Capital

1.
1 INTRODUCTION
Working capital management is a very important component of corporate finance because it
directly affects the liquidity and profitability of the company. It deals with current assets and
current liabilities. Working capital management is important due to many reasons. For one thing,
the current assets of a typical manufacturing firm accounts for over half of its total assets. For a
distribution company, they account for even more. Excessive levels of current assets can easily
result in a firms realizing a substandard return on investment. However firms with too few current
assets may incur shortages and difficulties in maintaining smooth operations.
Efficient working capital management involves planning and controlling current assets and current
liabilities in a manner that eliminates the risk of inability to meet due short term obligations on the
one hand and avoid excessive investment in these assets on the other hand. Many surveys have
indicated that managers spend considerable time on day-to-day problems that involve working
capital decisions. One reason for this is that current assets are short-lived investments that are
continually being converted into other asset types. With regard to current liabilities, the firm is
responsible for paying these obligations on a timely basis. Working Capital Management is a very
sensitive area in the field of financial management. It involves the decision of the amount and
composition of current assets and the financing of these assets.
1.2 TITLE OF THE STUDY
A Study on the Impact of Working Capital Management on Profitability
1.3 NEED FOR THE STUDY
The study conducted to gain practical knowledge about Working Capital Management& activities
of eicher motors Pvt. Ltd. It helps us to known the factors and determinants of working capital in a
firm.
1.4 OBJECTIVES OF THE STUDY
Identify the financial strengths & weakness of the company.
Study various components of working capital
Study the sources and uses of working capital
Evaluating companys performance relating to financial statement analysis.
To find out the utility of financial ratio in credit analysis & determining the financial
capacity of the firm.
1.5 SCOPE OF THE STUDY
The scope of working capital management lies in testing short run solvency and on the
effectiveness with which business conducted. The scope of the study remained to apply into
practical the theoretical aspect of the study into real life work capability. The study of working
capital is based on the tools like Ratio Analysis, Statement showing changes in working capital.
The study is based on last 5 years Annual Reports of Eicher Motors Pvt. Ltd.
1.6 METHODOLOGY
This project A Study on Impact Working Capital Management on Profitability at Eicher Motors
Pvt. Ltd is considered as analytical research. The data collected for this purpose is from following
sources:
Primary Data: Has been collected from personal interactions with the finance manager Mr. sachin
kini and other staff members.
Secondary Data: The major sources of secondary data collected for this project was collected
through company prospectus, balance sheet, profit and loss statement and some more data from
text and internet sources.
Tools for Analysis:
Ratio analysis
Graphical analysis
1.7 LITERATURE REVIEW

Relationship working capital management and profitability a statistical approach: The
study indicates that the company has made investment in working capital following Conservative
approach. Among the components of working capital, inventory and sundry Debtors are the
dominative contributory causes for the galloping increase in working capital. The increasing trend
of long-term funds used for financing working capital shows that the company has not utilized its
long-term funds more effectively by investing them in fixed assets.
Working capital and automobile industry The study shows that, Working capital management is
of critical importance to all companies. Ensuring that sufficient liquid resources are available to the
company is a pre-requisite for corporate survival. Companies must strike a balance between
minimizing the risk of insolvency (by having sufficient working capital) with the need to maximize
the return on assets, which demands a far less conservative outlook.
The impact of company characteristics on working capitalmanagement: This research studies
the effect of company characteristics on the working capital management. The company
characteristics include profitability, operating cash flow, company size, sale growth, current ratio,
quick ratio and debt ratio. In the first stage the relationship between the company characteristics
with cash conversion cycle were assessed in all companies and the result indicated that
profitability, operating cash flow, company size, sale growth and debt ratio affect the companys
working capital management. In the second stage, the companies were divided into 3 categories:
great, average and small. Then the relationship between company characteristics with cash
conversion cycle was assessed separately. The results indicated that the effective factors in great
levels were profitability, operating cash flow, debt ratio and sale growth, in the average level, the
effective factors were profitability, company size, sale growth and debt ratio, and small levels were
affected by profitability, sale growth, current ratio, quick ratio and debt ratio.
1.8 LIMITATIONS OF THE STUDY
The analysis is limited to just five years of data
Limited interactions with the concerned staff due to their busy schedule
The findings of the study are based on the information retrieved by the selected unit.
The study is conducted with the available data gathered from financial statements of the
company and the analysis was made accordingly.
INDUSTRY PROFILE
AUTOMOBILE INDUSTRY IN INDIA
The automobile industry in India is the ninth largest in the world with an
annual production of over 2.3 million units in 2008 In 2009, India emerged as Asia's fourth
largest exporter of automobiles, behind Japan, South Korea and Thailand.
Following economic liberalization in India in 1991, the Indian
Automotive
industry has demonstrated sustained growth as a result of increased competitiveness and relaxed
restrictions. Several Indian automobile manufacturers such as Tata Motors, Maruti Suzuki and
Mahindra and Mahindra, expanded their domestic and international operations. India's robust
economic growth led to the further expansion of its domestic automobile market which attracted
significant India- specific investment by multinational automobile manufacturers. In February
2009, monthly sales of passenger cars in India exceeded 100,000 units.
Byronic automotive industry emerged in India in the 1940s. Following the
independence, in 1947, the Government of India and the private sector launched efforts to
create an automotive component manufacturing industry to supply to the automobile industry.
However, the growth was relatively slow in the 1950s and 1960s due to nationalization and the
license raj which hampered the Indian private sector. After 1970, the automotive industry
started to grow, but the growth was mainly driven by tractors, commercial vehicles and
scooters. Cars were still a major luxury. Japanese manufacturers entered the Indian market
ultimately leading to the establishment of Maruti Udyog. A number of foreign firms initiated
joint ventures with Indian companies.
In the 1980s, a number of Japanese manufacturers launched joint-ventures for building
motorcycles and light commercial-vehicles. It was at this time that the Indian government
chose Suzuki for its joint-venture to manufacture small cars. Following the economic
liberalization in
1991 and the gradual weakening of the license raj, a number of Indian and multi-national car
companies launched operations. Since then, automotive component and automobile
manufacturing growth has accelerated to meet domestic and export demands.
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
th
19
century reams of self-propelling the horse-drawn bikeriage. Similarly, the invention of
the motorcycle created the self propelling bicycle. The first commercial design was threewheeler built by Edward Butler in Great Britain in 1884. This employed a horizontal singlecylinder 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.
need
for reliable constructions.
There was then felt the
This led to road trial tests and competition between
manufacturers. Tourist Trophy (TT) races were held on the Isle of main in 1907 as reliability
or endurance races. Such were the proving ground for many new ideas from early twostroke-cycle designs to supercharged multivalent engines mounted on aerodynamic, bikebon
fiber reinforced bodywork
INVENTION OF TWO WHEELERS:
The invention of two wheelers is a much-debated issue.
Who invented the first
motorcycle? May seem like a simple question, safety, bicycle, i.e., bicycle with front
and rear wheels of the same size, with a pedal crank mechanism to drive the rear wheel.
Those bicycles in turn described from high-wheel bicycles.
The high wheelers descended
from an early type of pushbike, without pedals, propelled by the riders feet pushing against the
ground. These appeared around 1800, used iron banded wagon wheels, and were called bonecrushers, 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!
FURTHER DEVELOPMENTS:
Most of the developments during the early phase concentrated on three and fourwheeled design since it was complex enough to get the machines running with out having to
worry about them falling over. The next notable two-wheeler though was the Hildebrand &
Wolf Mueller, patented in Munich in 1894. In 1895, the French firm of DeDion-button built
and engine that was to make the mass production and common use of motorcycle possible.
The first motorcycle with electric start and a fully modem electrical system; the Hence
special from the Indian Motorcycle Company astounded the industry in 1931. Before World
War 1, IMC was the largest motorcycle manufacturer in the world producing over 20000 bikes
per year.
INCREASING POPULARITY:
The popularity of the vehicle grew especially after 1910, in 1916; the Indian motorcycle
company introduced the model H racer, and placed it on sale. During World War 1, all
branches of the armed forces in Europe used motorcycles principally for dispatching. After
the war, it enjoyed a sport vogue until the Great Depression began in motorcycles lasted into
th
the late 20
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.
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 twowheelers industry made a small beginning in the early 50s when Automobile products of India
(API) started manufacturing scooters in the country.
the sole producers.
HISTORY OF THE FOUR WHEELERS:
Until 1958, API and Enfield were
1912
self-starting
Cadillac.
Folder
"General
Motors
Corporation, misc." Box 1, Jack Kausch papers.

However, when gas-powered internal combustion engines no longer needed the help of a hand
crank to start, then the electric automobile lost ground. The 1912 Cadillac was the first vehicle to
have an effective self-starting engine.
Consumers materialized and marketing attempts began almost as soon as manufacturers knew that
they had a product to sell. In 1898, William Metzger became the country's first automobile dealer
not in the direct employ of a manufacturer with the establishment of his Detroit dealership. Two
years later, in 1900, the first National Autombile Show was held in New York City at Madison
Square Garden. Approximately 48,000 people visited the 51 exhibitors, consisting of automobile
manufacturers and parts supply companies, and saw 300 different models.
Automovtive Industry:
the total prodution of auto components has deen increasing in aboit 19 percent per annum since
1960s.however, the gross output in value termsa was quite miniscule till mid seenties and picked up
only afer 80's. this is true at the various components levels as well. as can be gleaned from figure 1,
the volume of production was almost negligible in the 1960s.it is only since 1975, a respectable
production started and in the subsequent year the toltal auto component production has grown
almost exponentially.following the high growth of total production is the grown of engine parts and
drive parts transmission and steering parts etc. all through the period,engine parts bening high
valueadded in nature,has been contributing the most to the total production. a closer look at the
trends however reveals that a short rcessionary period occureed in 1997-1999 dueing which the
production growth was almost negligible, most of segement even experienceing negative growth s
overall, the post liberalization period induced a cagr of about 20 percent, which is slightiy more
than the cagr of the entire span 1961-2001
Growth of Auto Components production in India
Engine
Drive
& Suspension
Parts
Transmission
&
Parts
Parts
Electrical
Equip-
Total
Braking Parts
ment
1997-98
0.70
11.13
-0.18
-3.79
-1.05
4.73
1998-99
2.75
2.61
6.37
4.33
17.59
7.72
1999-00
21.43
43.06
9.04
18.50
18.57
22.99
2000-01
-9.79
15.04
-2.43
-7.07
15.61
5.30
CAGR(1961- 16.97
21.23
21.92
17.32
19.89
18.47
20.69
13.63
19.75
27.22
19.81
2001)
CAGR(1991- 14.86
2001)
Component- wise Production Trend
COMPANY PROFILE:
Eicher Motors Ltd is one of the leading manufacturers of commercial vehicles in India.
Their principal activity is manufacturing and selling of commercial. They are having their
manufacturing facilities at Pithampur and Dewas in Madhya Pradesh, Chennai in Tamil Nadu,
Thane in Maharashtra and Gurgaon in Haryana.
Eicher Motors Ltd was incorporated in the year 1982. The company in technical collaboration
agreement with Mitsubishi Motor Corporation of Japan produced the Light Commercial Vehicle
in India. The commercial production was commenced in their plant at Pithampur in Madhya
Pradesh, with the launch of Canter truck in June 1986. The agreement with Mitsubishi ended in
March 1994 after successful transfer of technology and achieving total Indigenization.
The demerger of Tractors, Two-Wheelers, Engines and Gears businesses from Eicher Ltd was
transferred to the company with effect from April 1, 2003. In May 25, 2005, the company
acquired 100% of the shares of Design Intent Engineering Inc, USA, which is engaged in the
business of providing computer aided engineering & design services for a consideration of USD
2.5 million.
The company's Tractor division at Mandideep, Gears division at Parwanoo and Engines division
at Alwar had been sold to TAFE Motors and Tractors Ltd, a wholly owned subsidiary of Tractors
and Farm Equipment Ltd, for a consideration of Rs 310 crore with effect from June 1, 2005. The
company acquired a transmission gear manufacturing plant at Dewas having a gear cutting
capacity of 5 lacs gears per annum with effect form November 1, 2006.
During the year 2006-07, the company acquired the 100% equity shares of Hoff and Associates
(Hoff), Plymouth, Michigan (USA) along with Hoff's two wholly owned subsidiaries in Beijing
and Shanghai, China for a consideration of USD 3.5 million. In order to synergize the activities
between the two subsidiary companies in USA, Hoff and Associates merged with Design Intent
Engineering Inc with effect from January 1, 2008 and the name of Design Intent Engineering Inc
was changed to Eicher Engineering Solutions Inc.formation of a joint venture company through
transfer of the existing Commercial Vehicle Business along with related Components and Design
Services Business. In August 2008, they transferred the Components and Design Services
Business to VECV, the joint venture company with effect from July 01, 2008.
A STUDY ON IMPACT OF WORKING CAPITAL MANAGEMENT ON PROFITABILITY
Business structure
Eicher motors ltd

Eiche
Royal Enfield Motorcycle

(100%)
r VE commerical vehicles
(54.4%)
Mors
EICHER ENGINEERING COMPONENTS

Eicher Engineering Components (EEC) is the automotive component division of VECV (VE
Commercial Vehicles Limited), a Volvo Group and Eicher Motors joint venture.
Commerical
EEC came
into existence in 1992 in Engineering
a take-over from Ramon & engineering
Demm, Thane.
vehicles
components
solutions
Ramon & Demm plant was originally set up in 1964 in technical collaboration with "Fratelli
Daldi & Matteucci" of Italy - the makers of the famed "DEMM" brand gears - and it was the first
gear manufacturing facility in the auto-ancillary sector in India.
In the ensuing years, EEC has grown from strength to strength and is a leader in the field today.
The company has achieved excellence in manufacturing Power-train components (Differential
Gears, Transmission Gears & Shafts) and Gear Boxes for a worldwide clientele both in OEMs
and
spare
part
market
In recent years, the group has continually invested in innovation, technology and expansion. As a
result, the units continue to expand their capacities and efficiency, while adhering to their core
principal of quality and manufacturing excellence.
E Commercial Vehicles Limited is a 50:50 joint venture between the Volvo Group (Volvo) and
Eicher Motors Limited (EML). It is a partnership that brings together Global leadership in
technology, quality, safety and environmental care, along with the deep knowledge and
understanding of the Indian Commercial Vehicle (CV) market. VE Commercial Vehicles Ltd.
Girijabai Sail Insititute Of Technology, karwar
Page 11
(VECV) owes its inception to the compelling intent of driving modernization in commercial
transportation, in India and other developing markets.
Eicher Engineering Components (EEC) is the automotive component division of VECV.
Established in 1992, EEC has grown to become one of the largest and most well reputed gear
manufacturers in India. Not only does EEC meet all the automotive component requirements of
Eicher Trucks and Buses, it also manufactures differential gears, transmission gears and shafts for a
large domestic and global clientele, both in the OEM and spare-parts segments. Besides, EEC also
supplies gear boxes to industrial, agricultural and other segments in the United States and Canada.
EEC has four manufacturing plants, one at Thane (Maharashtra) and two at Dewas (Madhya
Pradesh) manufacturing the complete range of gears, and one at Pithampur (Madhya Pradesh)
manufacturing gear boxes. It is continuously developing new products and upgrading its
technology, while increasing operational efficiency, to make sure that it gets the best products to
the market at the most competitive rates.
The manufacturing set up in Thane houses state-of-the-art machines which include Gleason
Conifex machines for straight bevel gear, Pfauter, Liebherr, Mitsubishi (CNC) and Cleveland
Hobbing machines, latest heat treatment facilities and CNC bore and Cylindrical grinding
machines.
The Plant in Dewas, Madhya Pradesh houses technologically advanced machines and equipment
which includes a battery of Mitsubishi CNC Hobbing machines, fellow shaping machines,
Reishauer Gear Grinder RZ400, Shaving Cutter Re-sharpening machine from Gleason Hurth, stateof-the-art Continuous Gas Carburising Furnace (from Aichelin) - fully PLC controlled with
robotics for Press Quenching and PLC Controlled Sealed Quench Furnaces (with hot oil quenching
for reduced distortions). Ground breaking ceremony of the proposed second unit at Dewas took
place in January 2012.
MANUFACTURING LOCATIONS
Page 12
EEC THANE
OVERVIEW OF EICHER ENGINEERING COMPONENTS

THANE PLANT
The manufacturing set up in Thane houses progressive machines, which include Gleason CWP
Cutting Machines, Gleason Conifex Machines for Straight Bevel Gear, Pfauter, Liebherr,
Mitsubishi (CNC) and Cleveland Hobbing machines, state-of-the-art heat treatment facilities and
CNC bore and Cylindrical grinding machines.
1964
: Roman & Demm setup plant in Thane first commercial gear manufacturing facility in
India, in collabration with Fratelli Daldi & Mattuecci.

1992 : Eicher take over Ramon & Demm.
1996 : Receives ISO9001 certification folr manufacturing of gear
1998 : : Receives QS9001 certification folr manufacturing of gear
Page 13
2004 : outsourrcing of component start

2005 : Gearbox assembly set up in Thane
2006 : take over the dewas plant from BMC company
2008 : 50 : 50 joint venture volvo & eicher motor ltd
To form VECV
2009 : Set a plant in Pithampur fpr no space in Thane for Gaer Box assemblies
Competitive Strength
Eicher Motors Ltd. main competitive strength is its manufacturing capability in passenger and
goods MHCV segment. Although company has presence in LCV segment but in that segment
it is a very insignificant player with a market share of less than 2%.
Eicher automobiles are sold mainly because of their reliability factor and because of which its
sales has been consistently growing at above market rate for the last 7 years which has
resulted its market share growth from 6.9% to 9.5% in goods MHCV segment. Eicher entered
the passenger MHCV segment in 2002 and it has already captured the 4.5% of fast
growing passenger MHCV segment. This growth is a result of conscious effort of the Eicher
management. In the last 7 years Eichers presence in LCV segment has been declining and I
expect it will soon exit from that segment.
Company also draws its strength from its strong product line which caters all the segments
of MHCV segment.
Company also manufactures 2 wheelers by the brand Royal Enfield, but that also captures a
very niche segment and does not amount to a significant portion of Eichers revenues.
Other competitive strength for will be its size its size is much smaller than industry leaders
like TATA and M&M and it provides Eicher with a great amount of flexibility in terms of
strategy but it becomes a disadvantage because of lower economies of scale.
Vision & Mission

Vision
Page 14
To be recognised as the industry leader driving modernization in commercial transportation in

India and the developing world.
Mission
VECV aims to continuously improve transportation efficiency in India and developing markets,
thereby reducing logistics costs for goods and people leading to higher enablement of
specialization in manufacturing, agriculture and services, thereby increasing the nations
economic activity and productivity.
We choose to do this in a sustainable manner by having the safest, most durable and efficient
products in the market;
We care for our customers holistically by offering not just trucks and buses, but also the best
service and soft products to enable him to be most profitable;
We work with the driver community to enhance their productivity and overall working
environment;
We ensure a level of quality and innovation that will continue to set standards in the commercial
transportation industry;
Going Forward
VECV aims to emerge as an Industry leader in driving modernization in commercial vehicle
transportation in India and the developing world by bring about improvement in transport
efficiencies.
In the near course, VECV will strengthen each of its product brands as leaders in their respective
segment
through innovative products and expansion of its existing network spanning the
geographical expanse of the country.

Eicher Moter Ltd Board of Director
S Sandilya: Non-executive Chairman
Siddhartha Lal: Managing Director & CEO
RL Ravichandran: Executive Director & CEO
Page 15
Priya Brat: Independent Director
MJ Subbiah: Independent Director
Prateek Jalan: Independent Director
VE Commrcial vehicles Board of Director

Siddhartha Lal: Chairman &Managing Director
Joachim Rosenberg: Volvo nominated director
Bertil Thoren: Volvo nominated director
Philippe Divry: Volvo nominated director
Raul Rai: Eicher nominated director
Prateek Jalan: Eicher nominated director
Eicher Engineering Components (EEC)

S R Mukherjee: senior vice president & Head EEC
Hitendra N Mishra: vice president
CATERSupplier Quality Excellence 2008, 2009 & 2010
John & Deere Commendlabe performence EPDP support 2009

Mahindra & Mahindra Outstanding performance 2009
Voltas best vender gear 2008
Farifield Graziano outsanding Delivery reliability 2006
BBc topbgear most beautiful bike of year
Strengths
Page 16
One of the leading manufacturers having established brand and
extensive dealer network
Tie up with Volvo would enhance presence in CV market
Sufficient Cash on balance sheet for funding capex
Opportunities
Use of Volvo overseas network to boost expor ts
Increased sourcing by Volvo from VECV (e.g. engines)
Increasing share of road in freight movement
Weakness
Minimal presence in the fast growing LCV

goods segment
Having manufacturing presence in only one location
Lack of captive financing
Threats
Intense competition from existing players
Global players entering the market would fur ther aggravate competition
CSR
When we define Eicher as a company committed to the community, we mean community in its
broadest sense: the totality of the social, economic, and natural spheres in which we do business
and live our lives.
This commitment takes many forms, with special attention to enhancing education and quality of
healthcare facilities throughout the country.
Eichers commitment to the cause of education saw the birth of the Eicher Schools at different
locations in the country. These schools are recognized co-educational, English medium schools,
and are affiliated to the Central Board of Secondary Education. The first school was built in the
Alwar district of Rajasthan which is named as the Alwar Public School in 1976-77. Eicher
followed this by opening its second school at Parwanoo, Himachal Pradesh, in 1993. A year later
in 1994, the Eicher School at Faridabad, Haryana, was inaugurated.
Page 17
In its aim to reach the remote interiors of the Indian subcontinent and provide education to the
children in these rural areas, Eicher setup a foundation, which would work on, as its focus,
interventions for improvement in quality of education, initially in the government primary
schools in rural areas. Setup in 1996, this foundation is named as the Goodearth Education
Foundation (GEF).
In the field of healthcare, Eichers contribution took the form of management and funding of the
Dr. Shroff Charitable Eye Hospital, located in Delhi. Eicher has been managing the operations of
this hospital since the year 1996. Located in the heart of Delhi, this hospital is a non-commercial,
non-profit trust setup to enable people from all walks of life and all sections of society to receive
quality eye care.
Primary School Students
The Play and activity areas: Dollhouse for Activity based learning. Ample space both for
indoor and outdoor games
Computer Room: Exposing children at a very young age to user friendly computers
Reading Room: to inculcate reading habits in students
Health: Medical Room to provide comfort and first aid to the sick children. Medical
Check-up (eye, ear and dental) conducted at regular intervals by a team of doctors
Senior School Students

Well equipped laboratories: Physics, Chemistry and Biology
Computers: Two Computer labs with multimedia hardware
Sports: Facilities for playing Volley ball, Basketball, Kabaddi, 110 m four line tracks for
athletics
Page 18
Extracurricular: Expert instructors for teaching Judo, Theatre, Music & Dance
Hobby Classes: Arrangement for remedial and hobby classes after the school hour
EICHER SCHOOL - ALWAR
The Alwar Public School is an English Medium Co-educational Senior Secondary School, which
strives to provide comprehensive quality education to develop all facets of a childs personality.
This school was started by Shankar Lal Memorial Education Foundation, a trust created by
Eicher which now is renamed as the Goodearth Foundation. The school was started on a very
humble scale but with the combined efforts of the enlightened management and committed and
competent staff, it soon touched dizzy heights of success in all fields of excellence. The school
concentrates on imparting excellent academic education from nursery to Class XII. Focus areas
also include all round development of childs personality, encouragement of competitive spirit
and inculcation of strong value systems in the students. It strives to allow full scope for the
development of the personality so as to facilitate specialisation of the individual through suitable
creative work. Also it concentrates on providing training in
PRODUCT
EICHER ENGINEERING COMPONENTS (EEC)
ROWN WHEEL PINION

A bevel gear that permits rotation of two shafts at different speeds; used on the rear axle of
automobiles to allow wheels to rotate at different speeds on curves.
TRANSMISSION SHAFT
Page 19
These are used for transmitting the power from an automobile engine via the drive shaft to the
live axle.
SPEED GEARS
These are used for transmitting the power from an automobile engine via the drive shaft to the
live axle.
BEVEL GEAR DRIVE GEARBOX

Bevel Gear Drive Gearboxes come in a large variety, ranging from 1:1, 1.5:1 & 2:1 reducer
ratios. The complete range is developed from 4" cube to 12" cube.
PRODUCT PROCESSING
LCV LIGHT COMMERCIAL VEHICLES
HCV HEVHY COMMERCIAL VEHICLES
COMMERCIAL VEHICLES
EICHER TRACTORS
ROYAL ENFIELD
BUS & TRUCK
Behind A Successful Market Strategy Process
Page 20
Define Your Market(s)

A company wins customers by creatively identifying differences in particular type of customers'
needs (price, product, and non-product needs). Recognizing the different discreet needs of
different customers is the first step towards delineating different market sectors. This will enables
an organization to stake claim on the most lucrative sectors of the market, matching corporate
capabilities to the market requirements. This provides the logistical focus for marketing program
execution.
Because strategies uniquely deliver value to specific markets, getting market definition wrong
means getting everything else in the process misdirected
MAKETING PROCESS
DOMESTIC
OEMS
REPLACEMENT MARKET
WEST 55%
WEST 20%
NORTH 20%
NORTH 20%
SOUTH 25%
SOUTH 30%
CENTRAL 15%
EAST 15%
EXPORTS
COUNTRIES
Contain Both : OEMS & Domestic it cannot measure

Major user both domestic & exports
Mahindra & Mahindra ltd
Jhon Deere
Tafe
Escorts
Page 21
marketing which we expect most

Tractors
commercial vehicles
Three wheels
Off road vehicles (forklip etc)
Competitors
TATA MOTOR
ASHOK LEYLAND
BUT WE PRODUCE FOR ALL VEHICLES PARTS COMPANY AND MODELS

AS WISH OF DEALERS (VENDERS)
Page 22
WORK FLOW OF PRODUCTION
PROCESSING UINTS
RAW MATERIALS
FORGINGS(IRON &
STEELS)
CUTTINGS
GRINDING
TESTING OR QUALITING
CHEAKING
DECISION
OUT
PROCESS
INTERNAL
REGESTION
PACKING
ACCEPTED
END
PROCESS
Page 23
2.2(k) FINANCIAL STATEMENTS OF THE COMPANY

2.2.k(i) Balance sheet of the company for the period 2008-09 & 2009-10
For the period
For the period
2009 - 10
2008 -09
Particulars
I. Sources of funds
1 Shareholders fund
Equity share cap
Reserves & surplus
Share app. Money
Total (a)
10000000.000
6135771.320
10974409.650
27110180.970
8234870.000
4939370.000
11743206.000
24917446.000
2 Loan funds
Secured loan
3 Deferred tax liability
Total (b)
17578934.730
17578934.730
13929092.000
13929092.000
Grand total (A+B)
44689115.700
38846538.000
Application of funds
Fixed assets
Investments
A) Current assets, loan and advances
B) Less: Current liabilities and provisions
21699110.570
743511.000
43020729.860
20812135.730
20843570.000
943511.000
30690617.000
13706959.000
Net current assets/liabilities
22208594.130
16983658.000
37900.000
75800.000
44689115.700
38846539.000
I
I
1
2
3
4 Miscellaneous expenses
Total
.k(ii) Balance sheet of the company for the period 2009-10 & 2010-11
Page 24
For the period For the period

Particulars
I. Sources of funds
1 Shareholders fund
Equity share cap
Reserves & surplus
Share app. Money
Total (a)
2010 - 11
2009 - 10
10000000
7558732.51
23876910
41435642.51
10000000.000
6135771.320
10974409.650
27110180.970
2 Loan funds
Secured loan
3 Deferred tax liability
Total (b)
24530315.76
68177
24598492.76
17578934.730
17578934.730
Grand total (A+B)
66034135.27
44689115.700
Application of funds
Fixed assets
Investments
A) current assets, loan and advances
B) less: current liabilities and provisions
28954822.05
7770026
40004896.13
10695608.91
21699110.570
743511.000
43020729.860
20812135.730
Net current assets/liabilities
29309287.22
22208594.130
37900.000
I
I
1
2
3
4 Miscellaneous expenses
Total
66034135.27 44689115.700
iii) Balance sheet of the company for the period 2010-2011 & 2011- 2012
Page 25
For the period
For the period
Particulars
I EQUITY AND LIABLITIES
1 Shareholder's fund
A. Share capital
B. Reserves and surplus
C. Money received against share warrants
2011 - 2012
2010 - 2011
10000000.000
11614653.320
-
10000000
7558732
-
2 Share application money pending allotment
34964092.000
23876910
3 Non-current liabilities
A. Long term borrowings
B. Differed tax liabilities(net)
C. Other long term liabilities
D. Long term provisions
34323003.560
329146.000
1652400.000
24530316
68177
1652400
4 Current liabilities
A. Short-term borrowings
B. Trade payables
C. Other current liabilities
D. Short term provisions
21412762.670
873055.370
8215888
827321
115169112.920
76729744
I ASSETS
1 Non-current assets
A. Fixed assets
i. Tangible assets
ii. Intangible assets
iii. Capital work-in-progress
iv. Intangible assets under development
B. Non-current investments
C. Differed tax assets(net)
D. Long-term loans and advances
E. Other non-current assets
43387493.420
590566.500
15210064.000
-
28262423
692399
7770026
-
2 Current assets
A. Current investments
B. Inventories
C. Trade receivables
D. Cash equivalents
Girijabai
Sail Insititute
Ofadvances
Technology, karwar
E. Short-term
loans and
F. Other current assets
23261699.340
31673372.100
92103.590
953813.970
19004353
19422134
580531
Page
26
997878
TOTAL
I
TOTAL
115169112.920
76729744
2.2.k(iii) Balance sheet of the company for the period 2011-2012 & 2012- 2013
Page 27
Particulars
EQUITY AND LIABLITIES
1 shareholder's fund
a. share capital
b. reserves and surplus
c. money received against share warrants
For the period
For the period
2012-2013
2011 - 2012
10000000.000
19710501.580
-
10000000.000
11614653.320
-
2 share application money pending allotment
38874133.000
34964092.000
3 non-current liabilities
a. long term borrowings
b. deferred tax liabilities(net)
c. other long term liabilities
d. long term provisions
23797114.000
812970.000
0.000
34323003.560
329146.000
1652400.000
4 current liabilities
a. short-term borrowings
b. trade payables
c. other current liabilities
d. short term provisions
16828298.220
35947400.280
1698734.010
21412762.670
873055.370
147669151.09
TOTAL
II
ASSETS
1 non-current assets
a. fixed assets
i. tangible assets
ii. Intangible assets
iii. Capital work-in-progress
iv. Intangible assets under development
b. non-current investments
c. differed tax assets(net)
d. long-term loans and advances
e. other non-current assets
2 Current assets
a. current investments
b. inventories
c. trade receivables
d. cash equivalents
e. short-term loans and advances
f. other current assets
115169112.920
58999412.470
1708520.500
20188106.000
-
43387493.420
590566.500
15210064.000
-
35054394.660
28948775.120
64559.060
2705383.280
23261699.340
31673372.100
92103.590
Page 28
953813.970
147669151.09
TOTAL
115169112.920
3.1 INTRODUCTION TO WORKING CAPITAL:

Working capital is a financial metric which represents operating liquidity available to a
business organization. Along with fixed assets such as plant and equipment working capital is
considered life blood and nerve center of a business. Just as circulation of blood is essential in
the human body for maintaining life, working capital is very essential to maintain the smooth
running of a business. No business can run successfully without an adequate amount of working
capital.
There is operative aspects of working capital i.e. current assets which is known as funds
also employed to the business process from the gross working capital. Current asset comprises
cash receivables, inventories, marketable securities held as short term investment and other items
nearer to cash or equivalent to cash. Working capital comes into business operation when actual
operation takes place generally the requirement of quantum of working capital is determined by
the level of production which depends upon the management attitude towards risk and the factors
which influence the amount of cash, inventories, receivables and other current assets required to
support given volume of production.
Working capital management as generally concerned with management of the current
assets as well as current liabilities. The area comprises the necessity of funds from various
resources and to employ them in all result oriented manner. It can be stated without exaggeration
that effective working capital management is the short obligation for long term success.
The prominence of working capital management is indisputable. Business liability relies
on its ability to effective management of receivables, inventory, and payables. By decreasing the
amount of funds tied up in current assets firms are able to shrink financing costs or surge the
funds available for growth. Many managerial efforts are put into bringing non-optimal level of
current assets and liabilities back to their optimal levels.
Page 29
3.2 CONCEPT OF WORKING CAPITAL MANAGEMENT

Working capital means the capital (i.e.; funds) available and used for day to day activities
(i.e.; functioning) of an enterprise. It broadly consists of that portion of assets of a business
which are used in or related to its current processes. It refers to funds which are used during an
accounting period to spawn a current income of a type which is regular with major purpose of a
firms survival.
I.
I.
I.
I.
I.
I.
I.
I.
I.
I.
I.
ON THE BASIS OF CONCEPT
1. Gross working capital: is the amount of funds invested in various aspects of current
assets. Current assets are those assets which can be easily converted into cash within a
short period of time say, an accounting year. Current assets includes Cash in hand and
cash at bank, Inventories, Bills receivables, Sundry debtors, short term loans and
advances.
2. Net working capital: is the difference between current assets and current liabilities.
Current liabilities are those that are likely to mature within an accounting year and
include creditors, bills payable and outstanding expenses.
The working capital requirement increase as the firm develops. As sales grow, the firm
needs to invest more in debtors and inventories. The finance manager ought to be aware of such
requirements and fund them quickly.
Page 30
Page 31
II.
ON THE BASIS OF TIME

1. Permanent / Fixed Working Capital: Permanent or fixed working capital is minimum
amount which is essential to ensure effective application of fixed facilities and for
maintaining the circulation of current assets. Every firm has to preserve a minimum level
of raw material, work- in-process, finished goods and cash balance. This minimum level
of current assets is called permanent or fixed working capital as this part of working is
permanently clogged in current assets. As the business grow the requirements of working
capital also increases due to increase in current assets.
a. Initial working capital: At its inception and during the formative period of its
operations a business must have sufficient cash fund to meet its obligations. The
need for initial working capital is for every company to consolidate its position.
b. Regular working capital: Regular working capital refers to the minimum amount
of liquid funds required to keep up the flow of the capital from the cash inventories
to accounts receivable and from account receivables to back again cash. It consists
of sufficient cash balance on hand and at bank, adequate stock of raw materials and
finished goods and amount of receivables.
2. Temporary / Fluctuating Working Capital: Temporary / Fluctuating working capital is
the working capital required to meet seasonal as well as unexpected requirements. It may
be divided into two types.
a. Seasonal Working Capital: There are many lines of business where the volume of
operations vary and hence the amount of working capital vary with the seasons. The
capital essential to meet the seasonal needs of the enterprise is known as seasonal
Working capital.
b. Special Working Capital: The Capital required to meet any special actions such as
experiments with new products or new techniques of manufacture and making
interior advertising campaign etc., are also known as special Working Capital.
Page 32
3.3 WORKING CAPITAL CYCLE

The working capital cycle exists to the length of time between the firms payments of
cash for materials etc., this working capital also known as operating cycle. Working capital cycle
or operating cycle shows the length of time gap between companies paying for materials
purchased and in receipt of the cash from sales of finished goods. The operating cycle (Working
Capital) consists of the following events:
Conversion of cash to raw materials.

Conversion of raw materials into work in progress.
Conversion of work in progress into finished goods.
Conversion of finished goods into accounts receivables by sale of goods and
Conversion of account receivables into cash.
Page 33
3.4 ADEQUACY OF WORKING CAPITAL:

Working capital should be sufficient so as to protect a business from the adverse effects
of reduction in the values of current assets. It makes sure that the maintenance of a companys
credit standing and provides for difficulties such as strikes, floods, fire etc. It permits the
maintenance of inventories at a level that would enable a business to function satisfactorily the
needs of its clients. It enables a company to operate and control its business more efficiently
since there is no delay in procurement of materials etc.; due to credit difficulties.
Dangers of Inadequate Working Capital
Lack of working capital stagnates the growth and it becomes difficult for an organization
to undertake profitable ventures due to non-availability of working capital funds.
Difficulty in executing operating plans and attaining the firms profit targets.
Operating inadequacies sneak in when it becomes difficult even to meet day-to-day
obligations. Fixed assets are not employed efficiently thus the firms effectiveness would
deteriorate.
Scarcity of working capital funds condenses the firm unable to avail attractive credit
opportunities. The firm loses its reputation as soon as it is not in a position to meet it
short-term obligations thereby leading to tight credit terms.
Dangers of Excessive Working Capital
Results in avoidable accumulation of inventories. Thus chances of inventory
mismanagement, excess, robbery and losses increase.
Sign of defective credit policy and slack collection period. Thus, it results in higher rate
of bad debts, adversely disturbing profits.
Makes the management complacent which degenerates in to managerial inefficiency.
The tendencies of assembling inventories to make a speculative profit, which tends to
slacken the dividend policy, make it difficult for the concern to survive in the future when
it is not able to make speculative profits.
Page 34
3.5 IMPORTANCE OF WORKING CAPITAL

1. Creditworthiness of the business: Adequate working capital helps in preserving the
solvency of the business by providing for continuous production.
2. Goodwill: Adequate amount of working capital enables a firm to make regular and
prompt payments and sustain the goodwill.
3. Cash rebates: Sufficient working capital also enables a concern to avail cash discounts
on the purchases and hence reduces cost.
4. Smooth Business Operation: Working capital is life blood of any organization which
sustains the firm in well condition. Any day to day financial obligation can be met
without any scarcity of fund. All expenditures and current liabilities are paid on time.
5. Improved Production Efficiency: A continuous supply of raw material, research
programme, innovations and technical development and expansion programmes can
effectively be carried out if adequate working capital is maintained in the business. It will
increase the production efficiency, which will, in turn increases the efficiency and morale
of the employees and lower costs and create image among the community.
6. Ability to face crisis: Adequate working capital enables a firm to face crisis in case of
emergencies such as depression
Page 35
3.6 FINANCING OF WORKING CAPITAL

Introduction:
After determining the level of working capital, a firm has to decide how it is to be
financed.
In that Prakruti Products Pvt. Ltd, it was financing the working capital from the following four
common sources. They are,
1.
Shares:
Prakruti Products Pvt. Ltd. has issued the equity shares for raising the funds. The Equity
shares do not have any fixed commitment charges and the dividend on these shares is to
be paid subject to the availability of adequate funds. These funds have been introduced
from the companys own personal resources and from the members.
2.
Trade Credit:
The trade credit refer to the credit extended by the suppliers of goods in the
regular course of business. The firm has a good relationship with the trade creditors. So
that vendors supply the goods to the firm for the payment to be received in future as per
the arrangement or sales statement. In this way, the firm makes the short-term finances
from the trade creditors. It is an easy and suitable method to finance and it is informal
and spontaneous source of finance for the firm.
3.
Bank Credit:
Commercial banks play an important role in funding the trade & industry Bank
provides short-term, medium term & long term finance to any business man.Prakruti
products Pvt. Ltd., has taken loan from the commercial bank for working capital
requirement for a certain period at certain interest rate.
Page 36
3.7 FACTORS OF WORKING CAPITAL REQUIREMENTS

In order to determine the amount of working capital needed by the firm a number of factors
have to be considered by finance manager. These factors are explained below.
1. Characteristics of Business:
The Nature of the business effects the working capital
requirements
to a high degree. For
example public services like railways, electric companies, etc. require very little working
capital because they do not hold large inventories and their operations are mostly on cash
basis,
but
in case of manufacturing firms and trading firms, the requirement
working capital is sufficiently large as they have to invest extensively in
of
inventories
and accounts receivables .

2. Production Policies:
The manufacture policies also determine the Working capital requirement.
Through the
production schedule i.e. the plan for production, production process etc.
3. Credit Policy:
The credit policy relates to sales and affects the working capital. The credit policy effect the
requirement of working capital in two ways:
Through credit terms approved by the firm to its customers/buyers.
Credit terms existing to the firm from its creditors.
In a manufacturing company raw materials are purchased with a credit or cash and finished
goods are sold on cash basis and also credit basis.
4. Development in Technology:
Technology used in manufacturing process is mainly determined need of working capital.
Modernized technology needs low working capital, where as old and traditional technology
needs greater working capital.
5. Size of the Business Unit:
Page 37
The size of the business unit is also significant factor in influencing the working capital needs of
a firm. Large Scale Industries requires huge amount of working capital compared to Small scale
Industries.
Page 38
6. Growth and Expansion:

The growth in volume and growth in working capital go hand in hand, however, the change may
not be proportionate and the increased need for working capital is felt right from the early stages
of growth.
7. Dividend Policy:
Another appropriation of profits which has a bearing on working capital is dividend payment.
Payment of dividend uses cash while holding profits acts as a source as working capital. Thus
working capital gets affected by dividend policies.
8. Supply Conditions:
If supply of raw material and spares is timely and sufficient, the firm can get by with a
comparatively low inventory level. If supply is limited and irregular or available during
particular seasons, the firm will have to obtain raw material when it is available. It is essential to
keep larger stocks increasing working capital requirements.
9. Business Cycle:
The working capital requirements are also determined by the nature of the business cycle.
Business fluctuations lead to cyclical and seasonal changes which, in turn, cause a shift in the
working capital requirement, particularly for temporary working capital the variations in the
business conditions may be in two directions:
Upward phase when boom condition prevail,
Downswing phase when economic activity is marked by a decline.
10. Profit Level:
Profit level also affects the working capital requirements as a concern higher profit margin
results in higher generation of internal funds and more contributing to working capital.
Page 39
3.8 COMPONENTS OF WORKING CAPITAL

The components of working capital are:
1) Cash Management: cash is the most liquid and important component of working capital.
It is the input needed to keep the business running on continuous basis, it is also the final
output expected to be realized by sale of product produced by the firm. The firm should
keep adequate amount of cash neither more nor less. Cash shortage will disturb the firms
manufacturing process while excessive cash will remain unutilized without contributing
anything towards the firms profitability
2) Receivables Management: Receivables or debtors form one of the most important part
of the current Assets which is created by the sale of companys finished goods to the
customer but not receipt of cash for the same instantaneously. Trade credit arises when a
company sells its products or services on credit and does not receive cash immediately. It
is an essential marketing tool, acting as a link for the movement of goods through
production and distribution stages to customers.
3) Inventory Management: Inventories are stock held for ultimate sale by a firm.
Inventories thus form one of the major components, which help a firm in
procurement of desired level of sales. Inventories includes raw materials, work-inprogress, semi-finished goods, finished products.
Page 40
4.1
Year
2009
2010
2011
2012
2013
WORKING CAPITAL
Current Assets
30690617.00
43020729.86
40004896.13
55980989.00
66773112.12
Current
NET
Net Working
Liabilities
13706959.00
20812135.73
10695608.91
22285818.04
54474432.51
Capital
16983658.00
22208594.13
29309287.22
33695170.96
12298679.61
4.1(a) Table showing Net Working Capital
4.1(b) Graph showing Net Working Capital
Interpretation:
The above chart shows that during the year 2009 the company has Net working capital
(N.W.C) of 16983658. In the year 2010 there is increase in the N.W.C i.e., 22208594.13. In
Page 41
the year 2011 the companys N.W.C is 29309287.22. In the year 2012 the company has
33695170.96N.W.C.the N.W.C of the company is showing an increasing trend up to 2012. In
the year 2013 the company has 12298679.61 N.W.C which shows a decrease.
Page 42
4.2 STATEMENT SHOWING CHANGES IN WORKING CAPITAL

The purpose of preparing this statement is for finding out the increase or decrease in working
capital and to make a comparison between two financial years.
4.2(a) Statement Showing Changes In Working Capital for the Year 2009-2010
Particulars
CURRENT ASSETS
Inventories
Sundry debtors
Cash & Bank balance
Other current assets
Loans and Advances
(A)Total Current Assets
As on 31-03-
As on 31-03-
Effect on Working
2009
2010
Capital
Increase
Decrease
9465281.51
2379776.6
3
4885973.18
700432.20
341797.40
-
8963860.00
18429141.51
15101628.00
12721851.37
880249.00
5828241.00
-83361.00
5766222.18
6528673.20
-425158.40
30690617.00
43020729.86
12115391.00
1591568.00
19421114.10
1391021.63
13706959.00
20812135.73
16983658.00
22208594.13
CURRENT
LIABILITIES
Sundry creditors
Provisions
(B)Total Current
Liabilities
(A)-(B) Net Working
Capital
Increase in Working
Capital
TOTAL
7305723.10
-
200546.37
22699207.3
2580323.0
5224936.13
22208594.13
22208594.13
9
4.2(b) Statement Showing Changes In Working Capital for the Year 2010-2011
Particulars
As on 31-03-
As on 31-03-
Effect on Working Capital

Page 43
2010
2011
CURRENT ASSETS
Inventories
18429141.51
19004352.69
Increase
575211.00
Sundry debtors
12721851.37
19422133.71
6700282.00
5766222.18
6528673.20
-425158.40
580531.90
997878.00
-
699919.00
-
5185690.00
-
43020729.86
40004896.30
19421114.10
1391021.63
8215888.24
2479720.67
1088699.00
11205226.00
-
20812135.73
10695608.91
22208594.13
29309287.39
7100693.26
29309287.39
29309287.39
Cash & Bank balance

Loans and Advances
Decrease
-
CURRENT
LIABILITIES
Sundry creditors
Provisions
(B)Total Current
Liabilities
(A)-(B) Net Working
Capital
Increase in Working
Capital
TOTAL
9064111.00 16390916.00
Page 44
4.2(c) Statement Showing Changes In Working Capital for the Year 2011-2012
Particulars
As on 31-03-
As on 31-03-
2011
2012
CURRENT ASSETS
Inventories
19004352.69
23261699.34
Sundry debtors
19422133.71
31673372.10 12251238.39
Cash & Bank balance

Loans and Advances
580531.90
997878.00
-
92103.59
953813.97
-
40004896.30
55980989.00
Increase
4257346.65
Decrease
-
488428.31
6274778.69
-
21412762.67 13196874.43
873055.37
-
160665.30
CURRENT
LIABILITIES
Sundry creditors
Provisions
(B)Total Current
Liabilities
(A)-(B) Net Working
Capital
Increase in Working
Capital
TOTAL
8215888.24
2479720.67
10695608.91
22285818.04
29309287.39
33695170.96
4385883.57
33695170.96
33695170.96 29705459.47
6923872.30
Page 45
4.2(d) Statement Showing Changes In Working Capital for the Year 2012-2013
Particulars
CURRENT ASSETS
Inventories
As on 31-03-
As on 31-03-
2012
2013
23261699.34
35054394.66
31673372.1
28948775.12
Cash & Bank balance

Loans and Advances
92103.59
953813.97
-
64559.06
2705383.28
-
55980989
66773112.12
Sundry debtors

Increase
11792695.32
Decrease
2724596.98
1751569.31
-
27544.53
-
21412762.67
873055.37
35947400.28 14534637.61
18527032.23 17653976.86
22285818.04
54474432.51
33695170.96
12298679.61
CURRENT
LIABILITIES
Sundry creditors
Provisions
(B)Total Current
Liabilities
(A)-(B) Net Working
Capital
Decrease in Working
Capital
TOTAL
21396491.35
54474432.51
54474432.51 45732879.10
2752141.51
Page 46
4.3 RATIO ANALYSIS

4.3.1. LIQUIDITY RATIOS: It shows the link between the current assets & current liabilities of
the organization. Liquidity refers to the capability of a firm to meet its short-term requirements.
The ratios, which indicate the liquidity of a company, are
a) Current ratio
b) Quick/Acid-Test ratio
c) Absolute Liquid Ratio
CURRENT RATIO
It is the ratio, which express the relationship between the total current Assets and current
liabilities. It measures the firms ability to meet its current liabilities. It indicates the availability
of current assets in rupees for every one rupee of current liabilities. A ratio of greater than one
means that the firm has more current assets than current liabilities claims against them. A
standard ratio between them is 2:1.
Current Ratio: Current Assets
Current Liabilities
Table 4.3.1(a): Current ratio
Year
2009
2010
2011
2012
2013
Current Assets
30690617.00
43020729.86
40004896.13
55980989.00
66773112.12
Current
Liabilities
13706959.00
20812135.73
10695608.91
22285818.04
54474432.51
Current Ratio
2.24
2.07
3.74
2.51
1.23
Page 47
Chart 4.3.1(a): Current ratio
Interpretation
It is seen from the above chart that during the year 2009 the current ratio was 2.24, during the
year 2010 it was 2.07. This shows the current ratio decreases and in the year 2011 it was 3.74.
This shows the current ratio has increased, but in the year 2012 and 2013 the current ratio has
dropped to 2.51 and 1.23 due to increase in current liabilities. The current ratio is below the
standard ratio i.e., 2:1 for the year 2013. Hence it can be said that there is insufficient current
assets in Prakruti Products Pvt Ltd to meet its current liabilities in the year 2013.
QUICK RATIO
This ratio establishes a link between quick/liquid assets and current liabilities. It measures the
firms ability to pay off current obligations immediately. An asset is liquid if it can be converted
in to cash instantly without a loss of value; Inventories are considered to be less liquid. Because
inventories normally require some time for converting into cash. This ratio is also known as acidtest ratio. The standard quick ratio 1:1 is considered satisfactory.
Quick Ratio = Quick Assets (current assets - Inventory)
Page 48
Current Liabilities
Table 4.3.1(b): Quick ratio
Year
2009
2010
2011
2012
2013
Quick Assets
21726757
24591588.35
21000543.13
32719289.66
31718717.46
Current
Liabilities
13706959
20812135.73
10695608.91
22285818.04
54474432.51
Quick Ratio
1.59
1.18
1.96
1.47
0.58
Chart 4.3.1(b): Quick ratio
Interpretation
During the year 2009 the quick ratio was 1.59, in the year 2010 it decreases to 1.18. This shows
the company maintains standard quick ratio even though there is a decrease. in the year 2011 the
quick ratio increases to 1.96, in the year 2012 it decreases to 1.37, in the year 2013 it shows a
decrease i.e., 0.58 which falls below the industry level, due to decrease in quick assets. The quick
Page 49
ratio has beenfluctuating over the years and then falls below the standard ratio i.e., 1:1. Hence it
shows that the liquidity position of the company is inadequate.
ABSOLUTE LIQUID RATIO:Absolute liquid ratio can be defined as the relationship between Absolute liquid assets
and current liabilities. Absolute liquid assets consist of cash in hand and cash at bank.
The standard ratio is 0.5: 1.
Absolute Liquidity Ratio =
Cash & Bank Balance

Current Liabilities
Table 4.3.1(c): Absolute Liquid Ratio
Year
Cash
2009
2010
2011
2012
2013
Current Liabilities
880249.00
5766222.18
580531.90
92103.59
64559.06
13706959.00
20812135.73
10695608.91
22285818.04
54474432.51
Absolute Liquid
Ratio
0.064
0.277
0.054
0.004
0.001
Chart 4.3.1(c): Absolute Liquid Ratio
Interpretation
During the year 2009 the Absolute liquidity ratio was 0.064, during the year 2010 it was 0.277
and in the year 2011 it was 0.054, in the year 2012 it was 0.004 and in the year 2013 it further
falls down to .001. This not only shows that Absolute liquidity ratio is decreasing every year also
Page 50
that it is below the standard ratio. Hence it shows that the liquidity position of the company is
deficient.
4.3.2TURNOVER/ACTIVITY RATIOS:
These are the ratios which indicate the speed with which assets are converted or turned
over into sales.
a)
b)
c)
d)
Inventory Turnover Ratio.

Debtors/ Accounts receivables Turnover Ratio.
Creditors/Accounts Payables Turnover Ratio.
Working Capital Turnover Ratio.
INVENTORY TURNOVER RATIO.

Inventory turnover ratio is the ratio, which shows the number of times the stock is turned over
i.e., sold during the year. This measures the effectiveness of the sales and stock levels of a
business. A high ratio means high sales, speedy stock turnover and a low stock level. A low
inventory turnover ratio means the business is slowing down or has a high stock level.
Inventory Turnover Ratio =
Net Sales
Closing Inventory
Table 4.3.2(a): Inventory Turnover Ratio

Inventory
Year
2009
Sales
71650907.00
Inventory
8963860
Turnover
Ratio
7.99
Page 51
2010
2011
2012
2013
112134276.45
119693102.32
178478770.52
214933628.22
18429141.51
19004353
23261699.34
35054394.66
6.08
6.30
7.67
6.13
Chart 4.3.2(a): Inventory Turnover Ratio
Interpretation
From the above chart during the year 2009 the Inventory t/o ratio is 7.99 times, in the year 2010
it decreased to 6.08 times, and increases to 6.30 and 7.67 times in the year 2011 and 2012. This
shows a subsequent increase for two years i.e., in the year 2011 and 2012. But decreases to 6.13
times in the year 2013. This indicates that the companys sales have been fluctuating over the
period.
DEBTORS/ ACCOUNTS RECEIVABLES TURNOVER RATIO
Debtors turnover ratio shows the speed of debt collection of the organization. This ratio works
out the number of times debtors/receivables have been turned over during the particular period.
Debtors Turnover Ratio = Net Sales
Average Debtors
Table 4.3.2(b): Debtors Turnover Ratio
Year
Sales
Average
Debtors
DTR
Page 52
2009
71650907
15101628
2010
112134276.5 12721851.37
2011
119693102.3 19422133.71
2012
178478770.5
31673372.1
2013
214933628.2 28948775.12
Chart 4.3.2(b): Debtors Turnover Ratio
4.74
8.81
6.16
5.63
7.42
Interpretation:
The DTR was 4.47 times in the year 2009. It increased to 8.81 times in the year 2010. It
decreases to 6.16 times in the year 2011 and further decreases to 5.63 in the year 2012. But
increases to 7.42 times in the year 2013. It is clear that debtor turnover ratio is fluctuating over
the years .This shows the company is not able to collect its debt rapidly.
Debtors Collection Period
Debtors collection period measures the quality of debtors since it measures the rapidity
or the slowness with which money is collected from them a shorter collection period implies
prompt payment by debtors. It reduces the chances of bad debts. A longer collection period
implies too liberal and inefficient credit collection performance.
Average Collection Period =
Days in a Year
Debtors Turnover Ratio
Page 53
Table 4.3.2[b (i)]: Debtors Collection Period
Year
2009
2010
2011
2013
2013
Days in a Year
Debtors Turnover
365
365
365
365
365
Ratio
5.50
5.51
5.51
5.52
5.52
Average
Collection
Period
66.31
66.28
66.25
66.18
66.18
Chart 4.3.2[b (i)]: Debtors Collection Period
Interpretation
Page 54
There is no much variation in Debt collection period over the years. It was 66.31days in the year
2009. It increased to 66.28 days in the year 2010, in the year 2011 it was 66.25 days. There is no
changes in the year 2012 and 2013 i.e. 66.18days. This shows the credit collection performance
of the company is stable
CREDITORS/ACCOUNTS PAYABLES TURNOVER RATIO.
Creditors turnover ratio is the ratio, which shows the number of times the debts are paid off in
the year. This ratio is calculated as follows.
Creditors Turnover Ratio =
Net Purchases
Average Creditors
Table 4.3.2(c): Creditors Turnover Ratio
Year
Purchases
2009
2010
2011
2012
2013
20754349.00
53463860.04
49239435.00
65249102.27
72277579.57
Trade
Creditors
Credit
Turnover
12115391.00
19421114.10
8215888.00
21412762.67
35947400.28
Ratio
1.71
2.75
5.99
3.05
2.01
Chart 4.3.2(c): Creditors Turnover Ratio

Interpretation
The creditor turnover ratio was 1.71 times in the year 2009. There is a subsequent increase in the
year 2010 and 2011 to 2.75 times and 5.99 times respectively. In the year 2012 and 2013 the ratio
is decrease to 3.05 and 2.01. It shows that company is not able to make prompt payment to its
creditors.
Creditors Payment Period:-
Page 55
The Creditors Payment Period represents the average number of days taken by the firm
to pay the creditors and other bills payables.
Average Payment Period
Days in a Year
Creditors Turnover Ratio
Table 4.3.2[c (i)]: Creditors Payment Period

Year
Days in a Year
2009
2010
2011
2013
2013
365
365
365
365
365
Creditors Turnover
Average Payment
Ratio
1.71
2.75
5.99
3.05
2.01
Period
213.07
132.59
60.90
119.78
181.53
Chart 4.3.2[c (i)]: Creditors Payment Period
Page 56
Interpretation
Average payment period changing over the years. It was 213.07 days in the year 2009. It reduced
to 132.59 days in the year 2010, in the year 2011 it decreased to 60.90 days. There was
subsequent increase in the year 2012 and 2013 i.e. 119.78 days and 181.53 days.
WORKING CAPITAL TURNOVER RATIO

This ratio indicates the number of times the working capital is turned over in a year. This ratio
measures the effectiveness with which the working capital is utilized by the firm. A higher ratio
indicates effective utilization of working capital and a low ratio indicates otherwise. But a very
high working capital turnover ratio is not a good state for any organization
Working Capital Turnover Ratio =
Net Sales
Net Working Capital
Table 4.3.2(d): Working Capital Turnover Ratio

Page 57
Year
Sales
2009
71650907
2010
112134276.5
2011
119693102.3
2012
178478770.5
Net Working
Working Capital
Capital
Turnover Ratio
16983658
4.22
22208594.13
5.05
29309287.22
4.08
33695170.96
5.30
12298679.61
2013
214933628.2
Chart 4.3.2(d): Working Capital Turnover Ratio
17.48
Interpretation
The working capital t/o ratio was 4.22 times in 2009. And in the year 2010 it increases to 5.05
times, but fall down to 4.08 times in 2011. There is subsequent increase in the year 2012 and
2013 i.e. 5.30 times and 17.48 times.
4.3.3 OTHER RATIOS

a) Net Assets Turnover Ratio
b) Current Assets Turnover Ratio
c) Fixed Assets Turnover Ratio
Page 58
d) Net Working Capital Turnover Ratio

NET ASSETS TURNOVER RATIO
This ratio measures the efficiency of the assets employed by the business. Asset Turnover
indicates the speed with which an amount of cash, equivalent to the money invested in the
business comes back in form of sales.
Net Assets Turnover Ratio = Net Sales
Total Assets
Table 4.3.3(a): Net Assets Turnover Ratio

Asset
Year
Sales
2009
2010
2011
2012
2013
71650907
112134276.5
119693102.3
178478770.5
214933628.2
Net Assets
Turnover
52477698
65463351.43
76729744.18
115169112.9
147669151.1
Ratio
1.37
1.71
1.56
1.55
1.46
Chart 4.3.3(a): Net Assets Turnover Ratio
Page 59
Interpretation
During the year 2009 the Asset turnover ratio is 1.37. It increases to 1.71 in the year 2010. And
then there is slight decrease for three years i.e. 1.56, 1.55 and 1.46 for the year 2011, 2012 and
2013 respectively. The fluctuation in the ratio is minimal.
CURRENT ASSETS TURNOVER RATIO
This ratio shows the relationship between net sales and current assets. Higher the ratio is better
because indicates that there is more sale with less investment in current assets.
Current Assets Turnover Ratio =Net Sales
Current Assets
Table 4.3.3(b): Current Assets Turnover Ratio
Page 60
Year
Sales
2009
2010
2011
2012
2013
71650907
112134276.5
119693102.3
178478770.5
214933628.2
Current Assets
30690617.00
43020729.86
40004896.13
55980989.00
66773112.12
Current Assets
Turnover Ratio
2.33
2.61
2.99
3.19
3.22
Chart 4.3.3(b): Current Assets Turnover Ratio
Interpretation
The current assets turnover ratio has been increasing slightly over the years. In the year 2009 it
was 2.33. In the year 2010 it was 2.61. In the year 2011 it was 2.99. In the year 2012 it was 3.19
and in the year 2013 it was 3.22. There is subsequent increase in the ratio.
FIXED ASSETS TURNOVER RATIO
This ratio measures a company's ability to generate net sales from investments in fixed assets. A
higher fixed-asset turnover ratio indicates that the company has been more efficient in using the
investment in fixed assets to generate revenues.
Page 61
Fixed Assets Turnover Ratio =Net Sales

Fixed Assets
Table 4.3.3(c): Fixed Assets Turnover Ratio
Year
Sales
2009
2010
2011
2012
2013
Fixed Assets
71650907
112134276.5
119693102.3
178478770.5
214933628.2
20843570
21699110.57
28954822.05
43978059.92
60707932.97
Fixed Assets
Turnover Ratio
3.44
5.17
4.13
4.06
3.54
Chart 4.3.3(c): Fixed Assets Turnover Ratio
Interpretation
The fixed asset turnover ratio shows a decreasing trend over the years. During the year 2009 it
was 3.44. During the year 2010 it has increased to 5.17. And there is subsequent decrease in the
year 2011, 2012 and 2013 i.e., 4.13, 4.06 and 3.54 respectively.
Page 62
5 SUMMARY OF FINDINGS, CONCLUSIONS AND SUGGESTIONS

FINDINGS
The company raises its funds through issue of 100% equity shares.
The company has no funds raised through debts.
The liquidity position of the company is not stable as they do not maintain reasonable
amount of cash and bank balance to pay off it immediate obligations.
The overall financial position of the company is satisfactory.
The company is investing more in current assets.
Page 63
SUGGESTIONS
Working capital of the company has decreased so the company must take necessary
actions to improve the same.
Profit has also decreased this is not a good sign for the company. It has to improve and
maintain it further, to run the business long term.
The Current and quick ratios are lower than the standard requirement. So the Working
capital management is not satisfactory and it has to improve it.
The company should take precautionary measures for investing and collecting funds from
receivables and to reduce the bad debts.
Creditors turnover ratio has been fluctuating. On-time payment to suppliers will increase
the credibility of the firm. It has maintain it further to survive in the market.
The company should concentrate on its liquidity position.
Page 64
CONCLUSION
The study on working capital management conducted in Eicher Motors Pvt Ltd. to analyze the
financial position of the company. The companys financial position is analyzed by using the tool
of annual reports from 2009 to 2013.
The financial status of in Eicher Motors Pvt Ltd. is satisfactory
In the last year the inventory turnover has decreased, this is not a good sign for the company. The
companys liquidity position is not stable. With regard to the investments in current assets there
are adequate funds invested in it. Care should be taken by the company not to make further
investments in current assets, as it would block the funds, which could otherwise be effectively
utilized for some productive purpose. On the whole, the company is moving forward with
excellent management.
Page 65
BIBLIOGRAPHY
Website:
http://www.eicher.in/
http://www.academia.edu/Documents/in/Aproject_Report_on_Working_C
apital
http://www.moneycontrol.com/
Books:
Prasanna Chandra, Financial Management Theory and Practice, I M Pandey,
(2011) Financial Management, ,
Page 66
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1.

1.7 LITERATURE REVIEW

HISTORY OF THE TWO WHEELERS:

century reams of self-propelling the horse-drawn bikeriage. Similarly, the invention of

for reliable constructions.

There was then felt the

This led to road trial tests and competition between

Who invented the first

The high wheelers descended

This destination was achieved due to variety of reason like restrictive

HISTORY OF THE FOUR WHEELERS:

Until 1958, API and Enfield were

Corporation, misc." Box 1, Jack Kausch papers.

Component- wise Production Trend

A STUDY ON IMPACT OF WORKING CAPITAL MANAGEMENT ON PROFITABILITY

Eicher motors ltd

Royal Enfield Motorcycle

EICHER ENGINEERING COMPONENTS

Girijabai Sail Insititute Of Technology, karwar

A STUDY ON IMPACT OF WORKING CAPITAL MANAGEMENT ON PROFITABILITY

Girijabai Sail Insititute Of Technology, karwar

A STUDY ON IMPACT OF WORKING CAPITAL MANAGEMENT ON PROFITABILITY

OVERVIEW OF EICHER ENGINEERING COMPONENTS

India, in collabration with Fratelli Daldi & Mattuecci.

Girijabai Sail Insititute Of Technology, karwar

A STUDY ON IMPACT OF WORKING CAPITAL MANAGEMENT ON PROFITABILITY

2004 : outsourrcing of component start

Vision & Mission

A STUDY ON IMPACT OF WORKING CAPITAL MANAGEMENT ON PROFITABILITY

To be recognised as the industry leader driving modernization in commercial transportation in

geographical expanse of the country.

Siddhartha Lal: Managing Director & CEO

RL Ravichandran: Executive Director & CEO

Girijabai Sail Insititute Of Technology, karwar

A STUDY ON IMPACT OF WORKING CAPITAL MANAGEMENT ON PROFITABILITY

Priya Brat: Independent Director

MJ Subbiah: Independent Director

Prateek Jalan: Independent Director

VE Commrcial vehicles Board of Director

Eicher Engineering Components (EEC)

CATERSupplier Quality Excellence 2008, 2009 & 2010

John & Deere Commendlabe performence EPDP support 2009

A STUDY ON IMPACT OF WORKING CAPITAL MANAGEMENT ON PROFITABILITY

One of the leading manufacturers having established brand and

extensive dealer network

Tie up with Volvo would enhance presence in CV market

Sufficient Cash on balance sheet for funding capex

Use of Volvo overseas network to boost expor ts

Increased sourcing by Volvo from VECV (e.g. engines)

Increasing share of road in freight movement

Minimal presence in the fast growing LCV

Having manufacturing presence in only one location

Lack of captive financing

Intense competition from existing players

A STUDY ON IMPACT OF WORKING CAPITAL MANAGEMENT ON PROFITABILITY

Senior School Students

A STUDY ON IMPACT OF WORKING CAPITAL MANAGEMENT ON PROFITABILITY

ROWN WHEEL PINION

A STUDY ON IMPACT OF WORKING CAPITAL MANAGEMENT ON PROFITABILITY

BEVEL GEAR DRIVE GEARBOX

A STUDY ON IMPACT OF WORKING CAPITAL MANAGEMENT ON PROFITABILITY

Define Your Market(s)

Contain Both : OEMS & Domestic it cannot measure

A STUDY ON IMPACT OF WORKING CAPITAL MANAGEMENT ON PROFITABILITY