Funds Flow Statement

Chapter-I
INTRODUCTION

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Introduction

The basic financial statements i.e., the Balance Sheet and Profit & Loss A/c or
Income Statement of business reveals the net effect of various transactions on
operational and financial position of the company.

The balance sheet gives as There are many transactions that take place in an
undertaking and which do not operate Profit & Loss A/c. Thus another statement has
to be prepared to show the change in Assets & Liabilities from the end of one period
of time to the end of another period of time. The statement is called a statement of
changes in financial position or a Funds Flow Statement.

The Funds Flow Statement is a statement which shown the movement of funds and is
a report of financial operations of business undertaking. In simple words it is a
statement of source and application of funds.

MEANING & CONCEPT OF FUNDS

The term “Fund” has been defined and interpreted differing by different experts.
Broadly the term fund refers to all the financial resource of the company on the other
extreme fund has been understood as cash only. The most acceptance meaning of the
“fund” is “working capital”.

1.2. Working Capital is excess of current assents over current liability. The term fund
has a variety of meaning.

CASH FUND OR NARROW SENSE

In a narrow sense, funds mean only cash. ‘Cash flow statement portrays net effect of
various business transactions cash into account receipts & disbursement of cash.The
concept of preparing funds from statement is not accepted, as there are many such
transactions that do not affect cash but represent the flow of fund.

For Ex:Purchase of furniture on credit does not affect cash but there is flow of fund.

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C). NET WORKING CAPITAL (or) POPULAR SENSE

Networking capital means differences between current assets & liabilities. A fund
generally refers to cash or cash equipment or to working capital.

In any business we cannot under estimate the flow of funds from two operations. The
business runs with funds but the organization knows how to flow of funds.The Funds
Flow Statement is concerned with sources and applications of organization.Statement
of changes in working capital shows the increase or decrease in the working
capital.“Funds from Operations” statement shows how much funds from operations

1.3.1. Diversity in Approaches to Working Capital Concepts

Various authors have formulated working capital theories with diverse

perceptions,using both gross working capital concept and net working capital
concept. The theoriesthat used gross working capital concept were based on the
patterns of utilization offunds, in terms of investment in current assets. Thus by
literal meaning, if investment infixed assets is to be regarded as fixed capital,
investment in current assets could betermed as working capital, since the current
assets are considered as means to utilize thefixed assets productively and profitably.
Most of the authors have supported this view and consider working capital as
current assets only, treating the sources of funds for investment in short term current
assets as adistinct aspect.

1.3.2. Quantitative Definition of Working Capital

Mead Edward Field Kenneth Baker and Mallet have suggested for the
quantitative Approach to define working capital. They have suggested that the
whole of the currentassets help to earn profits and prudent financial
management calls for efficientutilization of total current assets and their
contribution of fixed assets to device desiredprofits. They have suggested that
working capital should be considered as current assetsonly because,

a). Both fixed assets and current assets help an enterprise make profits. While
fixedassets are means to produce, current assets are means to operate these fixed
assets andthus generate profits. While theoretically fixed assets are termed as
fixed capitalinvestment, current assets therefore should be termed as working capital,
and.

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b). The management is generally concerned with the total amount of finds
available interms of current assets for meeting the operational requirements.
The sources of funds for such current assets are treated as a different aspect.

Adam Smith has supported this view. According to him “the goods of a merchant
yield him no revenue of profit till he sells them for money and the money yield him a
little till it is again exchanged for good. His capital is continuously going from him
in one shapeand returning to him in another, and it is only by means of such
circulation orsuccessive exchanges, that can yield him any profit. Such capital
therefore may very appropriately be called circulating capital (current
assets)".William H. Husband and James. Dockery have also supported the
quantitativedefinition of working capital on the grounds that "Despite the
uncertainty ofquantitative concept of working capital, it provides more objective
basis of determiningthe type and the amount of financing".J. I.Bogey has considered
that working capital is the total of current assets of an enterprise which
circulates from one form to another, for instance, from cash toinventories, from
inventories to receivables and from receivables to back into cash.Total current
assets of an Thus, the capital that circulates, equal the enterprise. Hence
working capital and current assets are interchangeable terms.6C. W. Gaston Berg
has further supported the views of Professor Bogey and considered working
capital as the total of current assets of an enterprise which circulates from one
from to another.7Some others, however, have used the net working capital
concept indicating thatworking capital comprises the sum of current assets and
correspondingly, resources of the enterprise for investment in such current assets
will have to be necessarily considered while assessing working capital in an
enterprise.

1.3.3. Qualitative Definition of Working Capital

In Accountants' Handbook it has been stated that a statement of working capital
(excessof current assets over current liabilities) is designed to emphasize the
current financialposition.8Authorities like Lincoln, Silviers and Stevens have
suggested that: 9, 10, and 11.

 What matters in the long run is the surplus of current assets over current
liabilitiesAnd not the absolute quantum of current assets,
 This concept of working capital helps the investors and creditors of an
enterprise toJudge its financial soundness and margin of safety.
 It is a dependable source to meet the contingencies since the enterprise
has noObligation to this amount, and
 It is useful in assessing financial position of the enterprises possessing
the same amount of current assets.
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According to Dr. Colin Park and Professor J. W. Glasson, working capital is defined
as the excess of current assets of business (cash, accounts receivables,
inventories) over current items owed to employees and others (such as salaries,
wages, and accounts payable, taxes owed to government).12As defined by the
National Council of Applied Economic Research, working capital is taken as the
total current assets or as the excess of current assets over currentliabilities.13

 Gestern Berg C.W., "Financial Organization and Management", New York,

Prentice Hall, 1959,
 American Institute of Accountants, "Committee on Accounting Procedure",
New York, Restatement and
 Revision Accounting Research Bulletin No.43, 1952.
 Lincoln E.E., "Applied Business Finance", New York, McGraw Hill.
 Silviers E.A., "Hand Book of Corporation Management and Procedure",
 Stevens W.M., "Financial Organization and Administration", New York,
McGraw Hill, 1934,
 Park C. and Glasson J.W., "Working Capital", New York, the Macmillan,
1963.
 National Council of Applied Economic Research, "Structure of Working
Capital", New Delhi, 1966.

According to Harry G. Guthman and Herbert E. Dougall, "working capital is the

excess of current assets over current liabilities". William H. Husband and James.
Dockery have suggested that, "working capital comprises the sum of current
assets, and it takes into consideration all the currentResources of the enterprise,
and their application to the current and future activities". Some authors have,
however, clarified that only that part of the long term source of an enterprise
which has been utilized for investment in current assets should be termed as
workingcapital. In the absence of any universally accepted concept of working
capital, earlier research studies were based on both these concepts. The gross
working capital concept was considered for studies on management of working
capital in an enterprise while the networking capital concept was considered for
studies on financial position of an enterprise with specific reference to liquidity. A
sincere review of theoretical concepts and research studies on working
capitalManagement has helped to adopt the "Gross Working Capital Concept".Review
of

Earlier Studies in Working Capital Management in Enterprises Considerable numbers

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of studies have been done in the area of working capital management in

enterprises. The studies have considered overall management of working capital as
also the management of individual component of working capital. This chapter
highlights the review of previous literature and tries to provide necessary
information about what is already known and what is unknown, also describe
shortcoming and strengths and in where they are agreed/disagreed. This study
emphasizes that prior to the initiation of this study other researchers in this areas
havebeen developed but this study will try to find out the new answers for the
new developed questions that have been described under the problem under the study.

1.3.4. Working Capital Management

Research studies on working capital management pertaining to small scale
undertakings are found to be very limited which pinpoints the very cant
attention paid to this particular area of financial management. Sagan’s theory of
working capital management has advocated that working capitalmanagement
should be linked with the objectives of liquidity and profitability of the
enterprise. He also has suggested that working capital management should aim
at stability and growth of the enterprise. However, Sagan's theory has put
emphasis on cash management, on the assumption that in an enterprise, it is
cash which is more liquid and difficult to manage than other components of
working capital i.e., inventoriesand receivables. Sagan's theory also further stated
that a high level of sales in anenterprise calls for large cash balances. E .L. Motel
has observed that the largest portion of a financial manager’s time is utilized in the
management of working capital. He also has noticed that shortage ofworking
capital so often advocated as the main cause of failure of an enterprise,
isnothing but the evidence of mismanagement of working capital, which is so
common.17Earnest W. Walker in his study of nine enterprises has indicated
that the level ofworking capital and rate of return are not directly related. It
was more a change inworking capital than its level that caused a gain or loss to
an enterprise. The study alsohas revealed that a decrease in working capital
resulted in an increase in the rate ofreturn while an increase in working capital
generally has resulted in a decrease in therate of return.18Chadda (1964)
assessed inventory management practices of Indian companies.

Theapplication of modern inventory control techniques like operations research

has beensuggested for the advantage of companies.As far back as in 1966, the first
and foremost study on working capital management in relation to Indian industry
was compiled and published under the caption —Structure ofWorking Capital“ by
the National Council of Applied Economic Research (NCAER,1966).The study
was confined to the analysis of the composition of working capital,19with
special reference to three types of industries viz., Fertilizers, Cement and
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Sugar. The principal objective of this study was to examine as to what extent
these three.

Industries controlled andutilized working capital components. The study has

revealed that there had been excessive working capital funds locked up in most
of these industries. It finally concluded that the need of the hour was to
establish goodaccounting and costing systems, including new techniques of
inventory management in each company of these three key industries.

 John Sagan, "Towards a Theory of Working Capital Management", The

Journal on Finance, 1955,
 ABD E.L. Motall M.H.B., "Working Capital: its role in the short run liquidity
policy of industrialconcern, Accounting Research", Vol. IX, 1958.
 Walker E.W., "Towards the theory of working capital, The Engineering
Economist", 1964,
 National Council of Applied Economic Research, Structure of Working
Capital, NCAER, New Delhi, 1966.Jerome B. Cohen and Sydney M. Robbins
have suggested that to assess an ideal level.

Operating cycle method has been considered as an effective tool, through which
the flow of cash invested is identified throughout, from the stage of
procurement of raw material to finished goods and flow of cash back to
business through cash sales or collections from debtors. In practice, however,
there may be subsidiary flows and circuits existing alongside the mainstream of
enterprise flows. Van Horne, in his study on working capital during 1969, has
observed that if the level of liquid assets in an enterprise is reduced, its ability
to meet the current obligations would also reduce. Based on this, his study was an
examination of liquid assets and the current obligations of an enterprise as separate
issues. The liquidassets consideredforth study were only cash and marketable
securities, for the purposes of ascertainingthe liquidity. On this basis Van Horne
emphasized that the risk of an enterprise in meeting the current obligations
increases, when the liquid asset's position decreased. The welter study on the other
hand has focused more on the profitability goal of working capital management.
A unique feature of this study was to identify 'delay centers' located throughout
the production and marketing function, and work out the possibility of reducing
delays occurring in various delay centers. Reduction in delayswould eventually
reduce working capital investment by the firm.

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Appavadhanulu in his study of working capital and choice of techniques has stated
that the period of production in an enterprise depends on technical factors. In
view of this, the techniques of production either increase or decrease the length of
production, which in turn, change the amount of working capital. Jerome B. Cohen
and Sydney M. Robbins, "The Financial Manager", Harper and Row, New
York,1968, James C. Van Horne, "A risk-return analysis of a firm's working capital
position, The EngineeringEconomist", 1969. Paul Welter,"How to calculate taxing
possible through reduction of working capital, FinancialExecutive"1970.

Appavadhanulu, "Working Capital and choice of techniques.The Indian Economic

Journal", July- September.

The study carried out by Chakraborthy has pointed out two issues, Viz., the
relationshipof return on capital employed to excessive or insufficient working
capital and estimation of working capital through relating operating cycle and
operating expenses. Mishra‘s (1975) work was based on the case studies of working
capital management insix central public sector enterprises in India for the
period 1960-61 to 1967-68. His study has identified inventory, receivables, cash
and working finance as the fourproblem areas of working capital confronting
public enterprises. The study has also included large-scale units, promoted by
the Central Government such as Fertilizer Corporation of India Limited (FCI),
Hindustan Steel Limited (HSL), Heavy Electrical India Limited (HEI), National
Coal Development Corporation Limited (NCDC) andInstrumentation Limited
(INS). After a thorough probe into the problems of working capital
management in these enterprises, he has pointed out the need for efficient and
effective utilization of working capital, as it was a neglected area hitherto affecting
the profitability.Smith has observed that working capital management is
concerned with the problems that arise in attempting to manage the current assets,
the current liabilities and the inter-relationship that exists between them.A basic study
by Misra on problem of working capital in selected enterprises has indicated
that,they have not been able to manage working capital efficiently,Inventory
constituted a major component in the current assets,Inventory management and
receivables management were inefficient, and there were disproportionately high
levels of cash due to improper planning andcontrol.Weston and Brigham have
stated that there are many aspects of working capital management, which make it
an important function of the financial manager.Gitman has suggested that the goal of
working capital management is to manage each of the firm's current assets and
current liabilities in such a way that an acceptable level often working capital is
maintained. Economic and Political Weekly", August 1973. Smith K.V.,
"Management of working capital", New York, West Publishing Company, 1974. Ram
K. Misra, "Problems of working capital (with special reference to selected public

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undertaking IN India)", Somaiya Publications (p) Ltd., Bombay, 1975. Weston Fred j.
and Eugene Brigham F. "Managerial Finance", New York, Dryden Press, 1975.

28 Lawrence J. Gitman, "Principles of Managerial Finance", Harper and Row

Publishers, 1976.

1.3.5. Salient Feature

The earlier studies on working capital management in small enterprises have
not been addressed to specific present issues but were related to small
enterprises ingeneral.The present study has considered surveying the extent of
inventory level maintained byte sample units. The research has also included the
study of various inventory control technique used by samples units. All these and
other allied questions such as impact of

under-utilization of the available resources, unpredictable environmental situations,

lack of regular supply of materials, and lack of control on investment in inventories
form the subject matter of this study.

Working capital management in an enterprise depends upon a number of

variables like operating cycle, storage period of inventories, cash holding, credit
period to customers, credit period from suppliers etc. Only a few studies with
particular reference to small enterprises have highlighted such dependency by
working capital on the variables cited. Even those studies neither consider all
the dependent variables of working capital, nor the impact of dependency by
working capital on such variables

analyzed in depth. The present study highlights the requirement by making

quantitative analysis of dependency of working capital on selected variables. Some
variables are considered for such analysis to focus the finding on more prominent
variables.

Accordingly, the following variables are identified for statistical analysis:

 Application of the managerial skills for holding cash,

 Creation of the motivating behavior in manpower,
 Application of the economic order quantity,
 Use of the coordination on operations,
 Application of the credit policy,
 Effect on the business cycle,
 Effect on the assigned planning,
 Effect on the current decision making,
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 Effect on the improper flows of operations,

 Attempt to reduce uncertainty,
 Delay in the product delivery,
 Irregular flows of the work,
 Reduction in the volume of output,
 Effect on the opportunity cost,
 Effect in the direct-indirect costs,
 Effect on the activities of sales, operating and financial.

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Chapter -II
INDUSTRY PROFILE

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HISTORY OF THE TWO WHEELERS:

The Britannica Encyclopedia a motorcycle as a bike or tricycle propelled by an
internal –combustion engine (or, less often by an electric engine). The automobile
was the reply to the 19th –century reams of self-propelling the horse-drawn biker age.
Similarly, the invention of the motorcycle created the self –propelling bicycle.

The first commercial design was three-wheeler built by Edward Butler in Great
Britain in 1884. This employed a horizontal single-cylinder gasoline engine mounted
between two steer able front wheels and connected by a drive chain to the rear wheel.
The 1900s saw the conversion of many bicycles or pedal cycles by adding small,
centrally mounted spark ignition engine engines.

There was then felt the need for reliable constructions. This led to road trial tests and
competition between manufacturers. Tourist Trophy (TT) races were held on the Isle
of man in 1907 as reliability or endurance races. Such were the proving ground for
many new ideas from early two-stroke-cycle designs to supercharged multivalent
engines mounted on aerodynamic, bike on fiber reinforced bodywork.

2.1.INVENTION OF TWO WHEELERS:

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

2.2. FURTHER DEVELOPMENTS:

Most of the developments dAuring the early phase concentrated on three and four-
wheeled design since it was complex enough to get the machines running without
having to worry about them falling over. The next notable two-wheeler though was
the Hildebrand & Wolf Mueller, patented in Munich in 1894. In 1895, the French
firm of DeDion-button built and engine that was to make the mass production and
common use of motorcycle possible. The first motorcycle with electric start and a

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fully modem electrical system; the Hence special from the Indian Motorcycle
Company astounded the industry in 1931. Before World War 1, IMC was the largest
motorcycle manufacturer in the world producing over 20000 bikes per year.

2.3. INCREASING POPULARITY:

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

2.4. HISTORICAL INDUSTRY DEVELOPMENTS:

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

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

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

The industry had a smooth ride in the 50s, 60s and 70s when government prohibited
new entries and strictly controlled capacity expansion. The industry saw a sudden

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growth in the 80s. The industry witnessed a steady of 14% leading to a peak volume
of 1.9 man vehicles in 1990.

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

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

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

As incomes grow and people grow and people feel the need to own a private means of
transport, sales of two-wheelers will rise. Penetration is expected to increase too
approximately to more than 25% by 2005.The motorcycle segment will continue to
lead the demand for two-wheelers in the coming years. Motorcycle sale is expected
to increase by 20% yoyo as compared to 1% growth in the scooter market and 3% by
moped sales respectively for the next two years.The four-stroke scooters will add new
dimension to the two-wheeler segment in the coming future.The Asian continent is
that largest user of the two-wheelers in the world. This is due to poor road
infrastructure and low per capita income, restrictive policy on bike industry. This is
due to oligopoly between top five players in the segment, compared to thirsty
manufacturers in the bike industry.

Hero Honda motors Led, is one of the leading companies in the two-wheeler industry.
At present it is the market leader in the motorcycle segment with around 47% the
market share during FY 2000 –01. During the year, company posted a 41.15% yoyo
rise in turnover to Rs.31, 686.5mn in motorcycles which driven by a 35.17% yoyo rise

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in Motorcycle sales volumes. The company has emerged as one of the most successful
players, much ahead of its competitions an account of its superior and reliable product
quality complemented with excellent marketing techniques. The company has been
consistently addressing the growing demand for motorcycles and has been cumulative
customer base of over 4 million customers, which is expected to reach 5min mark
with rural and semi-urban segment being the new class of consumers.

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CHAPTER-III
COMPANY PROFILE

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

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

3.1 Vision
The Hero Motocorp story began with a simple vision – the vision of a mobile
and an empowered India, powered by Hero Honda. This vision was driven by Hero
Honda’s commitment to customer, quality and excellence, and while doing so,
maintaining the highest standards of ethics and societal responsibilities. Hero Honda
believes that the fastest way to turn that dream into a reality is by remaining focused
on that vision.
3.2. Strategy
Hero Motocorp key strategy has been driven by innovation in every sphere of
activity – building a robust product portfolio across categories, exploring new
markets, aggressively expanding the network and 1continuing to invest in brand
building activities.

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

3.4.Technology
In the 1980’s Hero Honda pioneered the introduction of fuel-efficient,
environment friendly four-stroke motorcycles in the country. Today, Hero Honda
continues to be technology pioneer. It became the first company to launch the Fuel
Injection (FI) technology in Indian motorcycles, with the launch of the Glamour FI in
June2006.

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

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

3.7. Brand
The company has been continuously investing in brand building utilizing not only the
new product launch and new campaign launch opportunities but also through
innovative marketing initiatives revolving around cricket, entertainment and ground-
levelactivation.Hero Honda has been actively promoting various sports such as
hockey, cricket and golf. Hero Honda was the title sponsor of the Hero Honda FIH
Hockey World Cup that was played in Delhi during Feb-March 2010. Hero Honda
also partners the Commonwealth Games Delhi 2010.

3.8. 2010-11 Performance

Total unit sales of 54, 02,444 two-wheelers, growth of 17.44 per cent
Total net operating income of Rs. 19401.15 Cores, growth of 22.32 per cent
Net profit after tax at Rs. 1927.90 Cores

Total dividend of 5250% or Rs. 105 per share including Interim Dividend of Rs. 70
per share on face value of each share of Rs. 2 each
EBIDTA margin for the year 13.49 per cent
EPS of Rs. 96.54

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3.9. 2009-10 Performance

Total unit sales of 46, 00,130 two-wheelers, growth of 23.6 per cent
Total net operating income of Rs. 15860.51 Cores, growth of 28.1 per cent
Net profit after tax at Rs. 2231.83 Cores, growth of 74.1 per cent

Final dividend of 1500% or Rs. 30 per share on face value of each share of Rs. 2
EBIDTA margin for the year 17.4 per cent
EPS of Rs. 111.77, growth of 74.1 per cent

3.10. HERO HONDA'S MISSION

Hero Honda’s mission is to strive for synergy between technology, systems and
human resources, to produce products and services that meet the quality, performance
and price aspirations of its customers. At the same time maintain the highest standards
of ethics and social responsibilities. This mission is what drives Hero Honda to new
heights in excellence and helps the organization forge a unique and mutually
beneficial relationship with all its stake holders.

3.11. HERO HONDA'S MANDATE

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

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CHART: 3.1.

3.12. BOARD OF DIRECTORS

No. Name of the Directors Designation

Chairman and Managing
1 Mr.PAWAN MUNJAL
Director&CEO
Non
2 MR. PRADEEP DINODIA
Executive&independentDirector
Non Executive &independent
3 GEN.(RETD) V.P.MALIK
Director
4 MR.SUMAN KANT MUNJAL Non-Executive Director
Non Executive &independent
5 MR.PAUL EDGERLEY
Director
Non Executive &independent
6 DR. ANAND C.BURMAN
Director
Non Executive &independent
7 MR.M.DAMODARAN
Director
Non Executive &independent
8 DR.PRITAM SINGH
Director
Non-executive & Independent
9 MR.RAVI NATH
Director
Non-executive & Independent
10 MS.SHOBANA KAMINENI
Director
11 MR. VIKRAM KASBEKAR executive Directors operation
Non-executive & Independent
12. Dr. Anand C. Burman
Director

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3.13BRIEF PROFILE OF DIRECTORS

MR. BRIJMOHAN LALL MUNJAL

Mr. BrijmohanLallMunjal is the founder Director and Chairman of the Company and
the $ 3.2 billion Hero Group. He is the Past President of Confederation of Indian
Industry (CII), Society of Indian Automobile Manufacturers (SIAM) and was a
Member of the Board of the Country's Central Bank (Reserve Bank of India). In
recognition of his contribution to industry, Mr. Munjal was conferred the Padma
Bhushan Award by the Union Government.

Mr.Pawan Munjal
Mr.pawan munjal is the Chairman ,Managing Director &CEO of the company.
He is responsible for growth and strategic planning for the enteir Group. A graduate
in mechanical engineering Mr.Munjal has been instrumental in bringing about
technological and managerial excellence in the company’s operations.he has been the
chairman of several committees of CII.

CHART:3.2.

No Name of Company Nature of Office

.
1 Hero Honda Motors Limited Chairman and Whole-time Director

2 Hero Honda Finleas Limited Chairman and Director

3 Munjal Showa Limited Chairman and Director

4\ Easy Bill Limited Director

5 Rickman Industries Limited Director

6 ShivamAutotech Limited Director

CHART: 3.3.

KEY MILESTONES OF HERO HONDA

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Year Event
1983 Joint Collaboration Agreement with Honda Motor Co. Ltd. Japan
signed
Shareholders Agreement signed
1984 Hero Honda Motors Ltd. Incorporated
1985 First motorcycle "CD 100" rolled out
1987 100,000th motorcycle produced
1989 New motorcycle model - "Sleek" introduced
CHART: 3.4.

3.14. PROMINENT AWARDS TO THE COMPANY

Yea Awards & Recognitions

r

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

1 Adjudged the "Bike Manufacturer of the Year" at the Economic Times
ZigWheels Car and Bike Awards. CNBC Awaaz - Storyboard special
commendation for "Effective rebranding of a new corporate entity" by
CNBC Awaaz Consumer Awards "Most Recommended Two-Wheeler
Brand of the Year" award by CNBC Awaaz Consumer Awards Colloquy
Loyalty Awards "Innovation in Loyalty Marketing International 2011" for
Hero GoodLife "Best Activity Generating Short or Long-Term Brand
Loyalty" by the Promotion Marketing Award of Asia Order of Merit for
201 Hero GoodLife
0 Ranked No 1 brand in the Auto (Two-Wheelers) category in the Brand
Equity "Most Trusted Brand" 2011 surveyCompany of the Year awarded by
Economic Times Awards for Corporate Excellence 2008-09.CNBC TV18
Overdrive Awards 2010 'Hall of Fame' to SplendorNDTV Profit Car & Bike
Awards 2010 -Two-wheeler Manufacturer of the YearCNB Viewers' Choice
Two-wheeler of the Year (Karizma ZMR)Bike Maker of the Year by ET-
ZigWheels Car & Bike of the Year Awards 2009
200 'Two-wheeler Manufacturer of the Year' by NDTV Profit Car & Bike
9 Awards 2009 and Passion Pro adjudged as CNB Viewers' Choice two-
wheeler

Top Indian Company under the 'Automobile - Two-wheelers' sector by the

Dun & Bradstreet-Rolta Corporate Awards

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

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NDTV Profit Business Leadership Awards 2009 - two-wheeler category

200 NDTV Profit Business Leadership Award 2008 - Hero Honda Wins the
8 Coveted "NDTV Profit Business Leadership Award 2008"

Top Gear Design Awards 2008 - Hunk Bike of the Year Award

NDTV Profit Car India & Bike India Awards - NDTV “Viewers’ Choice
Award” to Hunk in Bike category

IndiaTimes Mindscape and Savile Row ( A Forbes Group Venture ) Loyalty

Awards - “Customer and Brand Loyalty Award” in Automobile (two-
wheeler) sector

Asian Retail Congress Award for Retail Excellence (Strategies and

Solutions of business innovation and transformation) - Best Customer
Loyalty Program in Automobile category

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

Overdrive Magazine - Bike Manufacturer of the year

TNS Voice of the Customer Awards:

No.1 executive motorcycle Splendor NXG

No.1 standard motorcycle CD Deluxe

No. premium motorcycle CBZ Xtreme

200 The NDTV Profit Car India & Bike India Awards 2007 in the following
7 category:

Overall "Bike of the Year" - CBZ X-treme

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

"Bike Technology of the Year" - Glamout PGM FI

"Auto Tech of the Year" - Glamout PGM FI by Overdrive Magazine.

"Bike of the Year" - CBZ X-treme by Overdrive Magazine.

Ranked CBZ X-treme "Bike of the Year" - by B S Motoring Magazine

“Most Trusted Company” , by TNS Voice of the Customer Awards 2006.

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CD Deluxe rated as "No 1 standard motorcycle" by TNS Voice of the

Customer Awards 2006.

200 Adjudged 7th Top Indian Company by Wallstreet Journal Asia (Top Indian
6 Two Wheeler Company).

One of the 8 Indian companies to enter the Forbes top 200 list of world’s
most reputed companies.

No. 1 in automobile industry by TNS Corporate Social Responsibility

Award.
Best in its class awards for each category by TNS Total Customer
Satisfaction Awards 2006:

Splendor Plus (Executive)

CD Deluxe (Entry)

Pleasure (Gearless Scooters)

Splendor & Passion - Top two models in two wheeler category by ET Brand
Equity Survey 2006.

Adjudged 7th Top Indian Company by Wallstreet Journal Asia (Top Indian
Two Wheeler Company).

Top Indian company in the Automobile - Two Wheeler sector by Dun &
Bradstreet - American Express Corporate Awards 2006.

Hero Honda Splendor rated as India's most preferred two-wheeler brand at

the Awaaz Consumer Awards 2006.

Certificate of Export Excellence for outstanding export performance during

2003-04 for two-wheeler & three- wheelers - Complete (Non SSI) by
Engineering Export Promotion Council.
The NDTV Profit Car India & Bike India Awards 2006 in the following
category:

Bike Maker of the Year

Bike of the Year - Achiever

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

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

NDTV Viewers' Choice Award to Glamour in the bike category

3.15. CORPORATE SOCIAL RESPONSIBILITY (CSR)

STAKEHOLDER TIES AT THE GRASSROOTS

Hero Honda Motors takes considerable pride in its stakeholder relationships,

especially ones developed at the grassroots. The Company believes it has managed to
bring an economically and socially backward region in Dharuhera, Haryana, into the
national economic mainstream.An Integrated Rural Development Centre has been set
up on 40 acres of land along the Delhi-Jaipur Highway. The Centre-complete with
wide approach roads, clean water, and education facilities for both adults and
children-now nurtures a vibrant, educated and healthy community.

The Foundation has adopted various villages located within vicinity of the Hero
Honda factory at Dharuhera for integrated rural development. This
includes:Installation of deep bore hand pumps to provide clean drinking water.
metalled roads and connecting these villages to the National Highway (NH -
8).Renovating primary school buildings and providing hygienic water and toilet
facilities.Ensuring a proper drainage system at each of these villages to prevent water-
logging.

Promoting non-conventional sources of energy by providing a 50 per cent subsidy on

biogas plants.

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

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

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1.Vocational Training Centre

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

2.Adult Literacy Mission

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

3.Marriages of underprivileged girls

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

4.Rural Health Care

Besides setting up a modern hospital, the Foundation also regularly provides doorstep
health care services to the local community. Free health care and medical camps are
now a regular feature in the Hero Group's community outreach program

3.16. Key policies an environmentally and socially, aware company

At Hero Honda, our goal is not only to sell you a bike, but also to help you every step
of the way in making your world a better place to live in. Besides its will to provide a
high-quality service to all of its customers, Hero Honda takes a stand as a socially
responsible enterprise respectful of its environment and respectful of the important
issues.Hero Honda has been strongly committed not only to environmental
conservation Programmers but also expresses the increasingly inseparable balance
between the economic concerns and the environmental and social issues faced by a
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business. A business must not grow at the expense of mankind and man's future but
rather must serve mankind. "We must do something for the community from whose
land we generate our wealth."A famous quote from our Worthy Chairman
Mr.BrijmohanLallMunjal.

Environment Policy
We at Hero Honda are committed to demonstrate excellence in our environmental
performance on a continual basis, as an intrinsic element of our corporate philosophy.

To achieve this we commit ourselves to:

 Integrate environmental attributes and cleaner production in all our

business processes and practices with specific consideration to substitution
of hazardous chemicals, where viable and strengthen the greening of
supply chain.
 Continue product innovations to improve environmental compatibility.
 Comply with all applicable environmental legislation and also controlling
our environmental discharges through the principles of "alara" (as low as
reasonably achievable).
 Institutionalise resource conservation, in particular, in the areas of oil,
water, electrical energy, paints and chemicals.
 Enhance environmental awareness of our employees and dealers / vendors,
while promoting their involvement in ensuring sound environmental
management.

3.17. Quality Policy

Excellence in quality is the core value of Hero Honda's philosophy.We are committed
at all levels to achieve high quality in whatever we do, particularly in our products
and services which will meet and exceed customer's growing aspirations through:

 Innovation in products, processes and services.

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

3.18. Safety Policy

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Hero Honda is committed to safety and health of its employees and other persons who
may be affected by its operations. We believe that the safe work practices lead to
better business performance, motivated workforce and higher productivity. We shall
create a safety culture in the organization by:

 Integrating safety and health matters in all our activities.

 Ensuring compliance with all applicable legislative requirements.
 Empowering employees to ensure safety in their respective work places.
 Promoting safety and health awareness amongst employees, suppliers and
contractors.
 Continuous improvements in safety performance through precautions
besides participation and training of employees.

3.19. INTRODUCTION ABOUT PHOENIX DEALER PROFILE (PHOENIX

MOTORS)

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

PVT LTD. is established on 21st march 2003. The business is running by only one
man. The owner name is C.H. Madhumathi the firm is located at habsiguda in
Hyderabad.Generally the sale will be either on cash basis or on institutional basis.
Bank like ICICI, HDFC and CENTURION are providing loans to customers.

Advertising strategy of phoenix motors:

They are giving the ads through newspapers, wall paintings, hoardings and field staff.
They are upgrading sales by introducing the schemes, group bookings, institutional
sales and customer door-to-door activities.

Categorization of Staff members:

Staff members are categorized for technicians, 25 members are allotted , for field
staff, 5 members are recruited. for sales , 5 persons are placed. for stores &spare parts,
5 members are allotted for managerial accounts and another 3 persons for cash
transaction and other members are allotted for remaining work.

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Customer relationship:
They entertain the showroom providing a customer’s huge having pool game, internet
facility and television with home there system. They provide bile maintenance
programs on every week.

According to other dealers PHOENIX motors in first in sales and best in service.
They treat customer, is the very important person at PHOENIX motors customer
satisfaction is their motto, why because, they will satisfied customer is the best
advertisement. They provide better value for the customers and as well as employees
also. At PHOENIX motors the customer is the boss.

3.20. SALES STRATEGY OF PHOENIX MOTORS:

Average they are selling 25 vehicles per day. PHOENIX motors PVT L.T.D is the
A.P s NO.1 dealership in sales and other activities? It is a QLAD (qualify leader
through quality dealer). At PHOENIX motor they gave the quality service to the
customers why because ‘the cost is long forgotten but the quality is remembered for
ever”. They treat quality has a...

Q Quest for excellence

U Understanding customer’s needs

A Action to achieve customer’s appreciation.

L Leadership determined to be a leader

I involving all the people

T Team spirit to work for a common goal

Y Yard sticks to measure programs.

3.21. WARRANTY ON PROPRIETARY ITEMS:

Warranty on proprietary items like Tyros, Tubes and Battery etc, will be directly
handled by the respective original manufactures (OEM’s) except AMCO for batteries
and Dunlop and Falcon tires and Tubes. In case of any defect in proprietary items,
other than the above two mentioned OEM’S the dealers must approach the Brach
office dealer of the respective
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Manufacture. For AMCO batteries and Dunlop and falcon tires, tubes claims will be
accepted at our authorized dealerships per the mutually agreed terms and conditions
between HERO HONDA and of these two OEM’s in case the claim is not accepted
for invalid reasons. Then the claim along with the refusal note form the OEM can be
sent to the warranty section at gorgon plan after due to recommendation of the area
service engineer. If any other six services or subsequent paid services is not availed as
per the recommended schedule given in the owner’s manual. If HERO HONDA
recommended engine oil is not used. To normal wear & tear components like bulbs,
electric wiring, filters, spark plug, clutch plates, braded shoes, fasteners, shim
washers, oil seals, gaskets, rubber parts (other than tire and tube) plastic components,
chain$ sprockets and in case of wheel rim misalignment or bend.If there is any
damage due o modification or fittings of accessories other than ones recommended by
HERO HONDA.If the motor has been used in any competitive events like tracking
races or rallies. If there is any damage to the painted surface due to industrial
pollution or other extraneous factors. For clams made for any consequential damage
due to any previous malfunction. For normal phenomenon like noise, vibration, oil
seepage, which do not affect the performance of the motorcycles?

3.22.SOCIAL SERVICE ACTIVITIES

PHOENIXmotors participate and conduct social service activities. Recently the

phoenix motors organized a BLOOD DONATION CAMP for the trust on 21st January
2006.they motivated on the consumers to participated in this camp and also provide
certificate for the customers

CHART: 3.5.

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

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3.23. CUSTOMER RELATIONSHIP:

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

3.24.SOCIAL SERVICE ACTIVITIES

PHOENIX Motors participates in social service activities. The Phoenix motors

organize a BLOOD DONATION CAMP for the trust in every year. They motivated
on the customers to participated in this camp and also provide Certificate for the
customer

NEED AND IMPORTENCE OF STUDY

Many business owners disregard the importance of Funds flow statements because
they unwittingly believe that their current financial standing can be construed from
other financial reports and projections. Unfortunately, however, a Funds flow
statement is necessary to adequately assess the incoming and outgoing flow of Funds

and other resources in a business.

Not only will a business owner with a Funds flow system be more aware of his or her
financial standing, but it will also help investors to make educated decisions on future
investments. A business with regular and reliable Funds flow statements shows more
economic solvency, and is more attractive to investors.

A Funds flow statement documents the incoming and outgoing Funds in plain terms.
Future sales and sales made for credit (unless they have been paid off) are not
included in the Funds flow statement, and most of the data will come from core
operations. Payables and receivables should be expressly defined, as should
depreciation of product value and inventory that has not yet been moved.

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This will allow a business owner to compare past periods with the current financial
standing and determine whether your receivables have increased or decreased.

This can also help to track your investmentsnext to your receivables and payables.
Are your investments increasing or decreasing in value? And has your inventory
moved at a steady pace? New or expanding businesses can expect to see a decrease in
Funds flow, but this doesn’t mean that the business is going under. More stables
businesses should see a steadily increase in Funds flow over a period of several
months or years.

There are typically five different sections in a Funds flow statement, though large
businesses might have more complex Funds flow systems as required.

OBJECTIVES OF THE STUDY

To know the operational efficiency ofPHOENIX MOTORS PVT LTD

To show the manner in which the operations have been financed , and how the
financial resources have been used.

To analyze the movement of funds between the dates of two balance sheets in period
of study.

To identify the changes in the working capital in between above mentioned year

To improve the financial performance of the company.

It focuses attention on resources available for capital investment.

They provide useful guide to creditors & lenders

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SCOPE OF THE STUDY

Financial analysis consists of ratio analysis and funds flow analysis. To know funds
flow from one to one, as the time available is very limited and the subjects are very
vast, the study is continued to overall financial condition of a firm. This study is to
know working capital increase or decrease funds from operation, sources and
application of funds of M/S PHOENIX MOTORS PVT LTD.

Financial analysis consists of funds flow analysis. To know funds flow from one to
one, as the time available is very limited and study is continued to overall financial
condition of a firm. The study to know working capital increase or decrease, funds
from operation, source and application of funds

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3.3. SOURCES OF DATA

3.3.1. PRIMARY DATA

The primary data is collected in a showroom where I did my project work.

3.3.2. SECONDARY DATA

The secondary data was collected form already published sources such as annual
reports, returns and internal records.

3.4. THE DATA COLLECTION INCLUDES:

Data collected from annual reports of PHOENIX MOTORS PVT LTD).

Reference form JOURNALA AND PERIODICAL relating to financial management.

RESEARCH TOOLS:Funds Flow Statement

Tools of Analysis

Various statistical tools such as percentages averages were used to process the date, of
effectiveness of funds flow in organization & management in Hero MotoCorp
Ltd(PHOENIX MOTORS PVT LTD).

Research Design: Working capital

Data Sources : Primary &Secondary Data

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3.4. LIMITATIONS OF THE STUDY:

 The study is only pertaining to PHOENIX MOTORS PVT LTD.

 The period of study is of 4 years and the performance evaluation is also
limited to 4 years.
 The study is purely based on the data available the form of annual
reports...
 Analysis is only means and not an end itself; different people interpret the
same analysis in different ways.
 The overall financial performance is taken into consideration without
taking into account the minute values or individual values.
 This study is conducted within a short period. The time factor is also a
limitation.

Composition of current Assets of phoenix motors

(all the amounts are in Cr)

TABLE:4.1.

Particulars 2013-14 2014-15 2015-16 2016-17 Avg.

Inventory 317.1 326.83 436.4 524.93 313.473333

Sundry Debtors 297.44 149.94 108.39 130.59 170.268333

Cash and Bank 131.09 219.57 1907.21 71.52 394.195

Loans & 185.46 311.26 405.76 728.66 315.7

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Advances

Other current 5.69 5.89 24.82 48.87 14.8116667

Assets

Total 936.78 1013.49 2882.58 1504.57

CHART: 4.1.

Chart Title
3000
2500
2000
1500
1000
Axis Title

500
0
ry s k es s l
or an et ta
nto bt b anc ass To
ve e & dv
In yd sh nt
r Ca &A ur
re
nd ns
Su
Lo
a
erc
h
Ot
Axis Title

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CHAPTER IV

RIVIEW OF
LITERATURE

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REVIEW OF LITERATURE
Ever since the evolution of the concept of working capital, several authors
have attempted to analyze the concept by defining it so that the components of
working capital are properly identified. In doing so, quantitative and qualitative
characteristics of working capital are also identified to make working capital analysis
for meeting specific needs. These efforts have offered further scope to the authors
to approach this topic in the context of management of components of working
capital in many ways. Such approaches have also facilitated evolution of
techniques to manage working capital .Each of these approaches has their own
basis and justification. Views expressed by various authors suggest further need
to analyze working capital management issues .Review of some of the studies
carried out and suggestions offered by eminent author son the subject have
helped in formulating the theme meaningfully and to carry out the study in line
with the objective and scope. A sincere effort has been made for comprehensive
review of literature on working capital management in general and small
enterprises in particular, reveal the following:

INTERPREATITION:

The income statement is considered to be the most useful of all financial statements.
It prepared by a business concern in order to know the profit earned and loss sustained
during a specified period. It explains what has happened to a business as a result of
operations between two balance sheet dates. For this purpose it matches the revenues
and cost incurred in the process of earning revenues and shows the net profit earned
or loss suffered during a particular period.

The nature of Income which is a focus of the income statement can be well
understood if business is taken as an organization that uses “Input” to produce
“Output”. The output of the goods and services that the business provides to its
customers. The values of these outputs are the goods and services that the business
provides to its customers. The values of these outputs art the amounts paid by the
customers for them. These amounts are called “revenues” in the accounting. The
inputs are the economic resources used by the business in providing these goods and
services. These are termed “expenses” in accounting.

4.1.: Statement of changes in working capital of phoenix motors

TABLE:4.2. In crors

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Working capital 2015

Working capital turnover ratio 2015-2016 2016-2017

Total current Assets

Inventories 436.4 524.93

Sundry Debtors 108.39 130.59

Cash and Bank Balances 1907.21 71.52

Other Current Assets 405.76 728.66

Loans and Advances 24.82 48.84

Total 2882.58 1504.54

Total Current Liabilities

Current Liabilities 3805.06 5063.68

Provisions 1026.35 1081.07

Total 4831.41 6144.75

Net working capital -1948.83 -4640.21

Increase\decrease in net working capital -2691.38

CHART:4.2.

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Interpretation:

The networking capital of PHOENIX MOTORS has been decreased to 2691 Cr the
financial position i.e. the performance of PHOENIX MOTORS has increased and the
current assets defects its current liability.

4.3. STATEMENT OF SOURCES AND APPILICATION OF FUNDS FOR

THE PERIOD (2015-16)OF PHOENIX MOTORS

TABLE:4.3. Rs in cry/

Source Rs. Application Rs.

Issue of share capital 39.94 Funds lost in operation 0.00

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Repayment of long term loan

Raising of long term loans 32.71 4699.94
loans

Sale of non-current (fixed) Purchase of long term

424.87 -1765.05
assets investments

Non-trading receipts 0.00

Sale of investment 5128.75

Decrease in working capital -2691.38

2934.89 2934.89

CHART: 4.3.

From the table it is observed that the working capital of company shows decreased
trend. The current Asset of the company has decreased Rs 2882.58 in 2015-16 is
1504.54. But the item cash balance showing increasing trend. The current liabilities
ofcompany .are decreased in 2016.In the net working capital of company stood -
2691.38. It is decreased in 2015-16. The decreasing net working capital is Rs 2691.38

Regarding the application of funds 33.71% used for investment in fixed assets and
funds used for working capital purpose. Constitute 30.77% respectively

INTERPRETATION

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It is concluded that during the period 2015-16 Increasing gross block and net
Decreasing in working capital.

TABLE :4.4.

4.4. Statement of changes in working capital phoenix motors

Working capital 2014-15

Working capital turnover ratio 2015-2016 2016-2017

Total current Assets

Inventories 326.83 436.4

Sundry Debtors 149.94 108.39

Cash and Bank Balances 219.57 1907.21

Other Current Assets 311.26 405.76

Loans and Advances 5.89 24.85

Total 1013.49 2882.61

Total Current Liabilities

Current Liabilities 1525.85 3805.06

Provisions 526.97 1026.35

Total 2052.82 4831.4

Net working capital -1039.33 -1948.79

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Increase\decrease in net working capital -909.46

CHART:4.4.

Graph showing STATEMENT OF CHANGES IN WORKING CAPITAL OF

PHOENIX MOTORS

Interpretation:

The networking capital of Hero Monocarp Ltd has been decreased to 909 Cr the
financial position i.e. the performance of Hero Monocarp Ltd has increased and the
current assets defects its current liability.

TABLE:4.5

STATEMENT OF SOURCES AND APPILICATION OF FUNDS FOR THE

PERIOD (2014-15) OF PHOENIX MOTORS
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Rs in lacks

Source Rs. Application Rs.

Issue of share capital 39.94 Funds lost in operation 0.00

Raising of long term loans 66.03 Redemption of pre share capital 0.00

Sale of non-current (fixed) assets 340.61 Repayment of long term loan 16098.79

Purchase of long term

Non-trading receipts 100.41 -20675.43
investments

Decrease in working capital -909.46 Dividend Paid 4939.11

-362.47 -362.47

CHART: 4.5.

Analysis:

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From the table it is observed that the working capital of company shows decreased
trend. The current Asset of the company has decreased Rs 7885.65 to Rs 1013.49 in
2014-15.

Regarding the application of funds 17.13% used for investment in fixed assets and
funds used for working capital purpose. Constitute 0.84% respectively

INTERPRETATION

The working capital of company shows decreased trend. The current Asset of the
company has decreased and current liabilities are increased in the year.

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TABLE:4.6.

STATEMENT OF CHANGES IN WORKING CAPITAL OF PHOENIX

MOTORS

Rs in lacks

Working capital 2014

Working capital turnover ratio 2012-2013 2013-2014

Total current Assets

Inventories 317.1 326.83

Sundry Debtors 297.44 149.94

Cash and Bank Balances 131.09 219.57

Other Current Assets 185.46 311.26

Loans and Advances 5.69 5.89

Total 936.78 1013.49

Total Current Liabilities

Current Liabilities 1324.98 1525.85

Provisions 499.76 526.97

Total 1824.74 2052.82

Net working capital -887.96 -1039.33

Increase\decrease in net working capital -151.37

CHART:4.6.

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GRAPH SHOWING STATEMENT OF CHANGES IN WORKING CAPITAL

OF PHOENIX MOTORS

Interpretation:

The networking capital of PHOENIX MOTORS has been decreased to 151.37Cr the
financial position i.e. the performance of PHOENIX MOTORS has increased and the
current assets defects its current liability.

TABLE: 4.7.

STATEMENT OF SOURCES AND APPILICATION OF FUNDS FOR THE

PERIOD (2013-14) OF PHOENIX MOTORS (in lacks)
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Source Rs. Application Rs.

Raising of long term loans 39.94 Funds lost in operation 0.00

Sale of non current (fixed) assets 246.09 Repayment of long term loans 4032.32

Purchase of long term

Non-trading receipts 109.09 -3788.57
investments

Decrease in working capital -151.37

243.75 243.75

CHART:4.7.

GRAPH SHOWING STATEMENT OF SOURCES AND APPILICATION OF

FUNDS FOR THE PERIOD (2013-14) OF PHOENIX MOTORS

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CHATPER - V
DATA ANALYSIS AND
INTERPRITATION

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ANALYSIS:

From the table it is observed that the working capital of company shows decreased
trend. The current Asset of the company has decreased Rs 936.78 in 2013-2014 to Rs
1013.49 in 2012-13.

Regarding the application of funds 2.29% used for investment in fixed assets and
funds used for working capital purpose. Constitute 1.57% respectively.

INTERPRETATION

The working capital of company shows decreased trend. The current Asset of the
company has decreased and the current liabilities of company are increased.

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TABLE:4.8.

Statement of changes in working capital of phoenex motors

Rs in lacks

Working capital 2013

Working capital turnover ratio 2011-2012 2012-2013

Total current Assets

Inventories

Sundry Debtors 275.58 317.1

Cash and Bank Balances 335.25 297.44

Other Current Assets 35.78 131.09

Loans and Advances 263.06 185.46

3.6 5.69

Total 909.67 931.09

Total Current Liabilities

Current Liabilities 1041.92 1324.98

Provisions 437.24 499.76

Total 1479.16 1824.74

Net working capital -569.49 -893.65

Increase\decrease in net working capital -324.16

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CHART:4.8.

GRAPH SHOWING STATEMENT OF CHANGES IN WORKING CAPITAL

OF PHOENEX MOTORS

Interpretation:

The networking capital of PHOENIX MOTORS has been decreased to 324 Cr the
financial position i.e. the performance of PHOENIX MOTORS has increased and the
current assets defects its current liability.

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TABLE:4.9.

STATEMENT OF SOURCES AND APPILICATION OF FUNDS FOR THE

PERIOD (2012-13) OF PHOENIX MOTORS

Rs in lacks

Source Rs. Application Rs.

Funds from operations 2265.11 Repayment of long term loans 2100.56

Purchase of long term

Raising of long term loans 101.14 166.03
investments

Sale of non-current (fixed) assets 1944.29 Increase in Working Capital 2145.55

Non-trading receipts 102.00

4412.54 4412.14

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CHART:4.9.

ANALYSIS

From the table it is observed that the working capital of company shows increased
trend. The current Asset of the company has increased Rs 8167.50 to Rs 10725.94 in
2012-13

Regarding the application of funds 9.44% used for investment in fixed assets and
funds used for working capital purpose. Constitute 9.84% respectively.

INTERPRETATION

The working capital of company shows increased trend. The current Asset of the
company has increased than current liabilities.

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TABLE:4.10.

NET DECREASE IN WORKING CAPITAL

Rs in Lacks

Year Increase/Decrease Amount

2012-13 Decrease -887.96

2013-14 Decrease -1039.3

2014-15 Decrease -1945.8

2015-16 Decrease -4640.2

CHART:4.10

Amount
0
-500 Decrease Decrease Decrease Decrease
-887.96
2012-13 2013-14 2014-15 2015-16
-1000 -1039.3

-1500
-2000 Amount
-1945.8
-2500
-3000
-3500
-4000
-4500
-5000 -4640.2

INTERPRETATIN

The above table we observed that 2007-08 would be decreased by Rs. 887.96 .In the
year 2012-13 the working capital has been decreased by Rs. 1039.3. In the year 2013-
14 the working capital is Rs. 1945.8. In 2015-16Rs.4640.2 has increased the working
capital.
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CHAPTER-VI
FINDINGS AND SUGGESTIONS

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5.1. FINDINGS

The PHOENIX MOTORS net working capital is satisfactory between the years 2012-
13 since it shows decreasing trend ; but after that it is in declining position.The
current ratio of PHOENIX MOTORS is satisfactory during the period of study 2012-
13 to 2015-16. It is increased but after that it is declining.The average quick ratio of
PHOENIX MOTORS is not good though the quick ratio is showing maximum value
of 6.01 in the year 2012-13 and then it is declining to be deal.Fixed assets turnover
ratio of PHOENIX MOTORS increased. The company has to maintain this.Inventory
turnover ratio of PHOENIX MOTORS is also increased gradually, without any fit
falls up to 2012-13. But in the year 2012-13 it is declined, and again it has increased
in the year 2010-11. Good inventory management is good sign for efficient
management. Total Assets turnover ratio of PHOENIX MOTORS is not satisfactory
because it is always below one, except in the year 2015-16 having a value of 1.03

Return on investment is not satisfactory. This indicates that the company’s funds are
not being utilized in a better way.

5.2. SUGGESTIONS

For the improving the financial performance of the company the following
suggestions are made.

Net working capital is very low; it is suggested to maintain sufficient net working
capital.

Effective inventory management is needed in the company

The firm should increase investment in current assets to create sufficient securities for
the current liabilities

For the improving the financial performance of the company the following
suggestions are made.

In order to reduce the outside borrowings in the company has to acquire. The capital
from equity sources. Keeping in view the debt equity the proportion as normal.

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The liquidity of the company should be improved by maintaining the optimum current
assets and liquid assets according to standard norms.

The quantum of the sales generated should be improved impressively in order to

attain higher return on investment.

To improve the financial health of the company and maximizing the time between the
source mobilization and utilization the management must introduce the new cost
saving techniques.

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CHAPTER-VII

CONCLUSION

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6.1. CONCLUSION

ThePHOENIX MOTORS net working capital is satisfactory between the years since
it shows increasing trend but after that it is in declining positionProfit Margin of
PHOENIX MOTORSis decreasing and showing negative profit because there is
increase in the price of copper The PHOENIX MOTORS Net Working Capital Ratio
is satisfactory.

The Operating Ratio ofPHOENIX MOTORS isn’t satisfactory. Due to increase in cost
of production, this ratio is decreasing. So the has to reduce its office administration
expensesImprove position funds should be utilized properly. Better Awareness to
increase the sales is suggested. Cost cut down mechanics can be employed. Better
production technique can be employed.

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6.2. BIBLIOGRAPHY

Khan, M Y and P K Jain, Financial Management, Tata McGraw-Hi Publishing Co.,

New Delhi, 2007.

I M Pandey, Essentials of Financial Management, Vikas Publishing House Pvt Ltd,

New Delhi, 1995.

Prasanna Chandra, financial Management, Tata McGraw-Hill Publishing Co., New

Delhi, 2007.

ANNUAL REPORTS OF PHOENEX MOTORS

WEBSITES:

www.hero.com

www.ponexherohonda.com

www.indianauto.com

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