROX. 5,000 BUSINESS TURNOVER: RS. 1,000 CRORE CURRENT BUSINESS ACTIVITIES (NATIONAL & INTERNATIONAL) : TRACTOR MANUFACTURING, TRACTOR EXPORTING ETC.

3. MARKETING DATA
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o PRODUCT : AGRICULTURAL MACHINERY o COMPETITORS : MAHINDRA & MAHINDRA( M& M) EICHER SONALIKA PUNJAB TRACTOR LIMITED (PTL) o o MARKETING STRATEGY : CONFIDENTIAL I. T. APPLICATION : ORACLE- 11i

1. FINCIAL DATA PROVIDER


o FINANCIAL CONCERN : MR. M. M. HALDER o JOB PROFILE : ASSISTANT FINANCE MANAGER

ANNEXURE-2
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Table 1
PROFIT & LOSS ACCOUNT DESCRIPTRION 2006-07 (OCT 06 TO SEP 07) INCOME SALES SALES-INTER DIVISION OTHER INCOME INTER DIVISION RECEIPT TOTAL INCOME EXPENDITURE MATERIAL &MANUFACTURING MATERIAL CONSUMED PERSONNEL SALES EXPENSES INTEREST BANK & FINANCE CHARGE AMORTISATION EXPENSESE PROVISION & WRITE OFF EXCISE INTER DIVISION SERVICES TOTAL EXPENSES 18,782,874,734.63 11,205,736.06 122,599,057.46 15,031,912.00 18,931,711,440.15 14,529,371,114.89 398,075.00 1,591,586,402.78 1,627,772,755.06 165,814,609.56 15,305,698.84 41,905,702.98 10,078,938.32 61,023,664.00 9,888,491.17 18,189,145,452.60 15,692,391,469.97 19,215,106.56 177,874,066.93 20,928,339.00 15,910,408,982.46 12,079,154,538.57 214,342.00 1,356,484,006.69 1,364,709,104.99 220,379,177.86 145,221,302.13 38,996,216.86 27,462,421.16 89,388,565.09 33,372,434.04 15,355,382,109.39 2005-06 (OCT 05 TO SEP 06)

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PROFIT BEFORE DEPRECIATION DEPRECIATION TRANSFER FROM REVALUTION RESERVE FRINGE BENEFIT TAX

742,565,987.55 398,799,618.31 -53,935,917.51

555,026,873.07 347,139,550.25 - 45,415,612.79

18,230,265.00

17,171,364.00

PROFIT/LOSS CARRIED TO BALANCE SHEET

379,472,021.75

236,131,571.61

ANNEXURE-3
Table 2
INTER DIVISION SALES DESCRIPTION INTER SALE TO A.S.P. INTER SALE TO R.E.D. TOTAL 2006-07 (OCT 06 TO SEP 07) 11,205,736.06 0.00 11,205,736.06 2005-06 (OCT 05 TO SEP 07) 19,215,106.56 0.00 19,215,106.56

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Table 3
INTER DIVISION PURCHASES DESCRIPTION A.S.P. R.E.D. TOTAL 2006-07 (OCT 06 TO SEP 07) 0.00 398,075.00 398,075.00 2005-06 (OCT 05 TO SEP 07) 0.00 214,342.00 214,342.00

ANNEXURE-4
Table 4
INTER DIVISION RECEIPTS DESCRIPTION 2006-07 (OCT 06 TO SEP 07) CORPORATE A.S.P. R.E.D. 826,770.00 12,873,523.00 1,331,619.00 15,031,912.00 2005-06 (OCT 05 TO SEP 07) 8841,891.00 11,436,774.00 649,674.00 20,928,339.00

TOTAL

Table 5
INTER DIVISION SERVICES

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DESCRIPTION CORPORATE A.S.P. R.E.D. TOTAL ANNEXURE-5

2006-07 (OCT 06 TO SEP 07) 3,195302.17 1,330,896.00 5,362,293.00 9,888,491.17

2005-06 (OCT 05 TO SEP 07) 25,473,731.04 1,330,896.00 6,567,807.00 33,372,434.04

Table 6
OTHER INCOME (AMG) DESCRIPTION 2006-07 (OCT 06 TO INTEREST OTHERS MISC. INCOME COMMISSION ERECTION & SERVICING SURPLUS SALE (ASSETS) EXPORT INCENTIVE SALE OF SCRAP PROV. DOUDTFUL DEBTS PROV. NOT REQ. WRITTEN PROV. DOUBTFUL ADVANCES SEP 07) 0.00 0.00 1,083,593.00 141,199.40 383,224.10 10,026,328.11 29,332,859.35 1,845,381.95 19,540,782.16 0.00 2005-06 (OCT 05 TO SEP 07) 0.00 0.00 3,500,000.00 153,000.00 970,338.40 56,452828.37 23,295,943.93 16,166,105.56 153,433.91 0.00

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UNCLAIMED BALANCES OTHERS SUB TOTAL MISC. INCOME EXCHANGE VARIATION(NET) TOTAL

3,100,758.91 57,144,930.48 122,599,057.46 0.00 122,599,057.46

0.00 43,629,574.42 144,321,224.59 33,552,842.34 177,874,066.93

ANNEXURE-6

Table 7
MATERIAL, MANUFACTURING & OPERATING EXPENSES DESCRIPTION 2006-07 (OCT 06 TO SEP 07) RAW MATERIAL CONSUMED OPENING STOCK ADD: PURCHASES LESS: CLOSING STOCK 2 13,269,344,609.8 5 783,817,238.1 8 13,348,868,124.8 9 11,068,454,381.42 863,340,753.2 736,593,624.50 11,195,201,510.14 863,340,753.22 2005-06 (OCT 05 TO SEP 07)

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FINISHED &TRDING GOODS & WIP CONSUMED OPENING STOCK:FINISHED& TRADING GOODS WORK-IN-PROGRESS 330,019,759.15 86,858,651.33 182,455,221.53 ADD: PURCHASES 416,878,410.48 425,100,951.7 LESS: CLOSING STOCK FINISHED&TRADINGGOODS WIP 1 3 841,979,362.2 330,019,759.15 86858,651.33 507,504,981.93 MATERIAL CONSUMED EXCISE DUTY STORES, SPARES & TOOLS LEASE CHARGES (PLANT POWER & FUEL REPAIRS (BUILDING) REPAIRS (MACHINERY) TOTAL OPERATING COST GRAND TOTAL 6 13,960,566,083.6 5 11,265,635.00 8 611,697,958.7 7 84,049,204.6 146,232,198.7 11,575,959,363.35 0.00 166,418,846.68 0.00 231,908,150.90 27,432,710.54 77,435,467.10 503,195,175.22 12,079,154,538.57 741,928,170.88 924,383,392.41 166,428,824.08 16,026,397.45

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186,622,382.42 0.00 251,377,328.6 4 20,431,627.9 3 99,108,057.2 5 557,539,396.2 4 14,529,371,114.8 9

90

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91

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