Chapter-1: Financial Management

RECEIVABLE MANAGEMENT
CHAPTER-1
Introduction:
Finance is one basic foundation of all kinds of economic activities. It is

the master key, which provides access to all the sources for being employed in
manufacturing. Hence it is rightly said that Finance is life blood of any
enterprise, besides being the scarcest element, it is also the most indispensable
requirement. Without finance neither any business can be started nor
successfully run. Provision of sufficient funds at the required time is the key to
success of concern. As matter of fact finance may said to be the circulatory
system of economic body, making possible the needed co-operation among
many units of the activity.
Financial Management:
Financial management emerged as a distinct field of study at the turn of this
century. Many eminent persons defined it in the following ways.
Definition:
According to GOUTHMANN AND DOUGHAL:’’ Business Finance can
broadly be defined as the activity concerned with planning, rising controlling
and administrating of funds used in the business
According to BONNEVILE AND DEWEY:’’ Financing consists in the
rising, providing and managing of all the money, capital or funds of any kind to
be used in connection with the business.’’
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According to Prof. EZARA SOLOMAN:’’ Financial management is

concerned with the efficient use of any important economic resource, namely
capital funds.”’
Financial Functions:
The finance functions of raising funds, investing them in assets and distributing
returns earned from assets to shareholders are respectively known as financing
investment and dividend decisions. While performing these functions, a firm
attempts to balance cash inflow and outflows. This called as liquidity decision.
The finance functions can be divided into four broad categories.
Financing or capital mix decision, Dividend or profit allocation decision,
Liquidity or investment or long-term asset mix decision, Short-term asset mix
decision.
Investment Decision:
Investment or capital budgeting involves the decision of allocation of
cash or commitment of funds to long-term assets, which would yield benefits in
future profitability, which involves risk because of uncertain future. Other major
aspect of investment decision is the measurements of standard or hurdle rate
against which the expected return of new investment can be compared.
Financing Decision:
Financing decision is the second important function to be performed
by the firm. Broadly, he must decide when, where and how to acquire funds to
meet the firm’s investment needs. He has to determine the proportion of debt
and equity. This mix of debt and equity is known as the firms ‘capital structure’.
The financial manager must strive to obtain the least financing mix or the
‘optimum capital structure’ where the market value of share is maximized.
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Dividend Decisions:
It is the third major financial decision. The financial manager decides
whether the firm should distribute all profits, or return them, or distribute a
portion and return the balance. The optimum dividend policy should determined
where is maximizes the markets value of shares.
Liquidity Decisions:
Current asset management, which affects firm’s liquidity, is yet another
finance function in addition to the management of long-term assets. Current
assets should be managed effectively safeguarding the firm against the dangers
of liquidity and insolvency.
Investment in current assets affects the profitability, liquidity, and risk. A

conflict exists between profitability and liquidity while managing current assets.
If the firm does not invest sufficient funds in current assets it may become
liquid. But it could loose profitability, as idle CA could not even anything. Thus
a proper take of must be achieved between profitability and liquidity. In order to
ensure that neither insufficient nor unnecessary funds are invested in current
assets.
Goals of financial management:
Maximize the value of the firm to its equity shareholders, Maximization of
profit, Maximization of earning per share. Maximization return on equity.
Maintenance of liquid assets in the firm. Ensuring a fair return to the share
holders on their investment.
Receivables Management:
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The Financial management is managing the receivable is concerned with

maintained the receivables at the optimum level, and review the credit policy
and procedures accordingly.
In most of business enterprises, investment in account receivable forms a
major part of their assets. Account receivable is one of the receivable is one of
the major component of working capital.
The problem of management of receivable is basically a problem of
balancing profitability and liquidity.
Hence it is a very vital issue for the financial management, the longer
period of credit. The greater the risk. The greater level of debt and greater the
strain on the liquidity of the company.
Determinants of size of investment in Receivables:
The level of Investment in receivables is determined by the following two
factors. General factors and Specific factors
General factors:
Time and nature of business, Volume of anticipated sales, Volume of the
Business, Price level variations, Availability of fund and Attitude of executives
Specific factors:
Volume of credit sales, Terms of sales, Policy of credit sale, Stability of sales,
Size and policy of cash discount and Credit and collection policy.
Trade credit arises when a firm sells its products or services on credit and
does not receive cash immediately. It is an essential marketing tool, acting as a
bridge for the movements of goods through production and distribution stages to
customers. A firm grants trade credit to protect its sales from the competitors
and to attract the potential customers to buy its products at favorable terms.
Trade credit creates debtors (book debts) or account receivables. it is
used as marketing tool to maintain or expand the firm’s sales. A firm’s
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investment in account receivable depends on two types. They are the following:
volume of Sales and collection period
There are three methods to monitor Receivables. The average
collection period and aging schedule are based on aggregate data for showing
the payment patterns and therefore do not provide any meaningful information
for controlling receivables. Third approach that uses disaggregated data is the
collection experience matrix
Trade credit is considered as an essential marketing tool, acting as
a bridge for the movement of the products through production and distribution
stages to customers. When the firm sells its products or services and do not
receive the cash for it immediately, the firm is said too have granted trade credit
to the customers. Trade credit, thus, creates receivables or book debts which the
firm is expected to collect in the near future.
Receivables constitute a substantial portion of current assets of several firms.
In India, Trade debtors, after the inventories, are the major components of the
current assets. They form one-third of the current assets in India. Granting credit
and creating debtors amount to the blocking of funds. The interval between the
date of sale and the date of payment has to be financed out of the working
capital. Thus, trade debtors represent investment. As substantial amounts are
tied up in trade debtors, in needs careful analysis and proper management.
Organization Structure:
The organization structure of the credit departments can be classified as follows.
Line structure, Line & staff structure and Functional structure.
Collection:
The purpose of collection operations is to maximize collections and
minimize the loss of future trade collection effectiveness is mainly influence,
however.
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The classification of debtors, Credit policy as influenced by the type of business

and its goods, profit margin and competitive and The type of records to be used
to monitor collection procedures.
Classification of Customer Accounts:

Analysis of collection from accepts accounts provide a useful measure of the
potential loss in the various customer classifications. Customer accounts may be
classified in various Categories.
Government, prime or excellent large, Good firms that are not large and have
not yet established excellent credit reputations.
Restricted: firms that are limited to a definite credit line and Marginal high risk
accounts which must be watched
Accounts receivables
Receivables are a border line item which may be classified as either a
cash fund asset of an operating fund asset according to the purpose for which
the classification is designed.
More ever Receivables may be viewed as cash fund asset for any purpose
which looks beyond the period of time in which receivables on the books will
mature into cash.
Northerly, every organization will go for offering credit and these may be
gives raise to increase their customers as well as extra fund is acquired as the
facet of interest. These receivables come under assets as they sooner are
converted into cash.
RAW MATERIALS WORK IN PROCESS
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FINISHED GOODS
Receivables management
Important Of cash
In starting of business enterprise the initial investment is still required to
be made in cash and all fruits of the operation of a business enterprise are also
ultimately in the form of cash by way of dividend.
Cash participate a major role for further business expansion to generate
and purchase fixed assets like land, building, plant and machinery.
Other cash has to be invested in the business for the purpose of generating
the important elements of cost viz, materials, wages and expenses.
CHAPTER – II
REVIEW OF LITERATURE
2.1. Accounts receivable management
Accounts receivable represents a sizable percentage of most firms' assets.

Investments in accounts receivable, particularly for manufacturing companies,
represent a significant part of short -term financial management. Firms typically
sell goods and services on both cash and a credit basis. Firms would rather sell
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for cash than on credit, but competitive pressures force most firms to offer
credit. The extension of trade credit leads to the establishment of accounts
receivable. Receivables represent credit sales that have not been collected. As
the customers pay these accounts, the firm receives the cash associated with the
original sale. If the customer does not pay an account, a bad debt loss is
incurred.
When a credit sale is made, the following events occur: inventories are
reduced by the cost of goods sold, accounts receivable are increased by the
sales price, and the difference is profit, which is added to retained earnings. If
the sale is for cash, then the cash from the sale has actually been received by the
firm, but if the sale is on credit, the firm will not receive the cash from the sale
unless and until the account is collected. Carrying receivable has both direct
and indirect costs, but it also has an important benefit-increased sales.
According to Chambers and Lacey there are three primary issues in the
management of accounts receivable: to whom to extend credit, what the terms
of the credit should be, and what procedure should be used to collect the
money. Extending credit should be based upon a comparison of costs and
benefits. The analysis must build in uncertainty because we are uncertain of
future payment, and we will handle this by computing the expected costs and
expected benefits through payment probabilities. The potential cost of
extending credit is that the customer will not pay. Although there is a
temptation to compute this cost as the full price of the product, it is almost
always more appropriate to use the actual cost of the product. The potential
benefit of extending credit is not just the hope for profit on the one transaction;
rather, it is the potential value of the customer for a long-term relationship.
The decision of how much credit to offer must be made when the customer
initially requests credit and when the customer requests additional credit. The
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fundamental principle that guides financial decisions can be used: marginal

benefit versus marginal cost. The marginal cost is the additional potential lost
costs of the product. The costs of past uncollected sales are sunk costs and
should not be included as marginal costs. The marginal benefits are the
potential sales and interest revenues – including the potential to recover past
sales that remain uncollected.
Once the decision to grant credit has been made, the firm must establish
the terms of the credit. Credit terms are often separated into two parts: the credit
period and the credit discount.
Collection of accounts receivable is an important process for a
corporation and requires a well-designed and well-implemented policy. One
technique is the factoring of accounts receivables. In a typical factoring
arrangement, one firm will sell their accounts receivable outright to another
firm for an agreed-upon price. There ia usually no recourse in such transactions,
such that the buyer (also known as the factor) takes the loss if the purchaser of
the goods does not ultimately pay for them.
Another technique to expedite the receipt of accounts receivable is to utilize
lock boxes. Lock boxes are payment collection locations spread geographically
so as to reduce the amount of time required for checks mailed to the firm to be
deposited and cleared. The lock boxes are typically post office box addresses
from which deposits go directly to a bank on the day of receipt. The reduction
of mailing time and check clearing time for the banks can produce significant
savings when large sums of money are involved.
Payments of accounts receivable should be closely monitored to detect
potential problems such as would be indicated by slow payments. Following up
on slow-paying customers is an important function of the credit department.
Procedures should be carefully developed and consistently implemented 4.
The major decision regarding accounts receivable is the determination
of the amount and terms of credit to extend to customers. The total amount of
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accounts receivable is determined by two factors: the volume of credit sales and
the average length of time between sales and collections. The credit terms
offered have a direct bearing on the associated costs and revenue to be
generated from receivables.
In evaluating a potential customer’s ability to pay, consideration
should be given to the firm’s integrity, financial soundness, collateral to be
pledged, and current economic conditions. A customer’s credit soundness may
be evaluated through quantitative techniques such as regression analysis. Bad
debt losses can be estimated reliably when a company sells to many customers
and when its credit policies have not changed for a long period of time. In
managing accounts receivable, the following procedures are recommended:
establish a credit policy, establish a policy concerning billing, establish a policy
concerning collection.
The establishment of a credit policy can include the following activities:

A detailed review of a potential customer’s soundness should be made prior to
extending credit. Procedures such as a careful review of the customer’s
financial statements and credit rating, as well as a review of financial service
reports are common. As customer financial health changes, credit limit should
be revised. Marketing factors must be noted since an excessively restricted
credit policy will lead to lost sales. The policy is financially appropriate when
the return on the additional sales plus the lowering in inventory costs is greater
than the incremental cost associated with the additional investment in accounts
receivable.
The following procedures are recommended in establishing a policy

concerning billing: Customer statements should be sent within 1 day
subsequent to the close of the period. Large sales should be billed immediately.
Customers should be invoiced for goods when the order is processed rather than
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when it is shipped. Billing for services should be done on an interim basis or

immediately prior to the actual services. The billing process will be more
uniform if cycle billing is employed. The use of seasonal date in should be
considered.
In establishing a policy concerning collection the following procedures

should be used: Accounts receivable should be aged in order to identify
delinquent and high-risk customers. The aging should be compared to industry
norms. Collection efforts should be undertaken at the very first sign of customer
financial unsoundness.
2.2. Managing the credit policy

The success or failure of a business depends primarily on the demand for
its products. The major determinants of demand are sales prices, product
quality, advertising, and the company’s credit policy. The financial manager is
responsible for administering the company’s credit policy. Receivables
management begins with the credit policy. Credit policy consists of four major
components: credit standards, credit terms, the credit limit and collection
procedures.
Credit standards refer to the required financial strength of acceptable
credit customers.
Based on financial analysis and non financial data, the credit analyst
determines whether each credit applicant exceeds the credit standard and thus
qualifies for credit. Lower credit standards boost sales, but also increase bad
debts. The minimum standards a customer must meet to be extended credit are:
character, capital, capacity, conditions and collateral.
The credit period, stipulating how long from the invoice the customer has
to pay, and the cash discount together comprise the seller’s credit terms. A
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company’s credit terms are usually very similar to that of other companies in its
industry7.
Discounts given for early payment include the discount percentage and
how rapidly payment must be made to qualify for the discount.
If credit is extended, the dollar amount that cumulative credit purchases
can reach for a given customer constitutes that customer’s credit limit. The
customer periodically pays for credit purchases, freeing up that amount of the
credit limit for further orders. The two primary determinants of the amount of a
customer’s credit limit are requirements for the supplier’s products and the
ability of the customer to pay its debts. The latter factor is based primarily on
the customer’s recent payment record with the seller and others and a review
and analysis of the customer’s most recent financial statements.
Detailed statements regarding when and how the company will carry out
collection of past-due accounts make up the company’s collection procedures.
These policies specify how long the company will wait past the due date to
initiate collection efforts, the methods of contact with delinquent customers,
and whether and at what point accounts will be referred to an outside collection
agency.
Collection policy is measured by its toughness or laxity in attempting to
collect on slow-paying accounts. A tough policy may speed up collections, by it
might also anger customers, causing them to take their business elsewhere.
A firm may liberalize its credit policy by extending full credit to
presently limited credit customers or to non-credit customers. Full credit should
be given only if net profitability occurs. A financial manager has to compare
the earnings on sales obtained to the added cost of the receivables. The
additional earnings represent the contribution margin on the incremental sales
because fixed costs are constant. The additional costs on the additional
receivables result from the greater number of bad debts and the opportunity cost
of tying up funds in receivables for a longer time period.
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If a firm considers offering credit to customers with a higher-than-normal

risk rating, the profitability on additional sales generated must be compared
with the amount of additional bad debts expected, higher investing and
collection costs, and the opportunity cost of tying up funds in receivables for a
longer period of time. When idle capacity exists, the additional profitability
represents the incremental contribution margin (sales less variable costs) since
fixed costs remain the same.
Research methodology
Methodology refers to the way adopted for collecting information for the
purpose of drawing inferences methodology plays a vital role in the analysis of
the study. Methodology is the science of system and a method of conducting a
research work.
Scope of the study:
An extensive study is done on the blocking up of Receivables and its retaining

activities, and the factors determining these notes receivables and its retaining
activities, and the factors determining these notes receivables. The study
concentrates on the liquidity position of the firm, and a brief study is made on
the technique used by the firm.
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Objectives of the study:
The main objective of the current study is the company’s performance

towards receivables action executing in srikalahasti pipes limited. The prime
objective is to analyze and evaluate the receivables management and its

performance in srikalahasti pipes limited. The following are the objectives of
the study: To know how receivables were managed. To analyze to what extent
they were offering credit. To know who were the major defaulter. To know
which extent if cash is blocked.
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Limitations of the study:
 The data used is gathered mainly through secondary sources and no

independent verification has been done on the same.
 The time series analysis of ratios has been attempted with no effect being
given to inflation
 All the individual analysis statements and schedules are totally
independent and it doesn’t lay emphasis on other statements to know the
roots.
 The total statements are given as secondary sources and they don’t
provide to go through scrutiny of those statements
 ad debts.
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DATA COLLECTION:
The study depends on primary and secondary data from various sources.
Primary Data:
First hand information was collected from experts of Finance department

on their course of actions towards collections.
Secondary Data:
The secondary data that is required for the studies is collected from the
schedules past notes, budgets, through company websites and other statements
provided by the Finance department of Srikalahasti pipes limited.
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CHAPTER - III
INDUSTRY PROFILE
‘’Economy builds the nation and builds the Economy’’
Introduction:
Pipes is a key infrastructure Industry. It has been decontrolled from
price and distribution on 1st March,1989 and de-licensed on 25th July, 1991.
However the performance of the industry and prices of pipes are monitored
regularly. The constraints faced by the industry are reviewed in the
infrastructure coordination committee meetings held in the cabinet secretariat
under the chairmanship of secretary
COMPANY PROFILE
Srikalahasti Pipes Limited (SPL) was incorporated on 8 September, 2014

by Pipes Group of Companies to manufacture pig Iron using Korf (German)
Technology and Pipes. The unit is located at Rachagunneri village on Tirupati. -
/ Srikalahasti road which is about 30kms. From Tirupati and 10kms. From
Srikalahasti. The installed capacity of Pig Iron was 90,000 TPA and with
similar capacity 90,000 TPA for Pipes.
Due to the poor demand and other reasons ,the operations of the Pipes
unit of the company was suspended and the unit was reengineered for producing
a different product mix having potential in south India.
As a measure of forward integration project for adding value to the pig

Iron manufactured by the Company ,SPL floated an another company named
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Pipes Kalahastri Castings Limited (LKCL) on 4th March 1997 to manufacture

Iron Castings and spun pipes in the same Campus of the Company with an
annual Capacity of 40,000 TPA and 35,700 TPA respectively. Accordingly,
SPL had an arrangement with LKCL for supply of molten iron and Pig Iron to
LKCL, being a value added product, as such iron pipes manufactured by LKCL
offered better returns.
However, due to falling Pig Iron prices, increase additional capacity in the
industry competition and the technical and financial assistance, the operations of
both SPL and LKCL were affected and the Company was exploring financial
and technical strategic alliance with Indian/Foreign Partner.
n).Its performance is also reviewed by the Cabinet Committee on
Infrastructure.
DATA ANALYSIS & INTERPRETATION
The company decides to liberalize credit to increase its sales. The liberalized credit policy
will bring additional sales of 71051.85, 68046.95. The variable cost will be 70% of sales and
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there will be 12% risk for non payment and 3% collection cost, will the company benefits
from the new credit policy.
Estimated sales 71,051.85
(-) 70% variable cost 49,736.295
Incremental revenue 21,315.55
(-) 12% risk of incremental revenue 2,557.86
(-) 3% collection cost 562.730
18194.95
Assuming additional sales is to decrease 71051.85, 68046.95 for next following year, so from
estimated sales will be analyze the estimated decreasing low revenue from these estimated
sales.
Estimated sales 71,051.85 68,046.95
(-) 70% variable cost 49,736.295 47,632.86
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Incremental revenue 21,315.55 20,414.09
(-) 12% risk of incremental revenue 2,557.86 2,449.69
17,964.40 18,757.68
(-) 3% collection cost 562.73 538.93
18194.96 17425.47
Interpretation:
1. From the above estimated sales. The revenue is decreased as below. on estimated sales of
71051.85 The revenue is 18194.96
2. If the sales is decreased from 71051.85lakh.estimated sales is 68046.95. The revenue is
17425.47
Gain in Receivables on net sales:

Net sales 192513.72
Net Receivables for 60 days 25967
Receivables for 45 days 20526
Receivable for 30 days 15085
Net Gain:-
(60-45 days) = 25967-20526
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= 5441
= 5441*17/100
= 924.97
(Gain (45-30 days)) = 20526-15085

= 5441
= 5441*17/100
=924.97
Interpretation:-
The period of time-gap for the receivables in net sales is 60-45 days, from the
above calculations the time gap of 30-45 days for the receivables yields same amount of gain.
To calculated the net receivables by using this formula.
Sales * collection period

---------------------------------------------------
No of days
Net gain is calculated by using there formula.
(Difference between collection period amount * percentage of profit).
Calculating proposed sales through collection period:
Here the companies sales & debtors on to be taken regarding to their financial
records. From these sales & debtors, will be analyzed the proposed sales through collection
period. The company sales and debtors are shown year wise details in below:
Sales debtors
2014 33589.67 6706.59
2015 41045.08 7667.92
2016 49472.02 8814.31
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2017 68046.95 11966.16
Proposed sales:-
Debtors* No of days
----------------------------------------
Collection Period .
If collection period is 30 days then the proposed sales is
11966.16 * 360
= ----------------------------
30
= 143593.92lakhs.
If the collection period is increased to 90 days the approximately the sales will be increment
to extent of 20% that is
= 11966.16 * 360
-------------------------- =143593.92+20%=172312.70
30
Interpretation:-
1. From the actual sales and debtors, the proposed sales is to be calculated. If the
collection period is 30 days, the proposed sales will be lower.
2. If the collection period is 90 days, The proposed sales is more than the sales on 30
days collection period.
Calculation of proposed receivables through proposed sales.
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From the proposed sales, we can calculate the proposed receivables through collection
period. By using the formula given below.
Proposed receivables: proposed sales * collection period

-----------------------------------------------------
No of days
Assuming the proposed sales is 65, 70, 75lakhs for the following year from there we can
analyze the proposed receivables through collection periods.
To calculate the proposed receivables by using the formula are given below.
Sales 65 70 75
Receivables for 30
5 6 6
days
Receivables for 45
8 9 9
days
Receivables for 60
10 12 12
days
Hint:
 The company can estimate sales for 2009 is 65Lakhs. From these we can take
proposed sales.
 Calculations are taken to nearest values.
Interpretation:
 on different proposed sales , if the A.C.P is 30 days, then the receivables
is lowest
 On different proposed sales, if the A.C.P is 45 days, then the receivables
is mid of 30-60 days.
 On different proposed sales, if the A.C.P is days, then the receivables is
highest.
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Difference on Receivables from proposed sales:
Sales 65 70 75
Difference
3 3 3
( 30-45 days )
Difference
2 3 3
( 45-60 days )
Difference
5 6 6
( 30-60 days )
Interpretation:
Here the difference on receivables from proposed sales, the collection period is as
same as (30-45) days and (45-60) days.
The difference of proposed receivables from the proposed sales 65, 70 and 75lakhs
from the collection period is 30-45 days then the difference of receivables (3, 3, and 3).
The difference of proposed receivables from the proposed sales 65, 70 and
75lakhs from the collection period is 45-60 days then the difference of
receivables (2, 3, and 3).
The difference on receivables is same as to the collection period (30-45)
and (45-60) days.
Calculation of Bad debts from sales:
The company sales are 33589.67 for 2006. Their bed debts is 1% on sales. The
company is decides to reduce its bad debts to 0.5%for future (or) next following years on
proposed sales. It is to be calculated.
Sales 33589
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(-) Bad debts (1%) 335

----------------
Net sales 33254
----------------
If it is reduced to 0.5% then
Sales 33589
(-) Bad debts (0.5%) 167
Net sales ------------------
33422
------------------
For proposed sales:
Regarding to calculate proposed sales is 143593lakhs.
Sales = 143593lakhs
(-) Bad debts = 5.1
---------------------
143587
---------------------
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Interpretation:
From the actual sales of the Bad debts is 1% of the bad debt is 335. At the same time
if the bad debt is reduced to 0.5% the bad debt is 167.
So on reduction of bad debt % from 1% to 0.5% it reduces the bad debts with a value
of (167). This will increment the sales.
Bad debts on proposed sales:-
Here the bad debts are to reducing on proposed sales. If bad debt is reduces 1% to
0.5% on proposed sales, the company can earn extra receivables. It can be shown below.
Sales 65 70 75
Bad debts (1%) 0.65 0.70 0.75
(0.5%) 0.32 0.35 0.375
(1%-0.5%) 0.32 0.35 0.375
Interpretation:
From the proposed sales, the bad debts are taken in the form of 1% and 0.5%
Above if the management strive, hand to reduced bad debts from 1% to 0.5%.
The organization can earn more.
A STATEMENT OF SALES & RECEIVABLES DATA
The last and final statement in analysis frame work is preparation of sales and
receivables data sheet; this gives us an elaborative frame towards the company performance
towards collection vitae. This statement will throw a light upon:
Average collection period and as well as Debtors Turnover Ratio.
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In preparation of sales and receivables data we will come across with various terms like
Average collection period and Debtors Turnover Ratio.
Debtors Turnover Ratio is the ratio between sales or credit sales with respect of average
debtors.
Debtors Turnover Ratio =sales/average debtors
Average collection period=collection period*credit sales/360
Average collection period is the ratio between Average Debtors and sales or credit sales with
respect to the period of 360 days.
Average collection period=Average debtors/credit sales*360
A STATEMENT OF SALES AND RECEIVABLES DATA FROM THE YEAR 2014

TO 2017
Year
Sales Debtors DTR ACP
2014
33589.67 6706.59 5.01 94
2015
41045.08 7667.92 5.35 77
2016
49472.02 8814.31 5.61 64
2017
68046.95 11966.16 5.71 46
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Interpretation:
1. In the above years the company suffers from the drought of collections. Due to this the
investment in the receivables had increased. The company suffers from liquidity in
above years.
The Debtors Turnover Ratio is shows to increase in year wise. But totally the
DTR is constant i.e.6%
The company may decrease in the profitability due to the liquidity position for
meeting the working capital needs, and it further by offering too much collection length.
A STATEMENT OF SALES & RECEIVABLES DATA FROM THE MONTH OF

MARCH TO SEP 2015
Month
Credit sales Debtors DTR ACP
March
5642.91 82 12 30
April
3887.33 86 8.27 44
May
1033.18 94 2.13 168
June
4230.88 120 9.00 40
July 2970.62 176 6.32 57
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MARCH TO SEP 2016
Month
March
10350.98 84 12 30
April
4864.96 62 5.64 64
May
3415.82 59 3.96 91
June
724.57 110 0.84 42
July
5735.45 125 6.65 54
Aug
4027.02 199 4.67 77

MARCH TO SEP, 2017
Month
March
6780.81 74 12.00 30
April
4843.43 79 8.572 41
May
830.30 124 1.46 24
June
8409.65 147 14.88 34
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July
6006.89 245 10.63 34
Aug
1201.37 257 2.12 19
Sep
276.78 171 0.48 73
Findings
1) The sales of the company are in both cash and credit terms. Out of the sales generated
70% are of cash and 30% are of credit. But SPL sales were done on cash and credit
terms.
2) The company extends a credit period of 30 days to its customers. It waits for a period
of 60 days to get the payments from the customers the company does not offer cash
discounts to reduce their debt crisis.
3) The credit worthiness and credit limit of customers is determined by the character and
financial position of customers and period of presence in the business.
4) The transaction with the new customers will be on cash terms, with due course of
time, credit will be given to them.
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5) The company follows the classification of debts into three categories namely debts
outstanding for less than 30-90 days are considered to be ‘’GOOD’’, for 90-180 days
are considered to be ‘’DOUBTFUL’’ and >181 days are considered to be
‘’DISPUTES’’.
6) The company employs ‘’AGING SCHEDULE’’ in order to monitor its book debts. It
provides more information about the collection experiences and helps to spot out the
slow paying debtor. With the aging schedule, the company did not trace out the over
dues from the customers, which results in poor debt Management.
7) Before investigating whether the payments from debtors are collecting in time or not,
it would be necessary to look at:
i. The exact existing billing system?
ii. Is the billing mechanism efficient to introduce/

(For periodical payments)
iii. Are there any complaints on the rules & quantities?
iv. Mentioned in bills?
v. How does the existing system compared with the competitor?
SUGGESTIONS
 Employment of ‘’collection experience Matrix’’, the company employs the ‘’Aging

schedule’’ to monitor its debts, which suffers from the problem of aggregation and
does not relate book debts to sales of the same period. This problem can be eliminated
by using disaggregated data for analyzing collection experience.
 Structured frame work of bank guarantee limits must be done by the company to that
extent the company give credit limit to its customers.
 Implementation of special package of ‘’ERP’’ can improve the cash and credit
management procedure in a better manner regarding to; ACCOUNT
RECEIVABLES’’.
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 Granting cash discounts to encourage regular payments.

 If payments are delayed due to wrong billing etc., the billing system should be
improved.
 If any customer is habitually defaulter in making payments, guarantee from a
schedule to be taken.
CONCLUSION
From overall analysis of the company we conclude that the financial position and
profitability of the company are good. Because the company’s sales in every year increased
and also the debtors also increased yearly. The company receivables are also increased by
yearly.
BIBLIOGRAPHY
1. I.M. PANDEY : Financial Management, Vikas Publishing

Housing pvt ltdNew Delhi
2. Dr. S.N. MAHESWARI : Principles of Management Accounting, Sulthan
Chand& Sons, New Delhi.
3. PRASANNA CHANDRA : Fundamentals of Financial Management,
Tata McGraw hill, Publishing Pvt Ltd, New Delhi
4. M.Y. KHAN & P.K. JAIN : Management Accounting, Tata McGraw hill
Publishing Pvt Ltd, New Delhi.
CREC Page 32
5. Annual Reports of SRIKALAHASTI PIPES LIMITED
Websites:-
www.srikalahashtipipes.com
Balance sheet as at 31st March 2012

1. SOURCE OF FUNDS schedule 31st Mar’12 31st Mar’11
1. Shareholders funds
a) Share capital 1 3,976.36 3,976.36
b) Reserves & Surplices 2 3,804.74 2,160.18
2. Loan Funds
a) Secured Loans 3 10,886.36 10,723.23
b) Unsecured Loans 4 9,588.74 5,404.59
3. Deferred Tax Liability (Net) Total 28,680.37 22,264.36
11. APPLICATION OF FUNDS
1. Fixed Assets
a) Gross Block 20,021.36 17,884.47
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b) Less Depreciation 5,417.03 4,648.10

c) Net Block 5 14,604.33 13,236.37
Capital work in process 6,015.09 2,652.95
2. Investments 6 589.23 -
3. Current assets Loans & Advances
a) Inventories 7 7,075.18 5,294.05
b) Sundry Debtors 8 7,197.89 4,098.66
c) Cash & Bank Balances 9 247.72 447.49
d) Loans and Advances 10 1,616.75 11,302.96
Less current liabilities and provisions 11
a) Current Liabilities 8,090.45 5,052.57
b) Provisions 586.14 572.72
NET CURRENT ASSETS 7,460.95 5,677.67
4. Deferred Tax Assets
5. Miscellaneous Expenditure 12 10.17 13.89
26,680.37 22,264.36
BALANCE SHEET AS AT 31ST MARCH, 2013

a) Share capital 1 3,976.36 3,976.36
2. Loan Funds
a) Secured Loans 3 9,244.81 10,886.36
b) Unsecured Loans 4 15069.11 9588.74
3. Deferred Tax Liability (Net) 618.06 424.17
TOTAL 32,901.40 28,680.37
1. Fixed Assets
a) Gross Block 25,035.99 20,021.36
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c) Net Block 5 18,525.70 14,604.33
Capital work in process 5,604.02 6,015.09
2. Investments 6 - 589.23
a) Inventories 7 9,194.08 7,075.18
b) Sundry Debtors 8 6,706.59 7,197.89
c) Cash & Bank Balances 9 350.67 247.72
18,321.76 16,137.54
32,901.40 28,680.37

a) Share capital 1 3,976.36 3,976.36
2. Loan Funds
a) Secured Loans 3 16,382.92 9,244.81
3. Deferred Tax Liability (Net) 1,184.79 618.06
TOTAL 40,386.36 32,901.40
1. Fixed Assets 5
a) Gross Block 31,824.32 25,035.99
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c) Net Block 24,158.08 18,525.70
d) Capital work in process 754.45 5,604.02
2. Investments 6 - -
a) Inventories 7 10,636.86 9,194.08
b) Sundry Debtors 8 7,667.92 6,706.59
c) Cash & Bank Balances 9 2,650.37 350.67
26,196.83 18,321.76
40,386.36 32,901.40

a) Share capital 1 3,976.36 3,976.36
2. Loan Funds
a) Secured Loans 3 17,832.33 16,382.92
3. Deferred Tax Liability (Net) 2,576.95 1,184.79
TOTAL 43,836.66 40,386.36
1. Fixed Assets 5
a) Gross Block 35,516.23 31,824.32
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c) Net Block 26,388.35 24,158.08

d) Capital work in process 862.01 754.45
a) Inventories 7 12,092.91 10,636.86
b) Sundry Debtors 8 8,814.31 7,667.92
c) Cash & Bank Balances 9 420.10 2,650.37
26,616.98 26,196.83
5. Miscellaneous Expenditure 12 - 3.59
43,836.66 40,386.36

a) Share capital 1 3,976.36 3,976.36
2. Loan Funds
a) Secured Loans 3 22,645.44 17,832.33
TOTAL 53,755.86 43,836.66
1. Fixed Assets 5
a) Gross Block 38,974.86 35,516.23
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c) Net Block 28,239.88 26,388.35

d) Capital work in process 425.37 862.01
a) Inventories 7 14,436.48 12,092.91
b) Sundry Debtors 8 11,966.16 8,814.31
c) Cash & Bank Balances 9 3,463.66 420.10
35,973.84 26,616.98
10,883.33 10,030.68
TOTAL 53,755.86 43,836.66

a) Share capital 1 3,976.36 3,976.36
2. Loan Funds
a) Secured Loans 3 26,486.50 33,227.46
TOTAL 53,742.80 53,755.86
1. Fixed Assets 5
a) Gross Block 40,286.29 38,974.86
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c) Net Block 27,759.09 28,239.98
d) Capital work in process 3,441.21 425.37
a) Inventories 7 11,519.31 14,436.48
b) Sundry Debtors 8 11,845.80 11,966.16
c) Cash & Bank Balances 9 1,516.42 3,550.27
30,463.18 35,973.84
b) Provisions 1,066.74 774.95
7,920.68 10,883.33
TOTAL 53,742.80 53,855.86
FINANCIAL MANAGEMENT:
Financial management emerged as a distinct field of study at the turn of this century.
Many eminent persons defined it in the following ways.
DEFINITIONS:
According to GOUTHMANN AND DOUGHAL:’’ Business Finance can broadly be
defined as the activity concerned with planning, rising controlling and administrating of
funds used in the business
According to BONNEVILE AND DEWEY:’’ Financing consists in the rising,
providing and managing of all the money, capital or funds of any kind to be used in
connection with the business.’’
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According to Prof. EZARA SOLOMAN:’’ Financial management is concerned with

the efficient use of any important economic resource, namely capital funds.”’
FINANCIAL FUNCTIONS:
The finance functions of raising funds, investing them in assets and distributing returns
earned from assets to shareholders are respectively known as financing investment and
dividend decisions. While performing these functions, a firm attempts to balance cash inflow
and outflows. This called as liquidity decision.
The finance functions can be divided into four broad categories.

 Financing or capital mix decision
 Dividend or profit allocation decision
 Liquidity or investment or long-term asset mix decision
 Short-term asset mix decision
INVESTEMENT DECISION:
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Investment or capital budgeting involves the decision of allocation of cash or

commitment of funds to long-term assets, which would yield benefits in future profitability,
which involves risk because of uncertain future. Other major aspect of investment decision is
the measurements of standard or hurdle rate against which the expected return of new
investment can be compared.
FINANCING DECISION:
Financing decision is the second important function to be performed by the firm.

Broadly, he must decide when, where and how to acquire funds to meet the firms investment
needs. He has to determine the proportion of debt and equity. This mix of debt and equity is
known as the firms ‘capital structure’. The financial manager must strive to obtain the least
financing mix or the ‘optimum capital structure’ where the market value of share is
maximized.
DIVIDEND DECISIONS:
It is the third major financial decision. The financial manager decides whether the
firm should distribute all profits, or return them, or distribute a portion and return the balance.
The optimum dividend policy should determined where is maximizes the markets value of
shares.
LIQUIDITY DECISIONS:
Current asset management, which affects firm’s liquidity, is yet another finance
function in addition to the management of long-term assets. Current assets should be
managed effectively safeguarding the firm against the dangers of liquidity and insolvency.
Investment in current assets affects the profitability, liquidity, and risk. A conflict
exists between profitability and liquidity while managing current assets. If the firm does not
CREC Page 41
invest sufficient funds in current assets it may become liquid. But it could loose profitability,
as idle CA could not even anything. Thus a proper take of must be achieved between
profitability and liquidity. In order to ensure that neither insufficient nor unnecessary funds
are invested in current assets.
GOALS OF FINANCIAL MANAGEMENT:
 Maximize the value of the firm to its equity shareholders

 Maximization of profit
 Maximization of earning per share.
 Maximization return on equity.
 Maintenance of liquid assets in the firm.
 Ensuring a fair return to the share holders on their investment.
The Financial management is managing the receivable is concerned with maintained

the receivables at the optimum level, and review the credit policy and procedures
accordingly.
In most of business enterprises, investment in account receivable forms a major part
of their assets. Account receivable is one of the receivable is one of the major component of
working capital.
The problem of management of receivable is basically a problem of balancing
profitability and liquidity.
Hence it is a very vital issue for the financial management, the longer period of credit.
The greater the risk. The greater level of debt and greater the strain on the liquidity of the
company.
Determinants of size of investment in Receivables:
The level of Investment in receivables is determined by the following two factors.
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 General factors
 Specific factors
General factors:
o Time and nature of business
o Volume of anticipated sales
o Volume of the Business
o Price level variations
o Availability of fund
o Attitude of executives
Specific factors:
 Volume of credit sales
 Terms of sales
 Policy of credit sale
 Stability of sales
 Size and policy of cash discount
 Credit and collection policy
Trade credit arises when a firm sells its products or services on credit and does not
receive cash immediately. It is an essential marketing tool, acting as a bridge for the
movements of goods through production and distribution stages to customers. A firm grants
trade credit to protect its sales from the competitors and to attract the potential customers to
buy its products at favorable terms.
Trade credit creates debtors (book debts) or account receivables. it is used as

marketing tool to maintain or expand the firm’s sales. A firm’s investment in account
receivable depends on two types. They are the following:
 volume of Sales
 collection period
There are three methods to monitor Receivables. The average collection period and aging
schedule are based on aggregate data for showing the payment patterns and therefore do not
CREC Page 43
provide any meaningful information for controlling receivables. Third approach that uses
disaggregated data is the collection experience matrix
Trade credit is considered as an essential marketing tool, acting as a bridge for the
movement of the products through production and distribution stages to customers. When the
firm sells its products or services and do not receive the cash for it immediately, the firm is
said too have granted trade credit to the customers. Trade credit, thus, creates receivables or
book debts which the firm is expected to collect in the near future.
Receivables constitute a substantial portion of current assets of several firms. In India,
Trade debtors, after the inventories, are the major components of the current assets. They
form one-third of the current assets in India. Granting credit and creating debtors amount to
the blocking of funds. The interval between the date of sale and the date of payment has to be
financed out of the working capital. Thus, trade debtors represent investment. As substantial
amounts are tied up in trade debtors, in needs careful analysis and proper management.
Organization Structure:
The organization structure of the credit departments can be classified as follows.
o Line structure
o Line & staff structure
o Functional structure.
Collection:
The purpose of collection operations is to maximize collections and minimize the loss of
future trade collection effectiveness is mainly influence, hoe every.
 The classification of debtors
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 Credit policy as influenced by the type of business and its goods, profit margin and
competitive and
 The type of records to be used to monitor collection procedures.
Classification of Customer Accounts:

Analysis of collection from accepts accounts provide a useful measure of the potential
loss in the various customer classifications. Customer accounts may be classified in various
Categories.
 Government
 prime or excellent large
 Good firms that are not large and have not yet established excellent credit reputations.
 Restricted: firms that are limited to a definite credit line and
 Marginal high risk accounts which must be watched.
ACCOUNTS RECEIVABLES
Receivables are a border line item which may be classified as either a cash fund asset
of an operating fund asset according to the purpose for which the classification is designed.
More ever Receivables may be viewed as cash fund asset for any purpose which looks
beyond the period of time in which receivables on the books will mature into cash.
Northerly, every organization will go for offering credit and these may be gives raise
to increase their customers as well as extra fund is acquired as the facet of interest. These
receivables come under assets as they sooner are converted into cash.
RAW MATERIALS WORK IN PROCESS
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Receivables management
Important Of cash
In starting of business enterprise the initial investment is still required to be made in
cash and all fruits of the operation of a business enterprise are also ultimately in the form of
cash by way of dividend.
Cash participate a major role for further business expansion to generate and purchase
fixed assets like land, building, plant and machinery.
Otherly cash has to be invested in the business for the purpose of generating the
important elements of cost viz, materials, wages and expenses.
NEED FOR THE STUDY
CREC Page 46
The main purpose behind this project is to know how the debts were produced by
srikalahasti pipes Limited. The study is on internal financing pattern of the debtor’s
receivables relating to the wing of cash management to acquire more customers with better
excellence of policies relating to domestic economy of the company. Therefore clear analysis
is to be made to know the reason& find out the measures to be taken to make the organization
more successful in acquiring debt amounts from its customers.
DATA COLLECTION:
The study depends on primary and secondary data from various sources.
Primary Data:
First hand information was collected from experts of Finance department on their
course of actions towards collections.
Secondary Data:
The secondary data that is required for the studies is collected from the schedules past
notes, budgets, through company websites and other statements provided by the Finance
department of Srikalahasti pipes limited.
OVERVIEW OF THE CHAPTER SCHEME

Chapter-1 Introduction to Finance and
Receivable Management
Chapter-2 Design of the study
Need of the study
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Objectives
Scope of the study
Research Methodology
Limitations
Review of literature
Chapter-3 Industry profile
Company Profile
Chapter-4 Data Analysis & interpretation
Chapter-5 Findings
Chapter-6 Suggestions
Conclusion
Chapter-7 Annexure
Bibliography
Capacity and Production:
The pipes Industry comprises of 125 large pipes plants with an installed capacity of
148.28 million tons and more than 300 mini pipes t plants with an estimated capacity of 11.0
million tons per anum. The pipes Corporation of India which is a Central public Sector
Undertaking has 10 Units. There are 10 large Pipes Plants owned by various State
Governments. The total installed capacity in the Country as a whole is 159.38 million tons.
actual Pipes production in 2002-03 was 116.35 million tons as against a production of 106.90
million tons in 2001-02,registering a growth rate of 8.84%.
Keeping in view the trend of growth of the industry in previous years, a production
target of 126 million tons has been fixed for the year 2003-04.during the period (provisional)
was 31.30 million tons. The industry has achieved a growth rate of 4.86 percent this period.
CREC Page 48
Exports:
Apart from meeting the entire domestic demand, the industry is also exporting Pipes
and clinker. The export of Pipes during 2001-02 and 2003-04 was 5.14 million tons and
6.92millon tons respectively. Export during April-May 2003 was 1.355 million tons. Major
exporters were Gujarat Abuja Pipess Ltd. and L&T Ltd.
Recommendations on Pipes Industry:

For the development of the Pipes industry ‘working Group on Pipes Industry’ was
constituted by the planning commission for the formulation of X Five Year plan. The
working Group has projected a growth rate of 10% for the Pipes industry during the plan
period and has projected creation of additional capacity of 40-62 million tons mainly through
expansion of existing plants. The Working Group has identified following trust areas for
improving demand for Pipes;
Further push to housing development programmes
Promotion of concrete highways and Roads
Use of ready-mix concrete in large infrastructure project.
Further in order to improve global competitiveness of the Indian Pipes Industry. The
department of Industrial policy and promotion commissioned a study on the global
competitiveness of the Indian Industry through an organization of international repute viz.,
KPMG consultancy Pvt Ltd. The report submitted by the organization had made several
recommendations for making the Indian Pipes Industry more competitive in the international
market. The recommendations are under consideration.
Technological Change:
Pipes industry has made tremendous strides in technological up gradation and
assimilation of latest technology. At present ninety three percent of the total capacity in the
industry is based on modern and environment-friendly dry process technology and only seven
percent of the capacity is based on old wet and semi-dry process technology. There is
tremendous scope for waste heat recovery in Pipes plants and thereby reduction in emission
level. One project for co-generation of power utilizing waste heat in an Indian
CREC Page 49
Pipes Plant is being implemented with Japanese assistance under Green Aid Plan. The
induction of advanced technology has helped the industry immensely to conserve energy and
fuel and to save materials substantially. India is also producing different varieties of Pipes
like Ordinary Portland Pipes (OPC), Portland Pozzolana Pipes (PPC), Portland Blast
Furnance, Slag Pipes, Sulphate resisting Portland Pipes, White Pipes etc. Production of these
varieties of Pipes conform to the BIS Specifications. It is worth mentioning that some Pipes
plants have set up dedicated jetties for promoting bulk
transportation and export.
CREDIT POLICY AND PRACTICES AT PIPES INDUSTRIES

LIMITED
The sales of the company; Pipes industries limited go on cash as well as credit terms.
The trading division of the SPL limited sells its products which receive from the factories on
a credit period of 30 days.
CREDIT POLICY
The company Pipes industries limited, extends a credit period of 30 days to its
customers. for the payments from the customers.
There is one way in which the financial manager can control the volumes of credit
sales and collection period and consequently, investment in account receivables it can
changes through collection policies,
CREDIT POLICY
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Credit standard Credit term Collection Cash
discount
CREDIT STANDARDS:
Credit standards are criteria to decide the types of customers to whom goods could be
sold on credit. If a firm has show paying customer in investment in account receivables will
increase the firm will also be exposed to higher risk of default.
Credit terms:
Specify duration of credit and terms of payment by customer’s investment in accounts
receivables will be high if customer are allowed extended time period for making payment.
Collection Efforts:
Collection effort determine the actual collection period. The lower the collection the
lower the investment in accounts receivables and vice-versa.
Goals of credit policy
Stringent credit policy Lenient credit
Less credit to customer More credit to

as a result decrease in customer as it leads
CREC
sales to increase in sales
Page 51
If there is any changes in credit policy there will be change in the
 Volume of credit sales

 Default risk or bad debts
 Costs
 Average collection period
Collection procedures:
The company a system of centralized control and decentralized collections. The

company does not employ any collection agency for its collection activities. The trading
division receives a statement of sales and outstanding daily from the branch to initiate
appropriate actions. The sales offices are engaged in collection activity and the collection is
done through CMP account and bank cheques.
Monitoring book debts:
The company classifies the book debts based on the number of outstanding days in the
given following way.
Outstanding days Debts category
More than 300 days Disputes

Between 180 days Bad debts
Between 90-180 days Doubtful debts
Between 0-90 days Good debts
During the same M/s Eloctrosteel Castings Limited, was also looking for additional
capacities for producing spun pipes. Considering the synergies involved, Pipes Industries
Limited entered into a strategic alliance partnership during December 2002, with M/s.
Electrosteel Castings Limited (ECL), Kolkatta a leading manufacturer of CI, pipes and DI
pipes. This was win-win situation for both SPL and ECL. After takeover, a financial
CREC Page 52
reengineering and re-structuring of SPL was undertaken by ECL by implementing the

following.
Immediately after take over an amount of Rs.2200lakhs was infused as share capital
of the Company by M/s ECL to strengthen the equity base of the company.
During 2002 the capacity of Pig Iron was increased from 90,000 TPA to 15,000 TPA.
With effect from 1st April,2003 LKCL was merged with the company to take
advantage of the close synergy in the business of the two Companies ,since a large part of
Molten Iron/Pig Iron is consumed by LKCL for manufacture of DI pipes.
After the merger ,the share capital of SPL, the paid up share value of Rs.w10/-was
reduced to Rs.2.50 per share and accordingly one share of Rs.10/- each fully paid up in SPL
was issued to all the existing shareholders for every 4 shares held by them.
During 2003, the capacity of the DI pipes was increased to 90,000 TPA.
During 2004 the Company the step of backward integration by setting up 150,000
TPA coke oven plant in the same complex, which was commissioned in June 2005.
During 2005, the company started set5ting up of a Captive Power Plant of 12 MW by

using the waste heat recovered from the coke oven plant which is expected to be
commissioned by March 2006.
An Additional amount of Rs.25crores is being spent on other capital works like

Revamping of bitumen coating machine, balancing equipment and facilities for
production of higher diameter DI pipes etc. to increase the capacity of DI pipes from the
present 90,000 TPA to 120,000 TPA by 2006-07.
The above has resulted in the company witnessing a profitable years after a gap of 8
years during the years ended 31st March, 2003, 2004 and 2005 and a dividend of 10% was
declared for the years ended 31st March 2004 and 2005 to the shareholders.
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Step by Step Company’s Growth
1991 Incorporation of Pipes
1994 setting up of Mini Blast Furnace with 90,000

TPA capacity
1995 Setting up a 250 TPD Mini Pipes Plant

1997 setting up of LKCL for manufacture of 40,000 TPA
Castings and 35,700 TPA DI pipes
2002 Strategic alliance with Electro steel Castings Limited
2002 Infusion of Rs.2200lakhs to the equity and

Financial restructuring
2003 Merger of Pig Iron LKCL with SPL for synergy
2003 capacity of Pig Iron was increased to 90,000

TPA to 15,000 TPA
2004 capacity of DI pipes was increased to 90,000 TPA.
2005 Commissioning of 150,000 TPA coke oven plant.
2005 Setting up of Captive Power Plant of 12 MW by using

The waste heat recovered from the coke oven plant.
“This reduction was in Green House Gases will contribute to our battle against global
warming’’.
Pig Iron was conceived in 1992.commercial production started in September 1994.
CREC Page 54
Capacity:-90,000 TPA at inception.
Pipes division started commercial production in 1996. Spun pipe project conceived in
March 1998 and commercial production commenced in
January 2000.Capacity:-60,000 TPA at inception.

ECL joined as strategic partner in 2002 /LKCL merged with SPL in 2003
New 1, 50,000 TPA Coke Oven Plant Commissioned ion 2005
‘’An integrated industrial complex for manufacture of DI pipes’’
Expansion/New project after take-over: Investment Rs.175Crs.
Spun pipe division capacity increased from 60,000 TPA

To 90,000 TPA
Pig Iron Division capacity increased from 90,000 TPA
To 175,000 TPA
Coke Oven Division New Plant with a capacity of 1, 50,000 TP
12 MW Capacity expected commissioning end
May’07 Power plant
Pig Iron project was conceived in 1992.commercial production started in September

1994 .capacity:-90,000 TPA at inception.
Pipes division started commercial production in 1996.

Spun pipe project conceived in March 1998 and commercial production commenced in
January 2000.capacity:-60,000 TPA at inception.
ECL joined as strategic partner in 2002/LKCL merged with SPL in 2003.
New 1, 50,000 TPA Coke Oven Plant commissioned in 2005.
‘’ An integrated industrial complex for manufacture of DI pipes’’
Expansion/New project after Take-over: Investment Rs.175Crs.
CREC Page 55
Spun pipe division capacity increased from 60,000 TPA

to 90,000 TPA
Pig Iron Division capacity increased from 90,000 TPA
to 175,000 TPA
Coke Oven Division New Plant with a capacity of 1, 50, 000
TP
12 MW capacities expected commissioning end May’07
Power plant
SPUN
Pre-analyzed liquid metal from Blast Furnance is taken into Induction Furnance. The
metal is superheated to a temperature of about 1520 o c and adjusted for chemical
composition by addition of Steel Scrap and Ferro Silicon. The adjusted from converter is
transferred to Spinning Machines through ladles .The Metal is poured to unlined water-
cooled metallic moulds through a runner. The mould is kept at a slightly inclined position and
rotated at high speed. Due to the centrifugal force the metal is held against the mould wall
and the solidification of metal takes place due to water-cooling of mould. The pipe cast
through above process known as DELVAD process is heat treated to achieve the requisite
physical properties and micro structure. After heat treatment the pipes are coated externally
with zinc and then pipes are finished before testing them with hydrostatic pressure. The tested
pipes are lined internally with Pipes and then cured in the stream chamber. The lined pipes
are ground and washed with water before sending them for bitumen painting. The pipes are
preheated before bitumen coating on external surface. The coated pipes are sent to dispatch
yard after marking.
SALIENT FEATURES:
 Virgin liquid metal from Mini Blast Furnance is made available to ductile Iron Pipe
Plant.
 Energy conservation through direct usage of liquid metal from Mini Blast Furnance in
Ductile Iron Pipe Plant.
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 Blast Furnance Gas generated is used 100% in Blast pre-heating power generation and
ladle heating areas.
 Process water is recycled after treatment.
 Captive power generation with MBF gas.
100% no leakage & no honey combing on application.

Low heat of hydration, very low poor volume in concrete, high importability, resulting in
structures of high strength &long life.
Crack free structure & walls, result of low thermal stresses and absence of differential
volume change.
Super resistance to sulphate in concrete, resultant low corrosion, less alkali aggregate
reaction, and final outcome of long lasting super finish surfaces.
East workability with high concentration of fines.
Wide range application from domestic to industrial, pilling foundation ,marine
constructions, coastal area buildings, roads, bridges and any for all other special purposes.
Coke Oven
“ENERGY RECOVERY COKE OVEN PLANT”
Pipes Industries Limited is engaged in manufacturing of the ductile in pipes

manufactured through a spinning process from 1999, with a capacity of a 1, 00,000
tones/year. To meet the pipe plant requirement of hot metal Pipes operates a mini blast
furnace with a capacity of 1,65,000 tones/year.
Previously, Pipes use to import coke from Japan and China to meet the requirement of the
mini blast furnance but then due to the steep rise in the coke prices in the international market
it was very difficult to maintain the cost of hot metal produced.
Thus it was decided to install a coke manufacturing facility to meet the in-house coke
CREC Page 57
Requirements. The Company attracted by the low cost of the non-recovery type of coke
ovens with its easy compliance with the pollution. Control norms without any major
investments. Now the company operates a coke oven plant with a set of 68 ovens based on
The Dasgupta technology. The plant was commissioned in May 2005 and is producing to the
rated capacity of 1, 25,000 tones/year.
Each Battery is connected to an independent stack. The flue gas will be tapped to the
waste heat recovery boilers just before the stack for steam generation for the 12 MW captive
power plants. A comprehensive coal handling and blending plant with a coal tower of 200
MT rated capacity of 1, 25,000 Tones/year.
Configuration and capacity of Pipes’s Coke Oven Plant in Andhra Pradesh
Pipes’s plant at Srikalahasti, AP consist of two batteries with 34 ovens each with a
level coal charge capacity of 14 tones and coking cycle of 48 Hours. the plant is producing to
the capacity, a quenching tower with wet quenching and a coke cutting and screening plant
service both the coke oven batteries. The plant is equipped with a coal charging car, hot coke
quenching car and a leveler cum pusher car.
Power Plant
Pipes Industries Limited (SPL) has installed a 12MW captive power plant (CPP)
whose input would be hot waste gases from non-recovery type Coke Oven as source of
energy to generate electricity of 79.2 MU annually.
CPP auxiliaries like:
 Water Treatment Plant

 Cooling Tower & Cooling water system
 DG Sets—2 x 600KVA
 Compressors- 2Nos
 Hot Gas Dampers(4Nos) with cooling system
CREC Page 58
 Generation of power : Approx. 10MW

 Use of power :
 CPP Auxiliaries :1.0MW
 In House consumption :9.0MW
Spun:
 Pig Iron
 Power Plant
 Pipes
 Coke Oven
BOARD OF DIRECTORS:
Managing Director : Shri Mayank Kejriwal
Director : Shri G.Maruti Rao
Director : Shri Gouri Shankar Rati
Director : Shri L.Madhusudhan Rao
Director : Shri G.Bhaskar Rao
Director : Shri L.Sridhar
Director : Shri P.M. Suresh(Nominee of IDBI)
Director : Shri Vinod KumarAgarwal, IAS

(Nominee of APIDC)
SR.GENERAL MANAGER- : Shri G.D.Saini
-FINANCE& COMPANY SECRETAR
CREC Page 59
ANALYSIS FRAME WORK

CLASSIFICATION OF COLLECTION OPERATIONS:
 Preparation of aging Schedules.

 Credit sales to account receivables statement.
 Collection to Accounts receivables Statement.
The whole collection data has provided by the employees of Finance Department secondary
source of data and there was no scope has given me to look into original statements. When
we step into the organization, we will see a wal hanger consists of “ A LITTLE FROM
EVERYONE CAN SAVE A LOT”.
ANALYSIS OF AGING SCHEDULE
The company prepares monthly aging schedule to monitor its book debts. The debts
are broken down into year wise enterprise. The aging schedules for the past three years have
been thoroughly analyzed to come out with average outstanding days of the book debts in the
company is as follows overdue less than 30 days, 30 to 60 days, 60 to 90 days, 90 to 180
days, 180 to 300 days and above 360 days respectively.
These reports are prepared especially for the extended over due accounts. The basic
reason is to develop a file of customers who require special attention either in the form of
statements, letters or other collection activity.
Accounts Receivables Turnover Ratio:
1. Credit sales divided by ending accounts receivables and

2. Accounts receivables divided by credit sales time
365 days the first formula gives the number of times the correct balance of receivables is
collected during the year, while the second formula gives the average Number of days the
current balance is expected to remain outstanding before it is collected.
Collection Ratio:
This is the ratio of monthly collections to the accounts receivables outstanding at the
first of the month to ratio sales to receivables and collection to receivables is closely
related.
CREC Page 60
Account receivable is the second most liquid form of assets of the firm. The
receivables come into being as credit sales and constitute as one of the largest assets. Skill
full is administration of the receivables management is therefore of prime importance to
the business. The very reason of credit sales is to expand sales volume and if too debt is
maintained by the company. The company approval of customer credit purchases many
sales may be lost that would otherwise contribute to the profits of the firm. Before going
to quote the credit aspiration and credit purchases at Pipes Industries Ltd.,
What actually credit will create?
1) Company position
2) Protection from competition
3) Buyer states and Requirements.
4) Dealer Relationship
5) Transit Delays
6) Industrial Practice
ANALYSIS OF AGING SCHEDULE
Company prepares monthly aging schedule to monitor its debtors. The outstanding are
broken down to branch wise entries. The going schedules for the past three years have been
thoroughly analyzed to come out with average outstanding days of the book debts of the
company, on an average the outstanding days of the book debt in the company is as follows:
% of Outstanding
Outstanding The period Outstanding Receivables
Receivables
0-30
2575 46%
31-60
2071 37%
61-90
392 7%
CREC Page 61
91-180
280 5%
>181
280 5%
Total
5598 100%
With 30 days of the period the total outstanding Receivables 46% with 31-60 days the total
outstanding Receivables 37%, with in 61-90 days the total outstanding Receivables are 7%
and so on respectively for the schedules of 100% and these aging schedules were considered
with various years.
AGING SCHEDULE 2013-14
% of outstanding
Outstanding period Outstanding Receivables
receivables
0-30
3078 45%
31-60
2120 31%
61-90
547 8%
91-180
410 6%
>181
684 10%
Totals
1642 100%
The total outstanding receivables are 1642 considered as 100% in that with in a period
of 365 days the debt amounts were collected in the above pattern.

CREC Page 62
% of outstanding
Outstanding period Outstanding receivables
Receivables
0-30
3875 47%
31-60
2721 33%
61-90
577 7%
91-180
742 9%
>181
330 4%
Total
8245 100%
The total outstanding receivables are 8245 considered as 100% in that with in a period
of 365 days the debt amount were collected in the above pattern.
% of outstanding
Receivables
0-30
5557 49%
31-60
3970 35%
61-90
681 6%
91-180 907 8%
CREC Page 63
>181
227 2%
Total
11342 100%
The total outstanding receivables are 11342 considered as100% in that with in a
period of 365 days the debt amounts were collected with in the above pattern.
% of outstanding
receivables
0-30
4737 40%
31-60
3316 28%
61-90
1421 12%
91-180
829 7%
>181 1539 13%
CREC Page 64
Total
11842 100%
The total outstanding receivables are RS.11842 considered as 100% in that with in a
period of 365 days the debt amount were collected in the above pattern.
OUTSTANDINGS 2012-13
31-61 TOTAL
<30 Days 61-90 91-180 >181
days
<30 days
3023
31-60
days 3527
61-90
5206
91-180
5318
>181
5318
Total 22392
<30 days 31-60 61-90 91-180 >181 Total
<30 days
3763
31-60 4720
CREC Page 65
61-90
6294
91-180
6437
>181
6157
Total
27365
<30 days 31-60 61-90 91-180 >181 Total
<30 days
4370
31-60
5524
61-90
7668
91-180
7503
>181
7915
CREC Page 66
Total
32980
<30 days 31-60 61-90 91-180 >181 Total
<30 days
5784
31-60
7372
61-90
10661
91-180
10435
>181
11115
Total
45307
<30 days 31-60 61-90 91-180 >181 Total
<30 days
7105
31-60
8526
61-90 10421
CREC Page 67
91-180
11013
>181
10303
Total
47368
Frame work of collection Matrix
We can convert the table to a COLLECTION EXPERIENCE MATRIX by dividing

the outstanding receivables in each column by sales amount in that column. The following
table is the second schedules in analysis frame work statements. The following table which
contain information on the percentage of the credit sales from which those receivables are
originated. If the percentages increase as we it implies that the firm is unable to its
receivables faster. But these are wholly separated from the past data.
COLLECTION MATRIX
A collection matrix is a statement which is prepared which reference to credit

sales. This statement confines how were the debt amounts are collected with in respective
tenure of months which cash values. Now we have respective year’s collection statements
which play a major role in analysis work. We can interpret this table in percentages.
CREC Page 68
Collection matrix 2012-13
Sept
Mar Apr May June July Aug Oct
Sales 10393 11584 11612

Credit
6963 8572 9289
sales
Mar
Apr 3203
May 2576
June 487
July
Aug 3943
3171
Sept
348
348
The collection statement normally consists of various months with various collection
procedures. Every month cash is collected with little amounts and often it may collected huge
amounts. If any part of amount is not recovered the remaining amount is collected from the
next consecutive months.
Mar Apr May June July Aug Sept

Sales 18716 12164.72 10164.23
Credit
12539 9001.89 8131.38
sales
Mar 5642.91
Apr 3887.33
May 1003.18
CREC Page 69
June 4230.88
July 2970.62
752.38
Aug
720.15
Sept 1258.98
procedures. Every month cash is collected with little amounts and oftenly it may collected
huge amounts. If any part of amount is not recovered the remaining amount is collected from
the next consecutive months.

Sales 15449.23 16490.67 17532.12
Credit
10350.98 12203.29 14025.69
Sales
Mar 4864.96
Apr 3415.82
May 724.57
June 5735.45
July 4027.02
931.59
Aug
854.22
Sept 414.04
The collection statements normally consist of various months with various collection
Apr May June July Aug Sept Oct

Sales 20654.32 23192.65 24199.98
CREC Page 70
Credit 13838.39 17162.56 19359.98

Sales
Apr 6780.81
May 4843.43
June 83.0.30
July 8409.65
Aug
Sep 6006.89
Oct 1201.37
1107.07
276.78

Sales 22451.60 23734.17 24866.08
Credit 15041.57 17563.28 19892.80
Sales
Mar 6017.02
Apr 4211.63
May 1804.88
June 7025.31
July 4917.68
CREC Page 71
Aug 1052.80
2107.58
Sept 1905.80
Percentages of collection matrix 2012-13
Mar Apr May June July Aug Sept Oct

Sales 31% 34% 35%
Credit 67% 74% 80%
Sales
Mar 46%
Apr 37%
May 7%
June
July 46%
Aug 37%
Sept 7%
CREC Page 72
5%
Oct 5%
These are the preparation statements with reference to credit sales which are recouped in
consecutive to percentage of collections.
Percentage of collection matrix 2013-14

Sales 46% 30% 25%
Credit 67% 74% 80%
Sales
Mar 45%
Apr 31%
May 8%
June 45%
July 31%
Aug 6%
8%
Sept 10%
CREC Page 73

Sales 31% 33% 35%
Credit 67% 74% 80%
sales
Mar 47%
Apr 33%
May 7%
June 47%
July 33%
Aug 7%
9%
Sept 4%
Apr May June July Aug Sept Oct

Sales 30% 34% 35%
Credit 67% 74% 80%
Sales
Apr 49%
May 35%
June 6%
July 49%
Aug 35% 6%
8%
Sept 2%
CREC Page 74
Oct

Sales 32% 33% 35%
Credit 67% 74% 80%
Sales
Mar 40%
Apr 28%
May 12%
June 40%
July 28%
Aug 12%
7%
Sept 13%
Sales chart:
CREC Page 75
sales chart
80000
68046.95
70000
60000
49472.02
50000
41045.08 year
40000 33589.67
amount
30000
20000
10000 2006 2007 2008 2009
0
1 2 3 4
Interpretation:
From the above chart the table shows the sales in 2006 is 33589.67lakhs and then
increased the next years are in 2007 is 41045.08lakhs and 2008 is 49472.02lakhs and in 2009
is 68046.95lakhs.
Debtors chart:
CREC Page 76
debtors chart
14000
11966.16
12000
10000 8814.31
7667.92
8000 6706.59 year
6000 amount
4000
2006 2007 2008 2009
2000
0
1 2 3 4
Interpretation:
From the above chart the debtor in 2006 is 6706.59lakhs and 2007 is increased by
7667.92lakhs and 2008 is increased by 8814.31lakhs and then increased by the next year is
11966.16lakhs.
Receivables chart:
Receivables chart
60000 56080.79
50000
40657.71
40000
33377.16 Series1
30000 26883.08 Series2
Series3
20000
10000
0 0 2006 2007 2008 2009
0
1 2 3 4 5
CREC Page 77
Interpretation:
From the above the receivables are in 2006 is 26883.08 and then continuously
increased by the next years are in 2007 is 33377.16, in 2008 is 40657.71, in 2009 is
56080.79.
Cash and bank balance:
Cash & Bank Balances
4000
3463.66
3500
3000 2650.37
2500
2006 2007 2008 2009 year
2000
amount
1500
1000
350.67 420.1
500
0
1 2 3 4
Interpretation:
From the above chart show’s the cash and bank balances are in 2006 is
350.67lakhs.and in 2007 is 2650.37lakhs. and in 2008 is deceased in 420.10lakhs.and 2009 is
increased in 3463.66lakhs.
CREC Page 78

Chapter-1: Financial Management

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Chapter-1: Financial Management

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RECEIVABLE MANAGEMENT

Finance is one basic foundation of all kinds of economic activities. It is

According to Prof. EZARA SOLOMAN:’’ Financial management is

Investment in current assets affects the profitability, liquidity, and risk. A

The Financial management is managing the receivable is concerned with

The classification of debtors, Credit policy as influenced by the type of business

Classification of Customer Accounts:

RAW MATERIALS WORK IN PROCESS

2.1. Accounts receivable management

Accounts receivable represents a sizable percentage of most firms' assets.

fundamental principle that guides financial decisions can be used: marginal

The establishment of a credit policy can include the following activities:

The following procedures are recommended in establishing a policy

when it is shipped. Billing for services should be done on an interim basis or

In establishing a policy concerning collection the following procedures

2.2. Managing the credit policy

If a firm considers offering credit to customers with a higher-than-normal

Scope of the study:

An extensive study is done on the blocking up of Receivables and its retaining

Objectives of the study:

The main objective of the current study is the company’s performance

objective is to analyze and evaluate the receivables management and its

Limitations of the study:

 The data used is gathered mainly through secondary sources and no

First hand information was collected from experts of Finance department

Srikalahasti Pipes Limited (SPL) was incorporated on 8 September, 2014

As a measure of forward integration project for adding value to the pig

Pipes Kalahastri Castings Limited (LKCL) on 4th March 1997 to manufacture

DATA ANALYSIS & INTERPRETATION

Estimated sales 71,051.85

(-) 70% variable cost 49,736.295

Incremental revenue 21,315.55

(-) 12% risk of incremental revenue 2,557.86

(-) 3% collection cost 562.730

Estimated sales 71,051.85 68,046.95

(-) 70% variable cost 49,736.295 47,632.86

Incremental revenue 21,315.55 20,414.09

(-) 12% risk of incremental revenue 2,557.86 2,449.69

(-) 3% collection cost 562.73 538.93

Gain in Receivables on net sales:

Net Receivables for 60 days 25967

Receivables for 45 days 20526

Receivable for 30 days 15085

(60-45 days) = 25967-20526

(Gain (45-30 days)) = 20526-15085

To calculated the net receivables by using this formula.

Sales * collection period

Calculating proposed sales through collection period:

2014 33589.67 6706.59

2015 41045.08 7667.92

2016 49472.02 8814.31

2017 68046.95 11966.16

If collection period is 30 days then the proposed sales is

Proposed receivables: proposed sales * collection period

Difference on Receivables from proposed sales:

(-) Bad debts (1%) 335

If it is reduced to 0.5% then

Net sales ------------------

For proposed sales:

Regarding to calculate proposed sales is 143593lakhs.

Average collection period and as well as Debtors Turnover Ratio.

Debtors Turnover Ratio =sales/average debtors

Average collection period=collection period*credit sales/360