CHAPTER I

CASH MANAGEMENT
1.1 INTRODUCTION:
Cash is the important current asset for the operations of the business. Cash is the basic
input needed to keep the business running on a continuous basis; it is also the ultimate output
expected to be realized by selling the service or product manufactured by the firm. The firm
should keep sufficient cash, neither more nor less. Cash shortage will disrupt the firm’s
manufacturing operations while excessive cash will simply remain idle, without contributing
anything towards the firm’s profitability. Thus, a major function of the financial manager is to
maintain a sound cash position.

Cash is the money which a firm can disburse immediately without any restriction. The
term cash includes coins, currency and cheques held by the firm, and balances in its bank
accounts. Sometimes near-cash items, such as marketable securities or bank times deposits,
are also included in cash. The basic characteristic of near-cash assets is that they can readily
be converted into cash. Generally, when a firm has excess cash, it invests it in marketable
securities. This kind of investment contributes some profit to the firm.

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1.2 NEED FOR THE STUDY

The importance of Cash management in any industrial concern cannot be

overstressed. Under the present inflationary condition, management of Cash is perhaps more
important than even management of profit and this requires greatest attention and efforts of
the finance manager. It needs vigilant attention as each of its components require different
types of treatment and it throws constant attention on exercise of skill and judgment,
awareness of economic trend etc, due to urgency and complicacy the vital importance of
Cash.

The anti-inflationary measure taken up by the Government, creating a tight money

condition has placed working capital in the most challenging zone of management and it
requires a unique skill for its management. Today, the problem of managing Cash has got the
recognition of separate entity, so its study and management is of major importance to both
internal and external analyst to judge the current position of the business concerns. Hence, the
present study entitled “An Analysis on Cash Management” has been taken up.

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 1.3 OBJECTIVES OF THE STUDY

 Primary Objective:
• To analyze the cash management of Hero Moto Corp Ltd.

 Secondary Objective:
• To find out the liquidity position of the concern through ratio analysis.
• To study the growth of Hero Moto Corp Ltd in terms of cash flow statement.
• To make suggestion and recommendation to improve the cash position of Hero Moto
Corp Ltd.

1.4 SCOPE OF THE STUDY

 It helps to take short term financial decision.

 It indicates the cash requirement needed for plant or equipment expansion
programs.
 To find strategies for efficient management of cash.
 It helps to arrange needed funds on the most favorable terms.
 It helps to meet routine cash requirement to finance the transaction.
 It reveals the liquidity position of the firm by highlighting the various sources
of cash and its uses.

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 1.5 LIMITATIONS OF THE STUDY

 The study is restricted only to Hero Moto Corp Ltd Being a case study, the
findings cannot be generalized.
 The study does not take into account the inflation.
 The study takes into account only the quantitative data and the qualitative
aspects were not taken into account

RESEARCH METHODOLOGY

1.6 RESEARCH
Research is a process in which the researchers wish to find out the end result for a
given problem and thus the solution helps in future course of action. The research has been
defined as “A careful investigation or enquiry especially through search for new facts in
branch of knowledge”

1.7 RESEARCH DESIGN

The research design used in this project is Analytical in nature the procedure using,
which researcher has to use facts or information already available, and analyze these to make
a critical evaluation of the performance.

1.8 DATA COLLECTION

 Primary Sources
1. Data are collected through personal interviews and discussion with Finance-
Executive.
2. Data are collected through personal interviews and discussion with Material
Planning- Deputy Manager.
 Secondary Sources
1. From the annual reports maintained by the company.
2. Data are collected from the company’s website.

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 3. Books and journals pertaining to the topic.

1.9 TOOLS USED IN THE ANALYSIS

 Cash flow statement

 Trend analysis
 Ratio analysis.

1.10 Period of study

The present study has taken into account Five years viz., 2012-2013 to 2016-2017.

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 CHAPTER II
REVIEW OF LITERATURE

Meaning:

Cash is the money which a firm can disburse immediately without any restriction. The
term cash includes coins, currency and cheques held by the firm, and balances in its bank
accounts. Sometimes near-cash items, such as marketable securities or bank times deposits,
are also included in cash. The basic characteristic of near-cash assets is that they can readily
be converted into cash.

FACETS OF CASH MANAGEMENT:

Cash management is concerned with the managing of: (i) Cash flows into and out of
the firm, (ii) Cash flows within the firm, and (iii) Cash balances held by the firm at a point of
time by financing deficit or investing surplus cash. It can be represented by a cash
management cycle. Sales generate cash which has to be disbursed out. The surplus cash has
to be invested while deficit this cycle at a minimum cost. At the same time, it also seeks to
achieve liquidity and control. Cash management assumes more importance than other current
assets because cash is the most significant and the least productive asset that a firm’s holds. It
is significant because it is used to pay the firm’s obligations. However, cash is unproductive.
Unlike fixed assets or inventories, it does not produce goods for sale. Therefore, the aim of
cash management is to maintain adequate control over cash position to keep the firm
sufficiently liquid and to use excess cash in some profitable way.

Cash management is also important because it is difficult to predict cash flows

accurately, particularly the inflows, and there is no prefect coincidence between the inflows
and outflows of cash. During some periods, cash outflows will exceed cash inflows, because
payments for taxes, dividends, or seasonal inventory build up. At other times, cash inflow
will be more than cash payments because there may be large cash sales and debtors may be
realized in large sums promptly. Further, cash management is significant because cash
constitutes the smallest portion of the total current assets, yet management’s considerable time

6
is devoted in managing it. In recent past, a number of innovations have been done in cash
management techniques. An obvious aim of the firm these days is to manage its cash affairs
in such a way as to keep cash balance at a minimum level and to invest the surplus cash in
profitable investment opportunities.

In order to resolve the uncertainty about cash flow prediction and lack of
synchronization between cash receipts and payments, the firm should develop appropriate
strategies for cash management. The firm should evolve strategies for cash management. The
firm should evolve strategies regarding the following four facets of cash management.

 Cash planning: Cash inflows and outflows should be planned to project cash surplus
or deficit for each period of the planning period. Cash budget should be prepared for
this purpose.
 Managing the cash flows: The firm should decide about the properly managed. The
cash inflows should be accelerated while, as far as possible, the cash outflows should
be decelerated.
 Optimum cash level: the firm should decide about the appropriate level of cash
balances. The cost of excess cash and danger of cash deficiency should be matched to
determine the optimum level of cash balances.
 Investing surplus cash: The surplus cash balances should be properly invested to
earn profits. The firms should decide about the division of such cash balances
between alternative short-term investment opportunities such as bank deposits,
marketable securities, or inter-corporate lending.

MOTIVES FOR HOLDING CASH

The firm’s need to hold cash may be attributed to the following three motives:
 The transactions motive
 The precautionary motive
 The speculative motive

TRANSACTION MOTIVE
The transactions motive requires a firm to hold cash to conduct its business in the
ordinary course. The firm needs cash primarily to make payments for purchases, wages and

7
salaries, other operating expenses, taxes, dividends etc. The need to hold cash would not arise
if there were perfect synchronization between cash receipts and cash payments, i.e., enough
cash is received when the payment has to be made. But cash receipts and payments are not
perfectly synchronized. For those periods, when cash payments exceed cash receipts, the firm
should maintain some cash balance to be able to make required payments. For transactions
purpose, a firm may invest its cash in marketable securities. Usually, the firm will purchase
securities whose maturity corresponds with some anticipated payments, such as dividends or
taxes in the future. Notice that the transactions motive mainly refers to holding cash to meet
anticipated payments whose timing is not perfectly matched with cash receipts.

PRECAUTIONARY MOTIVE
The precautionary motive is the need to hold cash to meet contingencies in the future.
It provides a cushion or buffer to withstand some unexpected emergency. The precautionary
amount of cash depends upon the predictability of cash flows. If cash flows can be predicted
with accuracy, less cash will be maintained for an emergency. The amount of precautionary
cash is also influenced by the firm’s ability to borrow at short notice when the need arises.
Stronger the ability of the firm to borrow at short notice, less the need for precautionary
balance. The precautionary balance may be kept in cash and marketable securities.
Marketable securities play an important role here. The amount of cash set aside for
precautionary reasons is not expected to earn anything; the firm should attempt to earn some
profit on it. Such funds should be invested in high-liquid and low-risk marketable securities.
Precautionary balances should, thus, be held more in marketable securities and relatively less
in cash.

SPECULATIVE MOTIVE

The speculative motive relates to the holding of cash for investing in profit-making
opportunity to make profit may arise when the security prices change. The firm will hold
cash, when it is expected that interest rates will rise and security prices will fall. Securities
can be purchased when the interest rate is expected to fall; the firm will benefit by the
subsequent fall in interest rates and increase in security prices. The firm may also speculate
on materials prices. If it is expected that materials prices will fall, the firm can postpone
materials purchasing and make purchases in future when pric4e actually falls. Some firms
may hold cash for speculative purposes. By and large, business firms do not engage in

8
speculations. Thus, the primary motives to hold cash and marketable securities are: the
transactions and the precautionary motives.

CASH PLANNING

Cash flows are inseparable parts of the business operations of firms. A firm needs
cash to invest in inventory, receivable and fixed assets and to make payment for operating
expenses in order to maintain growth in sales and earnings. It is possible that firm may be
making adequate profits, but may suffer from the shortage of cash as its growing needs may
be consuming cash very fast. The ‘poor cash’ position of the firm cash is corrected if its cash
needs are planned in advance. At times, a firm can have excess cash may remain idle. Again,
such excess cash outflows. Such excess cash flows can be anticipated and properly invested
if cash planning is resorted to. Cash planning is a technique to plan and control the use of
cash. It helps to anticipate the future cash flows and needs of the firm and reduces the
possibility of idle cash balances ( which lowers firm’s profitability ) and cash deficits (which
can cause the firm’s failure).

Cash planning protects the financial condition of the firm by developing a projected
cash statement from a forecast of expected cash inflows and outflows for a given period. The
forecasts may be based on the present operations or the anticipated future operations. Cash
plans are very crucial in developing the overall operating plans of the firm.
Cash planning may be done on daily, weekly or monthly basis. The period and
frequency of cash planning generally depends upon the size of the firm and philosophy of
management. Large firms prepare daily and weekly forecasts. Medium-size firms usually
prepare weekly and monthly forecasts. Small firms may not prepare formal cash forecasts
because of the non-availability of information and small-scale operations. But, if the small
firms prepare cash projections, it is done on monthly basis. As a firm grows and business
operations become complex, cash planning becomes inevitable for its continuing success.

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OTHER FACTORS THAT AFFECT THE SIZE OF CASH BALANCE

1. Availability of short-term credit:

To avoid holding unnecessary large balances of cash, most firms attempt to make
arrangements at borrow money is case of unexpected needs. With such an agreement, the
firm normally pays interest only during the period that the money is actually used.

2. Money market rates:

If money will bring a low return a firm may choose not to invest it. Since the loss or
profit is small, it may not be worth the trouble to make the loan. On the other hand, if interest
rates are very high, every extra rupee will be invested.

3. Variation in cash flows:

Some firms experience wide fluctuation in cash flows as a routine matter. A firm with
steady cash flows can maintain a fairly uniform cash balance.

4. Compensating balance:
If a firm has borrowed money from a bank, the loan agreement may require the firm to
maintain a minimum balance of cash in its accounts. This is called compensating balance. In
effect this requires the firm to use the services of bank a guaranteed deposit on which it pays
no interest. The interest free deposit is the bank’s compensation for its advice and assistance.

CASH MANAGEMENT – BASIS STRATEGIES

The management should, after knowing the cash position by means of the cash budget,
work out the basic strategies to be employed to manage its cash.

CASH CYCLE:
The cash cycle refers to the process by which cash is used to purchase materials from
which are produced goods, which are them sold to customers.
Cash cycle=Average age of firm’s inventory
+Days to collect its accounts receivables
-Days to pay its accounts payable.

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The cash turnover means the numbers of times firm’s cash is used during each year.

360
Cash turnover = ----------------
Cash cycle

The higher the cash turnover, the less cash the firm requires. The firm should, therefore, try to
maximize the cash turn.

MANAGING COLLECTIONS:

a) Prompt Billing:
By preparing and sending the bills promptly, without a time log between the dispatch of
goods and sending the bills, a firm can ensure earlier remittance.

b) Expeditious collection of cheques:

An important aspect of efficient cash management is to process the cheques receives very
promptly.

c) Concentration Banking:
Instead of a single collection center located at the company headquarters, multiple
collection centers are established. The purpose is to shorten the period between the time
customers mail in their payments and the time when the company has use of the funds are
then to a concentration bank – usually a disbursement account.

d) Lock-Box System:
With concentration banking, a collection center receives remittances, processes them and
deposits them in a bank. The purpose is to lock-box system is to eliminate the time between
the receipt of remittances by the company and their deposit in the bank. The company rents a
local post office box and authorizes its bank in each of these cities to pick up remittances in
the box. The bank picks up the mail several times a day and deposits the cheque in the

11
company’s accounts. The cheques are recorded and cleared for collection. The company
receives a deposits the cheque in the company’s accounts. The cheques are recorded and
cleared for collation. The company receives a deposit slip and a lift of payments. This
procedure frees the company from handling a depositing the cheques.

CONTROL OF DISBURSMENT

a) Stretching Accounts Payable

A firm should pay its accounts payables as late as possible without damaging its credit
standing. It should, however, take advantages of the cash discount available on prompt
payment.

b) Centralized Disbursement
One procedure for rightly controlling disbursements is to cenrealise payables in to a
single account, presumably at the company’s headquarters. Such an arrangement would
enable a firm to delay payments and can serve cash for several reasons. Firstly, it increases
transit time. Secondly, if a firm has a centralized bank account, a relatively smaller total cash
balances will be needed.

c) Bank Draft
Unlike an ordinary cheque, the draft is not payable on demand. When it is presented
to the issuer’s bank for collection, the bank must present it to the issuer for acceptance. The
funds then are deposited by the issuing firm to cover payments of the draft. But suppliers
prefer cheques. Also, bank imposes a higher service charge to process them since they require
special attention, usually manual.

d) Playing the float

The amount of cheques issued by the firm but not paid for by the bank is referred to as
the “payment float”. The differences between “payment float” and “collection float” are the
net float. So, if a firm enjoys a positive “net float”, it may issue cheques even if it means

12
having an ever drown account in its books. Such an action is referred to as “playing the
float”, within limits a firm can play this game reasonably safely.
Thus management of cash becomes essential and it should be seen to, that neither
excessive nor inadequate cash balances are maintained.

CASH FLOW ANALYSIS

The cash flow analysis is done with the help of cash flow statement. A cash flow
statement is a statement depicting changes in cash position from one period to another. It is
an important planning tool. Cash flow statement gives a clear picture of the source of cash,
the uses of cash and the net changes in cash. The primary purpose of cash flow statement is
to show that as to where from the cash to be acquired and where to use them.

UTILITY OF CASH FLOW ANALYSIS

A Cash flow analysis is an important financial tool for the management. Its chief
advantages are as follows.

1. Helps in efficient cash management

Cash flow analysis helps in evaluating financial policies and cash position. Cash is the
basis for all operation and hence a projected cash flow statement will enable the management
to plan and co-ordinate the financial operations properly. The management can know how
much cash is needed from which source it will be derived, how much can be generated, how
much can be utilized.

2. Helps in internal financial management

Cash flow analysis information about funds, which will be available from operations.
This will helps the management in repayment of long-term debt, dividend policies etc.,

3. Discloses the movements of Cash

Cash flow statement discloses the complete picture of cash movement. The increase
in and decrease of cash and the reasons therefore can be known. It discloses the reasons for
low cash balance in spite of heavy operation profits on for heavy cash balance in spite of low
profits.

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4. Discloses success or failure of cash planning
The extent of success or failure of cash planning be known by comparing the projected
cash flow statement with the actual cash flow statement and necessary remedial measures can
be taken.

DETERMINE THE OPTIMUM CASH BALANCE

One of the primary responsibilities of the financial manager is to maintain a sound

liquidity position of the firm so that the dues are settled in time. The firm needs cash to
purchase raw materials and pay wages and other expenses as well as for paying dividend,
interest and taxes. The test of liquidity is the availability of cash to meet the firm’s
obligations when they become due.
A firm maintains the operating cash balance for transaction purposes. It may also
carry additional cash as a buffer or safety stock. The amount of cash balance will depend on
the risk-return trade-off. If the firm maintains small cash balance, its liquidity position
weakens, but its profitability improves as the released funds can be invested in profitable
opportunities (marketable securities). When the firm needs cash, it can sell its keeps high
cash balance, it will have a strong liquidity position but its profitability will be low. The
potential profit foregone on holding large cash balance is an opportunity cost to the firm. The
firm should maintain optimum – just to enough, neither too much nor too little – cash balance.
How to determine the optimum cash balance if cash flows are predictable and if they are not
predictable.

Optimum cash balance under certainty

BAUMOL’S MODEL
The Baumol model of cash management provides a formal approach for determining a
firm’s optimum cash balance under certainty. It considers cash management similar to an
inventory management problem. As such, the firm attempts to minimize the sum of the cost
of holding cash (inventory of cash) and the cost of converting marketable securities to cash.

14
The baumol’s model makes the following assumptions:
 The firm is able to forecast its cash needs with certainty.
 The firm’s cash payments occur uniformly over a period of time.
 The opportunity cost of holding cash is known and it does not change over time.
 The firm will incur the firm sells securities and starts with a converts securities to
cash.

Cash balance

C/2 Average

Time

0 T1 T2 T3
Baumol’s model for cash balance

Cost trade-off: Baumol’s model

Optimum Cash Balance under uncertainty:

The Miller-Orr Model
The limitation of the Baumol model is that it does not allow the cash flows to
fluctuate. Firms in practice do not use their cash balance uniformly nor are they able to
predict do not use their cash inflows and outflows. The Miller-Orr model overcomes this
15
shortcoming and allows for daily cash flow variation. It assumes that net cash flows are
normally distributed with a zero value of mean and a standard deviation. The MO model
provides for two control limits-the upper control limit and the lower control limit as well as a
return point. If the firm’s cash flows fluctuate randomly and hit the upper limit, then it buys
sufficient marketable securities to come back to a normal level of cash balance (the return
point). Similarly, when the firm’s cash flows wander and hit the lower limit, it sells sufficient
marketable securities to bring the cash balance back to the normal level (the return point)

16
1. The Latest Trends in North American Cash Management

Steve Wilder, Senior Vice President and JPMorgan Chase Treasury Services Western

Hemisphere Corporate and Financial Institutions Sales Executive

The Drive towards Efficiency, Transparency,

Standardization and Integration

Fragmentation is a key driver of corporate inefficiency. This has long been the case in

the movement of paper checks and related remittance documents within the U.S. payments

system, and the flow of goods, trade-related documents and funds within the broader global

supply chain. As corporate treasurers pursue end-to-end automation for treasury and supply-

chain activities, they understand that to achieve straight-through processing — and the

subsequent optimization of working capital globally — they must integrate the payment and

information components of a transaction.

Based on this drive for efficiency, three interrelated trends are shaping North America’s cash

management landscape today. First, corporate treasurers and their banks are driving the

convergence towards electronic payments to better integrate money and information flows.

Second, there is a parallel convergence in international trade towards open account, electronic

payment and the automation of information flows, as treasury pushes to integrate the physical

and financial supply chains. On both fronts, solutions are emerging to digitize paper wherever

it persists. Third, as companies continue to expand globally — and information and money

flows follow — treasury is focused on standardizing processes and strengthening internal

controls. The objective is to create transparency across a range of business activities to

manage risk and ensure financial reporting integrity in compliance with Sarbanes-Oxley.

17
2. CASH MANAGEMENT AND CAPITAL BUDGETING PRACTICES

Virginia department of transportation Richmond, Virginia.

Our review has found that Transportation has made significant progress or completed
most of the recommendations made in our 2002 special report. Complete implementation of
these changes will take at least four to five years.

Over the last two years, Transportation’s management has started not only
implementing recommendations, but more importantly begun implementing a change in the
corporate and cultural structure of the organization. The success of change with
Transportation will depend on whether a true structural change in organization takes place.
The measure of success will require a substantial long-term commitment by management to
not only making the change, but to prevent backsliding into Transportation’s old approaches.

In some ways, the accomplishments to date are the easy part of change. The harder
part lays ahead in funding and implementing new systems, continuing to make the changes to
get closer to capital budgeting process, and overcoming Transportation’s corporate and
cultural structure to improve project management. The success of this effort is highly
dependent on management guidance and direction, and current management has demonstrated
their dedication towards this effort. If any management change occurs, it is essential that they
have the same commitment; otherwise, progress may be negatively impacted.

Transportation is restoring fiscal accountability by implementing several budgetary

and financial changes, including adopting a debt management policy and model. Additionally,
they are establishing a methodology to identify statewide transportation priorities and
developing project management policies.

Transportation has completed several budgetary and financial changes, including attempts to
make the Six-Year Improvement Program a realistic management tool and reduce the projects
with a deficit status.

18
However, to ensure accurate matching on cash inflows and outflows, Transportation must
begin estimating the cost of projects by fiscal year. Transportation does not currently have
sufficient controls and processes in place to manage the rate at which they spend funds.

For major projects, Transportation has begun assigning a project management team that
follows a project from its inception to its completion. However, it is still too early in the
process to determine if the policies put into place will provide Transportation with better
project management. However, the actions to date are those considered best practices in both
the private and public for large organizations.

Maintenance is still an area of concern at Transportation. The growing maintenance

requirements and the limited ability to budget on a needs-based approach increases the risk of
inappropriately applied funding. Once the asset management system is fully implemented a
needs-based approach will be possible and Transportation will be able identify and prioritize
maintenance projects.

3. Ms. Katherine M. Landmann Controller Washington University in St.

Louis Campus.
This final report presents the results of our audit of the cash management procedures
used by Washington University in St. Louis (University) to control the funds paid by the
Payment Management System (PMS) during the three years ended June 30, 2000.

We found that the University did not have adequate policies and procedures in place to
monitor daily cash balances and to precisely calculate interest earned on positive daily cash
balances. In monitoring the daily cash balances, the University did not consider (1)
outstanding checks and (2) overhead costs as incurred. In addition, the University did not use
the appropriate interest rates when calculating the interest remitted to the Federal government.

We determined that the amount of excess interest remitted by the University was
comparable to the amount of interest that should have been remitted if appropriate procedures
had been used. We believe that this occurrence was a coincidence due to off setting factors in
the University’s calculation of the amount to be remitted.

19
 We are recommending that the University revise its written policies and procedures to
effectively monitor the daily cash balance and to accurately compute the Federal remittance.
We made four specific recommendations for improving the University’s cash management
procedures. The University concurred with two and is still evaluating the third. However, they
did not accept our fourth recommendation. The University’s response is included in its
entirety as Appendix A.

4. Cash Management by Enid Beverly Jones

It is a Financial Overview for School Administrators is a succinct overview of public

school finance, presenting concepts of importance to both site-based and central-office
leaders. A pragmatic blend of theoretical concepts and factual information provides readers
with an excellent synopsis of public school finance.

The economics and politics of education are discussed in the context of human capital
and the role of public education in the United States as an investment in human capital.
Author Enid Jones, who is an associate professor of school finance at Fayetteville State
University, stresses the importance of investment in human capital and its necessity for an
educated, productive workforce.

The chapter on adequacy and equity provides an understanding of the two concepts so
frequently debated in school finance. As more states struggle with funding issues, this subject
matter is timely and useful.

Cash Management seems intended for use nationwide with information on basic
school business procedures, including budgeting and financing of school facilities. The use of
lay terminology and relevant examples make the book valuable both in graduate school
classes on educational leadership and in the hands of practicing administrators.

(Cash Management: A Financial Overview for School Administrators, by Enid Beverley

Jones, Scarecrow Press, Lanham, Md., 2001)

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 INDUSTRY PROFILE&COMPANY PROFILE

Automobile industry in India

The automobile industry in India is the ninth largest in the world with an annual production of
over 2.3 million units in 2013 In 2014, India emerged as Asia's fourth largest exporter of
automobiles, behind Japan, South Korea and Thailand.

Following economic liberalization in India in 1991, the Indian automotive industry has
demonstrated sustained growth as a result of increased competitiveness and relaxed
restrictions. Several Indian automobile manufacturers such as Tata Motors, Maruti Suzuki and
Mahindra and Mahindra, expanded their domestic and international operations. India's robust
economic growth led to the further expansion of its domestic automobile market which
attracted significant India-specific investment by multinational automobile manufacturers. In
February 2009, monthly sales of passenger cars in India exceeded 100,000 units.

Bryonic automotive industry emerged in India in the 1940s. Following the independence, in
1947, the Government of India and the private sector launched efforts to create an automotive
component manufacturing industry to supply to the automobile industry. However, the growth
was relatively slow in the 1950s and 1960s due to nationalization and the license raj which
hampered the Indian private sector. After 1970, the automotive industry started to grow, but
the growth was mainly driven by tractors, commercial vehicles and scooters. Cars were still a
major luxury. Japanese manufacturers entered the Indian market ultimately leading to the
establishment of MarutiUdyog. A number of foreign firms initiated joint ventures with Indian
companies.

In the 1980s, a number of Japanese manufacturers launched joint-ventures for building

motorcycles and light commercial-vehicles. It was at this time that the Indian government
chose Suzuki for its joint-venture to manufacture small cars. Following the economic
liberalization in 1991 and the gradual weakening of the license raj, a number of Indian and
multi-national car companies launched operations. Since then, automotive component and
automobile manufacturing growth has accelerated to meet domestic and export demands.

21
HISTORY OF THE TWO WHEELERS:

The Britannica Encyclopedia a motorcycle as a bike or tricycle propelled by an internal –

combustion engine (or, less often by an electric engine). The automobile was the reply to the
19th –century reams of self-propelling the horse-drawn bikeriage. Similarly, the invention of
the motorcycle created the self –propelling bicycle. The first commercial design was three-
wheeler built by Edward Butler in Great Britain in 1884. This employed a horizontal single-
cylinder gasoline engine mounted between two steer able front wheels and connected by a
drive chain to the rear wheel. The 1900s saw the conversion of many bicycles or pedal cycles
by adding small, centrally mounted spark ignition engine engines. There was then felt the
need for reliable constructions. This led to road trial tests and competition between
manufacturers. Tourist Trophy (TT) races were held on the Isle of main in 1907 as reliability
or endurance races. Such were the proving ground for many new ideas from early two-stroke-
cycle designs to supercharged multivalent engines mounted on aerodynamic, bikebon fiber
reinforced bodywork.

INVENTION OF TWO WHEELERS:

The invention of two wheelers is a much-debated issue. “Who invented the first motorcycle?”
May seem like a simple question, “safety”, bicycle, i.e., bicycle with front and rear wheels of
the same size, with a pedal crank mechanism to drive the rear wheel. Those bicycles in turn
described from high-wheel bicycles. The high –wheelers descended from an early type of
pushbike, without pedals, propelled by the rider’s feet pushing against the ground. These
appeared around 1800, used iron banded wagon wheels, and were called “bone-crushers”,
both for their jarring ride, and their tendency to toss their riders. Gottiieb Daimler (who
credited with the building the first motorcycle in 1885, one wheel in the front and one in the
back, although it had a smaller spring-loaded outrigger wheel on each side. It was constructed
mostly of wood, the wheels were of the iron-banded wooden-spooked wagon-type and it
definitely had a “bone-crusher” chassis!

22
FURTHER DEVELOPMENTS:

Most of the developments during the early phase concentrated on three and four-wheeled
design since it was complex enough to get the machines running with out having to worry
about them falling over. The next notable two-wheeler though was the Hildebrand & Wolf
Mueller, patented in Munich in 1894. In 1895, the French firm of DeDion-button built and
engine that was to make the mass production and common use of motorcycle possible. The
first motorcycle with electric start and a fully modem electrical system; the Hence special
from the Indian Motorcycle Company astounded the industry in 1931. Before World War 1,
IMC was the largest motorcycle manufacturer in the world producing over 20000 bikes per
year.

INCREASING POPULARITY:

The popularity of the vehicle grew especially after 1910, in 1916; the Indian motorcycle
company introduced the model H racer, and placed it on sale. During World War 1, all
branches of the armed forces in Europe used motorcycles principally for dispatching. After
the war, it enjoyed a sport vogue until the Great Depression began in motorcycles lasted into
the late 20th century; weight the vehicle beingused for high-speed touring and sport
competitions. The more sophisticated of a 125cc model. Since then, an increasing number of
powerful bikes have blazed the roads.

HISTORICAL INDUSTRY DEVELOPMENTS:

Indian is the second largest manufacturer and producer to two wheelers in the World. It
stands next only to Japan and China in terms of the number of V produced and domestic sales
respectively. This destination was achieved due to variety of reason like restrictive policy
followed by the government of India towards the passenger bike industry, rising demand for
personal transport, inefficiency in the public transportation system etc. The Indian two-
wheelers industry made a small beginning in the early 50s when Automobile products of India
(API) started manufacturing scooters in the country. Until 1958, API and Enfield were the
sole producers.

23
The two –wheelers market was opened were opened to foreign competition in the mid-80s.
And the then market leaders-Escorts and Enfield – were caught unaware by the onslaught of
the 100cc bikes of the four Indo- Japanese joint ventures. With the availability of fuel-
efficiency low power bikes, demand swelled, resulting in Hero Honda –then the only producer
of four stroke bikes (100cc category), gaining a top slot.

The first Japanese motorcycles were introduced in the early eighties. TVS Suzuki and Hero
Honda brought in the first two-stroke and four-stroke engine motorcycles respectively. These
two players initially started with assembly of CKD Kits, and later on progressed to indigenous
manufacturing.

The industry had a smooth ride in the 50s, 60s and 70s when government prohibited new
entries and strictly controlled capacity expansion. The industry saw a sudden growth in the
80s. The industry witnessed a steady of 14% leading to a peak volume of 1.9 mn vehicles in
1990.

In 1990 the entire automobile industry saw a drastic fall in demand. This resulted in a decline
of 15% in 1991 and 8% in 1992, resulting in a production loss of 0.4mn vehicles. Barring
Hero Honda, all the major producers suffered from recession in FY93 and FY94. Hero Honda
showed a marginal decline in 1992.

The reason for recession in the sector were the incessant rise in fuel prices, high input costs
and reduced purchasing power due to significant like increased production in 1992, due to
new entrants coupled with recession in the industry resulted in companies either reporting
losses or a fall in profits.

CONCLUSION:

The two-wheelers market has hada perceptible shift from a buyers’ market to a sellers’
market with a variety of choice, players will have compete on various fronts viz. pricing,
technology product design, productivity after sale service, marketing and distribution. In the
short term, market shares of individual manufacturers are going to be sensitive to capacity,
product acceptance, pricing and competitive pressures from other manufacturers.

As incomes grow and people grow and people feel the need to own a private means of
transport, sales of two-wheelers will rise. Penetration is expected to increase to
approximately to more than 25% by 2005.

24
The motorcycle segment will continue to lead the demand for two-wheelers in the coming
years. Motorcycle sale is expected to increase by 20% yoy as compared to 1% growth in the
scooter market and 3% by moped sales respectively for the next two years.

The four-stroke scooters will add new dimension to the two-wheeler segment in the coming
future.

The Asian continent is that largest user of the two-wheelers in the world. This is due to poor
road infrastructure and low per capita income, restrictive policy on bike industry. This is due
to oligopoly between top five players in the segment, compared to thirsty manufacturers in the
bike industry.

Hero Honda motors LTd., is one of the leading companies in the two-wheeler industry. At
present it is the market leader in the motorcycle segment with around 47% the market share
during FY 2000 –01. During the year, company posted a 41.15% yoy rise in turnover to
Rs.31, 686.5mn in motorcycles which driven by a 35.17% yoy rise in Motorcycle sales
volumes. The company has emerged as one of the most successful players, much ahead of its
competitions an account of its superior and reliable product quality complemented with
excellent marketing techniques. The company has been consistently addressing the growing
demand for motorcycles and has been cumulative customer base of over 4 million customers,
which is expected to reach 5min mark with rural and semi-urban segment being the new class
of consumers.

25
 COMPANY PROFILE

CORPORATE PROFILE

Hero Moto Corp Ltd. (Formerly Hero Honda Motors Ltd.) is the world's largest manufacturer
of two - wheelers, based in India.
In 2001, the company achieved the coveted position of being the largest two-wheeler
manufacturing company in India and also, the 'World No.1' two-wheeler company in terms of
unit volume sales in a calendar year. Hero MotoCorp Ltd. continues to maintain this position
till date.

Today, every second motorcycle sold in the country is a Hero Honda bike. Every 30 seconds,
someone in India buys Hero Honda's top-selling motorcycle – Splendor.

Vision
The Hero Honda story began with a simple vision – the vision of a mobile and an empowered
India, powered by Hero Honda. This vision was driven by Hero Honda’s commitment to
customer, quality and excellence, and while doing so, maintaining the highest standards of
ethics and societal responsibilities. Hero Honda believes that the fastest way to turn that
dream into a reality is by remaining focused on that vision.

Strategy
Hero Honda’s key strategy has been driven by innovation in every sphere of activity –
building a robust product portfolio across categories, exploring new markets, aggressively
expanding the network and continuing to invest in brand building activities.

Manufacturing
Hero Honda bikes are manufactured across three globally benchmarked manufacturing
facilities. Two of these are based at Gurgaon and Dharuhera which are located in the state of
Haryana in northern India. The third and the latest manufacturing plant is based at Haridwar,

26
in the hill state of Uttrakhand.

Technology
In the 1980’s Hero Honda pioneered the introduction of fuel-efficient, environment friendly
four-stroke motorcycles in the country. Today, Hero Honda continues to be technology
pioneer. It became the first company to launch the Fuel Injection (FI) technology in Indian
motorcycles, with the launch of the Glamour FI in June 2006.

Products
Hero Honda's product range includes variety of motorcycles that have set the industry
standards across all the market segments. The company also started manufacturing scooter in
2006. Hero Honda offers large no. of products and caters to wide variety of requirements
across all the segments.

Distribution
The company's growth in the two wheeler market in India is the result of an intrinsic ability to
increase reach in new geographies and growth markets. Hero Honda's extensive sales and
service network now spans close to 4500 customer touch points. These comprise a mix of
authorized dealerships, Service & Spare Parts outlets, and dealer-appointed outlets across the
country.

Brand

The company has been continuously investing in brand building utilizing not only the new
product launch and new campaign launch opportunities but also through innovative marketing
initiatives revolving around cricket, entertainment and ground- level activation.

Hero Honda has been actively promoting various sports such as hockey, cricket and golf.
Hero Honda was the title sponsor of the Hero Honda FIH Hockey World Cup that was played
in Delhi during Feb-March 2010. Hero Honda also partners the Commonwealth Games Delhi
2010.

27
2015-16 Performance

Total unit sales of 54,02,444 two-wheelers, growth of 17.44 per cent

Total net operating income of Rs. 19401.15 Crores, growth of 22.32 per cent
Net profit after tax at Rs. 1927.90 Crores
Total dividend of 5250% or Rs. 105 per share including Interin Dividend of Rs. 70 per share
on face value of each share of Rs. 2 each
EBIDTA margin for the year 13.49 per cent
EPS of Rs. 96.54

2014-15 Performance

Total unit sales of 46,00,130 two-wheelers, growth of 23.6 per cent

Total net operating income of Rs. 15860.51 Crores, growth of 28.1 per cent
Net profit after tax at Rs. 2231.83 Crores, growth of 74.1 per cent
Final dividend of 1500% or Rs. 30 per share on face value of each share of Rs. 2
EBIDTA margin for the year 17.4 per cent
EPS of Rs. 111.77, growth of 74.1 per cent

HERO HONDA'S MISSION

Hero Honda’s mission is to strive for synergy between technology, systems and human
resources, to produce products and services that meet the quality, performance and price
aspirations of its customers. At the same time maintain the highest standards of ethics and
social responsibilities.

This mission is what drives Hero Honda to new heights in excellence and helps the
organization forge a unique and mutually beneficial relationship with all its stake holders.

28
HERO HONDA'S MANDATE

Hero Honda is a world leader because of its excellent manpower, proven management,
extensive dealer network, efficient supply chain and world-class products with cutting edge
technology from Honda Motor Company, Japan. The teamwork and commitment are
manifested in the highest level of customer satisfaction, and this goes a long way towards
reinforcing its leadership status

BOARD OF DIRECTORS

No. Name of the Directors Designation

1 Mr. PawanMunjall Chairman & Whole-time Director
2 Mr. Toshiaki Nakagawa Joint Managing Director
3 Mr. Sumihisa Fukuda Technical Director
4 Mr. Sunil Kant Munjal Non-Executive Director
5 Mr. Suman Kant Munjal Non-Executive Director
6 Mr. Takashi Nagai Non-Executive Director
7 Mr. Yuji Shiga Non-Executive Director
8 Mr. PradeepDinodia Non-executive & Independent Director
9 Gen. (Retd.) V. P. Malik Non-executive & Independent Director
10 Mr. Analjit Singh Non-executive & Independent Director
11 Dr. Pritam Singh Non-executive & Independent Director
12 Ms. ShobhanaBhartia Non-executive & Independent Director
13. Mr. M. Damodaran Non-executive & Independent Director
14. Mr. Ravi Nath Non-executive & Independent Director
15. Dr. Anand C. Burman Non-executive & Independent Director

29
 BRIEF PROFILE OF DIRECTORS

Mr. Munjal is the Chairman, Managing Director & CEO of the Company. He is responsible

for growth and strategic planning for the entire Group. A graduate in Mechanical Engineering,

Mr. Munjal has been instrumental in bringing about technological and managerial excellence

in the Company's operations. He has been the Chairman of several Committees of CII.

He is also on the board of Indian Institute of Management, Lucknow and Indian School of

Business. An avid golfer, Mr. Munjal is Past Chairman of the Asian PGA Tour Board of

Directors and the Past President of Professional Golfers Association of India (PGAI). Under

his guidance, Hero MotoCorp launched the Hero Indian Sports Academy (HISA) in

collaboration with Laureus Foundation to provide equal opportunities in sports to various

communities and to reward talent in the country.

Mr. Suman Kant Munjal

Non Executive Director

Mr. Munjal was appointed as an Additional Director on the Board of the Company on July 29,

2010. Mr. Munjal is the Managing Director of Rockman Industries Ltd., one of the leading

30
suppliers of Aluminum Die Casting, Machined and Painted Assemblies to Hero MotoCorp

Ltd. Mr. Munjal, a graduate in Commerce, possesses rich experience and expertise in business

management and thus has been instrumental in elevating Rockman Industries Ltd. to its

current status.

No. Name of Company Nature of Office

1 Hero Honda Motors Limited Chairman and Whole-time Director
2 Hero Honda Finlease Limited Chairman and Director
3 Munjal Showa Limited Chairman and Director
4 Easy Bill Limited Director
5 Rockman Industries Limited Director
6 ShivamAutotech Limited Director

KEY MILESTONES OF HERO HONDA

Year Event
1983 Joint Collaboration Agreement with Honda Motor Co. Ltd. Japan signed
Shareholders Agreement signed
1984 Hero Honda Motors Ltd. incorporated
1985 First motorcycle "CD 100" rolled out
1987 100,000th motorcycle produced
1989 New motorcycle model - "Sleek" introduced
1991 New motorcycle model - "CD 100 SS" introduced
500,000th motorcycle produced
1992 Raman MunjalVidyaMandir inaugurated - A School in the memory of founder
Managing Director, Mr. Raman Kant Munjal
1994 New motorcycle model - "Splendor" introduced
1,000,000th motorcycle produced
1997 New motorcycle model - "Street" introduced
Hero Honda's 2nd manufacturing plant at Gurgaon inaugurated
1998 2,000,000th motorcycle produced
1999 New motorcycle model - "CBZ" introduced
Environment Management System of Dharuhera Plant certified with ISO-14001 by

31
 DNV Holland
Raman Munjal Memorial Hospital inaugurated - A Hospital in the memory of founder
Managing Director, Mr. Raman Kant Munjal
2000 4,000,000th motorcycle produced
Environment Management System of Gurgaon Plant certified ISO-14001 by DNV
Holland
Splendor declared 'World No. 1' - largest selling single two-wheeler model
"Hero Honda Passport Programme" - CRM Programme launched
2001 New motorcycle model - "Passion" introduced
One million production in one single year
New motorcycle model - "Joy" introduced
5,000,000th motorcycle produced
2002 New motorcycle model - "Dawn" introduced
New motorcycle model - "Ambition" introduced
Appointed VirenderSehwag, Mohammad Kaif, Yuvraj Singh, Harbhajan Singh and
Zaheer Khan as Brand Ambassadors
2003 Becomes the first Indian Company to cross the cumulative 7 million sales mark
Splendor has emerged as the World's largest selling model for the third calendar year
in a row (2000, 2001, 2002)
New motorcycle model - "CD Dawn" introduced
New motorcycle model - "Splendor +" introduced
New motorcycle model - "Passion Plus" introduced
New motorcycle model - "Karizma" introduced
2004 New motorcycle model - "Ambition 135" introduced
Hero Honda became the World No. 1 Company for the third consecutive year.
Crossed sales of over 2 million units in a single year, a global record.
Splendor - World's largest selling motorcycle crossed the 5 million mark
New motorcycle model - "CBZ*" introduced
Joint Technical Agreement renewed
Total sales crossed a record of 10 million motorcycles
2005 Hero Honda is the World No. 1 for the 4th year in a row
New motorcycle model - "Super Splendor" introduced
New motorcycle model - "CD Deluxe" introduced
New motorcycle model - "Glamour" introduced

32
 New motorcycle model - "Achiever" introduced
First Scooter model from Hero Honda - "Pleasure" introduced

2006 Hero Honda is the World No. 1 for the 5th year in a row

15 million production milestone achieved

2007 Hero Honda is the World No. 1 for the 6th year in a row
New 'Splendor NXG' launched
New 'CD Deluxe' launched
New 'Passion Plus' launched
New motorcycle model 'Hunk' launched
20 million production milestone achieved

2008 Hero Honda Haridwar Plant inauguration

New 'Pleasure' launched
Splendor NXG lauched with power start feature
New motorcycle model 'Passion Pro' launched
New 'CBZ Xtreme' launched
25 million production milestone achieved
CD Deluxe lauched with power start feature
New 'Glamour' launched
2009 Hunk' (Limited Edition) launched
Splendor completed 11 million production landmark
New motorcycle model 'Karizma - ZMR' launched
2010 Silver jubilee celebrations
New model Splendor Pro launched
2011 Launch of new Super Splendor and New Hunk

New licensing arrangement signed between Hero and Honda

Launch of new refreshed versions of Glamour, Glamour FI, CBZ Xtreme, Karizma
Crosses the landmark figure of 5 million cumulative sales in a single year
Migration of all products to Brand Hero, Strategic partnership with Erik Buell
2012
Racing (EBR) of USA, Launch of Impulse, Maestro and Ignitor

33
 Neemrana Plant Foundation Stone laid, Global Parts Centre Foundation Stone
2013 laid
50 Million cumulative 2 wheelers production
2014 Neemrana Plant Inauguration, Global Parts Centre Inauguration

2015 60 Million cumulative 2 wheelers production

PROMINENT AWARDS TO THE COMPANY

Year Awards & Recognitions

Two-wheeler Manufacturer of the Year award by Bike India magazine.

2011
Adjudged the "Bike Manufacturer of the Year" at the Economic Times ZigWheels Car and
Bike Awards.
- CNBC Awaaz - Storyboard special commendation for "Effective rebranding of a new
corporate entity" by CNBC Awaaz Consumer Awards
- "Most Recommended Two-Wheeler Brand of the Year" award by CNBC Awaaz Consumer
Awards
- Colloquy Loyalty Awards "Innovation in Loyalty Marketing International 2011" for Hero
GoodLife
- "Best Activity Generating Short or Long-Term Brand Loyalty" by the Promotion Marketing
Award of Asia Order of Merit for Hero GoodLife
2010 - Ranked No 1 brand in the Auto (Two-Wheelers) category in the Brand Equity "Most
Trusted Brand" 2011 survey

Company of the Year awarded by Economic Times Awards for Corporate Excellence 2008-09.

CNBC TV18 Overdrive Awards 2010 'Hall of Fame' to Splendor

NDTV Profit Car & Bike Awards 2010 -

 Two-wheeler Manufacturer of the Year
 CnB Viewers' Choice Two-wheeler of the Year (Karizma ZMR)

Bike Maker of the Year by ET-ZigWheels Car & Bike of the Year Awards 2009

2009 'Two-wheeler Manufacturer of the Year' by NDTV Profit Car & Bike Awards 2009 and
Passion Pro adjudged as CNB Viewers' Choice two-wheeler

Top Indian Company under the 'Automobile - Two-wheelers' sector by the Dun & Bradstreet-
Rolta Corporate Awards

Won Gold in the Reader's Digest Trusted Brand 2009 in the 'Motorcycles' category

34
 NDTV Profit Business Leadership Awards 2009 - two-wheeler category

2008 NDTV Profit Business Leadership Award 2008 - Hero Honda Wins the Coveted "NDTV Profit
Business Leadership Award 2008"
TopGear Design Awards 2008 - Hunk Bike of the Year Award
NDTV Profit Car India & Bike India Awards - NDTV “Viewers’ Choice Award” to Hunk in
Bike category
IndiaTimes Mindscape and Savile Row ( A Forbes Group Venture ) Loyalty Awards -
“Customer and Brand Loyalty Award” in Automobile (two-wheeler) sector
Asian Retail Congress Award for Retail Excellence (Strategies and Solutions of business
innovation and transformation) - Best Customer Loyalty Program in Automobile category

NDTV Profit Car India & Bike India Awards - Bike Manufacturer of the year

Overdrive Magazine - Bike Manufacturer of the year

TNS Voice of the Customer Awards:
 No.1 executive motorcycle Splendor NXG

 No.1 standard motorcycle CD Deluxe

 No. premium motorcycle CBZ Xtreme

2007 The NDTV Profit Car India & Bike India Awards 2007 in the following category:
 Overall "Bike of the Year" - CBZ X-treme

 "Bike of the Year" - CBZ X-treme (up to 150 cc category)

 "Bike Technology of the Year" - Glamout PGM FI

"Auto Tech of the Year" - Glamout PGM FI by Overdrive Magazine.
"Bike of the Year" - CBZ X-treme by Overdrive Magazine.
Ranked CBZ X-treme "Bike of the Year" - by B S Motoring Magazine
“Most Trusted Company” , by TNS Voice of the Customer Awards 2006.
CD Deluxe rated as "No 1 standard motorcycle" by TNS Voice of the Customer Awards 2006.
2006 Adjudged 7th Top Indian Company by Wallstreet Journal Asia (Top Indian Two Wheeler
Company).
One of the 8 Indian companies to enter the Forbes top 200 list of world’s most reputed
companies.
No. 1 in automobile industry by TNS Corporate Social Responsibility Award.

Best in its class awards for each category by TNS Total Customer Satisfaction Awards 2006:
 Splendor Plus (Executive)

35
  CD Deluxe (Entry)

'Two-wheeler Manufacturer of the Year' by NDTV Profit Car & Bike Awards
2010
2009 and Passion Pro adjudged as Car and Bike Viewers' Choice two-wheeler

Rated as Top Indian Company in Automobile - Two Wheelers sector by Dun &
2011
Bradstreet - Rolta Corporate Awards 2009

2012 Business Leader in Automobiles (two-wheelers) at the NDTV Profit Business

Leadership Awards 2012 (Conferred upon Mr. Pawan Munjal)

Green Pioneer Award – 2013

2013

Motorbeam - Bike Manufacturer of the year, Zigwheels - Entry-Level Bike of

2014
the year: Hero Splendor iSmart

2016 Overdrive - Scooter of the Year - Hero Maestro Edge,

. Overdrive - 'Viewers' Choice Scooter of the Year - Hero Maestro Edge

The NDTV Profit Car India & Bike India Awards 2006 in the following category:
 Bike Maker of the Year

 Bike of the Year - Achiever

 Bike of the Year - Achiever (up to 150 cc category)
 Bike of the Year - Glamour (up to 125 cc category)

 NDTV Viewers' Choice Award to Glamour in the bike category

CORPORATE SOCIAL RESPONSIBILITY (CSR)

STAKEHOLDER TIES AT THE GRASSROOTS

Hero Honda Motors takes considerable pride in its stakeholder relationships, especially ones
developed at the grassroots. The Company believes it has managed to bring an economically
and socially backward region in Dharuhera, Haryana, into the national economic mainstream.

An Integrated Rural Development Centre has been set up on 40 acres of land along the Delhi-
Jaipur Highway. The Centre-complete with wide approach roads, clean water, and education
facilities for both adults and children-now nurtures a vibrant, educated and healthy
community.

36
The Foundation has adopted various villages located within vicinity of the Hero Honda
factory at Dharuhera for integrated rural development. This includes:

 Installation of deep bore hand pumps to provide clean drinking water.

 Constructing metalled roads and connecting these villages to the National Highway
(NH -8).
 Renovating primary school buildings and providing hygienic water and toilet facilities.
 Ensuring a proper drainage system at each of these villages to prevent water-logging.
 Promoting non-conventional sources of energy by providing a 50 per cent subsidy on
biogas plants.

The Raman MunjalVidyaMandirbegan with three classes (up to class II) and 55 students from
nearby areas. It has now grown into a modern Senior Secondary, CBSE affiliated co-
educational school with over 1200 students and 61 teachers. The school has a spacious
playground, an ultra-modern laboratory, a well-equipped audio visual room, an activity room,
a well-stocked library and a computer centre.

The Raman Munjal Sports Complex has basketball courts, volleyball courts, and hockey and
football grounds are used by the local villagers. In the near future, sports academies are
planned for volley ball and basket ball, in collaboration with National Sports Authority of
India.

Vocational Training Centre

In order to help local rural people, especially women, Hero Honda has set up a Vocational
Training Centre. So far 26 batches comprising of nearly 625 women have been trained in
tailoring, embroidery and knitting. The Company has helped women trained at this centre to
set up a production unit to stitch uniforms for Hero Honda employees. Interestingly, most of
the women are now self-employed.

Adult Literacy Mission

This Scheme was launched on 21st September, 1999, covering the nearby villages of Malpura,
Kapriwas and Sidhrawali. The project started with a modest enrolment of 36 adults. Hero
Honda is now in the process of imparting Adult Literacy Capsules to another 100 adults by
getting village heads and other prominent villagers to motivate illiterate adults.

37
 Marriages of underprivileged girls

Marriages are organized from time to time, particularly for girls from backward classes, by
the Foundation by providing financial help and other support to the families.

Rural Health Care

Besides setting up a modern hospital, the Foundation also regularly provides doorstep health
care services to the local community. Free health care and medical camps are now a regular
feature in the Hero Group's community outreach program
KEY POLICIES AN ENVIRONMENTALLY AND SOCIALLY, AWARE
COMPANY
At Hero Honda, our goal is not only to sell you a bike, but also to help you every step of the
way in making your world a better place to live in. Besides its will to provide a high-quality
service to all of its customers, Hero Honda takes a stand as a socially responsible enterprise
respectful of its environment and respectful of the important issues.

Hero Honda has been strongly committed not only to environmental conservation
programmers but also expresses the increasingly inseparable balance between the economic
concerns and the environmental and social issues faced by a business. A business must not
grow at the expense of mankind and man's future but rather must serve mankind.

"We must do something for the community from whose land we generate our wealth."
A famous quote from our Worthy Chairman Mr.BrijmohanLallMunjal.
Environment Policy

We at Hero Honda are committed to demonstrate excellence in our environmental

performance on a continual basis, as an intrinsic element of our corporate philosophy.
To achieve this we commit ourselves to:
 Integrate environmental attributes and cleaner production in all our business processes
and practices with specific consideration to substitution of hazardous chemicals, where
viable and strengthen the greening of supply chain.
 Continue product innovations to improve environmental compatibility.

38
  Comply with all applicable environmental legislation and also controlling our
environmental discharges through the principles of "alara" (as low as reasonably
achievable).
 Institutionalise resource conservation, in particular, in the areas of oil, water, electrical
energy, paints and chemicals.
 Enhance environmental awareness of our employees and dealers / vendors, while
promoting their involvement in ensuring sound environmental management.

Quality Policy

Excellence in quality is the core value of Hero Honda's philosophy.

We are committed at all levels to achieve high quality in whatever we do, particularly in our
products and services which will meet and exceed customer's growing aspirations through:

 Innovation in products, processes and services.

 Continuous improvement in our total quality management systems.
 Teamwork and responsibility.

Safety Policy

Hero Honda is committed to safety and health of its employees and other persons who may be
affected by its operations. We believe that the safe work practices lead to better business
performance, motivated workforce and higher productivity.
We shall create a safety culture in the organization by:
 Integrating safety and health matters in all our activities.
 Ensuring compliance with all applicable legislative requirements.
 Empowering employees to ensure safety in their respective work places.
 Promoting safety and health awareness amongst employees, suppliers and contractors.
 Continuous improvements in safety performance through precautions besides
participation and training of employees.

INTRODUCTION ABOUT PHOENIX DEALER PROFILE (PHOENIX

MOTORS)

39
PHOENIX MOTORS PVT LTD is dealership type of business. PHOENIX MOTORS PVT

LTD. is established on 21st march 2003. The business is running by only one man. The owner

name is ch .madhumathi the firm is located at habsiguda in Hyderabad.

Generally the sale will be either on cash basis or on institutional basis. Bank like ICICI,

HDFC and CENTURION are providing loans to customers.

Advertising strategy of phoenix motors:

They are giving the ads through newspapers, wall paintings, hoardings and field staff. They

are upgrading sales by introducing the schemes, group bookings, institutional sales and

customer door-to-door activities.

Categorization of Staff members:

Staff members are categorized for technicians, 25 members are allotted for field staff, 5

members are recruited for sales for persons, 5 persons are placed for evaluating for spare

parts, 5 members are allotted for managerial accounts and another 3 persons for cash

transaction and other members are allotted for remaining work.

Customer relationship:

They entertain the showroom providing a customer’s huge having pool game, internet facility

and television with home there system. They provide bile maintenance programs on every

week.

According to other dealers PHOENIX motors in first in sales and best in service. They treat

customer, is the very important person at PHOENIX motors customer satisfaction is their

motto, why because, they will satisfied customer is the best advertisement. They provide

better value for the customers and as well as employees also. At PHOENIX motors the

customer is the boss.

SALES STRATEGY OF PHOENIX MOTORS:

40
Average they are selling 25 vehicles per day. PHOENIX motors PVT L.T.D is the A.P s NO.1

dealership in sales and other activities? It is a QLAD (qualify leader through quality dealer).

At PHOENIX motor they gave the quality service to the customers why because ‘the cost is

long forgotten but the quality is remembered for ever”. They treat quality has a...

Q Quest for excellence

U Understanding customer’s needs

A Action to achieve customer’s appreciation.

L Leadership determined to be a leader

I involving all the people

T Team spirit to work for a common goal

Y Yard sticks to measure programs.

WARRANTY ON PROPRIETARY ITEMS:

Warranty on proprietary items like Tyros, Tubes and Battery etc, will be directly handled by

the respective original manufactures (OEM’s) except AMCO for batteries and Dunlop and

Falcon tires and Tubes. In case of any defect in proprietary items, other than the above two

mentioned OEM’S the dealers must approach the Brach office dealer of the respective

manufacture. For AMCO batteries and Dunlop and falcon tires, tubes claims will be accepted

at our authorized dealerships per the mutually agreed terms and conditions between HERO

HONDA and of these two OEM’s in case the claim is not accepted for invalid reasons. Then

the claim along with the refusal note form the OEM can be sent to the warranty section at

gorgon plan after due to recommendation of the area service engineer. If any other six

services or subsequent paid services is not availed as per the recommended schedule given in

the owner’s manual. If HERO HONDA recommended engine oil is not used. To normal wear

41
& tear components like bulbs, electric wiring, filters, spark plug, clutch plates, braded shoes,

fasteners, shim washers, oil seals, gaskets, rubber parts (other than tyre and tube) plastic

components, chain$ sprockets and in case of wheel rim misalignment or bend.

If there is any damage due o modification or fittings of accessories other than ones

recommended by HERO HONDA. If the motor has been used in any competitive events like

tracking races or rallies. If there is any damage to the painted surface due to industrial

pollution or other extraneous factors. For clams made for any consequential damage due to

any previous malfunction. For normal phenomenon like noise, vibration, oil seepage, which

do not affect the performance of the motorcycles.

SOCIAL SERVICE ACTIVITIES

PHOENIX motors participate and conduct social service activities. Recently the phoenix

motors organized a BLOOD DONATION CAMP for the trust on 21 st January 2006.they

motivated on the consumers to participated in this camp and also provide certificate for the

customer

THE MARKETED LATEST BIKES OF PHOENIX (All Hero Moto Corp.)

42
 KARIZMA

IMPULSE

43
MAESTRO EDGE

44
SPLENDOR PRO CLASSIC

XTREME SPORTS

45
 IGNITOR

CUSTOMER RELATIONSHIP:

To entertain the customers the showroom providing a customers huge having pool game,
Internet facility and television with home theatre system. They provide bike maintenance
programs on every week. According to other dealers PHOENIX motors in first in sales and
best in service. They treat customer, is the very important person at PHOENIX motors
customer satisfaction is their motto, why because, the well satisfied customer is the best
advertisement. They provide better value for the customers and as well as employees also. At
PHONIX motors the customer is the boss.

46
 DATA ANALYSIS & INTERPRETATION

4.1 CALCULATIONS OF FUNDS FROM OPERATION AND CASH

FROM OPERATION FOR THE YEAR ENDED (Rs in Thousand)
Particulars 2013-2014 2014-2015 2015-2016 2016-2017
Net Profit 621082 1183275 478738 400470
Depreciation during the 1260161 1440184 1620207 1800231
year
FFO(FLO) 1881243 2623459 2098945 2200701

ADD:
Sundry debtors 736292 293962
Prepaid Expenses 43200
Sundry creditors 4731130 1710210 10643203
Outstanding liabilities 1009534 91841
Bank O/D 2950464 10801353

LESS:
Stock 1497634 567073 1755576 1106913
Bank O/D 2950464
Outstanding liabilities 767131 334244
Sundry Debtors 9562393 910746
Sundry Creditors 1699354

CFO(CLO) 9854229 342963 1516020 8950797

47
 4.2 CASH FLOW STATEMENT
Inflow 2013-2014 2014-2015 2015-2016 2016-2017
Opening balance 14564 64678 104545 63582
Cash from operation 9854229 342963 1516020 8950797
Increase in loan funds
2410798
Sales of Asset 797244
Increase in share
capital 2800000
Total 9868793 1204885 6831363 9014379

Outflows
Cash outflow from
operation
Purchase of Asset 9776411 6767781 7004825
Decrease in loan 27704 900340 1731144
funds
Decrease in share 200000
capital
Closing balance 64678 104545 63582 278410
Total 9868793 1204885 6831363 9014379

Inference:

This table shows that the cash flow statements of Hero Moto Corp Ltd are to be
efficient. The cash inflow of the company is to be increased for year after year. The fund
from operation is also to differ from every year. The company should increase their share
capital from 2015-2016 for Rs. 28, 00,000. Its must be used as efficient for the next year for
decrease their loan amount.

48
 5.3 TREND ANALYSIS

Y = a + bX

Where a = ∑Y ; b = ∑XY
n ∑X2

5.3.1 INVENTORIES

Inventories
YEAR X X2 (Rs in lakhs) XY
Y (Rs in lakhs)
2012 – 13 -2 4 27,76,072 -55,52,144
2013 – 14 -1 1 12,78,438 -12,78,438
2014 – 15 0 0 18,45,511 0
2015 – 16 1 1 36,01,087 36,01,087
2016 –17 2 4 47,08,000 94,16,000
TOTAL 10 1,42,09,108 61,86,505

a = 1, 42, 09,108 = 2, 84,182.6

5

b = 61, 86,505 = 6, 18,650.5

10
Inference:

This table indicates that the volume of inventory has been increased every year. Its
must be increased for the last year 11, 06,913. Inventories value in 2012-17 will be

about 2, 84,182.6

49
 5.3.2 SUNDRY DEBTORS

Sundry
YEAR X X2 Debtors XY
(Rs) (Rs)
Y
2012 – 13 -2 4 20,69,513 -41,39,026
2013 – 14 -1 1 28,05,805 -28,05,805
2014 – 15 0 0 25,11,842 0
2015 – 16 1 1 1,20,74,236 1,20,74,236
2016 –17 2 4 1,29,84,982 2,59,69,964
TOTAL 10 3,24,46,378 3,10,99,369

a = 3, 24, 46,378 = 64, 89,275.6

5

b = 3, 10, 99,369 = 31, 09,936.9

10
Inference:

This table shows that the Sundry Debtors has been more every year. It must be
increased more than 6 times from the beginning of the period of the study. Sundry Debtors

value in 2012-17 will be about 64, 89,275.6.

50
 5.3.3 CASH / BANK

Cash / Bank
YEAR X X2 (Rs) XY
Y (Rs)
2012 – 13 -2 4 14,564 -29,128
2013 – 14 -1 1 64,679 -64,679
2014 – 15 0 0 61,858 0
2015 – 16 1 1 63,582 63,582
2016 –17 2 4 2,78,410 5,56,820
TOTAL 10 4,83,093 5,26,593

a = 4, 83,093 = 96,618.6
5

b = 5, 26,593 = 52,659.3
10

Inference:

The cash value of the HERO MOTO CORP LTD has been increased and the estimated
it should be decreased for the previous year. Cash value in 2012-17 will be about
96,618.6

5.3.4 LOANS & ADVANCES

51
 Loans &
YEAR X X2 Advances XY
(Rs) (Rs)
Y
2012 – 13 -2 4 1,00,065 -2,00,130
2013 – 14 -1 1 8,26,377 -8,26,377
2014 – 15 0 0 3,60,138 0
2015 – 16 1 1 27,70,937 27,70,937
2016-17 2 4 5,62,837 11,25,674
TOTAL 10 46,20,354 28,70,104

a = 46, 20,354 = 9, 24,070.8

5

b = 28, 70,104 = 2, 87,010.4

10

Inference:

The table indicates that the loans and advances of HERO MOTO CORP LTD
will be reduced from the year 2012-2017. Loans & Advances value in 2012-17 will be

about 9, 24,070.8
.

5.3.5 CURRENT LIABILITIES

Current

52
 YEAR X X2 Liabilities XY
(Rs) (Rs)
Y
2012 – 13 -2 4 22,58,576 -45,17,152
2013 – 14 -1 1 57,45,442 -57,45,442
2014 – 15 0 0 38,56,338 0
2015 – 16 1 1 1,44,73,102 1,44,73,102
2016 –17 2 4 1,25,88,203 2,51,76,406
TOTAL 10 3,89,21,661 2,93,86,914

a = 3, 89, 21,661 = 77, 84,332.2

5

b = 2, 93, 86,914 = 29, 38,691.4

10

Inference:

The table shows that the company’s current liability will be increased from the every
year.
Current Liabilities value in 2012-17 will be about 77, 84,332.2

5.3.6 CURRENT ASSET

Current asset
X X2 (Rs) XY

YEAR Y (Rs)
2012 – 13 -2 4 21,27,277 -42,54,554

53
 2013 – 14 -1 1 41,48,921 -41,48,921
2014 – 15 0 0 59,74,933 0
2015 – 16 1 1 1,85,09,842 1,85,09,842
2016 –17 2 4 2,03,50,240 4,07,00,480
TOTAL 10 5,11,11,213 5,08,06,947

a = 5,11,11,213 = 1,02,22,242.6
5

b = 5,08,06,947 = 50,80,694.7
10
Inference:

This table shows that the current asset of the company will be grown at 9times. When
compared to the beginning of the period of study its must be increased. Current Asset value in
2012 will be about 1,02,22,242.6.

RATIO ANALYSIS:

Ratio Analysis is a powerful tool of financial analysis. A Ratio is defined as

“the indicated quotient of two mathematical expressions” and as “the relationship between
two or more things”. In financial analysis, a ratio is used as a benchmark for evaluating the
financial position and performance of a firm.

54
 Ratio helps to summarize large quantities of financial data and to make
qualitative judgment about the firm’s financial performance.

5.4 RATIO ANALYSIS

5.4.1 Current Assets to Fixed Assets Ratio

The formula for the ratio is Current Assets

Fixed Assets

Current Assets to Fixed Assets Ratio

55
 Increase/
YEAR RATIO Decrease
2012 – 13 0.94:1
2013 – 14 0.72:1 -0.22
2014 – 15 1.55:1 0.82
2015 – 16 1.28:1 -0.27
2016 –17 1.62:1 0.34

. Inference:
The level of Current Assets can be measured by using this Current Asset to Fixed
Assets Ratio. The level has been fluctuating every year.

5.4.2
5.4.3 Current Assets to Total Assets Ratio

The formula for the ratio is Current Assets

Total Assets
Current Assets to Total Assets Ratio

Increase/

56
 YEAR RATIO Decrease
2012 – 13 0.26:1
2013 – 14 0.48:1 0.22
2014 – 15 0.62:1 0.14
2015 – 16 0.59:1 -0.03
2016 –17 0.59:1

Inference:
The Table shows the Current Assets to Total Assets ratio of the company, which registered
a fluctuating trend throughout the study period. This ratio varied from 0.26 to 0.48 times
during the study. There is no change for last year.

5.4.3 Net Working Capital Ratio

The formula for the ratio is Net Working Capital

Net Assets

Net Working Capital Ratio

Increase/
YEAR RATIO Decrease
2012 – 13 0.27:1
2013 – 14 0.12:1 - 0.15
2014 – 15 0.15:1 0.03
2015 – 16 0.21:1 0.06
2016 –17 0.22:1 0.01

57
Inference:
Net Working Capital is used as a measure of a firm’s liquidity and the firm’s
potential reservoir of funds. It can also be relate to net assets.
The Net Working Capital Ratio from the table shows a fluctuating trend and the
average Net Working Capital Ratio is 0.21 times of Net Working Capital to Net Assets. Hence
it shows that HERO MOTO CORP LTD has an average liquidity position.

5.3.4 Inventories to Current Assets Ratio

The formula for the ratio is Inventories

Current Assets

Inventories to Current Assets Ratio

Increase/
YEAR RATIO Decrease
2012 – 13 1.30:1
2013 – 14 0.31:1 -0.99
2014 – 15 0.31:1
2015 – 16 0.19:1 -0.12
2016 –17 0.23:1 0.04

58
Inference:
From the table it is known that the Inventories to Current Assets Ratio also register a
fluctuating trend during the entire study period.
The average ratio is 0.31 times and thus it is found that the investment in inventories
(being one of the important Current Assets) is kept at the considerable level.

5.4.5 Sundry Debtors to Current Assets Ratio

The formula for the ratio is Sundry Debtors

Current Assets
Sundry Debtors to Current Assets Ratio

Increase/
YEAR RATIO Decrease
2012 – 13 0.97:1
2013 – 14 0.68:1 -0.29
2014 – 15 0.42:1 - 0.26
2015 – 16 0.65:1 0.23
2016 –17 0.63:1 -0.02

59
Inference:
From the table the Sundry Debtors to Current Assets Ratio shows a fluctuating trend
throughout the study period from 2012-13 to 2016-17.
The average ratio is 0.65 times. Hence it implies the credit policy followed by HERO
MOTO CORP LTD is moderate.

5.4.6 Loans and Advances to Current Assets Ratio

The formula for the ratio is Loans and Advances

Current Assets

Loans and Advances to Current Assets Ratio

Increase/
YEAR RATIO Decrease
2012 – 13 0.02:1
2013 – 14 0.19:1 0.17
2014 – 15 0.06:1 -0.13
2015 – 16 0.15:1 0.09
2016 –17 0.02:1 - 0.13

Inference:
From the table it is noted that the Loans and Advances to Current Assets Ratio have
registered a fluctuating trend.

60
 It implies that a quarter positions of the Current Assets are kept in for Loans and
Advances; thereby it is found that HERO MOTO CORP LTD value of Loans and Advances is
considerable.

5.4.7 Cash to Current Assets Ratio

The formula for the ratio is Cash

Current Assets
Cash to Current Assets Ratio

Increase/
YEAR RATIO Decrease
2012 – 13 0.006:1
2013 – 14 0.015:1 0.09
2014 – 15 0.01:1 -0.14
2015 – 16 0.003:1 - 0.007
2016 –17 0.013:1 0.01
Inference:
The table shows the details of Cash to Current Assets Ratio and registered a
fluctuating trend throughout the study period from 2012-13 to 2016-17.
Hence we find that HERO MOTO CORP LTD had maintained a moderate level of
cash in proportion to Current Assets.

61
 5.4.8 Cash to Working Capital Ratio

The formula for the ratio is Cash

Working Capital
Cash to Working Capital Ratio

Increase/
YEAR RATIO Decrease
2012 – 13 0.11:1
2013 – 14 0.04:1 - 0.07
2014 – 15 0.03:1 - 0.01
2015 – 16 0.07:1 0.04
2016 –17 0.06:1 -0.01
Inference:
The Cash to Working Capital Ratio registered a fluctuating trend during the study
period this is noted from the table. It was 0.11 times in 2012-13, which sharply increased to
0.04 times in the next year and later for the following years it is fluctuating.
Hence it is found that 4% of the Working Capital ratio is managed by using the cash &
bank balance available in the company.

62
 The policy regard financing the Working Capital in HERO MOTO CORP LTD can be
said as aggressive policy.

5.4.9 Cash to Sales Ratio

The formula for the ratio is Cash

Sales
Cash to Sales Ratio

Increase /
YEAR RATIO Decrease
2012 – 13 0.0007:1
2013 – 14 0.0026:1 0.0019
2014 – 15 0.0028:1 0.0002
2015 – 16 0.0069:1 0.0041
2016 –17 0.0064:1 - 0.0005
Inference:
This is one of the important ratios of controlling cash. A study of cash to sales ratio
will provide a deep insight into the cash balances held in the concerns.
Evident from the table shows Cash to Sales registered a fluctuating trend throughout
the study period.

63
5.4.10 Cash Ratio

The formula for the ratio is Cash

Current liabilities

Cash Ratio

Increase /
YEAR RATIO Decrease
2012 – 13 0.0064:1
2013 – 14 0.0112:1 0.0048
2014 – 15 0.0160:1 0.0048
2015 – 16 0.0044:1 -0.0116
2016 –17 0.0221:1 0.0177
Inference:
From the table it is noted that the cash position of the HERO MOTO CORP LTD is
satisfactory.
It is found that the cash required to meet out the current liabilities is maintained at a
normal level.

64
 5.4.11 Current Ratio

The formula for the ratio is Current Assets

Current liabilities
Current Ratio

Increase /
YEAR RATIO Decrease
2012 – 13 0.94: 1
2013 – 14 0.72: 1 -0.22
2014 – 15 1.55: 1 0.83
2015 – 16 1.27: 1 -0.28
2016 –17 1.62: 1 0.35
Inference:
This ratio is an indicator of the firm’s commitment to meet its short – term liabilities.
From the table it is clear that the Current Ratio of HERO MOTO CORP LTD has been
fluctuating from the starting of the study period, later for last year it has been increasing;
hence the Current Ratio is quite satisfactory.
Thus the Current Ratio shows that the company has sufficient funds to meet its short-
term obligations.

65
 5.4.12 Liquidity Ratio

The formula for the ratio is Liquid Assets

Current liabilities

Liquidity Ratio

Increase /

Inference: YEAR RATIO Decrease

This ratio helps the

2012 – 13 0.94: 1
management to 2013 – 14 0.50: 1 -0.44 measure short-term
solvency. The ideal 2014 – 15 1.07: 1 0.57 liquid ratio is 1:1
From the table 2015 – 16 1.03: 1 -0.04 it is clear that
HERO MOTO 2016 –17 1.24: 1 0.21 CORP LTD liquid
ratio is more than the ideal ratio during the starting of the study period and later in 2012 -
13 it had reduced slightly, yet for the rest of the period current liabilities were fully
secured by liquid assets because the liquid assets were more than the current liabilities and
hence the company’s liquidity is satisfactory.

66
 5.4.13 Super Quick Ratio

The formula for the ratio is Super Quick Assets

Quick liabilities
Super Quick Ratio

Increase /
YEAR RATIO Decrease
2012 – 13 0.65:1
2013 – 14 0.32:1 -0.33
2014 – 15 0.58:1 0.26
2015 – 16 0.62:1 0.04
2016 –17 0.64:1 0.02
Inference:
Super Quick Ratio is the healthy measure of the firm’s liquidity position.
From the table 4.21 it is noted that the liquidity of HERO MOTO CORP LTD had a steep
slope in between during the year 2003-04, yet it was able to have a slow increase in the
rest of the study period and able to maintain its position.

Hence it shows that HERO MOTO CORP LTD is able to meet its current
obligations (liabilities).

67
 5.4.14 Working Capital Turnover Ratio

The formula for the ratio is sales

Working Capital
Working Capital Turnover

Increase /
YEAR RATIO Decrease
2012 – 13 12.36: 1
2013 – 14 17.70: 1 5.34
2014 – 15 11.55: 1 -25.15
2015 – 16 31.55: 1 20.00
2016 –17 5.45: 1 -26.15
Inference:
This ratio indicates whether Working Capital has been effectively utilized in making
sales or not.
From the table it is noted that Working Capital had some fluctuation in the middle of
the study period, yet the company was able to increase it in the later years.
Hence the turnover indicates that HERO MOTO CORP LTD had utilized its Working
Capital efficiently and the company can also try to work on this to get more effective values.

68
 5.4.15 Inventories Turnover Ratio
The formula for the ratio is Cost of Goods Sold

Average Stock

Inventories Turnover

YEAR RATIO Increase /

Decrease
2012 – 13 1.36: 1
2013 – 14 1.02: 1 -0.34
2014 – 15 1.02: 1 0
2015 – 16 1.02: 1 0
2016 –17 1.53: 1 0.51
Inference:
This ratio indicates whether investment in inventory is efficiently used or not and
whether the investment is within proper limits.
From the table it is found that the Inventory turnover Ratio of HERO MOTO CORP
LTD had some fluctuations in the starting of the study period then it had a growth in it.
Hence the efficiency of inventory control in HERO MOTO CORP LTD shows a
satisfactory position.

69
 5.4.16 Debtors Turnover Ratio

The formula for the ratio is Sales

Sundry Debtors
Debtors Turnover

Increase /
YEAR RATIO Decrease
2012 – 13 7.84: 1
2013 – 14 8.54: 1 0.70
2014 – 15 8.49: 1 -0.05
2015 – 16 3.30: 1 -5.19
2016 –17 3.26: 1 -0.04
Inference:
This is one of the techniques employed by the company with regard to the collection
of the receivables through effective management of collection policy with the help of
factoring services.
From the table it shows that the Debtors’ turnover Ratio had satisfactory increase in
the starting of the study period. However, in middle of the study period it had slight
fluctuations, the company was able to raise it in the next year.

70
 5.4.17 Debt Collection Period Ratio

The formula for the ratio is Days in a Month

Sundry Debtors turnover

Debt Collection Period Ratio

Increase /
YEAR RATIO Decrease
2012 – 13 46.5
2013 – 14 42.7 -3.8
2014 – 15 81.29 39.79
2015 – 16 110.6 29.31
2016 –17 111.9 1.3
Inference:
This ratio indicates the extent to which the debts have been colleted in time. It gives
the average debt collection period.
HERO MOTO CORP LTD use this ratio to find out whether their borrowers are
paying on time. From the table it is found that throughout the study period the collection
period is fluctuating and is within the average.

71
 5.4.18 Cash Interval Measure Ratio
The formula for the ratio is Current Assets – Inventories

Avg. Daily Operating Exp.

Cash Interval Measure Ratio

Increase /
YEAR RATIO Decrease
2012 – 13 135.14
2013 – 14 104.27 -30.89
2014 – 15 136.44 32.17
2015 – 16 144.72 8.28
2016 –17 146.13 1.41
Inference:
This ratio examines the firm’s ability to meet its regular cash expenses.
The defensive interval measures the time period for which a firm can operate on the
basis of present liquid assets without resorting to the next year’s revenue.
This ratio of HERO MOTO CORP LTD, from the table shows that the company can
meet its operating cash requirements within a period of 105 to 146 days without resorting to
next year’s income.

72
 CHAPTER V

5.1 FINDINDS

 The cash management of Hero Moto Corp Ltd has been working well in the
organization.
 The Funds from operations of a company has been increased from year by year.
 The cash from operations has been find that it used as efficient.
 The cash inflow and outflow of cash flow statement have a cash balance will be
increased 4.2 times when compared to last year balance.
 Current Ratio shows that the company has sufficient funds to meet its short-term
obligations.
 The company’s Liquidity Ratio shows a satisfactory trend.
 Super Quick Ratio shows that Hero Moto Corp Ltd is able to meet its current
obligations (liabilities)..
 The efficiency of inventory control in Hero Moto Corp Ltd shows a satisfactory
position..
 The Cash Ratio shows that the cash required to meet out the current liabilities is
maintained at a normal level hence, it shows that Hero Moto Corp Ltd follows an
average policy.

73
 Interval Measure Ratio shows that the company can meet its operating cash
requirements within a period of 105 to 146 days without resorting to next year’s
income.
 The Current Assets to Total Assets Ratio implies that Hero Moto Corp Ltd is
maintaining a considerable level of Current Assets in proportion to Total Assets.
 The average Cash to Current Assets is maintained at 0.009 times. Hence, it is found
that the company had maintained a moderate level of cash in proportion to Current
Assets.
 The average ratio of Inventories to Current Assets is 0.46 times and thus it is found
that the investment in inventories.
 The average ratio of Sundry Debtors to Current Assets is 0.67 times. Hence it implies
that the credit policy followed by HERO MOTO CORP LTD is moderate.
 The loans and Advances to Current Assets ratio of the company imply that a quarter
positions of the Current Assets are kept in for loans and advances, which is
considerable.
 The policy regard financing the Working Capital in Hero Moto Corp Ltd can be said
as Aggressive policy according to the Cash to Working Capital Ratio.
 The average cash to sales ratio is 0.004 times and which indicates that only 0.4% of
sales has been maintained as cash with the business.

74
 6.2 SUGGESTIONS & RECOMMENDATIONS

 Hero Moto Corp Ltd should try to match their Cash with the sales. In case of surplus
Cash, it should be invested either in securities or should be used to repay borrowings.
 The company should try to prepare a proper ageing schedule of debtors. This will help
them to reduce the bad debts and speed up collection efforts.
 The company should be prompt in making payments so as to enjoy cash discount
opportunities
 The company should determine the optimum cash balance to be kept.
 The company followed an aggressive policy of financing working capital should try to
finance 50% of their working capital using long term source and improve their status.
 The current Ratio of 2:1 is considered normally satisfactory. Hero Moto Corp Ltd
should try to improve the current ratio. So it should invest large amount in current
ratio, in order to maintain liquidity and solvency position of the concern.
 The company should try to follow a matching policy for financing current Assets (i.e.)
using both long term and short-term sources of finances.

75
 CONCLUSION

The Cash Management Analysis done on the financial position of the company
has provided a clear view on the activities of the company. The use of the ratio analysis, trend
analysis, Cash Flow Statement and other accounting and financial management helped in this
study to find out the financial soundness of the company.
This project was very useful for the judgment of the financial status of the
company from the management point of view. This evaluation proved a great deal to the
management to make a decision on the regulation of the funds to increase the sales and bring
profit to the company.
Before I conclude I wish to convey my thankfulness in regard to the training
given to me in Hero Moto Corp Ltd. It gave me extreme satisfaction and practical knowledge
of the financial activities carried out in the company. The kindness, attention, and immense
co-operation extended to me buy all the officials in the company made my project easy and
comfortable. Really it was a very pleasant experience Hero Moto Corp Ltd.

76
 BIBILIOGRAPHY

BOOKS:
 S.N. Maheshwari, Financial management, Eleventh Edition 2006,
Sultan Chaqnd & Sons, Educational Publishers. New Delhi.
 I.M Pandey, Financial management, Ninth Edition, Vikas publishing
house pvt Ltd.
 M.Y Khan- P.K Jain, Management Accounting, Third edition, Tata Mc
Graw-Hill Publishing co. Ltd
 B.L. Gupta, Management of Liquidity and Profitability, Arihant
Publishing House, Jaipur.

WEBSITE:

 www.financeindia.org

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 www.fao.org

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