Working Capital Management at TVS Sundaram Motors

The study aim is to understand the working capital direction patterns followed at TVS Sundaram motors. Working capital direction is a important facet of concern for any organisation. The study carries the inside informations of working capital direction processes followed by fiscal analysis of TVS Sundaram motors. The fiscal analysis includes assorted tools such as ratio analysis in order to understand and get at decisions sing the fiscal place of TVS Sundaram motors. These decisions are so used to come up with certain strategic recommendations which might assist bettering the working capital place at TVS Sundaram motors.

The methodological analysis adopted was, foremost to understand the overall concern theoretical account of TVS Sundaram motors – the major organisational maps are used as a base upon which we try to suit the bing sections so as to obtain a clear image at the macro degree. Following, we go a degree deeper and take a expression at the procedures used by each of these sections ; the finance section in peculiar is our country of involvement. Here we try to see how the accounting map supports the gross revenues and service maps of TVS Sundaram motors. The major activities and their relevancy are observed. In the 3rd portion of our research we look at the fiscal Numberss of TVS Sundaram motors and make a ratio analysis based on which we arrive at certain decisions. These decisions lead to recommendations which would better upon the working capital direction patterns followed.

The major findings are related to the assorted processs followed and working capital place of the company. We go one measure further and seek to place the grounds behind such issues noticed and come up with certain recommendations which would turn to them. Ratio analysis is the nucleus tool used in order to understand the financials of the company.

Recognition

A

I am heartily grateful to my director, Mr.V.Rajaraman, whose encouragement, counsel and support from the initial to the concluding degree enabled me to develop an apprehension of the undertaking and its demands.

Last, I offer my respects to all of those who supported me in any regard during the completion of the undertaking.

Balaji S R

Table of Contentss

Introduction 12

Merchandise 13

Report Requisites 15

Existing Procedure 16

Methodology Adopted 18

Observations 22

Demographics 28

Recommendations 49

Mentions 51

List of Figures

Figure 1 16

Figure 2 18

Figure 3 19

Figure 4 19

Figure 5 20

Figure 6 20

Figure 7 20

Figure 8 21

Figure 9 25

Figure 10 28

Figure 11 30

Figure 12 33

Figure 13 37

Figure 14 41

Figure 15 45

Figure 16 48

List of Tables

Table 1 21

Table 2 22

Table 3 30

Table 4 34

Table 5 37

Table 6 39

Table 7 41

Table 8 45

Table9 48

List of Pictures

Picture 1 26

Picture 2 27

Picture 3 27

Picture 4 29

Picture 5 33

Picture 6 36

Picture 7 38

Picture 8 40

Picture 9 43

Picture 10 44

Picture 11 46

Introduction

About the Company

The TVS Group was established in 1911 by Shri. Television Sundaram Iyengar. As one of India ‘s largest industrial entities it epitomizes Trust, Value and Service.

Today, there are over 30 companies in the TVS Group, using more than 40, 000 people world-wide and with a turnover in surplus of USD 2.2 billion.

With steady growing, enlargement and variegation, TVS commands a strong presence in fabrication of two-wheelers, car constituents and computing machine peripherals. It besides has vibrant concern in the distribution of heavy commercial vehicles rider autos, finance and insurance.

Merchandises and Servicess

Bing the trading and distribution arm of the group, the concern activities of TVS & A ; Sons include Dealerships for Automobile vehicles, Distribution of spares for after – market, Gross saless & A ; Service support for Garage Equipment, Gross saless & A ; Service of merchandises for particular applications like building & A ; Material handling and supplying client centric services for auto clients under trade name ‘My TVS ‘ . The Logistics Services of the company has since been hived off as a subordinate company called ‘TVS Logistics Services Limited ‘ .

The planetary concern operations of the company include pull offing joint- ventures / confederations in Srilanka, Thailand, UK & A ; Europe for car distribution / franchise concern, Sourcing and supply concatenation related activities.

Automobile Dealership

TVS & A ; Sons distributes commercial vehicles, Utility & A ; Sports Utility vehicles, Passenger Cars stand foring assorted taking car vehicle makers such as Ashok Leyland, Daimier Chrysler, General Motors, Honda and Mahindra & A ; Mahindra. The company has more than 100 mercantile establishments and sells over 30,000 vehicles and services more than 3,00,000 vehicles per annum being the taking car distribution company in India.

Partss distribution

The company is the largest distributers of car trim parts in the state, managing more than 80 providers and 35, 000 portion Numberss of franchised parts, bureau lines TVS branded parts and so on. It has operation in Tamil Nadu, Kerala, MP & A ; UP and ranges over 3000 retail mercantile establishments spread all over these districts. It has modern warehouse supported with province of the art IT substructure.

Tools and Garage equipments division

The company besides undertakes Gross saless & A ; Service of Garage Equipments and specializes in put ining commissioning and supplying complete after gross revenues – service support for critical imported province – of – the art car service equipment. All these are imported from assorted states from providers who are reputed trade names abroad.

Particular merchandises division

The company has besides diversified into Marketing ( Gross saless & A ; Service ) merchandises for particular application such as Construction & A ; Material handling Equipment, Man lifts, Air Compressors, Bus Air Conditioners etc. , stand foring taking names from India & A ; Overseas in this field and has earned a niche for itself in this class of concern. The company has besides launched a new avenue of service supplying Fork Lift Trucks with trained operators on a monthly rental footing under its alone Own & A ; Operate strategy.

Customer centric concern – MyTVS

My TVS is the newest enterprise of TVS & A ; Sons to offer clients a branded option concatenation of service web for all trade names of autos. Therefore, TVS has given birth to a true multi trade name independent aftermarket incorporate solution for auto clients.

Rationale for Study

The intent of this survey is to acquire a clasp on the existent accounting patterns followed in organisations, to detect in pattern what has been studied in theory. By traveling through the procedures of working capital direction at TVS Sundaram motors it is hoped to derive an penetration into the workings of the company from the context of its accounting map. The range of the undertaking has been limited to the finance section and specifically within it to countries refering the direction of working capital – i.e. hard currency, stock list and receivables and their use. Fiscal statement analysis forms the nucleus portion of the survey.

Analysis and reading of fiscal statement refers to such a intervention of information containing in the balance sheet and income statement so as to afford full diagnosing of the fiscal place and profitableness of the concern endeavors. Financial statement analysis mostly depends upon the relationship between assorted fiscal factors in a concern.

The aim is non merely to understand the constructs entirely, but instead to detect the procedures involved and look for possible countries of betterment. A comparing with ideal instance scenarios would assist us place such countries which can so be improved upon. Recommendations would be made maintaining in head these specific countries. Specifically the aims for this survey are:

Problem Statement

1. To analyse working capital direction in TVS Sundaram motors limited.

2. To measure the comparative significance of assorted beginning of working capital.

3. To detect the relationship between working capital and liquidness place of the

company.

4. To happen out the impact of working capital on profitableness and to propose possible

countries of betterment.

Literature study

Working Capital

The accounting rules board of the America Institute of certified public comptrollers, USA, has defined working capital as follows:

“ Working capital, sometimes called net working capital, is represented by the surplus of current assets over current liabilities and identifies the comparatively liquid part of entire endeavors capital which constitutes a border or buffer for maturating duty within the ordinary operating rhythm of the concern.

The Need

Working capital is required by a house to prolong its operations in the clip spread between gross revenues of goods to acknowledge of hard currency. This clip spread ever arises because gross revenues do non interpret into hard currency outright. There are two major considerations which affect the manner working capital is managed. First, the fixed assets of the house can be put to optimum usage merely when there is sufficient degree of working capital. Second, proper direction of working capital ensures that it does non do obstruction of scarce resources of the house. Lack of sufficient working capital can do hinderances in smooth operation of the house.

Fixed and Fluctuating working capital

Fixed working capital is the minimal degree of working capital required by a house to transport out its operations efficaciously. The house can non run below this flat irrespective of its degree of production or gross revenues. The production and gross revenues volumes of a steadfast fluctuate with clip sometimes increasing and sometimes decreasing, nevertheless fixed working capital does non alter with these fluctuations. It is the minimal irreducible sum of working capital required to maintain the houses current assets in circulation. It is besides known as lasting working capital since this on the job capital is for good locked up in concern.

Fluctuating working capital is the degree of working capital that is needed by a house over and above its lasting on the job capital. The demand for fluctuating working capital arises because of alterations in the degree of production and gross revenues due to seasonal alterations, unnatural conditions or unforeseen demand. Excess on the job capital is required to back up such alterations in demand. For illustration, some extra capital might be required in order to finance a particular advertisement run designed to hike gross revenues in a thin season. This excess working capital needed to back up altering concern activities is called fluctuating working capital.

Components of Working Capital

The Research Design

Methodology of Study

Data aggregation was resorted to through secondary beginnings of informations, fiscal statements of the company, company procedure paperss and general observation.

Datas Analysis

Activity Ratios

Activity ratios are employed to measure the efficiency with which the house manages and use its assets. These ratios are called turnover ratio because they indicate the velocity with which assets are being converted or turnover into gross revenues. Activity ratio is therefore a relationship between gross revenues and assets.

Working Capital turnover ratio

working_capital_turnover.jpg

Year

Gross saless

Working Capital

WCTR ( times )

2004-05

2005-06

2006-07

2007-08

2008-09

16836.54

21296.81

28344.90

27387.51

33923.12

2797.99

3795.33

9554.71

12192.03

14980.42

6.017

5.611

2.966

2.246

2.264

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Current Asset turnover ratio

Inventory turnover ratio

inventory_turnover.jpg

Year

Cost of goods sold

Average Inventory

ITR ( times )

2004-05

2005-06

2006-07

2007-08

2008-09

18891.23

21550.27

22434.67

26574.01

29766.04

3744.37

3081.44

4220.69

6210.06

6651.47

5.045

6.993

5.315

4.279

4.475

& lt ; Some text here & gt ;

Debtor ‘s turnover ratio

debtors_turnover.jpg

Year

Gross saless

Assorted Debtors

DTR ( times )

2004-05

2005-06

2006-07

2007-08

2008-09

16836.54

21296.81

28344.90

27387.51

33923.12

1660.09

1549.96

1908.45

1881.73

2314.75

10.142

13.74

14.852

14.793

14.655

& lt ; Some text here & gt ;

Creditor ‘s turnover ratio

creditors_turnover.jpg

Year

Recognition purchase

Creditors

CTR ( times )

2004-05

2005-06

2006-07

2007-08

2008-09

6234.12

6904.52

9358.75

12391.38

13328.25

1677.55

1781.63

2208.56

2427.52

2545.12

3.717

3.876

4.238

5.105

5.236

& lt ; Some text here & gt ;

Liquidity Ratios

Current ratio

Liquidity ratio

Absolute liquid ratio

Solvency Ratios

Debt equity ratio

Proprietary ratio

Recommendations