CHAPTER 1

INDUSTRY PROFILE

THE INDISPENSABLE VALVE

A valve is a product rarely noticed by the average person, yet it plays an important role in the quality of our life. Each time you turn on awater faucet, use your dishwasher, turn on a gas range or step on the accelator of your car, you operate a valve. Without modern valve syatems, there would be no fresh pure water or automatic heat in your home. There would be no public utilities, and beyond wood and coal, almost no energy of any kind. Plastics would be unheard of, as would many inexpensive consumer products. A valve is a device that regulates the flow of afluid (gases, liquid, fluidized solids, or slurries) by opening, closing, or partially obstructing various passageways. Valves are technically pipe fittings, but are usually discussed as a seprate category. In an open valve, fluid flows in a direction from higher pressure to lower pressure. Valves are also found in the human body . for example, there are several heart valves which control the flow of blood in the chambers of the heart and maintain the correct pumping action. Valves are used in a variety of contexts, including industrial, military, commercial, residential, transport.

HISTORY For centuries, throughout the Dark Ages, there were no advances in valve design. Then during the Renaissance, artist and inventor Leonardo da Vinci designed canals, irrigation projects, and other large hydraulic systems, which included valves for use in these projects. Many of his technical sketches are still in existence.

The modern history the valve industry parallels the Industrial Revolution, which began in 1705 when Thomas Newcomer invented the first industrial steam engine. Because steam built up pressures that had to be contained and regulated, valves acquired a new importance. And as Newcomers steam engine was improved upon by James Watt and other inventors, designers and manufactures also improved the valves for these steam engines. Their interest, however, was in the whole project, and the manufacture of valves as a separate product was not undertaken on a large scale for a number of years. AUTOMOBILE INDUSTRY The history of the automobile begins as early as 1769, with the creation of steam engine automobiles capable of human transport. In the 1806, the first cars powered by an internal combustion engine running on fuel gas appeared, which led to the introduction in 1885 of the ubiquitous modern gasoline- or petrolfueled internal combustion engine. The internal combustion engine is an engine in which the combustion of fuel (normally a fossil fuel) occurs with an oxidizer (usually air) in a combustion chamber. In an internal combustion applies direct force to some component of the engine, such as pistons, turbine blades, or a nozzle. This force moves the component over a distance, generating useful mechanical energy. Applications Internal combustion engines are most commonly used for mobile propulsion in vehicles and portable machinery. In mobile equipment, internal combustion is advantageous since it can provide high power-to-weight ratios together with excellent fuel energy density. Generally using fossil fuel(mainly petroleum), these engines have appeared in transport in almost all vehicles

(automobiles, trucks, motorcycles, boats, and in a wide variety of aircraft and locomotives). Internal combustion engines can be classified by their configuration. Four stroke configuration As their name implies, operation of four stroke internal combustion engines have four basic steps that repeat with every two revolutions of the engines: Intake: Combustion mixtures are emplaced in the combustion chamber Compression: The mixtures are placed under pressure Combustion: The mixture is burnt, almost in variably a deflagration, although a few systems involve detonation. The hot mixture is expanded, pressing on and moving parts of the engine and performing useful work. Exhaust: the cooled combustion products are exhausted into the atmosphere. Many engines overlap these steps in time; jet angines do all steps simultaneously at different parts of the engines. Two stoke configuration Engines based on the two-stroke cycle use two strokes(one up, one down) for every power stroke. Worldwide production In 2007, worldwide production reached a peak of 73.3 million new motor vehicles. In 2009, production dropped 13.5 percent to 61 million. In 2010, world markets mostly recovered.

In 2009, India being the top seventh Motor Vehicle Manufacturing country has produced of about 2,632,694 units. Consumption trends About 250 million vehicles are in use in the United States. Around the world, there were about 1006 million cars and light trucks on the road in 2009. The Detroit branch of Boston Consulting Group predicts that, by 2014, one-third of world demand will be in the four BRIC markets (Brazil, Russia, India and China). Other potentially powerful automotive markets are Iran and Indonesia. Tus, it can be said that valve industries have a very good future.

CHAPTER 2

COMPANY PROFILE

INTRODUCTION KAR mobiles limited manufacture valves for internal combustion engines. The company manufactures valve of all sizes and ranges used in various vehicles like motorcycle, cars, trucks, railway engines, defense tanks, generator sets and marine engines. Aiming to achieve and sustain product excellence, KML has corners in establishing comprehensive world class facilities for its entire range of products. The test laboratories and other manufacturing shops are well equipped with the state-of-the-art facilities for reliable manufacturing and testing operations. KML has also got well equipped classrooms with the facilities of LCDs and OHPs, which are used to train the employees and trainee students. It has got a very good transportation facilities and canteen facilities for the employees and for trainees.

THEY BELIEVES IN: K-Knowledge A-Application R-Reliability

M-Motivation O-Opportunity B-Brilliance I-Innovation L-Leadership E-Excellence S-Service

Rane Group Companies

Sl. No.

Company

Products

Kar Mobiles Limited Medium & Large (KML) Valves for diesel engines. Specialize in Locomotive, Power generation, Off-road vehicles &defense applications.

Rane Brake Linings Brake linings, Disc Limited (RBL) pads, Composite brake blocks, Clutch facings

Rane Diecast High Pressure Limited (RDL) Casting Products

Die

Rane Engine Valve Valves, Valve Guides, Limited (REVL) Tappets

Rane (Madras) Manual Steering & Limited (RML) Suspension Systems

Rane NSK Steering Energy Absorbing System Limited Steering Columns (RNSSL) Rane TRW Steering Power Steering Systems Limited Systems & Seat Belt (RTSSL) Systems

A.BACKGROUND AND INCEPTION OF THE COMPANY Kar valves limited was born out of an electric supply undertaking in the old Maharajas state of cochin under the name of cochin state power and light corporation limited. This company was started in the year 1936 and was engaged in distribution of electricity. In 1971 this business was nationalized so the company received compensation from the government and the shareholders decided to invest in the new business activity. The company was name as KAR Valves Limited and incorporated in the year 1972 under India companies Act, with licensed capacity of 1.5 million valves per annum. Mr. L.L. Narayan laid the foundation stone on 30th August 1973 and established as private organization and started as a manufacturing unit. Sri. V. P. Aghoram was appointed as the Managing Director of the company in 1972.

 The company commenced its commercial production in the year 1975 and the first invoice was made on 12-03-1975 to M/S. convert private limited, Delhi. Large valves for Diesel Loco Application & Export came into focus. This success led the company to expand its licensed capacity from 1.5 million to 5 million per annum. In 1981 the company set up a 100% export oriented unit at Tumkur. In the year 1997, the company entered into technical collaboration with TRW inc, USA, to upgrade its product and process technology.

B. NATURE OF THE BUSINESS CARRIED It manufactures valves for all internal combustion engines. The company is one the diesel oriented unit which supplies valves for all engines both petrol and diesel and is fully equipped to support its developing market needs. A valve is a product rarely noticed by the average person, yet it plays an important role in the quality of our life. Each time you turn on water faucet, use your dishwater,

or turn on water faucet, use your dishwater, or turn on a gas range, or step in the accelerator of your car, you operate a valve. Valves made from chrome-silicon alloy steel and exhaust from chrome-nickelsilicon alloy steel (to operate under high temperature and high stress conditions). Valves are also supplied with liquid nitrating process or hard chrome plating which increases the surface hardening the stem. This improves resistance with consequent sliding ease. Valves are used to regulate the flow of fluids in piping system and machinery the flow phenomenon is frequently of pulsating or intermittent character and the valve, with its associated gear, contributes a timing feature. The valves commonly used in piping systems are gate valves, usually operated closed or globe valves, frequently fitted with a renewable disk and adaptable throttling operations check valves, for automatically limiting flow in a piping system. To control the kinematics of the cycle, system engine valves range from D-slide and piston valves to multicoated types. Many type of reversing gear have been perfected which use the same slide valve or piston valve for both forward backward rotation of an engine, as in rail road almost exclusively in internal combustion receipt locating engines because of the demands for tightness with high operating pressures and temperatures,. Two-cycle engines utilize ports, alternately covered and uncovered by the main piston, for inlet or exhaust. A structure in a hollow organ (like the heart) with a flap to ensure one way flow of fluid through it, Device in a brass wind instrument for varying the length of the air column to alter

pitch of a ton control consisting of a mechanical device for controlling the flow of a fluid. Application: Engine valves for high performances locomotives, marine engines, heavy duty engines, battle tanks, Tractors, Agriculture/Industry/ stationery, Automotive passenger cars/ Light commercial vehicles/ heavy commercial cars.

C. VISION, MISSION AND QUALITY POLICY Vision To be highly profitable and socially responsible leading manufacturer of engine valves for customers in global markets. Mission Provide superior products and service to our customers and maintain market leadership. Evolve as an institution that serves the best interest of all stakeholders. Ensure the highest standard of ethics and integrity in all our action. Pursue excellence through total quality management.

Motto Customer satisfaction through-on-time delivery of superior quality valves. A testimony to the companys commitment to quality system through. QS 9000 Quality certificate from BVQI. Well-equipped standards room with testing facilities. Negligible warranty claims. Initiation like TQM, TPM and employees involvement.

 Concern for environment and initiatives for ISO 14000 certificate. Quality policy KML is committed to comply with ISO/TS 16949 system requirements and improve customer satisfaction by Identifying and fulfilling all requirements of the clients/ customers. Complying with all applicable statutory and regulatory requirements. Providing training to all employees to particle total quality management and achieve continual improvement in all areas. Build awareness amongst all employees on environmental issues through continuous training. Operate under an environmental management system as specified in ISO 14001.

D. PRODUCTS PROFILE Product classification The auto ancillary industry can be further divided into six main segment. Engine parts Piston, piston rings, engine valves, fuel pumps, carburetors and bimetal bearings. Starter motors, generators and and spark plug.

Electrical Parts

Transmission

steering Gears, steering gears and system, wheel, clutch plate and and disc. Leaf springs, shock absorbers, brake assembly and facings. Equipment Others Head light instruments. and dashboard

Suspension breaking

Sheet metal parts, pressure disc castings.

MANUFACTURING KML has 2 world class manufacturing plants in Bangalore & Tumkur Manufacturing valves of all sizes for internal combustion engines for automated and non automated applications. Valves are being used in engines having 5 H.P to 4000 H.P. For production of these valves different sophisticated and modern equipments are being used such as McGrinders, Lathe cutters, welders, Heat treatment, CNC machine etc. Engine Valves Applications ranging from 5 H.P. to 4000 H.P. engines in segment such as: Agricultural/Industrial/ Stationary Marine Locomotives

 Battle Tanks Farm Tractors Automotive Passenger cars / Light Commercial vehicle / Heavy Commercial vehicles High performance cars Manufacturing capability: Min Head Dia Stem Dia Overall Length Configuration: Monometal Bimetal Friction welded Projection welded Head Finish Machine finish Forge finish Seat Hardfaced Induction Hardened Tip end Flame Hardened Induction Hardened Stellite faced MONOMETAL In Monometal only a single metal or material is used to manufacture the 18mm 5mm 50mm Max 105mm 22mm 450mm

Valve. The head to tip of valve is produced using the single material. This type of valve is comparatively costlier. BIMETAL In Bimetal two metals or materials are used. Bimetal is used for increasing the length of the valve. If any vehicles requires the valves of long length then Starting material of the valve will be of high alloy and ending material will be of low alloy. The main aim of this process is to reduce the cost of the valve.

Material used : Low Carbon Steel Martensitic Valve Steel Austenitic Valve Steel Nickel Alloy Stainless Steel Surface Treatment : Hard Chrome Plated Tufftrided Phosphated

D. AREA OF OPERATIONS Location Total Built Up Production Geographic Area Valve al (Sq.mts) (million) Area(Sq.mt s) 2430 14000 6 Export

Bangalore

5%

Tumkur

40450

2200

2.5

95%

The company has its network all over the globe, and the manufacturing process entirely takes place in India. They have agents who market their products behalf of the company and even they sell their product directly to the customers according to their needs and satisfaction. D. OWNERSHIP PATTERN Pattern of shareholdings as on March 31, 2011 Sl. No. A B C Category PROMOTERS GOVT. OF KERALA BANKS No. Shares 979337 37500 3978 of % of share holdings 43.72% 1.67% 0.18%

D E F G

PRIVATE BODY CORPORATE NRIs & OBCs INDIVIDUALS OTHER TOTAL AND

230786 4800 983599 2240000

10.30% 0.21 43.91% 100

Rane Group is the main promoter of the company with 43.72% share in the company. Remaining share is divided among private body corporate, banks, government of Kerala, individual and others.

D. COMPETITORS INFORMATION There is several numbers of competitors of KML in the industry. Rane Engine Valves Limited Shriram Piston & Rings Limited Auto Field Engineers Benera Udyog Gratco Valves Limited Duro Valves Limited Vikram Valves Limited The range of products manufactured with each broad product segment having different market structure and technology has neglected any possible concentration of the market in a few hands. The market is so large and diverse that a large number of players can be absorbed to accommodate buyer needs. However there are a few large companies that have integrated their operations across the valve chain. The key to compete in this industry is through specialization by

product type and integrating operations across the related area of specialization.

D.

INFRASTRUCTURE FACILITIES The basic physical systems of a countrys or communitys population, including roads, utilities, water, sewage, etc. These systems are considered essential for enabling productivity in the economy. Developing infrastructure often requires large initial investment, but the economies of scale tend to be significant. Canteen Facilities: Hygienic nutritious foods are facilitated to the employees according to standards prescribed by the organization and factories act. 1948. Ambulance: 24 hours ambulance facilities are provided to the employees in case of any damage to employees or health upset during the working hours. Sports/Clubs: The Company has its own team of sports such as cricket team and indoor games are facilitated such as carom, table tennis. Library: A Library facility is available with books, journals, and articles, technical books etc., with related to the company.

E. ACHIEVEMENTS/AWARD Award is parts of the evolution and growth of every company. They look at these recognitions as a source of motivation that drives them to pursue higher level of performance and excellence. They are proud of every award they have received and they greatly value the role they

played in transforming Kar Mobiles Limited into a high performance organization.

1988- Excellence of export award (E&PC) 1995- ISO 9000 Certification 2001-Received QS9000/98 certification from BVQI 2004-JIPM award (Japan institute of plant maintenance) 2004-Achieving for DEMING award 2004-ISO/TS/16949 Certification 2005-06-ISO 14000 Certification MILESTONES OF KAR MOBILES LIMITED 1973 Foundation stone laid 1975 Commercial production started and made forays into OEM segment. 1976 Developed large valves for diesel low applications. 1977 First exports made to RA lister &Co. 1983 set up plant II, a 100% EOU, with a capacity of 1.5 million valves. 1988 Capacity enhanced from 1.5 million to 5 million numbers. 1991 Promoted ETA Technologies for developing special purpose machines. 1995 Received ISO 9000 Certification. 1996 Business process Re-engineering implemented 1997 Entered into technical collaboration with TRW Inc., USA. 1999 Approved by Electro Motive Division [EMD] of General Motors Corporation, USA as first vendor from India. 2000 TQM and TRM initiated. 2001 Received QS 9000 Certification.

D. WORK FLOW MODEL Accounts Receivable Process The Accounts Receivable Process starts with the shipment of the goods to the customer. When this occurs, the shipping department automatically causes Systems Applications and Products(SAP) to send a bill to the customer by interchanging customer master data with the shipment data. This transcation also posts to the Accounts Receivable subsidiary ledger and also to the reconciliation account.The billing to the customer may be on paper or by Electronic Data Interchange (EDI). The next step of accounts receivable is setting up of client account record. This information may come from a sales receipt, a sales contract, a form from the sales/credit department or whatever documentation is used to record a sale. Contract information such as names, addresses, phone numbers and references ( to name but a few ) are compiled and entered into an accounts receivable software program and/or a hard copy file is organized and stored for later use. After the sale is made or the service has been provided, a bill can be produced using the client account record. Bills are sent to clients on a regular basis and include such things as the date of the bill, a description of the product or service, the price of each item, any additional fees or taxes and a due date. Penalties for missing the due date is listed on every bill, as well as instructions on where and how to send a payment. With the accounts receivable software, the orders/contracts are all entered and identified by a client ID and then the bills are printed and sent to each customer. If accounts are not

paid in full before the due date, accounts receivables collection measures are taken. As the clients send in payments are posted to the correct accounts. Each payment is identified either by account number or client ID in order to be posted accurately.

E. FUTURE GROWTH AND PROSPECTS Looking forward, the industry displays tremendous potential in generating employment and boosting entrepreneurship in country. The spate of new investment plans announced by global and domestic automobile manufacturing promises the emergency of India as a global hub for auto components. The industry is transforming and the boost in demand will see the emergency of several new payers in industry. The vast market for auto components, and the diverse products and technology involved ensure a place and role for many. At the same time, the entry of several global automobile manufacturing will bring in more regulation into the industry and see a pruning of the spurious market. Among the small players in the unorganized segment, this implies moving away from being standalone companies to entering into either contact manufacturing or being ancillary units. The newly defined rules are specialized, development and delivery that hold the key of the success in the auto component industry. At KAR MOBILES LIMITED, they have always taken a long term perspective when preparing their business strategies. They expected robust all-round growth in the global economy in the next 10 years. They also believe that the global economy has more inclusive. Countries like India and

China are now poised to play a larger role in determining the course of the global economy. Their manufacturing presence in India, the US, Europe and China has positioned them to capture global growth opportunities, and helping downturns, should they occur. In view of this, they are very optimistic about the future. KAR MOBILES LIMITED is a 37 years old company. Since their inception they have believed in setting challenging milestone and have worked hard to achieve their goals. While scale of operation is an important parameter for manufacturing company like KAR Mobiles, there are critical areas like: Technology Product development Customer service Human resource In which they are striving to excel. Their goal is to be the industry bench mark in all these area, to be an end-to-end service provided to global customers and provide them with unassailable value. The company in its continuous guest for excellence seeks new frontiers, delivering best-of-breed products that meet global quality standards and adopts innovative techniques to further improve customer services.

3. McKensys 7S MODEL

McKensys 7S FRAME WORK

INTRODUCTION Background of the model The 7s framework was developed by the consultants at the Mc Kensy Company, a very well management consultancy firm the United States, towards the end of 70s to diagnose the course of organizational problems and to formulate programs for improvement. The model starts on the premise that an organization is not just Structure, but consists of seven elements:

The 7s frame of Mckensey is a value based management model that describes how one can holistically and effectively organize a company. Together these factors determine how a company operates. The 3 S across the top the model are described as Hard S Strategy: the plan devised to maintain and build competitive advantage over the competition. Structure: the way the organization is structured and who reports to whom. Systems: the daily activities and procedures that staff members engage in to get the job done. The 4S across the bottom of the model are less tangible, more culture in the nature and were termed as Soft S by McKinsey:

Skills: the capabilities and competencies that exist within the company. Shared values: the capabilities and beliefs of the company. Ultimately they guide employees towards valued behavior. Staff: the Companys people resources and hoe they are development trained and motivated. Style: the leadership approach of top management and the companys overall operating approach.

STRUCTURE In Kar Mobiles Limited functional organization structure exists under which all employees reports to their respective head of department reports directly to the president.

a) Overall organization structure details

Level 1 Chairman (1)

Level 2

President (1)

Level 3

General Manager/ Deputy General Manager/Senior Manager (12)

Level 4

Manager/Assistant manager/Deputy manager (40)

Level 5

Senior executive/Executive/Deputy Executive/ Assistant executive (180)

Level 6

Staff (20)

Level 7

Workmen (285)

b) Substructure dealing with each functional discipline Finance department

President

General Manager Senior Manager

Assistant

Senior

Executive

Deputy

Marketing department
President General Manager

Senior Manager

Senior Manager

Senior Manager

Executives

Office Administration

Executives

Field staff

HR department
President

Senior Manager HR

Senior Executive

Assistant

Manager(Tum

Executives

IT department
President

Senior

In charge IT

Quality Assurance department

Plant Head 1

Head Plant Quality

Product Audit

Process Audit

Raw Material Audit

Gauge Room

Material Labs

Customer complaint s

Production Planning & Control department

Plant Head Operations

Head PC

In charge PPC Forge Shop

In charge PPC Machine Shop

Shift In charge 1 PPC Machine Shop

Shift In charge 2 PPC Machine Shop

Shift In charge 1 PPC Forge Shop

Shift In charge 2 PPC Forge Shop

Materials department
President

Senior Manager Materials

Purchases

Stores Consumable

Raw Materials

Sub Contracting

Maintenance department
Plant Head

Plant Head Maintenance

Utilities

Shop In charge

Forge Shop

Machine Shop

STRATEGIES Kar Mobiles Limited has maintained a good position in the value industry through its good strategies in the market. Because of its innovative strategies KML is the second largest valve manufacturing company. Continuously cost reduction and consistent quality helps to Kar Mobiles limited in the maintenance of good position in the valve industry. Company is focusing more on cost reduction and inventory control in order to increase the efficiency of firm by periodically review the system of the organization. Kar Mobiles limited also review the management structure of the organization as well as different of departments in order to know whether to increase or decrease staff and makes new structure of top management also. Apart from this company continuously focus on the development of existing product as well as tries to enter in new market segment. KML continouously review and adjust the policies of different department i.e, financial policies, Human resource policies, Distribution system and Marketing Strategies etc. to respond the environment of business.

SYSTEMS Management system of KML is as follows: Preparation of budget for the different activities, every year in the month of February for the next financial year. Quarterly auditing of financial records.

 Pay scale revision for the top management once in a year. Pay scale revision for the employees once in four years. Performance analysis report of company is prepared for every financial year. Continuous training program for the employees in its own training institute as well as outbound training. Insurance for all employees on the basis of team. Sales of valves in replacement market through 500 dealers only spreading in all over the India. Incentives are given on the basis of performance appraisal system only. All major decision are takes by president subject to the discussion with Board of Director. SHARED VALUES Provide superior products and services to companys customer and maintain leadership. Evolve as an institution that serves the best interests of all stakeholders. Pursue excellence through total quality management. Ensure the highest standards of ethics and integrity in all actions. STAFF Staff of KML is efficient but not highly qualified. Mostly male workers are there in Kar Mobiles Limited. Kar Mobiles Limited is not a big company so there is no more opportunity for career growth. Kar Mobiles Limiteds workers belong to different geographical areas but most of them are from Karnataka state only.

SKILLS

The staff of KML can be divided into 3 categories i.e skilled non skilled and semi-skilled. There is less number of highly competent employees. There are lacks of multi-tasks employees and most of employees are specialized in particular area only. STYLE Culture of KML is very good there is a democratic environment exists within the organization. Relationship amongst the employees and between the employees and manager is not very formal. All employees day to day reports to the respective head if necessary and get suggestion and recommend them without any restriction. In the some types of decision making process ideas are invited from the employees. Culture of KML is very open and all employees enjoy freedom at the work place.

4. SWOT ANALYSIS The SWOT analysis is the foundation for developing your strategies and tactics that then becomes the road map for writing your business operating plan. Prior to defining the companys strengths, weaknesses, opportunities and threats you need to: Have a written Vision, Mission and Values statement. Have completed a through internal and external business status evaluation. So SWOT analysis plays an important role in comparing between the competitors, and problems within the company, this helps the management to make changes with regard to these factors. STRENGTHS High brand equity Vast dealer network and field force

Capability to manufacture large valves Skilled manpower Wide range of products at industry level Experience in handling overseas customers

WEAKNESS Low productivity Changing product/ market mix Poor process capability Inadequate focus on exports Poorly maintained machines Weak in technological innovation Lack of pride in workmanship Insensitivity to customers High wages cost Inadequate systems Low competencies OPPORTUNITIES Win market shares from high cost competitors in overseas market Exploit large and growing domestic two wheeler market in global outsourcing Manufacturing/trading of related engine components THREATS Dumping from china and cheaper imports from other low cost countries Strengthening of Rupee affecting exports More competition since there are no growth opportunities for MNCs elsewhere

CHAPTER 5 ANALYSIS OF FINANCIAL STATEMENT

Current Ratio:
Current Ratio measures the ability of an entity to pay its nearterm obligations. Current usually is defined as within one year. Formula: Current Ratio= Current Assets /Current Liabilities The companys current ratio is 1.85 which can be read as 1.85:1 Though the ideal current ratio depends to some extent on the type of business, a general rule of thumb is that it should be at least 2:1. As the current ratio is lower the company will not be able to pay its bills on time, while with a higher ratio the company has money in cash or safe investments that could be put to better use in the business. So, the company is suggested to work on its Current Ratio.

Inventory Turnover Ratio:

Inventory Turnover Ratio shows how efficiently the company is managing its production, warehousing, and distribution of product, considering its volume of sales. Formula: Cost of Goods Sold for the year / Average Inventory The companys inventory turnover ratio is 9.88 Higher ratios-over six or seven times per year-generally thought to be better. Extremely high inventory turnover will indicate a narrow selection and possibly lost sales. A low inventory turnover rate, on the other hand, means that the company is paying to keep a large inventory, and may be overstocking or carrying obsolete items. therefore, the company is suggested retain the Inventory Turnover Ratio for further years.

Debt to equity ratio: Debt to equity shows the ratio between capital invested by the owners and the funds provided by lenders. Formula: (Debt)/(Equity) The companys Debt Equity Ratio is 0.76 which is 76% A company is generally considered safer if it has a low debt to equity ratio i.e, higher proportion of owner-supplied capital-

through a very low ratio can indicate excessive caution. In general, debt should be between 50 and 80 percent of equity. The company is maintaining very less Debt Equity Ratio when compared with the standards which shows that its playing safe. On the other hand, too little debt means the company is not realizing the full potential of the business and actually hurts the overall profitability. Return on Net Sales: Return on Net Sales shows how munch profit comes from every rupee of sales. Formula: (Net Profit)/ (Total Sales) The companys Return on Sales is 8.15% Compare to other businesses in the same industry to see if the business is operating as profitably as it should be. Look at the trend from month to month. Is saying the same? Improving? Deteriorating? Are you generating enough sales to leave an acceptable profit? Trend from month to month can show how well the company is managing the operating or overhead costs. Investment Turnover Ratio: Investment turnover ratio measures a companys ability to use assets to generate sales. Formula: Net Sales/Total Assets The companys Investment Turnover Ratio is 1.35 times Although the ideal level for this ratio varies greatly, a very low figure may mean that the company maintains too many assets or has not deployed its assets well, whereas a high figure means that the assets have been used to produce good sales numbers. It can be justified that the company is using its assets efficiently.

PART B

GENERAL INTRODUCTION THEORITICAL BACKGROUND OF THE STUDY Accounts Receivable is the money owed by a customer (individuals or corporations) to another entity in exchange for products and services that have been delivered or used, but not yet paid for. Receivables usually come in the form of operating lines of credit and are usually due within a relatively short time period, ranging from a few days to a year. On a public companys balance sheet, accounts receivbles is often recorded as an asset because this represents a legal obligation for the customer to remit cash for its short-term debts. Accounts receivables(alternately receivables) are created when a customer purchases goods or services from a company but do not pay for them at the time of purchase. Instead, the company issues an invoice for the goods or services at a later date, often at the end of the month. The amount due on the invoice is considered accounts receivables for the company. Receivables are treated as current assets on a companys balance sheet. Receivables are entered into a companys books when they receives an invoice for good or service provision (and not before), as the invoice proves that money is legally owed to the company by an outside entity. Receivables are typically issued by companies to reliable customers, since they are selling their goods on credit. Objectives The sales of goods on credits is an essential part of modern competitive economic systems. In fact, credit sales and therefore, receivables, are treated as a marketing tool aid the sales of goods. Management should weigh the benefits as well as cost to determine the goal of receivables management. The objective of receivables management is to promote sales and profits until that

point is reached where the return on investment in further funding receivables is less than the cost of funds raised to finance that additional credit (i.e. cost of capital ). The specific cost and benefits which are relevant to the determination of objectives of receivables management are examined below.

Costs
The major categories of cost associative with the extension of credit and account receivables are: Collection costs Capital cost Delinquency cost Default cost

Benefits of Receivables management

Increase sales Market share increase Increase in profit Enhanced customer services Control bad debts

TITLE OF THE STUDY A study on account receivables management of Kar Mobiles Ltd, Bangalore. Statement of Problem Accounts Receivables Management means planning, organizing, directing and controlling of receivables. Generally, account receivables refer to the total amount due and are considered in calculating the value of a business or the business problems in paying its own debts. Poor administering of credit policies by the company to its customers: By following a relaxed credit policy the liquidity decision is seriously affected. The company is locking funds in idle assets resulting in improper cash management. This problem spills into another serious issue such as longer operating cycle resulting in increased working capital requirement. Hence, the study is conducted to know the accounts receivables management of Kar Mobiles Ltd. Objectives of study To study the present receivables management procedure in the organization. To calculate various ways in which the debtors can be managed efficiently. To study the trends in bad debts for the last 5years. To determine different ways in which the customer service can be increased by redefine the collection process.

To analyze the impact of present credit policy on the company.

Scope of the study The scope of study is confined to the manufacturing industry and there by suggesting ways by which an auto ancillary company such as Kar Mobiles Ltd can optimally manage its accounts receivables. The study has been carried out with data for five years. Information has been collected after a study on the existing system of management of accounts receivables and also by interviewing the concerned authorities in finance department. Research Methodology The system of collecting data for research projects is known as research methodology. The data may be collected for either theoretical or practical research. For example management research may be strategically conceptualized along with operational planning methods and change management. Descriptive research is the type of research used in the collection of data. Descriptive research includes surveys and fact-finding enquiries of different kinds. The major purpose of descriptive research is description of the state of affairs as it exists at present. The main characteristic of this method is that the researcher has no control over the variables; he can only report what has happened or what is happening. Collection of Data

The data is collected through both primary and secondary sources. Primary data is collected by approaching related personal in the finance department , production department, HR department and so on Secondary data is collected through various sources such as from companys annual report, company library, previous projects, internet, text books, etc Tools Used Critical data with respect to accounts receivables will be analyzed by using various tools such as: Graphs To analyze data this follows a trend or a pattern. Ratios To analyze the various components in financial statements. Correlation Analysis The data that will be collected will be analyzed in the following ways: Trend Analysis: the growth of sales and the receivables position for the financial years 2006-07, 2007-08, 2008-09, 2009-10, 2010-11 will be calculated. Excepts from annual reports and other statements have been used for making the analysis A study has been made on the reasonableness of credit sales of the company

Sample size This study which has been carried out on accounts receivables management of Kar Mobile Ltd., and has taken into consideration the entire aspect of accounts receivables of Kar Mobiles Ltd.,

therefore the sample size is Kar Mobiles Ltd., in total. And the sample amount is annual report of 5 year period. Limitation of the study The study on accounts receivables management of the company is time based. Other components of working capital management such as cash management, inventory management are not considered for the study. The confidentiality of some facts and figures and the nonavailability of relevant information is one of the limitations.

ANALYSIS & INTERPRETATION

Table no. 1 1.Determination of growth in sales

(000) Year Sales Changes in sales (37928) 183259 81943 (127977) 115527 Percentage

2006- 2007 2007-2008 2008-2009 2009-2010 2010-2011

670354 853613 935556 807579 923106

(5.35) 27.34 9.61 (13.68) 14.31

Analysis:

Interpretation:

Tables no. 2 2. Determination of growth in Accounts receivables

Year

Receivables Changes in Receivables 170703 195105 215235 163758 203691 12127 24402 20130 (51477) 39933

Percentage

2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

7.65 14.30 9.35 23.92 24.39

Analysis

Table no. 3 3. Determination of growth in profits

Year

Profit

Change in profit (12368) 5849 (18602) 21128 1496

Percentage

2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

65340 71189 52587 73715 75211

15.92 8.95 (26.13) 40.18 2.03

Analysis

4.

Table no. 4 Determination of Debtors Turnover Ratio

Year

Gross Sales

Average Debtors 170703

Times

20062007 20072008 20082009 20092010

728746

4.27

920439

195105

4.72

998370

215235

4.64

855767

163758

5.22

20102011

981914

203691

4.82

Analysis

5.

Table no. 5 Determination of Average Collection Period Year Debtor turnover No. of working days 365 365 Average Collection period 85 77

2006-2007 2007-2008

4.27 4.72

2008-2009 2009-2010 2010-2011

4.64 5.22 4.82

365 365 365

79 70 75

Analysis

Table no. 6 6. Percentage of Debtors in total Current Assets

(000) Year

Debtors

Total

Percentage

Current Assets 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 170703 195105 215235 163758 203691 317878 404977 355051 266935 393200 53.70 48.18 60.62 61.34 51.80

Analysis

Table no. 7. Percentage of Debtors in total Current Assets

(000) Year

Debtors

Total Assets Percentage

2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

170703 195105 215235 163758 203691

479610 584637 578161 502563 679717

Analysis

Table no.8 8. Percentage of Debtors to Total Sales

(000) Year

Debtors

Total Sales

Percentage

2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

170703 195105 215235 163758 203691

670354 853613 935556 807579 923106