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PROJECT REPORT ON
RECEIVABLES MANAGEMENT
IN
HINDUJA FOUNDRIES LTD .(DCU)
Submitted to
JAWAHAR LAL NEHRU TECHNOLOGICAL UNIVERSITY
In partial fulfillment of the requirement
For the award of the degree of
MASTER OF BUSINESS ADMINISTRATION
BY
Mr.V.VIJAYA BHASKARAM REDDY
CERTIFICATE
title
RECIEVABLES
MANAGEMENT
in
(G.VEERESH REDDY)
MBA.
Asst.Professor
Internal Guide
ACKNOWLEDGEMENT
A.M(FIN
&
ACC)
of
M/S
HINDUJA
FOUNDRIES
PLACE:
DATE:
DECLARATION
in
M/S
HINDUJA
FOUNDRIES
CONTENTS
Chapters
Particulars
Page
no
I
INTRODUCTION
Introduction
Objectives of Study
Scope of the Study
Research methodology
Limitations
II
INDUSTRY &
COMPANY PROFILE
III
THEORTICAL CONCEPTS
IV
FINDINGS
SUGGESTION
CONCLUSION
VI
BIBLIOGRAPHY
Chapter-1
Introduction
Introduction
Accounts receivable
Money owed to a business by customers who have bought goods or
services on credit. Accounts receivables are current assets that
continually turn into cash as customers pay their bills. Also
called receivables.
Definition:
In the accounting system, the entries in the accounts receivable ledger
represent amounts of money you are owed. These amounts are usually
the result of the sale of assets or for services you have provided.
A separate accounts receivable ledger is used if your business sells to
customers on credit.
Money which
is
owed
to
a company by
a customer for
generally
only
treated
as
METHODOLOGY
The study is not aimed at collecting information from source, the
players of the industry with sample survey.
Secondary data is the main source i.e., information from industry fro
the effective study of the receivables management.
The basic date for the study from industry will be the profit and loss
accounts and Balance sheet of the unit for the past Four Years.
The database so collected will be analyzed using different accounting
ratios to find out how effective the receivables management in the
organization is.
PERIOD OF STUDY
For the Financial periods of 4 years
1. 2005-2006
2. 2006-2007
3. 2007-2008
4. 2008-2009
(STUDY AND ANALYSIS FOR 45 DAYS)
Chapter-2
INDUSTRY&COMPANY
PROFILE
INDUSTRY PROFILE
COMPANY PROFILE
MANAGEMENT: - Founded In 1948, Ashok Leyland has emerged
to be a leading manufacturer of commercial vehicles in India. From 7.5
Development
Area,
Uppal
Hyderabad.
This
Unit
state-of-the-art
high
pressure
dimension1150x750x350/350with
molding
production
line
rate
(box
of
60
boxes/hour),
BUSINESS PLANS IN FUTURE:This unit is planning to provide 100% machined castings to the
customers to enable them to send the components directly to the
assembling line of machine by customer. For this purpose the
CHAPTER-3
THEORITICAL CONCEPT
plus of default. But, the receivables does not result in increasing the
cost only, rather they bring some benefits also to the firm.
BENEFITS OF RECEIVABLES:
INCREASE IN SALES: Expect a few monopolistic firms; most
of the firms are required to sell goods on credit, either because of trade
customers or other conditions. The sales can further be increased by
liberalizing the credit terms. This will attract more customers to the
firm resulting in higher sales and growth of the firm,
Thus, the receivables bring some costs as well as benefits to the firm.
Both the cost and the benefits are to be looked carefully and a trade-off
between then m should be attempted.
The receivable management must be attempted by adopting a
systematic approach and considering the following aspects
1. THE CREDIT POLICY
2. THE CREDIT EVALUATION
3. THE CREDIT CONTROL
While setting the credit standards for a firm the following points are to
be noted:
length of the period for which the credit will be the offered, the interest
rest on the credit, and the cost of default.
The credit terms may relate to
a. Credit period
b. Discount terms
a)
credit policy. It refers to the lengthy of time over which the customers
are to allowed to delaying the payment. The credit period generally
varies from 3 days to 6 days. Lengthening the credit period increases
the sales by attracting more and more customers. The effect of
changing the credit period is similar to that of changing the credit
standard and hence requires careful analysis. The firm mists consider
the cost involved in increasing the credit period which will result in
increase in the investment in receivables.
b) DISCOUNT TERMS: The customers are generally offered
cash discount to induce them to make prompt payment. Different
discount rates may be offered for different periods. Eg.3/10, 2/20,net
30 means that 3% cash discount if payment made within 10 days:2%
discount if payment made with 20 days; otherwise full payment by the
end of 30 days from the date of sale. This will result in shortening of
the average collection period.
2.CREDIT
EVALUATION:
Credit
evaluation
involves
determination of the type of customers who are going to qualify for the
trade credit. Several costs are associated with extending credit to less
credit-worthy customers. When more time is spent investigating the
less credit worthy customers, the cost of credit investigation increases.
Default costs also very directly with the quality of the customers. As
the customers credit rating declines, the chance that the amount will
not be paid on time increases. Collection costs also increases as the
quality of the customers declines. More delinquent customers force the
firm to spend more time and money collecting them. In nutshell, the
decline in customers quality results in increased cost of default,
collection and credit investigation.
Assessment of the credit worthiness of a customer is subjective matter
and a lot depends upon the experience and judgment of the person
taking the decision, there are three basic factor of credit worthiness of
a customer.
Credit Scoring: If the credit request is large enough, then the firm
can send its own representatives/employees to collect information
about the customer. In this case, the customer may be evaluated
through the use of credit scoring which involves the numerical
evaluation of each of the new customers who receive a score based on
his answers to a simple set of questions. This score is then evaluated
accounting to a predetermined standard, its level relative to the
standard determining whether credit should be extended. The major
benefit of credit scoring is that it is relatively inexpensive and less time
consuming.
Information collected is often costly and therefore, firms also weigh
the benefits of gathering information against its costs. It should, in
particular, gather only as much as information is required and
necessary to find out the credit worthiness of the customer with a
reasonable degree of accuracy.
Character
Capacity
Capital
Collateral
Conditions
a)
b)
the case must be taken for a approval for a temporary increase in the
line of credit.
The lines of must be reviewed periodically fro all the
customers. This review of credit lines, however, need not necessarily
mean that credit lines must be changed. Rather, the credit line may
remain unchanged or may increase or reduced. In a extreme case, the
credit lines after a review may even be suspended if the experience
request for a review of credit line order to obtain more credit or more
liberal credit terms. Such a request should be looked into properly and
costs and benefits of extending credit terms should be evaluated.
d)
CHAPTER-4
FINDINGS,CONCLUSIONS
&SUGGESTIONS
2005-06
2006-07
2007-08
2008-09
Carraro india
2.91
3.32
3.59
2.03
Caterpiller
0.34
0.64
1.02
0.85
Escorts ltd
1.56
2.91
3.63
3.62
HV Axles
1.32
1.08
0.73
0.49
0.02
0.08
0.14
0.09
2.37
3.82
6.22
6.07
Shakthi Prec-others
2.14
0.37
0.2
0.55
TAFE
2.32
1.27
3.57
2.14
TATA Motors
1.26
1.23
1.39
1.68
Sub trotal-A
14.24
14.72
20.06
17.53
AL-Ennore
5.75
7.33
7.59
4.68
AL-Hosur1
6.17
4.77
4.7
1.93
AL-HOsur2
2.1
4.1
1.76
1.49
AL-Bhandara-others
0.9
1.11
0.85
0.69
Sub total-B
14.92
17.30
14.90
8.80
TOTAL
29.16
32.03
35.36
26.32
ASHOK LEYLANDS
X-AXIS-companies
Y-AXIS-rs in lakhs
X-AXIS-companies
lakhs
Y-AXIS-rs in
AVERAGE DEBTORS
IN LAKS
200506
200607
200708
200809
364.69
32.52
218.53
74.56
0.69
161.8
125.02
185.09
52.88
1216.3
9
429.47
34.31
260.72
98.87
3.04
212.87
26.93
129.33
61.93
1257.4
5
437.83
43.3
299.81
69.18
5.77
348.07
13.84
259.2
111.61
1585.6
2
261.61
30.3
291.94
54.92
7.5
430.56
50.97
287.5
138.48
1553.7
8
439.11
332.95
289.8
142.62
1204.4
8
462.45
295.43
198.01
140.79
1096.6
9
275.35
125.15
53.11
76.12
Sub total -B
378.48
302.73
266.62
130.11
1077.9
2
TOTAL
2294.3
1
2461.9
3
2682.3
1
2083.5
2
CUSTOMER PROFILE
OTER CUSTOMER
Carraro india
Caterpiller
Escorts ltd
HV Axles
JCB India ltd
New Holland Tractors
Shakthi Prec-Others
TAFE
TATA Motors
Sub total-A
ASHOK LEYLAND
AL-Ennore
AL-Hosur1
AL-HOsur2
AL-Bhandara-Others
529.74
AVERAGE DEBTORS
X-AXIS-companies
lakhs
(OUTSIDE CUSTOMERS)
Y-AXIS-rs in
AVERAGE DEBTORS
X-AXIS-companies
(A L CUSTOMERS)
Y-AXIS--rs in lakhs
2005-06
2006-07
2007-08
2008-09
CUSTOMER PROFILE
OTHER CUSTOMERS
Carraro india
125
129
123
129
Caterpiller
96
53
42
36
Escorts ltd
140
90
83
81
HV Axles
57
62
91
112
42
36
42
85
68
56
56
71
Shakthi Prec-Others
59
72
69
92
TAFE
80
102
73
135
TATA Motors
42
50
80
82
AL-Ennore
66
60
61
59
AL-Hosur1
49
70
63
65
AL-HOsur2
127
71
112
36
AL-Bhandara-Others
145
129
166
110
ASHOK LEYLAND
(OUTSIDE
CUSTOMERS)
X-AXIS-companies
Y-AXIS--rs in lakhs
X-AXIS-companies
Y-AXIS--rs in lakhs
200506
200607
200708
Carraro India
90 DAYS
35
39
33
39
Caterpillar
30 DAYS
66
23
12
Escorts ltd
72 DAYS
68
18
11
HV Axles
30 DAYS
27
62
61
82
30 DAYS
12
12
55
30 DAYS
38
26
26
41
Shakthi Prec-Others
60 DAYS
28
25
47
TAFE
45 DAYS
35
57
28
90
TATA Motors
30 DAYS
12
20
50
52
AL-Ennore
30 DAYS
36
30
31
29
AL-Hosur1
30 DAYS
19
40
33
35
AL-HOsur2
30 DAYS
97
41
82
AL-Bhandara-Others
30 DAYS
115
99
136
80
PARTICULARS
200809
CUSTOMER PROFILE
OTHER CUSTOMERS
ASHOK LEYLAND
X-AXIS-companies
lakhs
Y-AXIS-rs in
ASHOK LEYLAND
CUSTOMERS
X-AXIS-companies
lakhs
Y-AXIS-rs in
Step 4
There is a time to time reconciliation with the customers in order to
confirm the due amounts from the customer.
Step 5
In case
VALUES
2005-2006
10643.00
2006-2007
11691.08
2007-2008
12906.34
2008-2009
9610.38
PERIOD
VALUES
2005-2006
5195.95
2006-2007
5374.93
2007-2008
7466.96
2008-2009
6398.1
The company has sold goods worth RS 5195.95 lakhs during 2005-06,
RS 5374.93 lakhs during 2006-07 and RS 7466.96 lakhs during 200708 but there is only sale of 6398.10
VALUES
2005-2006
5447.05
2006-2007
6316.15
2007-2008
5439.38
2008-2009
3212.28
there was out side company demanded more material. Hence ashok
Leyland sales have come down. And 2007-08 but there is only sale of
3212.29lacs during the year 2008-09. There is a decrease of sale in the
year 2008-09 worth RS2227.09 lakhs when compare to the sale of
2007-08.As per company the decrease in sale was due to market
recession.
OUTSIDE CUSTOMERS
SALES VALUE FOR THE FINANCIAL YEAR 20052009
(CARRAO INDIA)
PERIOD
VALUES
2005-2006
1063.76
2006-2007
1211.68
2007-2008
1301.22
2008-2009
742.67
The company has sold goods worth RS 1063.76 lakhs during 2005-06,
RS 1211.68 lakhs during 2006-07 and RS 1301.22 lakhs during 200708 but there is only sale of 742.67
VALUES
2005-2006
124.14
2006-2007
234.57
2007-2008
372.72
2008-2009
310.52
INTERPRETATION (CATERPILLER)
The company has sold goods worth RS 124.14 lakhs during 2005-06,
RS 1234.57 lakhs during 2006-07 and RS 372.72 lakhs during 2007-08
but there is only sale of 310.52 lakhs during the year 2008-09. There
is a decrease of sale in the year 2008-09 worth RS 62.2 lakhs when
compare to the sale of 2007-08.As per company the decrease in sale
was due to market recession.
VALUES
2005-2006
569.18
2006-2007
1062.22
2007-2008
1324.88
2008-2009
1321.49
VALUES
2005-2006
480.17
2006-2007
392.94
2007-2008
265.56
2008-2009
179.56
but there is only sale of 179.56 lakhs during the year 2008-09. There
is a decrease of sale in continuously fall down. Why because, as per
company the decrease in sale was due to market recession
VALUES
2005-2006
6.00
2006-2007
62.325
2007-2008
50.02
2008-2009
32.34
VALUES
2005-2006
864.41
2006-2007
1395.65
2007-2008
2269.77
2008-2009
2216.26
The company has sold goods worth RS 864.41 lakhs during 2005-06,
RS 1395.65 lakhs during 2006-07 and RS 2269.77 lakhs during 200708 but there is only sale of 2216.26
PERIOD
VALUES
2005-2006
781.64
2006-2007
136.26
2007-2008
72.97
2008-2009
202.08
The company has sold goods worth RS 781.64 lakhs during 200506,but here compare to other products are demanded fallowing 2 years
RS 136.26 lakhs during 2006-07 and RS 72.97 lakhs during 2007-08
but there is only sale of 202.08 lakhs during the year 2008-09. There is
a increase of sale in the year 2008-09 worth RS 129.11
lakhs when
VALUES
2005-2006
846.70
2006-2007
462.61
2007-2008
1302.05
2008-2009
780.09
INTERPRETATION (TAFE )
The company has sold goods worth RS 846.70 lakhs during 200506,but here compare to other products are demanded so sale are fall
down. RS 462.61 lakhs during 2006-07 and RS 1302.05 lakhs during
2007-08 but there is only sale of 780.09 lakhs during the year 2008-09.
There is a decrease of sale in the year 2008-09 worth RS 521.96lacs
when compare to the sale of 2007-08.As per company the increase in
sale was due to market recession.
VALUES
2005-2006
459.95
2006-2007
448.56
2007-2008
507.76
2008-2009
613.1
The company has sold goods worth RS 459.95 lakhs during 200506,but here compare to other products are demanded so this year sales
are fall down. RS 448.56 lakhs during 2006-07 and RS 507.76 lakhs
during 2007-08 but there is only sale of 613.10 lakhs during the year
2008-09. There is a increase of sale in the year 2008-09 worth RS
105.34
VALUES
2005-2006
2006-2007
2007-2008
2008-2009
2099.99
2675.00
2770.32
1708.00
`The company has sold goods worth RS 2099.99 lakhs during 200506, RS 2675 lakhs during 2006-07 and RS 2770.32 lakhs during 200708 but there is only sale of 1708 lakhs during the year 2008-09. There
is a decrease of sale in the year 2008-09 worth RS 1062.32 lakhs when
compare to the sale of 2007-08.As per company the decrease in sale
was due to out side company demanded more material. Hence ashok
Leyland sales have come down
PERIOD
VALUES
2005-2006
2006-2007
2007-2008
2008-2009
2253.72
1741.60
1714.92
706.08
INTERPRETATION (AL-HOSUR I)
PERIOD
VALUES
2005-2006
2006-2007
2007-2008
2008-2009
764.89
1495.66
646.93
544.72
VALUES
2005-2006
2006-2007
2007-2008
2008-2009
328.45
403.89
310.21
253.48
sale are fall down during 2006-07 and RS 310.21 lakhs during 2007-08
but there is only sale of 253.48 lakhs during the year 2008-09. There is
a decrease of sale in the year 2008-09 worth RS 56.73lacs when
compare to the sale of 2007-08.As per company the increase in sale
was due to market recession.
CHAPTER-4
FINDINGS
This
Receivables
management
work
efficient
in
an
SUGGESTIONS
The receivables management which is generally laid out and
maintained in an organization for the maintaining the
relationship of various credit policies and other costs. So when
maintain receivables management maintained in providing
credit I suggest the HINDUJA FOUNDRIES LTD(DCU), must
have to do credit analysis through obtaining credit information
from banks, credits bureaus internal external sources etc. with
the help of which the organization can maintain a sustainable
and attain profit maximization.
CONCLUSION
As we observed during the project study of Receivables Management
in the HINDUJA FOUNDRIES LTD (DCU), organization which the
main function is to operate various forms of credits to various
institutions and individuals and performing the various costs related
functions in the organization structure. The receivables management
owes a credit to various individuals in the form of the credit and will
improve its various forms of performance in an organizational unit.
This
CHAPTER-5
BIBOLIOGRAPHY
BIBLIOGRAPHY
1) References:
1. Financial Management by I.M.Pandey
2.Cost and Financial mgmt by S.N.Maheshwari
3.Financial Management
by K.Prasanna Chandra
2)
ANNUAL REPORT
ANNUAL REPORT
ANNUAL REPORT
ANNUAL REPORT
2005-2006
2006-2007
2007-2008
2008-2009
3)WEBSITES:
www.Hindujafoundaries.com