1.

INTRODUCTION A firm grants credit to protect its sales from competitors and to attrac t the potential customers to buy its products at favorable terms. An account receivable is the money owed to a company by a cons umer for products and services purchased on credit. This is usually treated as a current asset of accounts receivable after the customer is sent an invoice. Accounts receivable are known by various names, such as account s receivable ageing, accounts payable, days receivable, accounts receivable turn over and invoice factoring. The receivables arising out of credit has three characteristics . First, it involves an element of risk which should be carefully analyzed. Cash sales are totally riskless, but not the credit sale, as the cash payment is yet to be received. Second, it is based on economic value to the buyer, the economi c value in goods or services passes immediately at the time of sale, while the s eller expects are equivalent value to be received later on. Third it implies fut urity. The cash payment for goods or service received by the buyer will be made by him in a future are called trade debtors or simply as debtors and represent the firms claim or asset. Receivables constitute a substantial portion of current assets of several firms. Granting credit and creating debtors, amount to the blocking of the firms funds. The interval between the date of sale and date of payment ha s to be financed out of working capital. This necessitates the firm to get funds from banks or other sources. Thus trade debtors represent investment. As substa ntial amounts are tied-up in trade debtors, it needs careful analysis and proper management. Terms of payment vary widely in practice. The seller has fin ancial sinews it may extend liberal credit to the buyer till it converts goods b ought into cash. The buyer may pay cash in advance to the seller and finance the entire trade cycle. The trade cycle is financed partly by the seller, partly by the buyer, and partly by some financial intermediary. The financial manager hardly has any control over these vari ables. The percentage of credit sales to total sales is mostly influenced by the nature of business and industry norms. If debtors are not being turned into cash fast enough, th ere can be only two reasons. Either credit terms are too long to support the bus iness or there is an overdue situation. Credit terms have already been examined in the context of credit and profits. The various aspects of credit management are as follows: Terms of payment Credit evaluation Credit granting decision Control of accounts receivable Credit policy variables Objectives of Credit Management:

Creating, preserving, and collecting A/R. Establishing and communicating credit policies. Evaluation of customers and setting credit lines. Ensuring prompt and accurate billing. Maintaining up-to-date records of accounts receivables. Initiating collection procedures on overdue accounts.

1.1 OBJECTIVES OF THE STUDY: PRIMARY OBJECTIVE: To find out the effectiveness of the receivables management in Gandhimathi appli ances ltd. SECONDARY OBJECTIVES: To study the existing credit policy of the company. To analyze the collection procedure adopted. To study the implications of receivables in working capital. To identify the relationship between sales and receivables.

1.2

NEED FOR THE STUDY

The sale of goods on credit is an essential part of the modern competiti ve economic systems. The credit sales are generally made on open account in the sense that there are no formal acknowledgements of the debt obligations through a financial instrument. If debtors are not being turned into cash fast enough, there can be only two reasons. Either credit terms are too long to support the busines s or there is an overdue situation. Credit terms have already been examined in t he context of credit and profits. The study is conducted at GANDHIMATHIMATHI APPLIANCES LTD to evaluate the receivables management. This will help the company to collect the debts arising out of credit sales within limited time period. The study also exa mined the duration of receivables outstanding using ageing schedule of various b ranches throughout India.

1.3 SCOPE & SIGNIFICANCE OF THE STUDY The modern economy is money based economy. All over the world the r apid industrial growth requires a heavy volume of investment to suit the mega or der of production. The present study on Receivables management undertaken here c an be applied to find out the outstanding of the customers & consumers. The scope of the study is that the company will be able to know its performance regarding receivable management. The project analyses each componen ts of receivables and so it is easy to know the areas that need closer attention , and to improve the efficiency of the receivables management in Gandhimathi App liances ltd. Thus the company will be able to make changes in the necessary area s.

1.4 COMPANY PROFILE HISTORY OF THE COMPANY: The Butterfly group, pioneers in stainless steel appliances started ope rations four decades ago. The company was the first in India, to introduce stain less steel pressure cookers and vacuum flasks, and acquire the ISO 9002 certific ation, in the LPG and mixie divisions. Over the years, under the enterprising le adership of Mr.V Murugesa chettiar and his sons, butterfly has grown to be a hou sehold name among millions in India. Today, butterfly manufactures a comprehensive range of home appliance s, kitchen products and cookware. Four state-of-the-art-manufacturing units, bac ked by the latest R&D facilities ensure total compliance to standards of excelle nce in design and quality.

Quality and consistency are the prime motivating factors. Butterflys i n-house design facilities, tool & die-making facilities with an impetus on quali ty control, has enabled the company to consistently produce products of the high est quality sticking to the finest functionality norms. The company has the state of the art manufacturing facility. The comp anys R&D facilities have the latest design and development tools, spectrum analyz er etc to keep up its passion for progress at all levels. This passion would con stantly give birth to new product ranges. Over the years, the butterfly group has grown from just manufacturing a handful of basic kitchen utensils to an organization involved in a comprehens ive range of domestic appliances, kitchen products and cookware. Across the globe, butterfly products have been recognized for the ir quality standards by various international organizations. The success of butterfly is attributed to its customer orientation. S erving the customer with the finest quality products and adapting to the changin g needs and a taste of customers has been the companys primary motive. Butterfly is all to conquer wider horizons. OBJECTIVE: A Customer is the most important visitor on our premises. He is not an interruption on our work. He is the purpose of it. He is not an outsider in our business. We are not doing him a favour by servicing him. He is doing us a favour by giving us an opportunity to do so. Mahatma Gandhi WE AT BUTTERFLY SHALL CONTINUE TO CEASELESSLY WORK TOWARDS THIS OBJECTIVE QUALITY POLICY: We are committed to produce and supply products that exceed cust omer expectation and strive for continual improvement by establishing an effecti ve quality management system. QUALITY OBJECTIVES: Create market demand and improve production and supplies. Updating and redesigning the products to meet customer requirements and exp ectations. Improve production processes for consistent quality and reduced waste. Foster a culture of continual improvement by providing necessary support and res ources. Improve working environment and establish effective teamwork Make continuous efforts to train personnel at different levels to develop qualit y consciousness. PRODUCTS: 1. LPG STOVES 2. MIXER GRINDER 3. STAINLESS STEEL PRESSURE COOKER

4. VACUUM FLASKS 5. WET GRINDERS 6. INDUCTION STOVES EXPORT PERFORMANCE AND NET FOREIGN EXCHANGE COLLABORATIONS: The companys products are predominantly orientated for Indi an cuisine. However, Indians living abroad are showing interest in the products. The highest export performance of the company at Rs.171.77 lakhs was achieved for the financial year of fifteen months ended 30.06.07

1.5 REVIEW OF LITERATURE Receivable Management is also called as Credit Management. The term Credit is defined as debt owed to the firm by customers arising from sale of goods or s ervices in the ordinary course of business. When a firm makes an ordinary sale o f goods or services and does not receive payment, the firm grants trade credit a nd creates accounts receivables which could be collected in the future. Accounts Receivable represent an extension of credit to customers, allowing them a reaso nable period of time in which to pay for the goods received. The sale of goods on credit is an essential part of the modern c ompetitive economic systems. The credit sales are generally made on open account in the sense that there are no formal acknowledgements of the debt obligations through a financial instrument. The extension credit involves risk and cost. The objective of credit management is to promote sales and profits until that point is reached where the return on investment in further funding receivables is less than the cost of funds raised to finance that additional credit. An account receivable is the money owed to a company by a consu mer for products and services purchased on credit. This is usually treated as a current asset of accounts receivable after the customer is sent an invoice. Acco unts receivable are known by various names, such as accounts receivable aging, a ccounts payable, days receivable, accounts receivable turnover and invoice facto ring. According to the experts, accounts receivable or invoice factori ng is one of a series of accounting transactions. These accounting transactions deal with the billing of customers who owe money to a person, company or organiz ation for goods and services purchased. If you are seriously considering using a ccounts receivable as a method of obtaining a more liquid asset, then it is wise to hire accounts receivable management specialists. Trade credit arises when a firm sells its products or service s on credit and does not receive cash immediately. A firm grants trade credit to protect its sales from the competitors and to attract the potential customers t o buy its product at favorable terms. Trade credit creates accounts receivables or trade debtors that the firm is expected to collect in the near future. The cu

stomer from whom receivable or book debts have to be collected in the future are called trade debtors or simply as debtors and represent the firms claim or asset . A credit sale has three characteristics It involves an element of risk that should be carefully analyzed. It is based on economic value. It implies futurity. If debtors are not being turned into cash fast enough, there can be onl y two reasons. Either credit terms are too long to support the business or there is an overdue situation. Credit terms have already been examined in the context of credit and profits. The various aspects of credit management are as follows: Terms of payment Credit evaluation Credit granting decision Control of accounts receivable Credit policy variables TERMS OF PAYMENT: Terms of payment vary widely in practice. The seller has financ ial sinews it may extend liberal credit to the buyer till it converts goods boug ht into cash. The buyer may pay cash in advance to the seller and finance the en tire trade cycle. The trade cycle is financed partly by the seller, partly by th e buyer, and partly by some financial intermediary. CREDIT EVALUATION: Proper assessment of credit risk is an important element of credit management. It helps in establishing credit limits. CREDIT GRANTING DECISION: Companies in practice feel the necessity of granting credit for seve ral reasons: COMPETITION: Generally higher the degree of competition more will be credit granted by a firm . BUYERS REQUIREMENTS: In a number of business sectors buyers/dealers are not able to opera te without extended credit. BUYERS STATUS: Large buyers demand easy credit terms because of bulk purchases and higher bargaining power. RELATIONSHIP WITH DEALERS: Companies sometimes extend credit to dealers to build long term relat

ionship with them or to reward them for their loyalty. CONTROL OF ACCOUNTS RECEIVABLES: Traditionally two methods have been commonly suggested f or monitoring accounts receivables: Days sales outstanding and ageing schedule. COST OF MAINTAINING DEBTORS: Credit sales, and hence maintenance of debtors, involve the follow ing costs: 1. 2. 3. 4. Cost of financing debtors Collection costs Delinquency costs Default costs

1. Cost of financing debtors: Debtors tie up a portion of the firms financial resources. The resourc es may be financed from one of the following three sources. i. Share capital ii.Retained earnings, and/ or iii. Debt capital (long term and/ or short-term) In any of the above cases, the firm incurs a cost for the use of the funds. 2. Collection costs: These are costs, which have to be incurred in connection with the coll ection of credit sales. It, therefore, includes (a) Administrative expenses of running the credit and collection department, (b) Expenses incurred to obtain information regarding the credit worthiness of potential customers, and (c) Cost of additional steps to increase the chances for eventful payment. 3. Delinquency cost: This cost arises out of the failure of the customers to meet their obliga tions when payment on credit sales becomes due, after the expiry of the credit p eriod. Such costs are called delinquency costs. The important components of this cost are (a) Blocking- up of funds for an extended period, (b) Cost associated with steps that have to be initiated to collect the over dues, such as, reminders and other collection efforts, legal charges, where nec essary and so on.

4. Default cost: Finally, the firm may not be able to recover the over dues because of the inability of the customers. Such debts are treated as bad debts and have to be written off. They cannot be realized. Such costs are known as default costs asso ciated with credit sales and accounts receivables. Cash Flow Cycle of a Business :

Objectives of Credit Management: Creating, preserving, and collecting A/R. Establishing and communicating credit policies. Evaluation of customers and setting credit lines. Ensuring prompt and accurate billing. Maintaining up-to-date records of accounts receivables. Initiating collection procedures on overdue accounts.

Credit and A/R Management: Fit Into the Financial Organization A credit manager or a captive finance company is the administrator of credit pol icies. Credit policies and collections will impact cash flows so credit and cash manage rs must work together. Reasons for credit and cash manager interaction include the accuracy of cash flo w forecast, banking network management, and accounts receivable updating. Cost Associated With a Credit Policy: Credit Department Costs Credit Evaluation Costs A/R Carrying Cost Discounted Payments Selling and Production Cost Collection Expenses Bad Debts

The Five Cs of Credit: Character Capacity Capital Collateral Conditions Cost of Trade Credit: From a sellers viewpoint, the cost of the discount must be weighed against the be nefit of receiving early payment. From buyers viewpoint, the cost of trade credit is an opportunity cost. A buyer should take the discount if its cost of borrowing is less than the cost of foregoing the discount. Alternatively, a buyer should forego the discount if investment rates are higher than the cost of foregoing the discount. Account Common Receivable Monitoring and Control: Monitoring and control is the responsibility of the credit manager. Receivables turnover least favored technique Monitoring conducted on individual accounts through aging schedules. Monitoring conducted at the aggregate level using days sales outstanding (DSO). Terms Cash Cash Cash of Sales Before Delivery (CBD) on Delivery (COD) Terms

Net Terms Discount Terms Monthly Billing Bill of Lading or Documentary Collection Seasonal Dating Consignment

A/R Financing: Unsecured Bank Borrowing Secured Bank Borrowing Captive Finance Company Third Party Financing Institutions Credit Card Factoring Private Label Financing

The term credit policy is used to refer to the combination of the following deci sion variables: CREDIT STANDARDS: Credit standards are criteria to decide the type of customers to whom goods could be sold on credit. If a firm has more slow paying customers, i ts investment in accounts receivables will increase. The firm will also be expos ed to higher risk of default. CREDIT PERIOD: It specifies the duration of credit and terms of payments by cus tomers. The credit period is the length of time the company will extend credit t o the customer. The longer the credit period, the greater the stimulus on sales, all else held constant. CASH DISCOUNT: A cash discount is a reduction in payment offered to customers to induce them to repay credit obligation within a specified period of time, whi ch will be less than the normal credit period. COLLECTION EFFORT: Collection efforts determine the actual collection period. Th e stricter the collection period, the lower will be the investment in accounts r eceivables and vice versa.

1.6 RESEARCH METHODOLOGY RESEARCH: Systematic and organized effort to investigate a scientific problem. Identify the problem. Gather information. Analyze the data. Take corrective action and solve the problem

Research methodology is the way to systematically solve the research problem. This study on receivables management is an analytical study because the facts and information that is readily available are being used to make critical evaluations of receivables management at GANDHIMATHI APPLIANCES LTD. 1.6.1Research design: The research design refers to the preplanning of what a researcher to d o in his study. The design adopted in this study comes under analytical design s ince the data collected from the financial statement of the company under goes t hrough various measures of accounting principles and statistical tools. 1.6.2 Data collection: The data collection for this study is based fully on secondary data obt ained from the balance sheet, profit & loss account and annual reports of GANDHI MATHI APPLIANCES LTD. Secondary data: Secondary data are based on the 5 year annual report from 2004 to 2008, it also contains the data available in the magazines, prospectus etc.

1.6.3TOOLS USED FOR ANALYSIS: Ratio analysis Ageing schedule Correlation analysis Trend analysis

RATIO ANALYSIS: The term ratio refers to the numerical or quantitative relationship betwe en two figures. A ratio is the relationship between two figures, and obtained by dividing the former by the latter. Ratios are designed to show how one number i s related to another. It is worked out by dividing one number by another. Ratio analysis is an important and age old technique of financial analys is. The data given in financial statements, in absolute form, are dump and are u nable to communicate anything. Ratios are relative form of financial data and ve ry useful technique to check upon the efficiency of a firm. Some ratios indicate the trend or progress or downfall of the firm. AGEING SCHEDULE: The Ageing statement breaks down the accounts receivables according t o the length of time for which they have been outstanding. CORRELATION ANALYSIS: The co-efficient of correlation measures the relationship between two se ts of variables. TREND ANALYSIS: While the chance variation are difficult to identify, control or pred ict, a more precise measurement of trend, cyclical effects and seasonal effects can be made in order to make the forecast more reliable. When a time series show s an upward or downward long term linear trend, then regression analysis can be used to estimate this trend and project the trend into forecasting the future va lues of the variables invalid. 1.6.4 LIMITATIONS OF THE STUDY

The study is limited to the past five years data only. The findings of the study are based on historical data. Hence accuracy cannot be ascertained. Projection made for future is subject to change. Time was a limiting factor in conducting the study. The analysis and interpretation of data are constrained by accuracy of various t ools used for analysis. The study is fully based on the information from audited reports, which provided limited information regarding companys performance.

2.1 RATIO ANALYSIS 2.1.1DEBTORS TURNOVER RATIO: Debtors turnover = Credit sales / Average Debtors

Debtors turnover ratio indicates the number of time debtors turnover each year. This is also called Debtors Velocity or Receivable Turnover. This ratio measu res the liquidity of receivables or ascertaining the average period over which r eceivables are uncollected. TABLE NO.2.1.1 TABLE SHOWING THE DEBTORS TURNOVER RATIO: YEAR SALES 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 (Rs in lakhs) DEBTORS RATIO 1593.20 301.49 5.28 2117.74 325.18 6.51 3474.09 661.78 5.24 6858.38 979.05 7.01 16055.57 2157.67 7.44

INTERPRETATION: The above table shows that debtors turnover ratio is 5.28 for the year 2003-04 and 6.51 for the year 2004-05. The ratio for the year 2005-06 is 5.24 an d for the year 2006-07 is 7.01.In 2007-08, the ratio is 7.44. The company is increasing its sales year after year by offering credit sales. But the firm should collect its receivables within in a minimum time spa n so that it can meet its working capital requirements. CHART NO.2.1.1 CHART SHOWING THE DEBTORS TURNOVER RATIO

2.1.2DEBTORS COLLECTION PERIOD: The average number of days for which debtors remains outstanding is called the Average Collection Period. Average Collection period = 360 / Debtors Turnover

An extended collection period delays cash inflows. It impairs the firms liquidity position and increases the chances of bad debt losses. The averag e collection period measures the quality of receivables since it indicates the s peed of the collection ability. TABLE NO.2.1.2 TABLE SHOWING THE DEBTORS COLLECTION PERIOD: YEAR 2003-04 2004-05 2005-06 2006-07 2007-08 DAYS IN A YEAR 360 5.28 360 6.51 360 5.24 360 7.01 360 7.44 (Rs in lakhs) DEBTORS TURNOVER RATIO COLLECTION PERIOD(DAYS) 68.18 55.29 68.70 51.35 48.38

INTERPRETATION: The above table shows that 68.18 days are taken to collect debts in the year 2003-04 and 55.29 days are taken to collect debts in the year 2004-05. Abo ut 68.7 days are taken to collect in the year 2005-06 and 51.35 days in the year 2006-07. But in the year 2007-08 within 48.38 days debts have been collected. So the firm should try to maintain the same as in the year 2007-08. CHART NO.2.1.2 CHART SHOWING THE DEBTORS COLLECTION PERIOD

2.1.3 TABLE NO.2.1.3 TABLE SHOWING THE QUICK RATIO (Rs in lakhs) YEAR 2003-04 2004-05 2005-06 2006-07 2007-08 LIQUID ASSET CURRENT LIABILITIES 607.19 1009.94 0.601 540.28 1302.13 0.414 898.65 1799.69 0.499 1181.87 2148.13 0.55 2697.67 1877.96 1.436 RATIO

INTERPRETATION: The standard ratio for quick ratio is 1: 1. The above table indicates that the liquid ratio ranges between 0.414 and 1.436. If the ratio is more than 1:1, it indicates sound financial position. If the ratio is less than 1:1 it in dicates financial difficulty. The company can maintain the liquid assets as in 2007-08 and can incr ease if it needs more. CHART NO.2.1.3 CHART SHOWING THE QUICK RATIO:

2.1.4 CASH POSITION RATIO: It is a variation of quick ratio. It is otherwise called as Absolute Liquidity Ratio. When liquidity is highly restricted in terms of cash and cash equivalents, this ratio is calculated. Cash position ratio TABLE NO.2.1.4 TABLE SHOWING THE CASH POSITION RATIO = Cash/ Current liabilities

(Rs.in YEAR 2003-04 2004-05 2005-06 2006-07 2007-08

lakhs) CASH 108.54 252.00 51.731 61.040 66.613

CURRENT 1009.94 1302.13 1799.69 2148.13 1877.96

LIABILITIES 0.107 0.193 0.028 0.028 0.035

RATIO

INTERPRETATION: The above table shows that the ratio is 0.107 in the year 2003-04 and 0.193 in the year 2004-05. The company has the ratio of 0.028 in the years 2005 to 2007 and in the year 2007-08, it is 0.035. The company has to increase its cash position still more to 1.00 ratio s.

CHART NO.2.1.4 CHART SHOWING THE CASH POSITION RATIO

2.1.5 CURRENT RATIO: The current ratio of a firm measures its short-term solvency i.e, its ab ility to meet short term obligations. As a measure of short-term current financi al liquidity, it indicates the rupees of current assets available for each rupee of current liability/obligation. Current ratio = Current assets / current liabilities TABLE NO.2.1.5 TABLE SHOWING THE CURRENT RATIO: (Rs YEAR 2003-04 2004-05 2005-06 2006-07 2007-08 in lakhs) CURRENT ASSETS 889.59 1009.94 918.78 1302.13 1339.21 1799.69 1794.90 2148.13 3983.72 1877.96 CURRENT LIABILITIES 0.88 0.71 0.74 0.84 2.12 RATIO

INTERPRETATION: In a sound business, a current ratio of 2:1 is considered an ideal one. Though the firm maintained low than the standard ratio, in 2007-08 the firm had secured an ideal ratio. This shows that the margin of safety to the credito rs is high. The company can maintain the same level ratio and can increase it when it needs more finance within a year.

CHART NO.2.1.5 CHART SHOWING THE CURRENT RATIO

2.2 AGEING SCHEDULE: The ageing schedule breaks down debtors according to length of time and quality of debtors. The average collection period measures the quality of de btors in an aggregative way ageing schedule very clearly spots out the slow payi ng debtors. However it also suffers from the problem of aggregation, and does no t relate receivables to sales of the same period. TABLE NO.2.2.1 TABLE SHOWING THE AGEING STATEMENT OF DEBTORS (ANDHRA PRADESH BRANCH): OUTSTANDING PERIOD(days) 1-30 days 255.60 38.12 31-60 days 138.32 20.63 61-90 days 130.10 19.40 91-120 days 37.70 5.62 121-180 days 56.10 8.37 181 & above 52.74 7.86 TOTAL 670.56 100.0 (Rs in lakhs) OUTSTANDING AMOUNT PERCENTAGE OF DEBTORS

INTERPRETATION: The above table clearly shows that almost 78% of the outstanding amou nt is Collected within 90 days and 15% is collected within 180 days. Nearly 7.86% o f debtors Take181 days & above to pay.

CHART NO.2.2.1 CHART SHOWING THE AGEING STATEMENT OF DEBTORS (ANDHRA PRADESH BRANCH):

TABLE NO.2.2.2 TABLE SHOWING THE AGEING STATEMENT OF DEBTORS (DELHI BRANCH) OUTSTANDING PERIOD(days) 1-30 days 1.65 24.12 31-60 days 1.28 18.72 61-90 days 0.62 9.06 91-120 days 0.77 11.26 121-180 days 0.07 1.02 181 & above 2.45 35.82 TOTAL 6.84 100.0 (Rs in lakhs) OUTSTANDING AMOUNT PERCENTAGE OF DEBTORS

INTERPRETATION: The ageing schedule of delhi branch shows that 24.12% of the amount is collected within 30 days and nearly 30% of the outstanding amount is collecte d within 180 days. Nearly 35.82% of the receivables are outstanding above 181 da ys.

CHART NO.2.2.2 CHART SHOWING THE AGEING STATEMENT OF DEBTORS (DELHI BRANCH)

TABLE NO.2.2.3 TABLE SHOWING THE AGEING STATEMENT OF DEBTORS (GUJARAT BRANCH) (Rs in lakhs) OUTSTANDING PERIOD(days) 1-30 DAYS 0.50 3.42 31-60 DAYS 11.48 78.58 61-90 DAYS 0.06 0.41 91-120 DAYS 0 0 121-180 DAYS 0.04 0.27 181 & ABOVE 2.53 17.32 TOTAL 14.61 100.0 OUTSTANDING AMOUNT PERCENTAGE OF DEBTORS

INTERPRETATION: The above table shows that nearly 78.58% of receivables are collect ed within 60 days and only 3.42 % of receivables are collected within 30 days. H owever 17.32% of the amount is outstanding for 181 days& above.

CHART N0.2.2.3 CHART SHOWING THE AGEING STATEMENT OF DEBTORS (GUJARAT BRANCH)

TABLE NO.2.2.4 TABLE SHOWING THE AGEING STATEMENT OF DEBTORS (KARNATAKA BRANCH)

(Rs in lakhs) OUTSTANDING PERIOD (days) 1-30 DAYS 185.77 47.78 31-60 DAYS 92.27 23.73 61-90 DAYS 49.43 12.72 91-120 DAYS 22.78 5.86 121-180 DAYS 13.82 3.55 181 & ABOVE 24.74 6.36 TOTAL 388.81 100.0

OUTSTANDING AMOUNT

PERCENTAGE OF DEBTORS

INTERPRETATION: The above table shows that nearly 47.78% of debtors pay within 30 days and 23.73% of receivables collected within 60 days. About 12.72% of receivables are collected within 90 days and 6.36% of receivables are outstanding for181 day s & above.

CHART NO.2.2.4 CHART SHOWING THE AGEING STATEMENT OF DEBTORS (KARNATAKA BRANCH)

TABLE NO.2.2.5 TABLE SHOWING THE AGEING STATEMENT OF DEBTORS (KERALA BRANCH) (Rs in lakhs) OUTSTANDING PERIOD (days) 1-30 DAYS 194.50 69.09 31-60 DAYS 63.58 22.58 61-90 DAYS 11.31 4.02 91-120 DAYS 4.78 1.70 121-180 DAYS 1.42 0.50 181 & ABOVE 5.94 2.11 TOTAL 281.53 100.0 OUTSTANDING AMOUNT PERCENTAGE OF DEBTORS

INTERPRETATION: The above table shows that about 69.09% of receivables are collected with

in 30 days and 22.58% of amount is collected within 60 days. Only 6% of debtors pay within 180 days and 2.11 % of receivables are oustanding181 days and above.

CHART NO.2.2.5 CHART SHOWING THE AGEING STATEMENT OF DEBTORS (KERALA BRANCH)

TABLE NO.2.2.6 TABLE SHOWING THE AGEING STATEMENT OF DEBTORS (MADHYA PRADESH BRANCH) (Rs in lakhs) OUTSTANDING PERIOD (days) OUTSTANDING AMOUNT PERCENTAGE OF DEBTORS 1-30 DAYS 0 0 31-60 DAYS 0 0 61-90 DAYS 0 0 91-120 DAYS 0 0 121-180 DAYS 0 0 181 & ABOVE 0.69 100.0 TOTAL 0.69 100.0 INTERPRETATION: The above table shows that 100% of amount is outstanding for 181 days & above. No percentages of debtors are paying within 180 days.

CHART NO.2.2.6

CHART SHOWING THE AGEING STATEMENT OF DEBTORS (MADHYA PRADESH BRANCH)

TABLE NO.2.2.7 TABLE SHOWING THE AGEING STATEMENT OF DEBTORS (MAHARASHTRA BRANCH) (Rs in lakhs) OUTSTANDING PERIOD(days) OUTSTANDING AMOUNT PERCENTAGE OF DEBTORS 1-30 DAYS 101.98 39.07 31-60 DAYS 60.22 23.07 61-90 DAYS 41.96 16.08 91-120 DAYS 17.63 6.75 121-180 DAYS 13.66 5.23 181 & ABOVE 25.57 9.80 TOTAL 261.02 100.0 INTERPRETATION: The above table shows that 39.07 % of debtors pay within 30 days. Abo ut 23.07% of receivables are collected within 90 days and 16.08% of receivables are collected within 90 days. Nearly 9.8% of receivables are outstanding for 181 days & above.

CHART NO.2.2.7 CHART SHOWING THE AGEING STATEMENT OF DEBTORS (MAHARASHTRA BRANCH)

TABLE NO.2.2.8 TABLE SHOWING THE AGEING STATEMENT OF DEBTORS (PUNJAB BRANCH) (Rs in lakhs) OUTSTANDING PERIOD(days) OUTSTANDING AMOUNT PERCENTAGE OF DEBTORS 1-30 DAYS 7.92 65.35 31-60 DAYS 2.22 18.32 61-90 DAYS 0.04 0.33 91-120 DAYS 0.0002 0.001 121-180 DAYS 0.001 0.082 181 & ABOVE 1.94 16.00 TOTAL 12.12 100.0

INTERPRETATION: The above table shows that nearly 65.35% of debtors are collected with in 30 days and 18.32% of receivables are collected within 60 days. Nearly 16% of receivables are outstanding for 181 days & above.

CHART NO.2.2.8 CHART SHOWING THE AGEING STATEMENT OF DEBTORS (PUNJAB BRANCH)

TABLE NO.2.2.9 TABLE SHOWING THE AGEING STATEMENT OF DEBTORS (TAMIL NADU BRANCH) (Rs in lakhs) OUTSTANDING PERIOD(days) 1-30 DAYS 516.81 45.51 31-60 DAYS 237.43 20.91 61-90 DAYS 75.71 6.67 91-120 DAYS 85.12 7.50 121-180 DAYS 77.12 6.79 181 & ABOVE 143.29 12.62 OUTSTANDING AMOUNT PERCENTAGE OF DEBTORS

TOTAL

1135.48 100.0

INTERPRETATION: The above table shows that 45.51% of receivables are collected withi n 30 days and 20.91% of amount is collected within 60 days. Nearly 7.5% of recei vables are outstanding for 120 days and 12.62 % of receivables are also outstand ing for 181 days & above.

CHART NO.2.2.9 CHART SHOWING THE AGEING STATEMENT OF DEBTORS (TAMIL NADU BRANCH)

TABLE NO.2.2.10 TABLE SHOWING THE AGEING SCHEDULE OF DEBTORS (UTTAR PRADESH BRANCH) (Rs in lakhs) OUTSTANDING PERIOD(days) 1-30 DAYS 0.09 6.92 31-60 DAYS 0 0 61-90 DAYS 0.64 49.23 91-120 DAYS 0.03 2.31 121-180 DAYS 0.09 6.92 181 & ABOVE 0.45 34.62 TOTAL 1.30 100.0 OUTSTANDING AMOUNT PERCENTAGE OF DEBTORS

INTERPRETATION: The above table clearly shows that 6.92% of receivables are collected w ithin 30 days and 49.23 % of receivables are collected within 90 days. About 34. 62 % of receivables are outstanding for 181 days & above.

CHART NO.2.2.10 CHART SHOWING THE AGEING SCHEDULE OF DEBTORS (UTTAR PRADESH BRANCH)

TABLE NO.2.2.11 TABLE SHOWING THE CONSOLIDATED AGEING STATEMENT OF DEBTORS (Rs in lakhs) OUTSTANDING PERIOD(days) OUTSTANDING AMOUNT PERCENTAGE OF DEBTORS 1-30 DAYS 1264.82 45.61 31-60 DAYS 606.80 21.88 61-90 DAYS 309.87 11.17 91-120 DAYS 168.81 6.10 121-180 DAYS 162.32 5.85 181 & ABOVE 260.34 9.39 TOTAL 2772.96 100.0 INTERPRETATION: A major part of the accounts receivables (45.61%) is o utstanding for a period of 30 days, and tamil nadu branch play a major part for the blockage of funds. Nearly 21.88 % of receivables are blocked for 31-60 days. About 11.17% and 6.10% of the total receivables are outstanding for the peri od ranging between 61-120 days. Nearly 9.39 % of receivables are outstanding for 18 0 days & above.

CHART NO.2.2.11 CHART SHOWING THE CONSOLIDATED AGEING STATEMENT OF DEBTORS

2.3 CORRELATION ANALYSIS: The Co-efficient of correlation measures the relationship between two sets of variables. The relationship between two variables such that a change in one variable results in a positive or negative change in the other variable and also a greater change in one variable results in corresponding greater or smaller ch ange in the other variable is known as correlation. The relative measures forms base for ascertaining the degree o f correlation and it is denoted as r. The value of r should be within the range of 1 and +1. The r is calculated by using the formula

NXY (X) (Y) R =______________________________________________ NX2 (X)2 NY2 (Y)2

The coefficient of correlation is a relative measure and we can compare the rela tionship between variables, which are expressed in different units.

s TABLE NO.2.3.1 TABLE SHOWING THE COEFFICIENT OF CORRELATION BETWEEN SALES & DEBTORS YEAR 2003-04 2004-05 2005-06 2006-07 2007-08 TOTAL SALES(X) 1593.20 301.49 2117.74 325.18 3474.09 661.78 6858.38 979.05 16055.57 30098.98 DEBTORS(Y) X2 Y2 XY 2538286.24 90896.22 480333.86 4484822.7 105742.03 688646.69 12069301.3 437952.76 2299083.28 47037376.22 958538.9 6714696.93 2157.67 257781328 4655539.8 34642621.72 4425.17 323911114.5 6248669.71 44825382.48

Where, X = Value of sales Y= Value of debtors N= Number of years

Thus, r = 0.996 INFERENCE: The above calculation reveals that sales and debtors are positively related. It indicates that when the value of sales increase, the debtors do increase and vic e-versa.

2.4 TREND ANALYSIS: The procedure by which the time related factors that influence th e values observed in the time series are identified and segregated is called Tim e- Series analysis. The general long term movement, which decreases in the time seri es values over an extended period of years, is called Trend or Secular Trend. It is a set of observation taken at specified time interval, us ually at Equal intervals from a sufficiently long period of time. They help in mak ing estimates of futures. The estimate made for the future period are forecasts and are approximate. METHOD OF LEAST SQUARES: This is the best method for obtaining the trend values. It provides a co nvenient basis for obtaining the line of best fit in a series. Line of the best fit is a line from which the sum of the deviations of various points on either s ide is zero. Further the sum of the squares of these deviations would be the lea st as compared to the sum of squares of the deviations obtained by using other l ines. For this reason the sum of squares of the deviations of various points fro m the line of the Best fit is the least. The straight line trend has an equation of the type Y = a + bu where Y u a & b Estimated values of the trend Deviation in time period Constraints

TABLE NO.2.4.1 TABLE SHOWING THE TREND ANALYSIS FOR DEBTORS: (Rs in lakhs) YEAR (X) DEBTORS (Y) U=X-2006 UY U2 2003-04 301.49 -2 -602.98 4 2004-05 325.18 -1 -325.18 1 2005-06 661.78 0 0 0 2006-07 979.05 1 979.05 1 2007-08 2157.67 2 4315.34 4 TOTAL 4425.17 4366.23 10

The equation of straight line is: Y UY Y = a + b U where, a = Where, a = 885.034 & b= 436.623 The normal equations are y = na + bU UY = aU + b U2 Y = a + b(X-2006) = Rs.2194.9 Y= a +b(X-2006) =Rs.2631.53 INFERENCE:

______ ; b=

_______ N

U2

When other factors remain the same, the value of debtors is estimate d to be Rs.2194.9 for the year 2008-09 and for the year 2009-10 is estimated to be Rs.2631.53. The trend shows the decrease in debtors values. CHART NO.2.4.1 CHART SHOWING THE TREND ANALYSIS FOR DEBTORS

TABLE NO.2.4.2 TABLE SHOWING THETREND ANALYSIS FOR SALES: (Rs in l akhs) YEAR (X) (y) 2003-04 2004-05 2005-06 2006-07 2007-08 TOTAL SALES U = X-2006 1593.2 -2 2117.74 -1 3474.09 0 6858.38 1 16055.57 30098.98

UY U2 -3186.4 4 -2117.74 1 0 0 6858.38 1 2 32111.14 0 33665.38

4 10

The equation of straight line is: Y UY Y = a + b U where, a = Where, a= 6019.796 & b= 3366.538 The normal equations are y = na + bU

______ ; b=

_______ N

U2

UY = aU + b U2 Y = a + b(X-2006) = Rs.16119.41 Y= a+b(x-2006) = Rs.19485.95 INFERENCE: When other factors remain the same, the value of sales is estimated to be Rs.16119.41 for the year 2008-09 and for the year 2009-2010 is estimated to be Rs.19485.95. The trend shows the increase in sales values. CHART NO.2.4.2 CHART SHOWING THE TREND ANALYSIS FOR SALES

3.1 FINDINGS Debtors turnover ratio is 5.28 for the year 2003-04 and 6.51 for the year 2004-05 . The ratio for the year 2005-06 is 5.24 and for the year 2006-07 is 7.01.In 200 7-08, the ratio is 7.44. About 68.18 days are taken to collect debts in the year 2003-04 and 55.29 days are taken to collect debts in the year 2004-05. About 68.7 days are taken to col

lect in the year 2005-06 and 51.35 days in the year 2006-07. But in the year 200 7-08 within 48.38 days debts have been collected. The liquid ratio ranges between 0.414 and 1.436. The Cash position ratio is 0.107 in the year 2003-04 and 0.193 in the year 200405. The company has the ratio of 0.028 in the years 2005 to 2007 and in the year 2007-08, it is 0.035. A current ratio of 2:1 is considered an ideal one. Though the firm maintained lo w than the standard ratio, in 2007-08 the firm had secured an ideal ratio. This shows that the margin of safety to the creditors is high. A major part of the accounts receivables (45.61%) is outstanding for a period of 30 days, and tamil nadu branch play a major part for the blockage of funds. Nearly 21.88 % of receivables are blocked for 31-60 days. About 11.17% and 6.10% of the total receivables are outstanding for the period r anging between 61-120 days. Nearly 9.39 % of receivables are outstanding for 180 days & above. Correlation analysis reflects a direct, positive relationship between debtors & sales Trend analysis shows increase in both debtors and sales.

3.2 SUGGESTIONS The company is increasing its sales year after year by offering credit sales . But the firm should collect its receivables within in a minimum time span so t hat it can meet its working capital requirements. The debtors collection period is decreasing year by year. The company can maint ain the debts till one month and can try to collect within 30 days or 60 days. The company can maintain the liquid assets as in 2007-08 and can increase if i t needs more. The company has to increase its cash position still more to 1.00 ratios. The company can maintain the same current ratio as in 2007-08 and can increase it when it needs more finance within a year. To cut the level of bad debts and debtors, the company can offer cash discount t o all its customers, so that they can retain them.

CONCLUSION Receivables Management is of vital importance in any industry. The ag eing statement gives a broad and clear picture about their period wise outstandi ng status. Average collection period is calculated as 58 days which blocked th e funds for the firm. It has been identified that debtors are increasing year by year. So, the sales also increasing. The firm has been suggested to offer cash discount to customers in order to reduce bad debts so that the company can maint ain adequate working capital to finance its requirements. Thus the study is done on how the components of receivables managemen t has been analyzed in detail especially outstanding debtors. Since the debtors are prepared for every branch all over India available for the company, it will be very useful for the company to give closure attention to the required branch which has more outstanding amount.