A STUDY ON ASSET & LIABILITY MANAGEMENT IN AVR MANUFACTURERS

ABSTRACT
This project deals with the A Study on Asset & Liability Management with reference
to AVR Manufacturers! Asset & Liability Management is concerned with the problems that
arise while attempting to manage the current assets" the current liabilities and the inter
relationship that e#ist between them! The goal of Asset & Liability Management is to manage
the firm$s current assets and current liabilities in such way that the satisfactory le%el of
wor&ing capital is mentioned! The current assets should be large enough to co%er its current
liabilities in order to ensure a reasonable margin of the safety! AVR Manufacturers is a
software de%elopment and soft s&ills training company which offers world class application
de%elopment ser%ices and an unparalleled training in recruitment and soft s&ills!
The main objecti%e of this study is that to study on the Asset & Liability Management
and the effecti%eness of managing a wor&ing capital in a company! The secondary objecti%es
of this study are to study the optimum le%el of current assets and current liabilities of the
company" to study the li'uidity position through %arious wor&ing capital related ratios" to
study the financial performance using trend analysis tool! Study of the Asset & Liability
Management is important because unless the wor&ing capital is managed effecti%ely"
monitored efficiently planed properly and re%iewed periodically at regular inter%als to
remo%e bottlenec&s if any" the company cannot earn profits and increase its turno%er!
The study of wor&ing capital is based on tools li&e Trend Analysis" Ratio Analysis"
wor&ing capital le%erage" operating cycle etc! (urther the study is based on last ) years
Annual Reports of AVR MA*+(A,T+R-RS! And e%en factors li&e competitor$s analysis"
industry analysis were not considered while preparing this project! (or this study the
secondary data collection method is used! The data collection was aimed at study of Asset &
Liability Management of the company! There is a need for wor&ing capital in the form of
current assets to deal with the problem arising out of lac& of immediate reali.ation of cash
against goods sold! Therefore sufficient wor&ing capital is necessary to sustain sales acti%ity!
-fficient Asset & Liability Management re'uires that firms should operate with some amount
of net wor&ing capital" the e#act amount %arying from firm to firm and depending" among
1
other things/ on the nature of companies! This study has some of the limitations li&e limited
data" limited period" limited area and the duration of the study is %ery low!
0t should be reali.ed that the wor&ing capital need of the firms may be fluctuating
with changing business acti%ity! This may cause e#cess or shortage of wor&ing capital
fre'uently! The inade'uate amount of wor&ing capital can be threatened for the sol%ency of
the firms because of its inability to meet its current obligation! The management should be
prompt to initiate an action and correct imbalance! The problems of the company are been
analy.ed and the suggestions are been gi%en for the company for its future estimation and
management of the wor&ing capital! The present study re%eals that the li'uidity position of
this company is comparati%ely good as it approaches the standard norms throughout the
period of study!
2
TABLE OF CONTENTS
CHAPTER NO PARTICULARS PAGE NO.
Ac&nowledgement
,ertificate
,ontents
List of Tables
List of ,harts
1.
1.1
1.2
1.3
1.4
1.5
Asset & L!"#t$ M!%!&e'e%t
0ntroduction
*eed of Asset & Liability Management
1ross 2!, and *et 2!,
Types of wor&ing capital
3eterminants of wor&ing capital
2.
2.1
2.2
I%()st*$ P*+,#e
0ndustry 4rofile
,ompany 4rofile
3. Re-e. +, Lte*!t)*e
4.
4.1
4.2
4.3
4.4
Rese!*/0 Met0+(+#+&$
0ntroduction
Types of research methodology
5bjecti%e of the study
Scope and Limitation of the study
5. D!t! !%!#$ss !%( I%te*1*et!t+%
3
5.1
5.2
5.3
2or&ing capital Analysis
Ratio Analysis
Trend Analysis
2.
2.1
2.2
2.3
F%(%&s & S)&&est+%s
(indings
Suggestion
,onclusion
LIST OF TABLES
4
T!"#e. %+ N!'e +, T!"#es P!&e. %+
5
5.1.1 Schedule of ,hanges in 2or&ing ,apital 67889:
5.1.2 Schedule of ,hanges in 2or&ing ,apital 6788;:
5.1.3 Schedule of ,hanges in 2or&ing ,apital 678<8:
5.1.4 Schedule of ,hanges in 2or&ing ,apital 678<<:
5.2.1 Schedule of ,hanges in 2or&ing ,apital 678<7:
5.2.2 ,urrent Ratio
5.2.3 =uic& Ratio
5.2.4 Absolute Li'uid Ratio
5.2.5 0n%entory Turno%er Ratio
5.2.2 3ebtors Turno%er Ratio
5.2.3 ,reditors Turno%er Ratio
5.2.4 (i#ed Asset Turno%er Ratio
5.2.5 ,ash to ,urrent Asset Ratio
5.2.16 ,urrent Asset Turno%er Ratio
5.2.11 0n%entory to Sales Ratio
5.2.12 2or&ing ,apital Turno%er Ratio
5.2.13 0n%entory to ,urrent Asset Ratio
5.2.14 1ross profit Ratio
5.2.15 Administrati%e -#penses Ratio
5.3.1 Trend Analysis> ,urrent Asset
5.3.2 Trend Analysis> (i#ed Asset
5.3.3 Trend Analysis> ,ash and ?an&
5.3.4 Trend Analysis> 0n%entory
5.3.5 Trend Analysis> Sundry 3ebtors
6
LIST OF CHARTS
F&)*e. N+ N!'e +, T!"#es P!&e. %+
5.2.2 ,urrent Assets
5.2.3 (i#ed Assets
5.2.4 ,ash & ?an& ?alances
5.2.5 0n%entory Turno%er ratio
5.2.2 Sundry 3ebtors turno%er ratio
5.2.3 ,reditors Turno%er ratio
5.2.4 (i#ed Asset Turno%er ratio
7
5.2.5 ,ash to ,urrent Asset
5.2.16 ,urrent Asset Turno%er
5.2.11 0n%entory Turno%er
5.2.12 2or&ing ,apital Turno%er Ratio
5.2.13 0n%entory to ,urrent Asset Ratio
5.2.14 1ross profit Ratio
5.2.15 Administrati%e -#penses Ratio
5.3.1 Trend Analysis> ,urrent Asset
5.3.2 Trend Analysis> (i#ed Asset
5.3.3 Trend Analysis> ,ash and ?an&
5.3.4 Trend Analysis> 0n%entory
5.3.5 Trend Analysis> Sundry 3ebtors
CHAPTER I
ABOUT THE STUDY
1.17 I%t*+()/t+% Asset & L!"#t$ M!%!&e'e%t
Asset & Liability Management is concerned with the problems that arise while
attempting to manage the current assets" the current liabilities and the inter relationship that
e#ist between them! The term current assets refers to those assets which in ordinary course of
business can be" or" will be" turned in to cash within one year without undergoing a
diminution in %alue and without disrupting the operation of the firm! The major current assets
are cash" mar&etable securities" account recei%able and in%entory! ,urrent liabilities ware
those liabilities which intended at their inception to be paid in ordinary course of business"
within a year" out of the current assets or earnings of the concern! The basic current liabilities
are account payable" bill payable" ban& o%er>draft" and outstanding e#penses!
The goal of Asset & Liability Management is to manage the firms current assets and
current liabilities in such way that the satisfactory le%el of wor&ing capital is mentioned! The
8
current assets should be large enough to co%er its current liabilities in order to ensure a
reasonable margin of the safety!
3efinition@>
According to 1uttmann & 3ougall>
-#cess of current assets o%er current liabilities
According to 4ar& & 1ladson>
The e#cess of current assets of a business 6i!e! cash" accounts recei%ables"
in%entories: o%er current items owned to employees and others 6such as salaries & wages
payable" accounts payable" ta#es owned to go%ernment:!
<!7: *eed of Asset & Liability Management
The need for wor&ing capital gross or current assets cannot be o%er emphasi.ed! As
already obser%ed" the objecti%e of financial decision ma&ing is to ma#imi.e the shareholders
wealth! To achie%e this" it is necessary to generate sufficient profits! This will naturally
depend upon the magnitude of the sales among other things but sales cannot con%ert into
cash! There is a need for wor&ing capital in the form of current assets to deal with the
problem arising out of lac& of immediate reali.ation of cash against goods sold! Therefore
sufficient wor&ing capital is necessary to sustain sales acti%ity! Technically this is refers to
operating or cash cycle! 0f the company has certain amount of cash" it will be re'uired for
purchasing the raw material which may be a%ailable on credit basis! Then the company has to
spend some amount for labor and factory o%erhead to con%ert the raw material in wor& in
progress" and ultimately finished goods! These finished goods con%ert in to sales on credit
basis in the form of sundry debtors! Sundry debtors are con%erted into cash after e#piry of
credit period! Thus some amount of cash is bloc&ed in raw materials" 204" finished goods"
and sundry debtors and day to day cash re'uirements! Aowe%er some part of current assets
may be financed by the current liabilities also! The amount re'uired to be in%ested in this
current assets is always higher than the funds a%ailable from current liabilities! This is the
precise reason why the needs for wor&ing capital arise
9
<!B: 1ross wor&ing capital and *et wor&ing capital
There are two concepts of Asset & Liability Management
1. G*+ss .+*8%& /!1t!#
1ross wor&ing capital refers to the firm$s in%estment in current assets! ,urrent assets
are the assets which can be con%ert in to cash within a year includes cash" short term
securities" debtors" bills recei%able and in%entory!
2. Net .+*8%& /!1t!#
*et wor&ing capital refers to the difference between current assets and current
liabilities! ,urrent liabilities are those claims of outsiders which are e#pected to mature for
payment within an accounting year and include creditors" bills payable and outstanding
e#penses! *et wor&ing capital can be positi%e or negati%e
-fficient Asset & Liability Management re'uires that firms should operate with some
amount of net wor&ing capital" the e#act amount %arying from firm to firm and depending"
among other things/ on the nature of companies! *et wor&ing capital is necessary because the
cash outflows and inflows do not coincide! The cash outflows resulting from payment of
current liabilities are relati%ely predictable! The cash inflow are howe%er difficult to predict!
The more predictable the cash inflows are" the less net wor&ing capital will be re'uired!
The concept of wor&ing capital was" first e%ol%ed by Carl Mar#! Mar# used the term
%ariable capital means outlays for payrolls ad%anced to wor&ers before the completion of
wor&! Ae compared this with constant capital which according to him is nothing but dead
labor! This %ariable capital is nothing but wage fund which remains bloc&ed in terms of
financial management" in wor&> in>process along with other operating e#penses until it is
released through sale of finished goods! Although Mar# did not mentioned that wor&ers also
ga%e credit to the firm by accepting periodical payment of wages which funded a portioned of
2!0!4" the concept of wor&ing capital" as we understand today was embedded in his %ariable
capital!
10
1.47 T$1es +, .+*8%& /!1t!#
The operating cycle creates the need for current assets 6wor&ing capital:! Aowe%er the
need does not come to an end after the cycle is completed to e#plain this continuing need of
current assets a destination should be drawn between permanent and temporary wor&ing
capital!
17 Pe*'!%e%t .+*8%& /!1t!l
The need for current assets arises" as already obser%ed" because of the cash cycle! To
carry on business certain minimum le%el of wor&ing capital is necessary on continues and
uninterrupted basis! (or all practical purpose" this re'uirement will ha%e to be met
permanent as with other fi#ed assets! This re'uirement refers to as permanent or fi#ed
wor&ing capital
27 Te'1+*!*$ .+*8%& /!1t!#
Any amount o%er and abo%e the permanent le%el of wor&ing capital is temporary"
fluctuating or %ariable" wor&ing capital! This portion of the re'uired wor&ing capital is
needed to meet fluctuation in demand conse'uent upon changes in production and sales as
result of seasonal changes
1raph shows that the permanent le%el is fairly constant/ while temporary wor&ing capital is
fluctuating in the case of an e#panding firm the permanent wor&ing capital line may not be
hori.ontal! This may be because of changes in demand for permanent current assets might be
increasing to support a rising le%el of acti%ity!
1.57 Dete*'%!%ts +, .+*8%& /!1t!#
The amount of wor&ing capital is depends upon a following factors
1. N!t)*e +, ")s%ess
11
Some businesses are such" due to their %ery nature" that their re'uirement of fi#ed
capital is more rather than wor&ing capital! These businesses sell ser%ices and not the
commodities and that too on cash basis! As such" no funds are bloc&ed in piling in%entories
and also no funds are bloc&ed in recei%ables! -!g! public utility ser%ices li&e railways"
infrastructure oriented project etc! their re'uirement of wor&ing capital is less! 5n the other
hand" there are some businesses li&e trading acti%ity" where re'uirement of fi#ed capital is
less but more money is bloc&ed in in%entories and debtors!
2. Le%&t0 +, 1*+()/t+% /$/#e
0n some business li&e machine tools industry" the time gap between the ac'uisition of
raw material till the end of final production of finished products itself is 'uite high! As such
amount may be bloc&ed either in raw material or wor& in progress or finished goods or e%en
in debtors! *aturally the need of wor&ing capital is high!
3. S9e !%( &*+.t0 +, ")s%ess
0n %ery small company the wor&ing capital re'uirement is 'uite high due to high
o%erhead" higher buying and selling cost etc! as such medium si.e business positi%ely has
edge o%er the small companies! 5nce the business grows beyond a certain limit" the wor&ing
capital re'uirements may be ad%ersely affected by the increasing si.e!
4. B)s%ess: T*!(e /$/#e
0f the company is operating in the time of boom" the wor&ing capital re'uirement may
be more as the company may li&e to buy more raw material" may increase the production and
sales to ta&e the benefit of fa%orable mar&et" due to increase in the sales" there may be more
and more amount of funds bloc&ed in stoc& and debtors etc! similarly in the case of
depressions also" wor&ing capital may be high as the sales terms of %alue and 'uantity may be
reducing" there may be unnecessary piling up of stac& without getting sold" the recei%able
may not be reco%ered in time etc!
5. Te*'s +, 1)*/0!se !%( s!#es
Some time due to competition or custom" it may be necessary for the company to
e#tend more and more credit to customers" as result which more and more amount is loc&ed
12
up in debtors or bills recei%ables which increase the wor&ing capital re'uirement! 5n the
other hand" in the case of purchase" if the credit is offered by suppliers of goods and ser%ices"
a part of wor&ing capital re'uirement may be financed by them" but it is necessary to
purchase on cash basis" the wor&ing capital re'uirement will be higher!
2. P*+,t!"#t$
The profitability of the business may be %ary in each and e%ery indi%idual case" which
is in turn its depend on numerous factors" but high profitability will positi%ely reduce the
strain on wor&ing capital re'uirement of the company" because the profits to the e#tent that
they earned in cash may be used to meet the wor&ing capital re'uirement of the company!
CHAPTER II
2.1 INDUSTRY PROFILE:
A)t+'+t-e;
The A)t+'+t-e %()st*$ in 0ndia is one of the largest in the world and one of the fastest
growing globally! 0ndia manufactures o%er << million %ehicles 6including 7 wheeled and D
wheeled: and e#ports about <!) million e%ery year! 0t is the worldEs second largest
manufacturer of motorcycles" with annual sales e#ceeding 9!) million in 788;! 0ndiaEs
passenger car and commercial %ehicle manufacturing industry is the se%enth largest in the
world" with an annual production of more than 7!F million units in 788;! 0n 788;" 0ndia
emerged as AsiaEs fourth largest e#porter of passenger cars" behind Gapan" South Corea and
Thailand!
13
As of 788;" 0ndia is home to D8 million passenger %ehicles and more than 7!F million cars
were sold in 0ndia in 788; 6an increase of 7FH:" ma&ing the country the second fastest
growing automobile mar&et in the world! According to the Society of 0ndian Automobile
Manufacturers" annual car sales are projected to increase up to ) million %ehicles by 78<) and
more than ; million by 7878! ?y 78)8" the country is e#pected to top the world in car
%olumes with appro#imately F<< million %ehicles on the nationEs roads!
A chun& of 0ndiaEs car manufacturing industry is based in and around the city of ,hennai"
also &nown as the I3etroit of 0ndiaI! 2ith the 0ndian city accounting for F8 per cent of the
countryEs automoti%e e#ports! 1urgaon and Manesar near *ew 3elhi are hubs where all of
the Maruti Su.u&i cars in 0ndia are manufactured! The ,ha&an corridor near 4une"
Maharashtra is another %ehicular production hub with 1eneral Motors" Vol&swagenJ S&oda"
Mahindra" Tata in the process of setting up or already set up facilities! Ahmadabad with Tata
Motors *ano plant and Aalol with 1eneral Motors in 1ujarat" Aurangabad in Maharashtra"
Col&ata in 2est ?engal are some of the other automoti%e manufacturing regions around the
country!
I%()st*$ s%!1s0+ts
-mployment of automoti%e ser%ice technicians and mechanics is e#pected to increase
as fast as the a%erage through the year 78<D! ?etween 788D>78<D" demand for
technicians will grow as the number of %ehicles in operation increases" reflecting
continued growth in the number of multi>car families! 1rowth in demand will be
offset somewhat by slowing population growth and the continuing increase in the
'uality and durability of automobiles" which will re'uire less fre'uent ser%ice!
Additional job openings will be due to the need to replace a growing number of
retiring technicians" who tend to be the most e#perienced wor&ers!
Most persons entering see&ing employment in the automoti%e industry can e#pect
steady wor&" e%en through downturns in the economy! 2hile car owners may
14
postpone maintenance and repair on their %ehicles when their budgets become
strained" and employers of automoti%e technicians may cutbac& hiring new wor&ers"
changes in economic conditions generally ha%e minor effects on the automoti%e
ser%ice and repair business!
5pportunities in the automoti%e industry should be plentiful in %ehicle maintenance
and repair occupations" especially for employees with formal automoti%e ser%ice
technician training!
<+*8,+*/e Iss)es
I'!&e !%( P*+'+t+%
Among the challenges automoti%e employers face is o%ercoming negati%e public
perceptions of the industry due to stereotypes and misinformation! Specifically" the
industry see&s to counteract this lac& of awareness by demonstrating the a%ailability
of %iable occupations that pay well and ha%e growth potential! The industry is also
wor&ing to de%elop a pipeline of young employees and transitioning wor&ers from
which health care employers can recruit!
D-e*st$ +, t0e .+*8,+*/e; *e/*)t'e%t !%( *ete%t+%
The industry is also focused on increasing di%ersity in the wor&force! To this end"
employers are wor&ing to impro%e the pipeline and the demographic ma&e>up of the
wor&force in areas such as race" gender and language di%ersity!
C!1!/t$ !%( I%st*)/t+%
The automoti%e industry is wor&ing to assist employees in the attainment of basic soft
s&ills" such as communications" basic reading" writing and math" problem sol%ing and
customer ser%ice s&ills! Training efforts must include the resources and curriculum to
stay current with todayEs technology! To aid industry employers in this effort" the
industry has focused on recruiting more teachers and trainers/ ensuring that they are
industry>certified and current in their field of &nowledge! There is also a need of
continuing education for instructors!
T*!%%& !%( E()/!t+%
15
Another concern among industry employers is the a%ailability of training for new
employees and the re>training of incumbent employees! -ducation centers will be
utili.ed to focus on the de%elopment of standardi.ed curriculum and the importance of
industry>based certification for training programs!
S8## Sets
Automoti%e technology is rapidly increasing in sophistication" and most training
authorities strongly recommend that persons see&ing automoti%e ser%ice technician
and mechanic jobs complete a formal training program in high school or in a
postsecondary %ocational school or community college! Aowe%er" some ser%ice
technicians still learn the trade solely by assisting and learning from e#perienced
wor&ers! ,ourses in automoti%e repair" electronics" physics" chemistry" -nglish"
computers and mathematics pro%ide a good educational bac&ground for a career as a
ser%ice technician!
5pportunities in %ehicle maintenance and repair should be plentiful" especially for
persons who complete formal automoti%e ser%ice technician training! The growing
comple#ity of automoti%e technology increasingly re'uires highly trained automoti%e
ser%ice technicians and mechanics to ser%ice %ehicles! Most persons who enter
maintenance and repair occupations in this industry may e#pect steady wor& because
changes in economic conditions ha%e little effect on this part of the dealerEs business!
Some automoti%e manufacturers and their associated dealers sponsor 7>year associate
degree programs at postsecondary schools! Students enrolled in these programs
typically spend alternate <8 to <7>wee& periods/ attending classes full>time and
wor&ing full>time in the ser%ice departments of participating dealers!
(or trainee positions" dealerships increasingly prefer to hire automoti%e ser%ice
technician graduates of postsecondary automoti%e training programs! 1ood reading
and basic math s&ills are re'uired to study technical manuals" &eep abreast of new
technology and learn new ser%ice and repair techni'ues as %ehicle components and
systems become increasingly sophisticated!
4roduction wor&ers account for three out of fi%e motor %ehicle and e'uipment
manufacturing jobs! These wor&ers recei%e most of their training on the job or
through apprenticeship programs
16
E'1#+$'e%t T*!%%& !%( A('st*!t+% =ETA7 % !/t+%;
0n Gune 788B" -TA announced the Aigh 1rowth Gob Training 0nitiati%e to engage
businesses with local education pro%iders and the localJregional wor&force in%estment system
to find solutions that address changing talent de%elopment needs in %arious industries!
0n 5ctober 788)" the ,ommunity>?ased Gob Training 1rants were announced to
impro%e the role of community colleges in pro%iding affordable" fle#ible and
accessible education for the nationEs wor&force!
-TA is in%esting more than K7F8 million in 7F different regions across the +nited
States in support of the 20R-3 62or&force 0nno%ation in Regional -conomic
3e%elopment: 0nitiati%e! Through 20R-3" local leaders design and implement
strategic approaches to regional economic de%elopment and job growth! 20R-3
focuses on cataly.ing the creation of high s&ill" high wage opportunities for American
wor&ers through an integrated approach to economic and talent de%elopment!
These initiati%es reinforce -TAEs commitment to transform the wor&force system
through engaging business" education" state and local go%ernments and other federal
agencies with the goal of creating a s&illed wor&force to meet the dynamic needs of
todayEs economy!
I%-est'e%ts
-TA has in%ested o%er K78"F9<")<< in the automoti%e industry! This includes <7 Aigh
1rowth Gob Training grants totaling K<D"B;)";)F and fi%e ,ommunity>?ased Gob Training
1rants totaling KF"79)")))! Le%eraged resources from all of the grantees total KB;"8F<"87<!
Res+)*/es
(or additional bac&ground information about the industry and details on the grants"
information about employment and training opportunities and wor&force de%elopment tools
for employers" educators and wor&force professionals
17
A)t+'+"#e I%()st*$ % I%(!
The Automoti%e industry in 0ndia is one of the largest in the world and one of the fastest
growing globally! 0ndia manufactures o%er << million %ehicles 6including 7 wheeled and D
wheeled: and e#ports about <!) million e%ery year! 0t is the worldEs second largest
manufacturer of motorcycles" with annual sales e#ceeding 9!) million in 788;!0ndiaEs
passenger car and commercial %ehicle manufacturing industry is the se%enth largest in the
world" with an annual production of more than 7!F million units in 788;! 0n 788;" 0ndia
emerged as AsiaEs fourth largest e#porter of passenger cars" behind Gapan" South Corea" and
Thailand!
As of 788;" 0ndia is home to D8 million passenger %ehicles and more than 7!F million cars
were sold in 0ndia in 788; 6an increase of 7FH:" ma&ing the country the second fastest
growing automobile mar&et in the world! According to the Society of 0ndian Automobile
Manufacturers" annual car sales are projected to increase up to ) million %ehicles by 78<) and
more than ; million by 7878!?y 78)8" the country is e#pected to top the world in car %olumes
with appro#imately F<< million %ehicles on the nationEs roads!
A chun& of 0ndiaEs car manufacturing industry is based in and around ,hennai" also &nown as
the I3etroit of 0ndiaI with the 0ndia operations of ?M2" (ord" Ayundai and *issan
head'uartered in the city! ,hennai accounts for F8 per cent of the countryEs automoti%e
e#ports! 1urgaon and Manesar near *ew 3elhi are hubs where all of the Maruti Su.u&i cars
in 0ndia are manufactured! The ,ha&an corridor near 4une" Maharashtra is another %ehicular
production hub with companies li&e 1eneral Motors" Vol&swagen" S&oda" Mahindra and
Mahindra" Tata Motors" Mercedes ?en." (iat and (orce Motors ha%ing assembly plants in the
area! Ahmedabad with the Tata *ano plant" Aalol with 1eneral Motors in 1ujarat"
Aurangabad with Audi in Maharashtra and Col&atta with Aindustan Motors in 2est ?engal
are some of the other automoti%e manufacturing regions around the country!
1. 2. 2 S)11#$ /0!% +, A)t+'+"#e I%()st*$@
The supply chain of automoti%e industry in 0ndia is %ery similar to the supply chain of the
automoti%e industry in -urope and America! The orders of the industry arise from the bottom
of the supply chain i! e!" from the consumers and go through the automa&ers and climbs up
until the third tier suppliers! Aowe%er the products" as channeled in e%ery traditional
automoti%e industry" flow from the top of the supply chain to reach the consumers!
18
Automa&ers in 0ndia are the &ey to the supply chain and are responsible for the products and
inno%ation in the industry!
The description and the role of each of the contributors to the supply chain are discussed
below!
Third Tier Suppliers@ These companies pro%ide basic products li&e rubber" glass" steel" plastic
and aluminum to the second tier suppliers!
Second Tier Suppliers@ These companies design %ehicle systems or bodies for (irst Tier
Suppliers and 5-Ms! They wor& on designs pro%ided by the first tier suppliers or 5-Ms!
1. 2. 2 F&)*e s0+.%& t0e S)11#$ C0!% +, I%(!% A)t+'+"#e I%()st*$
They
also
pro%ide engineering resources for detailed designs! Some of their ser%ices may include
welding" fabrication" shearing" bending etc!
(irst Tier Suppliers@ These companies pro%ide major systems directly to assemblers! These
companies ha%e global co%erage" in order to follow their customers to %arious locations
around the world! They design and inno%ate in order to pro%ide blac&>bo# solutions for the
re'uirements of their customers! ?lac&>bo# solutions are solutions created by suppliers using
their own technology to meet the performance and interface re'uirements set by assemblers!
(irst tier suppliers are responsible not only for the assembly of parts into complete units li&e
dashboard" brea&s>a#el>suspension" seats" or coc&pit but also for the management of second>
tier suppliers!
19
Automa&ersJVehicle ManufacturersJ5riginal -'uipment Manufacturers 65-Ms:@ After
researching consumers$ wants and needs" automa&ers begin designing models which are
tailored to consumers$ demands! The design process normally ta&es fi%e years! These
companies ha%e manufacturing units where engines are manufactured and parts supplied by
first tier suppliers and second tier suppliers are assembled! Automa&ers are the &ey to the
supply chain of the automoti%e industry! -#amples of these companies are Tata Motors"
Maruti Su.u&i" Toyota" and Aonda! 0nno%ation" design capability and branding are the main
focus of these companies!
3ealers@ 5nce the %ehicles are ready they are shipped to the regional branch and from there"
to the authori.ed dealers of the companies! The dealers then sell the %ehicles to the end
customers!
4arts and Accessory@ These companies pro%ide products li&e tires" windshields" and air bags
etc! to automa&ers and dealers or directly to customers!
Ser%ice 4ro%iders@ Some of the ser%ices to the customers include ser%icing of %ehicles"
repairing parts" or financing of %ehicles! Many dealers pro%ide these ser%ices but" customers
can also choose to go to independent ser%ice pro%iders!
2.2 COMPANY PROFILE
ABOUT US
AVR Manufacturers established in the year 788B" with an immense industry
e#perience of B8 years" ha%e achie%ed a prominent position in the manufacturing and
supplying of sheet metal components" pressed components and automoti%e components!
These encompass sheet metal parts" special type washer" precision sheet metal press
components" deep drawn components" and oil seal inner shells! ?ased on the latest
technology" these are widely used in industries such as Automobile" Automoti%e" and also in
other engineering firms!
20
2ith &nowledge and e#pertise" AVR Manufacturers broadened its hori.ons into
manufacturing of automobile sheet metal components after sur%eying and studying both
technical and mar&eting aspects! 5%er the last <8 years" the company has achie%ed a distinct
place in the mar&et! 0t has a strong and satisfying clientele!
2e channel our endea%ours towards achie%ing absolute customer satisfaction by
offering our clients with 'ualitati%e products! 5ur products" owing to its functionality"
durability" efficiency" and cost effecti%eness are preferred by a wide list of clients across
0ndia! 0n addition to e#hibiting finest 'uality" our entire product range is competiti%ely priced"
enabling us to earn immense credibility and faith of our %alued clients!
OUR VISION
AVR ManufacturersE mission is to help our customers in pro%iding high 'uality precision
components at competiti%e cost! 2hen the reputation and success depend on consistency and
'uality of products and ser%ices
5ur products comprise certain features which ha%e made us a preferred company to wor&
with! Some of the highlighting features are@
21
> ,ost effecti%e
> Long lasting ser%ice
> 2ell tested
> Made from premium 'uality raw material
> Rust resistant
> ,losely monitored by e#perienced professionals

5ur products are a%ailable in different dimensions and designs! They are manufactured from
'uality raw material and are technologically ad%anced! Some of the industries where our
products are used are@
> Automobile industries
> Te#tile machineries manufacturing
> 1eneral -ngineering
> -lectrical 4anel manufacturing
> Transformer manufacturing
> Val%es manufacturing
> Switch gear manufacturing
POLICY
To satisfy our clients" we consistently put our generous efforts to pro%ide 'uality
range of components and timely ser%ices to our clients! 2e ma&e use of latest technology and
ad%anced techni'ues to wor& effecti%ely e%en in fluctuating mar&et conditions!
5ur cost>effecti%e specialties with the help of latest technology" we manufacture these
components and panel bo#es in most efficient manner! This helps us in efficient utili.ation of
recourses and manufacturing 'uality range of products! (urther" this also reduces the
22
production cost and enables us to offer these products at highly competiti%e prices!

Some of these facilities are @
> 5n Time 3eli%ery 65T3:
> -fficient operations with economical machines
> 5pen cost system to customer
> Aour rates for wor& center Systematic cost e%aluation
> 5peration wise actual production timings
> 2astage and scrap %alue deduction from cost
C)st+'9!t+%;
2ith the help of our e#perienced team of professionals" we offer customi.ation facility to our
clients! 2e manufacture these components and assemblies in %arious designs and si.es to
meet the specified re'uirements of our clients!
>)!#t$ P+#/$;
2e ha%e 'ualified people for inspection of components who &eep a strict chec& on the 'uality
of the raw materials being procured as well as on the manufacturing process of the products!
(urther" we ensure to chec& our products at %arious stage of manufacturing li&e @
Raw Material test
3imensional measurements during production
Aardness tests
(inished test li&e 4lating & 4owder coating
(inal 0nspection as per client re'uirements
23
OUR INFRASTRUCTURE ;
2ith the support of our robust infrastructure" we successfully cater to the needs of our
reputed clients! 5ur sound infrastructure is spread o%er a %ast area of <8"888 s'uare feet"
which enables us to meet with the bul& of orders within set time frame!
5ur well e'uipped 0nfrastructure includes the following machineries @
Lathe Machine
2elding Machine
24
Mechanical 4ower 4resses
Surface 1rinding machine
(ly 4ress
3rilling Machine
Round barJ4in cutting machine
Testing & inspection -'uipment

PRODUCTS
25
PRODUCT PHOTOS
26
P*+()/ts R!%&e ;
Sheet Metal ,omponents for Automoti%e
industries
Sheet metal assemblies
3eep 3rawn 4arts
4ressed parts for Automoti%e industries
Metallic 1as&ets
Metal 0nserts
-lectrical Switch 4arts
Automoti%e Gac& 4arts
Special type 2ashers
(ine ?lan&ed ,omponents
P*+()/t Fe!t)*es ;
Long ser%ice life
Temperature resistant
3urable
,orrosion resistant
3imensionally accurate
CLIENTS;
27
As a customer>centric organi.ation" we consistently stri%e hard to offer the finest 'uality
products at industry leading prices to our clients! To meet the uni'ue needs of our clients" we
offer a highly customi.ed range of automobile components! ?ased on our ethical business
policy" customi.ed product range" transparent dealings" and ability to deli%er any si.e
consignment within promised time frame" we ha%e garnered a huge clientele!
CONTACT US
28
AVR MANUFACTURERS
72, 5
th
Cross Street,
Thiru-Vi-Ka Industrial state,
!uind" ,
Chennai#
Ta$ilnadu % 600 032
&h' 044 % 43322527
In(o)a*r$anu(a+turers#+o$
CHAPTER III
REVIE< OF LITERATURE
Asset & Liability Management is the management of assets that are current in nature! ,urrent
assets" by accounting definition are the assets normally con%erted in to cash in a period of one
year! Aence Asset & Liability Management can be considered as the management of cash"
mar&et securities recei%able" in%entories and current liabilities! 0n fact" the management
of current assets is similar to that of fi#ed assets the sense that is both in cases the firm
analyses their effect on its profitability and ris& factors" hence they differ on three major
aspects@
<! 0n managing fi#ed assets" time is an important factor discounting and compounding aspects
of time play an important role in capital budgeting and a minor part in the management
of current assets!
29
7! The large holdings of current assets" especially cash" may strengthen the firm$s li'uidity
position" but is bound to reduce profitability of the firm as ideal car yield nothing!
B! The le%el of fi#ed assets as well as current assets depends upon the e#pected sales" but it is
only current assets that add fluctuation in the short run to a business!
To understand wor&ing capital better we should ha%e basic &nowledge about the %arious
aspects of wor&ing capital! To start with" there are two concepts of wor&ing capital@
G*+ss <+*8%& C!1t!#
Net .+*8%& C!1t!#
1ross 2or&ing ,apital@ 1ross wor&ing capital" which is also simply &nown as wor&ing
capital" refers to the firm$s in%estment in current assets@ Another aspect of gross wor&ing
capital points out the need of arranging funds to finance the current assets! The gross wor&ing
capital concept focuses attention on two aspects of current assets management" firstly
optimum in%estment in current assets and secondly in financing the current assets! These two
aspects will help in remaining away from the two danger points of e#cessi%e or inade'uate
in%estment in current assets! 2hene%er a need of wor&ing capital funds arises due to increase
in le%el of business acti%ity or for any other reason the arrangement should be made 'uic&ly"
and similarly if some surpluses are a%ailable" they should not be allowed to lie ideal but
should be put to some effecti%e use!
*et 2or&ing ,apital@ The term net wor&ing capital refers to the difference between the
current assets and current liabilities! *et wor&ing capital can be positi%e as well as negati%e!
4ositi%e wor&ing capital refers to the situation where current assets e#ceed current liabilities
and negati%e wor&ing capital refers to the situation where current liabilities e#ceed current
assets! The net wor&ing capital helps in comparing the li'uidity of the same firm o%er time!
(or purposes of the Asset & Liability Management" therefore 2or&ing ,apital can be said to
measure the li'uidity of the firm! 0n other words" the goal of Asset & Liability Management
is to manage the current assets and liabilities in such a way that a acceptable le%el of net
wor&ing capital is maintained!
2or&ing capital refers to the in%estment by the company in short
terms assets such as cash" mar&etable securities! *et current assets or net
30
wor&ing capital refers to the current assets less current liabilities!
S$'"+#/!##$? t 'e!%s?
Net C)**e%t Assets @ C)**e%t Assets C)**e%t L!"#tes.
St)(es !(+1t%& ! %e. !11*+!/0 t+.!*(s Asset & L!"#t$ M!%!&e'e%t !*e *e-e.e(
0e*e.
S!&!% % 0s 1!1e* =15557?
< perhaps the first theoretical paper on the theory of Asset & Liability Management"
emphasi.ed the need for management of wor&ing capital accounts and warned that it could
%itally affect the health of the company! Ae reali.ed the need to build up a theory of Asset &
Liability Management! Ae discussed mainly the role and functions of money manager
inefficient wor&ing capital D9 management! Sagan pointed out the money manager$s
operations were primarily in the area of cash flows generated in the course of business
transactions! Aowe%er" money manager must be familiar with what is being done with the
control of in%entories" recei%ables and payables because all these accounts affect cash
position! Thus" Sagan concentrated mainly on cash component of wor&ing capital! Sagan
indicated that the tas& of money manager was to pro%ide funds as and when needed and to
in%est temporarily surplus funds as profitably as possible in %iew of his particular
re'uirements of safety and li'uidity of funds by e#amining the ris& and return of %arious
in%estment opportunities! Ae suggested that money manager should ta&e his decisions on the
basis of cash budget and total current assets position rather than on the basis of traditional
wor&ing capital ratios! This is important because efficient money manager can a%oid
borrowing from outside e%en when his net wor&ing capital position is low! The study pointed
out that there was a need to impro%e the collection of funds but it remained silent about the
method of doing it! Moreo%er" this study is descripti%e without any empirical support!
Reali.ing the dearth of pertinent literature on Asset & Liability Management" 2al&er in his
study 6<;FD:
7 made a pioneering effort to de%elop a theory of Asset & Liability Management by
empirically testing" though partially" three propositions based on ris&>return trade>off of Asset
31
& Liability Management! 2al&er studied the effect of the change in the le%el of wor&ing
capital on the rate of return in nine industries for the year <;F< and found the relationship
between the le%el of wor&ing capital and the rate of return to be negati%e!
V!%0+*%e % 0s st)($ =152574 ?
Recogni.ing Asset & Liability Management as an area largely lac&ing in theoretical
perspecti%e" attempted to de%elop a framewor& in terms of probabilistic cash budget for
e%aluating decisions concerning )<the le%el of li'uid assets and the maturity composition of
debt in%ol%ing ris&>return trade>off! Ae proposed calculation of different forecasted li'uid
asset re'uirements along with their subjecti%e probabilities under different possible
assumptions of sales" recei%ables" payables and other related receipts and disbursements! Ae
suggested preparing a schedule showing" under each alternati%e of debt maturity" probability
distributions of li'uid asset balances for future periods" opportunity cost" ma#imum
probability of running out of cash and number of future periods in which there was a chance
of cash stoc&>out! 5nce the ris& and opportunity cost for different alternati%es were
estimated" the form could determine the best alternati%e by balancing the ris& of running out
of cash against the cost of pro%iding a solution to a%oid such a possibility depending on
management$s ris& tolerance limits! Thus" Vanhorne study presented a ris&>return trade>off of
Asset & Liability Management in entirely new perspecti%e by considering some of the
%ariables probabilistically! Aowe%er" the usefulness of the framewor& suggested by Vanhorne
is limited because of the difficulties in obtaining information about the probability
distributions of li'uid>asset balances" the opportunity cost and the probability of running out
of cash for different alternati%e of debt maturities!
<e#te*? % 0s st)($ =15367
Stated that wor&ing capital originated because of the global delay between the moment
-#penditure for purchase of raw material was made and the moment when payments were
recei%ed for the sale of finished )7product! 3elay centers are located throughout the
production and mar&eting functions! The study re'uires specifying the delay centers and
wor&ing capital tied up in each delay centre with the help of information regarding a%erage
delay and added %alue! Ae recogni.ed that by more rapid and precise information through
computers and impro%ed professional ability of management" sa%ing through reduction of
32
wor&ing capital could be possible by reducing the length of global delay by rescuing andJor
fa%orable redistribution of this global delay among the different delay centers! Aowe%er"
better information and impro%ed staff in%ol%e cost! Therefore" sa%ings through reduction of
wor&ing capital should be tried till these sa%ing are greater or e'ual to the cost of these
sa%ings! Thus" this study is concerned only with return aspect of Asset & Liability
Management ignoring ris&! -nterprises" following this approach" can ad%ersely affect its
short>term li'uidity position in an attempt to achie%e sa%ing through reduction of wor&ing
capital! Thus" firms should be conscious of the effect of law current assets on its ability to
pay>off current liabilities! Moreo%er" this approach concentrated only on total amount of
current assets ignoring the interactions between current assets and current liabilities!
L!'"*A !%( S%&0- =15357
Adopting the wor&ing capital cycle approach to the Asset & Liability Management" also
suggested that in%estment in wor&ing capital could be optimi.ed and cash flows could be
impro%ed by reducing the time frame of the physical flow from receipt of raw material to
shipment of )Bfinished goods" i!e! in%entory management" and by impro%ing the terms on
which firm sells goods as well as receipt of cash! Aowe%er" the further suggested that
wor&ing capital in%estment could be optimi.ed also 6<: by impro%ing the terms on which
firms bought goods i!e! creditors and payment of cash" and 67: by eliminating the
administrati%e delays i!e! the deficiencies of paper>wor& flow which tended to e#tend the
time>frame of the mo%ement of goods and cash!
<!**e% !%( S0e#t+% =153173
Applied financial simulation to simulate future financial statements of a firm" based on a set
of simultaneous e'uations! (inancial simulation approach ma&es it possible to incorporate
both the uncertainty of the future and the many interrelationships between current assets"
current liabilities and other balance sheet accounts! The strength of simulation as a tool of
analysis is that it permits the financial manager to incorporate in his planning both the most
li&ely %alue of an acti%ity and the margin of error associated with this estimate! 2arren and
Shelton presented a model in which twenty simultaneous e'uations were used to forecast
future balance sheet of the firm including forecasted current assets and forecasted current
liabilities! ,urrent assets and current liabilities were forecasted in aggregate by directly
relating to firm sales! Aowe%er" indi%idual wor&ing capital accounts can also be forecasted in
33
a larger simulation system! Moreo%er" future financial statements can be simulated o%er a
range of different assumptions to portray inherent uncertainty of the future!
C+0% !%( P*%&#e % t0e* st)($ =153375
0llustrated the e#tension of ,apital Asset 4ricing Model 6,A4M:<8 for Asset & Liability
Management decisions! They tried to interrelate long>term in%estment and financing
decisions and Asset & Liability Management decisions through ,A4M! They emphasi.ed
that an acti%e Asset & Liability Management policy based on ,A4M could be employed to
&eep the firm$s shares in a gi%en ris& class! ?y ris&" he meant unsystematic ris&" the only ris&
deemed rele%ant by ,A4M! 5wing to the lumpy nature for long>term financial decisions" the
firm is continually subject to shifts in the ris& of its e'uity! The fluid nature of wor&ing
capital" on the other hand" can be e#ploited so as to offset or moderate such swings! (or
e#ample they suggested that a policy using ,A4M could be adopted for the management of
mar&etable securities portfolio such that the appropriate ris& le%el at any point in time was
that which maintains the ris& of the company$s common stoc& at a constant le%el! Similarly"
,opeland and Choury 6<;98: applied ,A4M to de%elop a theory of credit e#pansion! They
argued that credit should be e#tended only if the e#pected rate of return on credit is greater
than or e'ual to mar&et determined re'uired rate of return! They used ,A4M to determine the
re'uired rate of return for the firm with its new ris&" arising from uncertainty regarding
collection due to the e#tension of credit! Thus" these studies show how ,A4M can be used
for decisions in%ol%ed in Asset & Liability Management! )) 5ne more approach" used mainly
in empirical studies" towards Asset & Liability Management has been to apply regression
analysis to determine the factors influencing in%estment in wor&ing capital! 3ifferent studies
in the past ha%e considered different e#planatory %ariables to e#plain the in%estment in
in%entory! A brief re%iew<7 of these studies is important as regression e'uation of in%estment
in wor&ing capital" in the present study" would be formulated on the basis of wor&s on
in%estment in in%entory! 0n in%entory in%estment literature" there is basically one school of
thought according to which firms aim at an optimum or desired stoc& of in%entories in
relation to a gi%en le%el of outputJsales! This is &nown as acceleration principle! 4ioneering
wor& in this field has been done by Met.ler 6<;D<:<B!
Aowe%er" his wor& was mainly on simple acceleration principle which postulated that firms
li&ed to maintain in%entories in proportions to outputJsales and they succeeded in achie%ing
the desired le%el of in%entories in a unit time period! That is to say" any discrepancy between
34
the actual le%el and desired le%el of in%entories is adjusted within the same time>period!
*eedless to say" that such an instantaneous adjustment is not a realistic assumption to ma&e!
Modifications" therefore" ha%e been introduced in the literature to pro%ide for partial
adjustment! 1oodwin 6<;D9:<D assumed that firms attempted only a partial adjustment of the
discrepancy between the desired stoc&s as determined by the le%el of output and the e#isting
stoc&!
Similarly" 3arling and )FLo%ell 6<;F):<) modified Met.ler$s formulation based on simple
acceleration principle and obtained" the relationship based on fle#ible accelerator principle!
There are se%eral reasons physical" financial and technical those moti%ate partial adjustment!
Among the physical factors" mention may be made of procurement lags between orders and
deli%eries! The length of such lags is connected with the source of supply" foreign or
domestic a%ailability! 0mport licensing procedures on account of foreign e#change scarcity
could cause further delays in adjustment! Among the financial factors" cost ad%antages
associated with bul& buying and higher procurement costs for speedy deli%ery are also
mentioned! +ncertainties in the mar&et for raw materials and in the demand for final product
also play a role in influencing the speed of adjustment! Technically" firms li&e to ma&e sure
that changes in demand are of a permanent character before ma&ing full adjustment! The
acceleration principle has great rele%ance in in%entory analysis than in the analysis of fi#ed
in%estment" as there are limits to li'uidate fi#ed capital in the face of declining demand!
5ther %ariables influencing in%entories ha%e been introduced in the literature in the conte#t of
accelerator model! Rate of interest is used as a pro#y for the opportunity cost of carrying
stoc&s or as a measure of the cost of funds needed to hold in%entories! 0t has been found
significant in the studies of Ailton 6<;LF:<F and 0rwin 6<;9<:<L
! Time>trend is e#pected to be important because in%entories generally accumulate with the
e#pansion of economic acti%ities of the company! Anticipated )Lprice changes" measured by
changes in wholesale price inde# of in%entories" are ta&en as an e#planatory %ariable to
capture speculati%e element in in%entory! This suggests a positi%e relationship between price
changes and in%entory! An increase in sales is e#pected to increase the demand for stoc&s to
meet orders regularly! An increase in capacity utili.ation is also e#pected to increase the
demand for stoc& by increasing the demand for raw materials and increasing the in%entories
of finished goods! Thus" the %ariable" capacity utili.ation" is postulated to ha%e a positi%e
coefficient in the e'uation!
35
A"*!'+.t9 =1556714 !%( M+(&#!% =1553715
Aighlighted the impact of capacity utili.ation on in%entory in%estment! -#isting stoc& of
in%entories is e#pected to ta&e account of adjustment process to the desired le%els! Thus the
%ariable" e#isting stoc& of in%entories" is postulated to be negati%ely related with the desired
stoc&! The ratio of in%entory to sales may affect in%entory in%estment positi%ely because a
high ratio of stoc&s to sales in the past suggests the maintenance of high le%els of in%entories
in the past and thus also calling for high in%estment in in%entories in the current period!
T0e st)(es +, Met9#e* =1541726 !%( H#t+% =1532721
Aa%e found this %ariable" in%entory>sales ratio" to be statistically significant! (i#ed
in%estment is generally e#pected to affect in%entory in%estment in%ersely because of
competing demand for the limited funds! Aowe%er" in case of an e#panding firm" the two
components may be complementary! ?esides" a%ailability of funds from retained earnings
and e#ternal sources" may affect in%estment )9decision by pro%iding funds for financing
in%entory in%estment! Therefore" retained earnings and flow of debt are postulated to ha%e
positi%e coefficients!
CHAPTER IV
RESEARCH METHODOLOGY
4.1 NEED FOR THE STUDY
<! To pro%ide reliable financial information about economic resources and obligation of a
business firm!
7! To pro%ide other needed information about charges in such economic resources and
obligation!
B! To pro%ide reliable information about change in net resources 6recourses less obligations:
missing out of business acti%ities!
D! To pro%ide financial information that assets in estimating the learning potential of the
business!
36
4.2 OBBECTIVES OF THE STUDY
Study of the Asset & Liability Management is important because unless the wor&ing
capital is managed effecti%ely" monitored efficiently planed properly and re%iewed
periodically at regular inter%als to remo%e bottlenec&s if any" the company cannot earn profits
and increase its turno%er! 2ith this primary objecti%e of the study" the following further
objecti%es are framed for a depth analysis!
<! To study the Asset & Liability Management of AVR MA*+(A,T+R-RS!" ,hennai
7! To study the optimum le%el of current assets and current liabilities of the company!
B! To study the li'uidity position through %arious wor&ing capital related ratios!
D! To study the financial performance using trend analysis tool
4.3 SCOPE & LIMITATIONS OF THE STUDY
The scope of the study is identified after and during the study! The study of wor&ing capital
is based on tools li&e Trend Analysis" Ratio Analysis" wor&ing capital le%erage" operating
cycle etc! (urther the study is based on last ) years Annual Reports of AVR
MA*+(A,T+R-RS! And e%en factors li&e competitor$s analysis" industry analysis were
not considered while preparing this project!
4.4 L't!t+%s +, t0e st)($
(ollowing limitations were encountered while preparing this project@
17 L'te( (!t!;C
This project has completed with annual reports/ it just constitutes one part of data
collection i!e! secondary! There were limitations for primary data collection because of
confidentiality!
37
27 L'te( 1e*+(;C
This project is based on fi%e year annual reports! ,onclusions and recommendations
are based on such limited data! The trend of last fi%e year may or may not reflect the real
wor&ing capital position of the company
37 L'te( !*e!;C
Also it was difficult to collect the data regarding the competitors and their financial
information! 0ndustry figures were also difficult to get!
Rese!*/0 Met0+(+#+&$
4.47 I%t*+()/t+%
Research methodology is a way to systematically sol%e the research problem! 0t may
be understood as a science of studying now research is done systematically! 0n that %arious
steps" those are generally adopted by a researcher in studying his problem along with the
logic behind them!
0t is important for research to &now not only the research method but also &now
methodology! The procedures by which researcher goes about their wor& of describing"
e#plaining and predicting phenomenon are called methodology Methods comprise the
procedures used for generating" collecting and e%aluating data! All this means that it is
necessary for the researcher to design his methodology for his problem as the same may
differ from problem to problem!
3ata collection is important step in any project and success of any project will be
largely depend upon now much accurate you will be able to collect and how much time"
money and effort will be re'uired to collect that necessary data" this is also important step!
38
3ata collection plays an important role in research wor&! 2ithout proper data a%ailable for
analysis you cannot do the research wor& accurately!
4.4.1 RESEARCH DESIGN
The research design has been considered as a IblueprintI for research" dealing with
at least four problems@ what 'uestions to study" what data are rele%ant" what data to collect"
and how to analy.e the results!
RESEARCH DESIGN USED IN THE STUDY
0n analytical research" the researcher has to use facts or information already a%ailable"
and analy.e these to ma&e a critical e%aluation of the material!
4.4.27 T$1es +, (!t! /+##e/t+%
There are two types of data collection methods a%ailable!
<! 4rimary data collection
7! Secondary data collection
17 P*'!*$ (!t!
The primary data is that data which is collected fresh or first hand" and for first time
which is original in nature! 4rimary data can collect through personal inter%iew" 'uestionnaire
etc! to support the secondary data!
27 Se/+%(!*$ (!t! /+##e/t+% 'et0+(
The secondary data are those which ha%e already collected and stored! Secondary data
easily get those secondary data from records" journals" annual reports of the company etc! 0t
will sa%e the time" money and efforts to collect the data! Secondary data also made a%ailable
through trade maga.ines" balance sheets" boo&s etc!
This project is based on primary data collected through personal inter%iew of head of
account department" and other concerned staff member of finance department! ?ut primary
data collection had limitations such as matter confidential information thus project is based
39
on secondary information collected through fi%e years annual report of the company"
supported by %arious boo&s and internet sides! The data collection was aimed at study of
Asset & Liability Management of the company
4roject is based on
<! Annual report of AVR MA*+(A,T+R-RS" 7889
7! Annual report of AVR MA*+(A,T+R-RS" 788;
B! Annual report of AVR MA*+(A,T+R-RS" 78<8
D! Annual report of AVR MA*+(A,T+R-RS" 78<<
)! Annual report of AVR MA*+(A,T+R-RS" 78<7

CHAPTER V
DATA ANALYSIS AND INTERPRETAITION
<ORDING CAPITAL ANALYSIS
Asset & Liability Management is concerned with the problems which arise in
attempting to manage the current assets" the current liabilities and the inter relationship that
e#ist between them! The term current assets refers to those assets which in ordinary course of
business can be" or" will be" turned in to cash within one year without undergoing a
40
diminution in %alue and without disrupting the operation of the firm! The major current assets
are cash" mar&etable securities" account recei%able and in%entory! ,urrent liabilities ware
those liabilities which intended at their inception to be paid in ordinary course of business"
within a year" out of the current assets or earnings of the concern! The basic current liabilities
are account payable" bill payable" ban& o%er>draft" and outstanding e#penses!
The goal of Asset & Liability Management is to manage the firm s current
assets and current liabilities in such way that the satisfactory le%el of wor&ing capital is
mentioned! The current should be large enough to co%er its current liabilities in order to
ensure a reasonable margin of the safety!
The consideration of the le%el in%estment in current assets should a%oid two danger
points e#cessi%e and inade'uate in%estment in current assets! 0n%estment in current assets
should be just ade'uate" not more or less" to the need of the business firms! -#cessi%e
in%estment in current assets should be a%oided because it impairs the firm s profitability" as
idle in%estment earns nothing! 5n the other hand inade'uate amount of wor&ing capital can
be threatened for the sol%ency of the firms because of its inability to meet its current
obligation! 0t should be reali.ed that the wor&ing capital need of the firms may be fluctuating
with changing business acti%ity! This may cause e#cess or shortage of wor&ing capital
fre'uently! The management should be prompt to initiate an action and correct imbalance
5.1 SCHEDULE OF CHANGES IN <ORDING CAPITAL
TABLE 5.1
PARTICULARS
2664
AMOUNT
Rs.
2665
AMOUNT
Rs.
INCREASE
AMOUNT
Rs.
DECREASE
AMOUNT
Rs.
ASSETS;
41
CURRENT ASSETS
0n%entory 6-R4 Software
Licenses:
7")8";D8
9"7)"<88
)"LD"<F8 >
Sundry 3ebtors
<7"FB"DB8 <)";8"DD8 B"7L"8<8
,ash & ?an& ?alance
<)";8"DD8 )9"D88 > <)"B7"8D8
Loans and Ad%ances
77"9F"L)8 BF"9F"D88 <B";;"F)8
4repaid -#penses <D"F)8
<B"LB8 > ;78
Accrued 0ncome
);"8;8 D7";7) <F"<F)
TOTAL CURRENT
ASSETS
54?25?366 22?64?234
23?66?426 15?45?125
LESS;
CURRENT
LIABILITIES
Sundry ,reditors
FD")B"B<) F;"<8"F<8 > D")L"7;)
TOTAL CURRENT
LIABILITIES 24?53?315 25?16?216 C 4?53?255
NET <ORDING
CAPITAL =5?44?6157 =3?65?5327 23?66?426 16?51?436

INFERENCE;
2or&ing capital is re'uired to finance day to day operations of a firm! There should
be an optimum le%el of wor&ing capital! (rom the abo%e calculations it is clearly found that
the company$s wor&ing capital is not at the best le%el! The current assets are lesser than the
liabilities!
42
5.2 SCHEDULE OF CHANGES IN <ORDING CAPITAL
TABLE 5.2
PARTICULARS
2665
AMOUNT
Rs.
2616
AMOUNT
Rs.
INCREASE
AMOUNT
Rs.
DECREASE
AMOUNT
Rs.
ASSETS;
CURRENT ASSETS
0n%entory 9"7)"<88
)"D7";78
7"97"<98
43
Sundry 3ebtors
<)";8"DD8
B8";B"8F8
<)"87"F78
,ash & ?an& ?alance
)9"D88
F"8)"8B8
)"DF"FB8
Loans and Ad%ances
BF"9F"D88
B<";7"7B< D";D"<F;
4repaid -#penses
<B"LB8
<L"877
B"7;7
Accrued 0ncome
D7";7)
;F"D7F
)B")8<
TOTAL CURRENT
ASSETS
22?12?555
35?42?245 21?62?643 3?32?345
LESS;
CURRENT
LIABILITIES
Sundry ,reditors
F;"<8"F<8
<"DF"D7"8;8 > LL"B<"D98
TOTAL CURRENT
LIABILITIES 25?16?216
1?42?42?656 C 33?31?446
NET <ORDING
CAPITAL
=3?65?5327 =36?55?4617 21?62?643 =25?55?1317
INFERENCE;
0n the abo%e the wor&ing capital is negati%e due to more fluctuations in in%entory and
loans! The company has borrowed more from outsiders for their purchase of fi#ed asset! The
creditors are increased at a %ery high rate that causes the company for many bad debts! More
care should be ta&en to a%oid such fluctuations in the later years!
44
5.3 SCHEDULE OF CHANGES IN <ORDING CAPITAL
TABLE 5.3
PARTICULARS
2616
AMOUNT
Rs.
2611
AMOUNT
Rs.
INCREASE
AMOUNT
Rs.
DECREASE
AMOUNT
Rs.
ASSETS;
CURRENT ASSETS
0n%entory
)"D7";78 ;")8"B<8
D"8L"B;8
Sundry 3ebtors
B8";B"8F8 DD"B<"<;8
<B"B9"<B8
,ash & ?an& ?alance
F"8)"8B8 B"L<"BL)
7"BB"F))
Loans and Ad%ances B<";7"7B< BB"L<")<< <"L;"798
45
4repaid -#penses <L"877
B"<<"878
7";B";;9
Accrued 0ncome
;F"D7F
7B"<F8
LB"7FF
Ad%ance Ta#
7"7F"B9)
7"7F"B9) >
TOTAL CURRENT
ASSETS
35?42?245 52?44?551 24?45?143 3?62?521
LESS;
CURRENT
LIABILITIES
Sundry ,reditors <"DF"D7"8;8 ;B";F"FB< )7"D)"D); >
TOTAL CURRENT
LIABILITIES
1?42?42?656 53?52?231 52?45?455 C
NET <ORDING
CAPITAL
=36?55?4617 2?44?326 =24?66?2327 3?62?521
INFERENCE;
The company has an increased le%el in the year 78<<! This is due to the control on
creditors! And increase in the in%entory and loans! Moreo%er the company has to ta&e a
special attention o%er this %arying wor&ing capital!

46
5.4 SCHEDULE OF CHANGES IN <ORDING CAPITAL
TABLE 5.4
PARTICULARS
2611
AMOUNT
Rs.
2612
AMOUNT
Rs.
INCREASE
AMOUNT
Rs.
DECREASE
AMOUNT
Rs.
ASSETS;
CURRENT ASSETS
0n%entory
;")8"B<8 DL"89"D)8
BL")9"<D8 >
Sundry 3ebtors
DD"B<"<;8 B8"FF"778
> <B"FD";L8
,ash & ?an& ?alance
B"L<"BL) ;"7)"D<8
)")D"8B)
Loans and Ad%ances BB"L<")<<
>
> BB"L<")<<
Ad%ance Ta#
B"<<"878
)"9;"9L8 7"L9"9)8 >
4repaid -#penses 7B"<F8 <"DB"LL8 <"78"F<8 >>
47
Accrued 0ncome
7"7F"B9) <"F;"9B8
> )F")))
TOTAL CURRENT
ASSETS
52?44?551 52?63?556 43?11?235 43?53?632
LESS;
CURRENT
LIABILITIES
Sundry ,reditors ;B";F"FB< F8")B"8<) BB"DB"F<F >
TOTAL CURRENT
LIABILITIES
53?52?231 26?53?615 33?43?212 C
NET <ORDING
CAPITAL
2?44?3267 35?56?535 13?24?615 43?53?632

INFERENCE;
0t can be clearly inferred that the company has a fluctuating wor&ing capital! This
means that the management is not ma&ing a good attention to the flow of funds! The
company$s wor&ing capital for the year 78<7 is again decreased at a %ery low rate this is due
to more ?ad debts! Although the company has impro%ed to an e#tent by decreasing its
liabilities!
48
5.2 RATIO ANALYSIS
5.2 MEANING OF RATIO;
A ratio is a mathematical relationship between two items e#pressed in a
'uantitati%e form! Ratio can be defined as Relationship e#pressed &in 'uantitati%e terms
between figures which ha%e cause and effect relationship which are connected with each
other in some manner or the other!
DEFINITION OF RATIO;
According to Accountant$s Aand ?oo& by 2i#on" Cell and ?edford" a
Ratio 0s an e#pression of the 'uantitati%e relationship between two numbers!
LI>UIDITY RATIOS;
49
0t measures the ability of a company to meet its current obligations" and indicate
the short term financial stability of the company! The parties interested in the li'uid ratio
would be employees" ban&ers and short>term creditors!
CURRENT RARIO;
,urrent Ratio may be defined as the ratio of ,urrent Assets to ,urrent Liabilities!
0t is also &nown as 2or&ing ,apital Ratio 7@< ratio! ,urrent Ratio shows the relationship
between total current assets and total current liabilities e#pressed as a formula!

C)**e%t Assets
CURRENT RATIO @
C)**e%t L!"#tes
>UICD RATIO;
A measure of company$s li'uidity and ability to meet its obligations" =uic& ratio"
often referred to as acid>test ratio" is obtained by subtracting in%entories from current assets
and then di%iding by current liabilities! =uic& ratio is %iewed as a sign of company$s financial
strength or wea&ness 6higher number means stronger" lower number means wea&er:!
LE)(:>)/8 !ssets
>UICD RATIO @
C)**e%t L!"#tes
ABSOLUTE LI>UIDITY RATIO;
This is also &nown as super =uic& Ratio 6or: ,ash Ratio! This ratio
considers only absolute li'uidity a%ailable with the firm! Absolute Li'uid assets include cash
50
in hand" cash at ban& mar&etable securities! A standard of 8!)@ < absolute li'uidity ratio is
considered an acceptable norm! 0t is calculated as follows@
C!s0 & B!%8 B!#!%/es
ABSOLUTE LI>UIDITY RATIO @
C)**e%t L!"#tes
INVENTORY TURNOVER RATIO;
0n%entory Turno%er Ratio also &nown as stoc& turno%er ratio in the
traditional language/ usually establishes relationship between the cost of goods sold during a
gi%en period and the a%erage amount of 0n%entory outstanding during that period! 0n%entory
Turno%er Ratio can be calculated by of the following formula@

Net S!#es
INVENTORY TURNOVER RATIO @
A-e*!&e I%-e%t+*$
DEBTORS TURNOVER RATIO;
Recei%ables 6or: 3ebtors normally include both debtors and ?ill
Recei%able and represent the uncollected portion of ,redit sales recei%ables constitute an
important component of ,urrent Assets and therefore the 'uality of recei%ables to a great
e#tent determines the li'uidity of a firm! This Ratio can be calculated as follows@
C*e(t S!#es
DEBTORS TURNOVER RATIO @
De"t+*
CREDITORS TURNOVER RATIO;
This Ratio is similar to recei%able turno%er ratio! 0t compares the
Accounts 4ayable with the total credit purchases! 0t signifies the credit period enjoyed by the
51
firm in paying creditors! Accounts payable include both sundry creditors and bills payable! 0t
is calculated as follows@
Net P)*/0!se
CREDITORS TURNOVER RATIO @
A-e*!&e /*e(t+*s
FIFED ASSET TURNOVER RATIO;
This ratio indicates the e#tent to which the in%estment in fi#ed assets
contributes towards sales! 0f compared with a pre%ious period" it indicates whether the
in%estment in fi#ed assets has been judicious or not" the Ratio is calculated as follows@

S!#es
FIFED ASSET TURNOVER RATIO @
Net FAe( Assets
<ORDING CAPITAL TURNOVER RATIO;
A measurement comparing the depletion of wor&ing capital to the generation
of sales o%er a gi%en period" this pro%ides some useful information as to how effecti%ely a
company is using its wor&ing capital to generate sales!
Net S!#es
<ORDING CAPITAL TURNOVER RATIO@
Net <+*8%& C!1t!#
CASH TO CURRENT ASSET RATIO;
The cash asset ratio is similar to the current ratio" e#cept that the current
ratio includes current assets such as in%entories in the numerator! Some analysts belie%e that
52
including current assets ma&es it difficult to con%ert them into usable funds for debt
obligations! The cash asset ratio is a much more accurate measure of a firmEs li'uidity
C!s0
CASH TO CURRENT ASSET RATIO@
C)**e%t Assets
CURRENT ASSET TURNOVER RATIO;
The ratio is calculated to ascertain the efficiency of use of current
assets of the concerns! 2ith an increase in sales" current assets are e#pected to increase!
Aowe%er" an increase in the ratio shows that current assets turned o%er faster resulting in
higher sales for a gi%en in%estment in current assets! Aigher ratio is generally an inde# of
better efficiency and profitability of the concern! This ratio gi%es a general impression about
the ade'uacy of wor&ing capital in reaction to sales!
S!#es
CURRENT ASSET TURNOVER RATIO@
C)**e%t Assets
INVENTORY TO SALES RATIO;
0n%entory to Sales Ratio indicates the manner in which a firm$s in%entory in
turning! The in%entory to sales ratio indicates the efficiency with which in%entory turno%er
into sales!
I%-e%t+*$
INVENTORY TO SALES RATIO@
S!#es
INVENTORY TO CURRETN ASSETS RATIO;
0t indicates the amount of in%entory in ,urrent Assets! Any increase
amount of in%entory indicates the lower li'uidity as compared to the other ,urrent Assets!
53
A-e*!&e I%-e%t+*$
INVENTOTY TO CURRENT ASSETS RATIO@
C)**e%t Assets
DEBT UTILIGATION RATIOS
The debt utili.ation ratio measures the proportion of debt and low
efficiently management used the debt capital! The higher the ratio" the greater the amount
other people$s money being used in an attempt to generate profits
DEBT RATIO;
The 3ebt Ratio measures the proportion of total assets financed by the time$s
creditor! The lighter the ratio the greater the amount other people$s money being used in an
attempt to generate profits" the ratio is calculated as follows"
T+t!# L!"#t$
DEBT RATIO@
T+t!# Assets
PROFITABILITY RATIOS;

These measures the o%erall effecti%eness in terms of returns generated" with
profits being related to sales and ade'uacy of such profits as to sales or in%estment! The
profitability ratios are important to internal management" to ban&ers" to in%estors" and to the
owners!
GROSS PROFIT RATIO;
1ross 4rofit Ratio e#presses the relationship of gross profit of sales to net sales
in terms of percentage" representing the percentage of gross profit earned on sales!
G*+ss P*+,t
54
GROSS PROFIT RATIO@ H166
Net S!#es
ADMINISTRATIVE EFPENSES RATIO;
This Ratio is also &nown as supporting ratio$s operating ratio! They
indicate the efficiency with which business as a whole functions! 0t is better for the concern to
&nown how it is able to sa%e or waste o%er e#penditure in respect of different items of
e#penses! Therefore each aspect of cost of sales & operation e#penses are analy.ed!
A('%st*!t-e EA1e%ses R!t+
ADMINISTRATIVEEFPENSESRATIO@ H166
Net S!#es
5.2.1 CURRENT RATIO;
C)**e%t Asset
CURRENT RATIO @
C)**e%t L!"#tes
TABLE 5.2.1
55
INTERPRETATION;
The ,urrent Ratio measures the ability of the firm to meet its ,urrent Liabilities!
The standard norms of ,urrent Ratio are 7@<! (rom the abo%e table it can be inferred that
the ,urrent Ratio of AVR MA*+(A,T+R-RS4%t! Ltd Shows higher in the year 78<76i!e!:
<!);
CURRENT RATIO;
FIGURE 5.2.1
56
YEAR CURRENT ASSETS
Rs
CURRENT LIABILTIES
Rs
RATIO
2664 )D"F)"B88 FD")B"B<) 6.45
2665 F7"8D"FB9 F;"<8"F<8 6.56
2616 L8"8F"F); <"DF"D7"8;8 6.44
2611 ;F"9D";)< ;B";F"FB< 1.63
2612 ;F"8B"))8 F8")B"8<) 1.55
5.2.2 >UICD RATIO;
LE)(t$ Assets
>)/8 R!t+ @
57
C)**e%t L!"#tes
<0e*e !s =>)/8 Assets @ C)**e%t Assets C =St+/8 I P*e1!( EA1e%ses7
T!"#e 5.2.2


INTERPRETATION;

58
YEARS >UICD ASSETS
Rs
CURRENT LIABILTIES
Rs
RATIOS
2664 BF";7"998 FD")B"B<) 6.53
2665 )B"L9"<F) F;"<8"F<8 6.34
2616 F;"9F"LDL <"DF"D7"8;8 6.44
2611 9D"7B"F7< ;B";F"FB< 6.56
2612 BD"L7"BF< F8")B"8<) 6.53
The =uic& Ratio 6or: Li'uidity ratio gi%es a measure of Li'uidity the e#pected
industry standard is <@<! (rom the abo%e table it can be inferred that the =uic& Ratio of AVR
MA*+(A,T+R-RS4%t! Ltd fluctuating in trend from the year 7889 to 78<7! The ratio has
been decreased in the current year due to higher current liabilities!
>UICD RATIO
FIGURE 5.2.2
59
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
QUICKRATIO
0.57
0.78
0.48
0.9
0.57
5.2.3 ABSOLUTE LI>UIDITY RATIO;
C!s0 & B!%8 B!#!%/es
A"s+#)te LE)(t$ R!t+ @
C)**e%t L!"#t$
TABLE 5.2.3
YEARS
CASH & BAND BALANCE
Rs
CURRENT LIABILITIES
Rs RATIOS
7889
9B"F<8
FD")B"B<)
8!8<B
788;
)9"D88
F;"<8"F<8
8!889
78<8
F"8)"8B8
<"DF"D7"8;8
8!8D
78<<
B"L<"BL)
;B";F"FB<
8!8D
78<7
;"7)"D<8
F8")B"8<)
8!<)
INTERPRETATION;
(rom the abo%e table it can be inferred that the AVR MA*+(A,T+R-RS4%t! Ltd
has a high Absolute Li'uidity Ratio in the year 78<7 6i!e!: 8!<)! The ratios are being in a
60
increasing position which means that the company has a good cash utili.ation! The ideal cash
position is !8)@<! So the company$s cash position ratio is satisfactory!
ABSOLUTE LI>UIDITY RATIO
FIGURE 5.2.3
61
5.2.4 INVENTORY TURNOVER RATIO;
Net S!#es
I%-e%t+*$ T)*%+-e* R!t+ @
A-e*!&e I%-e%t+*$
TABLE 5.2.4
YEAR
NET SALES
Rs
AVERAGE INVENTORY
Rs RATIO
2664 B;BLLB88 7")8";D8 <!)F
2665
)LBFD988 9"7)"<88 8!F;
2616 FB7LBB)8 )"D7";78
<!<F
2611 LL7BL7)) ;")8"B<8
8!9<
2612 9;;FLF98 DL"89"D)8
8!<;
INTERPRETATION;

62
(rom the abo%e table it can be inferred that the company$s
0n%entory increase in year 78<8 and get decreased in the ne#t following years due to more
fluctuations in the sales!
INVENTORY TURN OVER RATIO;
FIGURE 4.2.4
63
5.2.5 DEBTORS TURNOVER RATIO;
C*e(t S!#es
De"t+*s T)*%+-e* R!t+ @
De"t+*s
TABLE 5.2.5
YEAR CREDIT SALES
Rs
DEBTORS
Rs
RATIO
2664
B;BLL7F8 <7"FB"DB8 8!B<
2665
)LBFD988 <)";8"DD8 8!BF
2616
FB7LBBD) B8";B"8F8 8!78
2611
LL7BL7)) DD"B<"<;8 8!<L
2612
9;;FLF98 B8"FF"778 8!7;
INTERPRETATION;
(rom the abo%e table it can be inferred that the 3ebtors Turno%er Ratio of
AVR MA*+(A,T+R-RS4%t! Ltd increase in the year 7889 to 78<7 6i!e!: 8!B< to 8!7;
shows high in the year 788; 6i!e!: 8!BF !2hen compare to pre%ious years!
64
DEBTORS TURN OVER RATIO;
FIGURE 5.2.5
65
5.2.2 CREDITORS TURNOVER RATIO;
Net P)*/0!se
C*e(t+*s T)*%+-e* R!t+ @
A-e*!&e C*e(t+*s
TABLE 5.2.2
YEAR
NET PURCHASE
Rs
AVERAGE CREDITORS
Rs RATIO
2664 34654355 FD")B"B<)
5.24
2665 55653125 F;"<8"F<8
3.53
2616 52214225 <"DF"D7"8;8
3.44
2611 35314355 ;B";F"FB<
4.62
2612 33316556 F8")B"8<)
12.33
INTERPRETATION;
(rom the abo%e table it can be inferred that the AVR MA*+(A,T+R-RS4%t!
Ltd company$s creditors turno%er ratio in year 7889 to 78<7 6i!e!: )!79 to <7!LL! The
company has decreased its creditors that ma&e the ratio to increase!
66
CREDITORS TURNOVER RATIO;
FIGURE 4.2.2
67
5.2.3 FIFED ASSET TURNOVER RATIO;
S!#es
FAe( Assets T)*%+-e* R!t+ @
Net FAe( Assets
TABLE4.2.3
YEAR SALES
Rs
NET FIFED ASSETS
Rs
RATIO
2664
B;BLL7F
8 LBD88<8 )!BF
2665
)LBFD98
8 ;)9FLB8 )!;9
2616
FB7LBBD
) ;)"89")9F )!;<
2611
LL7BL7)
) <7F7<BL8 F!<<
2612
9;;FLF9
8 <7FFD7L8 L!<8
S+)*/e; Annual Reports AVR MA*+(A,T+R-RS4%t! Ltd" ,hennai from 788)><8
INTERPRETATION;
68
(rom the abo%e table it can be inferred that the (i#ed Asset Turno%er Ratio of
AVR MA*+(A,T+R-RS4%t! Ltd" has increased by F!<<H in the year
FIFED ASSET TURNOVER RATIO@
FIGURE 4.2.3
69
5.2.4 CASH TO CURRENT ASSET RATIO;
C!s0
C!s0 t+ C)**e%t Asset R!t+@
C)**e%t Assets
TABLE 5.2.4
YEAR CASH
Rs
CURRENT ASSET
Rs
RATIO
2664
9B"F<8 FD")B"B<) 6.61
2665
)9"D88
F;"<8"F<8
6.64
2616
F"8)"8B8
<"DF"D7"8;8
6.664
2611
B"L<"BL) ;B";F"FB< 6.64
2612
;"7)"D<8 F8")B"8<) 6.15
INTERPRETATION;
70
(rom the abo%e table it can be inferred that the Ratio increase in the year 7889 to
78<7 6i!e!: 8!8< to 8!<)!The ,ash to ,urrent Asset Ratio shows higher in the year 78<7 6i!e!:
8!<)! this is due to increase in the cash balance and decrease in the sundry creditors!
CASH TO CURRENT ASSET RATIO@
FIGURE5.2.4
71
5.2.5 CURRENT ASSET TURNOVER RATIO;
S!#es
C)**e%t Asset T)*%+-e* R!t+ @
C)**e%t Assets
TABLE 5.2.5
YEAR SALES
Rs
CURRENT ASSETS
Rs
RATIO
2664 B;BLLB88
FD")B"B<) 2.16
2665 )LBFD988
F;"<8"F<8 4.3
2616 FB7LBB)8
<"DF"D7"8;8 2.33
2611 LL7BL7))
;B";F"FB< 4.21
2612 9;;FLF98
F8")B"8<) 14.42
72

INTERPRETATION;
(rom the abo%e table it can be inferred that the ,urrent Asset Turno%er Ratio
of AVR MA*+(A,T+R-RS4%t! Ltd in year 7889 to 78<7! 0t has been increased which
shows the satisfactory le%el of current asset correspondence to the sales in the subse'uent
years and the ratio finally increases in the year 78<7 6i!e!: <D!9F when compared to the
pre%ious years
CURRENT ASSET TURNOVER RATIO;
FIGURE 5.2.5
73
5.32.16 INVENTORY TO SALES RATIO;
I%-e%t+*$
I%-e%t+*$ t+ S!#es R!t+@
S!#es
TABLE 5.2.16
YEAR INVENTORY
Rs
SALES
Rs RATIO
2664
)97)<88 B;BLLB8
8
6.15
2665
)D7;7)< )LBFD98
8
6.65
2616
B998<78 FB7LBB)
8
6.62
2611
;<)8B<8 LL7BL7)
)
6.11
2612
DL89D)8 9;;FLF9
6.65
74
8
INTERPRETATION;
(rom the abo%e table it can be inferred that the 0n%entory to Sales Ratio of AVR
MA*+(A,T+R-RS4%t! Ltd!Aas been increased in the year 78<8 6i!e!: 8!<<!2hen
compared to pre%ious years! ?ut 0 the year78<<" the ratio ha%e been fall down to 8!8)!
INVENTORY TO SALES RATIO;
FIGURE 5.2.16
75
5.2.11 <ORDING CAPITAL TURNOVER RATIO;
Net <+*8%& C!1t!#
76
6.15
6.65
6.62
6.11
6.65
6
6.62
6.64
6.62
6.64
6.1
6.12
6.14
6.12
RATIOS
2664 2665
2616 2611
2612
YEARS
INVENTORY TO SALES RATIO
RATIO
<ORDING CAPITAL TURNOVER RATIO @
C)**e%t L!"#tes
TABLE 5.2.11
YEAR NET <ORDING CAPITAL
Rs
CURRENT LIABILITIES
Rs
RATIO
7889 C544615 FD")B"B<) C6.15
788; C365532 F;"<8"F<8 C6.16
78<8 C3235431 <"DF"D7"8;8 C6.52
78<< 244326 ;B";F"FB< 6.63
78<7 3556535 F8")B"8<) 6.55
INTERPRETATION;

(rom the abo%e table it can be inferred that the 2or&ing ,apital Turno%er Ratio of AVR
MA*+(A,T+R-RS4%t! Ltd! The 2or&ing ,apital Turno%er Ratio shows a negati%e ratio
in the first three years i!e!7889" 788;" 78<8 ! ?ut on 78<< and 78<7 there has been
continuously increase in the wor&ing capital due to decrease in the current liabilities!
<ORDING CAPITAL TURNOVER RATIOS
FIGURE 5.2.15
77
5.2.12 INVENTORY TO CURRE NT ASSET RATIO@
A-e*!&e I%-e%t+*$
I%-e%t+*$ t+ C)**e%t Asset R!t+ @
78
C)**e%t Assets
TABLE 5.2.12
INTERPRETATION;
(rom the abo%e table it can be inferred that the company$s 0n%entory to
,urrent Asset Ratio in the year 7889 to 78<7! There is a fluctuating in this ratio! The highest
ratio is on 788;" 8!;D and get decreases and finally comes to 8!D;
79
YEAR
AVERAGE INVENTORY
Rs
CURRENT ASSET
Rs RATIO
2664 )97)<88
54?25?366
1.62
2665 )D7;7)<
22?64?234
6.12
2616 B998<78
36?62?255
4.54
2611 ;<)8B<8
52?44?551
6.33
2612 DL89D)8
52?63?556
6.45
INVENTORY TO CURRENT ASSET RATIO

FIGURE 5.2.12
80
5.2.13 GROSS PROFIT RATIO;
G*+ss P*+,t
G*+ss P*+,t R!t+@ H 166
Net S!#es
<0e*e !s =G*+ss P*+,t @ Net S!#esC C+st +, G++(s S+#(7
C+st +, G++(s S+#( @ =O1e%%& St+/8I P)*/0!se Less Ret)*%sCC)**e%t
L!"#tes7
Net S!#es @ =S!#esC S!#es Ret)*%7.
TABLE 5.2. 13
YEAR GROSS PROFIT
Rs
CURRENT ASSET
Rs
RATIO
2664 BL)B)88
54?25?366
6.24
2665 D<L7888
22?64?234
6.65
2616 ))8;;)8
36?62?255
6.36
2611 FL;B8))
52?44?551
6.24
2612 97<)7B8
52?63?556
6.42

81
GROSS PROFIT RATIO
FIGURE 5.2.13
INTERPRETATION;
(rom the abo%e table it can be inferred that the company$s 1ross 4rofit Ratio
increase in year 788)>8F 6i!e!: ;!)B! ?ut from 788)>8F to 78<<><8 there has been slowdown
to some e#tent" when comparing to the pre%ious years!
82
5.2.14 ADMINISTRATIVE EFPENSES RATIO;
A('%st*!t-e EA1e%ses
A('%st*!t-e EA1e%ses R!t+@ H166
Net S!#es
TABLE 5.2.14
YEAR
ADMINISTRATIVE EFPENSES RATIO
Rs NET SALES
Rs
RATIO
2664 FFF8F78 B;BLLB88 12.51
2665 ;98)9L8 )LBFD988 13.65
2616 <<);9FD8 FB7LBB)8 14.33
2611 <B;<;F<) LL7BL7)) 14.62
2612 <D7BFBL) 9;;FLF98 15.42
INTERPRETATION;
(rom the abo%e table it can be inferred that the company$s
Administrati%e -#penses Ratio in year 7889 to 78<7 6i!e!: <F!;< to <)!97!has been increased
in the year 7889 6i!e!: <F!;<! 0n the year 78<7 the Administrati%e -#penses Ratio has been
decreased 6i!e!: <)!97!2hen compared to pre%ious years
83
ADMINISTRATIVE EFPENSES RATIO
FIGURE 5.2.14
84
12.51
13.65
14.33
14.62
15.42
14.5
15
15.5
12
12.5
13
13.5
14
14.5
RATIOS
2664 2665 2616 2611 2612
YEARS
ADMINISTRATIVE EFPENSES RATIO
RATIO
TREND ANALYSIS
5.3 MEANING TREND ANALYSIS;
Trend analysis is one of the important tools of analy.ing the financial
data! 0t computes the percentage changes for different %ariables o%er a long period and then
ma&es a comparati%e study of them! The trend percentage helps the analyst to study the
changes that ha%e occurred darning the period! Such an analysis indicates the progress by
showing ups and downs in its acti%ities
(0*A*,0AL TR-*3 A*ALMS0S is the process of analy.ing financial statements of
a company for any continuing relationship! 1enerally" an analysis is made to find out what
direction a concern is going" how rapidly" and whether there are enough resources to
complete proposed projects!
An aspect of technical analysis that tries to predict the future mo%ement of a stoc& based on
past data! Trend analysis is based on the idea that what has happened in the past gi%es traders
an idea of what will happen in the future!
There are three main types of trends@ short>" intermediate> and long>term!
85
CURRENT ASSET;
TABLE 5.3.1
M N a O bP 2here a N QM / b N QPM
n QP
7

86
YEAR
CURRENT ASSET
=Y7 F FY F
2
Y @ ! I " A
2664
))"8;"FF8
C2 ><<8<;B78 4 )<)B;98!B
2665
D"DB")D"D;)
C1 CD"DB")D"D;) 1 F7L<7L<!9
2616
L9"DF"F9;
6 6 6 )L"<9")BD
2611
7"L9"9D";)<
1 7"L9"9D";)< 1 ;99;98L!)
2612
;F"8B"))8
2 <;78L<88 4 <<9B9<B)
JY@32542422.5 JF@6 JFY@
11132525
JF
2
@
16
CURRENT ASSET@
FIGURE 5.3.1
87
FIFED ASSET;
TABLE 5.3.2
M N a O bP 2here a N QM / b N QPM
n QP
7
FAe( !ssets -!#)e ,+* 2612 K 11 .## "e !"+)t Rs. 2? 64? 35?31.334
88
YEAR
FIFED ASSET
=Y7 F FY F
2
Y @ ! I " A
2664
346616.266 C2 C1446621.2 4 445552.453
2665
542324.266 C1 C542324.2 1 1654364.222
2616
1366345.121 6 6 6 1342224.435
2611
1221324.213 1 1221324.213 1 1556546.264
2612
1224225.232 2 3324535.232 4 1435255.533
JY@2313122.134 JF@6 JFY@2443153.245 JF
2
@16
FIFED ASSET
FIGURE 5.3.2
89
CASH & BAND BALANCE;
TABLE 5.3.3
M N a O bP 2here a N QM / b N QPM
n QP
7
90
YEAR CASH & BAND F FY F
2
Y @ ! I " A
2664
54463.633 C2 C112462.154 4 216261.545
2665
265622.561 C1 C265622.561 1 326233.641
2616
553151.324 6 6 6 516232.453
2611
331334.345 1 331334.345 1 226363.545
2612
525462.415 2 1456412.43 4 416343.353
JY@2553322.422 JF@6 JFY@1566354.524 JF
2
@16
CASH & BAND BALANCES
FIGURE 5.3.3
91
INVENTORY
TABLE 5.3.4
M N a O bP 2here a N QM / b N QPM
n QP
7
INVENTORY
92
YEARS INVENTORY F FY F
2
Y @ ! I " A
2664 5425652.355 C2 C11256145.2 4
3435262.322
2665

5425251.125 C1 C5425251.125 1
5245422.223
2616

3446115.263 6 6 6
5354243.334
2611 5156316.334 1 5156316.334 1
5543426.441
2612

4364444.332 2 5412453.424 4
2652153.544
JY@24553214.23 JF@6 JFY@1443331.633 JF
2
@16
FIGURE 4.3.4
SUNDRY DEBTORS
93
TABLE 4.3.5
M N a O bP 2here a N QM / b N QPM
n QP
7
SUNDRY DEBTORS
FIGURE 5.3.5
94
YEARS SUNDRY DEBTORS
=Y7
F FY F
2
YC@ ! I " A
2664 1556435.332 C2 C3146435.552 4 1444553.354
2665 3653653.621 C1 C3653653.621 1 1513521.443
2616 2311556.564 6 6 6 2342456.332
2611
4431143.152 1 4431143.152 1 2335454.425
2612 3622213.135 2 2132434.354 4 3264423.314
JY@11332451.24 JF@6 JFY@4245244.453 JF
2
@16
CHAPTER VI
95
FINDINGS;
0n the year of 7889" 788; and 78<8 shows increase in 2or&ing
,apital! This indicates that the company has ability of payment of
short>term Liability!
The fi#ed assets ratio indicates that the wor&ing capital of this
company is funded by long>term funds which indicate efficient funds
management!
The Short Rterm Li'uidity and long> term Li'uidity position of the
concern were studied to e%aluate the 2or&ing ,apital of the concern!
3uring the study period 7889 to 78<7 the current ratio of the concern
%aried from 9!FB to 7!7<!?ut 78<8 > 78<< is %aried from 8!LL to <!98!
This was much less than the prescribed of 7@<! The inference is that
the ,urrent Liability may not be easily met out of ,urrent Asset by
the ,ompany!
The =uic& ratio of the concern during the period 7889 > 78<7 the
study is %aried from L!77 to <!FL!2hich was much greater than the
prescribed standard of <@<!So the company Li'uidity le%el is
satisfactory!
0n Trend analysis the ,ash &?an& ?alance ha%e been increased from
7889 to 78<<!So it shows the ,ash position of the company is good!

CHAPTER VII
96
SUGGESTION;
The company is a profit see&ing one/ it has to commit all of its
resources to achie%e its goal! To achie%e this" profitability" li'uidity
and sol%ency position a crucial elements to be monitored carefully"
thereby the trade off can be reached
This company$s ability to meet its current obligations is satisfactory
though it does not meet the con%entional norm! This company
maintains current liabilities more than the amount of current assets
which has to be %iewed seriously and impro%ement of this ratio is
re'uired to achie%e the optimum le%el!
Stoc& Turno%er Ratio should be maintained at the constant le%el!
The ,ash & ?an& ?alances of the company is good!
+sing trend analysis it can be suggested that the fi#ed assets cur%e
shows steady upward direction much than the current assets cur%e"
which enable us to understand the company$s funds are dumped in
fi#ed asset" it is not a fa%orable condition to the company
CHAPTER VIII
97
CONCLUTION
The present study re%eals that the li'uidity position of this company is comparati%ely good
as it approaches the standard norms throughout the period of study! 5n the
whole" it can be concluded that the company$s o%erall ris& e%aluation process is
not at desired le%el and the author has made the realistic recommendation for
the impro%ement in operational and managerial efficiency of the company as to
maintain and increase further by effecti%e utili.ation and control of all the
assets!
98
CHAPTER IF
BIBILIOGRAPHY
M!%!&e'e%t !//+)%t%& C S.N.MAHESH<ARY
F%!%/!# '!%!&e'e%t C I.M.PANDEY
Rese!*/0 'et0+(+#+&$ C C.R.DOTHARI
M!%!&e'e%t !//+)%t%& C R.S.N.PILLAI
&
BAGAVATHI
<e" ste;
www!google!com
www!finance!org
99
CONSOLIDATED BALANCESHEET AS ON 31ST MARCH 2664 TO 31ST MARCH 2612
100
101
PARTICULARS 2664 2665 2616 2611 2612
ASSETS;
CURRENT ASSETS;
a! 0n%entory
7")8";D8
9"7)"<88
)"D7";78 ;")8"B<8 DL"89"D)8
b! Sundry 3ebtors
<7"FB"DB8 <)";8"DD8 B8";B"8F8 DD"B<"<;8 B8"FF"778
c! ,ash and ?an&
9B"F<8 )9"D88 F"8)"8B8 B"L<"BL) ;"7)"D<8
d! 4repaid
-#penses
<D"F)8
<B"LB8 <L"877 B"<<"878 )"9;"9L8
e! Accrued 0ncome
);"8;8 D7";7) ;F"D7F 7B"<F8
<"DB"LL8
f! Ad%ance ta# > > >
7"7F"B9) <"F;"9B8
g! Loans and
Ad%ances
77"9F"L)8 BF"9F"D88 B<";7"7B< BB"L<")<< >
TOTAL CURRENT
ASSETS; B;")9"DL8 F7"<F";;) L8"8F"F); ;F"9D";)< ;F"8B"))8
FIFED ASSET;
(i#ed assets LB"D8"8<8 ;)"9F"LB8 ;)"89")9F <"7F"7<"BL8 <"7F"FD"7L8
TOTAL FIFED
ASSETS; LB"D8"8<8 ;)"9F"LB8 ;)"89")9F <"7F"7<"BL8 <"7F"FD"7L8
TOTAL ASSSET 1,12,98,480 1,58,03,725 1,65,15,245 2,23,06,321 2,22,67,820
LIABILITIES;
CURRENT
LIABILITIES;
a! Sundry
,reditors
FD")B"B<) F;"<8"F<8 <"DF"D7"8;8 ;B";F"FB< F8")B"8<)
RESERVES AND
SURPLUS;
,apital Reser%es L")8"888 <8")8"888 > <"88"88"888 <"88"88"888
1eneral Reser%e <)"88"888 7)"88"888 <)"88"888 <)"88"888 <)"88"888
UNSECURED
LOAN;