Volvo Working Capital Management

WORKING CAPITAL MANAGEMENT
CHAPTER 1
INTRODUCTION
1.1 Industrial bac!r"und
Industries are the backbone of the country. The economic development of
any country largely depends on the industrialization. India is basically an
agriculture-based country. It is only after the independence; India has give
importance to the growth of the industry through 5 year planning
programmers Government has taken a leading role for programming the
movement of Industrialization.
ORIGIN O# THE AUTOMOTI$E INDU%TR&'
Though ancient hinese writers described steam-powered vehicles!
and both steam- and electric powered cars competed with gas-powered
vehicles in the late "#
th
cent. $renchman %ean %oseph &tienne developed
the first practical internal combustion engine '"()*+ and later in the decade
several inventors! most notably ,arl -enz and Gottlieb .aimler! produced
gas-powered vehicles that ultimately dominated the industry because they
were lighter and less e/pensive to build. $rench companies set the design
of the modern auto by placing the engine over the front a/is in the "#(*0s
and 1.2 manufactures made important advances in the mass production of
the auto by introducing cars with interchangeable machine produced parts.
In "#"3 4enry $ord began to mass produce cars using assembly
lines. In addition! his practice of providing loans to consumers to buy cars
'"#"5+ made the model-T affordable to the middle class. In the "#5*0s
General 6otors further changed the industry by emphasizing car design.
The company introduced new models each year! marketed different lines
SMt. Danamma Channabasavaiah Mahila Samaja first grade college 1
of cars to different income brackets and created a modern decentralized
system of management. 1.2 auto sale grew from 3!*** in "#** to
(#5!#*** in "#"5! to 7.8 million in "#55! sales dropped in only "." million
in "#75 and during 9orld 9ar II! the auto factories were converted to
wartime production.
INDU%TR& PRO#ILE
:- ;olvo! ;olvo cars is the passenger vehicle maker owned by the
$ord 6otor ompany using the ;olvo Trade 6ark.
The ;olvo group is a 2wedish supplier of commercial vehicles such
as trucks! buses and construction e<uipment! drive systems for marine and
industrial applications! aerospace components and financial services.
:lthough ;olvo was incorporated in "#"5 as a subsidiary of :- 2,$! a
2wedish ball bearing manufacturer! the auto manufacturer was officially
founded on "3 :pril "#58! when the first car rolled out of the factory in
4isingen! Gothenburg.
;olvo means =I roll> in ?atin! con@ugated from =volvere> 'cp the
ball bearing producer 2,$+. The name ;olvo was originally registered in
6ay "#"" as a separate company within 2,$ :- and as a registered
trademark with the intention to be used for a special series of ball bearing!
but this idea was only used for a short period of time and 2,$ decided to
use =2,$> as the trademark for all its bearing products.
In "#53! :ssar Gabrielsson! a 2,$ 2ales 6anger! and &ngineer
Gustav ?arson! the two founders! decided to start construction of a
2wedish car. Their vision was to build cars that can withstand the rigors of
2weden0s rough roads and cold temperatures. This has become a feature of
;olvo products ever since.
The company :- ;olvo had no activities until "* :ugust "#5)! after
one year of preparations involving the production of ten prototypes! was
set up to carry out the car-manufacturing business within the 2,$ group.
:- ;olvo was introduced at the 2tockholm stock e/change in "#75 and
2,$ then decided to sell its shares in the company. ;olvo was desisted
from A:2.:B in %une 5**8! but remains listed on the 2tockholm
e/change.
The first series produced ;olvo automobile! the ;olvo C;3! left the
factory on "3 :pril "#5( which become the official date for the founding
of ;olvo.
6arine engines have been part of the group almost as long as trucks.
Dentaverken! founded in "#*8! was ac<uired in "#75. :s early as "#5#!
however! the outboard engine was introduced. 6anufacturing of continued
until "#)5.
Gr"u( C")(ani*s
ompanies within the ;olvo Group areE
;olvo Trucks
Fenault Trucks
6ack Trucks
Aissan .iesel 6otor o! formerly 1.
;olvo buses
;olvo onstruction &<uipment
;olvo Denta
;olvo :ero
;olvo $inancial 2ervices
-usiness units
The group companies are supported by a number of business unitsE
;olvo 7D
;olvo power train
;olvo ?ogistics
;olvo Information Technology
;olvo parts
;olvo Technology
;olvo Technology Transfer
;olvo -usiness 2ervices
;olvo Treasury
;olvo Group Feal &state
;olvo &vent 6anagement! which coordinates sponsorship activities
including the ;olvo Ccean Face
Drevost car! owned by ;olvo -us orporation! is the leading Aorth
:merican manufacturer of premium touring coaches and bus shells
for high G end motorhomes and specialty conversions. Aova -us.
Dart of prevost! stands as a Aorth :merican leader in the design!
production and marketing of urban transit buses.
;olvo -uses is a subsidiary and a business area of ;olvo which
became an independent division in "#)(.
It is the world0s second largest bus manufacturer! with a complete
range of heavy buses for passenger transportation. The product
range includes complete buses and coaches as well as chassis
combined with a comprehensive range of services.
The bus operation has a global presence! with production in &urope!
Aorth H 2outh :merica! :sia and :ustralia. Cne former production
facility was located in Irvine! 2cotland.
1.+ %U,-ECT ,ACKGROUND
#INANCE
The first and the foremost aspect to start any business is finance.
$inance is said to be the life blood of any business. Therefore it becomes
very necessary to know the e/act meaning of finance.
$inance is derived from a ?atin word $inance the basic dictionary
meaning of $inance refers to the management of money or money
resources. $inance is the one of the ma@or elements which activates the
overall growth of the economy. $inance is the part of business activity :
well knit financial system directly contributes to the growth of the
economy. :n efficient financial system calls for the effective performance
of financial institutions and financial markets.
W"rin! Ca(ital
9orking apital management is concerned with the problem that arises in
attempting to manage the current assets! current liabilities and the
interrelationship that e/ists between them. The term current assets refers to
those which are in ordinary course of business! can be! or will be! convert
into cash within one year without undergoing a diminution in value and
without disrupting the operation of the firm.
9orking capital management is a financial metric which represents
the amount of day by day operating li<uidity available to a business along
with fi/ed assets such as plant and e<uipment. 9orking capital is
considered as part of the operating capital. It is calculated as current assets
minus current liabilities. : company can be endowed with assets and
profitability but short li<uidity if these assets cannot readily converted into
cash.
The ma@or current assets cash! marketable securities! accounts
receivable and inventory. urrent liabilities are those liabilities which are
intended! at their inception to be paid in the ordinary course of business!
with in a year out of the current assets or earning of the concern. The basic
current liabilities are account payable bills payable! bank overdrafts! and
outstanding e/penses.
omponents of urrent :ssets
ash I -alances with F-I
-alances with -anks I 6oney at call I short Aotice.
:pproved securities.
-ills Durchased I discounted.
ash redit.
Interest :ccrued.
2tationary I 2tamps.
Aon--anking :ssets.
C")("n*nts ". Curr*nt Liabiliti*s
.emand .eposits.
-ills Dayable.
Interest :ccrued.
&very organization will have the goal of =working capital
management is to manage the firm0s current assets and current liabilities is
such a way that a satisfactory level of working capital is maintained>.
This is because if the firm cannot maintain a satisfactory level of
working capital it is likely to become insolvent and many even be forced
into bankruptcy. The current assets should be large enough to cover its
current liabilities in order to ensure a reasonable margin of safety.
&ach of the current assets must be managed efficiency in order to
maintain li<uidity of the firm while not keeping too high level of any one
of them. &ach of the short-term sources of financing must be continuously
managed to ensure that they are obtained and used in the best possible way.
=the interpretation between current assets and current liabilities is!
therefore the main theme of the theory of working capital>.
oncepts of working capital
9orking capital management is concerned with the management of
currents assets and current liabilities and the interrelationship that e/ist
between them. It is important and integral part of financial management as
short term survival is pre-re<uisite for long term success. If a firm does
not have ade<uate working capital! that is it does not invest sufficient funds
in current assets! it may become li<uid and conse<uently may not have the
ability to meet its current obligation and thus! invite the risk bankruptcy. If
a firm does not have ade<uate working capital! that is! it does not invest the
risk sufficient funds in currents assets! it may become li<uid and
conse<uently may not have the ability to meet its current are too large!
profitability is adversely affected. Thus the management of working
capital has two ingredients.
o :n overview of working capital management as a whole and
o &fficient management of the individual current assets such as cash!
receivable and inventory.
N**d and i)("rtanc* ". /"rin! ca(ital
To fulfill its endeavor to ma/imize the those holders wealth! firm
has to earn sufficient return from its operations which needs a successful
sales activity.
The firm has to invest sufficient funds in current assets to succeed in
sales! as the sales do not convert into cash instantaneously because of gap
between the sales of goods an actual receipt cash.
The working capital need arises for the following purposes.
$or purchasing raw materials! components and spare parts
$or paying wages and salaries
To incur day to day e/penses and over head costs like fuel! power
and office e/pense etc
To meet selling cost of packing advertising
To provide credit facilities to customers
To maintain inventories of raw materials work in progress! spare
parts and finished goods.
T0(*s ". /"rin! ca(ital
". Gross working capital permanent working capital
5. Aetworking capital
Gr"ss W"rin! Ca(ital
The total of current assets are termed as the gross working capital or
circulating capital. Total : includes cash! bank! marketable securities!
accounts receivable! inventories! prepaid e/penses! advance payment of
ta/.
Gross capital concepts focus attention on 5 aspects
". Cptimum investment in current asset.
5. $inancing of current asset.
N*t W"rin! ca(ital
A9 as a measure of li<uidity is not very useful for comparing the
performance of different firms! but it is <uite useful for internal control.
The A9 helps in comparing the li<uidity of the same firm overtime.
= The goal of working capital management is to manage the current
assets and liabilities in such a way that an acceptable level of A9 is
maintained>.
N*t /"rin! ca(ital can b* d*.in*d in t/" /a0s'
o A9 is the different between : and ?
o A9 is that portion of current assets which if financed with long
term funds.
The task if financial manager is managing working capital efficiently is
to ensure sufficient li<uidity in the operations of the enterprise. The
li<uidity of a business firm is measured by its ability to satisfy short
term obligations as they become due. The three basis measures of a
firm overall li<uidity areE
The current ratio
The acid test ratio
The net working capital
Classi.icati"n ". W"rin! Ca(ital
P*r)an*nt W"rin! Ca(ital
It is the minimum investment kept in the firm in the form of
inventory 'raw material! work in progress! finished goods stores and
consumable and book debts to facilitate uninterrupted operation in a firm.
It will be stable in short run but varies in long run.
T*)("rar0 W"rin! Ca(ital
:n amount over and above the permanent level of working capital is
known as temporary working capital which is to be maintained to satisfy
cyclical demand and to support the change in production and sales
activities. The additional working capital is re<uired to meet unforeseen
events like strikes! floods! fire and price hikes and contingencies.
Working
capital
Permanent
Working
Net
Working
Gross
Working
Time
basis
Concept
basis
Temporary
Working
C")("n*nts ". W"rin! Ca(ital
&fficient management of working capital involves effective control
over current assets and current liabilities are the components of working
capital.
Curr*nt Ass*ts
The assets which in due course of business can be or will be
converted into cash within one year without undergoing a reduction in
value and without disrupting the operations of the firm are referred to as
current assets. The components of current assets includeE
2tock of material in trade and in transit
2tores and spares parts
2undry debtors.
-ills of e/change
?oans and advances
.eposits
ash and bank balance
Investment in government and other securities
:mount due from subsidiary companies
Drepaid e/penses
Cutstanding incomes
Curr*nt Liabiliti*s
urrent liabilities are intended to be paid within one year through the
sale of the current asset or earning of the concern. It includesE
2undry creditors
:ccounts payable
?oans from bank and others
Drovision for ta/ation! dividend
?iabilities towards gratuity
Income received in advance.
I)("rtanc* ". /"rin! ca(ital
It minimizes the cost of working capital by maintaining minimum
level of current asset! the portion of current asset is financed by long
term sources of capital.
It ma/imizes the profits of a firm by avoiding blocking up of funds
on current asset
To maintain an uninterrupted production in the firm! by maintaining
ade<uate raw material and book debts
It effects the firm li<uidity and profitability
It is concerned with determination of relevant of current assets and
their efficient use as well as the choice of the financing mi/.
The investment in current asset represents as substantial portion of
total investment.
Ob1*cti2*s ". /"rin! ca(ital )ana!*)*nt
". To ensure optimum investment in current asset which gives more
profitability
5. To strike the balance between the twin ob@ectives of li<uidity and
profitability in the use of funds.
7. To ensure ade<uate flow of funds for current operations.
3. To speed up the flows of funds or to minimize the stagnation of funds.
$actors influencing working capital re<uirements
a. Aature of business
b. 2ales and demand conditions
c. 2ize of the business
d. 2eason ability of operations
e. onditions of supply of raw materials
f. Droduction policy
g. redit policy
h. :vailability of credit
i. Drice level changes
@. .ividend policy
k. Cperating ycle
l. Ta/ levels
W"rin! ca(ita c0cl*
It is time that elapses to convert raw material into cash. The
continuing flow from to suppliers to inventory! to accounts receivable and
back into cash. It involves
a+ onversion of cash into raw materials
b+ onversion of raw materials into work in progress
c+ onversion of work in progress into finished goods
d+ onversion of finished goods into sales
N**d t" )aintain ,alanc*d W"rin! ca(ital
$or ma/imization of profits or minimization of cost or to maintain
li<uidity and profitability there is a need to maintain a balancing working
capital. It should not be e/cessive or ade<uate working capital. -oth are
dangerous to the firm.
L*2*l ". /"rin! Ca(ital
a) Current asset policy or current asset financing policy
-oth are part of working capital policy! the two important issues in
formulating working capital policy are the ratio of current asset to sales
and the ratio of short term financing and through long term financing.
It is nothing but current asset in relation to sales or level of current
asset to sales. The investment in current asset depends upon the forecast of
sales! inventory level! and pattern of production and split between cash
sales and credit sales.
The current asset policy of the firm may be three types;
onservation : policyJ
6oderate : policy
:ggressive : policy
C3""sin! t3* /"rin! ca(ital ("lic0
The overall working capital policy adopted by the firm may be!
onservation overall working capital policyJ
6oderate overall working capital policy
:ggressive overall working capital policy
6oderate overall
9orking capita policy
:ggressive overall
9orking capital policy
onservation overall
6oderate overall
onservative :ssertive
1. C"ns*r2ati2* "2*rall /"rin! ca(ital ("lic0
It means the firm chooses a conservation current asset policy along
with a conservative current asset financing policy. It reduces risk and offer
low returns.
2. M"d*rat* "2*rall /"rin! ca(ital ("lic0
It reflects a combination of conservative current asset policy and an
aggressive current asset financing policy.
4. A!!r*ssi2* "2*rall /"rin! ca(ital ("lic0
onsist of aggressive current asset policy and an aggressive current
asset financing policy. It provides high risk and high return. The choice of
overall working capital policy would depend upon! the risk disposition off
management. If a firm is ready to take high risk! it can aggressive overall
working capita policy.
I)("rtanc* and ad2anta!*s ". /"rin! ca(ital
9orking capital is lifeblood and nerve center of a business. %ust as
circulation is essential in the human body for maintaining life! working
capital is very essential to maintain the smooth running of a business.
The main advantages of maintaining ade<uate of working capita are as
followsE
%"l2*nc0 ". t3* busin*ss'
:de<uate working capital helps and maintaining solvency of the
business by providing uninterrupted flow of production
G""d/ill'
2ufficient working capital enables business concern to make prompt
payments and hence in creating and maintaining goodwill.
Eas0 l"ans'
: concern having ade<uate working capital high solvency and good credit
standing can arrange loans from and others on easy and favorable terms.
Cas3 disc"unt'
:de<uate working capital also enables a concern to avoid cash
discount on the purchases and hence it reduces costs.
R*!ular su((l0 ". ra/ )at*rial'
2ufficient working capital ensures regular supply of raw material and
continuous production.
R*!ular (a0)*nt ". salari*s /a!*s and "t3*rs da0 t" da0
c"))it)*nts'
: company which has working capital can make regular payment of
salaries! wages and other day to day commitments which raises the morale
of its employees! increases their efficiency! reduces wastages and costs and
enhances production and profits.
#"r*cast "r Esti)at* ". W"rin! Ca(ital
9orking capita is the lifeblood and controlling nerve center of
business. Ao business can be successfully run without and ade<uate
amount of working capital. To avoid shortage of working capita at once an
estimate of working capital re<uirements should be made in advance so
that arrangements can be made to procure ade<uate working capital. -ut
estimated of working capital re<uirements is not an easy task and a large
number of factors have to consider before have to be taken into
considerations while making an estimate of working capital re<uirements.
Total cost incurred on materials! wages and overheads
The average period of credit allowed to customers
The average amount of cash re<uired to make advance payments!
if any!
Time lag in the payments of wages and other e/penses.
The length of sales cycle during which finished goods are to be
kept waiting for sales.
The length of time for which raw materials are to maintain in
stores before they are issued for production.
%"urc* ". /"rin! ca(ital
The source of working capital may be classified under two heads
short term sources for meeting the variable working capital re<uirements
and long term sources for meeting the permanent working capital
re<uirements.
%3"rt t*r) s"urc*s ". /"rin! ca(ital
Trad* cr*dit' This refers to the credit obtained form the suppliers of
goods from suppliers on credit.
,an cr*dit' This refers to the credit financial accommodation or
advances taken from commercial banks. -anks credit may take the
form of cash credit loans and bills.
Cust")*r ad2anc*' This refers to the advances received by the firm
from its customers before the delivery of goods. These advances are
for part of price of the goods ordered by the customers.
%3"rt t*r) (ublic d*("sits' It is the deposit accepted by a concern
for the general public for a short period not e/ceeding one year.
They are popular concerns which have high credit slandered in the
markets. They are obtained without any security to the depositors.
L"n! t*r) s"urc*s ". /"rin! ca(ital
Dublic deposit
Fedeemable preferences shares
Dlugging back of profits
Term finances from industrial finance corporation.
DI##ERENT A%PECT% O# WORKING CAPITAL
Mana!in! t3* cas3 .l"/s'
1. Management of Cash
&/cess cash remains idle and in los or profit! while shortage of cash
disrupts the normal working of a concern. 2o every concern should ensure
that it has sufficient amount of cash! which neither more or less! but is
sufficient to meet its re<uirements. &nsuring of the providing of cash to all
sections of the organization and ensuring that not all idle is called cash
management in short it means planning and control of cash. The main
ob@ective are to be meet the cash payments as per the payments schedule
and to minimize the amount locked up as cash balance.
Thus! cash management is concerned with the managing ofE
o ash inflows into and outflow of the firm.
o ash flows within the firm
o ash balance held by the firm at any point of time by the
financing deficit or investing surplus cash.
Mana!in! t3* cas3 .l"/s
ontrolling cash inflow the main ob@ectives of this is the prevention
of defalcation of cash by employs and increasing cash inflows through
speedy collection from the customers. This may be done through following
devise.
Droper system of internal check
Increasing the cash sale
oncentration banking
?ock bo/ system
6aintaining the minimum number of bank accounts.
C"ntr"llin! ". cas3 "ut.l"/s'
This is done by mainly to slow down disbursement or payment of cash a
for as possible. The techni<ues used for this include
entralized system of payment
Dayment only on due dates
Techni<ues of playing float
.elaying the salary or wages payments.
Mana!*)*nt ". r*c*i2abl*s'
6anagement of accounts receivable means of the account
receivables at an optimum level at which these is a tradeoff between
profitability and costs. It is the process of making such decisions of
investments on accounts receivable. 9hich will result in ma/imum return
of the firm.
:s the receivables constitutes a large position of total current assets and
there is a further risk of bad debts when they become very old! hence
proper management of accounts receivable is must management of
accounts receivables has there aspects
They are,
&stablishing credit policy of the concern! this includes determines of
the level of credit sales! credit standards and credit terms.
&stablishing collection policy of the concern it means determination
of the policy and procedures to be followed for the collections of
accounts receivables.
ontrol of the accounts receivables! this consist of maintaining the
account receivables at a minimum possible level.
Mana!*)*nt ". in2*nt"ri*s'
Inventories constitute a significant portion of the assets of many
business under takings. Th
e bank of working capital is locked up in inventories so inventories
management has ac<uired great importance in management working
capital. The main ob@ective of inventory control is to ensure ade<uate
maintenance of suppliers of raw materials stores and supplies to keep the
investments in inventory as low as possible to prevent or minimizes loss
due to obsolescence! deterioration and to have effective control over
purchase storage and use of materials.
Ob1*cti2*s ". in2*nt"r0 )ana!*)*nt'
To maintain a re<uired level of inventory for sufficient and smooth
production and sales operations.
To keep the investment in inventories as low as possible to
ma/imize profitability.
To ensure effective utilization of storage capacity of space.
To have effective control over purchases storage and use of
materials.
-oth e/cess and inade<uate inventories are not desirable. :n optimum
level of investment in inventory should be determined which will balance
the cost and profitability.
#"r)s ". in2*nt"r0
Faw materials
9ork in progress
$inished goods.
T""ls ". /"rin! ca(ital anal0sis
Gr"ss curr*nt ass*ts'
This is total tells us the amount invested in various components of
currents assets. It tell us proportion of various current assets and its shares
in a total investment of the company. -y standing this financial manager is
able to manage efficiently the working capital which ensures the greatest
returns on its investments planning and control of funds.
N*t curr*nt ass*ts'
It reflects net blocking of funds in current assets i.e. the e/cess
investment in current investment in current assets after compensating for
its current liabilities.
Rati" anal0sis'
Fatio analysis is the techni<ues of the calculation of a numbers of
accounting ratio from the data or figures found in the financial statements!
the comparison of the accounting ratios with those of the previous years or
with those of other concerns engaged in similar line of activities or with
those of standard or ideal rations and the interpretation of the comparison.
Curr*nt rati"'
urrent ratio is a ratio which e/presses the relationship between the
current assets and current liabilities. urrent assets refers to all those
assets. 9hich can be concerned into cash with one year current liabilities
are those liabilities which are to be paid with in one year.
urrent assets
urrent ratio K
urrent liabilities
5uic rati"'
Buick ratio is the ratio! which e/press the relationship between the
<uick currents and <uick liabilities.
Buick assets refer to those current assets which can be converted
into cash <uickly! with in a very short period <uick liabilities refers to all
those liabilities which are to be paid with in one year. They include all
current liabilities e/cept cash credit and bank over draft.
Buick currents
Buick ratio K
Buick liabilities
N*t /"rin! ca(ital rati"'
The different between current assets and current liabilities e/cluding
short term bank borrowing is collect net working capital or net current
assets.
Aet working capital K urrent assets G urrent liabilities
C"ll*cti"n (*ri"d'
The average number of days for which debtors remain outstanding is
called the average collection period and can be computed as follows.
:verage collection period K 7)* days H debtors turnover ratio.
lassification of FatiosE
Fatios can be broadly classified into three categories. They are as
under
I. ?i<uidity Fatios
II. ?everage or apital 2tructure Fatios
III. Drofitability Fatios
C3a(t*r + Rati"s us*d ."r t3* (ur("s* ". anal0sis'
Li6uidit0 rati"s'
1. Current ratio :
Cne of the important li<uidity ratios is the current ratio! current
ratio is the ratio! which e/presses the relationship between the current
assets and current liabilities .It is calculated by dividing current assets
by current liabilities. It is e/pressed as under.
urrent ratioK
2. Absolute liqui ratio or cash position ratio :
:bsolute li<uid ratio is the best ratio ! which indicates the
li<uidity of a concern. It is the ratio ! which e/presses the
relationship between absolute li<uid assets and <uick liabilities ! It
is e/pressed as under.
:bsolute li<uid asset
:bsolute li<uid ratio K
Buick liabilities
C3a(t*r 4 L*2*ra!* rati"s
1. !i"e assets to net #orth ratio :
$i/ed assets to Aet 9orth Fatio is the ratio that e/presses the
relationship between assets and net worth . The fi/ed assets to net
worth ratio e/pressed as under .
Aet fi/ed assets
$i/ed assets to Aet worth Fatio K
Aet worth
2. Current Assets to $et #orth ratio :
urrent assets to net worth ratio is the ratio between the
current assets and net worth . The current assets to net worth ratio
is e/pressed as under !
urrent assets
urrent assets to net worth ratio K
Aet worth
%rofitability ratios:
1. Creit eposit ratio :
redit deposit ratio is the ratio n between credit and deposits
in the bank .The credit deposit ratio is e/pressed as under !
redit
redit deposit ratio K L "**
.eposit
2. Current eposit to total eposits ratio :
urrent deposits to total deposits ratio is the ratio which
indicates the share of current deposits in the total deposits.
The current deposits to total deposits ratio is e/pressed as under!
urrent deposits
urrent deposits to total deposits ratio K L "**
Total deposits
&. 'a(ing s eposit to total eposits ratio :
2avings deposits to total deposits is the ratio which
indicates the share of savings deposits in the total deposits
in the total deposits . The savings deposit to total deposits is
2avings .eposits
2avings .eposits to Total .eposits Fatio K L "**
Total deposits
). Term *eposits to total eposits ratios :
Term deposits to total deposits in the total deposits .The term
deposits to total deposits ratios is e/pressed as under E
Term deposits
Term .eposits to total deposits ratio K L "**
Total deposits
+. ,nterest income to #or-ing funs ratio :
Interest income to 9orking funds ratio refers to the ratio which
indicates the interest income and working funds. Its indicates the
yield on the funds used through interest earned. The interest income
to working funds ratio is e/press as under E
Interest income
Interest income to working funds ratio K L "**
9orking funds
.. $on / interest income to #or-ing funs ratio:
The non - internet income to working funds ratio refers to the
ratio between The non internet income and working funds. The non -
Internet income to working funds ratio is e/press as under.
Aon Interest Income
Aon -Interest income to working funds ratio K L"**
9orking funds
0. Total income to #or-ing funs ratios:
Total income to working funds ratio is the ratio between the
total income and working funds .It include the income earned on
the funds employed.
Total income
Total Income to working funds ratio K L"**
9orking funds
1. $on / ,nterest income to total income ratio :
Aon G interest income to Total Income to Total Income Fatio
between the non - interest income and total income. It highlights the
share of non - interest income in the total income of the bank.
The Aon - Interest Income to total income ratio is e/press as
under E
Aon - Interest Income
Aon Interest Income to Total Income Fatio K L"**
Total income
2. 3perating e"penses to #or-ing funs ratio :
Cperating e/penses to working funds ratio is the ratio between
operating e/penses and working funds. The operating e/penses to
working funds ratio is e/pressed as under ;
Cperating e/penses
Cperating e/penses to working funds ratio K L"**
9orking funds
14.3perating profit to #or-ing funs ratio :
Cperating profit to working funds ratio is the ratio between
operating profits to working funds. The operating profit to working
funds ratio is e/pressed as under!
Cperating profit
Cperating profit to working funds ratio K L"**
9orking funds
11. $et profit to #or-ing funs ratio :
The net profit to working funds ratio is the ratio which
indicate the relationship between the profit and working funds It
shows the return on funds employed. The net profit to working funds
ratio is e/pressed as under;
Aet profit
Aet profit to working funds ratio K L "**
9orking funds
CHAPTER +
RE%EARCH DE%IGN
+.1 Titl* ". t3* stud0'
: study on =WORKING CAPITAL MANAGEMENT7 AT $OL$O
,U%E% INDIA P$T. LTD.
+.+ %tat*)*nt ". (r"bl*)'
In this competitive business world high efficiency of business is
very much important for this success. It mainly depends upon how the
company is archiving its goals and its profitability and these two main
aspects are considered to be critical these two factors are considered as
very essential for the long term e/istent of business each and every
business unit should concentrate on their skills resources and abilities to
achieve the productive and efficiency in every sphere of their activity.
The above scenario e/plains profitability and achievement of
targeted goals to be two main management 'creditor0s decision maker0s
economists others to @udge the operation+ aspects over which financial
discipline should be cautions. It is for these reasons that the management
creditors decision makers! economist others to @udge the operating
performance and financial positions of the firm use financial statements.
-ased on the above one has to manage the inflow and outflow of
funds in an optimum manner he has to watch and analyze each element!
which results in inflow as outflow of bunds working capital is having a
direct relationship with funds flow analysis of the concern to manage
working capital efficiency we should analyze the elements of working
capital.
6anagement of working capital is one area! which attracts the
immediate attention when we speak about costs. It is here where we can
minimize the cost an various aspects like managing raw material 9ID!
managing finished goods! managing accounts receivable! managing
creditors! and ultimately managing li<uidity i.e. cash. It is evident from the
above that the need to be strong in managing the working capital and thus
the study of management of working capital is essential.
9orking capital analysis depends to a larger e/tent on the study of
each asset larger e/tent on the study of each asset by calculating ratio0s
preparing fund flow statements etc! there techni<ues helps us in scientific
decision making process or in deciding the efficiency in utilizing of
working capital.
+.4 O,-ECTI$E% O# THE %TUD&
The main ob@ective of study is to discuss the importance of working
capital in the business and to ascertain the financial position of the
company. This will help to know how efficiency working capital is
managed. This will be an aid in taking corrective action by the
management. It bring out the strength and weakness in the financial
management of the corporation.
This appraisal is an important function of the management and will help
the management to review its policy and may decide upon the corrective
actions to be taken in feature. $ollowing are some of the specific
ob@ectives of the study.
To known the company vision and mission.
To study the company current assets and current liabilities.
To ensure the which technology is used in working capital
management
To study the working capital re<uirements and trends of managing
working capital
To study in detail! the reason for the fluctuation in working capital
To determine the amount of working capital employed by ;olvo
buses India private limited
To analyze the financial performance of ;olvo buses India private
limited
To understand the facts about why the working capital management
happens to be one of the important aspect of ;olvo
+.8 %COPE O# THE %TUD&
To study was taken up to know the financial activities in $OL$O
,U%E% INDIA P$T LTD to their business activities and the study is done
to ascertain the financial position and performance of the organization.
The study was done to know the financial activities of the company
and also the contribution of financial activities within the
community.
The study was done to ascertain the financial status of the firm.
The field was done to ascertain the financial status of the firm.
The field of financial analysis and interpretations comprises of ratio
analysis! leverages and turnover ratio.
The study was made to analyze the financial performance with
reference to financial statements.
+.9 O(*rati"nal D*.initi"ns ". t3* C"nc*(ts
W"rin! ca(ital' 9orking capital management is concerned with the
problem that arises in the attempting to manage the current assets current
liabilities and the interrelationship that e/ists between them. The term
current assets refers to those which are in ordinary course of business! can
be or will be! converted into cash within one year without undergoing a
diminution in value and without disrupting the operation of the firm.
Curr*nt ass*ts'
The assets which in due course of business can be or will be converted into
cash with in one year without undergoing reduction in value and without
disrupting the operation of the firm are referred to as current assets.
Curr*nt liabiliti*s'
urrent liabilities are indented to be paid within one year through the sale
of the current assets as earning of the concern. It includes
#inancial Mana!*)*nt'
$inancial management is the area business management developed
to a @udicious use of capital and a careful selection of sources of capital in
order to enables a business firm to move in the direction of reaching its
goals.
In2*nt"r0 Mana!*)*nt'
Inventory 6anagement refers to the purchase of raw materials from
the right source at the right time and at the right price and supplying the
material to the production department as and re<uired.
+.: METHODOLOG&
The methodology! in turn! depends on the nature of the pro@ect work.
The use of proper methodology is an essential part of any research. In
order to conduct the study scientifically! suitable methods and measures
are to be followed.
In due to course of data collection for converting the above stated
ob@ectives! the study methodologies followed are
Cbservation of the functioning of the finance department.
:n in depth studies of the various books! accounts manual! forms
and reports! ;C?;C -12&2 IA.I: D;T ?IT A&92 magazines
and @ournals! in order to understand the functioning of the division.
Through discussions with higher officials and other staffs members
of the finance department! as to their functions! procedures etc.!
#IELD WORK'
The area of study is Malac*hahally! Tavarekere Dost 4osakote
and the scope of study confines to ;-ID? ';olvo -uses India
Drivate ?imited+
+.; TOOL% #OR DATA COLELCTION'
%"urc*s ". data'
a. Drimary data
b. 2econdary data
Pri)ar0 data'
Drimary data for study is collected form observations and
discussions with the officers and the employees.
%*c"ndar0 data'
2econdary data is available from the past studies and records. :lso!
the secondary data is collected from the accounts manual maintained by
the company! newsmagazines! and @ournals and through ;C?;C website.
+.; RE#ERENCE PERIOD
The reference period of this study was 7* .ays i.e.! " 6onth.
+.< LIMITATION O# THE %TUD&'
". The study included collection of data through interaction with
official and the findings were based on the premises that
the respondent have given correct information.
5. The limitations of the techni<ues of ratio analysis also hold
well in their case .
7. .ue to time constraints! the study is restricted to the financial
statement of ;-ID?.
+.= CHAPTER %CHEME
CHAPTER > 1
Intr"ducti"n t" t3* stud0'
This chapter gives a briefing about the various aspects necessary for
the study and the study. It consists of meaning and information
about the various aspects used in the study.
CHAPTER > +
RE%EARCH DE%IGN
This chapter includes the scope of the study ! the methodology
involved ! the ob@ectives of the study ! the tools of data collection and
the limitations of the study.
CHAPTER >4
Pr".il* ". t3* c")(an0'
This chapter provides the insight about the past and present
standing of the company and also gives us a view about the
achievements of the company.
CHAPTER >8
.ata analysis and interpretationE
This chapter involves thorough analysis and interpretation of the data
collected. It also includes graphs showing the trend in the post and present.
C3a(t*r ? 9
%u))ar0 and #indin!s and C"nclusi"ns
This section concludes the study by summarizing the inferences
drawn from the analysis. Cn the basis of the inference final conclusions
are drawn in relation to the set ob@ectives of the research.
Fecommendations suggest some measures that can be adopted by the
company either to improve its financial position.
C3a(t*r ? :
R*c"))*ndati"ns @ su!!*sti"ns'
Fecommendations suggest some measures that can be adopted by
the company either to improve their financial position or to e/ploit the
financial status of the company.
A((*ndic*s @ ann*Aur*
,ibli"!ra(30
4.1 INCEPTION
NAME O# THE COMPAN&' ;ovlo -usses India Drivate ?imited
LOCATION' Malachally!
Tavarekere Dost 4osakote!
-angalore - 5)5"55
&EAR O# E%TA,LI%HMENT' "##(
%TATU%' 9orld 9ide Drivate under Taking
O##ICE' orporate office ;-ID?
;C?;C 4I2TCFM
,ANGALORE &ven since ;olvo initiated dialogue with the people of the
neighbouring Manc3a(ana3all0 and &alac3a3all0 villages in "##( when
it began operations at 4osakote! it has come a long way.
;olvo recently announced the success of its community
development programmes launched in these villages for generating
employment! bettering the civic amenities! facilitating literacy and
involvement of neighbors in the day-to-day activities of the company.
Two 5-km-long un mettled main roads in these villages! maintained
by ;olvo ever since they launched operations at 4osakote! have made life
easier for villagers.
.rains have also been constructed to improve sewage and sanitation.
In "###! two school buildings were built. The telephone e/change
building near by was also upgraded recently.
The company also provided a grant of Fs. 7* ?akh for development
of villages! besides working with the authorities on the electrical sub-
station in the area. : sponsored ambulance for emergencies is in active use
today.
=9ith our new company opening shop in the area! there was bound
to be some curiosity among villages! Father than facing unwanted
interference! we decided to improve surrounding villages and involve
villagers!> ;olvo India0s 4F head &mmanuel .avid said.
-ut ;olvo0s philosophy of sharing has e/tended for beyond bettering
the civic amenities. ;illagers have been employed as workers and
operators in ;olvo0s garden maintenance and housekeeping. = 9e
outsourced manpower from these villages to generate employment>.
;illagers and truck drivers have been enrolled into ;olvo0s .river
Training Drogramme to e<uip them with skills for better employment in
future. =9e either place them in @obs that use ;olvo vehicles or they are
free to @oin a @ob of their choice!> ;olvo0s ;D 'marketing+ :rne ,naben
said.
1nskilled drivers come from as far as Fa@asthan! ,erala! -ihar!
hennai or 1D. It trains each batch of students in the age group of 3* plus.
$or ;olvo! community development initiatives means sharing a little
of themselves with their neighboring communities! for better living.
C"lla(ar"t"rs'>
2weden! zed
;olvo -uses 4ong ,ong
;olvo -uses Germany
;olvo -uses Gustatory
Aova -uses 12:
;olvo -uses Droduction Drinciples and 2outh in Aorth :merican
6e/ico
;olvo -uses -uilds 2trong -ase in :ustralia
;olvo -uses 1,.
,"ard ". Dir*ct"rs'>
Haan Karlss"n ? Pr*sid*nt @ CEO $"l2" ,us
C"r("rati"n
Fune ?unolbery - hairman I 6anaging
.irector
:kash Dassey - 6anaging .irector
6athias :rvidrron G .irector
-upinder 2ingh hadha G .irector
:mar@eet 2ingh chadha G .irector
2ubhash ,aul - .irector
;ishwanath.,.2 - hief $inancial officer
Famamurthy., G ompany 2ecretary
&wa Gierc - hief financial officer.
ORGANI%ATION %TRUCTURE O# $OL$O
D*(art)*nt ". t3* Pr*)i*r and Cabin*t
%COPE @ PURPO%E
The scope and purpose of this transfer pricing documentation is to
identify the international transactions by and between ;olvo -uses India
private ?imited and its associated enterprises as defined in the Indian
Transfer Dricing regulations. 6ore over! this document analysis the
international transaction! applies the most appropriate method with the
ob@ective of complying with the documentation re<uirements under the
purview of the India Transfer pricing regulations 'TDF+ in respect of the
financial year ended 7"
st
6arch! 5**#.
O,-ECTI$E% O# $OL$O COMPAN&'
To undertake the manufacture! assembly! development and
marketing of bus and coach bodies and their spare-parts components
and accessories and to engage in the repair of bus and coach bodies
and provide after sales services to customers.
To maintain stocks of the products for marketing and distribution in
India and abroad.
To manufacture and deal in a wide range of bus and coach products
providing a global service network! financial service! customized
transport solutions! system solution for public transport and traffic
information systems.
To provide customer satisfaction
To earn more profitability.
,usin*ss Units
The business units are organized globally and combine e/pertise in
key areas. They have the overall responsibility for product planning and
purchasing! and developing and delivering components! subsystems!
services! and services and support to the group0s business areas. The
structure creates economies of scale in product development! production
and parts supply! logistics! administration and support functions. ;olvo
operates in the following business units.
$"l2" 4P> ;olvo 7D is responsible for product planning! product
development and purchasing for the group0s truck companies.
Droduct planning involves having the right products over the longer
term. Droduct development focuses on chassis! cabins and electrical
systems. In purchasing! ;olvo 7D offers significant size and
negotiating strength. This unit has 3.*58 employees.
$"l2" P"/*r train> ;olvo power train coordinates the ;olvo group
driveline operations and is responsible for the development and
manufacturing of heavy diesel engines! gearbo/ and driveshaft.
;olvo power train is also responsible for ensuring that the ;olvo
group is supplied with drivelines for medium-heavy applications.
The ;olvo group has common engine platforms that fulfill the latest
environmental re<uirements! a more focused research and
development program! more efficient production and a more focused
supplier structure. This unit has #!"(" employees.
$"l2" Parts> ;olvo parts provide services and tools for the
aftermarket. The services start with the suppliers and proceed via the
dealers all the way to the end-customers. This entails planning!
purchasing! shipping and storing parts! as well as inventory
management! order management! and tools and services for the
aftermarket. This unit has 3!"85 employees.
$"l2" L"!istics> ;olvo logistics develops and provides transport
and logistics solutions to the automotive and aerospace industries
worldwide. Its customers come from both inside the ;olvo group.
;olvo logistics provides customer-adapted services throughout the
logistics chain- everything from the design of comple/ logistics
systems to packaging! insurance and distribution solutions for
finished products. This unit has "!"(5 employees.
$"l2" T*c3n"l"!0- ;olvo technology '=;T&>+ develops new
technology and new concepts for =hard> and =soft> products and
processes in the transportation and automotive industries. The
primary customers are the ;olvo group! ford-owned ;olvo cars and
selected suppliers. ;T& also carries out a few strategic programs
and e/pert functions related to innovation and participates in
national and international research programs involving universities!
research institutions and other companies. This unit has 37"
employees.
T*c3n"l"!0 $"l2" In."r)ati"n > ;olvo information technology0s
'=IT>+ business concept is to manage comple/ IT .elivers solutions
for all segments of the industrial process and provides uni<ue
e/pertise in product lifecycle management! system application
products '=2:D>+ solutions and IT operation. Its customers include
the ;olvo group! ford-owned ;olvo cars! and other large industrial
companies. This unit has 5!75) employees.
#inancial %*r2ic*s> ;olvo $inancial services ';$2+ continued to
provide vital financial services to ;olvo group customers and dealers
throughout the world! focusing on strong credit discipline and a
close working relationship with dealers! customers and the other
business areas in the ;olvo group. This unit has "!5#* employees.
-y constantly developing and improving its products and services in
close cooperation with customers! the group strengthens its
competitiveness while creating value for customers and thus helping
to generate future shareholder value.
O2*r2i*/ ". $"l2" ,us*s India Pri2at* Li)it*d
;olvo -uses India Drivate ?imited was incorporated in -angalore in
Aovember 5**) under the ompanies :ct!"#5) and is a @oint venture
between ;olvo -uses orporation '=;- 2weden>+ and :zad Group!
India. ;-ID? is engaged in the manufacture of ;olvo -uses. urrently the
product profile of ;-ID? consists of 5 models of ;olvo -uses viz;
oaches which are used to ply commuters within the limits of the
city; and
oaches which are used as intercity transport vehicles
.uring the year 5**(-*#! the company sold 3*5 buses. In Cctober
5**(! the company launched a new coach with higher seating capacity and
better driving comfort.
G*"!ra(3ic %*!)*ntati"n ". Aut")"bil* Industr0'
The :sia pacific accounts for 75.(N of the global automobiles
industry0s value. :mericas accounts for 7*.8N of the global automobiles
industry0s value. &urope accounts for 5).8N of the global automobiles
industry0s value. The rest of the world accounts for ).8N of the global
automobiles industry0s value. The table 7 below shows the geographical
distribution global automobiles industryE
#UNCTION CHART B#INANCEC'

6anaging .irector
.irector of $inance
&/ecutive director of $inance
hief General of $inance
General 6anager of $inance
.ept General 6anager of $inance
:sst general manager of $inance
6anager of $inance
:sst 6anager of $inance
Cfficers
:ssistant Cfficers
2upervisors
AWARD% O# $OL$O
IIH% A/ards #"ur $"l2" M"d*ls /it3 T"( %a.*t0 Pic
Cnce again ;olvo has proven itself to be a leader in occupant
protection with an impressive four II42 Top 2afety Dicks!
including the ;olvo L)*.
C"nsu)*r Di!*st
The L)* was named a =onsumers .igest -est
-uy> in the =ars! Dickups! 6inivans! 21;0s!
and 4ybrids> category.
Ed)unds
;olvo is e/cited to announce that edmunds.com named the
volvo L)* a =Top Fecommended> vehicle for 5*"*.
$"l2" DC:E Wins Pr*sti!i"us +E1E
Int*rnati"nal Truc ". t3* 0*ar A/ard
The ;olvo L)* was named 5*"* International
Truck of the year today by the International ar
of they year 'ICTM+ @ury.
W")*nFs W"rld
9omen0s 9orld magazine named its 5*"* = $amily ar of the
Mear>! and it0s no surprise that it was the ;olvo L )*.
#utur* (r"s(*cts'
$isi"n'>
9e the employees of ;olvo way is what defines our couture
encouraging has to assume individual responsibility and ownership our
decisions and to take on new challenges. It constantly remains us that we
can achieve and delivers. hange and improve and reach deliver. hange
and improve and reach even higher goals. 9e work with energy! passion
and respect for the individual.
Missi"n'>
To delight consumer focus we can for our customers we are
dedicated to meeting their high e/pectations today and their long term
re<uirement for the future. ustomers focus is based on every ones
commitment and responsiveness clear ob@ective ;olvo group0s strategic
ob@ectives are based on customers re<uirements and focused on profit
growth! product renewal and operational e/cellence. Buality! safety and
environmental! there corporate values e/press out commitments.
:ll our innovations aim at creative added value for our customers.
The development of new transport related technologies also reinforces our
competitive advantages. &ach business fully leverages and utilizes the
groups common plat forms and processes! solutions and strengths our to
meet their customers specific needs our cultures embodies individuals
responsibility and accountability for results.
C")(*tit"rs'
2wedish university essays about ;olvo C6D&TITCF2
;olvo0s main competitors in it largest market 'the 12+ are
:ccess! :udi! -69 corollas! Tbilisi! ?e/us! 6ercedes--em5
:- ;olvo ompany profiled scab brome 4oover0s Top :-
;olvo competitors. .aimler trucks Aorth :merica ??- Aavistar
international.
;olvo LC -eats ompetition.
Dremises ompany parboil.
:- ;olvo G -uses market report.
1, competitors.
5**# ;olvo s)* competitors G 62A autos.
PRODUCT PRO#ILE
The ;olvo group is the world0s largest manufacture of heavy diesel
engine for commercial use and a significant manufacture of drive lines for
heavy vehicles. The group has production! research and development
facilities for drivelines on three continents and the products are sold to
customers in more than "(* markets worldwide. The drivelines are
designed so they can be adapted to a large number of applications in most
of the Group0s products. The diesel engines are used in trucks! busses and
constructions e<uipment! as well as in boats and industrial applications! set
as generator units.
:fter implementing comprehensive product renewal in recent
years! the ;olvo group continued to launch more new products in 5**( and
now has its more competitive product program to date. The customer
offering will be the further strengthened in the ne/t few years by focusing
intensely on the development of future generations of products and
services that create value for customers.
4ybrid technology is one of the most promising and competitive
technologies of the future for commercial vehicles. ?ast autumn! the ;olvo
Group introducing the fourth-generation hybrid solution on a broad front
for busses! trucks and construction e<uipment. The products includeE-
$"l2" trucs ? in the summer of 5**(! ;olvo Trucks
launched a new generation of trucks in &urope. The
;olvo $4! the company0s bestselling truck for long
haulage! and the ;olvo $4")! the flagship with the
highest tor<ue in the business! received substantial upgrades. :mong the
news was also new ;olvo $6 with an ""-litre engine.
R*nault Trucs> In early 5**(! Fenault Trucks
introduced a new version of the heavy duty truck Fenault
6agnum! which is Fenault Trucks flagship. The main
news was an improved interior with increased driver
comfort. :mong other news was the Fenault kera/ with a "7-litre engine.
Fenault premium distribution hybrys teach is mainly suited for city
distribution and other urban applications. Droduction of the new trucks is
e/pected to begin towards the end of 5**#.
Nissan di*s*l>Aissan diesel introduced the heavy-duty
truck <uon! which in distinguished by its fuel
efficiency! on the important e/port market in 2outh
:frica. &/port of Buon trucks commence in 5**8 when
2ingapore and 4ong ,ong! countries with &uro I; emission demands!
were the first ones out.
Mac Trucs> 6ack introduced a new prestige truck
with a ")-liter engine! the titan by 6ack. the model!
developed specifically for heavy haulage and
construction work! is e<uipped with the new ")-liter
6ack 6D"* engine.
$"l2" ,us*s> :t the ma@or I:: bus and truck
show in 4anover! Germany! ;olvo -uses
launched the first commercially viable hybrid
bus on the market! the ;olvo 88** 4ybrid. 9ith
up to 7*N lower fuel consu mption and hybrid
components from ;olvo! bus operators can earn a
very competitive payback on their investment. In Cctober! ;olvo buses
received its first order for the company0s new hybrid bus! ;olvo 88**
4ybrid. 2ales-?entz! a bus operator in ?u/embourg! has ordered si/ hybrid
buses with delivery starting in 5**#. the buses will be used in normal route
traffic! predominantly on routes with fre<uent stops so that the hybrid
technology can be full utilized. the bus stores braking energy in batteries
and uses this energy to power the electric motor. The diesel engine is shut
down at bus stops and the bus drives away from the stop emission free and
nearly noiseless powered by the electric motor. 9hen the bus reaches "5-
5*kph! the diesel engine starts up again. ;olvo buses is also carrying out
field tests with si/ hybrid-powered double-decker buses in ?ondon! an
investment that will be of great importance for the future demand for
hybrid buses in ?ondon.
$"l2" C"nstructi"n E6ui()*nt> :t the ma@or
on&/po fair in ?as ;egas! ;olvo construction
e<uipment showcased it s revolutionary hybrid wheel
loader prototype. $urthermore the new lines of road
machinery and close to 7* other newly launched
products from the companies entire product range were
on show. .uring the autumm! two new medium sized wheel loaders in
;olvo construction e<uipment0s $-series were introduced.
$"l2" P*nta> ;olvo Denta continued the launch of
;olvo penta IC2-the acclaimed drive system with
forward-facing propellers and steer able drive units.
9ith new and larger drive units connected to the
;olvo group0s ""-liter engine! ;olvo penta has
e/panded its ID2 offering with two new power classesE ID2(** and
ID2#**.
$"l2" A*r"> ;olvo :ero signed an agreement with
Folls-Foyce! under which ;olvo :ero will
develop and manufacture a key component for the
Trent L9-! the engine in :irbuses forthcoming
aircraft. ;olvo :ero also entered into an agreement with Dr att I 9hitney
regarding the development and manufacturing of three ma@or components
for both the 6itsubishi Fegional @et '6F%+ and the bombardier 2eries.
,usin*ss ". $,IPL'
;olvo busses manufactured by ;-ID? have set a new benchmark in the
lu/ury air-conditioned bus and coach market in India. ;-ID? has
successfully created a new segment of bus transport! with high and rear
engine busses! built on =true bus chassis> . It has contributed to the overall
development of the standards of city and intercity transport in India. 9ith
the new state of the art bus body building facility in place! it is ensured that
the international ;olvo bus production process.
The product profile of ;-ID? consists of two types of ;olvo busses i.e.;
;olvo #3** and ;olvo (3**. The ;olvo #3** intercity bus and (3** ity
bus are built on body designs that 2ignificantly raise the standards in
safety.
$"l2" =8EE Int*rcit0 bus ? ;olvo #3** intercity bus
has brought in a new concept in bus travel in form of a
true bus chassis. Its components include rear &ngine!
4ydraulic retarder! powerful disc brakes! high
performance gearbo/! power train! etc.
$"l2" <8EE> The ;olvo (3** range offers e/tremely
high levels of technical <uality! performance and total
economy with the new &uro 7 certified engines! as
well as of comfort and safety! passenger comfort is of
a high standard owing among other things to a new
interior! good sound insulation and an electronically
controlled climate system. The ;olvo (3** low &ntry is a modern and
comfortable bus with a low entry! designed for convenient boarding and
disembarking and swift passenger through-flow. The (3** is based on one
of the best selling chassis from ;olvo buses! and it offers e/tremely high
levels of and safety. Dassenger comfort is of a high standard owing among
other things to a new interior! good sound insulation and an electronically
controlled climate system.
The ;olvo (3** is approve according to &uro 7 standards! which means it
produces low emission levels. Its components include Fear &ngine!
4ydraulic retarder! powerful disc brakes! high performance gearbo/!
Dower train! etc.
%3ar*3"ldin! (att*rn
-elow shows the shareholding pattern of ;olvo -uses India Drivate
?imited
%3ar*3"ldin! Patt*rn
%3ar*3"ld*r Nu)b*r ".
*6uit0 s3ar*s ".
Rs. 1E *ac3
T"tal 2alu*
BRs.C
P*rc*nta!* ".
s3ar*3"ldin!
;olvo busses
corporation
2weden
(!#"5!()) (#!"5(!))* ##.(*N
:zad Group! India "7!))" "7)!)"* *.5*N
T"tal <G=+:G9+; <=G+:9G+;E 1EEH
$igure " below show the diagrammatical representation of the 4olding
pattern is given belowE
#i!ur* 1' %3ar*3"ldin! (att*rn ". $,IPL
2weden
-------------------------------------------------------------------------------
India
The list of group companies of ;olvo -uses India Drivate ?imited
;olvo -us
orporation
:zad Group!
India
;olvo -us India
Drivate ?imited
100
%
30%
70%
CHAPTER >8
ANAL&%I% AND INTEPRETATION
8.1 CURRENT A%%ET% $OL$EO ,U%E% INDIA P$T LTD.
PARTICULAR% 1E1E +EE= +EE<
IA;&ATCFI&2 'Faw
6aterials! work in progress!
finished goods+
7"!5)!5#!8)) 7(!*)!)*!87# -
2undry debtors
'unsecured! considered
goods! e/ceeding the )
months others+
55!58!3"!87) 8!5"!"5!575 -
ash and -ank -alance
'ash in hand! -alance with
2cheduled banks! current
accounts+
5!3)!*#( ")!)(" 5!3)!**!(3(
loans! :dvance and deposits
'1nsecured! onsidered
?oans to employees 'note+
prepaid e/penses. :dvance
income ta/ 'Aet+ advances
recoverable in cash as in
kinds+.
"!5"!5(!757 3!*8!)3!"") -
Ot3*r curr*nt ass*ts "!55!38!8"# 5(!5(!8*# ""!87!)7*
T"tal 585!757!)35 3#7!558!*)( 55!883!38(
Gra(3 >1
Anal0sis'>
The current assets has increased from 3#! 75! 58!*)( to 58! 57! 57!
)35.
8.+ CURRENT LIA,ILITIE% AT $OL$O ,U%E% INDIA P$T LTD.
Particulars +E1E +EE= +EE<
%undr0 Cr*dit"rs
.ate to micro and
small enterprises
Cthers
:dvances from
customers
Cther ?iabilities
"!7#7!*"#
3#*!7(#!*"#
55!3#5!888
)7!5*8!##"
8!))!()#
35)!85*!(*"
55!8(5!#((
5"!*85!573 #!#5)!(#*
Total )*8!8(5!(*) 5*"!73)!"#5 #!#5)!(#*
:dd provisions
fringe benefits ta/
9arranty
Gratuity
?eave
&ncashment
Cthers
7"#57
5(!*)5!5#3
-
5!**"!55"
-
(****
3!"(3!"5*
55)!55)
3)3!)**
5!75)!***
-
-
-
-
"33!*"8
Total 7*!*#5!8)( (*!7*!#8) "33*"8
T"tal liabiliti*s :4;G<;<G9;8 9E=G4;;G1:< 1EG1EEG=E;
Gra(3 >+
8.4 E%TIMATION O# WORKING CAPITAL O# A $OL$O ,U%E%
P$T LTD
Particulars +E1E +EE= +EE<
A. Curr*nt Ass*ts
a. Inventories! stores and
spares parts
b. sundry debtors
c. ash and bank balances
d. ?oans! advances and
deposits
e. Cther current assets

7"555#8))
55583"87)
53)*#(
"5"(757
"55388"#

7(*))*87)
85""5575
")!)("
3*#)37")
5(5(8*#
-
-
53)**(3(
-
""87)(*
Total ':+ 585757)35 3#7558*)( 5588338(
-. urrent liabilities and
provisions
)78(8(7583 5*#788")( "*"**#*8
Total '-+ )78(8(7583 5*#788")( "*"**#*8
Aet urrent :ssets'-+ 5(*)35##75 "5(5*"** 35)8758"
Aet urrent Fatio 5.(*) "5.(5* 35.)87
Anal0sis'>
The net current working capital has decreased by *.58N '$MIDM+
as compared to previous year.
Graph -7
Interpretation
It shows the company0s performance in 5**# was in effective use of
working capital compared to 5**( and 5**8. It reflects the less
investments incurrent assets after compensating for its current liabilities.
The working capital of the company is very less because utilization
current asset has less.
RATIO ANAL&%I%
8.8 CURRENT RATIO
'IA Fs.+
Mear urrent assets urrent liabilities Fatio
5**8-*( 55!883!38( "*!"**!#*8 5.55
5**(-*# 3##!7(5!888 5*#!788!")( *.#(
5**#-"* 585!757!)35 )78!(8(!583 *.(#
'2ourceE Drimary data+
Gra(3 ? 8
Anal0sis'>
The above table shows that the current ratio of company has been
decreased gradually year to year. The year 5**)-*8is 5.55 times! it is
increased by (5.55N in 5**8-*( i.e.! *.#( times! :gain it is decreased
#."(N in 5**(-*# i.e.! *.(# . The ratio has been decreased in 5**8-*#
respectively.
Int*r(r*tati"n
$rom the above :nalysis indicates that the current ratio has not been
meeting the ideal ratio of "E". It shows that the li<uidity position of the
company has not well and the firm shall not be able to pay its current
liabilities in time with out facing difficulties. 4ere! the company0s margin
of solvency is very poor and also short term debt paying ability is
decreased. 9hen the current liabilities are more than current! liabilities are
more than current assets! it presumes that short term creditors are meeting
the day to day business in its entirely. 4ere! the ratio in the *8-*( and *(-
*# is below "! it shows that the working capital is negative. Therefore!
additional funds raised as invested in current assets instead of providing
working capital.
8.9 5uic RATIO
Mear Buick :ssets Buick ?iabilities Fatio
5**8-*( 55!883!38( "*!"**!#*8 5.55
5**(-*# ""8!5#*!857 3("!"5)!"55 *.53
5**#-"* 557!#*"!57* )"5!373!### *.3"
Graph -5
Anal0sis'>
The <uick ratio of the company has been decreased drastically. The
ratio in the year 5**)-*8 is 5.55; it is decreased #5.)5N in 5**8-*( i.e.!
*.53. :gain it is decreased to *.3" in 5**(-*# respectively. These all ratios
are not meeting the ideal ratio of 5E" hence! it is not satisfactory.
Int*r(r*tati"n'>
$rom the above analysis shows that the <uick ratio is decreased. It
has not been meet ideal li<uidity position of 5E" It represents that the firms
li<uidity position is not good. 4ence! the firms capacity to pay-off current
obligations immediately has very poor. It shows that the company debt
paying of the business enterprises has very low.
8.: Abs"lut* Li6uid RATIO
Mear :bsolute Buick
Fatio
urrent liabilities Fatio
5**8-*( 53!)**!(3( "*!"**!#*8 5.3*
5**(-*# ")!)(" 3("!"5)!"55 *.**
5**#-"* 53).*#( )"5!373!### *.**
Graph- )
Anal0sis'
The absolute li<uid ratio of the company in the year 5**)-*8 is 5.3*.
it is decreased by "**N in 5**8-*( i.e.! *.** and it is decreased *.** in
5**(-*#. The ratio in 5**8-*( and 5**(-*# is decreased drastically.
Int*r(r*tati"n'>
$rom the above analysis the absolute li<uidity ratio of the company
has not been meeting the ideal ratio of *.5*E" in the current year 5**(-*#E
hence! it is not good. The company current li<uidity position is not better.
The company has been maintaining a sufficient cash and bank balance to
meet the future emergency re<uirements. -ut the ratio shows that more
long-term li<uidity position in year 5*8-*( and 5**(-*#.
LE$ERAGE OR CAPITAL %TRUCTURE RATIO
8.; DE,T ? E5UIT& RATIO
Mear .ebt 2hare holders fund Fatio
5**8-*( "*!"**!#*8 85!5#)!#78 *."7
5**(-*# "!*7#!)53!35( 35(!)(5!38* 5.37
5**#-"* "!583!8("!755 3#(!"85!5() 5.5)
Gra(3> ;
Anal0sis'>
The .ebt-e<uity ratio of the company has been increased gradually
by increasing of debt. In the year 5**)-*8 is *."7. it is increased by
"8)#.57N in 5**8-*( i.e.! 5.37. In The year 5*8-*( and 5**(-*# it is
increased by ).##N and "**N respectively.
Int*r(r*tati"n'>
The above ratio indicates that the proportionate claims of owners
and the outsiders against the firm0s assets. The company debt-e<uity ratio
is " i.e.! total debt is e<ual to e<uity considered as to <uite satisfactory. :
higher the ratio indicates that the claims of outsiders 'creditors+ are greater
than those of owners! may not considered by the creditors because it gives
a lesser margin of safety for at the time of li<uidation of firm. It the
company uses ma/imum outsider0s funds in order to take lesser risk of
investment and to increase their earnings by paying a lower fi/ed rate of
interest to outsiders. The company uses internal funds instead of outsider0s
funds.
8.< PROPRIET& RATIO
Mear .ebt 2hare holders
fund
Fatio
5**8-*( 85!5#)!#78 (5!7*7!#8* *.#5
5**(-*# 35(!)(5!38* (()!(5"!8#) *.3(
5**#-"* 3#(!"85!5() #3(!*57!577 *.57
Gra(3><
Anal0sis'>
The proprietary ratio has been fluctuating year to year. In the year
5**)-*8 is *.#5! it is decreased by 38.(7N in 5**8 -*( i.e.! *.3(!it is
decreased by '"*.35N+ in 5**(-*# i.e.! *.57 . :fter wards it is gradually
decreased in 5**8-*( and 5**(-*# respectively.
Int*r(r*tati"n'>
$rom the above :nalysis the proprietary ratio is low; it indicates that
the long-term solvency position of the company is not good. : high
proprietary ratio is considered to be a good indication of the general
financial strength of the business. : low ratio shows that the company
financial position is not good. The ratio shows conservation capital
structure and shows the e/tent of share holders funds in the total tangible
assets employed in business. $inancial e/perts contend that )8N to 85N of
the owner0s e<uity and 55N to 77N of outsiders e<uity may be treated as
ideal combination.
8.= #IDED A%%ET% RATIO
Mear $i/ed :ssets ?ong term funds Fatio
5**8-*( 5)!55#!3#5 87!#**!** *.7)
5**(-*# 7(8!37)!*"# 3"8!57"!*#( *.#7
5**#-"* 787!))#!5#" 3"8!8"#!#35 *.(#
Gra(3>=
Anal0sis'>
The fi/ed assets ratio of the company has increased in 5**8-*(! The
ratio is in the 5**)-*8 is *.7)! it is increased by "5(.77N in the year 5**8-
*( i.e.! in the year 5**(-*# has been decreased by *.(#.
Int*r(r*tati"n'>
$rom the above :nalysis indicates that the ratio0s are meeting the
ideal ratio of *.)8. therefore! it is satisfactory. It the ratio is less than "! it
shows that the part of working capital has been financed through long-term
funds. 4ere! the company has not been meet the long-term financial
re<uirement out the long term funds.
3."* DFC$IT:-I?ITM F:TIC
fund
Fatio
5**8-*( "((!)7* * *.**N
5**(-*# "(5!8(7!(8) "(3!8"5!"() ".*"N
5**#-"* 7!*"5!)3(!##7 7!**8!*#5!(*( ".**N
Gra(3>1E
Anal0sis'>
The gross profit ratio of the company gradually decreasing year to
year . The ratio in the 5**)-*8 is *.N! In the year 5**8-*( It is increased
to ".*"N and again in 5**(-*# it is decreased to ".**N.
Int*r(r*tati"n'>
The above :nalysis indicates that the gross profit ratio of the
company has decreased by every year. This ratio out as a indicator of the
efficiency of management control. Aormally! higher GHD ratio generally!
indicates higher cost of goods sold due to unfavorable purchase price!
lesser sales! lower selling and over investment infi/ed assets etc.! the
business undertaking must limit its operating e/penses to earn more profit.
TURN O$ER RATIOF%
8.11 IN$ENTOR& TURN O$ER RATIO
Mear Aet sales :verage
Inventory
Fatio
5**8-*( * * *.**
5**(-*# "(3!8"5!"() 7(*!))*!87) *.3#
5**#-"* 7!**8!*#5!(*( 7"5!)5#!8)) #.57
Gra(3>11
Anal0sis'>
The inventory turn over ratio is increasing year to year. The ratio in
the year 5**)-*8 is *.** times! it increased to *.3# times in the year 5**8-
*(. :gain it has been increased by #.57 times in the year 5**(-*#.
Int*r(r*tati"n
$rom the above analysis shows that the inventory turnover ratio
measures the velocity of conversion of stock into sales. 1sually! a high
inventory turnover ration indicates efficient management for inventory
because more fre<uently stock is sold! the lesser amount of ratio indicates
on inefficient management of inventory! dull business! and poor <uality of
goods! stock accumulation! and accumulation of investment. The company
always keep the ratio high! it gives the better profits and high efficiency in
management.
8.1+ WORKING CAPITAL TURN O$ER RATIO
fund
Fatio
5**8-*( * -)!757!**#!5#) -*.**
5**(-*# "(3!8"5!"() -"5!(5*!"** -"".)(
5**#-"* 7!**8!*#5!(*( -5)5!555!875 -5.75
Gra(3>1+
Anal0sis'>
The working capital turnover ratio has been decreased up to 5**(-*#
negatively. In the year 5**)-*8 is -* times! it has increased by 53.5*N in
5**8-*( i.e.! -"".)( times. :nd it has been decreased by -5.75 times in the
current year 5**(-*#. The working capital decreased and it goes to
negative in all the years.
Int*r(r*tati"n'>
The working capital ratio indicates that the velocity of the
effectively utilization of net working capital the ratio shows the number of
times the working capital is turned over in the course of a year. 4igher the
ratio indicates efficient utilization of working capital. 4owever it should
not result in over trading. The working capital ratio is negative in all the
years it shows that the current liabilities more than the current assets.
8.14 DE,TOR% TURNO$ER RATIO
&*ar Aet 2ales 2undry debtors Fatio
+EE;>E< * * *.**
+EE<>E= "(3!8"5!"() 85!""5!757 5.5)
+EE=>1E 7!**8!*#5!(*( 555!83"!87) "7.75
Graph-"7
Anal0sis'>
The debtors turnover ratio has been increasing year to year. In the
year 5**)-*8 it is * times and in the year 5**8-*( is 5.5) times. 2lightly it
has been increasing year 5**(-*# is "7.75 times.
Int*r(r*tati"n'>
The debtors turnover ratio of the company indicates that the average
time log in the number of days between the sales and cash collection from
debtors during a year. 4igher the value of ratio! the more efficient is the
management of debtors. The debtor0s collection of period of the company
has more in 5**(-*#. 9hen compare to previous years. The company
between to improve their debtor0s collection efficiently.
8.18 CURRENT A%%ET% TURN O$ER RATIO
Mear 2ales urrent assets Fatio
5**8-*( * 55!883!38( *.**
5**(-*# "(3!8"5!"() 3##!7(!5888 *.78
5**#-"* 7!**8!*#5!(*( 585!757!)35 5.55
Gra(3>18
Anal0sis'>
The current assets turn over ratio of the company is increasing year
to year. The ratio in the year. The ratio in the year 5**)-*8 is *.** times! it
has been increased *.78 times in 5**8-*( and again it increased 5.55 in
5**(-*#.
Int*r(r*tati"n'>
$rom the above :nalysis the ratio attempt to measures the utilization
and effectiveness use of the current assets and it reveals that the
relationship between cost of sales and current assets. 9hen the ratio has
high shows that the company effective utilization of current assets for cost
of sales.
8.19 #IDED A%%ET% TURN O$ER RATIO
fund
Fatio
5**8-*( * * *.**
5**(-*# "(3!8"5!"() 3"5!585!"#( *.33
5**#-"* 7!**8!*#5!(*( 7(8!#")!"5# 8.5)
Gra(3 ? 19
Anal0sis'>
The fi/ed assets turnover ratio has been increased drastically . In the
year 5**)-*8 is *.** times! it is increased *.33 times in 5**8-*(! :gain it
is increased to 8.5) in the current year 5**(-*# .
Int*r(r*tati"n'>
$rom the above :nalysis the ratio shows that the relationship
between net sales and fi/ed assets. This ratio indicates that the e/tent to
which the investment in fi/ed assets contribute towards sales. 4igher the
ratio shows that the better utilization of firms fi/ed assets.
8.1: TOTAL A%%ET% TURN O$ER RATIO
Mear 2ales Total :ssets Fatio
5**)-*8 * (5!7*7!#8* *.**
5**8-*( "(3!8"5!"() (()!(5"!"8#) *.5"
5**(-*# 7!**8!*#5!(*( #3)!*57!577 7."(
Gra(3 ? 1:
Anal0sis'>
The total assets turnover ratio has been increased continuously! in
the year 5**)-*8 is *.** times! 5**8-*( *.5" times! and in the current year
5**(-*# is 7."( times.
Int*r(r*tati"n'>
$rom the above analysis of the ratio indicates that the relationship
between total assets of the company cost of sales. This ratio indicates the
effective utilization of total assets in the workingHoperational of the
company.
CHAPTER ? 9
%UMMAR& O# #INDING% AND CONCLU%ION%
#INDING%'
The pro@ect work has been undertaken in meeting the re<uirement of
the academic obligation there of the study titled =9orking apital
6anagement> in ;-I.?. The study at ;-I.? indicated the following
findings.
The current ratio of the company has not been meeting the ideal
ratio of 5.". The current liabilities are more than the current assets in 5**8-
*# and 5**(-*#. The company short term debt paying ability is low. This
includes that the ability to pay its current liabilities without getting in to
any financial commitments.
The <uick ratio has been decreased; it cannot be meet the ideal ratio
of "E" but in the year 5**)-*8 only it has been meet the ideal ratio! here!
the company has not been current emergency obligation through these
li<uid assets. The ratio shows that the company may not pay its short term
creditors in time.
The absolute li<uid ratio <uite well in 5**)-*8 ; the company has
not meeting the ratio of *.5*E"! It shows that the base year li<uidity
position is good! it indicates that the company has been maintained a
sufficient cash and bank balance to meet the future emergency
re<uirement.
The debt e<uity ratio is increased continuously. It has been meeting
ideal ratio of i.e.! total debit is e<ual to e<uity. The company debt e<uity
position is good.
The proprietary ratio shows that the company long Gterm solvency
position has not well! because of total tangible assets have not been
meeting the share holder0s funds. It shows that the company has not been
deployed amount for further creation of tangible assets.
$i/ed assets ratio of the company has been meet the ideal ratio of
*.)8 hence it is <uite good. Therefore! the company has been meeting the
long term financial re<uirement of the long-term funds in future.
The company0s gross margin earn one sales has low. This ratio act as
a indicator of the efficient of inventory control. Aormally! higher GHD ratio
always consider good and services as an inde/ of higher profitability. 4ere!
the company0s efficiency of production and trading operation has been not
better.
The inventory turnover of the company has <uite well. The company
efficient management to turn the inventory into cash. The lower ratio
shows that the over-investment in inventories.
The working capital turnover ratio of the company is negative in all
the 7 years. It shows that the current liabilities has been e/ceeds than
current assets. 4ence! it affects the company0s day to day business! and it
affects the company0s day to day capital e/penses on business.
.ebtor0s turnover ratio has been increasing year to year. The
debtor0s turnover ratio of the company shows that the average times log in
number of days between the sales and cash collection from debtors during
a year. The ratio of the company has high in the year 5**(-*#. Indicatives
that the management is efficient to their debtor0s collection.
The current asset turnover ratio of the company has keep on
increasing it indicates that the effective utilization of current assets and
also investment on current assets is more.
The company fi/ed assets and total assets have been utilized more
effectively in the working and operation. The management more efficient
to utilization of both fi/ed and total assets very much.
CONCLU%ION
In this study an analysis of the structure of the assets and
liabilities of ;olvo -usses ompany it is 4osakote branch was conducted.
The study also covers the efficiency level of managing the
working capital. The busses can generate long terse funds by seduces its
current crusted and there by it can bring down the bromines.
To conclude the overall working capital of organization is good.
REA%ON% #OR THE LO%%
;olvo -uses India Drivate ?imited has incurred loss at the net level
during year ended 7"
st
march 5**#. The reasons for loss are discussed in
the
a. L"/ ca(acit0 utiliIati"n.
The company was established on Aovember 5**) and communed
its operation during the year 5**8. 2ince the company it still in this initial
stages of operations! the capacity of the manufacturing facility has not
been fully utilized. .uring the year! 5**(-*# ;olvo -uses India Drivate
?imited has manufactured 358 buses as against a capacity of "*** buses.
Thus based on the number of buses manufactured it can be inferred that the
capacity utilized was only 3)N of the installed capacity. The high fi/ed
costs due to lower capacity utilization have impacted the margins.
The uncontrolled comparable companies in India were early entrants
and hence are in operations for a substantially longer period of time!
whereby have attained optimal level of operations.
4ence an ad@ustment for the above under utilization of the capacity
needs to be considered while performing the benchmarking of the
international transactions of the ;olvo -uses India Drivate ?imited to
ensure comparability with the comparables which operates under normal
conditions.
b. Mar*t P*n*trati"n'>
The target customers for ;olvo buses are government institution and
private companies. :s a market penetration strategy! ;olvo -uses India
Drivate ?imited reduced the prices of the buses and also entered into an
annual maintenance contracts for four years whereby the warranty fee the
first year is preventive or maintenance free and from second year the fee
was charged at Fs.7H- ,6! the actual cost for providing the warranty
service is Fs.#H- ,6 this reduction in the service costs increased the
warranty costs for ;olvo -uses India Drivate ?imited.
The C&. defines &conomic onditions and -usiness 2trategy as =It is
essential to identify the relevant market or market taking account of
available substitute goods or services. &conomic circumstances that may
be relevant to deterring market comp ratability include the geographic
location; the size of the market; the e/tent of competition in the markets
and the relative competitive positions of the buyers and sellers; the
availability 'risk thereof + of substitute goods and services; the levels of
supply and demand in the market as a whole and in particular regions! if
relevant; consumer purchasing power! the nature and e/tent of government
regulation of the market; costs of production including the costs of land!
labour! and capital! transport costs! the level of the market 'e.g.! retail or
wholesale+; the date and time of transactions; and so forth>.
=-usiness strategies also could include market penetration schemes. :
ta/payer seeking to penetrate a market or to increase its market share
might temporarily charge a price for its product that is lower than the price
charged for otherwise comparable products in the same market.
$urthermore! a ta/payer seeking to enter a new market or e/pand 'or
defend+ it s market share might temporarily incur higher costs 'e.g.! due to
start-up costs or increased marketing efforts+ and hence achieve lower
profit levels than ta/payers operating in the same market>.
CHAPTER > :
RECOMMENDATION AND %UGGE%TION'
%u!!*sti"ns'
The over all performance of the ;olvo buses India private it is
satisfactory as company utilized its assailable finals effectively. 4ow ever
few recommendations can be givenE
The ;olvo has to concentrate on the cash conversion
cycle e/press the time for the capital tied up for the operating items.
Inventories! receivables and payables.
The company needs to improve its debt position since
huge percentage of its income going toward payment of the interest
on bills.
4ence if debt positions are improved the company can
improve level by paying less interest over debts.
The company needs to improve the inventory turnover
since over the years there has been a drastic reduction in the
inventory turnover cleans indicating lower decreases for the ;olvo
pro@ects.
The cash reserves of the company are a higher side
which is indicated in the li<uid assets ratios of the company. The
company can offer to lightly reduce the cash reserves and utilize the
same for its positional activities.
The interest payment of the company is very substantial
and the company needs to reduce this by improving its collections
period.
The profitability margin of the company is being
affected and this can be improved by management of inventory!
debtor0s collection and more aggressive prevocational strategy.
The working capital of the company is very less because
utilization current assets has less.
APPENDICE% @ ANNEDURE
,ALANCE %HEET #OR THE CURRENT &EAR A% ON 41
st
Marc3 +E1E>11
Particulars Curr*nt 0*ar
+EE=>1E
Pr*2i"us 0*ar
+EE<>E=
Pr*2i"us 0*ar
+EE=>E<
%"urc*s ". .unds
share holders funds
share capital
share .eposit
7(()**!***
-
7(()**!***
-
"!**!***
87(**!***
L"an #unds'>
1nsecured loan
.eferred ta/ liability
5#!""#!#35
-
5(#7"*#(
-
>
>
T"tal 3"8!8"#!#35 3"8!57"!*#( 87!#**!***
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www.michelintransport.com
www.zf.com
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