RAW MATERIAL STORAGE PERIOD

Automobile Sector: 2011 Force Motors Hindustan Motors Volkswagen Eicher Motors 2010 2009

81.23149 112.8824 50.63321 973.7399 495.3803 666.1494 0.030897 0 16.2818 0

16.54418 36.5251

3000 2000 1000 0

2009 2010 2011

Power Sector: 2011 JP POWER TATA POWER GVK POWER 2010 2009 525.0888

1050.747 -355.193 8.89035 -1855.75

8.143644 10.29963 1190.93 -560.615

2000 1000 0 -1000 2011 2010 2009 GVK POWER TATA POWER

RAW MATERIAL STORAGE PERIOD ANALYSIS

It is the average time period taken to convert raw material into work in process. FORMULA = AVERAGE RAW MATERIAL INVENTORY/ AVERAGE DAILY RAW MATERIAL CONSUMPTION RMSP = f (raw material consumption per day, raw material inventory) Automobile Sector: The raw material storage period for Hindustan Motors has decreased for the year 2010 due to the comparative increase in the total consumption than the increase in average stock of raw material. In the year 2011 there has been a decline in the raw material storage period due to the fall in the total consumption. The raw material storage period for Force Motors has suddenly increased during the year 2010 because of a significant increase in the consumption of raw materials as well as the average stock of raw materials. The increase in the average stock of raw material is the main cause of an increase in the RMSP. The raw material storage period of Eicher has decreased from 2009 to 2010 and had remained same from 2010 to 2011. The decrease in 2010 is because of the drastic fall of average stock of raw material compared to total consumption of raw material. And both the values have remained almost same from 2010 to 2011. The raw material storage period for Volkswagen is minimal as compared to all the other automobile firms. This can be attributed to the fact that Volkswagen does not manufacture in India but has its operations in Germany and therefore the amount of raw material that they keep here is minimal. They take orders from customers and order the various parts which are then imported and assembled and delivered to the customer.

Power Sector: The RMSP for Tata Power has almost remained same for the three years. There has been consistency in operations. The RMSP has decreased from 2009 to 2010 and has increased from 2010 to 2011.The reason being is fluctuation in stock of their stores and spares. The RMSP has been fluctuating over the years. It has been negative for the years 2011 and 2009 because of the fluctuation in raw material purchases. Among all the power sector firms TATA power has been consistent while GVK has fluctuated a lot. This shows the inefficiency of GVK.

WORK IN PROCESS CONVERSION PERIOD

Automobile Sector: 2011 Force Motors Hindustan Motors Volkswagen Eicher Motors 21.0187 2010 2009

13.59394 13.9763

31.36157 28.93592 42.53805 0 0 0

2.709147 2.661282 4.473523

150 100 50 0

2009 2010 2011

Power Sector: 2011 JP POWER TATA POWER GVK POWER 0 2010 0 2009 0

0.147773 0.226394 0.129525 0 0 0

0.4 0.2 0 2011 2010 2009

GVK POWER TATA POWER

WORK IN PROGRESS CONVERSION PERIOD

WIPCP is the average time taken to complete the semi finished work or work in process. Lower the value of WIPCP, better it is i.e. the ability of the firm to complete the work in less number of days. Also it shows the efficiency of the firm. FORMULA = AVERAGE WORK IN PROCESS INVENTORY/ AVERAGE DAILY COST OF PRODUCTION WORK IN PROCESS CONVERSION CYCLE Automobile Sector: The work in process conversion period for Eicher motors is very small for all the three years. This means that the management is quite efficient and they are converting their WIP to finished goods as very fast. Also this means that not a lot of funds are stuck in WIP. For the years 2009 the WIPCP was approximately 5 days which dropped approximately 3 days for the year 2010 and 2011. The WIPCP for Hindustan Motors has at first decreased from 43 days in the year 2009 to 29 in the year 2010. This decrease may be due to the decrease in depreciation from the year 2009 to 2010. Also in the year 2011 the WIPCP has increased from 29 days to 32 days. This is due to a decrease in the cost of production. Also there is a decrease in the average WIP but this decrease is very less as compared to the decrease in the cost of production. The WIPCP for Force Motors is consistent for the first two years of 2009 and 2010 but for the year 2011 it has shown a significant increase in the year 2011 because of the significant increase in depreciation in the year 2011. Again the value of WIPCP is zero for the same reason as mentioned above for Volkswagon. Power Sector: The WIPCP for GVK, JP and Tata is zero because the average WIP is zero. This is because the company functions in the power industry which has negligible work in progress. And therefore the WIPCP is zero.

FINISHED GOODS STORAGE PERIOD

Automobile Sector: 2011 Force Motors Hindustan Motors Volkswagen Eicher Motors 2010 2009

21.13423 18.42924 17.89215 18.38865 16.16809 16.72808 13.38593 13.63932 0 8.158605 7.547321 24.38433

150 100 50 0

2009 2010 2011 2009

Power Sector: 2011 JP POWER TATA POWER GVK POWER 0 0 0 2010 0 0 0 2009 0 0 0

FINISHED GOODS CONVERSION PERIOD

FGCP is the average time taken to sell the finished goods. Lower the value of FGCP, better it is i.e. the ability of the firm to convert finished goods into sales is fast and it would also enhance efficiency and lower inventory. FGCP = AVERAGE FINISHED GOODS INVENTORY/ AVERAGE DAILY COST OF SALES The FGSP has been consistent for 2009 and 2010. However it has shown a slight increase in 2011 due to the increase in the average finished goods. The FGSP has shown a continuous increase over the years which is because of the steady increase in the average finished goods. The FGSP has declined drastically from 2009 and has remained at almost the same level. The decline is due drastic fall in average finished goods compared to the annual cost of sales. The FGSP is zero for all the power companies because in power sector there cannot be any storage for power generated. It is consumed as soon as produced.

ACCOUNTS COLLECTION PERIOD

Automobile Sector: 2011 Force Motors Hindustan Motors Volkswagen Eicher Motors 2010 2009

25.99282 32.59194 44.56365 8.865151 8.467047 7.364957 287.0094 213.3856 360 3.624877 4.928286 2.655361

1000 500 0 2009 2010 2011

Power Sector: 2011 JP POWER TATA POWER GVK POWER 2010 2009

86.53467 83.38111 143.8235 129.5838 100.9251 92.30343 594.0825 523.0196 885.3272

1500 1000 500 0 2011 2010 2009 GVK POWER TATA POWER

AVERAGE COLLECTION PERIOD

ACP is the average time taken to convert debtors into cash. FORMULA = AVERAGE DEBTORS/ AVERAGE DAILY CREDIT SALES Lower the value of ACP, better it is i.e. the company is able to convert the debtors into cash at a faster rate, so the cash received can be utilized for the faster operating cycle and hence its efficiency is good. It also indicates the efficiency of the management. An effective control of receivables helps a great deal in properly managing it. The average collection period for Volkswagen is a little on the higher side which indicates the inefficiency of the management to convert debtors into cash. As compared to all the automobile companies the ACP for Volkswagen is the highest.

AVERAGE PAYING PERIOD

Automobile Sector: 2011 Force Motors Hindustan Motors Volkswagen Eicher Motors 2010 2009

224.8112 204.1757 178.7067 2553.651 2205.182 2434.737 301.2654 221.261 360

100.6863 98.53739 50.87857

10000 5000 0 2009 2010 2011

Power Sector: 2011 JP POWER TATA POWER GVK POWER 2010 2009

36311.45 11723.31 1587.47 134.5592 98.25627 76.44277 0 7652.711 0

40000 20000 0 2011 2010 2009 GVK POWER TATA POWER

AVERAGE PAYING PERIOD

APP is the average time taken by a firm to pay its suppliers or creditors. FORMULA = AVERAGE CREDITORS/ AVERAGE DAILY CREDIT PURCHASES Higher the value of APP, better it is i.e. the firm has more number of days to pay its creditors back.

GROSS OPERATING CYCLE

Automobile Sector: 2011 Force Motors Hindustan Motors Volkswagen Eicher Motors 2010 2009

149.3772 177.4975 127.0653 1032.355 548.9513 732.7805 300.4262 227.0249 360 30.77443 31.68106 68.03831

3000 2000 1000 0

2009 2010 2011

Power Sector: 2011 JP POWER TATA POWER GVK POWER 2010 2009 668.9122

1137.281 -271.812

138.6219 109.2951 102.7326 594.0825 523.0196 885.3272

2000 1000 0 -1000 2011 2010 2009 GVK POWER TATA POWER

GROSS OPERATING CYCLE

GOC is the time taken to convert cash into cash. The process of this conversion is as follows: CASH SUPPLIERS DEBTORS RAW MATERIAL WORK IN PROCESS FINISHED GOODS CASH

FORMULA: GOC = RMSP + WIPCP + FGSP + ACP

NET OPERATING CYCLE

Automobile Sector: 2011 Force Motors Hindustan Motors Volkswagen Eicher Motors -75.4339 -1521.3 -0.83922 -69.9119 2010 -26.6781 -1656.23 2009 -51.6414 -1701.96

5.763903 0 -66.8563 17.15975

5000 0 -5000 -10000 2009 2010 2011

Power Sector: 2011 JP POWER TATA POWER GVK POWER -35174.2 2010 -11995.1 2009 -918.558

4.062708 11.03887 26.28982 0 -7129.69 0

0 2011 2010 2009 -20000 -40000

GVK POWER TATA POWER

NET OPERATING CYCLE

NOC is the equal to difference between GOC and APP. Lowe the value of NOC, better it is i.e. if the NOC is negative then it indicates that the firm had those number of extra days to pay to its creditors or suppliers. FORMULA: NOC = GOC - APP

The net operating cycle for Force Motors is in the negative which is a good sign which implies that the management has an additional those many days to pay back their creditors. This also shows that the operations of the firm are efficient and they are able to convert their raw materials into cash far more efficiently than in any other company. For the year 2010 NOC is greater than the other two years. This anomaly can be attributed to the sudden increase in the credit purchases of the raw materials. The NOC for Eicher Motors for the year 2009 is positive and the NOC for both 2010 and 2011 is negative. This shows a significant drop in the NOC and this indicates a better and efficient management of the company. This can be attributed to the significant increase in the average purchasing period of the company in the years 2010 and 2011. The NOC for Hindustan Motors has been negative for all the years. The APP has been very high for the firm. Such a high NOC reflects the inability of the company to meet its financial charges and the creditors will hesitate in lending the firm. The net operating cycle for Volkswagen is relatively constant for all the three years with a standard deviation of +/- 5 days. This indicates that Volkswagen is quite efficient in managing its working capital but it can get better if it reduces its average collection period. The net operating cycle shows that how many times the working capital is turned over in a year. It represents the net time gap between investment of cash and its recovery out of sales revenue. The length of the operating cycle is the indicator of the operational management of the company.

The NOC for Tata Power has declined over the years because of the drastic increase in payment period compared to the increase in GOC. This shows that the firm has more time period to pay its creditors which is good for the firm. Currently the power sector is reeling under huge losses so it is good to have a high payment period. The NOC for JP Power is decreasing over the years drastically but such huge fluctuations are not accepted because the creditors will lose faith in the company. Also, because the company is in huge loses so it is unable to meet its financial charges and hence APP has increased drastically. This is leading to negative NOC. The NOC for JP Power cannot be defined for 2011 and 2009 because the purchases is zero in these years as the company in power sector is in loses and unable to meet its charges. In 2010 the NOC is highly negative because the creditors payment period is very high.