TABLE OF CONTENTS

S.no. Particulars Page No.

1. Executive Summery 7

2. Company Profile 8

Chapter -1

3. Introduction 35

4. Working Procedure 53

5. Objective of the study 76

6. Scope of the Study 78

7. Research Methodology 79

Chapter -2

8. Data Analysis And Interpretation. 82

9. Findings 96

10. Limitations Of The Study 97

Chapter -3

11. Recommendation & Suggestions 98

Chapter -4

12. Conclusion 100

13. Bibliography 102

14. Annexure 104

5
 PREFACE

Modern business world is full of competition, uncertainty and exposed to

different types of risks. The complexity of managerial problems has led to the

development of various managerial tools, techniques and procedures useful for the

management in managing the business successfully. One of the essential features of

modern business management is planning and control. There are a number of tools and

devices which assist management in planning and controlling business operations.

Performance appraisal is the most common, useful and widely used standard device of

planning and control. In the present project an attempt has been made to study and

understand

“BANKING PRODUCTS OF MAHINDRA FINANCE ” and convert the

theoretical practices into the practical working life.

6
 EXECUTIVE SUMMARY

Banking products of Mahindra finance, the market leader in multi-utility vehicles in India. The
company started manufacturing commercial vehicles in 1945. M&M is the leader by far in
commercial vehicle and the second largest in the passenger vehicle market. The company is the
world’s sixth largest medium and heavy commercial vehicle manufacturing.

Mahindra is best known for utility vehicles and tractors in India, Its automotive division, the
company's oldest unit (founded in 1945), makes jeeps and three-wheelers (not passenger "auto
rickshaws," but utilitarian delivery and flatbed incarnations). M&M’s farm
equipment sector, formed in 1963 during India’s green revolution, manufactures
tractors and industrial engines. M&M also produces military vehicles. The company has
facilities located throughout India.

The survey involved gathering wide information about the company, its products, customer
satisfaction and impact of various competitive firms on the company.

From the information collected, various aspects were identified where the company needs to focus
more to improve the efficiency of marketing team of Mahindra Automotives.

The research was conducted through collection of primary and secondary data. Secondary data was
collected through visiting various web sites, automobile magazines and Other
reliable sources. Primary data was collected through a well-framed questionnaire,
of which later a detailed analysis was done using various statistical I.T. tools like MS Word
and MS Excel.

On the basis, the secondary data analysis and the extensive analysis of the
primary data, interpretations were drawn for the questions and conclusion is drawn.
Certain suggestions are also drawn from the analysis to help. Mahindra
Automotives to increase its market share in commercial passenger segment and MPVs. The
main research that followed is to know
“Customer satisfaction towards Mahindra BOLA RO SLX”, a new SUV recently launched
by Mahindra. Due to the limited resources and time constraints, the study was conducted
within the area Lucknow . city

7
8
9
 Chapter -1

INTRODUCTION

10
 INTRODUCTION

Management is an art of anticipating and preparing for risks, uncertainties and

overcoming obstacles. An essential precondition for sound and consistent assets

management is establishing the sound and consistent assets management policies

covering fixed as well as current assets. In modern financial management, efficient

allocation of funds has great scope, in finance and profit planning, for the most

effective utilization of enterprise resources, the fixed and current assets have to be

combined in optimum proportions.

Working capital in simple terms means the amount of funds that accompany

requires for financing its day-to-day operations. Finance manager should develop

sound techniques of managing current assets.

WORKING CAPITAL

Working capital refers to the investment by the company in short terms assets

such as cash, marketable securities. Net current assets or networking capital refers to

the current assets less current liabilities. Symbolically, it means,

Net Current Assets= Current Assets - Current Liabilities.

DEFINITIONS OF WORKING CAPITAL:

The following are the most important definitions of Working capital:

11
1) Working capital is the difference between the inflow and outflow of
funds. In other words it is the net cash inflow.

2) Working capital represents the total of all current assets. In other words it is

the Gross working capital, it is also known as Circulating capital or Current

capital for current assets are rotating in their nature.

3) Working capital is defined as the excess of current assets over current

liabilities and provisions. In other words it is the Net Current Assets or Net

Working Capital.

12
 NEED OF THE STUDY

Working capital can be used for the purpose of meeting the day to day

financial requirements and providing the credit facilities to the

customers in the organization. Managing the working capital in an efficient

way is not an easy task. There is a need to study how the Mahindra&

Mahindra financial service Ltd., focus on managing the working capital and

how it uses the capital in an efficient way.

13
 WORKING CAPITAL

IMPORTANCE OF WORKING CAPITAL

Working capital may be regarded as the lifeblood of the business. Without

insufficient working capital, any business organization cannot run smoothly or

successfully.

In the business the Working capital is comparable to the blood of

thehuman body. Therefore the study of working capital is of major importanceto the

internal and external analysis because of its close relationship withthe current day to day

operations of a business. The inadequacy or mismanagement of working capital is the

leading cause of business failures.

To meet the current requirements of a business enterprise such as the

purchases of services, raw materials etc. working capital is essential. It is also pointed

out that working capital is nothing but one segment of the capital structure of a

business.

In short, the cash and credit in the business, is comparable to the blood inthe human

body like finance s life and strength i.e. profit of solvency to the business enterprise.

Financial management is called upon to maintain always the right cash balance so that flow

of fund is maintained at a desirable speed not allowing slow down. Thus enterprise can

have balance between liquidity and profitability. Therefore the management of working

capital is essential in each and every activity.

 WORKING CAPITAL MANAGEMENT

Working Capital is the key difference between the long term financial management

and short term financial management in terms of the timing of cash. Long term finance

involves the cash flow over the extended period of timei.e 5 to 15 years, while short term

financial decisions involve cash flow within a year or within operating cycle. Working capital

management is a short term financial management.

Working capital management is concerned with the problems that arise in

attempting to manage the current assets, the current liabilities &theater

relationship that exists between them. The current assets refer to those assets

which can be easily converted into cash in ordinary course of business, without

disrupting the operations of the firm.

Composition of working capital

Major Current Assets

• Cash

In English vernacular cash refers to money in the physical form of currency, such as

banknotes and coins. In bookkeeping and finance, cash refers to current assets comprising

currency or currency equivalents that can be accessed immediately or near-

immediately (as in the case of money market accounts). Cash is seen either as a reserve for

payments, in case of a structural or incidental negative cash flow or as a way to avoid a

downturn on financial markets.

40
• Accounts Receivables

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 customer for goods and

services that the customer has ordered.

Inventory

In a business accounting context, the word inventory is commonly used in American

English to describe the goods and materials that a business holds for the ultimate purpose of

resale. In the rest of the English speaking world stock is more commonly used, although the

word inventory is recognized as a synonym. In British English, the word inventory is more

commonly thought of as a list compiled for some

formal purpose, such as the details of an estate going to probate, or the contents of a

[1
house let ] In American English, the word stock is
furnished. commonly used to

describe the capital invested in a business, while in British English, the

word share is more widely used in the same context. In both British

and American English, stock is the collective noun for one hundred

shares as shares were usually traded in stocks on Stock Exchanges.

For this reason the word stock is used by both American and British

English in the term Stock Exchange.

•
Market
able
Securiti
es

41
 Very liquid securities that can be converted into cash

quickly at a reasonable price. Marketable securities are very liquid as

they tend to have maturities of less than

42
one year. Furthermore, the rate at which these securities can be bought or sold

has little effect on their prices.

Major Current Liabilities

• Bank Overdraft

A bank overdraft is when someone is able to spend more than what is actually

in their bank account. Obviously the money doesn't belong to them but belongs to the

bank so this money will need to be paid back; normally automatically done when money

goes into the persons account. The overdraft will be limited. A bank overdraft is also a

type of loan as the money is technically borrowed.

• Outstanding Expenses

Making liability provision for the expenses relating to current year but actual

payment to be incurred in the next financial year is outstanding expenses. Example of

this case may be salary arrears.

• Accounts Payable

Accounts payable is money owed by a business to its suppliers and shown on its Balance

Sheet as a liability. An accounts payable is recorded in the Account Payable sub-ledger at the

time an invoice is vouchered for payment. Vouchered, or vouched, means that an invoice is

approved for payment and has been recorded in the General Ledger or AP sub ledger as an

outstanding, or open, liability because it has not been paid. Payables are often categorized as

Trade Payables, payables for the

purchase of physical goods that are recorded in Inventory, and Expense
Payables, payables for the purchase of goods or services that are expensed.

• Bills Payable

Similar to accounts payable, this term is used to describe a bank's

indebtedness to other banks, principally a Federal Reserve Bank, that is backed

by collateral consisting of the bank's promissory note and a pledge of government

securities. In other words, bills payable is the money a bank borrows, mainly on a

short-term basis, and owes to other banks.

The Goal of Capital Management is to manage the firm s current assets

&liabilities, so that the satisfactory level of working capital is maintained.

If the firm can not maintain the satisfactory level of working capital, it is likely

to become insolvent & may be forced into bankruptcy. To maintain the margin of

safety current asset should be large enough to cover its current assets .Main theme

of the theory of working capital management is interaction between the current assets

& current liabilities.

CONCEPTS OF WORKING CAPITAL:

There are 2 concepts:

• Gross Working Capital

• Net Working Capital

Gross working capital: It is referred as total current assets. Focuses on,

Optimum investment in current assets: Excessive investments impair firm s

profitability, as idle investment earns nothing. Inadequate working capital can threaten

solvency of the firm because of its inability to meet its current obligations. Therefore

there should be adequate investment in current assets.

Financing of current assets: Whenever the need for working capital funds arises,

agreement should be made quickly. If surplus funds are available they should be

invested in short-term securities.

Net working capital (NWC)defined by 2 ways

Difference between current assets and current liabilities Net working capital is
that portion of current assets which is financed with long term funds.

NET WORKING CAPITAL = CURRENT ASSETS-

CURRENT

LIABILITIE
S

If the working capital is efficiently managed then liquidity and

profitability both will improve. They are not components of working capital but

outcome of working capital. Working capital is basically related with the question of

profitability versus liquidity & related aspects of risk.

 Implications of Net Working Capital:

Net working capital is necessary because the cash outflows and inflows donot

coincide. In general the cash outflows resulting from payments of current liability are

relatively predictable. The cash inflows are however difficult to predict. More predictable

the cash inflows are, the less NWC will be required. But where the cash inflows are

uncertain, it will be necessary to maintain current assets at level adequate to cover current

liabilities that are there must be NWC.

For evaluating NWC position, an important consideration is tradeoff between

probability and risk. The term profitability is measured by profits after expenses. The

term risk is defined as the profitability that a firm will become technically insolvents that

it will not be able to meet its obligations when they become due for payment. The risk of

becoming technically insolvent is measured by NWC. If the firm wants to increase

profitability, the risk will definitely increase. If firm wants to reduce the risk, the

profitability will decrease.

PLANNING OF WORKING CAPITAL:

Working capital is required to run day to day business operations. Firms differ in

their requirement of working capital (WC). Firm s aim is to maximize the wealth of share

holders and to earn sufficient return from its operations.WCM is a significant facet of

financial management. Its importance stems from two reasons:

• Investment in current asset represents a substantial portion of total investment.

• Investment in current assets and level of current liability has to be

geared quickly to change in sales.
 • Business undertaking required funds for two purposes:

• To create productive capacity through purchase of fixed assets.

• To finance current assets required for running of the business.

The importance of WCM is reflected in the fact that financial managers

spend a great deal of time in managing current assets and current liabilities.

The extent to which profit can be earned is dependent upon the magnitude of sales.

Sales are necessary for earning profits. However, sales do not convert into cash instantly;

there is invariably a time lag between sale of goods and the receipt of cash. WC management

affect the profitability and liquidity of the firm which are inversely proportional to each

other, hence proper balance should be maintained between two. To convert the sale of

goods into cash, there is need for WC in the form of current asset to deal with the problem

arising out of immediate realization of cash against good sold. Sufficient WC is necessary to

sustain sales activity. This is referred to as the operating or cash cycle.

WORKING CAPITAL CYCLE:

A firm requires many years to recover initial investment in fixed assets. On contrary

the investment in current asset is turned over many times a year. Investment in such

current assets is realized during the operating cycle of the firm.

It can be tempting to pay cash, if available, for fixed assets e.g. computers,

plant, vehicles etc. If you do pay cash, remember that this is now longer available for

working capital. Therefore, if cash is tight, consider other ways of financing capital

investment - loans, equity, leasing etc. Similarly, if you pay dividends or increase

drawings, these are cash outflows and, like water flowing down a plughole, they

remove liquidity from the business

Operating cycle:

The working capital cycle refers to the length of time between the firms

paying the cash for materials, etc., entering into production process/stock &the inflow of

cash from debtors (sales), suppose a company has certain amount of cash it will need raw

materials. Some raw materials will be available on credit but, cash will be
paid out for the other part immediately. Then it has to pay labor costs & incurs factory

overheads. These three combined together will constitute work in progress.

After the production cycle is complete, work in progress will get converted

into sundry debtors. Sundry debtors will be realized in cash after the expiry of the

credit period. This cash can be again used for financing raw material, work in

progress etc. thus there is complete cycle from cash to cash wherein cash gets

converted into raw material, work in progress, finished goods and finally into

cash again. Short term funds are required to meet the requirements offends during this

time period. This time period is dependent upon the length of time within which the

original cash gets converted into cash again. The cycle is also known as operating

cycle or cash cycle.

Working capital cycle can be determined by adding the number of days required

for each stage in the cycle. For example, company holds raw material on average for 60

days, it gets credit from the supplier for 15 days, finished goods are held for 30 days

& 30 days credit is extended to debtors. The total days are

120, i.e., 6015 + 15 + 15 + 30 + 30 days is the total of working capital.

The duration may vary depending upon the business policies. In light of the

facts discusses above we canbroadlyclassify the operating cycle of a firm into three

phases viz.

1. Acquisition of resources.

2. Manufacture of the product and

3. Sales of the product (cash / credit).

 First and second phase of the operating cycle result in cash outflows, and be predicted

with reliability once the production targets and cost of inputs are known. However, the third

phase results in cash in flows which are not certain because sales and collection which give

rise to cash inflows are difficult to forecast accurately.

Operating cycle consists of the following:

• Conversion of cash into raw-materials;

• Conversion of raw-material into work-in-progress;

• Conversion of work-in-progress into finished stock;

• Conversion of finished stock into accounts receivable through sales;

• And Conversion of accounts receivable into cash.

In the form of an equation, the operating cycle process can be expressed as follows:

Operating cycle = R + W + F + DC R

= Raw material storage period

W = Work in progress holding period

F = Finished goods storage period

D = Debtors collection period

C = Credit period availed

Operating cycle for manufacturing firm:

The firm is therefore, required to invest in current assets for

smooth and uninterrupted functioning.

• RMCP- Raw Material Conversion Period

• WIPCP- Work in Progress Conversion Period

• FGCP- Finished Goods Conversion Period

• ICP- Inventory Conversion Period

• RCP- Receivables Conversion Period

• Payables (PDP)- Payables Deferral Period

• NOC- Net Operating Cycle

• GOC- Gross Operating Cycle

Calculations:

On the basis of financial statement of an organization we can calculate the

inventory conversion period. Debtors / receivables conversion period and the creditors

conversion period and based on such calculations we can find out the length of the

operating cycle (in days) both gross as well as net operating cycle.

As mentioned above, on the basis of information presented in the

Balancesheet and CMA statement of Kirloskar Pneumatics Company Limited, the

length of gross as well as net operating cycle is calculated as follows:

Theneedforcurrentassetsarisesbecauseoftheoperatingcycle.Theoperating cycle is a

continuous process and, therefore, the need for current assets is felt constantly.
 But the magnitude of current assets needed is not always a minimum level of current assets

which is continuously required by the firm to carry on itsbusinessoperations.

Finance
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working of capital is necessary.
WORKING CAPITAL
POLICY
i. WORKING CAPITAL POLICY
ii. TYPES OF WORKING CAPITAL
iii. NEED FOR WORKING CAPITAL
iv. CHARACTERISTICS OF CURRENT ASSETS
v. CURRENT ASSETS CYCLE
vi. FACTORS INFLUENCING WORKING CAPITAL
vii. CURRENT ASSET FINANCING POLICY
viii. THEORY OF RATIO ANALYSIS
 PROJECT ON WORKING CAPITAL
▪
WORKING CAPITAL POLICY:

Working capital management provides a summarized view of

the position of the current assets and current liabilities and how to manage
them and have an efficient and effective and optimum working capital. For day
to day working of the concern is known as working capital and to fulfill this
need, working capital management is necessary.

This introduces working capital management or short term financial

management which is concerned with decisions relating to current assets and
current liabilities.

The key difference between long term financial management and

working capital management is in terms of the timing of cash. While long term
financial decisions like buying capital equipment or issuing debentures involve
cash flows over an extended period of time( 5 to 15 years or even more), short
term financial decisions typically involves cash flows within a year or within
the operating cycle of the firm.

There are two concepts of working capital: gross working capital and net
working capital. Gross working capital is the total of all current assets. Net
working capital is difference between current assets and current liabilities.
Management of working capital refers to the management of current assets as
well as current liabilities. The major thrust, of course, is on the management of
current assets. This is understandable because current liabilities arise in the
context of current assets.

Working capital management is a significant facet of financial

management. Its importance stems from two reasons;
 An investment in current assets represents a substantial portion of the total
investment.

Investment in current assets and the level of current liabilities have to be

geared quickly to change in sales. To be sure, fixed asset investment and long
term financing are also responsive to variation in sales. However, this
relationship is not as close and direct as it is in the working capital
components.

The importance of working capital management is reflected in the fact

that financial managers spend a great deal of time in managing current assets
and current liabilities. Arranging short term financing, negotiating favorable
credit terms, controlling the movement of cash, administering accounts
receivable, and investing short term surplus funds consume a great deal of
time of financial managers.
▪
TYPES OF WORKING CAPITAL:
There are two types of working capital:

o Fixed working capital

o Variable working capital
o Fixed working capital :
To carry on business a certain minimum level of working capital is necessary
on a continuous and uninterrupted basis and for all practical purpose this
requirement will have to be met with long term sources. This requirement is
referred to as permanent or fixed working capital.

Variable working capital :

Any amount over and above the permanent level of working capital is known
as temporary, fluctuating or variable working capital. This portion of the
working capital is needed to meet fluctuations in demand consequent upon
changes in production as a result of seasonal changes.
FACTORS INFLUENCING WORKING CAPITAL REQUIREMENTS:
The working capital needs of a firm are influenced by numerous
factors. The important ones are;
▪
Nature of business
▪
Seasonality of operations

▪
Production policy
▪
Market conditions
▪
Conditions of supply
▪
Credit
Policy
▪
Inventory
Policy
▪
Abnormal Factors
▪
Business
Cycle
▪
Growth And
Expansion
▪
Level Of
Taxes
▪
Dividend
Policy
▪
Price Level
Changes
▪
Operating
Efficiency

Few of them are given bellow;

a. Nature of business: The working capital requirement of a firm is

closely related to the nature of its business. A service firm, like an
electricity undertaking or a transport corporation, which has a short
operating cycle and which sales prominently on cash basis, has a modest
working capital requirement. On the other hand, a
manufacturing concern likes a machine tools unit, which has a long
operating cycle and which sales largely on credit have a very substantial
working capital requirement.

56
b. Seasonality of operations: Firms which have marked seasonality in
their operations usually have highly fluctuating working capital
requirements. To illustrate, consider a firm manufacturing ceiling fans.
The sale of ceiling fan reaches a peak during summer months and drops
sharply during winter period. The working capital requirements of such

a firm are likely to increase considerably in summer months and

decrease significantly during winter period. On the other hand, a firm
manufacturing product like lamps, which have fairly even sales round
the year, tends to have stable working capital

c. Production Policy: A firm marked by pronounced seasonal

fluctuations in its sales may pursue a production policy which may
reduce the sharp variations in working capital requirements. For
example, a manufacturer of ceiling fans may maintain a steady
production throughout the year, rather than intensify the production
activity during the peak business season. Such a production policy may
dampen the fluctuations in working capital requirements.

d. Market Conditions: The degree of competition prevailing in the

market place has an important bearing on working capital needs. When
competition is keen, a larger inventory of finished goods is required to
promptly serve customers who may not be inclined to wait because other
manufacturers are ready to meet their needs. Further, general credit
terms may have to be offered to attract customers in a highly
competitive market. Thus, working capital requirements tend to be
high because of greater investments in finished goods, inventory and
accounts receivable.

If the market is strong and the competition is weak, a firm can

manage with a smaller inventory of finished goods because customers
can be served with some delay. Further, in such a situation the firm can

57
 insist on cash payment and avoid lock-up of funds in accounts
receivable- it can even ask for advance payment, partial or total.

e. Conditions of Supply: The inventory of raw materials, spares and

stores depends on the conditions of supply. If the supply is prompt and
adequate, the firm can manage with small inventory. However, if the
supply is unpredictable and scant, then the firm, to ensure continuity of
production, would have to acquire stocks as and when they are available
and carry larger inventory, on an average. A similar policy may have to
be followed when the raw material is available seasonally and
production operations are carried out round the year.
▪
CURRENT ASSETS FINANCING POLICY:

After establishing the level of current assets, the firm must determine
how these should be financed. What mix of long term capital and short
term debt should the firm employ to support its current assets?

For the sake of simplicity, assets are divided into two classes, viz. fixed
assets and current assets. Fixed assets are assumed to grow at a
constant rate which reflects the secular growth in sales. Current assets,
too, are expected to display the same long-term rate of growth; however,
they exhibit substantial variations around the trend line, thanks to
seasonal (or even cyclical) patterns in sales and/or purchases.

The investment in current assets may be broken into two parts:

Permanent Current Assets and Temporary Current Assets. The former

represents what the firm requires even at the bottom of its sales cycle;
the latter reflects the variable component that moves in line with
seasonal fluctuations.

58
 Several strategies are available to a firm for financing its capital
requirements. These strategies are illustrated by lines A, B and C in
following diagram.

WORKING CAPITAL FINANCING:

▪
INTRODUCTION:
The investment in raw materials, stock-in-progress, finished goods, and receivables
(the principal constituents of current assets) often varies a great deal during the course
of the year. Hence, the financial manager generally spends a good chunk of his time
in finding money to finance current assets.

▪ TYPES OF FINANCING WORKING

CAPITAL:

The firm must find out the sources of finds to finance its working capital. There are
three different financial policies which are as follows;

• Long Term Financing: The sources of long term

financing
Are;

o Shares (Equity shares and preference

shares) o Debentures
o Retained earnings and
o Long term loan from financial institution

• Short Term Financing: The sources of short-term financing are short term
credit, which the firm arranges. These sources include.
o Short term bank credit or loans
o Commercial papers
o Factoring receivable and
o Public deposit

59
• Spontaneous Financing: Spontaneous financing refers to the automatic sources
of short term funds.

E.g. Trade credit and outstanding expenses. The main features of these sources are
that they are cost free.

Normally permanent working capital is financed by long term sources where

as temporary working capital is financed by short term sources.

While taking the decision of financing working capital requirement, certain

factors are to be taken into consideration;

i. cost of financing
ii. flexibility

o Cost of Financing: The interest rates increased with the time. Longer the
maturity of debit greater the interest rate. The decision of the company is
guided by risk-return trade off.

o Flexibility: Short term funds are more flexible. Short term funds can be easily
refunded as compared to long term funds, because long term funds can not be
refunded before its maturity period. Financing for the domestic order is majority
met by letter of credit. In case of any shortage company uses the surplus into
various activities such as;
a) short term investments

b) Inter corporate deposit – In case any sister factory is in need of funds,

the surplus fund is used as given to the sister concern.
c) Paying for Overdrafts

Typically, current assets are supported by a combination of long-term and short- term
sources of finance. Long-term sources of finance primarily support fixed assets and
secondarily provide the margin money for working capital. Short-term sources of
finance, more or less exclusively support the current assets.

60
 ▪
CASH FLOW STATEMENT:
Cash flow statements indicate movement of cash only. The preparation
of cash flow statement is important to understand the paradoxical
situation in which the firm finds difficulty in honoring its short period
business

Indicated by the funds flow statement (working capital basis).

▪
FUNDS FLOW STATEMENT:
The funds flow statement reveals the sources from which the funds are
made available and how they are utilized or applied. Difference between
cash flow and funds flow statement is given bellow;

61
REQUIREMENTS OF FUNDS

Funds Requirements of company

• Fixed Capital

• Working Capital

• Preliminary Expenses

• Raw Material

• Purchase of Fixed Assets

• Inventories

• Establishment work exp.

• Goods in Process

• Fixed working capital

• Others

Every company requires funds for investing in two types of capitalize. fixed

capital, which requires long-term funds, and working capital, which requires short-

term funds.

SOURCES OF WORKING CAPITAL

Long- term source Short-term source

(Fixed working capital) (Temporary working capital)

a)Loan from financial institution a) Factoring

62
 b)Floating of Debentures b) Bill discounting

c)Accepting public deposits c) Bank overdraft

d)Issue of shares d) Trade credit

e)Cash credit

f)Commercial paper

Sources of additional working capital include the following:

• Existing cash reserves

• Profits (when you secure it as cash!)

• Payables (credit from suppliers)

• New equity or loans from shareholders

• Bank overdrafts or lines of credit

• Term loans

If you have insufficient working capital and try to increase sales, you can easily

over-stretch the financial resources of business. This is called overtrading. the Early

warning signs include:

• Pressure on existing cash

• Exceptional cash generating activities e.g. offering high discounts for early
cash payment

• Bank overdraft exceeds authorized limit

• Seeking greater overdrafts or lines of credit

63
 • Part-paying suppliers or other creditors

• Paying bills in cash to secure additional supplies

Management pre-occupation with surviving rather than managing Frequent short-term

emergency requests to the bank (to help pay wages, pending receipt of a cheque).

64
 LONG TERM SOURCES

ISSUE OF SHARES

Ordinary shares are also known as equity shares and they are the most common

form of share in the UK. An ordinary share gives the right to its owner to share in the

profits of the company (dividends) and to vote at general meetings of the company. Since

the profits of companies can vary wildly from year to year, so can the dividends paid to

ordinary shareholders. In bad years, dividends may be nothing whereas in good years they

may be substantial. The nominal value of a share is the issue value of the share - it

is the value written on the share certificate that all shareholders will be given by the

company in which they own shares. The market value of a share is the amount at which a

share is being sold onthe stock exchange and may be radically different from the nominal

value.

When they are issued, shares are usually sold for cash, at par and/or at premium.

Shares sold at par are sold for their nominal value only - so ifRs.10 share is sold at

par, the company selling the share will receive Rs. 10for every share it issues. If a share is

sold at a premium, as many shares are these days, then the issue price will be the par

value plus an additional premium.

DEBENTURES

Debentures are loans that are usually secured and are said to have either fixed or

floating charges with them. A secured debenture is one that is specifically tied to the financing of

particular asset such as a building or a machine. Then, just like a mortgage for a private house,

the debenture holder has a legal interest in that asset and

65
the company cannot dispose of it unless the debenture holder agrees. If the debenture

is for land and/or buildings it can be called a mortgage debenture. Debenture holders have

the right to receive their interest payments before any dividend is payable to

shareholders and, most importantly, even if accompany makes a loss, it still has to pay its

interest charges. If the business fails, the debenture holders will be preferential creditors

and will be entitled to the repayment of some or all of their money before the shareholders

receives anything.

LOANS FROM OTHER FINANCIAL

INSTITUTIONS

The term debenture is a strictly legal term but there are other forms of loaner

loan stock. A loan is for a fixed amount with a fixed repayment schedule and

may appear on a balance sheet with a specific name telling the reader exactly what the

loan is and its main details.

SHORT TERM SOURCES

FACTORING

Factoring allows you to raise finance based on the value of your

outstanding invoices. Factoring also gives you the opportunity to outsource your sales

ledger operations and to use more sophisticated credit rating systems. Once you

have set up a factoring arrangement with a Factor, It works this way:

Once you make a sale, you invoice your customer and send a copy of the invoice to

the factor and most factoring arrangements require you to factor all your sales. The factor

pays you a set proportion of the invoice value within a pre-arranged

66
time - typically, most factors offer you 80-85% of an invoice’s value within 24 hours.

The major advantage of factoring is that you receive the majority of the cash from
debtors within 24 hours rather than a week, three weeks or even longer.

INVOICE DISCOUNTING

Invoice discounting enables you to retain the control and confidentiality of your

own sales ledger operations. The client company collects its own debts.

‘Confidential invoice discounting ‘ensures that customers do not know you are using

invoice discounting as the client company sends out invoices and statements as usual.

The invoice discounter makes a proportion of the invoice available to you once it

receives a copy of an invoice sent. Once the client receives payment, it must deposit

the funds in a bank account controlled by the invoice discounter. The invoice

discounter will then pay the remainder of the invoice, less any charges. The

requirements are more stringent than for factoring. Different invoice discounters will

impose different requirements.

OVERDRAFT FACILITIES

Many companies have the need for external finance but not necessarily ona long-

term basis. A company might have small cash flow problems from time to time but such

problems don't call for the need for a formal long-term loan. Under these circumstances, a

company will often go to its bank and arrange an overdraft.

Bank overdrafts are given on current accounts and the good point is that the

interest payable on them is calculated on a daily basis. So if the company borrows

67
only a small amount, it only pays a little bit of interest. Contrast the effects of an

overdraft with the effects of a loan.

TRADE CREDIT

This source of finance really belongs under the heading of working capital

management since it refers to short-term credit. By a 'line of credit' they mean that a creditor,

such as a supplier of raw materials, will allow us to buy goods now and pay for them later.

Why do they include lines of credits a source of finance? They ll, if they manage their

creditors carefully they can use the line of credit they provide for us to finance other parts

of the agribusiness. Take a look at any company's balance sheet and see how much they have

under the heading of Creditors falling due within one year' - let's imagine it is Rs. 25,000 for

a company. If that company is allowed an average of 30days to pay its creditors then they

can see that effectively it has a short-term loan of Rs. 25,000 for 30 days and it can do

whatever it likes with that money as long as it pays the creditor on time.

CASH MANAGEMENT:

Cash management is one of the key areas of WCM. Apart from the fact that

it is the most liquid asset, cash is the common denominator to which all current

assets, that is, receivables & inventory get eventually converted into cash.

Cash is oil of lubricate the ever-turning wheels of business: without it the

process grinds to a shop. Motives for holding cash Cash with reference to cash

management is used in two senses:

68
 • It is used broadly to cover currency and generally accepted equivalents of
cash, such as cheques, drafts and demand deposits in banks.

• It includes near-cash assets, such as marketable securities & time

deposits in banks.

The main characteristic of these is that they can be readily sold

&converted into cash. They serve as a reserve pool of liquidity that provides cash

quickly when needed. They provide short term investment outlet to excess cash

and are also useful for meeting planned outflow of funds.

CASH IS MAINTAINED FOR FOUR

MOTIVES:

A. Transaction motive:

Transaction motive refer to the holding of cash to meet routine cash requirements to

finance the transactions which a firm carries on in a variety of transactions to accomplish

its objectives which have to be paid for in the form of cash. E.g. payment for purchases, wages,

operating expenses, financial charges like interest, taxes, dividends etc. Thus requirement of

cash balances to meet routine need is known as the transaction motive and such motive refers to

the holding of cash to meet anticipated obligations whose timing is not perfectly synchronized

with cash receipts.

B. Precautionary motive:

A firm has to pay cash for the purposes which cannot be predicted or

anticipated. The unexpected cash needs at the short notice may be due to:

69
 • Floods, strikes & failure of customer

• Slow down in collection of current receivables

• Increase in cost of raw material

• Collection of some order of goods as customer is not satisfied

• The cash balance held in reserves for such random and unforeseen
fluctuations in cash flows are called as precautionary balance.

Thus, precautionary cash provides a cushion to meet unexpected

contingencies. The more unpredictable are the cash flows, the larger is the need for

such balance.

C. Speculative motive:

It refers to the desire of the firm to take advantage of opportunities which present

themselves at unexpected moment & which are typically outside the normal course of

business. If the precautionary motive is defensive in nature, in that firms must make

provisions to tide over unexpected contingencies, the speculative motive represents a positive

and aggressive approach. The speculative motive helps to take advantages of: An opportunity

to purchase raw material at reduced price on payment of immediate cash. A chance to

speculate on interest rate movements by buying securities when interest rates are expected to

decline. Make purchases at favorable price. Delay purchase of raw material on the

anticipation of decline in prices.

70
 RATIO ANALYSIS

1. LIQUIDITY RATIOS:

It is the ability of a firm to satisfy' its short term obligations as they

become due.

But Liquidity implies from the view point of utilization of the funds of the

firm that funds are idle or they earn very little. And it reflects the short term financial

strength / solvency ofa firm.

A firm should not suffer lack of liquidity and also that it does not have excess

liquidity. Low liquidity implies the firm's inability to meet its obligations and high

liquidity is also bad; idle masses earn nothing. Therefore it is necessary to strike a

proper; balance between high and lack of liquidity,

CURRENT RATIO:

This ratio establishes the relationship between Current Assets and Current Liabilities.

Components:

Meaning:

1 Current Assets: This means the assets which are held for their
conversion into cash within a year.

2 Current liabilities: This means liabilities which are expected to be

matured with a year.

71
 Computation:

This ratio is computed by dividing the current assets by current

liability. Generally 2 : 1 is considered ideal for a concern.

For
mula
: Current Assets
Current ratio = ---------------------------
Current liabilities

ABSOLU

TE

LIQUID

RATIO:

Meaning:

This ratio establishes the relationship between

absolute liquid assets and current liabilities.

Components;

1. Absolute quick assets (cash in hand, cash at bank

short term or temporary investment)

2. Current Liabilities

Computations

This ratio is computed by dividing the absolute

quick assets by the current liabilities.

72
Formula:
Absolute Liquid Assets
Absolute Liquid Ratio = -----------------------------

Current Liabilities

73
QUICK
RATIO:
Meaning:

This ratio establishes the relationship between quick assets and

current liabilities.
Components:

1 Quick Assets: This means those current assets, which can be converted
Into cash immediately or at a short notice without a loss of value.
2 Current Liabilities.
Computation:

This ratio is computed by dividing the quick assets by current

liabilities. Generally 1: 1 is considered ideal for a concern.
Formula:
Quick Assets
Current Ratio = -----------------------
Current Liabilities

INVENTORY TURNOVER

RATIO: Meaning:

This Ratio establishes a relationship between Cost of goods sold or sales and

average inventory.

Components:

1. Sales or Cost of Goods Sold.

2. Average Inventory (average of opening closing balance of inventory).

Computation:

This ratio is computed by dividing the sales or COGS by average inventory.

Formula:

Cost of goods sold

Inventory turnover Ratio = --------------------------
Average inventory

OR
Sales
Inventory turnover ratio = -----------------------
Inventory

WORKING CAPITAL TURNOVER

RATIO: Meaning:

This ratio establishes a relationship between net sales and working capital.

Components:

1. Net sales (Gross sales - sales returns)

2. Working capital (CA - CL) Computation:

This ratio is computed by dividing the net sales by the net working capital

Formula:

Net sales
Working capital Turnover Ratio = ------------------------
Working capital

CURRENT ASSETS TURNOVER RATIO:

Meaning:

This ratio establishes a relationship between net sales and current assets.

Components:
 1. Net sales (Gross sales - sales returns)

2. Current assets.

Formula:

Net sales

current assets Turnover Ratio = ------------------------

Current assets
OBJECTIVES OF

THE STUDY
 OBJECTIVES OF THE STUDY

• To study and analyse working capital management at

Mahindra & Mahindra financial service Ltd. Which includes

❖ Inventory management

❖ Receivable management

❖ Cash management

• To learn how to manage working capital needs of the organization.

• To learn the different ways through which theoretical learning is

applied practically in the organization.

• To learn and gain knowledge of the day to day working of the

organization as to how does the different decision are taken and on what
basis.

• To gaining the knowledge of different steps of raising the short term

funds and their effective management.

• To assess the efficiency of the working capital management of

the company.

• To evaluate company performance relating to financial statement

analysis.

• To know the liquidity position of the company with the help of

current ratio.

77
 SCOPE OF THE STUDY

 The study is limited to Mahindra & Mahindra financial service Ltd.,

 The study is based on availability of information relating to

Mahindra & Mahindra financial service Ltd., past 5 years data.

 The study focuses on analyzing the working capital management.

 To understand the financial position of Mahindra & Mahindra

financial service Ltd., for the current year.

78
 RESEARCH

METHODOLOGY

79
 RESEARCH METHODOLOGY

Research is an academic activity and as such the term should be used in a

technical sense. D. Slazenger and M. Stephenson in the Encyclopedia of Social

Sciences define research as “the manipulation of things, concepts or symbols for the
purpose of generalizing to extend, correct or verify knowledge, whether that
knowledge aids in construction of theory or in the practice of an art.”

Secondary Data:

Secondary data is data collected by someone other than the user. Common sources of
secondary data for social science include censuses, organizational records and data
collected through qualitative methodologies or qualitative research.

The data is collected through the secondary sources like:

 Annual Reports of the company.

❖
Office manuals of the department.
❖
Reports in the company.
❖
Data analysis.

▪
Through graphs
▪
Trend analysis

Source of data: Working capital can be used for the purpose of meeting the day to
day financial requirements and providing the credit facilities to the customers in the
organization. Managing the working capital in an efficient way is not an easy task. There
is a need to study how the Mahindra& Mahindra financial service Ltd., focus on managing
the working capital and how it uses the capital in an efficient way.

Methodology can be defined as:

1. The analysis of the principles of methods, rules, and postulates

employed by a discipline.

2. The systematic study of methods that are, can be, or have been applied within
a discipline.
3. A particular procedure or set of procedures.

80
Field of study

The field of study has been restricted. The focus is to conduct market
survey on Mahindra to Mahindra.
• Specification purpose

The main purpose of this survey is to find the consumer opinion towards
Mahindra to Mahindra Total emphasis is laid on general perception of consumers
and the products, their purchase intention, awareness and buying behavior.
Sampling plan:-

The sample consisted of 100 consumers. The convenience sampling

method was adopted.
The sampling plan includes-
1. Project Goals
2. Parameters to be measured
3. Sampling Locations
4. Sampling Timing and Frequency
5. Methods
Area :- Meerut
Data collection instruments:-

The research instrument in this study to avail information needed was

the questionnaire. Questionnaire was prepared for consumers.

Questionnaire includes both general information and specific information as

framed according to the objectives set in the required order.

81
 Chapter -2

DATA ANALYSIS

82
 DATA ANALYSIS

STATEMENT SHOWING CHANGES IN WORKING CAPITAL FOR THE

YEARS 2012-13 (IN ‘000)

INCREASE
PARTICULARS 2012 DECREASE
2013
IN
IN

WORKING
A) WORKING
C
ur
re
nt

Assets
Current
2016.00 3429.00
investment 1413.00
Sundry debtors 157.00 229.00 72.00

Cash and Bank 3680.00 5704.00 2024.00

Loans &
115138.00 143806.00
28668.00
Advances
Other current
369.00
413.00 44.00 assets
Total Current
121360.00 153581.00
32221.00
Assets
B) Current

Liabilities
Short term
15000.00 15103.00
borrowing 103.00
Sundry Creditor 4893.00 4507.00 386.00
 Other current
54352.00 69812.00
liability 15460.00
Provisions 6662.00 9212.00 2550.00

8
3
Total Current
80907.00 98634.00 386.00 18113.00
Liabilities
Net working
40453.00 54947.00 14494.00
capital
Increase in
14494.00
working capital

INTERPRETATION:

From the above table, it is clear that

• Current assets increased from 121360.00 in the year 2012 to

153581.00 in the year 2013.

• Current liabilities increased from 80907.00 in the year 2012 to

98634.00 in the year 2013.

• Net Working capital increased from 40453.00 in the year 2012 to

54947.00 in the year 2013.

84
STATEMENT SHOWING CHANGES IN WORKING CAPITAL FOR
THE YEARS 2013-14 (IN ‘000)

2013 2014 INCREASE DECREASE

IN IN
PARTICULARS
WORKING WORKING
CAPITAL CAPITAL
A) Current
Assets

Current
3429.00 945.00 2484.00
investment

Sundry debtor 229.00 145.00 84.00

Cash and Bank 5704.00 4936.00 768.00

Loans &
143806.00 167620.00 23814.00
Advances

Other current
413.00 475.00 62.00
assets

Total Current
153581.00 174121.00 23876.00 3336.00
Assets

B) Current
Liabilities

Short term
15103.00 52586.00 37483.00
borrowing

Sundry Creditor 4507.00 4954.00 447.00

Other current
69812.00 81823.00 12011.00
liability

Provisions 9212.00 11844.00 2632.00

Total Current
98634.00 151207.00 52573.00
Liabilities

Net working
54947.00 22914.00 32033.00
capital

85
Decreasing in
32033.00
working capital

INTERPRETATION:

From the above table, it is clear that

• Current assets increased from 153581.00 in the year 2013 to

174121.00 in the year 2014.

• Current liabilities increased from 98634.00 in the year 2013 to

151207.00 in the year 2014.

• Net Working capital decreased from 54947.00 in the year 2013 to

22914.00 in the year 2014.

86
 STATEMENT SHOWING CHANGES IN WORKING CAPITAL FOR
THE YEARS 2014-15
INCREASE DECREASE
IN IN
PARTICULARS 2014 2015
WORKING WORKING
CAPITAL CAPITAL

A) Current
Assets

Current
945.00 5467.00 4522.00
investment

Sundry debtor 145.00 200.00 55.00

Cash and Bank 4936.00 6098.00 1162.00

Loans &
167620.00 194669.00 27049.00
Advances

Other current
475.00 885.00 410.00
assets

Total Current
174121.00 207319.00 33198.00
Assets

B) Current
Liabilities

Short term
52586.00 52175.00 411.00
borrowing

Sundry Creditor 4954.00 5073.00 119.00

Other current
81823.00 99103.00 17280.00
liability

Provisions 11844.00 15691.00 3847.00

Total Current
151207.00 172042.00 411.00 21246.00
Liabilities

Net working
22914.00 35277.00 12363.00
capital

87
Increasingin
working capital

INTERPRETATION:

From the above table, it is clear that

• Current assets increased from 174121in the year 2014 to 207319 in the
year 2015.

• Current liabilities increased from 151207.00 in the year 2014 to

172042.00 in the year 2015.

• Net Working capital increased from 22914.00 in the year 2014 to

35277.00 in the year 2015.

88
1. CURRENT ASSETS

CURRENT ASSETS
YEAR
(In Million)

2012-13 121360.00

2013-14 153581.00

2014-15 174121.00

2015-16 207319.00

INTERPRETATION:

• In the year 2012-13 the current assets are 121360

• In the year 2013-14 the current assets are 153581 i.e., increased when
compared to previous year

89
 • In the year 2014-15 the current assets are 174121 and again increased when
compared to last year

• In the year 2015-16 the current assets are 207319 when compare to
previous year it is increased.

2. CURRENT LIABILITIES

CURRENT

YEAR LIABILITIE

S (In Million)

2012-13 80907

2013-14 98634

2014-15 151207

2015-16 172042

90
INTERPRETATION:

• In the year 2012-13 the current liabilities are 80907

• In the year 2013-14 the current liabilities are 98634 i.e., increased when
compared to previous year

• In the year 2014-15 the current liabilities are 151207 and increased when
compared to last year.

• In the year 2015-16 the current liabilities are 172042 when compare to
previous year it is increased

91
3. NET WORKING CAPITAL

NET WORKING
YEAR CAPITAL
(In Million)

2012-13 40453

2013-14 54947

2014-15 22914

2015-16 35277

INTERPRETATION:

• In the year 2012-13 the net working capital is 40453.00

• In the year 2013-14 the net working capital are 54947.00 i.e., increased when
compared to previous year

• In the year 2014-15 the net working capital are 22914.00 and again
decreased when compared to last year

• In the year 2015-16 the net working capital are 35277.00when

compare to previous year it is increased.

92
4. CURRENT RATIO:

YEAR CURRENT CURRENT CURRENT RATIO

ASSETS LIABILITIE

S
2012-2013 121360 80907 1.4999

2013-2014 153581 98634 1.5570

2014-2015 174121 151207 1.1515

2015-2016 207319 172042 1.2050

164095.25 125697.50 1.3534

AVERAGE

INTERPRETATION

From the above graph, it is clear that the current ratio is fluctuating year

by year. The current ratio in 2012-13 is 1.49. It increased to 1.55 in the year 2013-14.

It decreased to 1.15 in the year 2014-15. The ratio in the last year is 1.20 in the year

2015-16. Average current ratio of the company is 1.35

93
5. WORKING CAPITAL TURNOVER RATIO

WORKING

WORKING CAPITAL
YEAR SALES
CAPITAL TURNOVER

RATIO

40453
2012-13 29786474 736.3229

2013-14 37418109 54947 680.9854

2014-15 38796051 22914 1693.1156

2015-16 40173993 35277 1138.8154

Average 146174627 153591 1062.3098

INTERPRETATION

From the above analysis we can know that the working capital ratio is
fluctuating over the years from 2012-13 to 2015-16. In the year 2012-13 the ratio is
736.3229 and it decreased to 680.9854 at the year 2013-14. And at the last year
i.e., 2015-16, the ratio is 1138.8154.The average working capital turnover ratio of the
company is 1062.3098.

94
 CURRENT ASSETS TURNOVER RATIO:

Net sales
current assets Turnover Ratio = ------------------
Currentasset

Current assets
Current
Year Net sales
turnover ratio
Assets

2012-13 29786474 245.4389

121360

2013-14 37418109 243.6376

153581

2014-15 38796051 222.8108

174121

2015-16 40173993 193.7786

207319

Average 146174627 656381 226.4165

INTERPRETATIO
N

From the above analysis we can know that the current assets turnover ratio
is fluctuating over the years from 2012-13 to 2015-16. In the year 2012-
13 the ratio is 245.4389 and it decreased to 243.6376at the year 2013-14. And at
the last year i.e., 2015-16, the ratio is 193.7786.The average current assets turnover
ratio of the company is 226.4165.

95
 FINDINGS

Debtors for the year (In Million)

❖
2015-16: 157

Cash and bank balances for the year ( In Million)

 2015-16:3680

Loan & Advances for the year ( In Million)

❖
2015-16 : 194669

Creditors for the year ( In Million)

❖
2015-16 : 5073

Provisions for the year ( In Million)

❖
2015-16 : 15691

The average working capital turnover ratio of the company is 1062.309.

96
LIMITATIONS OF THE STUDY

• The study is limited only for a period of 5 years i.e. 2008-2016

• The study having limited scope of gathering sufficient financial

information as it is confidential.

• The study is limited up to the data and information provided by

Mahindra & Mahindra financial service ltd., and its annual reports.

• This study is confined to the Mahindra & Mahindra financial service ltd.,
Meerut only.

• The current study based on only the secondary data.

• As the some secrecy is maintained by the industry at the time of

disclosing the data, complete information has not secured.

97
 Chapter -3

RECOMMENDATION
&

SUGGESTION
98
 SUGGESTIONS

❖
Company should not rely on Long-term debts.

❖
Overall financial position of the company can be improved from the
point of view of liquidity.

❖
Increase volume based sales so as to stand in the competition.

❖
Stretch the credit period given by the suppliers.

❖
Maintain optimum level of cash in the business in order to maintain a
proper liquidity

99
 Chapter -4

CONCLUSION

100
 CONCLUSIONS

• Cash and bank balances are increasing showing an upward trend of

liquidity position of the firm.

• The company should administrate their credit on the basis of certain well

recognized and established principle of credit administration.

• The management has to decrease the loans taken by outsiders as it

demands more interest.

• Total assets of the firm must be properly maintained because the value of
total assets was decreased.

• From the above study, current liabilities are increasing. So the company

has to pay the loans and bills to reduce the liabilities and interest burden.

101
BIBLIOGRAPHY

102
 BIBLIOGRAPHY

BOOK TITLE AUTHOR

NAME Financial management IM Pandey

Financial management Prasanna Chandra

WEBSITES

www.mahindra.com/

www.mahindratractorworld.com/

103
1031
 Questionnaire

Section 1
a. Gender

Male

Female

b. Your Age

< 40

40-49
50-59

≥60

c. Your Education

Undergraduates/ MBA / Non MBA/ Doctrate

d. General state of Company

Outstanding

Strong

At industry average

Underperforming

e. Industry

Energy/ Finance/ Health Care/ Industrial/ It/

Medicals/Telecomm/ others

f. Company Type

Australian listed

Overseas listed

Not listed

g. Working capital % Sales

≥ 8%

<8%
104
1041
h. Size By No. of Employees

<100

100-999

1000-4999

5000-9999

≥10000

i. Size By Annual Revenue

= $5 billion

j. Foreign Sales

0%

1-24%

25-49%

≥ 50%

Section 2

1. Which of the following policies best describes your company’s financing?

Moderate

Aggressive

Conservative

2. Which of the following working capital practices does your firm adopt?

Emphasize the importance of working capital within the organisation Put

in place structure, governance and dedicated resources Understand and
design performance drivers

Outperform industry average targets

Embed with change management Goal

setting approaches

Other

Net working capital

Return on investments

105
1051
3. What are the key value metrics for your working capital management?

Net working capital

Return on investments

106
1061
 Risk management

Net cash conversion cycle (DSO+DIO-DPO)

Benchmark against competition

Weighted average capital cost

Other

4. Which of the following methods does your company use in working capital
management?

Roll over agreements

Term sheet

Collection agency

Securitization

Outsourcing

Factoring

5. Please indicate the cash management approach used by your company:

Managing cash through

netting Diversification of banks

Centralization of cash management decisions

Meet payment in a timely manner

Account structure / set-offs

Minimize float

Managing cash through leading and lagging

Streamline bank relationships (e.g. Prime Revenue online platform)

Policy on key liquidity parameters (e.g. cash, equity, dividend
forecasting) Emergency liquidity reserves

Tender for banking services Reduce

timeframes / error margins

Section 3

1. Does your firm deal with inventory management?

Yes

No

If 'No' proceed to Question 16

106
1061
2. What approaches does your firm use for inventory management?

Material requirement planning

Sales forecasting

Just-in-time

Inventory models (EOQ or EPQ etc.)

ERP system

Supply chain management

3. What are the factors considered in purchasing inventory for production?

Price discounts

Shortage costs

Availability

Inflation

Credit terms offered by suppliers

Storage costs

4. What are the factors considered in producing your finished product?

Seasonality of demand

Production schedule

Inflation

Shortage costs

Storage costs

5. What factors motivate your firm to use accounts receivable rather than cash?

Financial motives

Price motives

Transaction motives

Operating motives

Tax-based motives

N/A (your company only uses cash rather than accounts receivable)

Section 4

1. Does your firm deal with debt management?

107
1071
 Yes

No

2. Is your company negatively geared?

Yes

No

3. What are the preferred funding sources of your company?

Overdraft/Line of credit

Bonds

Money market

Debentures Cash

advances Term

loans Bank bills

Stocks

4. When your firm is in financial distress to what extent do you blame any of the
following?

0 (Not at all) to 4 (Very much)

Your own financial policy

0. 1. 2. 3. 4.

The economic environment

0. 1. 2. 3. 4.

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1081