A STUDY ON CASH MANAGEMENT ANAIYSIS IN

SRI ANGALAMAN FINANCE LIMITED

CHAPTER- I

1.1 INTRODUCTION OF THE STUDY

Cash is the important current asset for the operations of the business. Cash is the basic
input needed to keep the business running on a continuous basis; it is also the ultimate output
expected to be realized by selling the service or product manufactured by the firm. The firm
should keep sufficient cash, neither more nor less. Cash shortage will disrupt the firm’s
manufacturing operations while excessive cash will simply remain idle, without contributing
anything towards the firm’s profitability. Thus, a major function of the financial manager is to
maintain a sound cash position.

Cash is the money which a firm can disburse immediately without any restriction. The term
cash includes coins, currency and cheques held by the firm, and balances in its bank accounts.
Sometimes near-cash items, such as marketable securities or bank times deposits, are also
included in cash. The basic characteristic of near-cash assets is that they can readily be
converted into cash. Generally, when a firm has excess cash, it invests it in marketable
securities. This kind of investment contributes some profit to the firm.
 1.2 INTRODUCTION ABOUT THE INDUSTRY

The textile industry is the largest industry of modern India. It accounts for over 20
percent of industrial production and is closely linked with the agricultural and rural economy. It
is the single largest employer in the industrial sector employing about 38 million people. If
employment in allied sectors like ginning, agriculture, pressing, cotton trade, jute, etc. are added
then the total employment is estimated at 93 million. The net foreign exchange earnings in this
sector are one of the highest and, together with carpet and handicrafts, account for over 37
percent of total export earnings at over US $ 10 billion. Textiles,1 alone, account for about 25
percent of India’s total forex earnings.

India’s textile industry since its beginning continues to be predominantly cotton based
with about 65 percent of fabric consumption in the country being accounted for by cotton. The
industry is highly localised in Ahmedabad and Bombay in the western part of the country though
other centres exist including Kanpur, Calcutta, Indore, Coimbatore, and Sholapur.

The structure of the textile industry is extremely complex with the modern, sophisticated
and highly mechanized mill sector on the one hand and the hands pinning and hand weaving
(handloom) sector on the other. Between the two falls the small-scale power loom sector. The
latter two are together known as the decentralized sector. Over the years, the government has
granted a whole range of concessions to the non-mill sector as a result of which the share of the
decentralized sector has increased considerably in the total production.

The two sub-sectors of the decentralized sector, the power loom sector has shown the
faster rate of growth. In the production of fabrics the decentralized sector accounts for roughly
94 percent while the mill sector has a share of only 6 percent.

Being an agro-based industry the production of raw material varies from year to year
depending on weather and rainfall conditions. Accordingly the price fluctuates too.

The textile and clothing trade is governed by the Multi-Fibre Agreement (MFA) which
came into force on January 1, 1974 replacing short-term and long-term arrangements of the
1960’s which protected US textile producers from booming Japanese textiles exports. Later, it

.
was extended to other developing countries like India, Korea, Hong Kong, etc. which had
acquired a comparative advantage in textiles. Currently, India has bilateral arrangements under
MFA with USA, Canada, Australia, countries of the European Commission, etc. Under MFA,
foreign trade is subject to relatively high tariffs and export quotas restricting India’s penetration
into these markets.

India was interested in the early phasing out of these quotas in the Uruguay Round of
Negotiations but this did not happen due to the reluctance of the developed countries like the US
and EC to open up their textile markets to Third World imports because of high labour costs.
With the removal of quotas, exports of textiles have now to cope with new challenges in the
form of growing non-tariff / non-trade barriers such as growing regionalisation of trade between
blocks of nations, child labour, anti-dumping duties, etc.

It is now being admitted universally and even officially that the year 2012 AD is likely
to present more of a challenge than opportunity. If the industry does not pay attention to the very
vital needs of modernisation, quality control, technology up gradation, etc. it is likely to be left
behind. Already, its comparative advantage of cheap labour is being nullified by the use of
outmoded machinery.

The dismantling of the MFA, it becomes imperative for the textile industry to take on
competitors like China, Pakistan, etc., which enjoy lower labour costs. In fact the seriousness of
the situation becomes even more apparent when it is realised that the non-quota exports have not
really risen dramatically over the past few years. The continued dominance of yarn in exports of
cotton, synthetics, and blends, is another cause for worry while exports of fabrics is not growing.
The lack of value added products in textile exports do not augur well for India in a non-MFA
world.

Textile exports alone earn almost 25 percent of foreign exchange for India yet its share in
global trade is dismal, having declined from 10.9 percent in 1955 to 3.23 percent in 1996. More
significantly, the share of China in world trade in textiles, in 1994, was 13.24 percent, up from
4.36 percent in 1980. Hong Kong, too, improved its share from 7.13 percent to 12.65 percent
over the same period. Growth rate, in US$ terms, of exports of textiles, including apparel, was
over 17 percent between 1993-94 to 1995-96. It declined to 10.5 percent in 1996-97 and to 5
percent in 1997-98. Another disconcerting aspect that reflects the declining international
competitiveness of Indian textile industry is the surge in imports in the last two years.

On January 1st, 1974, the Arrangement Regarding the International Trade in Textiles,
otherwise known as the MFA came into force. It superseded all existing arrangements that had
been governing trade in cotton textiles since 1961. The MFA sought to achieve the expansion of
trade, the reduction of barriers to trade and the progressive liberalisation of world trade in textile
products, while at the same time ensuring the orderly and equitable development of this trade
and avoidance of disruptive effects in individual markets and on individual lines of production
in both importing and exporting countries.

Though it was supposed to be a short-term arrangement to enable the adjustment of the

industry to a free trade regime, the MFA was extended in 1974, 1982, 1986, 1991, and 1992.
Because of the quotas allotted, the MFA resulted in a regular shift of production from quota
restricted countries to less restricted ones as soon as the quotas began to cause problems for the
traders in importing countries. The first three extensions of the MFA, instead of liberalising the
trade in textiles and clothing, further intensified restrictions on imports, specifically affecting the
developing country exporters of the textile and clothing products. Increased usage of several
MFA measures tended to further erode the trust which developing countries had originally
placed in the MFA.

The MFA set the terms and conditions for governing quantitative restrictions on
textile and clothing exports of developing countries either through negotiations or bilateral
agreements or on a unilateral basis. The bilateral agreements negotiated between importing and
exporting country’s contained provisions relating to the products traded but they differed in the
details.annually.

The MFA permitted certain flexibility in quota restrictions for the exporters so that they
could adjust to changing market conditions, export demands and their own capabilities. The
MFA also provided for higher quotas and liberal growth for developing countries whose exports
were already restrained. The MFA asked the participants to refrain from restraining the trade of
small suppliers under normal circumstances. In general, developed countries, under MFA, chose
not to impose restrictions on imports from other developed countries.

The TSB ensured compliance by all parties to the obligations of bilateral agreements or
unilateral agreements. It called for notification of all restrictive measures. A Textiles
Committee – established as a management body consisting of all member countries – was the
final arbiter under the MFA and worked as a court of appeal for disputes that could not be
resolved under TSB.

.
1.3 SCOPE OF THE STUDY

 It helps to take short term financial decision.

 It indicates the cash requirement needed for plant or equipment expansion

programmers.

 To find strategies for efficient management of cash.

 It helps to arrange needed funds on the most favorable terms.

 It helps to meet routine cash requirement to finance the transaction.

 It reveals the liquidity position of the firm by highlighting the various sources of
cash and its uses.
1.4 OBJECTIVES OF THE STUDY

Finance business management is very important for modern business. Analysis interpretation of
financial statement and fiancé business very useful for shorterm management of funds. The
following are the main objectives of the study.

• Primary Objective

• To analyze the cash management of sri angalamman.

• Secondary Objective

• To find out the liquidity position of the concern through ratio analysis.

• To study the growth of sri angalamman in terms of cash flow statement.

• To make suggestion and recommendation to improve the cash position.

1.5 LIMITATIONS OF THE STUDY

• This study is subject to the limitations of secondary data

• Since the study is limited around only sri angalamman Karur ,the comparative
study with other textiles cannot be made.

• The major limitation of the study is limited period only. The study is limited to 5years
data only because they had given only 5 years financial details.

• The important limited to this study is not given needed details due to time constraints.
1.4 NEED FOR THE STUDY

The importance of Cash management in any industrial concern cannot be

overstressed. Under the present inflationary condition, management of Cash is perhaps more
important than even management of profit and this requires greatest attention and efforts of the
finance manager. It needs vigilant attention as each of its components require different types of
treatment and it throws constant attention on exercise of skill and judgment, awareness of
economic trend etc, due to urgency and complicacy the vital importance of Cash.

The anti-inflationary measure taken up by the Government, creating a tight money

condition has placed working capital in the most challenging zone of management and it requires
a unique skill for its management. Today, the problem of managing Cash has got the recognition
of separate entity, so its study and management is of major importance to both internal and
external analyst to judge the current position of the business concerns. Hence, the present study
entitled “An Analysis on Cash Management” has been taken up.

1.5 OBJECTIVES OF THE STUDY :

• Primary Objective:

• To analyze the cash management of sky cotex.

• Secondary Objective:
• To find out the liquidity position of the concern through ratio analysis.
• To study the growth of sri Angalamman finance ltdin terms of cash flow statement.
• To make suggestion and recommendation to improve the cash position of sky cotex.
1.6 SCOPE OF THE STUDY

 It helps to take short term financial decision.

 It indicates the cash requirement needed for plant or equipment expansion

programmes.

 To find strategies for efficient management of cash.

 It helps to arrange needed funds on the most favourable terms.

 It helps to meet routine cash requirement to finance the transaction.

 It reveals the liquidity position of the firm by highlighting the various sources of
cash and its uses.
1.7 LIMITATIONS OF THE STUDY

 The study is restricted only to SRI ANGALAMMAN FINANCE LTDS. Being

a case study, the findings cannot be generalized.

 The study does not take into account the inflation.

 The study takes into account only the quantitative data and the qualitative
aspects were not taken into account
1.6 RESEARCH METHODOLOGY

Research is a process in which the researchers wish to find out the end result for a given
problem and thus the solution helps in future course of action. The research has been defined as
“A careful investigation or enquiry especially through search for new facts in branch of
knowledge”

1.6.1 RESEARCH DESIGN

The research design used in this project is Analytical in nature the procedure using, which
researcher has to use facts or information already available, and analyze these to make a critical
evaluation of the performance.

1.6.2 DATA COLLECTION

 Primary Sources

1. Data are collected through personal interviews and discussion with Finance-Executive.

2. Data are collected through personal interviews and discussion with Material

Planning- Deputy Manager.

 Secondary Sources

1. From the annual reports maintained by the company.

2. Books and journals pertaining to the topic.

TOOLS USED IN THE ANALYSIS

 Ratio analysis

 Current assets to fixed assets

 Current assets to Total assets ratio

 Net working capital ratio

 Inventories to current assets ratio

 Sundry debtors to current assets ratio

 Loans and advances to current assets ratio

 Cash to current assets ratio

 Cash to working capital ratio

 Cash to sales ratio

 Cash ratio

 Current ratio

 Liquidity ratio

 Super quick ratio

 Inventories turnover ratio

 Debtors turnover ratio

 Debt collection period ratio

 Cash interval measure ratio

1.7 CHAPTERISATION

1. Chapter one contains introduction about the study, objectives, research design, scope
and limitations of the study.

2. Chapter two contains review of literature.

3. Chapter three contains company profile.

4. Chapter four contains data analysis and interpretation includes objective wise analysis
of various tools used for working capital assessment like trend analysis and ratio analysis.

5. Chapter five contains findings, suggestions and conclusion

 CHAPTER-II
REVIEW OF LITERATURE

Cash management is a broad term that refers to the collection, concentration, and
disbursement of cash. It encompasses a company's level of liquidity, its management of cash
balance, and its short-term investment strategies. In some ways, managing cash flow is the most
important job of business managers. If at any time a company fails to pay an obligation when it
is due because of the lack of cash, the company is insolvent. Insolvency is the primary reason
firms go bankrupt. Obviously, the prospect of such a dire consequence should compel companies
to manage their cash with care. Moreover, efficient cash management means more than just
preventing bankruptcy. It improves the profitability and reduces the risk to which the firm is
exposed.

Cash management is particularly important for new and growing businesses. As Jeffrey
P. Davidson and Charles W. Dean indicated in their book Cash Traps, cash flow can be a
problem even when a small business has numerous clients, offers a superior product to its
customers, and enjoys a sterling reputation in its industry. Companies suffering from cash flow
problems have no margin of safety in case of unanticipated expenses. They also may experience
trouble in finding the funds for innovation or expansion. Finally, poor cash flow makes it
difficult to hire and retain good employees.

It is only natural that major business expenses are incurred in the production of goods or
the provision of services. In most cases, a business incurs such expenses before the
corresponding payment is received from customers. In addition, employee salaries and other
expenses drain considerable funds from most businesses. These factors make effective cash
management an essential part of any business's financial planning. "Cash is the lifeblood of a
[store]," wrote Richard Outcalt and Patricia Johnson in Playthings. "Without cash for inventory,
payroll, and other expenses, an emergency is imminent."

When cash is received in exchange for products or services rendered, many small
business owners, intent on growing their company and tamping down debt, spend most or all of
these funds. But while such priorities are laudable, they should leave room for businesses to
absorb lean financial times down the line. The key to successful cash management, therefore, lies
in tabulating realistic projections, monitoring collections and disbursements, establishing
effective billing and collection measures, and adhering to budgetary restrictions.

Modiglianiand Miller (1958) were the first ones to landmarkthe topic of capital structure
and they argued thatcapital structure was irrelevant in determining thefirm’s value and its future
performance. On theother hand, Lubatkin and Chatterjee (1994) aswell as many other studies
have proved that thereexists a relationship between capital structure andfirm value.

showed that their model is no more effective iftax was taken into consideration since
taxsubsidies on debt interest payments will cause arise in firm value when equity is traded for
debt.
Pinegar and Wilbricht (1989) discovered that principal-agent problem can be dealt with
to some extent through the capital structure by4 increasing the debt level and without causing
any radical increase in agency costs.
Lubatkin and Chatterjee (1994) argue that increasing the debt to equity ratio will help
firms ensure that managers are running the business more efficiently. Hence, managers will
return excess cash flow to the shareholders rather than investing in negative NPV projects since
the managers will have to make sure that the debt obligations of the firm are repaid. Hence, with
an increase on debt level, the lenders and shareholders become the main parties in the corporate
governance structure
Warner (1977) argues that the potential bankruptcy costs a firm might face are reflected
in its share price and this is taken into consideration by investors when they make investment
decisions. Bankruptcy costs refer to the costs associated with declining credit terms with
customers and suppliers. It can be argued that suppliers would not be willing to give long term
credit terms to the firm as the latter faces the risk of default and similarly,

1. Modiglianiand Miller (1958) were the first ones to landmarkthe topic of capital structure and they argued thatcapital structure was irrelevant in determining thefirm’s value and its future
performance.
2. Modigliani and Miller (1963)showed that their model is no more effective iftax was taken into consideration since taxsubsidies on debt interest payments will cause arise in firm value when
equity is traded for debt.
3. Pinegar and Wilbricht (1989) discovered that principal-agent problem can be dealt with to some extent through the capital structure by4 increasing the debt level and without causing any
radical increase in agency costs.
4. ubatkin and Chatterjee (1994) argue that increasing the debt to equity ratio will help firms ensure that managers are running the business more efficiently.
5. Warner (1977) argues that the potential bankruptcy costs a firm might face are reflected in its share price and this is taken into consideration by investors when they make investment decisions.
Bankruptcy costs refer to the costs associated with declining credit terms with customers and suppliers.
 Lang, Stulz and Walking (1991) uses the Tobin’s q as a proxy to determine the quality
of investment. Firms with a high ‘q’ showed that firms were using their free cash flows to invest
in positive NPV projects whereas firms with low ‘q’ showed that firms were investing in
negative NPV projects and therefore, the free cash flows should instead be paid out dividends to
the shareholders. As a whole, this study is in line with the free cash theory and was considered as
very reliable among economists.

Jensen (1989) states that when free cash flows are available to top managers, they tend
invest in negative NPV projects instead of paying out dividends to shareholders. He argues that
the compensation of managers with an increase in the firm’s turnover. Hence the objective of the
company is to increase the size of the firm by investing in all sorts of projects even if these
projects have a negative NPV.

Dorff (2007) argued that compensation of managers tend to increase when there is an
increase in the firm’s turnover. Therefore, linking the ownership structure to management can
solve the principalagent problem.
Smith (1990) who carried a study on 58 Management Buyouts of public companies
during the period of 1977 to 1986. His findings revealed that there exists a positive relationship
between management ownership and the performance of the firm. This study also provide
empirical evidence that increase in operating profits result from the decrease in operating costs
and the proper management of working capital of the firms.
Lichtenberg and Siegel (1990) This paper is a review of the literatures on capital
structure and provides empirical evidence that here exists a relationship between the capital
structure and ownership structure of the firm. Economists have not yet reached a consensus on
how to determine the optimal capital structure (debt to equity ratio) that will enable firms to
maximise performance by simultaneously dealing with the principal-agent problem. Taking into
consideration the shortcomings of both equity 7 and debt financing

6. Lang, Stulz and Walking (1991) uses the Tobin’s q as a proxy to determine the quality of investment.
7. Jensen (1989) states that when free cash flows are available to top managers, they tend invest in negative NPV projects instead of paying out dividends to shareholders.

8. Dorff (2007) argued that compensation of managers tend to increase when there is an increase in the firm’s turnover .
9 Smith (1990) who carried a study on 58 Management Buyouts of public companies during the period of 1977 to 1986.
10. Lichtenberg and Siegel (1990).This paper is a review of the literatures on capital structure and provides empirical evidence that here exists a relationship between the capital structure and
ownership structure of the firm.
 A study by Fong (1990) found that most SMEs in Malaysia we remanaged by the owners
themselves. Therefore, the quality of management depends on the education, experience, and
training of the entrepreneurs themselves. However, since many of them did not have a formal
education in business management, they usually operated their business as traditionalfamily-type
businesses. Fong concluded that for the sector to remain dynamic,SMEs must employ
professional managers for the continued growth of the firm. A professional financial manager
will be able to manage the firm’s financial affair so as to maximize the value of the firm for its
owners.
According to Mohd Amy Azhar B. Hj. Mohd Harif and Harizal B. Osman (1990) the
important contribution of small and medium-scale denterprises to Malaysia’s GDP, employment,
and industrialization has beenare plagued by management problems (Hashim and Wafa, 2002).
These management problems include human resource management, marketing management,
operations management, financial management, and strategic management.
Kota Setar and Kubang Pasu district of Kedah Darul AmanThe findings of the study
show that three components of financial management to be categorized as core components
practiced by the SMEs, are financial planning and control, financial accounting, and working
capital management. Three other components which are financial analysis, management
accounting, and capital budgeting can be categorized as supplementary components practiced by
the SMEs due to the small percentage of the SMEs using these components in the management
of their business
Chan and Kevin (1990) reported that computers are used to improve efficiency and
produce quality products or services at the lowest costs. But they agree that small companies are
reluctant to accept information technology ( IT) because they find that it is difficult to use
computers.

11. Fong (1990) found that most SMEs in Malaysia we remanaged by the owners themselves. Therefore, the quality of management depends on
the education, experience, and training of the entrepreneurs themselves.
12. Mohd Amy Azhar B. Hj. Mohd Harif and Harizal B. Osman (1990) the important contribution of small and medium-scale denterprises to
Malaysia’s GDP, employment, and industrialization has beenare plagued by management problems (Hashim and Wafa, 2002).
13. Kota Setar and Kubang Pasu district of Kedah Darul AmanThe findings of the study show that three components of financial management to
be categorized as core components practiced by the SMEs, are financial planning and control, financial accounting, and working capital
management.
14. Chan and Kevin (1990) reported that computers are used to improve efficiency and produce quality products or services at the lowest costs.
 CHAPTER- III

COMPANY PROFILE

Sri Angalamman Traders got established in the year 2001 with its office based
at Karur, Tamil Nadu (India). The ownership type of the company is Sole Proprietorship. We
are engaged into supplying and trading of wide gamut of products which include Variable
Pump, PET Bottle Machine, CNC Machine, Metal Scrap, Plastic Molding Die and Molding
Machine. Additionally, we also execute Installation Service, Repairing
Service and Maintenance Service. Our offered ranges of products are in huge demand in many
sectors owing to their dynamic features and premium quality. We very well understand the wide
application of these products and make huge efforts in ensuring clients get the products of their
choice in a stipulated period of time. Each and every product offered by is well known for
absolute sturdiness, compact design, smooth finish and many more. Further, our services are
rendered by a team of professionals using latest technologies with an aim to create a large pool
of customers from all across the nation. The entire range is always readily available with us in
bulk stock and clients can avail the same at industry leading price. The firm is highly famous in
the industrial sector for its amazing state-of-the-art infrastructure. Moreover, our infrastructure
has also been the real reason behind our astounding success in the market. We execute our entire
business activities in a highly planned manner leaving no scope for any errors to take place.
Various units function with perfect coordination ensuring smooth operations.

The business operations of Sri Angalamman Traders take place under the astute guidance
of Mr. N. Venkatesan (Proprietor). It is his vast knowledge and commendable efforts that
today we are able to meet huge demands of clients without any hassle. His excellent management
skills have helped us to execute our entire business activities in a streamlined manner ensuring
greater success and higher profitability.
OUR TEAM

Faced by the growing challenges of industry, our team of professionals is accepting it as

an open opportunity to show our strength and ability in successfully fulfilling our clients’ needs
with accuracy and with time commitment. Our huge team of professionals is always engaged in
finding out innovative methods to improve the business experience of clients

Products offering
FINANCIAL GROWTH IN 2018:
 India has a diversified financial sector undergoing rapid expansion, both in terms of
strong growth of existing financial services firms and new entities entering the market. The
sector comprises commercial banks, insurance companies, non-banking financial companies, co-
operatives, pension funds, mutual funds and other smaller financial entities. The banking
regulator has allowed new entities such as payments banks to be created recently thereby adding
to the types of entities operating in the sector. However, the financial sector in India is
predominantly a banking sector with commercial banks accounting for more than 64 per cent of
the total assets held by the financial system.
The Government of India has introduced several reforms to liberalise, regulate and
enhance this industry. The Government and Reserve Bank of India (RBI) have taken various
measures to facilitate easy access to finance for Micro, Small and Medium Enterprises
(MSMEs). These measures include launching Credit Guarantee Fund Scheme for Micro and
Small Enterprises, issuing guideline to banks regarding collateral requirements and setting up a
Micro Units Development and Refinance Agency (MUDRA). With a combined push by both
government and private sector, India is undoubtedly one of the world's most vibrant capital
markets. In 2017,a new portal named 'Udyami Mitra' has been launched by the Small Industries
Development Bank of India (SIDBI) with the aim of improving credit availability to Micro,
Small and Medium Enterprises' (MSMEs) in the country. India has scored a perfect 10 in
protecting shareholders' rights on the back of reforms implemented by Securities and Exchange
Board of India (SEBI).

Market Size

The Mutual Fund (MF) industry in India has seen rapid growth in Assets Under
Management (AUM). Total AUM of the industry stood at Rs 24.03 trillion (US$ 342.01 billion)
between April-November 2018. At the same time the number of Mutual fund (MF) equity
portfolios reached a high of 74.6 million as of June 2018.
Another crucial component of India’s financial industry is the insurance industry. The
insurance industry has been expanding at a fast pace. The total first year premium of life
insurance companies reached Rs 193,866.23 crore (US$ 30.10 billion) during FY18.
 Along with the secondary market, the market for Initial Public Offers (IPOs) has also
witnessed rapid expansion. The total amount of Initial Public Offerings (IPO) increased to US$
1.2 billion raised from 37 between April – June 2018.

Over the past few years India has witnessed a huge increase in Mergers and Acquisition
(M&A) activity. In H12018, 74 deals of acquisition took place in financial sector. The total value
of such transactions was US$ 4.166 billion.

Furthermore, India’s leading bourse Bombay Stock Exchange (BSE) will set up a joint
venture with Ebix Inc to build a robust insurance distribution network in the country through a
new distribution exchange platform.

Investments/Developments

 Investments by Foreign Portfolio Investors (FPIs) in Indian capital markets have reached
Rs 6,310 crore (US$ 899.12 million) up to November 22, 2018.
 As of October 2018, the Financial Inclusion Lab has selected 11 fintech innovators with
an investment of US$ 9.5 million promoted by the IIM-Ahmedabad's Bharat Inclusion
Initiative (BII) along with JP Morgan, Michael and Susan Dell Foundation, and the Bill
and Melinda Gates Foundation.
 The private equity and venture capital (PE/VC) investments reached US$ 25.20 billion
between January to October 2018.*

Government Initiatives

 In December, 2018, Securities and Exchange Board of India (SEBI) proposed direct
overseas listing of Indian companies and other regulatory changes.
 Bombay Stock Exchange (BSE) introduced weekly futures and options contracts on
Sensex 50 index from October 26, 2018.
 In September 2018, SEBI asked for recommendations to strengthen rules which will
enhance the overall governance standards for issuers, intermediaries or infrastructure
providers in the financial market.
  The Government of India launched India Post Payments Bank (IPPB), to provide every
district with one branch which will help increase rural penetration. As of August 2018,
two branches out of 650 branches are already operational.

Road Ahead

 India is today one of the most vibrant global economies, on the back of robust banking
and insurance sectors. The relaxation of foreign investment rules has received a positive
response from the insurance sector, with many companies announcing plans to increase
their stakes in joint ventures with Indian companies. Over the coming quarters there
could be a series of joint venture deals between global insurance giants and local players.
 The Association of Mutual Funds in India (AMFI) is targeting nearly five fold growth in
assets under management (AUM) to Rs 95 lakh crore (US$ 1.47 trillion) and a more than
three times growth in investor accounts to 130 million by 2025.
 India's mobile wallet industry is estimated to grow at a Compound Annual Growth Rate
(CAGR) of 150 per cent to reach US$ 4.4 billion by 2022 while mobile wallet
transactions to touch Rs 32 trillion (USD $ 492.6 billion) by 2022.
FINANCAL SERVICES:

Sri angalamman finance ltd was registered under the state co operative’s law, on 25 th October 1988
and started its work on 4th November in the same year..Sri murgan credits has 4182 members who have
the voting power and 30 non members. Co-operative society gets funds from following ways.

 By getting deposits from members of the firm

 Borrow needed funds from co-operative firm and state cooperative firm.
 Using retained earnings from profit
 By getting interest from karur district central co-operative firm where the surplus fund is
deposited.

PRODUCTS AVAILABLE IN THE FIRM:

1. AVAILABLE LOAN PRODUCTS:

 Crop loan
 Jewel loan
 SHG (self Help Group Loan)
 Small Industries Loan
INTEREST RATE FOR DEPOSITS:

 Savings Deposit:
Interest rate for savings deposit is 4%

 Fixed Deposits:
Interest rate for fixed deposits is based on the deposit days. It has two types of fixing interest
rates.

 General

Days General Old age people

15 to 45 4.5% 4.5%

46 to 179 6% 6%

180 to 364 8% 8.5%

1 year and above 9% 9.5%

3 year and above 8% 8.5%

 CHAPTER - 4

DATA ANALYSIS & INTERPRETATION

4.1 RATIO ANALYSIS

Ratio Analysis is a powerful tool of financial analysis. A Ratio is defined as “the

indicated quotient of two mathematical expressions” and as “the relationship between two or
more things”. In financial analysis, a ratio is used as a benchmark for evaluating the financial
position and performance of a firm.
CURRENT RATIO

CURRENT RATIO = Current Assets

Current Liability

Table No: 1
(Rs in ‘000s)
Year Current Assets Current Liability Current Ratio
2013-14 22668 28369 0.79
2014-05 92298.34 53999.44 1.70
2015-16 81016.52 137963.56 0.59
2016-17 105191.92 126328.42 0.83
2017-18 111755.12 108341.54 1.03
Sources Company Records
 Chart No: 1

CURRENT RATIO

4
4
2.98
3.5
3
2.5
RATIO 2 1.52 1.2
1.5
1
0.09
0.5
0
2014 2015 2016 2017 2018
YEARS

Interpretation

In the year 2014-15 companies’ current liability is comparatively high

compared to last year as there is an increase in its liability. After 2014-15 company
started to recover and the current liabilities came down considerably. Current ratio
has shown an increasing trend in the past three years which means the company is
able to maintain sufficient margin of working capital after paying off the liabilities.
LIQUID RATIO OR QUICK RATIO

LIQUID RATIO = Liquid Assets

Liquid Liabilities

Table No: 2
(Rs in ‘000s)
Year Quick Assets Quick Liability Quick Ratio
2013-14 146946 209727 07
2014-15 129959 313114 0.43
2015-16 143414 257407 0.56
2016-17 169482 246131 0.7
2017-18 207869 196421 1.05
Sources Company Records
 Chart No: 2
1.2

0.8 Series 1
Series 2
0.6 Series 3
Series 4
0.4 Series 5

0.2

0
13-14 14-15 15-16 16-17 17-18

Interpretation

In the year 2014-15 the quick ratio has come down to 0.43 as the current liability is
high during the year. After 2014-15 company started to recover as there is an
increasing trend in quick ratio. The company has become successful in achieving
this ratio which means its quick assets are sufficient to pay off the short term
obligations. The current quick ratio of the firm is greater than 1:1 hence it can be
said that the financial position of the firm is good.
CASH RATIO

CASH RATIO = Cash and Bank + Cash in Hand

Current Liabilities

Table No: 3
(Rs in ‘000s)
Year Cash Current Liabilities Current Ratio
2013-14 11141 209727 0.052
2014-15 11930 313114 0.139
2015-16 13424 257407 0.052
2016-17 29272 246131 0.119
2017-18 47558 196421 0.242
Sources Company Records
 Chart No: 3

0.25

0.2

0.15

0.1

0.05

0
13-14 14-15 15-16 16-17 17-18

Interpretation

As the company was maintaining a small amount of cash the cash ratio is too
low during the year 2013-14 to 2015-16. From the year 2016-17 company started
to maintain high cash by which the cash ratio has increased to 0.199 in the year
2016-17 and to 0.242 in the year 2017-18. The acceptable norm for the ratio is
0.5:1. Cash position of the company is not satisfactory.
LEVERAGE RATIO OR SOLVENCY RATIO

DEBT EQUITY RATIO

Debt Equity Ratio = Long Term debt

Share Holders Fund

Table No: 4
(Rs in ‘000s)
Year Outsider’s Fund Share Holders Fund Debt Equity Ratio
2013-14 713444 172169 4.14
2014-15 644292 172169 3.74
2015-16 498467 264920 1.9
2016-17 487860 307688 1.6
2017-18 431125 344990 1.24
Sources Company Record
 Chart No: 4

4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
13-14 14-15 15-16 16-17 17-18

Interpretation

The debt equity ratio during 2013-14 is high as the company depended
mostly on outsiders fund during the year and it has decreased over the years as
there is a decreasing trend in ratio. The ratio indicates extend the firm depends
upon outsiders for its existence. The decreasing trend in the ratio shows that their
dependence has decreased when it comes from 2013-14 to 2017-18.
CAPITAL GEARING RATIO

Capital Gearing Ratio = Fixed Income bearing funds

Equity shareholder’s fund

Table No:5
(Rs in ‘000s)
Year Fixed Income bearing Equity Shareholder’s Capital
Funds Fund Gearing Ratio
2013-14 46000 84873 0.54
2014-15 46000 84873 0.54
2015-16 138727 84873 1.63
2016-17 138727 84873 1.63
2017-18 138727 84873 1.63
Sources Company Records
 Chart No: 5

1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
13-14 14-15 15-16 16-17 17-18

Interpretation

From the above table and chart it can be seen that the capital gearing ratio
has increased from 0.54:1 to 1.61:1 and is being constant for about the past three
accounting years. Company invested in more fixed income bearing funds in the
year 2015-16 and the equity shareholder’s fund has remained constant for the past
five years which indicates risk to the equity shareholders.
SOLVENCY RATIO
Solvency Ratio = Total assets
Total Liabilities

Table No:6
(Rs in ‘000s)
Year Total Assets Total Liability Solvency Ratio
2013-14 1055606 713444 1.48
2014-15 1017822 644292 1.58
2015-16 1021145 498467 2.05
2016-17 1147837 487860 2.15
2017-18 1140820 431125 2.41
Sources Company Records
 Chart No: 6

2.5

1.5

0.5

0
13-14 14.-15 15-16 16-17 17-18

Interpretation

Solvency ratio is low in the year 2013-14 as the total liability was high
during the year. After 2014-15 total assets has increased and the total liability has
come down and this has caused to an increase in the solvency ratio. Solvency ratio
measures the ability of a firm to pay the outside liabilities out if total assets. Higher
the ratio stronger is the financial position of the firm. Increasing trend of the ratio
had proven favorable for the company.
INTEREST COVERAGE RATIO
Interest Charges Ratio = Profit before depreciation and tax
Interest charges

Table No: 7
(Rs in ‘000s)
Year Profit before Interest Interest Charges Interest
and tax Coverage Ratio
2013-14 1010 93120 0.11
2014-15 88820 66313 1.34
2015-16 78165 20795 3.76
2016-17 95005 57891 1.64
2017-18 95167 55666 1.71
Sources Company Records
Chart -7

4
3.5
3
2.5
2
1.5
1
0.5
0
13-14 14-15 15-16 16-17 17-18

Interpretation

During the year 2013-14 company’s profit was too low and the company
recovered in the year 2014-15 and the interest coverage ratio has increased. In the
year 2015-16 it shows the highest ratio as the company as the interest charges were
too low during the year. The firm’s interest coverage ratio is far below the standard
ratio which is 6 to 7 times. Low ratio indicates excessive use of debt and the
inability to offer assured payment of interest to creditors.
PROFITABILY RATIO

NET PROFIT RATIO

Net Profit Ratio = Net Profit X100

Net Sales

Table No: 8
(Rs in ‘000s)
Year Net Profit Net sales Net Profit Ratio
2013-14 -40754 445028 NA
2014-15 21853 758559 2.88
2015-16 52709 290753 18.13
2016-17 42768 630840 6.78
2017-18 25836 750864 34.4
Sources Company Records
 Chart No: 8

35

30

25

20

15

10

0
13-14 14-15 15-16 16-17 17-18

Interpretation

From the above table and chart it is clear that the net profit ratio of the
company is constantly fluctuating. In the year 2013-14 the company has incurred a
loss. Net profit ratio measures the overall profitability of the firm. The ideal net
profit is 5% to 10%.
RETURN ON SHAREHOLDER’S FUND

Return on Shareholder’s fund = Net Profit after Interest and tax X 100
Shareholder’s Fund

Table No: 9
(Rs in ‘000s)
Year Net Profit after Shareholder’s Return on
Interest and Tax fund Shareholder’s Fund

2013-14 -40754 172169 NA

2014-15 21853 174924 12.5

2015-16 52709 264920 19.8

2016-17 42768 307688 13.9

2017-18 25836 344990 7.5

Sources Company Records

 Chart No: 9

20
18
16
14
12
10
8
6
4
2
0
13-14 14-15 15-16 16-17 17-18

Interpretation

From the above table and chart it can be inferred that return on shareholder’s
fund is constantly fluctuating. The net profit kept fluctuating during the years and
the share holders fund kept on increasing. Higher ratio indicates better utilization
of owner’s funds and higher productivity. Although return on equity shareholder’s
fund is satisfactory for the company but it has shown a decrease in the last two
accounting year.
PRICE EARNINGS RATIO

Price Earnings Ratio = Market Price per Share

Earnings per Share

Table No: 10
(Rs in ‘000s)
Year Market Price Per Earnings per Share Price Earnings Ratio
Share
2013-14 100 -54 NA
2014-15 100 12 8.33
2015-16 100 -7 NA
2016-17 100 2.5 4
2017-18 100 3.7 2.7
Sources Company Records
 Chart No: 10

9
8
7
6
5
4
3
2
1
0
13-14 14-15 15-16 16-17 17-18

Interpretation

From the above table and chart it is clear that in the year 2013-14 earnings
per share is negative and again in the year 2015-16 it again went to negative. The
ratio indicates the number of times the earnings per share is covered by its market
price. This ratio is mainly used to value company’s performance as expected by
equity shareholders
ACTIVITY RATIOS

STOCK TURNOVER RATIO

Stock Turnover Ratio = Net Sales

Average inventory at selling price

Table No:11
(Rs in ‘000s)
Year Cost of Goods Sold Average Stock Stock Turnover Ratio
2013-14 445028 314464 1.64
2014-15 758559 309641 2.8
2015-16 290753 307172 1.07
2016-17 630840 327906 2.2
2017-18 750864 336145 2.43
Sources Company Records
 Chart No: 11

2.5

1.5

0.5

0
13-14 14-15 15-16 16-17 17-18

Interpretation

From the above table and chart it can be seen that the cost of goods sold kept
fluctuating due to the changes in sales. Whereas the Average Stock was able to
maintain balance as the production was steady. The ratio measures how quickly
inventory is sold. The firm’s stock turnover is not very high which indicates the
inventories are not sold so fast.
FIXED ASSETS TURNOVER RATIO

Fixed Assets Turnover Ratio = Net Sales

Net fixed assets

Table No: 12
(Rs in ‘000s)
Year Net Sales Fixed Assets Fixed Assets Turnover Ratio
2013-14 445028 530137 0.94
2014-15 758559 518152 1.65
2015-16 290753 494547 0.66
2016-17 630840 454210 1.6
2017-18 750864 415081 2.00
Sources Company Records
 Chart No: 12

2
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
13-14 14-15 15-16 16-17 17-18

Interpretation

From the above table and chart it can be seen that there is a fluctuation in the
sales. And the company has been selling out its fixed assets as the amount came
down gradually Higher the ratio better is for the firm. Higher ratio indicates better
utilization of fixed assets. Fixed asset turnover ratio of the firm is in the increasing
trend for the past three accounting years which is favourable for the company.
WORKING CAPITAL TURNOVE RATIO

Working Capital Turnover Ratio = Net sales

Net Working capital

Table No: 13
(Rs in ‘000s)
Year Net Sales Net Working Capital Working Capital Turnover
Ratio
2013-14 445028 315842 1.6
2014-15 758559 193179 4.44
2015-16 290753 269091 1.22
2016-17 630840 347496 2.00
2017-18 750864 429318 1.90
Sources Company Records
 Chart No: 13

4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
13-14 14-15 15-16 16-17 17-18

Interpretation

From the above table and chart it is clear. Compared to 2013-14 the net sales
increased in 2014-15. The working capital started to increase after 2014-15 and it
showed a increasing trend. The ideal working capital turnover ratio is 7 or 8 times.
The company’s working capital turnover ratio is far below the standard ratio which
indicates working capital is not effectively utilised in making sales.
DEBTORS TURNOVER RATIO

Average Collection Period = No of days in an accounting year

Debtors Turnover ratio
Table No: 14

AVERAGE COLLECTION PERIOD (Rs in ‘000s)

Year No of Days Debtors Turnover Average Collection

Ratio Period
2013-14 365 6.19 58.96
2014-15 546 9.37 58.27
2015-16 182 3.49 52.15
2016-17 365 6.46 56.50
2017-18 365 6.66 54.80
Sources Company Records
 Chart No: 14

60

58

56

54

52

50

48
13-14 14-15 15-16 16-17 17-18

Interpretation

From the above table and chart it can be inferred that. Debtor’s turnover
ratio measures the efficiency in management of debtors. The ideal turnover ratio is
7 and the firm’s turnover ratio is also coming in this range which is a very
satisfactory figure. Average collection period of the firm is coming around 56 days
which means debtors remain outstanding for about 56 day.
4.1) CREDITORS TURNOVER RATIO

Creditors Turnover Ratio = Net Credit Purchase

Average Creditors including bills payable

Table No: 15
(Rs in ‘000s)
Year Net Credit Average Creditors Creditors Turnover
Purchase Ratio
2013-14 138641 128263 1.08
2014-15 239837 180654 1.33
2015-16 92892 169939 0.55
2016-17 227611 164057 1.39
2017-18 254163 81438 3.12
Sources Company Records
 Chart No: 15

3.5

2.5

1.5

0.5

0
13-14 14-15 15-16 16-17 17-18

Interpretation

From this above table and chart it is clear that creditors turnover ratio of the
company is 1.08:1 in the year 2013-14, 1.33:1 in the year 2014-15 and 0.55:1 in
the year 2015-16. The ratio reached1.39:1 in the year 2016-17 and 3.12:1 in the
year 2017-18. Creditor’s turnover ratio of the company is low which means
payment to creditors is delayed. The creditors by the company is more than one
year in the first three accounting years but payment period has been decreased in
the past two accounting years.
 CHAPTER 5

FINDINGS ,SUGGESTIONS &CONCLUSION

5.1 FINDINGS

 The cash management of SRI ANGALAMMAN has been working well in

the organization.

 The Funds from operations of a company has been increased from year by
year.

 The cash from operations has been find that it used as efficient.

 The cash inflow and outflow of cash flow statement have a cash balance will
be increased 4.2 times when compared to last year balance.

 Current Ratio shows that the company has sufficient funds to meet its short-
term obligations.

 The company’s Liquidity Ratio shows a satisfactory trend.

 Super Quick Ratio shows that sri angalamman is able to meet its current
obligations (liabilities)..

 The efficiency of inventory control in sri angalamman shows a satisfactory

position..

 The Cash Ratio shows that the cash required to meet out the current
liabilities is maintained at a normal level hence, it shows that sri
angalamman follows an average policy.
 Interval Measure Ratio shows that the company can meet its operating cash
requirements within a period of 112 to 146 days without resorting to next
year’s income.

 The Current Assets to Total Assets Ratio implies that sri angalamman is
maintaining a considerable level of Current Assets in proportion to Total
Assets.The average Cash to Current Assets is maintained at 0.009 times.
Hence, it is found that the company had maintained a moderate level of cash
in proportion to Current Assets.

 The average ratio of Inventories to Current Assets is 0.46 times and thus it is
found that the investment in inventories.

 The average ratio of Sundry Debtors to Current Assets is 0.67 times. Hence
it implies that the credit policy followed by sri angalamman is moderate.

 The loans and Advances to Current Assets ratio of the company imply that a
quarter positions of the Current Assets are kept in for loans and advances,
which is considerable.

 The policy regard financing the Working Capital in sri angalamman can be
said as Aggressive policy according to the Cash to Working Capital Ratio.

 The average cash to sales ratio is 0.011 times and which indicates that only
0.4% of sales has been maintained as cash with the business.
5.2 SUGGESTIONS

SRI ANGALAMMAN should try to match their Cash with the sales. In
case of surplus Cash, it should be invested either in securities or should be
used to repay borrowings.

 The company should try to prepare a proper ageing schedule of debtors. This
will help them to reduce the bad debts and speed up collection efforts.

 The company should be prompt in making payments so as to enjoy cash

discount opportunities

 The company should determine the optimum cash balance to be kept.

 The company followed an aggressive policy of financing working capital

should try to finance 50% of their working capital using long term source
and improve their status.

 The current Ratio of 2:1 is considered normally satisfactory. sri angalamman

should try to improve the current ratio. So it should invest large amount in
current ratio, in order to maintain liquidity and solvency position of the
concern.

 The company should try to follow a matching policy for financing current
Assets (i.e.) using both long term and short-term sources of finances.
5.3 CONCLUSION

The Cash Management Analysis done on the financial position of the

company has provided a clear view on the activities of the company. The use of the
ratio analysis, trend analysis, Cash Flow Statement and other accounting and
financial management helped in this study to find out the financial soundness of
the company.

This project was very useful for the judgment of the financial status of
the company from the management point of view. This evaluation proved a great
deal to the management to make a decision on the regulation of the funds to
increase the sales and bring profit to the company.

Before I conclude I wish to convey my thankfulness in regard to the

training given to me in sri angalamman . It gave me extreme satisfaction and
practical knowledge of the financial activities carried out in the company. The
kindness, attention, and immense co-operation extended to me buy all the officials
in the company made my project easy and comfortable. Really it was a very
pleasant experience in sri angalamman
 BIBLIOGRAPHY

BOOKS:

 S.N. Maheshwari, Financial management, Eleventh Edition 2013, Sultan

Chaqnd & Sons, Educational Publishers. New Delhi.

 I.M Pandey, Financial management, Ninth Edition, Vikas publishing

house pvt Ltd.

 M.Y Khan- P.K Jain, Management Accounting, Third edition, Tata Mc

Graw-Hill Publishing co. Ltd

 B.L. Gupta, Management of Liquidity and Profitability, Arihant

Publishing House, Jaipur.

WEBSITE:

 www.financeindia.org

 www.fao.org