OBJECTIVE

THE OBJECTIVES OF THE PROJECT IS TO COLLECT

TANGIBLE INFORMATION ABOUT RECEIVABLE
MANGEMENT PRACTICES ADOPTED BY THE
COMPANY HOW MUCH THE COMPANY INVEST IN
ACCOUNTS RECEIVABLES AND HOW COMPANY IS
ABLE TO COLLECT IT RECEVEIABLES
 DETAILS THE COMPANY

Established in 1997, LG Electronics India Pvt. Ltd., is a

wholly owned subsidiary of LG Electronics, South Korea.
In India for a decade now, LG is the market leader in
consumer durables and recognized as a leading
technology innovator in the information technology and
mobile communications business. LG is the acknowledged
trendsetter for the consumer durable industry in India with
the fastest ever nationwide reach, latest global technology
and product innovation. LG set up a state-of-the art
manufacturing facility at Greater Noida, near Delhi, in
1998, with an investment of Rs 500 Crores. This facility
manufactured Color Televisions, Washing Machines, Air-
Conditioners and Microwave Ovens. During the year 2001,
LG also commenced the home production for its eco-
friendly Refrigerators and established its assembly line for
its PC Monitors at its Greater Noida manufacturing unit.
The beginning of 2003 saw the roll out of the first locally
manufactured Direct Cool Refrigerator from the plant at
Greater Noida.Both the Indian manufacturing units has
been designed with the latest technologies at par with
international standards at South Korea and are one of the
most Eco-friendly units amongst all LG manufacturing
plants in the world.
LG has been able to craft out in ten years, a premium
brand positioning in the Indian market and is today the
most preferred brand in the segment.

QUESTIONNAIRE AND ITS

ANALYSIS

Q.1. WHAT TERMS OF PAYMENT DO YOU

FOLLOW?
(A) CASH TERMS
(B) OPEN ACCOUNT
(C) CONSIGNMENT
(D) LETTER OF CREDIT
CASH TERMS – When goods are sold on
cash terms, the payment is received either
before the goods are shipped (cash is
advance) or when the goods are delivered
(cash on delivery)

LG Pvt Ltd generally supplies its goods to its

dealers on cash terms in the domestic
market in which they receive the a part of
payment on the delivery as cash advance
basis and remaining part of payment they
consider as on credit basis.

OPEN ACCOUNT – Open account include

the three parts-
1) Credit period- It refers to the length of the
time the customer is allow to pay for its
purchases.
2) Cash discount- the discount provided by
the company to customers to make prompt
payment.
3) Billing- Company send single bill to its
customer for every month.

LG Pvt Ltd generally maintains open account

of its customers for credit terms. And it
shipped the goods and then sends the bill to
its customers.
LETTER OF CREDIT- A letter of credit
is a promise to pay. Banks issue letters of
credit as a way to ensure sellers that
they will get paid as long as they do what
they've agreed to do.
Letters of credit are common in international trade
because the bank acts as an uninterested party
between buyer and seller. For example, importers and
exporters might use letters of credit to protect
themselves. In addition, communication can be difficult
across thousands of miles and different time zones. A
letter of credit spells out the details so that everybody's
on the same page. Letter of credit is often used to
guarantee or to strengthen the credit worthiness of a
customer.

LG pvt ltd is also in the export business

and handle their export transactions
 through a liaison office. They usually are
doing exports and imports through the
Letter of credit facility provided by the
banks handled by their Liaison office.
Through this they check their
prospective client's creditworthiness.

A Liaison Office is in the nature of a

representative office set up primarily to
explore and understand the business and
investment climate. A Liaison Office is not
permitted to
Undertake any commercial / trading /
industrial activity, directly or indirectly,
and is
Required to maintain it out of inward
remittances received from parent
company
Through normal banking channels. The
Liaison Office is permitted to undertake
Following activities only:
Representing the parent Company
Promoting export/ import
 Promoting technical / financial
collaborations between the parent
companies
And companies abroad. Acting as a
communication channel between the
parent company and other companies

Q.2. WHAT IS YOUR CREDIT PERIOD FOR

CUSTOMERS AND DEALER? DOES YOUR’S
CREDIT PERIOD VARIES FROM CUSTOMER
TO CUSTOMER?
LG Pvt ltd is also in export business, they
provide credit period to its abroad
customer’s upto 150 days and credit period
varies customer to customer according to
the credit status which they maintain by the
liaison office.

Q.3. WHAT CASH DISCOUNT DO YOU

PROVIDE TO CUSTOMER FOR PROMPT
PAYMENT?
LG Pvt ltd do not provide any cash discount
in its export business to encourage prompt
payment. But they provide cash discount to
its domestic customer.

Q.4. DO YOUR CHECK THE

CREDITWORTHINESS OF CUSTOMERS
BEFORE GIVING CREDIT TERMS TO THEM?
Yes LG Pvt ltd checks the creditworthiness
of the customers before giving credit terms
by using the facility of liaison office which is
set up in the respective abroad country.
Liaison office knows the business culture of
country which help in maintaining the status
of their abroad customers.

Q.5. DO YOU CATERGORISES YOUR

CUSTOMER /DEALERS FOR GRANTING
CREDIT?
Yes LG categorizes its customers for its
export business according to the
creditworthiness.
Q.6. WHAT IS YOUR AVERAGE COLLECTION
PERIOD?
AVERAGE COLLECTION PERIOD- It is the
period in which firm able to collect the
receivable from customers.
As LG is the Pvt ltd company so it does not
disclose its internal information.

Q.7. WHAT TYPES OF CREDIT POLICY DO

YOU FOLLOW?
(A) FLEXIBLE
(B) STIFF

FLEXIBLE CREDIT POLICY- It helps the

company to push the sales by attracting the
customers. But flexible credit policy
increases the bad debt loss, large
investment receivable and increase the cost
of collection.

STIFF CREDIT POLICY- It help to depress the

sale, reduce the incidence of bad debt loss,
decrease the invest vestment in receivables,
and lower the collection cost.
LG pvt ltd follows the flexible credit policy to
meet its sales target.

Q.8. WHAT TYPES OF COLLECTION

EFFORTS YOUR COMPANY FOLLOWS?
(A) RIGROUS
(B) RELAXED

LG follows the rigorous method of collection

of its receivables which includes the
telegraphic and telephonic advice to
customers around the due date and
dispatch of letters to customers whose due
date is approaching.

Q.9. WHAT METHODS DOES YOUR COMPANY

FOLLOWS FOR MAINTAINING ACCOUNTS
RECEIVABLE?
(A) DAY SALES OUTSOURCING
(B) AGING SCHEDULE
(C) COLLECTION MATRIX
(D) ANY OTHER

AGING SCHEDULE- The aging schedule

(AS) classifies outstanding accounts
receivable at a given point of time into
different age brackets like
Age group (in days)
Percentage of receivables
0-30 35
31-60 40
61-90 20
The actual AS of the firm is compared with
some standard AS to determine whether
account receivables are in control.
LG Pvt ltd follows aging schedule method for
maintaining account receivables. For export
business they divide age groups like
Age group (in days)
0-10
11-20
21-30

For domestic business they divide age group

like
Age group (in days)
0-3
4-6-
7-9
CONCLUSION - LG is the market
leader in consumer durables and recognized
as a leading technology innovator in the
information technology and mobile
communications business. LG is the
acknowledged trendsetter for the consumer
durable industry in India with the fastest
ever nationwide reach, latest global
technology and product innovation.

One of the most formidable brands, LGEIL

has an impressive portfolio of Consumer
Electronics, Home Appliances, GSM mobile
phones and IT products. LG is one of the pvt.
Ltd. Companies so it does not disclose its
any kind of internal in formations like
balance sheet and profit and loss statement.
After all findings through questionnaire and
interaction with LG personnel we conclude
that it has well developed receivable
management and it follows the flexible
credit policy and it has liaison office which
help in receivable management. Liaison
office provides support to its parent
company by checking their creditworthiness
of customers in abroad.