ABSTRACT

The need for Cash to run the day-to-day business activities cannot be overemphasized.
One can hardly find a business firm, which does not require any amount of Cash. Indeed, firms
differ in their requirements of the Cash.
A firm should aim at maximizing the wealth of its shareholders. In its endeavor to do so,
a firm should earn sufficient return from its operation. Earning a steady amount of profit requires
successful sales activity. The firm has to invest enough funds in current asset for generating
sales. Current asset are needed because sales do not convert into cash instantaneously. There is
always an operating cycle involved in the conversion of sales into cash.
The objectives are to analyze the Cash management and to determine efficiency in cash,
inventories, debtors and creditors. Further, to understand the liquidity and profitability position
of the firm.
These objectives are achieved by using ratio analysis and then arriving at conclusions,
which are important to understand the efficiency / inefficiency of Cash.
It was noticed in the study that the company had utilized its Cash efficiently and can also
try to get more effective values by working on it. The cash required to meet out the current
liabilities is maintained at a normal level that shows the company follows an average policy.

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 firms manufacturing
operations while excessive cash will simply remain idle, without contributing anything towards
the firms 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.

Cash is the blood stream in the human body gives vitality and strength to business
enterprises. Cash is holding the smallest portion of total current assets. However cash is both the
beginning and end of working capital cycle - cash, inventories, receivables and cash it is the
cash, which keeps the business going. Hence, every enterprise has to hold necessary cash for its
existence. Moreover steady and healthy circulation of cash throughout the entire business
operations is the basis of business solvency. Now-a-days non-availability and high cost of
money have created a serious problem for industry. Nevertheless, cash like any other asset of a
company is treated as a tool of profit. Further today the emphasis is on the right amount of cash
at the right time at the right place and at the right cost

1.2 MEANING AND DEFINITION:

The term cash management refers to the management of cash resource in such a way that
generally accepted business objectives could be achieved. In this context, the objectives of a firm
can be unified as bringing about consistency between maximum possible profitability and
liquidity of a firm. Cash management may be defined as the ability of a management in
recognizing the problems related with cash which may come across in future course of action,
finding appropriate solution to curb such problems if they arise, and finally delegating these
solutions to the competent authority for carrying them out The choice between liquidity and ij
profitability creates a state of confusion. It is cash management that can provide solution to this
dilemma.
Cash management may be regarded as an art that assists in establishing equilibrium
between liquidity and profitability to ensure undisturbed functioning of a firm towards attaining
its li business objectives. Cash itself is not capable of generating any sort of income on its own. It
rather is the prime requirement of income generating sources and functions. Thus, a firm should
go for minimum possible balance of cash, yet maintaining its adequacy for the obvious reason of
firm's solvency. Cash management deals with maintaining sufficient quantity of cash in such a
way that the quantity denotes the lowest adequate cash figure to meet business obligations. Cash
management involves managing cash flows (into and out of the firm), within the firm and the
cash balances held by a concern at a point of time. The words, 'managing cash and the cash
balances' as specified above does not mean optimization of cash and near cash items but also
point towards providing a protective shield to the business obligations. "Cash management is
concerned with minimizing unproductive cash balances, investing temporarily excess cash
advantageously and to make the best possible arrangement for meeting planned and unexpected
demands on the firms' cash.

CHAPTER II

2.1 COMPANY PROFILE

Kalyani Associates (P) Ltd has rich heritage inherited from its parent concern
R.M.Appavu Chettiar Jewelry Shop, which was established in 1906. The management team of
Kalyani, namely Mr.L.Nanda Kumar and Mr.L.Murali Krishnan are the fourth generation
members.
The urge to establish a business of his own apart from his family business made
Mr.L.Nanda Kumar to start a business in the name of his mother Kalyani in the year 1985. He
was assisted by his brother Mr.L.Murali Krishnan. Under the banner of Kalyani Engineering
Company they promoted products like Kirloskar, Comet, Enfield Pump sets.
In a decade their product ranges kept on extended with Parry Genset, Dyanmax Genset,
and Solar RES. Then the name of the firm was changed into Kalyani Power Products, with
association of Honda Power products. It gave the company the first opportunity to market a
multi-national brand.
The experience gained in dealing Kalyani Associates (P) Ltd has rich heritage inherited
from its parent concern Rm.Appavu Chettiar Jewelry Shop, which was established in 1906. The
management team of Kalyani, namely Mr.L.Nanda Kumar and Mr.L.Murali Krishnan are the
fourth generation members.
The urge to establish a business of his own apart from his family business made
Mr.L.Nanda Kumar to start a business in the with petrol engines gave the courage to handle two
wheelers. High degree of passion to introduce the world leaders in two wheelers to the Madurai
market helped the company to win the confidence of Honda Motorcycles Scooters India (P) Ltd.
Honda Dealership started functioning from 2001 as Kalyani Motors.
The attempt to expand and diversify was the perpetual dream of the management, which
decorated the arena of Kalyani with various reputed multi-national brands like Prestige Smart
Kitchen, Levi's, Planet Fashion, Adidas, Fastrack, Maybell, Giny & Jony, Jockey, Pizza Corner,
Baskin Robbins, Naturals Salon, Featherlite and Elgi.

In 2004, all the firms of kalyani group were amalgamated as Kalyani Associates pvt
Ltd. With the vision of building a confident lifestyle 360 degrees, the management is
determined to keep on discover new business ventures and beautify its business galaxy
throughout its journey.
2.2 ABOUT ORGANISATION PERSONALITIES
L.NandaKumar
Chairman
He is the key person who paved way for the firm to establish in the year 1985. It is his
passion to diversify from his family jewellery business and laid the foundation for the company
to have an entity of its own.
His interest towards Engineering and allied products decided the direction of the
company in the nascent years. Serving as an employee for about a decade in a reputed retailer of
engineering goods inculcated rich experience that shaped him as a successful entrepreneur.
Desire to win and the determination to achieve the goal has given him the power to lead the
company in a successful path.
L.MuraliKrishnan
Managing Director
His role as an entrepreneur began at the age of 17, when he joined hands with his brother
Mr.L.Nanda Kumar. His eagerness in learning things and the thirst to succeed in business drove
him throughout his journey.
Under the guidance of his brother he strived hard to uphold and consistently retain the
company in number one position. His passion to achieve perfection and his desire to implement
novel ideas gave the company a new outlook. He loves to be an untiring hardworking
businessman and has a strong respect for human values.

S.SeethaRaman
General Manager
As one of the senior most employees, he has been serving the organization since 1998.
Dedication, hardworking, and adeptness in learning new things and acclimatizing to the
atmosphere has helped him to climb up the ladder from a sales executive to the level of a general
manager. His responsibility in the firm is to enhance productivity at all levels of the
management.
A.Janaki
AGM Accounts
She is one of the efficient and long term employees of the organization. She got
associated with the company in the year 1997. Gaining experience for more than 13 years in the
field of accounts has given her the strength to lead her department effectively and accurately.

2.3 PURSUIT OF QUALITY

The brand kalyani has been perceived by its patrons as a brand synonymous to
quality and flawless service. The drive inherited from its parent company urged the key
promoters to steer the organization steadily into a customer friendly environment that eases the
shopping experience with kalyani.
Obsession with quality has made kalyani tireless in introducing brands that have
earned international repute.
Guided by this principle, kalyani adheres to the international quality standards, be it
automobile, lifestyle products, consumer durables, food & beverages or for anything that lines
up. Just to mention one, besides ISO 9001:2008 certification, kalyani has been certified ISO
14001:2004 for its automobile division to make it been better.
2.4 VISION & MISSION
2.4.1 Vision
To evolve as an equity brand with India establishment in major metros and tier. Cities
by maximizing the number of excusive stores. To e became a preferred partner for leading brands
that touch the lives of every individual in a family.
2.4.2 Mission
i.

To keep vigil on the market expectation and source brands that would benefit the market.

ii.

To delight customer with flawless service to create to team of qualified & empowered
workforce to inspire the common man through our commitment to environment safety
and differently able kids.

2.5 CLUBS THAT ENSURE WELFARE

The success of a business venture rests on four pillars they are:
1.
2.
3.
4.

Customers
Dealers
Staff
Society

2.5.1CLUBS
1.
2.
3.
4.

Customer delight club

Dealers satisfaction club
Staff enrichment club
Social welfare club

1. Customer delight club

The relationship between a buyer and a seller is not one time, but it is lifetime bandam
that needs to be carefully nurtured. Understanding this truth we developed an exclusive club
named Customer Delight Club for our valuable customers.
The objective of this club is to keep our precious customers lively for 365 days in a year
and thus creating a smooth platform where the relationship between the seller and buyer
would be nourished in a long term basis. The secrets behind every successful business are
to ensure joy of selling for the trader and joy of buying for the customer.
One such sincere effort is the formation of CDC in our group, where the trader gets the
joy of selling a quality product to his valuable customer and the customer gets the joy of
buying a quality product from the trader. The portrayal of a family in the logo of CDC is a
symbolic presentation of an ideal family who are put to ecstasy from their purchase at
Kalyani.
Throughout the year the CDC is vibrant through our innovative activities like
Celebration of Customer Wedding day & Birthday, Fortune Offer, R & F coupon, Gift
Vouchers.
2. Dealers satisfaction club

The role of a dealer becomes indispensable to help an organization navigate in to the

right path of success.
As it is the responsibility of every organization to create a smoother platform where the
business partnership with dealers would flourish with satisfaction on the mutual ends, we
have formulated a club called Dealer Satisfaction Club, which ensures satisfaction for all
our business associates.
The prime objective of this club is catered by means of

Innovative & Attractive Schemes

Product Training Meetings

Discounts

Seasonal Offers

Awards
3. Staff Enrichment Club
A loyal and dutiful employee is the key factor for the growth of a successful
organization. To create a pleasing work environment for our staffs, we have dedicated a club
named Staff Enrichment Club that would motivate them for the mutual betterment of
ones career as well as the growth of the organization. The programs organized under this
club would be both informative and entertaining.
The chief objective of this club is to refine the capability of each staff in terms of
intellect, confidence, and optimistic perspective. Understanding the need of the day,
acceptable dosage of subjects will be delivered through effective orators and guest lectures
from various walks of life. In addition to on the job training, staffs are also given opportunity
to visit factories, where they get orientation from the manufacturers.

Besides capacity building programs, special trainings like first aid and emergency
tackling were also offered. To bring the staff out of the monotonous job cycle we are never
tired organizing entertaining activities that would act as a morale booster for the staff. Fun
trips, movie shows and Birth day, wedding day celebrations are organized to develop oneness
among the different layers of work group.
4. Contribution to the Society
We have a strong conviction that behind every successful organization there lies the
blessings of the society.
For a company to flourish the society can accept us. Without which all efforts to
become successful would be in vain. Now after turning successful it has become the
responsibility for us to contribute something for the welfare of the society.
As a corporate social responsibility, we dedicated club Contribution to the Society
that focuses on four prime areas like Environment, Safety, and Alternative Talented Children.
Concentrating on focus areas in the past gave birth to major activities like adoption of a
locality under E-LAWN project, Traffic Awareness campaign, Recruitment of mentally
challenged children at our showrooms.
The list of welfare activities keeps on extending with a view to maintain committed,
dedicated, trustworthy relationship with all members of the society.

2.6 EXECUTIVE COMMITTEE

Mr. L. Nantha Kumar

Chairman

Mr. L. Murali Kumar

Managing Director

Mr. S.Seetha Raman

General Manager

Mrs .A.Janaki
AGM Accounts

Mr.S.Kannan
AGM Project

2.7 ORGANISATION CHART

Managing
director

Managing director
(secretary)

General Manager

HR Department

HR Executives

Finance
Department

Database
Management

Accountant
s

Information
storage
management

EDP

System
managem
ent

2.8 DIVISIONS OF ORGANISATION

The organization of kalyani associates pvt Ltd in Madurai had a two different department,
there are following below:

Engineering
Automobile

ENGINEERING
i. Honda power
AUTOMOBILE
i. Honda Motorcycles & Scooters

CHAPTER III
REVIEW OF LITERATURE
3.1 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.
3.2 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 firms holds. It is significant because it
is used to pay the firms 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 managements considerable time 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.

3.3 GENERAL PRINCIPLES OF CASH MANAGEMENT:

Harry Gross has suggested certain general principles of cash management that, essentially
add efficiency to cash management. These principles reflecting cause and effect relationship
having universal applications give a scientific outlook to the subject of cash management. While,
the application of these principles in accordance with the changing conditions and business
environment requiring high degree of skill and tact which places cash management in the
category of art. Thus, we can say that cash management like any other subject of management is
both science and art for it has well-established principles capable of being skillfully modified as
per the requirements. The principles of management are follows as
1. Determinable Variations of Cash Needs
A reasonable portion of funds, in the form of cash is required to be kept aside to
overcome the period anticipated as the period of cash deficit. This period may either be short and
temporary or last for a longer duration of time. Normal and regular payment of cash leads to
small reductions in the cash balance at periodic intervals. Making this payment to different
employees on different days of a week can equalize these reductions. Another technique for
balancing the level of cash is to schedule i cash disbursements to creditors during that period
when accounts receivables collected amounts to a large sum but without putting the goodwill at
stake.
2. Contingency Cash Requirement
There may arise certain instances, which fall beyond the forecast of the management.
These constitute unforeseen calamities, which are too difficult to be provided for in the normal
course of the business. Such contingencies always demand for special cash requirements that was
not estimated and provided for in the cash budget. Rejections of wholesale product, large amount
of bad debts, strikes, lockouts etc. are a few among these contingencies. Only a prior experience
and investigation of other similar companies prove helpful as a customary practice. A practical
procedure is to protect the business from such calamities like bad-debt losses, fire etc. by way of
insurance coverage.

3. Availability of External Cash

Another factor that is of great importance to the cash management is the availability of
funds from outside sources. There resources aid in providing credit facility to the firm, which
materialized the firm's objectives of holding minimum cash balance. As such if a firm succeeds
in acquiring sufficient funds from external sources like banks or private financers, shareholders,
government agencies etc., the need for maintaining cash reserves diminishes.
4. Maximizing Cash Receipts
Every financial manager aims at making the best possible use of cash receipts. Again,
cash receipts if tackled prudently results in minimizing cash requirements of a concern. For this
purpose, the comparative cost of granting cash discount to customer and the policy of charging
interest expense for borrowing must be evaluated on continuous basis to determine the futility of
either of the alternative or both of them during that particular period for maximizing cash
receipts. Yet, the under mentioned techniques proved helpful in this context: - 210
(A) Concentration Banking:
Under this system, a company establishes banking centers for collection of cash in
different areas. Thereby, the company instructs its customers of adjoining areas to send their
payments to those centers. The collection amount is then deposited with the local bank by these
centers as early as possible. Whereby, the collected funds are transferred to the company's central
bank accounts operated by the head office.
(B) Local Box System:
Under this system, a company rents out the local post offices boxes of different cities and
the customers are asked to \ forward their remittances to it. These remittances are picked by the
authorized lock bank from these boxes to be transferred to the company's central bank operated
by the head office.

(C) Reviewing Credit Procedures:

It aids in determining the impact of slow payers and bad-debtors on cash. The accounts of
slow paying customers should be reviewed to determine the volume of cash tied up. Besides this,
evaluation of credit policy must also be conducted for introducing essential amendments. As a
matter of fact, too strict a credit policy involves rejections of sales. This is curtailing the cash
inflow. On the other hand, too lenient, a credit policy would increase the number of slow
payments and bad debts again decreasing the cash inflows.
(D) Minimizing Credit Period:
Shortening the terms allowed to the customers would definitely accelerate the cash inflow
side-by-side revising the discount offered would prevent the customers from using the credit for
financing their own operations profitably. (E)Others: Introducing various procedures for special
handling of large to very large remittances or foreign remittances such as, persona! pick up of
large sum of cash using airmail, special delivery and similar techniques to accelerate such
collections.
5. Minimizing Cash Disbursements
The motive of minimizing cash payments is the ultimate benefit derived from
maximizing cash receipts. Cash disbursement can be brought under control by preventing
fraudulent practices, serving time draft to creditors of large sum, making staggered payments to
creditors and for payrolls etc.
6. Maximizing Cash Utilization
Although a surplus of cash is a luxury, yet money is costly. Moreover, proper and
optimum utilization of cash always makes way for achievement of the motive of maximizing
cash receipts and minimizing cash payments. At times, a concern finds itself with funds in excess
of its requirement, which lay idle without bringing any return to it. At the same time, the concern
finds it unwise to dispose it, as the concern shall soon need it. In such conditions, efforts should
be made in investing these funds in some interest bearing securities. There are 211 certain basic

strategies suggested by Gitman, which prove evidently helpful in managing cash if employed by
the cash management.
3.4 FUNCTION OF CASH MANAGEMENT:
Cash management is concerned with minimizing unproductive cash balances, investing
temporarily excess cash advantageously and to make the best possible arrangements for meeting
planned and unexpected demands on the firm's cash."15 Cash Management must aim to reduce
the required level of cash but minimize the risk of being unable to discharge claims against the
company as they arise. All these aims and motives of cash management largely depend upon the
efficient and effective functioning of cash management. Cash management functions can be
studied under five heads, namely, cash planning, managing cash flow, controlling cash flow,
optimizing the cash level and investing idle cash. All these functions are discussed below in
details:
1. Cash Planning
Good planning is the very foundation of attaining success. For any management decision,
planning is the foremost requirement. "Planning is basically an intellectual process, a menfal predisposition to do things in an orderly way, to think before acting and to act in the light of facts
rather than of a guess." 16 Cash planning is a technique, which comprises of planning for and
controlling of cash. It is a management process of forecasting the future need of cash, its
available resources and various uses for a specified period. Cash planning, thus, deals at length
with formulation of necessary cash policies and procedures in order to carry on business
continuously and on sound lines. Good cash planning aims at providing cash, not only for regular
but also for irregular and abnormal requirements.
2. Managing Cash Flows
The heading simply suggests an idea of managing properly the flow of cash coming
inside the business i.e. cash inflow and cash moving out of the business i.e. cash outflow. These
two are said to be properly managed only, if a firm succeeds in accelerating the rate of cash
inflow together with minimizing the cash outflow. As observed expediting collections, avoiding
unnecessary inventories, improving control over payments etc. contribute to better management

of cash. Whereby, a business can conserve cash and thereof would require lesser cash balance for
its operations.
3. Controlling the Cash Flows
As forecasting is not an exact science because it is based on certain assumptions.
Therefore, cash planning will inevitably be at variance with the results actually obtained. For this
reason, control becomes an unavoidable function of cash management. Moreover, cash
controlling becomes essential as it increases the availability of usable cash from within | the
enterprise. As it is obvious that greater the speed of cash flow cycle, I greater would be the
number of times a firm can convert its goods and ' services into cash and so lesser will be the
cash requirement to finance the desired volume of business during that period. Furthermore,
every enterprise is in possession of some hidden cash, which if traced out substantially decreases
the cash requirement of the enterprise.
4. Optimizing the Cash Level
A financial manager should concentrate on maintaining sound liquidity position i.e. cash
level. All his efforts relating to planning, managing and controlling cash should be diverted
towards maintaining an optimum level of cash. The foremost need of maintaining optimum level
of cash is to meet the necessary requirements and to settle the obligations well in time.
Optimization of cash level may be related to establishing equilibrium between risk and the
related profit expected to be earned by the company.
5. Investing Idle Cash
Idle cash or surplus cash refers to the excess of cash inflows over cash outflows, which
do not have any specific operations or any other purpose to solve currently. Generally, a firm is
required to hold cash for meeting working needs facing contingencies and to maintain as well as
develop goodwill of bankers. The problem of investing this excess amount of cash arises simply
because it contributes nothing towards profitability of the firm as idle cash precisely earns no
returns. Further permanent disposal of such cash is not possible, as the concern may again need
this cash after a short while. But, if such cash is deposited with the bank, it definitely would earn

a nominal rate of interest paid by the bank. A much better returns than the bank interest can be
expected if a company deploys idle cash in make study securities.
.
3.5 MOTIVES OF HOLDING CASH:
Every business transaction whether carried on credit or on cash basis ultimately results in
either cash inflow or cash outflows. The pivotal point in present day financial management is to
maximize cash generation and to minimize cash outflows in relation to the cash inflows.17
Keynes postulated three motives for holding cash:1. Transaction Motive
2. Precautionary Motive and
3. Speculative Motive to which one more motive for holding cash has been added:4. Compensation Motive
1. Transaction Motive:
It refers to holding of cash for meeting routine cash requirements and financing
transactions carried on by the business in the normal course of action. This motive requires cash
for payment of various obligations like purchase of raw materials, the payment of usage and
salaries, dividend, income tax, various other operating expenses etc.
However, there exists regular and counter inflow of cash in the business by way of return on
investments, sales etc. However, cash receipts and cash payments do not perfectly synchronies
with each other. Therefore, a firm requires an additional cash balance during the periods when
payments are in excess of cash receipts. Thus transaction motive stresses on holding cash to meet
anticipated obligations that are not counter balanced by cash receipts due to disparity of timings.
2. Precautionary Motive
Under precautionary motive, the need to hold cash arises for meeting any unforeseen,
unpredicted contingencies or unexpected disbursements. Such motives provide a cushion to

withstand unexpected cash requirements arising spontaneously at short notice due to various
causes. In this regard, two factors largely influence the precautionary cash balance, degree of
predictability and availability of short-term credit.
If a cash management succeeds in estimating the cash requirements adequately, it escapes
from maintaining big cash balance for emergency. Likewise, if a management is capable and
efficient enough to borrow the required cash from short-term creditors small balance would be
held and vice-versa. 'Ready borrowing power is the best antidote to emergency cash drains and
facilitates release of available cash resources for remunerative
3. Speculative Motive
The speculative motive finds its origin out of the desire of an enterprise to avail itself the
benefits of the opportunities arising at unexpected moments that do not happen to exist in the
normal course of business. This motive represents a positive and aggressive approach.
Reasonable cash reserve is maintained by concerns for exploiting profistudy opportunities like
bulk purchase of raw materials at discounted prices, purchasing securities when interest rates are
expected to fall, postpone purchase of raw material if decline in prices is anticipated, etc.
4. Compensation Motive
Such motives require holding cash balance in case the concern enters into some loan
agreement with the bank. Bank provides a great variety of services to its customers. For some of
such services it charges commission or fee. While for other an indirect compensation is
demanded by it by asking its customers to keep a minimum bank balance sufficient to earn a
return equal to cost of services provided by it. Such balances are termed as compensating
balances.

3.6 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 firms profitability ) and cash deficits (which can cause the firms
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 nonavailability 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.

3.7 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 banks compensation for its advice and assistance.

3.8 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.
3.9 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 firms inventory +Days to collect its accounts receivables
-Days to pay its accounts payable.
The cash turnover means the numbers of times firms 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.
3.10 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 companys
accounts. The cheques are recorded and cleared for collection. The company receives a deposits
the cheque in the companys 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.
3.11 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 companys 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 issuers 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 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.
3.12 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.
3.12.1UTILITY 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.
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.

3.12.2 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 firms 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
BAUMOLS MODEL
The Baumols model of cash management provides a formal approach for determining a
firms 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.

The Baumols model makes the following assumptions:

The firm is able to forecast its cash needs with certainty.

The firms 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 converts securities to cash.

Cash balance

C/2
Average

Baumols model for cash balance

Cost trade-off: Baumols 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 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 firms 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 firms 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)

Miller-Orr Model

3.13 RATIO ANALYSIS:

The results and discussion of the study is presented in five different sections. The first section
explains about the various components of working capital, variable of working capital. The
second section explains about the liquidity trend of the organization. The third section explains
about the working capital trend. The fourth section explains the utilization of current assets and
current liabilities. The fifth section explains the measure to effective management of working
capital. The first section explains the various components of working capital and variables of
working capital.
3.13.1 DEFINITION
Ratio analysis is the powerful of financial statement analysis. A ratio is define as the
indicated quotient of two mathematical expression and as the relationship between two (or)
more things the absolute figure reported in the financial statement do not provide meaningful
understanding of the performance and financial position of the firm. Ratio helps to summaries
large qualities of financial data and makes qualitative judgment of firms financial performance.
3.13.2 SIGNIFICANCE OF RATIO ANALYSIS
Ratio analysis helps to appraise the firms in the term of profitability and efficiently of
performance, either individual (or) in relation to other firms in same duty. Ratio analysis is one
of the best possible techniques available to management to imparts the basic functions like
planning and control as future is closely related to the immediately past, ratio calculated on the
basis historical finance data may be of good assistance to predict the future. E.g. , on the basis of
the inventory turnover ratio or debtors turnover ratio in the past, the level of inventory and

debtors can be easily ascertained for any given amount of sales. Similarly, the ratio analysis may
be able to locate the point out the various areas which need the management attention in order to
improve the situation. E.g. current ratio which shows a constant decline trend may be indicate the
need for further introduction of long term finance in order. To increase the liquidity position.

3.13.3 IMPORTANCE OF RATIO ANALYSIS

Aid to measure general efficiency

Aid to measure financial solvency

Aid in forecasting and planning

Facilitate decision making

Aid in corrective action

Aid in intra-firm comparison

Act as a good communication

Evaluation of efficiency

Effective tool

3.13.4 ADVANTAGES OF RATIO ANALYSIS

Ratio analysis is necessary to establish the relationship between two accounting figures to
highlight the significant information to the management or users who can analyse the business
situation and to monitor their performance in a meaningful way. The following are the
advantages of ratio analysis:
(1) It facilitates the accounting information to be summarized and simplified in a required
form.

(2) It highlights the inter-relationship between the facts and figures of various segments of
business.
(3) Ratio analysis helps to remove all type of wastages and inefficiencies.
(4) It provides necessary information to the management to take prompt decision relating to
Business.
(5) It helps to the management for effectively discharge its functions such as planning,
organizing, controlling, directing and forecasting.
(6) Ratio analysis reveals profitable and unprofitable activities. Thus, the management is
able to concentrate on unprofitable activities and consider to improve the efficiency.
(7) Ratio analysis is used as a measuring rod for effective control of performance of
business activities.
(8) Ratios are an effective means of communication and informing about financial
soundness made by the business concern to the proprietors, investors, creditors and other parties.
(9) Ratio analysis is an effective tool which is used for measuring the operating results of
the enterprises.
(10) It facilitates control over the operation as well as resources of the business.
3.13.5 LIMITATIONS OF RATIO ANALYSIS

Differences in definitions

Limitations of accounting records

Lack of proper standards

No allowances for price level changes

Changes in accounting procedures

Quantitative factors are ignored

Limited use of single ratio

Background is over looked

Limited use

Personal bias

3.13.6 CLASSIFICATIONS OF RATIOS

The use of ratio analysis is not confined to financial manager only. There are different
parties interested in the ratio analysis for knowing the financial position of a firm for different
purposes.
Various accounting ratios can be classified as follows:
1. Traditional classification
Balance sheet (or) position statement ratio: They deal with the relationship between
two balance sheet items, e.g. the ratio of current assets to current liabilities etc., both the items
must, however, pertain to the same balance sheet.
Profit & loss account (or) revenue statement ratios: These ratios deal with the
relationship between two profit & loss account items, e.g. the ratio of gross profit to sales etc.,
Composite (or) inter statement ratios: These ratios exhibit the relation between a profit
& loss account or income statement item and a balance sheet items, e.g. stock turnover ratio, or
the ratio of total assets to sales.
2. Functional classification
These include liquidity ratios, long term solvency and leverage ratios, activity ratios and
profitability ratios.
3. Significance rations

Some ratios are important than others and the firm may classify them as primary and secondary
ratios. The primary ratio is one, which is of the prime importance to a concern. The other ratios
that support the primary ratio are called secondary ratios.
3.13.7 FUNCTIONAL CLASSIFICATION THE RATIOS
1. Liquidity ratio & 2. Leverage ratio
3. Activity ratio & 4. Profitability ratio
CHAPTER IV
4.1 OBJECTIVES OF THE STUDY
Primary Objective:
To analyze the cash management of kalyani associates pvt ltd.

Secondary Objective:
To find out the liquidity position of the concern through ratio analysis.
To study the growth of kalyani associates pvt ltd in terms of cash flow statement.
To make suggestion and recommendation to improve the cash position of

kalyani

associates pvt ltd

4.2 SCOPE OF THE STUDY

The study is conducted mainly to review the cash strength of the company for a period of
four years from 2011-12 to 2014-15as revealed from the cash data of the companys
annual reports.

Manual and accounting records it also helps in bringing out of the various factors which a
lead to down fall of the company performance.

4.3 LIMITATIONS OF THE STUDY

The study is mainly depends upon the secondary data. I.e. The Final report of the
company is for the period of five years only.

The Cash data cannot be estimated accurate for the future period

The analyses & Interpretation of the concern is based only past performance.

The technical aspects of the production process are not considered for the analysis.

It cannot be compared with those of other concern

Ratios are only post mortem of what has happened between two balance sheets, they also
given no clue to future.

4.4 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.

CHAPTER V
5.1 RESEARCH METHODOLOGY
5.1.1 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
5.1.2 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.

5.2 Data collection

5.2.1 Secondary data
1. From the annual reports maintained by the company.
2. Data are collected from the companys website.
3. Books and journals pertaining to the topic.

5.3 TOOLS USED IN THE ANALYSIS

Cash flow statement

Ratio analysis

CHAPTER VI
DATA ANALYSIS & INTERPRETATION

6.1 CALCULATIONS OF FUNDS FROM OPERATION AND CASH FROM

OPERATION FOR THE YEAR ENDED
Particulars

2011-2012

2012-2013

2013-2014

2014-2015

Net Profit

13,23,000

10,00,000

8,67,800

4,20,000

Depreciation during the

1,16,000

90,000

1,30,000

1,20,000

14,39,000

10,90,000

9,97,800

5,40,000

Sundry debtors

1,54,600

41,800

Prepaid Expenses

4,000

10,000

Sundry creditors

1,67,600

3,34,000

10,000

9,000

30,000

24,000

1,16,000

Stock

4,01,200

4,00,000

Bills receivable

3,00,000

year
FFO(FLO)
ADD:

Outstanding liabilities
Bank O/D

Bills payable

1,60,000

LESS:
Stock

9,61,200

5,00,000

Bank O/D

1,10,000

90,000

Outstanding liabilities

41,000

Sundry Debtors

2,22,000

5,24,400

Sundry Creditors

1,50,000

Prepaid Expenses

14,000

3,00,000

Bills receivable

Bills payable
CFO(CLO)

1,60,000
4,33,400

14,29,800

2,21,400

10,71,800

6.2 CASH FLOW STATEMENT

Inflow

2011-2012

2012-2013

2013-2014

2014-2015

Opening balance

100,500

8,87,100

23,91,700

63,07,100

Cash from operation

4,33,400

14,29,800

2,21,400

10,71,800

Increase in loan funds

24,000

1,16,000

10,54,000

3,02,000

13,72,000

90,000
22,00,000

Sales of Asset

Building
Land
Furniture
Increase in capital

18,50,000

Total

24,07,900

34,86,900

65,77,100

73,78,900

5,04,000

16,80,000

9,90,000

8,32,000

1,60,000

26,800
-

63,200
-

1,10,000

1,80,000
90,000

2,00,000

6,00,000

Closing balance

8,87,100

23,91,700

64,67,100

46,68,900

Total

24,07,900

34,86,900

65,77,100

73,78,900

Outflows
Purchase of Asset
Building
Land
Furniture
decrease in loan funds
Decrease in capital

Inference:
This table shows that the cash flow statements of kalyani associates pvt 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 capital from

2013-2014for Rs. 22, 00,000. Its must be used as efficient for the next year for decrease their
loan funds.

6.3 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.
Ratio helps to summarize large quantities of financial data and to make qualitative
judgment about the firms financial performance.

6.3.1 CURRENT RATIO

Current ratio is the most common ratio for measuring liquidity. It represents the ratio of
current assets to current liabilities. It is also called working capital ratio. It is calculated by
dividing current assets by current liabilities. Current assets mean assets that can be converted in
to cash within a short period of time usually one year. Current liability means liabilities that can
be repaid within a year. The ideal current ratio is 2:1
Current assets means cash or those assets which are expected to be converted in to cash
within a year e.g. Inventory, sundry debtors, bills receivables, bank balance, cash in hand etc.
Current liabilities are those liabilities to be paid off within a year e.g. Sundry creditors, bills
payable, and bank overdraft or bank cash credit.
If current assets are less than twice of current liabilities. The organization will find it
difficult to meet their current liabilities.

Current asset
Current ratio = ________________
Current liabilities

TABLE 6.3.1
CURRENT RATIO
Year

Current assets

Current liabilities

Current ratio

2011-12

17,57,200

3,50,000

5.02:1

2012-13

18,97,000

809,000

2.34:1

2013-14

25,61,800

7,50,000

3.41:1

2014-15

19,00,000

4,80,000

3.95:1

Average

3.68

Source: Secondary data

GRAPHICAL REPRESENTATION

Chart 6.3.1

CURRENT RATIO
6

5.02

3.95
3.41

CURRENT RATIO

2.34

3
2
1
0
2011-12

INTERPRETATION

2012-13

2013-14

2014-15

The standard for current ratio is 2:1. Through this company records an increasing and
decreasing trend in current ratio year by year, the ratios are near to the ideal level. The average
current ratio is 3.68.

6.3.2 CURRENT ASSETS TO FIXED ASSETS RATIO

This ratio differ from industry to industry. Increase in this ratio means that trading is slack or
mechanization has been used. A decline in the ratio means the debtors and stocks are increased
too much or fixed assets are more intensively used.
If current assets increase with the corresponding increase in profit, it will show that
the business expanding.

Current assets
Current assets to fixed assets ratio = _______________
Fixed assets
TABLE 6.3.2
CURRENT ASSETS TO FIXED ASSETS RATIO
Year

Current assets

Fixed assets

Current assets to
fixed assets ratio

2011-12

17,57,200

49,40,800

0.35:1

2012-13

18,97,000

47,12,000

0.40:1

2013-14

25,61,800

19,70,000

1.30:1

2014-15

19,00,000

21,90,000

0.86:1

Average =

Source: Secondary data

0.72

GRAPHICAL REPRESENTATION

Chart 6.3.2

Current assets to fixed assets ratio

1.3

1.4
1.2

0.86

1
0.8
0.6

0.35

Current assets to fixed

assets ratio

0.4

0.4
0.2
0
2011-12

2012-13

2013-14

2014-15

INTERPRETATION
Current assets are increased due to the increase in the sundry debtors and the net fixed
assets of the firm are decreased due to the charge of depreciation and there is no major increment
in the fixed assets. The increment in current assets and the decrease in fixed assets resulted an
increase in the ratio compared with the previous year. The average ratio is 0.72. The highest ratio
is 1.3 for the year 2013-14. The lowest ratio is 0.35 for the year 2011-12

6.3.3 CURRENT ASSETS TO TOTAL ASSETS RATIO

Current assets are the one of the part of assets. Current assets are those, the amount of
which can be realized within a period of one year. That is the current assets of a firm represent
those assets which can be ordinary course of business converted into cash within a period not
exceeding one year. This ratio is shows the relationship between current assets and total assets.

Current assets
Current assets to total assets ratio = __________________
Total assets
Current assets are such as cash in hand, cash at bank, Debtors, Bills receivable,
prepaid expenses and etc. The current assets are increase on the other hand total assets also
increased. Total assets are representing the assets total in the balance sheet.
TABLE 6.3.3
CURRENT ASSETS TO TOTAL ASSETS RATIO

Year

Current assets

Total assets

Current assets to
total assets ratio

2011-12

17,57,200

66,98,000

0.26:1

2012-13

18,97,000

43,20,000

0.43:1

2013-14

25,61,800

86,17,800

0.29:1

2014-15

19,00,000

73,00,000

0.26:1

Average =

0.31

Source: secondary data

Chart 6.3.3

Current assets to total assets ratio

0.43
0.45
0.4
0.35
0.3

0.29

0.26

0.26

0.25

Current assets to total

assets ratio

0.2
0.15
0.1
0.05
0
2011-12

2012-13

2013-14

2014-15

INTERPRETATION
The average ratio is 0.31. The highest ratio is 0.43 for the year 2012-13. And the lowest ratio is
0.26for the year 2011-12 & 2014-15

6.3.4 INVENTORIES TO CURRENT ASSETS RATIO

The formula for the ratio is

Inventories to Current Assets Ratio = inventories

Current Assets
TABLE 6.3.4

INVENTORIES TO CURRENT ASSETS RATIO

Year

inventories

Current assets

Inventories to current
assets ratio

2011-12

14,01,200

17,57,200

0.79:1

2012-13

10,00,000

18,97,000

0.52:1

2013-14

15,00,000

25,61,800

0.58:1

2014-15

11,00,000

19,00,000

0.57:1

Average =

Source: secondary data

0.61

Chart 6.3.4
Inventories to current assets ratio
0.79
0.8
0.7

0.58

0.57

0.52

0.6

Inventories to current
assets ratio

0.5
0.4
0.3
0.2
0.1
0
2011-12

2012-13

2013-14

2014-15

INTERPRETATION
The average ratio is 0.61. The highest ratio is 0.79 for the year 2011-12. And the lowest ratio is
0.52for the year 2012-13
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 0.61 times and thus it is found that the investment in inventories
(being one of the important Current Assets) is kept at the considerable level.

6.3.5 SUNDRY DEBTORS TO CURRENT ASSETS RATIO

The formula for the ratio is

Sundry Debtors to Current Assets Ratio = Sundry Debtors

Current Assets
TABLE 6.3.5
SUNDRY DEBTORS TO CURRENT ASSETS RATIO
Year

Sundry debtors

Current assets

Sundry debtors to
current assets ratio

2011-12

3,42,000

17,57,200

0.19:1

2012-13

8,66,400

18,97,000

0.45:1

2013-14

7,11,800

25,61,800

0.27:1

2014-15

6,70,000

19,00,000

0.35:1

Average =

Source: secondary data

0.31

Chart 6.3.5
0.45
0.45
0.4

0.35

0.35
0.27

0.3
0.25

Sundry debtors to current

assets ratio

0.19

0.2
0.15
0.1
0.05
0
2011-12

2012-13

2013-14

2014-15

INTERPRETATION
From the table the Sundry Debtors to Current Assets Ratio shows a fluctuating trend throughout
the study period from 2011-12 to 2014-15
The average ratio is 0.31. The highest ratio is 0.45 for the year 2012-13. And the lowest ratio is
0.19 for the year 2011-12

6.3.6 GROSS PROFIT RATIO

This ratio is also known as gross margin or trading margin ratio. Gross profit ratio
indicates the difference between sales and direct cost.

Gross profit ratio= gross profit / net sales x100

TABLE 6.3.6
SUNDRY DEBTORS TO CURRENT ASSETS RATIO
Year

gross profit

net sales

Gross profit ratio

2011-12

16,85,000

29,00,000

0.58:1

2012-13

10,00,800

29,46,000

0.33:1

2013-14

11,40,000

31,00,000

0.36:1

2014-15

11,90,000

42,50,000

0.28:1

Average =

Source: secondary data

0.38

Chart 6.3.6

Gross profit ratio

0.58
0.6
0.5
0.33

0.4

0.36
0.28

Gross profit ratio

0.3
0.2
0.1
0
2011-12

2012-13

2013-14

2014-15

INTERPRETATION
From the above study, it is clearly inferred that gross profit ratio has drastically increased and
decreased from the period of 2011-12 to 2014-15
The average ratio is 0.38. The highest ratio is 0.58 for the year 2011-12. And the lowest ratio is
0.28 for the year 2014-15

6.3.7 NET PROFIT RATIO

It measures of management efficiency in operation the business successfully from
the owner. It indicates the return on shareholder investment.

Net profit ratio = net profit after tax / net sales

TABLE 6.3.7
NET PROFIT RATIO
Year

Net profit

net sales

Net profit ratio

2011-12

13,23,000

29,00,000

0.45:1

2012-13

10,00,000

29,46,000

0.33:1

2013-14

8,67,800

31,00,000

0.27:1

2014-15

4,20,000

42,50,000

0.09:1

Average =

Source: secondary data

0.285

Chart 6.3.7

Net profit ratio

0.45
0.45
0.4

0.33

0.35

0.27

0.3

Net profit ratio

0.25
0.2
0.15

0.09

0.1
0.05
0
2011-12

2012-13

2013-14

2014-15

INTERPRETATION
From the above study, it is clearly inferred that net profit ratio has drastically increased and
decreased from the period of 2011-12 to 2014-15
The average ratio is 0.285. The highest ratio is 0.45 for the year 2011-12. And the lowest ratio is
0.09 for the year 2014-15

6.3.8 DEBTORS TURNOVER RATIO

The formula for the ratio is

Debtors Turnover Ratio =

Sales

Sundry Debtors

TABLE 6.3.8
DEBTORS TURNOVER RATIO
Year

sales

Sundry Debtors

Debtors Turnover
Ratio

2011-12

29,00,000

3,42,000

8.47:1

2012-13

29,46,000

8,66,400

3.44:1

2013-14

31,00,000

7,11,800

4.35:1

2014-15

42,50,000

6,70,000

6.34:1

Average =

Source: secondary data

5.65

Chart 6.3.8

Debtors Turnover Ratio

9
8

8.47

7
6.34

Debtors Turnover Ratio

5
4
3

4.35
3.44

2
1
0
2011-12

2012-13

2013-14

2014-15

INTERPRETATION
From the above study, it is clearly inferred that Debtors Turnover Ratio has drastically increased
and decreased from the period of 2011-12 to 2014-15
The average ratio is 5.65. The highest ratio is 8.47 for the year 2011-12. And the lowest ratio is
3.44 for the year 2012-13

6.3.9 RETURN ON ASSETS RATIO (ROA)

This ratio is calculated to measure the productivity of total asset.

Return on asset ratio = (net profit / total asset x 100)

TABLE 6.3.9
DEBTORS TURNOVER RATIO
Year

Net profit

Total assets

Return on asset ratio

2011-12

13,23,000

66,98,000

19.7:1

2012-13

10,00,000

43,20,000

23.1:1

2013-14

8,67,800

86,17,800

10.06:1

2014-15

4,20,000

73,00,000

5.75:1

Average =

Source: secondary data

14.65

Chart 6.3.9

Return on asset ratio

5.75

2011-12
19.7

10.06

2012-13
2013-14
2014-15

23.1

INTERPRETATION
From the above study, it is clearly inferred that Return on asset ratio has drastically increased and
decreased from the period of 2011-12 to 2014-15
The average ratio is 14.65. The highest ratio is 23.1 for the year 2012-13. And the lowest ratio is
5.75 for the year 2014-15

6.3.10 QUICK RATIO

Quick Ratio also termed as Acid Test or Liquid Ratio. It is supplementary to the current
ratio. The acid test ratio is a more severe and stringent test of a firm's ability to pay its short-term
obligations 'as and when they become due. Quick Ratio establishes the relationship between the
quick assets and current liabilities. In Quick Ratio can be calculated by two basic components of
quick assets and current liabilities.
Quick Assets = Current Assets - (Inventories + Prepaid expenses)
The ideal Quick Ratio of I: I is considered to be satisfactory. High Acid Test Ratio is an
indicate on that the firm has relatively better position to meet its current obligation in time. On
the other hand, a low value of quick ratio exhibiting that the firm's liquidity position is not good.

Quick assets
Quick ratio = ______________________
Current liabilities
TABLE 6.3.10

QUICK RATIO
Year

Quick assets

Current liabilities

Quick ratio

2011-12

3,56,000

3,50,000

1.01:1

2012-13

8,87,000

809,000

1.09:1

2013-14

10,61,800

7,50,000

1.41:1

2014-15

7,90,000

4,80,000

1.64:1

Average =

1.28

Source: secondary data

Chart 6.3.10

Quick ratio
1.01
2011-12

1.64

2012-13
2013-14
2014-15
1.09

1.41

INTERPRETATION
From the above study, it is clearly inferred that quick ratio has drastically increased and
decreased from the period of 2011-12 to 2014-15
The average ratio is 1.28. The highest ratio is 1.64 for the year 2014-15. And the lowest ratio is
1.01 for the year 2011-12

6.3.11 AVERAGES OF RATIOS:

TABLE 6.3.11
AVERAGES OF RATIOS
Ratio analysis

Averages ratios

Current ratio

3.68

Current assets to fixed assets ratio

Current assets to total assets ratio

0.31

Inventories to current assets ratio

0.61

Sundry debtors to current assets ratio

0.31

Gross profit ratio

0.38

Net profit ratio

0.285

Debtors Turnover Ratio

5.65

Return on asset ratio

14.65

10

Quick ratio

1.28

Source: secondary data

Chart 6.3.11

0.72

Averages ratios
16
14
12
10
8
6 3.68
4
0.72
2
0

14.65

5.65
0.610.31
0.380.29

1.28

0.31

Averages ratios

INTERPRETATION
From the above study, it is clearly inferred that quick ratio has drastically increased and
decreased from the period of 2011-12 to 2014-15
The highest average ratio (return on asset ratio) is 14.65. And the lowest ratio (net profit ratio) is
0.285

CHAPTER VII

FINDINGS, SUGGESTIONS
7.1 FINDINGS:

7.2 SUGGESTIONS

CHAPTER VIII

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
KALYANI ASSOCIATES (P) LTD. It gave me extreme satisfaction and practical knowledge of
the financial activities carried out in the company. The kindness, attention, and immense cooperation extended to me buy all the officials in the company made my project easy and
comfortable. Really it was a very pleasant experience in KALYANI ASSOCIATES (P) LTD.

BIBLIOGRAPHY

REFERENCES:

M.Y.Khan & P.K.Jain, Cashmanagement (5th ed: Tata Mc Graw-Hill publishing

company limited)

M.P pandikumar. Management accounting(1st ed: Excel books, New Delhi)

T.S. Reddy & Y Hariprasad reddy, Management accounting Margham publication:7th

edition 2006

S.N. Maheswari, Management accounting Sultan chand & sons,1995 6th edition

C.R Kothari, Research methodology Methods and Techniques, (2nd ed ; New Delhi:
Viswa Prakasham, 1996)

.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.

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