A.

LIQUIDITY RATIOS
1. CURRENT RATIO CURRENT RATIO = CURRENT ASSETS / CURRENT LIABILITIES Table No: 5.1 YEAR 2008-2009 2009-2010 2010-2011 2011-2012 Graph No: 5.1 CURRENT ASSETS (Rs) 3,99,12,174 6,00,80,235 6,37,29,138 7,90,80,195 CURRENT LIABILITIES (Rs) 4,93,99,123 6,00,95,467 8,06,58,227 12,14,00,470 CURRENT RATIO (In times) 0.80 0.99 0.79 0.65

Source: Annual Report of HMT Ltd., From 2008-12

Interpretation:

The ratio is equal to or near to 2:1, i.e., current assets double the current

liabilities is considered to be idle for the research period. The firm is not maintaining the current assets as per idle levels over the period of the study. It is too low for year 2010-11 ie., 0.65.

2.ACID TEST OR QUICK RATIO :

Table No: 5.2 YEAR QUICK ASSETS CURRENT LIABILITIES 47 QUICK RATIO (In times)

2008-2009 85,02,095 4,93,99,123 2009-2010 1,86,06,435 6,00,95,467 2010-2011 1,07,24,367 8,06,58,227 2011-2012 1,95,94,503 12,14,00,470 Source: Annual Report of HMT Ltd., From 2008-12 ACID TEST RATIO= QUICK ASSETS / CURRENT LIABILITIES Graph No: 5.2

0.172 0.309 0.132 0.161

Interpretation: The quick ratio is high in the year 2009-10 when compared to other years next best year for quick ratio is 2007 to 08 followed by 06-07, and 09-10. In the year 08-09 quick ration is very less because current liabilities has decreased. But from last 4 years firm is in a position to maintain the idle levels that is 1: 1. 1. Cash ratio: Cash ratio = Cash and bank balances / Current liabilities

Table No: 5.3 YEAR 2008-2009 2009-2010 2010-2011 2011-2012 Cash and bank balances 9,88,418 6,90,661 5,03,843 3,27,889 Current liabilities 4,93,99,123 6,00,95,467 8,06,58,227 12,14,00,470 Cash Ratio (In times) 0.02 0.011 0.007 0.004

48

Source: Annual Report of HMT Ltd., From 2008-12 Graph No: 5.3

Interpretation:

The overall year from 2008-2012, the operating ratio was in positive trend.

Where as in the year 2008-2009 the operating ratio was higher then other 4 years, and it indicates the ratio operating profits and sales is more in the year 2008-2009 is the highest compared to the other years. B. TURN OVER RATIOS COST OF GOODS SOLD INVENTORY TURN OVER RATIO = AVGERAGE INVENTORY Table No: 5.4 YEAR 2008-2009 2009-2010 2010-2011 2011-2012 COST OF GOODS SOLD 34,01,717 42,87,638 41,00,613 46,15,472 AVGERAGE INVENTORY 85,02,095 13,55,426.5 69,95,440.5 58,84,272.5 RATIO (In times) 0.40 0.32 0.59 0.79

49

Source: Annual Report of HMT Ltd., From 2008-12 Graph No: 5.4

Interpretation: The ratio indicates that in the above 4 years the last ie., 2011-2012 having high ratio then other years. It indicates a high ratio is good from the viewpoint of liquidity and vice versa. A low ratio would signify that inventory does not sell fast and stays in the warehouse for a long time. 2. DEBTORS TURNOVER RATIO: NET CREDIT SALES DEBTORS TURNOVER RATIO = AVERAGE DEBTORS Table No: 5.5 YEAR 2008-2009 2009-2010 2010-2011 2011-2012 NET CREDIT SALES 2,57,59,418 2,39,75,943 2,85,28,079 4,39,58,437 50 AVERAGE DEBTORS 2,57,59,418 2,49,67,681 2,62,52,011 3,62,43,258 RATIO (In times) 1 0.96 1.08 1.21

Source: Annual Report of HMT Ltd., From 2008-12 Graph No: 5.5

Interpretation: Debtors turnover ratio is the ratio between Debtors and Credit sales, as the ratio is the positive it shows the collection of debts. Comparing to all the above 4 years 200910 is least collection and in the year 2010-11 the rate of collection is high. 3. CREDITORS TURNOVER RATIO: NET CREDIT PURCHASES CREDITORS TURNOVER RATIO = AVERAGE CREDITORS Table No: 5.6 YEAR 2008-2009 2009-2010 NET CREDIT PURCHASES 2,57,92,594 3,31,95,823 AVERAGE CREDITORS 2,57,92,594 2,94,96,709 RATIO (In times) 1 1.125

51

2010-2011 2011-2012

3,58,28,927 4,58,74,370

3,45,12,375 4,08,51,649

1.038 1.122

Source: Annual Report of HMT Ltd., From 2008-12 Graph No: 5.6

Interpretation: The ratio indicates the velocity with which the creditors are turned over in relation to purchases. Generally, higher the creditors velocities better it is or otherwise lower the creditors velocity, less favorable are the results. In the above 4 years 2009-10 and 201011 are having high creditability. 4. WORKING CAPITAL TURNOVERRATIO: COST OF GOODS SOLD WORKING CAPITAL TURNOVER RATIO = WORKING CAPITAL Table No: 5.8 COST OF GOODS SOLD 34,01,717 42,87,638 41,00,613 WORKING CAPITAL 9486949 1523225 16929089 RATIO (In times) 0.35 0.30 0.24 0.10

YEAR 2008-2009 2009-2010 2010-2011

2011-2012 46,15,472 42320275 Source: Annual Report of HMT Ltd., From 2008-12 52

Graph No: 5.8

Interpretation: Working capital turnover ratio depends on the cost of goods sold and the working capital of the company. In the year 2008-2009 the working capital turnover ratio was 0.35 and in the year 2009-2010 the ratio reached to 0.30 and where as the ratio in the year 2011-2012 the ratio decreased to 0.24. 5. TOTAL ASSETS TURN OVER: TOTAL ASSETS TURN OVER = SALES / TOTAL ASSETS Table No: 5.9 YEAR SALES TOTAL ASSETS 19,78,51,721 21,33,79,764 18,78,23,138 20,43,04,065 RATIO (In times) 0.57 0.72 0.74 1.05

2008-2009 11,40,97,329 2009-2010 15,46,52,721 2010-2011 13,87,63,846 2011-2012 21,57,87,862 Source: Annual Report of HMT Ltd., From 2008-12 Graph No: 5.9

53

Interpretation: that is 1.05.

The total assets turnover ratio is gradually increasing trend. It is increasing

year by year. The lowest in the year 2007-08 that is 0.57.the highest in the year of 2010-11

6. FIXED ASSETS TURN OVER: FIXED ASSETS TURN OVER = SALES / FIXED ASSETS Table No: 5.10 YEAR SALES FIXED ASSETS RATIO (In times) 0.75 1.07 1.03 1.67

2008-2009 114097329 15,14,92,689 2009-2010 154652721 14,44,42,861 2010-2011 138763846 13,42,52,695 2011-2012 215787862 12,88,73,565 Source: Annual Report of HMT Ltd., From 2008-12 Graph No: 5.10

54

Interpretation: Fixed assets turnover ratio in the year 2011-2012 was the highest that is 1.67 and the other years were comparatively low. And the fixed asset turn over ratio is low in the year 2007-08. 7. CURRENT ASSETS TURN OVER:CURRENT ASSETS TURN OVER = SALES / CURRENT ASSETS Table No: 5.11 YEAR 2008-2009 2009-2010 2010-2011 2011-2012 SALES 114097329 154652721 138763846 215787862 Current Assets 3,99,12,174 6,00,80,235 6,37,29,138 7,90,80,195 RATIO (In times) 2.85 2.57 2.18 2.73

Source: Annual Report of HMT Ltd., From 2008-12 Graph No: 5.11

55

Interpretation: Current assets turnover ratio is the ratio of sales and current assets. The current assets turn over ratio completely depends up on sales. As per the flow of sales the current assets turn over ratio is flowing. The current assets turn over ratio is high in the year 2007-08. The least one is 2010-11. .

56

1) Operating activates of Cash flow for the Year 2007-08 Table No: 5.12 YEAR ENDED Cash Flow from Operating Activities Profit /(Loss) as per the profit & Loss a/c Adjustment for depreciation Fringe Benefits tax provision Interest and financial charges Paid Loss on sail on fixed assets Interest Earned Operating Profit/(Loss) before working Capital Charges Add Extra-Ordinary Items Benefits under OTS-Principal Waiver Benefits under OTS-Principal Waiver Insurance claim Receiver Interest on Insurance claim received Creditors Written off Profit after extra-Ordinary items but before working charges Adjustments for Increased/Decrease in Sundry Debtors Increased/Decrease in Inventory Increased/Decrease in Current Liabilities Increased/Decrease in Loans& Advances Cash Generated from Operations Interest and Financial Charges Paid Net Cash from Operating Activities Source: Annual Report of HMT Ltd., From 2007-08 31-03-2007 95.2 122.76 4.97 1.28 31.25 -

(Rs/- in Crores)

YEAR ENDED 31-03-2008 93.77 119.76 1.75 12.43 1.39 0.2 37.86 566.33 241.31 34.6 26.5 1042.59 17.83 101.04 106.96 140.63 925.29 12.43 913.29

31.25 37.78 12.07 65.58 7.64 54.62 4.97 49.65

1) By comparing Net cash from operations activities of 2007-08 the cash balances are so high due to the increase in Cash generation from Operations are high. 2) Comparing to 2007-08 the overall operations i.e.. Increase in Sundry Debtors, Inventory, Current Liabilities and Loans and advances.

Investing activates of Cash flow for the year 2007-08 57

( Rs/- in Crores)

Table No: 5.13 Cash Flow from investing Activities Purchases of Fixed assets including CWP Proceeds From sale of fixed Assets Interest Earned Deferred Revenue expenditure Cash used in Investing activities Source: Annual Report of HMT Ltd., From 2007-08 The investments are so high in the year due to the cash generations from operations are so high. 2007 20.34 1.28 14.61 4.45 2008 51.55 0.9 0.2 5.64 44.81

58

Financing Activates of Cash Flow for the year 2007-08 Table No: 5.14 Cash Flow from Financing activities

(Rs/- in Crores)

2007

2008 809.65 210 127.25 21.52 12.2 148.95 866.54 1.94 5.04 6.98

Principal and Interest weiver from Banks 10.11 Increases in Share Application Money Amount paid under OTS Increase/(Decrease) in other secured loans 49.6 Prior period adjustment Increased/(Decrease) Unsecured Loans 6.67 Interest and financial charges Paid 53.04 Cash used in Investing activities Net Increase/(Decrease) in cash & cash equilents 7.84 Opening cash & cash equilents 12.87 Closing cash & cash equilents 5.04 Source: Annual Report of HMT Ltd., From 2007-08

The principal and interest weaver from Banks are so high in financing activities in 2006 due to cash generations are so high in the year 2008

59

2) Operating activates of Cash flow for the Year 2007 2008 Table No: 5.15

(Rs/- in Crores)

Cash Flow from Operating Activites Profit /(Loss) as per the profit & Loss a/c Adjustment for depreciation Fringe Benefits tax provision Interest and financial charges Paid Loss on sail on fixed assets Interest Earned Operating Profit/(Loss) before working Capital Charges Add Extra-Ordinary Items Benefits under OTS-Principal Waiver Benefits under OTS-Principal Waiver Insurance claim Receiver Interest on Insurance claim received Creditors Written off Profit after extra-Ordinary items but before working charges Adjustments for Increased/Decrease in Sundry Debtors Increased/Decrease in Inventory Increased/Decrease in Current Liabilities Increased/Decrease in Loans& Advances Cash Generated from Operations 60

YEARENDED 31-03-2008 93.77 119.76 1.75 12.43 1.39 0.2 37.86

YEARENDED 31-03-2009 92.68 121.79 0 4.15 0.84 0.04 34.06

566.33 241.31 34.6 26.5 1042.59 17.83 101.04 106.96 140.63 925.29

135.89 0 0 0 0 169.95

45.52 78.82 36.34 118.43 358.02

Interest and Financial Charges Paid Net Cash from Operating Activities Source: Annual Report of HMT Ltd., From 2009-10

12.43 913.29

358.02

The interests paid in the year 2007 high due to large number of cash generated from Banks are so high, comparing to 2009-10.

The cash generation from sundry debtors, Inventory, Current Liabilities and Loans and advances are less that compared to 2009-10

Over all cash generations of 2008 are less that compared to 2007

Investing activates of Cash flow for the year 2008 2009 Table No: 5.16 Cash Flow from investing Activities Purchases of Fixed assets including CWP Proceeds From sale of fixed Assets Interest Earned Deferred Revenue expenditure Cash used in Investing activities Source: Annual Report of HMT Ltd., From 2010-11 The purchase of fixed assets are less that compared to 2008 - 2009 2008 51.55 0.9 0.2 5.64 44.81

(Rs/- in Crores)

2009 25.86 5.13 0.04 0.31 20.38

61

Financing Activates of Cash Flow for the year 2008 2009 Table No: 5.17 Cash Flow from Financing activities Principal and Interest weiver from Banks Increases in Share Application Money Amount paid under OTS Increase/(Decrease) in other secured loans Prior period adjustment Increased/(Decrease) Unsecured Loans Interest and financial charges Paid Cash used in Investing activities Net Increase/(Decrease) in cash & cash equilents Opening cash & cash equilents Closing cash & cash equilents Source: Annual Report of HMT Ltd., From 2010-11 2008 809.65 210 127.25 21.52 12.2 148.95 866.54 1.94 5.04 6.98

(Rs/- in Crores)

2009 0 135.89 0 265.09 16.82 25.87 74.61 4.15 339.57 1.93 6.97 5.04

The interest and financial charges paid are so high in the year 2008 that compared to 2009. Due to the unsecured loans are high in the year 2008.

62

3) Operating activates of Cash flow for the Year 2009 2010 Table No: 5.18 YEAR ENDED Cash Flow from Operating Activites Profit /(Loss) as per the profit & Loss a/c Adjustment for depreciation Fringe Benefits tax provision Interest and financial charges Paid Loss on sail on fixed assets Interest Earned Operating Profit/(Loss) before working Capital Charges Add Extra-Ordinary Items Benefits under OTS-Principal Waiver Profit after extra-Ordinary items but before working charges Adjustments for Increased/Decrease in Sundry Debtors Increased/Decrease in Inventory Increased/Decrease in Current Liabilities Increased/Decrease in Loans& Advances Cash Generated from Operations Interest and Financial Charges Paid Net Cash from Operating Activities Source: Annual Report of HMT Ltd., From 2010-11

(Rs/- in Crores)

YEAR ENDED 31-03-2010 111.09 123.13 0 12.85 0 0.22 246.84 0 246.84 154.3 88.71 153.51 22.64 179.98 179.98 179.98

31-03-2009 92.68 121.79 0 4.15 0.84 0.04 34.06 135.89 169.95 45.52 78.82 36.34 118.43 358.02 358.02

The net cash from operating activities of 2009 are almost all doubled that compared to 2010. Due to the investments is less than that to 2009 to 2010.

63

Investing activates of Cash flow for the year 2009 Table No: 5.19 Cash Flow from investing Activities Purchases of Fixed assets including CWP Proceeds From sale of fixed Assets Interest Earned Deferred Revenue expenditure Cash used in Investing activities Source: Annual Report of HMT Ltd., from 2010-11

(Rs/- in Crores)

2009 25.86 5.13 0.04 0.31 20.38

2010 69.34 0 0.22 0 69.11

The purchases of fixed assets are less that compared to 2010 to 2009. At the same time the differed Revenue Expenditure are more due to the less purchases of fixed assets. Financing Activates of Cash Flow for the year 2009 Table No: 5.20 Cash Flow from Financing activities Principal and Interest waiver from Banks Amount paid under OTS Increase/(Decrease) in other secured loans Prior period adjustment Increased/(Decrease) Unsecured Loans Interest and financial charges Paid Cash used in Investing activities Net Increase/(Decrease) in cash & cash equivalents Opening cash & cash equivalents Closing cash & cash equivalents Source: Annual Report of HMT Ltd., From 2010-11 fixed assets in the year of 2010. ANALYSIS OF WORKING CAPITAL MANAGEMENT IN HMT: Figures in lakhs 2005 2006 2007 Particulars Inventories Sundry Debtors 3733.17 845.18 CURRENT ASSETS: 4831.75 5736.59 2861.75 917.17 1045.87 1417.74 64 3056.24 1526.91 3261.66 1364.52 2873.02 1695.27 2008 2009 2010 2011 2009 135.89 265.09 16.82 25.87 74.61 4.15 339.57 1.93 6.97 5.04 2010 0 230 36.86 1 89.12 12.85 115.87 5 5.04 0.04 (Rs/- in Crores)

The closing Cash and cash equivalents are having huge difference due to the purchases of

Other Current Assets Loans and Advances Acceptances Sundry Creditors HMT Ltd (Subsidiary companies) Advance against sales Other Liabilities Interest accrued but not due Provisions Gross Working Capital Net Working Capital

4.23 96.14 314.91

5.18 122.13

7.96 196.25

50.67 366.78

126.68 473.99 7.49 807.54

274.77 533.66 9.76 1120.77

95.39 649.56 3.67 1205.88

CURRENT LIABILITIES: 61.95 549.05 451.81 574.18

10.28

4.35

19.58

5.39

13.32

12.77

12.15

2893.97 322.24 8.45 33.12 2345.96 2341.34 1225.18

2451.83 299.26 3.43 143.24 1647.50 3786.56 1678.45

3680.84 484.22 12.48 66.66 4837.96 7059.50 2221.54

1906.86 203.19 7.23 247.38 2981.50 4798.35 1816.85

2010.03 544.61 4.21 382.39 3767.59 5311.36 1543.77

2207.09 551.85 2.88 704.85 4609.97 5466.27 856.03

1671.40 971.71 63.94 869.41 4798.16 5337.47 539.31

ANALYSIS OF WORKING CAPITAL IN HMT (HYDERABAD) 2007: Gross working capital is 7059.54lakhs and this mainly consisted of inventories worth 5736.59 and sundry debtors amounting to 1045.87lakhs. Net working capital is 2221.54lakhs. The current liabilities are 574.96lakhs. Sundry creditors are 574.18lakhs while advance against sales is 3680.84lakhs. 2008: -

65

Gross working capital is 4798.35lakhs and this mainly consisted of inventories worth 2861.75lakhs and sundry debtors amounting to 1417.741lakhs. Net working capital is 1816.85lakhs. The current liabilities amounted to 2981.50lakhs of which major part is constituted by advance against sales, which was 1906.86lakhs. 2009: Gross working capital is 5311.36lakhs and this mainly consisted of inventories worth 3056.24lakhs and sundry debtors worth 1526.91lakhs. Net working capital is 1543.77lakhs. Current liabilities amounted to 3767.59lakhs of which major part is constituted by advances against sales which amounted to 2010.03lakhs followed by sundry creditors worth 807.54lakhs. 2010: Gross Working Capital is 5466.27lakhs consisting mainly of inventories worth 3261.66lakhs and sundry debtors worth 1364.52lakhs. Net working capital is 856.31lakhs. This year networking capital is low compared to previous three years mainly due to higher current liabilities which amounted to 4609.97lakhs of which major part is constituted by advance against sales amounting to 2207.09lakhs followed by sundry creditors worth 1120.77lakhs. 2011: Gross working capital is 5337.47lakhs consisting mainly of inventories worth 2873.02lakhs and sundry debtors worth 1695.27lakhs. Net working capital is 539.31lakhs. It has declined further due to rise in current liabilities which amounted to 4796.16lakhs of which major part is constituted by advance against sales amounting to 167.40lakhs followed by sundry creditors worth 1205.88lakhs.

COMPARITIVE BALANCE SHEET

66

The effect of conduct of a business is reflected in its balance sheet by increase or decrease in assets, liabilities and proprietary capital. These changes can be known by a comparison of the balance sheets of two or more different dates of previous years. Knowledge of this change is of considerable value in framing an operation regarding the progress of the business unit, while a single balance sheet reveals the financial status at a specified point of time, a comparative balance sheet analysis shows the changes in it. These changes may be result of operations, the conversion of assets, liabilities and capital. In the comparative balance sheet not only the absolute changes (in terms of rupees) the relative changes are more important than others to the analyst. Information regarding relative changes must modify the analysis of operations based on absolute changes. In the computation of percentages it should be noted that if a certain item has a value in one year and does not exist in the next year, the percentage of decrease in 100%. But if the item has no value in the first year and has a value in the second year, no percentage can be shown because if zero divides a number, the quotient is infinity. COMPARITIVE STATEMENT OF BALANCE SHEETS FOR 2008 AND 2009: Figures in Lakhs %Increase / Decrease (20.89) 56.07 (100) (10.98)

Particulars Fixed Assets Gross Block Less: Depreciation Net Block Capital Work in Progress (at Cost) Machine and Equipment in Transit And under inspection (at cost) Investment Current Assets:

2007 2763.56 2337.07 426.49 64.39 1.47 492.35

2008 2763.16 2425.80 337.36 100.09 438.26 67

Increase/ Decrease (89.13) 36.51 (1.47) (54.09)

Inventories Sundry debtors Balance Other Current Assets Loans and Advances Fixed Liabilities Capital Reserves and Surplus Head office Current a/c Secured Loans Unsecured Loans Current Liabilities: Acceptances Sundry Creditors HMT (Subsidiary Companies) Advance against sales Other Liabilities Not due Provisions Miscellaneous Expenditure (to the Extent not written Off or Adjusted)

5736.59 10445.8 7 7.96 72.83 196.25 7059.50 4.84 1516.45 1199.05 2720.34 574.18 19.58 3680.84 484.22 12.48 66.66 4837.96

286175 1417.74 Cash and Bank 50.67 101.41 366.78 4798.35 12.14 972.93 1178.42 61.95 2255.80 549.50 5.39 1906.86

(2874.84) 371.87 42.71 28.58 170.52 (2261.15) 7.03 (543.52) (20.63) 92.31 (464.54) (24.68) (14.19) (1773.98)

(50.11) 35.56 536.55 39.24 86.09 (32) 150.08 (35.08) (1.72) (17.00) (4.298) (72.47) (48.19) (58.04) (42.07) 71.11 (38.37)

203.19 (281.03) Interest accrued but 7.23 (5.25) 247.38 2981.50 180.72 (1856.46)

6.43

0.07

(5.73)

(89.11)

COMPARITIVE STATEMENTS OF BALANCE SHEETS FOR 2008 AND 2009 Figures in Lakhs Particulars 2008 2009 68 Increase/ Decrease %Increase /Decrease

Fixed Assets Gross Block Less: Depreciation Net Block Capital Work in Progress (at Cost) Machine and Equipment in Transit And under inspection (at cost) Investment Current Assets: Inventories Sundry debtors Balance Other Current Assets Loans and Advances Fixed Liabilities Capital Reserves and Surplus Head office Current a/c Secured Loans Unsecured Loans Miscellaneous Expenditure (to the Extent not written Off or Adjusted) Acceptances Sundry Creditors

2763.16 2425.80 337.36 438.28 2861.75 1417.74 50.67 101.41 366.79 4798.35 12.14 972.93 1178.42 92.31 2255.80 0.07

2761.84 2498.61 107.67 9.01 380.00 3056.24 1526.91 Cash and Bank 126.68 127.54 476.99 5311.36 12.14 688.89 1222.95 193.98

(73.09) 9.01 (58.26) 194.49 109.17 76.01 26.13 107.21 516.01 (284.04) (44.53) (92.31) (331.82)

(21.09) (13.29) 6.79 7.07

150 25.77 29.23 10.75 (29.19) (3.78) (100) (14.07)

(0.07)

(100)

61.95 549.50

Current Liabilities: 7.49 (54.45) 807.54 69 258.04

(87.09) 46.96

HMT (Subsidiary Companies) Advance Against sales Other Liabilities Interest accrued But not due Provisions 5.39 13.32 7.93

147.12

1906.86 7.23

2010.03 4.21

101.17 (3.02)

5.03 (41.77)

247.38 2981.50

382.39 3767.14

135.01 785.64

54.58 26.35

COMPARITIVE STATEMENT OF BALANCE SHEET FOR 2009 AND 2010 Figures in Lakhs Particulars Fixed Assets Gross Block Less: Depreciation Net Block Capital Work in Progress (at Cost) Machine and Equipment in Transit And under inspection (at cost) Investment Current Assets: Inventories Sundry debtors Balance Other Current Assets Loans and Advances Fixed Liabilities Capital 2009 2761.84 2425.80 263.23 9.01 380.00 3056.24 1526.91 126.68 127.54 476.99 5311.36 2010 2769.56 2498.61 213.73 9.03 334.97 3261.66 1364.52 Cash and Bank 274.77 29.66 535.66 5466.27 70 Increase/ Decrease (49.05) 0.02 (45.03) 205.42 (162.39) 148.09 (97.88) 58.67 154.91 %Increase / Decrease (18.80) 2.19 (11.85) 6.72 (10.64) 116.90 (76.94) 12.09 2.92 -

Reserves and Surplus Head office Current a/c Secured Loans Unsecured Loans Miscellaneous Expenditure (to the Extent not written Off or Adjusted) Current Liabilities: Acceptances Sundry Creditors HMT (Subsidiary Companies) Advance Against sales Other Liabilities Interest accrued But not due Provisions Miscellaneous Expenditure (to The extent not Written off or Adjusted)

12.14 688.89 1222.95 1923.98 0.07

12.14 10.01 1146.60 1158.73

(678.88) (76.38) (765.04)

(6.24) (39.76)

(0.07)

(100)

7.49 807.54 13.32

9.76 1120.77 12.77

2.26 313.23 (0.55)

30.54 38.79 (4.13)

2010.03 544.61 4.21 382.39 3767.14

2207.09 551.85 2.88 704.85 4609.97

199.06 7.69 (1.33) 322.47 842.33

9.91 1.41 (31.59) 84.33 22.35

COMPARITIVE STATEMENT OF BALANCE SHEET FOR 2010 AND 2011 Figures in Lakhs Particulars Fixed Assets 71 2010 2011 Increase/ Decrease %Increase / Decrease

Gross Block Less: Depreciation Net Block Capital Work in Progress (at Cost) Machine and Equipment in Transit And under inspection (at cost) Investment Current Assets: Inventories Sundry debtors Balance Other Current Assets Loans and Advances Fixed Liabilities Capital Reserves and Surplus Head office Current a/c Secured Loans Unsecured Loans Miscellaneous Expenditure (to the Extent not written Off or Adjusted) Current Liabilities: Acceptances Sundry Creditors HMT (Subsidiary Companies)

2769.65 2555.83 213.73 111.94 9.03 334.97 3261.66 1364.52 274.77 29.66 535.66 5466.27 12.14 -10.01 1146.60 1158.74

2775.53 2585.12 190.41 111.94 2.03 -

(23.32) (7.00) -

(10.91) (75.27) (9.05) (11.92) 24.24 (65.28) (18.30) 21.26 (2.36) 21.52 21.29

304.65 (30.32) 2873.02 (388.64) 1695.27 330.75 Cash and Bank 95.39 (179.38) 24.23 649.56 5337.47 12.14 -1696.43 1393.38 1405.52 (5.43) 113.09 (128.08) (1686.42) 246.78 246.78

0.07

(0.07)

(100)

9.76 1120.77 12.77

3.67 1205.88 12.15

(6.09) 85.11 (0.62)

62.30) 7.59 (4.86)

72

Advance Against sales Other Liabilities Interest accrued But not due Provisions Miscellaneous Expenditure (to The extent not Written off or Adjusted)

2207.09 551.85 2.88 704.85 3767.14

1671.40 971.71 63.94 869.41 4609.97

(535.69) 419.86 61.06 164.56 888.19

(24.27) 76.08 2120.13 23.35 4.08

ANALYSIS OF COMPARITIVE STATEMENT OF BALANCE SHEETS 2007 2008 Fixed assets in 2007 were at 492.3lakhs but in 2008 it decreased to 438.26lakhs. This is because there is reduction in the rate of depreciation. Current assets in 2007 were at 7059.52lakhs but they decreased to 4798.35lakhs. This is mainly due to decrease in levels of inventories. Fixed liabilities in 2007 were at 2720.34lakhs while in 2008 it was 22565.80lakhs, there was decreased in head office current a / c by 543.52lakhs. Current liabilities in 2007 were at 4937.96lakhs but decreased to 2981.50lakhs in 2007 mainly because of decrease in advance against sales. 2008 -09 Fixed assets in 2008 were at 438.26lakhs but it decreased to 380lakhs in 2009. Current assets in 2008 were at 4798.35lakhs but increased to 5311.36lakhs in 2009 mainly because of decrease in head office current a / c by 284.04lakhs.

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Current liabilities in 2008 were 2481.50lakhs which increased to 37667.14lakhs in 2009 due to increase in sundry creditors by 258.04lakhs followed by other liabilities which were 341.42lakhs. 2009 -10 Fixed assets in 2009 were at 380lakhs decreased to 334.97lakhs in 2010. Current assets in 2009 were at 5311.36lakhs which increased to 5466.27lakhs in 2010. This is because of increase in inventories by 205.42lakhs followed by cash and bank balance 148.04lakhs. Fixed liabilities in 2009 were at 1923.77lakhs which declined to 1168.75lakhs in 2010. This is due to decrease in head office current a / c by 678.88lakhs. Current liabilities in 2009 were at 3767.64lakhs which increased to 4609lakhs in 2010. This is mainly due to increase in sundry creditors by 313.23lakhs. 2010 -11 Fixed assets in 2010 were at 334.97lakhs which decreased to 304.65lakhs in 2011. Current assets in 2010 were at 5466.27lakhs which decreased to 5337.47lakhs. This is due to decrease in inventories and cash and bank balance by 388.64lakhs and 179.38lakhs respectively, even though there was an increase in sundry debtors by 330.75lakhs. Fixed liabilities in 2010 were at 1158.74lakhs which increased to 1405.52lakhs in 2011. This is mainly due to increase in secured loans by 246.78lakhs. Current liabilities in 2010 were at 4609.97lakhs but increased to 4798.16lakhs in 2011 mainly because of increase in other liabilities by 419.86lakhs. ANALYSIS OF THE PROJECT The analysis of the project is being made with reference to the theory of working capital management. The theory is used here to understand the current assets and current

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liabilities and working capital; also it is helpful to Receivable management and Cash budget frosting we will analyze about the current assets ratio and quick ratio. The current ratio is also called the working capital ratio, since it is related to the working capital of firm. The current ratio of the firm managers its short term solvency., its ability to meet short term obligations. It implies that for every rupee of current liabilities what amount of the current assets is available to meet them. Here we find that the current ratio has increased for the past two years. It indicates adequate margin of safety between assets that will be available to liquidate claims. The Quick ratio is a rigorous measure of a firms ability to service short term liabilities. The usefulness of the ratio lies in the fact that it is widely accepted as the best available test of the liquidity position of a firm. In this case low ratio can be interpreted as large part of the current assets of the firm is tied up in slow moving and unsolvable inventories and slow paying debts. The firm would find it difficult to pay its current liabilities. ANALYSIS OF RECEIVABLE MANAGEMENT IN HINDUSTHAN MACHINE TOOLS LIMITED: A firm investment in Accounts Receivables depends on (a) Volume of Credit Sales and (b) The Collection Period The volume of credit sales is a function of the firms total sales depends on the market size. The firms market share, product quality intensity of competition, economic condition etc. The percentage of credit sales to total sales is mostly influenced by nature of business and industry norms. At HMT, the volume of Credit Sales constitutes to percent of total sales. Much of the business is generated because of the credit facility provided by the firm. The collection period is the average time taken the customer to make the payment for the credit purchases. At HMT, the present collection period is 72 days. 75

There is one way in which the financial manager can affect the volumes of Credit Sales and Collection period and consequently, investment in accounts receivable. This is through changes in credit policy. The term credit policy is used to refer the combination of three decision variables. 1) 2) 3) Credit standards Credit terms and Collection efforts

Referee we discus about the decision variable it is important to about a credit policy is, a firm may follow lenient or stringent credit policy. At HMT, the credit policy, which is being followed, has an inclination towards the lenient credit policy. The reason behind it is the customers to whom they are catering. GOALS OF CREDIT POLICY: The main goal of the Credit Policy is additional sales and at the same time reduction in costs due to additional sales. Additional sales should add to the firms operating profits there are three types of costs involved. 1) 2) 3) Production and selling costs Administrative costs Bad debt losses

At HINDUSTHAN MACHINE TOOLS LIMITED, the losses from bad debts are relatively less because of two reasons. The clients of this firm who constitution % of their sales has proven track record for credit worthiness and other reasons is that companys product is shortage product and the customers dont want their names dropped from the customers list because their production will come to stand still. CREDIT TERMS:

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The second decision is account receivable management is the credit terms. After the credit worthiness of the customers has been assessed, the management must determine the terms and conditions on which the trade credit will be made available. The stipulation under which the credit is made available is called credit terms. The stimulations include: 1) 2) The credit period The cash discount

At HINDUSTHAN MACHINE TOOLS LIMITED, the firms credit period is sixty days. Most of the customers pay their bills within the credit but some credit sales do result in debtors outstanding for more than 3 months or 90 day.

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