1.1.

THE BACKGROUND:A project entitled study on working capital management of Ashok Leyland ltd, Chennai was carried out with an intention to analyze the utilization of working capital. The study helps to know the level of current asset and current liability. Various analytical tools have been used to analyze and to make inference. Findings are based on the analysis; the major finding was that the company has a good liquidity position and profit percentage. Based on the findings various suggestions have been given for the further improvement of the effective utilization of the working capital.

1.2. THE PROBLEM STATEMENT:Managing working capital in a manufacturing firm is very difficult and risky position. It is required to maintain the liquidity position of any firm to be good. This is the main problem for all firms. So, components of working capital like inventory management, cash management and receivables management should be managed well.

1.3. OBJECTIVE OF THE STUDY:Study of the working capital management is important because unless the Working capital is managed effectively, monitored efficiently planed properly and reviewed periodically at regular intervals to remove bottlenecks if any the Company cannot earn profits and increase its turnover. With this primary Objective of the study, the following further objectives are framed for a depth Analysis. To study the working capital management of Ashok Leyland Ltd. To study the optimum level of current assets and current liabilities of the Company. To study the liquidity position through various working capital related ratios. To study the working capital components such as receivables accounts, Cash management, inventory position. To study the way and means of working capital finance of the Ashok Leyland Ltd. To estimate the working capital requirement of Ashok Leyland Ltd To study the operating and cash cycle of the company.

1.4. METHOD: 1.4.1 INTRODUCTION:

Research methodology is a way to systematically solve the research problem. It may be understood as a science of studying now research is done systematically. In that various steps, those are generally adopted by a researcher in studying his problem along with the logic behind them.

Methods comprise the procedures used for generating, collecting and evaluating data. All this means that it is necessary for the researcher to design his methodology for his problem as the same may differ from problem to problem. Data collection is important step in any project and success of any project will be largely depend upon now much accurate you will be able to collect and how much time, money and effort will be required to collect that necessary data, this is also important step. Data collection plays an important role in research work. Without proper data available for analysis one cannot do the research work accurately.

1.4.2) TYPES OF DATA COLLECTION: There are two types of data collection methods available. Primary data collection Secondary data collection

1.4.2.1) Primary Data:The primary data is that data which is collected fresh or first hand, and for first time which is original in nature. Primary data can collect through personal interview, questionnaire etc. to support the secondary data.

1.4.2.2) Secondary Data Collection Method:The secondary data are those which have already collected and stored. Secondary data easily get those secondary data from records, journals, annual reports of the company etc. It will save the time, money and efforts to collect the data. Secondary data also made available through trade magazines, balance sheets, books etc.

This project is based on primary data collected through personal interview of head of account department and other concerned staff member of finance department. But primary data collection had limitations such as matter confidential information thus project is based on secondary information collected through five years annual report of the company, supported by various books and internet sides. The data collection was aimed at study of working capital management of the company. Project t is based on * Annual report of Ashok Leyland Ltd 2007-08 * Annual report of Ashok Leyland Ltd 2008-09 * Annual report of Ashok Leyland Ltd., 2009-2010 * Annual report of Ashok Leyland Ltd., 2010-2011 * Annual report of Ashok Leyland Ltd., 2011-2012

1.5. SCOPE OF THE STUDY:The Study of working capital is based on tools like trend Analysis, Ratio Analysis, Working capital analysis, operating cycle etc. Further the study is based on last 5 years Annual Reports of Ashok Leyland Ltd

1.6. LIMITATIONS OF THE STUDY:Following limitations were encountered while preparing this project:

1.6.1) Limited data:This project has completed with annual reports; it just constitutes one part of Data collection i.e. Secondary. There were limitations for primary data Collection because of confidentiality.

1.6.2) Limited period:This project is based on five year annual reports. Conclusions and Recommendations are based on such limited data. The trend of last five year may or may not reflect the real working capital position of the company.

1.6.3) Limited area:Also it was difficult to collect the data regarding the competitors and their financial information. Industry figures were also difficult to get.

1.6.4) Expectation from study: To be able to know the financial position of the company. To be able to know the working capital requirement of the company. To be capable to help the company in marking better decision.

Working Capital Management

2.1) Working Capital Management:Working capital management is concerned with the problems arise in attempting to manage the current assets, the current liabilities and the inter Relationship that exist between them. The term current assets refers to those Assets which in ordinary course of business can be, or, will be, turned into cash within one year without undergoing a diminution in value and without disrupting the operation of the firm. The major current assets are cash, marketable securities, account receivable and inventory. Current liabilities ware those liabilities which intended at their inception to be paid in ordinary course of business, within a year, out of the current assets or earnings of the concern. The basic current liabilities are account payable, bill payable, bank over-draft, and outstanding expenses. The goal of working capital management is to manage the firms current assets and current liabilities in such way that the satisfactory level of working capital is mentioned. The current assets should be large enough to cover its current liabilities in order to ensure a reasonable margin of the safety.

2.2)Definition:According to Guttmann &Doug allExcess of current assets over current liabilities

According to Park &Glad sonThe excess of current assets of a business (i.e. cash, accounts receivables, inventories) over current items owned to employees and others (such as salaries & wages payable, accounts payable, taxes owned to Government) are expected to mature for payment within an accounting year and include creditors, bills payable and outstanding expenses.

The concept of working capital was, first evolved by Karl Marx. Marx used the term variable capital means outlays for payrolls advanced to workers before the completion of work. He compared this with constant capital which according to him is nothing but dead labor.

2. 3Types of Working Capital:The operating cycle creates the need for current assets (working capital). However the need does not come to an end after the cycle is completed to explain this continuing need of current assets a destination should be drawn between permanent and temporary working capital. The need for current assets arises, as already observed, because of the cash cycle. To carry on business certain minimum level of working capital is necessary on continuous and uninterrupted basis. For all practical purpose, this requirement will have to be met permanent as with other fixed assets. This requirement refers to as permanent or fixed working capital.

2.3.1) Temporary Working Capital:Any amount over and above the permanent level of working capital is temporary, fluctuating or variable, working capital. This portion of the required working capital is needed to meet fluctuation in demand consequent upon changes in production and sales as result of seasonal changes,

2.3.2) Permanent Working Capital:-

Graph shows that the permanent level is fairly castanet; while temporary working capital is fluctuating in the case of an expanding firm the permanent working capital line may not be horizontal. This may be because of changes in demand for permanent current assets might be increasing to support a rising level of activity.

2.4

DETERMINANTS OF WORKING CAPITAL:The amount of working capital is depends upon following factors:

2.4.1) Nature of Business:Some businesses are such, due to their very nature, that their requirement of fixed capital is more rather than working capital. These businesses sell services and not the commodities and that too on cash basis. As such, no founds are blocked in piling inventories and also no funds are blocked in receivables. E.g. public utility services like railways, infrastructure oriented project etc. There requirement of working capital is less. On the other hand, there are some businesses like trading activity, where requirement of fixed capital is less but more money is blocked in inventories and debtors.

2.4.2) Length of Production Cycle:In some business like machine tools industry, the time gap between the acquisition of raw material till the end of final production of finished products itself is quite high. As such amount may be blocked either in raw material or work in progress or finished goods or even in debtors. Naturally there need of working capital is high.

2.4.3) Size And Growth Of Business:In very small company the working capital requirement is quit high due to high overhead, higher buying and selling cost etc. As such medium size business positively has edge over the small companies.

2.4.4) Business/ Trade Cycle:If the company is the operating in the time of boom, the working capital requirement may be more as the company may like to buy more raw material, may increase the production and sales to take the benefit of favorable market, due to increase in the sales, there may more and more amount of funds blocked in stock and debtors etc. similarly in the case of depressions also, working capital may be high as the sales terms of value and quantity may be reducing, there may be unnecessary piling up of stack without getting sold, the receivable may not be recovered in time etc.

2.4.5) Terms Of Purchase And Sales:Sometime due to competition or custom, it may be necessary for the company to extend more and more credit to customers, as result which more and more amount is locked up in debtors or bills receivables which increase the working capital requirement. On the other hand, in the case of purchase, if the credit is offered by suppliers of goods and services, a part of working capital requirement may be financed by them, but it is necessary to purchase on cash basis, the working capital requirement will be higher.

2.4.6) Profitability:The profitability of the business may be vary in each and every individual case, which is in turn its depend on numerous factors, but high profitability will positively reduce the strain on

working capital requirement of the company, because the profits to the extent that they earned in cash may be used to meet the working capital requirement of the company.

2.4.7) Operating Efficiency:If the business is carried on more efficiently, it can operate in profits which may reduce the strain on working capital; it may ensure proper utilization of existing resources by eliminating the waste and improved coordination etc.

2.4.8) Seasonal Variations:Generally, during the busy season, a firm requires larger working capital than in slack season.

2.4.9) Working Capital Cycle:The speed with which the working cycle completes one cycle determines the requirements of working capital. Longer the cycle larger is the requirement of working capital.

2.4.10) Rate of Stock Turnover:There is an inverse co-relationship between the question of working capital and the velocity or speed with which the sales are affected. A firm having a high rate of stock turnover will needs lower amt. of working capital as compared to a firm having a low rate of turnover

2.4.11) Credit Policy:A concern that purchases its requirements on credit and sales its product / services on cash requires lesser amt. of working capital and vice-versa.

2.4.12)Earning Capacity and Dividend Policy:Some firms have more earning capacity than other due to quality of their products, monopoly conditions, etc. Such firms may generate cash profits from operations and contribute to their working capital. The dividend policy also affects the requirement of working capital. A firm maintaining a steady high rate of cash dividend irrespective of its profits needs working capital than the firm that retains larger part of its profits and does not pay so high rate of cash dividend.

2.4 RATIO ANALYSIS:A. WORKING CAPITAL RATIOS:Turnover ratios: Working capital turnover ratio= sales/working capital

Liquidity ratios:Current ratio=current assets/current liabilities Quick ratio= quick assets/current liabilities

Profitability ratios:Gross profit ratio=gross profit/net sales*100 Net profit ratio=net profit/net sales*100

B. INVENTORY MANAGEMENT RATIOS: Inventory turnover ratio=sales/average inventory Inventory holding period=360/inventory turnover ratio

C. RECEIVABLES MANAGEMENT RATIOS: Debtors turnover Ratio = sales/average, Debtors collection period=360/DTR Creditors turnover ratio= credit purchases/average, Creditor holding Period=360/CTR.

D. CASH MANAGEMENT RATIOS: Cash ratio=cash and bank balances/CL Cash turnover ratio=sales/average cash and bank balances

The Company Profile 3.1 INTRODUCTION:In 1948, when independent India was one year old, Ashok Leyland was established. We were Ashok Motors then, assembling Austin cars at the first plant, at Ennore near Chennai. In 1950 started assembly of Leyland commercial vehicles and soon local manufacturing under license from British Leyland. With British Leyland participation in the equity capital, in 1954, the Company was rechristened Ashok Leyland.

Since then Ashok Leyland has been a major presence in India's commercial vehicle industry. These years have been punctuated by a number of technological innovations which went on to become industry standards. This tradition of technological leadership was achieved through tieups with international technology leaders and through vigorous in-house R&D.

Ashok Leyland vehicles have built a reputation for reliability and ruggedness. The 375,000 vehicles we have put on the roads have shared the additional pressure placed on road transportation in independent India.

The share of goods movement by road rose from 12% in 1950 to 60% in 1995. In passenger transportation, the jump is equally dramatic: from 25% to 80%. At 60 million passengers a day, Ashok Leyland buses carry more people than the entire Indian rail network. In the populous Indian metros, four out of the five State Transport Undertaking (STU) buses come from Ashok Leyland. Some of them like double Decker and vestibule buses are unique models from Ashok Leyland, tailor-made for high density routes.

In 1987, the overseas holding by LRLIH (Land Rover Leyland International Holdings Limited) was taken over by a joint venture between the Hinduja Group, the Non-Resident Indian transnational group and IVECO Fiat Spa, part of the Fiat Group and Europe's leading truck manufacturer.

Global Standards, Global Markets the blue-print prepared for the future reflected the global ambitions of the Company, captured in four words: Global Standards, Global Markets

(Liberalization and globalization were not yet in the air). Buoyed by the backing of the two international giants, Ashok Leyland embarked on a major product and process technology up gradation to world-class standards of technology.

In the journey towards global standards of quality, Ashok Leyland reached a milestone in 1993 when it became the first in India's automobile industry to win the ISO 9002 certification. The more comprehensive ISO 9001 certification came in 1994. 1994 was also the year, when international technology changed the way India perceived trucks. The year when a new breed of world class trucks - technologically superior and eco-friendly - rolled out on Indian roads.From our state-of-the-art manufacturing Plant at Hosur, near Bangalore. They carried the name Cargo. Cargo brought with it, a new set of values and an unmatched basket of benefits, ushering in a change.

3.2 INDUSTRY PROFILE:-

The automobile industry in India is the tenth largest in the world with an annual production of approximately 2 million units is expected to become one of the major global automotive industries in the coming years. A number of domestic companies produce automobiles in India and the growing presences of multinational investment, too has led to an increase in overall growth following the economic reforms of 1991 the Indian growth as a result of increased competiveness and relaxed restrictions.

History:-

In 1953, the Govt of India and the Indian private sector initiated manufacturing processes to help develop the automobile industry, which had emerged by the 1940s in a nascent form. Between 1940 to the economic liberalization of 1991, the automobile industry continued to grow at a slow pace due to the many govt restrictions. Japanese manufacturers entered the Indian market ultimately leading to the establishment of Marutiudyog. A number of foreign firms joint ventures with Indian companies.

Indian Automobile companies:-

1. Ashok Leyland 2. Ford Motors 3. Hindustan Motors 4. Mahindra &Mahindra Ltd 5. Maruthi Suzuki 6. Tata Motors

Market Share:-

COMPANY

MARKET SHARE

1.Tata Motors

60.2

2.Ashok Leyland Ltd

28.4

3.Others

11.4

Market Share
11.4 28.4 Tata Motors 60.2 Ashok leyland Others

Multinational Companies in India:-

1. Fiat 2. Ford Motors 3. General Motors 4. Honda 5. Hyundai 6. Mercedes-Benz 7. Mitsubishi Motors

3.3 COMPANY PROFILE:-

ENNORE PLANT:-

(My project was carried in Ennore plant located in Chennai.)

Ashok Leyland has six manufacturing plants - the mother plant at Ennore near Chennai, two plants at Hosur (called Hosur I and Hosur II, along with a Press shop), the assembly plants at Alwar and Bhandara. The total covered space at these six plants exceeds 450,000 sq m and together employs over 11,500 personnel.

Spread over 135 acres, Ashok Leyland Ennore is a highly integrated Mother Plant accounting for over 40% ALL production. The plant manufactures a wide range of vehicles and house production facilities for important aggregates such as Engines, Gear Box, Axles and other key inhouse components. Number of employees in ennore plant are 4146 and number of models manufactured are 132.

Ashok Leyland is the flagship company of the Hinduja group and is the second largest manufacturer of commercial vehicles in India.

Ashok motor was set up in 1948 for the assembly of Austin cars. The company name and objective changed with equity participation by British Leyland and Ashok Leyland commenced manufacturer of commercial vehicles in 1955. It has since than grown as a reputed manufacturer of quality automotive products ranging from light commercial vehicles to heavy duty vehicles and for automotive, industrial and marine applications. In 1987, the overseas hold by Land Rover Leyland International Holidays Ltd(LRLIH) was taken over by a joint venture between the Hinduja group, Non-Resident Indian Transitional group and IVECO (since July 2006,the Hinduja group is 100% stake holder of LRLIH). Ashok Leyland also acquired truck business unit of Avia, Prague (Czech Republic effective 19-10-06).

The products of the company are of proven design for durability and reliability and are hence very popular both in Indian and overseas markets.

In the journey towards the Global standard of Quality , Ashok Leyland has reached a major milestone in 1993, when it became the first in Indias automobile industry to win ISO 9002 Certification. The more comprehensive ISO 9001 certification came in 1994, QS 9000 in 1998 and ISO 14001 certification for all vehicle manufacturing units in 2002. It has also become the first Indian automobile company to receive the latest ISO/TS 16949 corporate certification which is specific to the auto company.

The company has the corporate office register at Chennai.

The marketing headquarter is at Chennai and the sales and services network, dealer network and spare parts warehouse spread throughout India with regional sales office and services centre located in all major cities and towns in the country. The products are also exported to a range of overseas countries.

The marketing personal maintain constant interaction with customers for application development and feedback for continuous improvement of the products. The services function is carried out by qualified personal whose skills are continuously upgraded through training to meet the servicing requirements of newer or improved products. The design function is carried out by the product Development Division operating through 4 centers viz. Product Development (Ennore) for R&D related to Ashok Leyland engines, Technical center vellivoyalchavadi for design, proto-type developments of vehicle, vehicles and components testing; Engine R&D (Hosur) for design and development of Hino engines and Advanced Engineering (Chennai) for research related to future products.

The manufacturing units of the company are located at Ennore (TN),Hosur,(KT),Alwar (Rajasthan) and Bhandara(MR).The Ennore ,Hosur(palnt-I) Hosur (plant-II), Ambattur ,Alwar and Bhandara manufacturing units are certified ISO 9001:2000 and QS 9000:1998 certification by Indian register Quality system. The company is also certified to ISO 14001:2000 Environmental Management System for all the manufacturing units. The Bhandara unit of the company has won the Golden Peacock Environmental Award 2002 of the world Environmental Foundation in the Large/manufacturing category. Ashok Leyland is also the 1stauto mobile company to receive the ISO/TS 16949 corporate certification in June 2006. TS 16949 reckon the nuances of automobile Industry and is more customer centric. It integrates the salient concepts of all the QMS standards has been accepted

recognized and followed by all automobiles manufactures in USA , Europe and Asia.

Ashok Leyland has also obtained ISO 27001 certificates for its Ennore Data canter and Advanced Engineering group located in Chennai. Ennore data center obtained the certificate in May 2005 and advanced engineering in April 2007.

HISTORY AND ORIGIN:The origin of Ashok Leyland can be traced to the urge for self-reliance, felt by independent India. Pandit Jawaharlal Nehru, India's first Prime Minister persuaded Mr. Raghunandan Saran, an industrialist, to enter automotive manufacture. In 1948, Ashok Motors was set up in what was then Madras, for the assembly of Austin Cars. The Company's destiny and name changed soon with equity participation by British Leyland and Ashok Leyland commenced manufacture of commercial vehicles in 1955

(Source: www.ashokleyland.com)

Since then Ashok Leyland has been a major presence in India's commercial vehicle industry with a tradition of technological leadership, achieved through tie-ups with international technology leaders and through vigorous in-house R&D.

Access to international technology enabled the Company to set a tradition to be first with technology. Be it full air brakes, power steering or rear engine busses, Ashok Leyland pioneered all these concepts. Responding to the operating conditions and practices in the country, the Company made its vehicles strong, over-engineering them with extra metallic muscles. "Designing durable products that make economic sense to the consumer, using appropriate technology", became the design philosophy of the Company, which in turn has moulded consumer attitudes and the brand personality.

Diesel Engines. In July 1955, the name of the Company Was changed from Ashok Motors Ltd., to Ashok Leyland Ltd.

In February 1979, the Company made a public issue of 49, 61,349 No. of equity shares of Rs.5 each at a premium of Rs.3 per share.

In 1980, with the collaboration, the Company embarked on a programmer of manufacture of integral buses. The R & D division was also engaged in developing a new vehicle prime mover with turbocharged engine which in operation with a Tandem-Axle trailer would enable a GTW of 26T. The Company also developed a longer integral bus with larger seating capacity. A technical collaboration agreement was entered into for the manufacture of synchromesh transmissions to the designs of Azhnradfabrik Friedrichshafen AG of West Germany.

In 1983, the Company entered into an agreement for a joint venture in Sri Lanka for the assembly and progressive manufacture of Ashok Leyland vehicles. ACL proposed to create facilities for body building and assembly of panels for front-end structures for truck and business in order to cater to the requirements. Then the Company entered into a technical collaboration with Hino Motor Ltd., Japan for their w series engines.

In 1986, DGTD registration for the manufacture of metal cutting and grinding machines at the Hosur and Alwar plants was obtained. A Prototype of a rear engine by chassis according to the specifications laid down by special working group for use In State Transport Undertakings was acknowledge by the latter during the year

In 1987, the Intermediate vehicle with 4-cylinder HINO engine was introduced in the market under the brand name CHITAL. A test track for endurance testing of vehicles was also commissioned.

In 1989, the Company introduced Normal Control (Bonneted) vehicle. With access to superior IVECO TECHNOLOGY, THE Company was evaluating various contemporary product options that were relevant to the requirements of Indian road transport industry.

In 1994, the Company issued 10,771,908 GDRs at issue price of US$12.79 per GDR for a total value of US $137.773 million. Each GDR represents 3 equity shares of RS. 10 Each.32, 315,724 shares issued through GDRs. The Company entered into a technical collaboration with Hino Motor Ltd., Japan for their Wseries Engines. In 1998, Ashok Leyland has introduced The Panther, a low floor bus which has been indigenously designed to cater to the needs of the common masses and is based on the parameters set by the Central institute of Road Transport and the Association of State Road Transport Undertakings. The Ashok Leyland Ltd., the commercial vehicles major, has entered into an agreement with the leading US-based management consultant, A T Kearney, to Kick-start the process re-engineering work in the companys various production units. Ashok Leyland Limited is developing a new range of low floor chassis in the passenger vehicle sector for more convenient urban transportation. The Ministry of Defenses

Vehicle Factory in Jabalpur has signed manufacturing agreements with Ashok Leyland & Tata Electric and Locomotives Company (Telco) recently.

In 1999, the Company would enter into an alliance with dealers of tractor on a temporary basis. The Company was talking to tractor manufacturers including Mahindra & Mahindra,Eicher, TAFE and Punjab Tractors in this connection.

In 2000, the Company launched of two interactive Internet initiatives, one for domestic parts operations and the other for exports. Ashok Leyland has announced a voluntary retirement scheme for its unionized staff. Ashok Leyland Limited (ALL) and Maruti Udyog Ltd have been selected for the IRTE National Award, in recognition of their efforts towards promoting the cause of road safety, traffic management and environment protection capital of Rs.75 lakhs with equal contribution from the three partners. Ashok Leyland Ennore unit has received ISO 14001 certification for its environment management system from Indian Registrar Quality Systems.

In 2002, Ashok Leyland Ltd has informed that Mr. G. Boschetti ceased to be a Director on our Board. Mr. Marc Petit also ceased to be an Alternate Director to Mr. G Boschetti Mr. R Sorcehas been appointed as a Director in the place of Mr. G Boschetti

In 2003, Leyland has reported a 70% increase in its sales. Ashok Leyland set to increase HINO engine platform through in-house product development, to deliver higher horsepower in tune with improving road infrastructure. Ashok Leyland Ltd has supplied 25 buses to Afghanistan which is a part of Indian Governments Assistance to the war-ravaged Afghanistan. Leyland bagged $46 million truck supply contract from the United Nations.

In 2004, Ashok Leyland unveils new range of buses and trucks in a bid. It launches Ecomet, a light commercial vehicle, in the Andhra Pradesh market. Ashok LeylandsHosur unit bags CIIs awards in safety, health and environment. Ashok

Leyland Ltd (ALL) and Indian Oil Corporation (IOC) have joined hands to offer freight management services across the country. Ashok Leyland Ltd signs a collaboration agreement with ZF of Germany local manufacturing of ZFs 9-speed synchromesh gearbox. Now, Wipro InfoTech has signed up with Ashok Leyland for strategic cost reduction.

Ashok Leyland vehicles have built a reputation for reliability and ruggedness. The 5, 00,000 vehicles we have put on the roads have considerably eased the additional pressure placed on road transportation in independent India.

The Non-Resident Indian transnational group and IVECO. (Since July 2006, the Hinduja Group is 100% holder of LRLIH).

The blueprint prepared for the future reflected the global ambitions of the company, captured in four words: Global Standards, Global Markets. This was at a time when liberalisation and globalisation were not yet in the air.

In the journey towards global standards of quality, Ashok Leyland reached a major milestone in 1993 when it became the first in India's automobile history to winthe ISO 9002 certification. The more comprehensive ISO 9001 certification camein 1994, QS 9000 in 1998 and ISO 14001 certification for all vehicle manufacturing units in 2002. It has also become the first Indian auto company toreceive the latest ISO/TS 16949 Corporate Certification (in July 2006) which isspecific to the auto industry.

3.4 VISION:Achieving leadership in the medium/heavy duty segments of the domestic commercial vehicle market and a significant presence in the world market through transport solutions that best anticipate customer needs, with the highest value to cost.

Be among the top Indian corporations acknowledged nationally and internationally for Excellence in quality of its products. Excellence in customer focus and service.

3.5 MISSION:Be a leader in the business of commercial vehicles, excelling in technology, quality, value to customer, fully supported by customer service of the highest order and meeting national and international environment and safety standards. Identifying with the customer. Being the lowest cost manufacturer. Global benchmarking our products, processes & people against the best in the industry.

3.6 VALUES:1. CUSTOMERS:We value our customers and will constantly endeavor to fulfill their needs by proactivity offering them products and service appropriate to their diverse applications.

2. EMPLOYEE:We consider our employee as our most valuable asset and are committed to provide full encouragement and support to them to enhance their potential and contribution to the companys business.

3. VENDORS:Our vendors are our valued partners in our business development and we will work with them in a spirit of mutual co-operation to meet our business objectives.

4. DISTRIBUTERS:Our distributers are the vital between the company and the customers and we are committed to advice and support our distributers to continuously upgrade their infrastructure, skills and capability to serve our customers better.

5. SHAREHOLDERS:We value the trust reposed in us by our shareholders and strive unstintingly to ensure a fair and reasonable return on their investments.

6. SOCIETY:We are committed to add to the wealth and well-being of our society by enhancing the quality of life and contributing to this economic development while maintaining the highest level of environmental and safety standards.

The five Ashok Leyland CORPORATE values are:

International Speedy Value creator Innovative Ethical

3.7 POLICIES AND OBJECTIVES OF ASHOK LEYLAND: QUALITY POLICY:-

Ashok Leyland is committed to achieve customer satisfaction, by anticipating and delivering superior value to the customers in relation to their own business, through the products and services offered by the company and comply with statutory requirements.

Towards this, the quality policy of ASHOK LEYLAND is to make continual improvements in the process that constitute the quality management system, to make them more robust and to enhance their effectiveness and efficiency in achieving stated objectives leading to: I). Superior products manufactured as also services offered by the company.

II). Max use of employee potential to contribute to quality and environment by progressive upgradation of their knowledge and skills as appropriate to their functions.

III). Seamless involvement from vendors and dealers in the mission of the company to address customers changing needs and protection of the environment.

3.8 ENVIRONMENTAL POLICY:We at Ashok Leyland committed personal environmental measures. 1. We follow all legal reasons. 2. Adopt pollution prevent technology in design and manufacturing projects. 3. Conserve all resources such as power, water, oil, gas, compressed air etc., and optimize their usage through scientific methods. 4. Provide clean working environment to employees. 5. Set and review objectives and targets for continually improving environment.

The Operation and Objectives of the Company are following below:To carry on the Business of manufacturers, assemblers of, dealers in, hirers, repairers ,cleaners, stores, warehouses, motor cars, motor cycles, cycle-cars, motors, scooters, motor-buses and lorries, trucks, tractors, cycles, bicycles, and carriages, launches, boats and ships, vans aero planes, hydroplanes, and other vehicles and conveyances of all descriptions for carrying passengers or other personnel, goods, commodities, produce, cargoes and other things on land or sea or by air whether propelled or assisted by means of petrol, spirit, steam, gas, electrical, animal or other powers, and all engines, chassis, bodies, turbines, tanks, tools, implements, accessories and other things, materials and products used for, in or in connection with motors and other things. To Buy, sell, let on, hire, repair, alter and deal in machinery, component parts, accessories and fittings of all kinds for motors and other things and all articles and things referred to in the above item hereof or used in or capable of being used in connection with the manufacture, maintenance and working thereof. To carry on the business of garage-keepers and suppliers of and dealers in petrol, electricity and other motive power to motors and other things. To develop, design, program me, conduct feasibility studies, act as advisor, retainers, consultants and / or agents to all projects and to engage in project survey, implementation, progress monitoring and turnkey installation. To promote any other Company for the purpose of acquiring all or any of the property and liabilities of this Company of for any other purpose which may seem directly or indirectly calculated to benefit this Company and to buy, sell, contract to buy or sell and deal in shares, stocks, debentures and securities of all kinds.

To invest or deposit or deal with the moneys of the Company not immediately required for the purposes of its business in such manner as may from time to time be determined.To guarantee the performance of contracts.To establish agencies or branches in India or elsewhere and to undertake the management of any Company or Companies having objects altogether or in part similar to those of this Company and to take all necessary steps for registering the Company in any Country as may be thought fit.

To improve, manage, work, develop, lease, mortgage, abandon or otherwise deal with, all or any part of the part of the property movable or immovable of the Company and all or any of the rights and concession of the Company The Company to do all or any of the above things in any part of the world as Principals, Agents, Contractors, Trustees, Insurers, or otherwise and either alone or in conjunction with others.

PRODUCT PROFILE: 1. Buses 2. Trucks 3. Engines 4. Defence& Special Vehicles

CHAPTER 4 Data Analysis and Interpretation

DATA ANALYSIS & INTERPRETATION

4.1 WORKING CAPITAL

4.2MANAGING CAPITAL WORKING

4.3OPERATING CYCLE

4.2.1INVENTORY MANAGEMENT

4.2.2RECEIVABLES MANAGEMNET

4.2.3CASH MANAGEMNET

4.1.0 WORKING CAPITAL:_ Working capital is the life blood and center of business. Adequate amount of working capital is very much essential for the smooth running of the business. And the most important part is the efficient management of working capital in right time. The liquidity position of the firm is totally effected by the management of working capital. So, a study of changes in the uses and sources of working capital is necessary to evaluate the efficiency with which the working capital is employed in a business. This involves the need for working capital analysis.

4.1.1 Statement Showing the Schedule of Changes in WORKING CAPITAL:For the year 2007-2008(Rs. In Cores) PARTICULARS CURRENT ASSESTS Inventories Sundry Debtors Cash and Bank Balance Loan & Advances (A) CURRENT LIBAILTIES Liabilities Provisions (B) (A-B) Working Capital Increasing in WC Total 2007 2008 Increase Decrease

10703.21 5228.75 4349

12239.14 3758.35 4513.7

1535.93 1470.40 164.31

6695.79

8241.38

1545.595

26977.14

1545.595

16516.25 1042.3 17558.55 9418.59

19267.581 3452.31 22719.394 6033.19 3385.40 9418.59 TABLE 1 3385.40 6631.235

2750.834 2410.01

9418.59

6631.235

(Source: Annual Report of Company) INFERENCE:1. The above table shows that there has been decrease in need for working capital to the extent of 3385.40 from the year 2007 to 2008.

4.1.1 Statement Showing the Schedule of Changes in WORKING CAPITAL:For the year 2008-2009 (Rs. In Crores) PARTICULARS CURRENT ASSESTS Inventories Sundry Debtors Cash and Bank Balance Loan & Advances (A) CURRENT LIBAILTIES Liabilities Provisions (B) (A-B) Working Capital Increasing in WC Total 2008 2009 Increase Decrease

12239.14 3758.35 4513.7

13300.144 9579.742 880.836

1061 5821.391 3632.865

8241.385

7895.44

346.25

28752.581

31656.14

19267.084 3452.31 22719.394 6033.19 4253.5 10286.68

18688.641 2680.82 21369.461 10286.679

5784.43 771.49

10286.68 TABLE 2

8232.32

4253.5 8232.32

(Source: Annual Report of Company) INFERENCE:1. The above table shows that there has been increase in need for working capital to the extent of 4253.50 from the year 2008 to 2009.

4.1.1 Statement Showing the Schedule of Changes in WORKING CAPITAL:For the year 2009-2010(Rs. In Crores) PARTICULARS CURRENT ASSESTS Inventories Sundry Debtors Cash and Bank Balance Loan & Advances (A) CURRENT LIBAILTIES Liabilities Provisions (B) (A-B) Working Capital Increasing in WC Total 2009 2010 Increase Decrease

13300.41 9579.74 880.84

16382.40 10226.90 5189.20

3082.26 647.16 4308.36

7895.44

9604.60

1709.16

31656.14

41403.10

18688.64 2680.82 21369.46 10286.68 1508.92 11795.60

25920.60 3686.90 29607.50 11795.60

7231.96 1006.08

11795.60 TABLE 3

9746.94

1508.92 9746.94

(Source: Annual Report of Company) INFERENCE:1. The above table shows that there has been increase in need for working capital to the extent of 1508.92 from the year 2010 to 2011.

4.1.1 Statement Showing the Schedule of Changes in WORKING CAPITAL:For the year 2010-2011(Rs. In Crores) PARTICULARS CURRENT ASSESTS Inventories Sundry Debtors Cash and Bank Balance Loan & Advances (A) CURRENT LIBAILTIES Liabilities Provisions (B) (A-B) Working Capital Increasing in WC Total 2010 2011 Increase Decrease

1638.24 1022.06 518.92

22.8.90 1185.21 179.53

570.66 163.15 339.39

960.46

793.60

166.86

4139.68

4367.24

733.81

506.25

2592.06 386.69 2978.75 1160.93

3037.95 490.33 3528.28 838.96 321.97 321.97 TABLE 4

445.89 103.64 549.53 184.28 132.26 506.25

132.26

(Source: Annual Report of Company) INFERENCE:1. The above table shows that there has been decrease in need for working capital to the extent of 132.26 from the year 2011 to 2012.

4.1.1 Statement Showing the Schedule of Changes in WORKING CAPITAL:For the year 2007-2008(Rs. In Crores) PARTICULARS CURRENT ASSESTS Inventories Sundry Debtors Cash and Bank Balance Loan & Advances (A) CURRENT LIBAILTIES Liabilities Provisions (B) (A-B) Working Capital Increasing in WC Total 2007 2008 Increase Decrease

2208.90 1185.21 179.53

2230.63 1230.25 32.56

21.73 45.04 146.97

793.60

727.09

66.51

4367.24

4303.89

150.14

213.48

3037.95 490.33 3528.28 838.96

1549.12 420.37 4843.70 -539.81 -539.81 539.81 TABLE 5 -539.81 2874.21

1488.83 69.96 1558.79

321.97

(Source: Annual Report of Company) INFERENCE:1. The above table shows that there has been decrease in need for working capital to the extent of 39.81 from the year 2011 to 2012.

4.2 MANAGING WORKING CAPITAL:-

4.2.1 INVENTORY MANAGEMENT:Inventories are goods held for eventual sale by a firm. Inventories are thus one of the major elements, which help the firm in obtaining the desired level of sales.

Kinds of inventories:Inventories can be classified into 3 categories. They are, a) Raw materials:These are goods, which have not yet been committed to production in a manufacturing firm. They may consist of basic raw materials or finished goods. b) Work in progress:This includes those materials, which have been committed to production process but have not yet been completed.

c) Finished goods:-

These are completed products awaiting sale. They are the final outputs of the production process in a manufacturing firm. In case of wholesalers and retailers, they are generally referred to as merchandise inventory.

Benefits of holding inventories:-

1) Avoiding losses of sales. 2) Reducing ordering cost. 3) Achieving efficient production runs.

Effects of holding low-costs:

1) No service levels:-

Often, customer demand cannot be satisfied, leading to immediate loss of business.

2) Increased production control costs:-

An enterprise may have to rush special production runs, recognize the schedules, an unordinary high level chasing etc,.

3) Increased replenishment costs:-

When operating with low stock levels, average replenishment orders would be placed frequently.

Effects of holding high stock:-

1. Increased storage costs: a) Increased capital investments, which reduces the capital available for other activities and project. b) Increased risk of obsolescence. 2. Increased opportunities for obtaining purchases discounts by bulk ordering. 3. Stable production programs, which result in the maintenance of a steady work force. 4. High level of service, and 5. Reduction in replacement costs.

Risks and costs associated with inventories:Holding of inventories exposes a firm to a no: of risks and costs. The Risk of holding inventories are as follows. Price decline Product deterioration Obsolescence

The costs of holding inventories are as follows: Materials cost Ordering cost Carrying cost

Features of inventory:A comparison of inventory with other positive components of working capital would reveal it has some special features of its own. On an average, it accounts for lions share of firms investment in WC. The risk factor is holding inventory generally is higher than that of holding other items of current assets. Although holding of a more and more inventory may be desirable from the point of view of functional managers, it affects adversely short-term liquidity. It involves many types of costs associated with it viz... Acquisition cost, carrying cost, short cost, etc It is the only item of current assets, which has direct influence on the prices, and income of a firm.

Motives of inventory:

Ashok Leyland ltd holds inventory to achieve the following 3 motives.

Transaction motives: It emphasizes the Ashok Leyland ltds need to maintain inventories to facilitate smooth production and sales operations.

Precautionary motive: It necessities the ALLs need to maintain inventories to guard against the risk of unpredictable changes in demand and supply forces and other conditions.

Speculative motive:

It influences the decision to increase or decrease inventory levels in Ashok Leyland ltd to take advantage of price fluctuations.

Objectives of inventory management:There should be optimal levels of investment for any asset, whether it is plant, cash or inventories. Again, inadequate inventories will disrupt production and loss sales. All this calls for an effective inventory program.

The main adjectives are: 1) To ensure that materials are available for use in production and production services, as and when required. 2) To ensure that finished goods and available for delivery to customers to fulfill orders. 3) To minimize investments in inventories to maximize profitability. 4) To protect the inventory against deterioration, obsolescence and unauthorized use.

A good inventory management policy should balance the requirements of opposing

and conflicting demands viz...

To maintain a leverage quality for smooth operations and efficient customers service. To maintain only a min possible inventory because inventory holding costs and the opportunity cost of funds invested in inventory.

INVENTORY CONTROL TECHNIQUES:1. Determination of stock levels: A firm should maintain records of various levels of stocks in order to have an effective management of inventory. They are: 1. Minimum stock level 2. Maximum stock level 3. Reorder stock level 4. Danger stock level 5. Optimum stock level 6. Free stock level 7. Marginal stock level 8. Physical stock level

Ashok Leyland ltd is following these types of stock levels.

2. ABC analysis:

From the point of view of monitoring info for control it becomes extremely difficult to consider each one of these items. The ABC analysis comes in quite handy and enables the management to concentrate attention and keep a close watch on a relatively less number of items which account for a high percentage of the value of annual usage of all items of inventory.

A firm using ABC system segregates its inventory into 3 groups. A,B and C. The A items are those in which it has the largest rupee investment. The B group items consist of the items accounting for the next largest investment. The C group typically consists of larger no: of items accounting for a small rupee investment.

Standard values for ABC analysis:

Category A B C

% in value 70-80% 10-20% 5-10%

% in quantity 5-10% 10-20% 70-80%

In Ashok Leyland: Category A B C % in value 75.5% 15% 7.5% % in quantity 8% 12% 72.2%

3. FSN analysis:In Ashok Leyland according to FSN analysis the items are categorized as follows: 1. 0-1 = Non Moving 2. 1-3 = Crawling 3. 3-6 = Slow Moving 4. 6-9 = 5. 9-12 = Moderate Fast Moving Fast Moving

Determination of economic order quantity (EOQ):Determination of quantity for which the order should be placed is one of the important problems concerned with efficient Inventory Management. EOQ refers to the size of

the order, which gives maximum economy in purchasing in an item of Raw materials or finished products. It is fixed mainly after taking into account the following cost. Ordering cost Inventory carrying cost

Assumptions:1. The firm knows with certainly the annual usage or demand of the particular items of inventories. 2. The rate at which the firm uses the inventories or makes sales is constant throughout the year. 3. The order for replenishment of inventory is placed exactly when inventories reach zero level. 5. Determination of optimum production quantity:The EOQ model can be extended to production runs to determine the optimum production quantity. The 2 costs involved are: Setup cost Inventory carrying cost

6. Determination of optimum Re-order level:For optimum production quantity, it is important to decide when to order for the new stock. New goods will arrive before the firm runs out of goods to sell. To determine Re-order level we should know about: The load time The usage rate.

7. Aging Schedule Of Inventory:By identifying the data of purchase or manufacture of each item of the inventory is known as aging schedule of inventory. 8. Just In Time (JIT) Inventory System:Normally high inventories blocking of capital investment, insurance etc.To minimize that by keeping the inventories at the lowest possible level by JIT system. JIT inventory system

means all inventories whether of raw materials, WIP & Finished goods are received in time to go into production, manufacture parts are completed into products and products are shipped to customers. In JIT environment the flow of goods is controlled by pull down approach.

9. Flexible Manufacturing System (FMS):-

The basis features of FMS are automated flow of materials to the cell and automated removal of finished items from the cell. Cells are linked together by automated material handling system and flow of goods is controlled by a system.

4.2.2 RECEIVABLES MANAGEMENT:INTRODUCTION: The term debtors are defined, as debt owed to the firm by the customers arising from sale of goods or services in the ordering course of business. Debtors or receivables are asset accounts representing amounts owed to the firm by customers from sale of goods or services. It has to be mentioned that the credit that is open account in the sense that no formal cknowledgement of debt obligation is required. In fact, a credit sale, which leads to debtors, is treated as one of the marketing tools. Great majority of firms does not demand immediate cash payment when goods or services are sold to their regular and credit worthy customers. Because of this practice, most sales require the firm to maintain debtors account for customer or a group of them for some period. Accordingly, debtors or receivables occupy a significant role in firms current assets structure usually next to inventories.

Objectives of Maintaining Receivables:

more goods or services then if it insists on immediate cash payment. Similarly, an additional sale normally results in higher profits for the firm. This proportion will hold goods only when the marginal contribution or gross margin greater than the additional cost associated with the administering the credit policy.

To survive in the competitive market, firm have to establish credit policies similar to competitors. Thus, by adopting its term of trade to the industry norms, a firm will avoid of sale from customers who would by elsewhere if they did not receive the expected credit. The above 2 objectives have a single purpose, that is generate larger flow of operating revenue and hence profit, than would be achieved in the absence of a commitment of the funds to debtors. Extension of credit involves cost and risk management should weigh benefits against cost. The optimum point may be considered as the point where the return on investment in further funding of receivables is less than the cost of funds raised that additional credit (i.e. cost of capital).

Cost of Maintaining Receivables: Credit sales, and hence maintaining of debtors, involve certain costs. They are:

Facts affecting size of receivables: The size of a firm is determined by its:

Credit Policy: The credit policy relating to sales and purchase also affects the working capital. The credit policy influences requirement of working capital in 2 ways. credit terms granted by the firm to its customers/buyers of goods.

The credit terms granted to customers bearing on magnitude of working capital by determining the level of book debts. The credit sales result in higher book debts. Higher book debts mean more working capital. On the other need, for working capital is less. The working

capital requirements of a business are, thus affected by the terms of purchase and sale, and the role given to credit by a company in its dealing with creditors and debtors. Similarly, collection procedure will differ from customer. With the permanent but temporary defeating customers, the firm may not be very strict in following the collection procedures. The credit evaluation procedure involves the following steps: 1. Credit information 2. Credit investigation 3. Credit limits and 4. Collection procedure For effective management of credit, a firm should lay down clear-cut guidelines and procedures for granting credit to individual customers and collecting individual accounts.

Size of Receivables: An analysis of the percentage of receivables in relation assets indicates the recovery efficiency of the company. Moreover, the % receivable in relation to sales indicates the firm credit sales requirements. However, this kind of analysis reveals the overall operational efficiency of the company in relation to credit sales and their recovery.

Chapter 6 Summary of Findings &Suggestions FINDINGS:6.1 STATEMENTS SHOWING SCHEDULE OF CHANGES IN WORKING CAPITAL: 1. There has been increase in the working capital for the year 2006-07. 2. There has been decrease in the working capital for the year 2007-08. 3. There has been increase in the working capital for the year 2008-09. 4. There has been decrease in the working capital for the year 2009-10. 5. There has been increase in the working capital for the year 2010-11. 6. There has been increase in the working capital for the year 2011-12

6.2 WORKING CAPITAL RATIO ANALYSIS: 1) To study overall efficiency: Net working capital of Ashok Leyland Ltd is maintained balanced in all years. The working capital turnover ratio of Ashok Leyland Ltd is increasing from 2006-08. But suddenly there is a dip in 2008-09.

2) To study the structure of working capital: The portion of current assets in total assets is reducing year by year. CL to TL ratio is increasing from 2006-08.There is a decrease in 2008-09.But company is capable of recovering in 2009-10. 2007-08 has highest ratio.

3) To study the liquidity of working capital: Here industry ratio of current ratio is 1.55. Except in 2007-08 remaining all years companys current ratio is almost near to industry average ratio. In the year 2006-07 company had power to affect the industry.

RECOMMENDATIONS: Recommendations can be use by the firm for the betterment increased of the firm after study and analysis of project report on study and analysis of working capital. I would like to recommend. Company should raise funds through short term sources for short term requirement of funds, which comparatively economical as compare to long term funds. Company should take control on debtor s collection period which is major part of current assets. Company has to take control on cash balance because cash is non earning assets and increasing cost of funds. Company should reduce the inventory holding period with use of zero inventory concepts. Company should make a policy in respect of investment of excess cash, if any; in marketable securities and overall cash policy should be introduced. Management should develop a credit policy and proper self realization system from customers so that efficient and effective management of accounts receivable can be ensured. This will significantly improve the profitability and liquidity of the company.

Over all company has good liquidity position and sufficient funds to repayment of liabilities. Company is increasing sales volume per year which supported to company to increase the market share year by year.

BiBliography Book Referred:1. Bolten, SE, Managerial finance Principles and Practices, Houghton, Miffin company, Boston 1976, p.162. 2. HRISHIKESH BHATTACHARYA 2007 WORKING CAPITAL MANAGEMENT NEW DELHI: Prentice-Hall of India P.Ltd. 3. 4. Principles of Corporate Finance, McGraw Hill, 1991, p.159 190. Introduction to Financial Management, Richard Irwin, Homewood F11, 1991, p.126. 5. An introduction to Financial Management, Good year Publishing company, Santa Califf, Solomn, Ezra and JJ Prigle, 1977, p.282 -312

WEBLIGRAPHY http://www.capitalbudgetingtechniques.com/ www.studyfinance.com/lessons/capbudget http://en.wikipedia.org/wiki/Capital_budgeting http://www.bimite.co.in/

CONCLUSION:I have carried out a project entitled Astudy on working capital management of AshokLeyland ltd, Chennai with an intention to analyze the utilizationof working capital. It is an Indian automobile manufacturing Company, established during the year 1948. I am proud in executing my project in this most esteemed famous company with age of more than 6 decades.

The studyhelps to know the level of current asset and current liability of the company. Various analytical tools have been used to analyze and to make inference. Findings are based on the analysis; the major finding was that the company has a good liquidity position and profit percentage.

The company is engaged in the activity of manufacturing automobiles and aiming at very high level of production. As such, the current assets is not stable in all the years, which shows the result of increase/decrease in net working capital sometimes , due to the fluctuations in the cost price. However, the

company is managing the working capital in smooth manner, leading them for success in their business in this competitive scenario.

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