EXECUTIVE SUMMARY

The major objective of the study is to proper understanding the working capital of Scooters India Limited & to suggest measures to overcome the shortfalls if any. Funds needed for short term needs for the purpose like raw materials, payment of wages and other day to day expenses are known as working capital. Decisions relating to working capital (Current assets-Current liabilities) and short term financing are known as working capital management. It involves the relationship between a firms short-term assets and its short term liabilities. By definition, working capital management entails short-term definitions, generally relating to the next one year period. The goal of working capital management is to ensure that the firm is able to continue its operation and that it has sufficient cash flow to satisfy both maturing short term debt and upcoming operational expenses. Working capital is primarily concerned with inventories management, Receivable management, cash management & Payable management. Inventories management at Scooters India Limited SIL is a large scale manufacturing company. It is a totally integrated automobile plant, engaged in designing, developing, manufacturing and marketing a broad spectrum of conventional and non-conventional fuel driven 3-wheelers. Cash management at SIL: SIL has been accumulating huge cash surpluses over last several years, which enables the organization to maintain adequate cash reserves and to generate required amount of cash.

HISTORY OF THE COMPANY

Incorporated in 1972, Scooters India Limited is an ISO 9001:2000 and ISO 14001 Company, situated at 16 Km mile stone, South-west of Lucknow, the capital of Uttar Pradesh on NH No 25 and is well connected by road, rail and air. It is a totally integrated automobile plant, engaged in designing, developing, manufacturing and marketing a broad spectrum of conventional and non-conventional fuel driven 3wheelers. Companys plant owes its origin to M/s. Innocenti of Italy from which it bought over the plant and machinery, design, documentation, copyright etc. The company also possesses the world right of the trade name LAMBRETTA / LAMBRO.

In 1975, company started its commercial production of Scooters under the brand name of Vijai Super for domestic market and Lambretta for overseas market. It added one more wheel to its product range and introduced three wheelers under the brand name of VIKRAM/LAMBRO. However, in 1997, strategically, the company discontinued its two-wheeler production and concentrated only on

manufacturing and marketing of 3 wheelers.These three wheelers have become more relevant in the present socio-economic environment as it transports goods and passengers at least cost.

DEPARTMENTS
The organisation has various departments to perform different activities competently. SIL has an organised system to control different activities. Personnel & administration department looks after the employees welfare, medical benefits, conveyance facilities, maintains their personal records and controls their regularity. It also take care of the security for the organisation. Marketing & services department looks after the marketing of the products, provide services to the customer and regulates the activities in its various regional offices. Materials control the purchasing of the raw material, keep an eye on the cost of the material in the market, store the different materials and products and establish a company-vendor relationship. Workshop manufactures different products in steps in different lines. Design & development is the prime creative unit for the organization. It brings out some brilliant design with modern technologies. Finance & accounts section keeps track on the financial growth and the maintenance of various types of accounts. Based in Lucknow, Scooters India Limited successfully caters to the various needs of the customers through its own marketing network of Regional Sales Offices all over India. The company is facing stiff competition from other private players but still it is fairing well especially in Northern India and running in profit. Its well equipped CAD laboratory provides a wide range of facilities. The versatility of brains combines with the flavour of new creation to evolve a quality product. There are various types of departments present SIL as can be seen from the following page:

MATERIAL DEPARTMENT Material Department is responsible for the proper handling of inputs and controlling of material inputs. Proper handling of input materials ensures the smooth running of plant. Material department recognizes the need of the input materials and arranges them for the plant. It includes the procurement, verification and controls of materials in right quantity and at right time to facilities the production function. Material management includes two important functions: Purchasing Storing and control of materials

Thats why; it is divided into following sections: Purchase section ( It is responsible for purchasing of materials ) Store section ( It stores the inputs)

These both sections are interrelated and perform their function on coordination. All purchases are to be made only by the materials department except purchases of petty item through some vouchers and Department Managers within the limits prescribed in purchase procedure. Material purchase indent should give following information: 1) Quantity in stores 2) Average monthly consumption since last purchase for stock items 3) Maximum /minimum level 4) Last purchase order reference 5) Reorder level

PURCHASE SECTION

The purchase department is at the interface of internal and external department. Purchase department do enquiry about the inputs whether it is required or not. This enquiry is done in two ways that are: 1) Single stage 2) Two stage After enquiry purchase department invites a tender. After confirmation of all terms and conditions the department contacts the supplier and orders for the inputs. Thus it is responsible for purchasing of materials and other raw materials whatever is required by the organization. Purchase department is responsible for the delivery of right amount of material at the right time and at the right location to avoid the hampering of the production. Purchasing is distinct from buying. Purchasing involves the extra knowledge as the tenders, various vendors, their prices, comparison between them, after sale service, dispatching follow up and payment terms. The purchase department considers various things before purchasing the raw materials. 1. Information about the input material 2. Sources of material- vendor 3. Reasonable price of that material 4. All terms and conditions

Assembly Department: The components manufactured in plant as well as those bought have to be finally assembled to make the product three wheelers. In the process many sub assemblies, too, are involved. However, two main assemblies worth mentioning are engine assembly and vehicle assembly.
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Both are conveyorised. Every 5 minutes a three wheeler rolls down the conveyor. The vehicle conveyor has 23 stations. Speed can be adjusted to meet increasing demand

. Scooters India Limited is the only organistion to bring the revolution in the automobile field by designing and developing an Electric Maestro Vikram EV. It has stylish and bold masculine bodyline that allows spacious interior having ample space for entire family.

Die Casting Department: The biggest die casting shop in this part of the country handles both Aluminum and Zinc alloys. Equipped with pressure die casting machines of 160, 250, 400 and 1,000 tons locking pressure, the metal is fed to machines from individual holding furnaces of 75/150 kg., which in turn are fed by mother melting furnace of 500 kg. aluminum capacity.

The shop based on projected area, is capable of producing aluminum die casting upto 5 kg. in weight. The shop is backed by chemical and metallurgical labs as also with a die maintenance section. The well-equipped machineries are used in this department in single shift, except two machines that are used in two shifts; that produce all the accessories required by this organization. The die casting of various type of components like Gear box housing, Crantcase, Front wheel drum, Rear wheel drum, Bell housing, Magneto flange, Cylinder head, lower and upper Handle bar, Levers, Differential housing cover, Brake shoe etc are undertaken. Die casting some components for fulfilling customers' requirement are also taken up. Some of our customers are BHEL, Bhopal; Greaves India Limited, Aurangabad to whom supplying the Gear boxes and 422 cc aluminium Engine are supplied.

Machine Shop Department: Machine shop has a wide variety of machines like General purpose machine, Special purpose machine, Multispindle automatic machine, Single spindle automatic machine etc; which are mainly working on single shift through eight different lines. Line no 2 is basically
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machining the aluminium components. crank shaft cylinder machining is usually done on line no 3.

and

Line no. 4 is the Grinding line where the grinding process is done. Heat treatment is performed in line no 5, while different turning of shafts and gear shaping and shaving are carried on line no 6.Line no. 7 includes the functioning of gear manufacture process mainly broaching, hobbing, finish turning, gear shaving etc.Machining of different levers, centreless grinding of tubes and shafts, serration / thread rolling operations is achieved in line no. 8 & lastly different components are fed in two other lines by line no. 9. Blank turing of gear and machining of parts is done on multi spindle and single spindle automatic machine. Engine components and some vehicle component are the prime production.

Fabrication Department: The fabrication operations are carried out in Two departments viz. Press Shop and Welding Shop. The Press Shop is equipped with 20 presses ranging from 10 tons to 550 tons. Presses are fed by sheets cut to size on
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shearing machines of 3000x6 & 2500x3 mm. size. Components ranging from washer to cabin roof and door(1000x1200 mm.) are being processed in this shop.

The Welding Shop is equipped with battery of Spot welding, MIG welding, Seam welding as well as Arc welding machines. CO2 welding is extensively used for getting close tolerance on welded structures. The department has its own auxillary shop for maintenance of tools and dies.

Surface Treatment and Painting Department: Paint shop includes three sections namely Paints section, spray phosphating section, pickling.Paint section includes two convention painting spray booth & one electrostatic painting plant. The first one is called conventional primer where mainly frame paintings are done. The equipments used for conventional painting are Bullow's 230 spray gun and pressure fit tanks (we prepare paints). The various types of frames like Diesel 750, Mini petrol, Mini diesel, Diesel floor mounting, Diesel Nepal, Diesel
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scrubber, Electric vehicle are painted here. The other conventional booth is known as conventional finish booth. Here the frame accessories like cabin front, roof top, front fork, axle housing are painted. In electrostatic plant the accessories of the frame, the component of lighter weight and minimum size like silencer, pillar and various brackets are painted here.

In spray phosphating the main work is to clean the components before painting or to make surface according to paint requirement. After phosphating the products goes to passivation for converting ferrous to ferric for paintings need. The products comes from welding shop, press shop and machine shop to phosphating, and after the process is being done the products go to vehicle assembly. The pickling department is mainly for maintaining the surface of heavily corroded materials.
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Foundry Department: The foundry, most modern in this part of the country, can produce all grades of grey cast iron as well as S. G. iron. In fact, it had been innovative to find new processes of modulisation, for which it was granted 2 patents.Equipped with an Induction Melting furnace, Shell Moulding Machines & Core Shooters, Green Sand Moulding facilities, Isothermal Heat Treatment Furnace, one sand muller machine, two shot blasting machine, two set jolting machines for green sand moulding, fettling and shot blasting equipments, its normal range of production weighs upto 8 Kgs. on a pattern plate of 450x600 mm. However, foundrymen are trained to make casting even of 1 ton weight if emergent requirement arises.

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The foundry is not fully loaded with its captive requirement. Spare capacity is utilised for producing sophisticated castings of prestigious customers like BHEL, Indian Railways, Aerospace, Brakes India Limited, Crompton Greaves limited.The induction furnace has a capacity of 1.3 tons. The two types of moulding is been done here. 1. Shell moulding 2. Green sand moulding. The foundry can manufacture a wide range of products namely Differential housing, Differential cages, Power transimission wheel, Crankcase flange, Magneto motor, Engine output flange, Adapter plate for electric vehicle, Cylinder for both Vikram 410 petrol version and Vikram 750 diesel version

Tool Room Department: The tool room is a cell where brain combines with versatility to evoke the new era of invention. The designs of tool coming from main tool planning departments are implemented here. The tool room is furnished with well equipped machineries namely, CNC machine (Taiwan), Jig Boring machine (Czec Republic), Jig Grinding machine (Switzerland), Profile Grinding machine (Germany), Die shielding machine (Czech Republic), EDM (USA), Schaublin machine (Switzerland).

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Tool room evoke a high performance output, consisting almost 99.9% of company's requirement : one die casting die per year, 1-10 press tools per month, 8-10 jigs per month, 10-12 gauges per month and 400 C.T. tools per monthThese machines are efficiently used to manufacture different tools and dies like Jigs & fixture, Gauges, Cutting tools, Forging dies, Die casting dies, Development items etc. The different activities like like turning, milling different shapes, grinding, heat treatment, jig boring, jig grinding, checking in the standard room, heat treatment according to the job requirement, final inspection are undertaken in the tool room.

Design

and

Development

Department:

Design

&

Development has become the prime mover for the organisation. The business today is customer driven. The department remains in constant touch with the customers to transplant their needs and thinking on the drawing board - nay on the computer
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screen. The department serves the internal customers through design, development, standardization, value engineering, defect removal etc. Equipped with Computer Aided Design Laboratory (CAD lab ), Advanced Instrumentation, testing rigs prototype manufacturing facilities and internet, the company's D & D is recognised by the Ministry of Science and Technology, Govt. of India.

It has the distinction of the developing first zero pollution electric three wheeler in the world. Company besides its own inhouse R&D ; also works in association with leading Research Associations & Educational Institution like I.I.T 's. Kanpur; I.I.T. , Dehradun; A.R.A.I. Pune; T.C.I.R.D. Patiala etc

Computer Aided Design Laboratory: The CAD laboratory provides a wide range of facilities. The versatility of brains combines with the flavour of new creation to evolve a quality product. All the designing & drafting process moulds into a shape in this well-equipped
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environment

of

CAD

laboratory.Which includes FE analysis, Working model

simulation & designing through Auto-Cad 14. Computer-Aided Design is one of the many tools used by engineers and designers and is used in many ways depending on the profession of the user and the type of software in question. There are several different types of CAD.

Each of these different types of CAD systems require the operator to think differently about how he or she will use them and he or she must design their virtual components in a different manner for each department.

VISION MISSION
Mission

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To fulfill customer's needs for economic and safe mode of road transport and quality engineering products through contemporary technologies.

Vision
To grow into an environment friendly and globally competitive company constantly striving to meet the changing needs of customer through constantly improving existing products, adding new products and expanding customer base. Objective Providing economical and safe means of transportation with contemporary technology for movement of cargo and people.Providing eco-friendly, flawless and reliable products to fulfill customer needs. Achieving customer satisfaction by providing products at right price and at right time.

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The Initial Moves

When Dr. Sahay took charge in February 1990, the production of scooters had dropped to zero level. There were problems of orders as the SIL scooters could not withstand the intense competition that had set in the two wheeler market (by over capacity in the industry and the entry of fuel efficient scooters), with its outdated technology and worn out plant and machinery. Luckily, the company also had a three wheeler technology, which met the requirements of low cost public transport system. But it had never been the focus of the companys attention. The production and sales of three-wheeler averaged around 100 per month that could fetch about Rs.90 million sales, which was not adequate to foot even the salary and wages bill that was over Rs.120 million. The first and foremost task was to build the confidence of people, said Dr. Sahay. How to make them see the harsh reality, the impending threat of closure of the
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* A regional festival, which is celebrated with geity in many parts of the country. company, and that by only superior performance the threat could be warded off, was a difficult task. The task was further compounded by the fact that some of the senior members of the management team were not co-operating. I was given the release order of the departing Executive Director and was asked to take charge of the company. Today, employees firmly believe that even higher out-put is possible without additional plant and machinery or manpower., he concluded. Commenting on the issue of perception of capacity for 3W manufacturing, a senior officer said, it is true. Though we had the machines that could be used for manufacturing both 2-Wheelers (scooters) and 3-Wheelers, but we had not realised

the extent to which the facilities could be geared up to make 3Wheelers. Our bankers, therefore, were in no mood to help on working capital front. As no outside help was available, we started identifying and selling scrap and requested the suppliers to extend a helping hand for reviving the company. We also asked our Dealers to place advance with the company for purchase of three-wheeler Unsatisfied demand and spare capacity in supply chain became major source of working capital Marketing Challenges Reflecting on the challenges earlier and now, the Dy. General Manager (Marketing) said, before the present CEO took over, we produced 5020

60 3Ws a month, they used to get sold in and around Lucknow. Company believed what was happening was the best. Nobody was prepared to think big. My first effort after arrival of Dr. Sahay was to seek the approval of State Transport Authorities (STA) of different states. You know all the (automobile) vehicles have to first get road worthiness certificate, either from ARAI, Pune or VRDE, Ahmednagar, without which the state transport authorities would not give approval for registration of vehicle in their state. They may still deny the permission on other criteria such as total vehicle population in the state being more than required etc. The next stage is getting permit from Regional Transport Authority (RTA), which is necessary in the case of commercial vehicles and without which they wont be allowed to ply, and therefore, no body will purchase it. We had permit for Uttar Pradesh (UP) and Bihar States only. They also had to be persuaded, because if they are not favourably inclined, they may not give permit as it happened in the case of Lucknow, when RTA refused to issue permit.

The second problem we are facing is that of changed norms of emission (e.g., earlier the carbon monoxide permissible limit was 4%, now it is reduced to 2.5%. Likewise, hydrocarbon plus nitrox limit was 2 gm. now it is 0.97gm. Now I have to get all the products re-tested from ARAI, or VRDE and get approval from each state afresh. You can imagine the task from the fact that getting STA approval may take 6
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months to 24 months. We are also facing the problem of technology. We have developed and produced in-house, a battery operated electric motor driven vehicle. We had also worked a project on electric car, but the opportunity was lost as we did not get permission from the appropriate authorities at the appropriate time. I feel the quality of product is not up to our expectation. It has to improve further. We must give credit to the present CMD that he is relentlessly pressing the point that customer has to be listened and that customer is the only profit rest all are overheads. The Service Department would be asked many questions to shut them up. To some extent they are also to be blamed for inadequacy of their analysis on account of lack of proper data to support the customers viewpoint. Occasionally the modifications in the design get validated in the field, rather than fixing the quality standards, before the modifications are introduced. Reflections of the Trade Unions By 1990 we realized enough was enough. There wase too much of Dushmani (animosity). There was no law and order. We asked officers, how will all this make our future. However, before any result could come out, the company got covered under BIFR. Ministry played havoc. The machines, which were rejected earlier are giving 40% more output these days. As the representatives left, the Chief of Personnel winked to the case writers this firebrand man is a good machinist. He finishes the days work in 2 hrs, without having any quality problem.
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Sharing their experience of over 25 years, the representatives of Union A said, From 1974 to 1985, the people used to think that they were government employees, do whatever they felt (good or bad) only to ensure their serviceBy 1986 the environment started changing. Government started feeling that it could not run loss making companies. Our union started thinking if the company is in loss, it has implications for us. In 1986 we had no work. Indeed, we formed a joint action committee (JAC) along with (supervisory) staff and officers. We also formed an expert group, who went for an extensive examination of viability, met all the past Chief Executives and came to the same conclusion. We submitted report to government, who rejected it. Government was willing to offer it to be run as cooperative, but was unwilling to write off the losses. There was some change in government attitude also. Government appointed a new Chief Executive (Dr. Sahay). We also thought we must cooperate and work. With Chief Executive from inside, the climate changed. BIFR said you people are responsible for loss, we realized that we must also admit our share of responsibility in companys mounting losses. It was not easy to convey this to people, but we told them after BIFR meeting plainly. Indeed, we maintained what we had said in 1986 (we must get 8 hours work) and that there was no alternative to work if the company was to survive.

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There has been some positive role played by the management. They promoted 10% people in 1991 before the company got covered under BIFR. Since, April 1995 to April 97, about 80% people have got promotion. Today we realise a mental revolution has taken place. Majority of people believe now that without work, no prosperity was possible. Now if a target is set (collectively) no body needs to be watched. Indeed, at times people go and ask others (down stream) whether there was any problem with what they produced.

SIL From Loss to Profit Position

Increase in Revenue Costs

Reduction in

Increase Reducing the

Increase

Reducing the

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in Price Fixed Costs

in Volume

Variable Costs

Increase in Productivity

Expand Interest Capacity

Brief History of the Company: Scooters India was established by the Government of India in 1972 as a public sector enterprise, by importing old plant and machinery from an automobile company in Italy, which had closed down its scooters manufacturing activity a few years back. The company was employing over 3200 persons, about 85% of which constituted the labour force. SILs performance right from the beginning was poor and was deteriorating at a faster rate during the later part of eighties. Indeed during the year 1989-90, the company had made a net loss of Rs. 404
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million on a sales of Rs. 103 millions and had accumulated loss of Rs 2125* millions. In 1987 the government had explored the possibility of selling the company to a leading automobile giant in private sector, but the talks failed, as the latter was reluctant to accept the total labour force, which was thought to be far in excess of the requirements of meagre production. (Further details about the background of the company are available in the SIL (A), (B) and (C) cases). In 8 years period, by 1998, the company had touched a sale of Rs. 1279 million, earning a net profit of Rs. 119 million and shattering several myths while achieving this performance level. The government almost makes up its mind to wind up the company and appoints a new chief executive, who pleads against the winding up and works for revival of the company.

Achievements of SIL:

The sales went up from Rs.10.3 million to Rs.119.1 million (11.3 times).

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The company earned a net profit 109 million in 1996-97 as compared to a net loss of Rs.404 million on a sale of 103 million in 1989-90.

The 3W production went up from 1435 to 15618 i.e., 10.9 times.

This was achieved, when the work force was reduced from about approximately 3000 to 2000 or so.

There has been no substantial change in the investment. Gross block increased from Rs.251 million to Rs.297 million (the net block indeed reduced from Rs.86 million to Rs.60 million).

The rise has not been overnight, but through a sustained effort, highlighting the slogging done in achieving the results.

LINE CHART AT SCOOTER INDIA LTD.

Sr. General Manager 27

General Manager

General Manager

JGM/CM Production

JGM/CM Maint.

JGM/CM Technical

JGM/CM Utility

JGM/CM Comm.

JGM/CM F&A

Ammoni a

Mechanical

Process

Power Plant

Purchase

F& A

Urea Plant

Electrical

Design & Drawing

Offsite

Store

Product Handling

Instrumental Library & Civil Document

Fire & Safety & Env. Laboratory

Traffic

Training & Development

General Engg. JGM/CM

Organisation Structure
FINANCE & ACCOUNT DEPARTMENT

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BOOKS/FICC CELL

FINANCIAL CONCURRENCE

BILL SECTION

PAYROLL SECTION

PSL SECTION

Supply Section

Note Sheet Payment

Work Order

Indigenous supply

Imported supply

Work contract

Service contract

Line of Control in Finance & Account Department

HOD/ C.M. (F & A)

Senior Manager (F& A)

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Senior Manager (F& A)

Manager (Account)

Manager (Account)

Manager (Account)

Manager (Account)

Deputy Account Manager

Deputy Account Manager

Deputy Account Manager

Deputy Account Manager

Senior Account Officers

Account Officers Junior Account officers Senior Accountant Junior Accountant

SIL-PRODUCTS

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Scooters India Limited makes various & versatile types of three wheelers: Vikram 450D,Vikram 410G, Vikram 600G, Vikram 750D,Vikram 750D(WC), Vikram EV. The products have a high payload capacity and efficiency. These are specially designed and developed for local transportation. However, the generation of Vikram run successfully in different countries also. Our product is very demanding in various countries all over the world . Germany, Italy, Sudan, Nigeria, Nepal, Bangladesh are few of the countries. For product details click on the product options.

LIST OF PRODUCTS
Vikram 750D

Vikram 600P
Vikram 450D Vikram 410G Vikram EV

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PRODUCTS
I.

Vikram 750D

A premiere product from the family of "Vikram" vehicles. It is sturdy, highly fuel efficient, easily maintainable and meets latest emission norms. It is highly cost effective and being used as bread earner for many families . Application :Passenger Carrier, Load Carrier, Delivery Van etc. Specification Engine 4 Stroke, Single Cylinder Diesel Engine ; Air Cooled / Water Cooled Fuel Diesel Displacement 510cc Bore 85mm
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Stroke 90mm Maximum Power 7.5KW @ 3000 rpm Maximum Torque 27Nm @ 1800-2400 rpm Compression Ratio 17.5 : 1 G.V.W 1250 kgs 625 kgs for Passenger Carrier, 570 Kg Kerb Wt. for Goods Carrier Wheel Track 1315 mm

Wheel Base 2270 mm Ground Clearence 140 mm Tyre Size 4.5 x 10 " , 8 ply Steering Steering Wheel Hydrualic brakes for simultaneous Brakes action on all 3 wheels Front coil spring with hydraulic Suspension damper . Rear leaf spring with hydraulic damper. Gear Box Constant mesh type ; Four forward and one reverse gear. Clutch Dry Starting Electric Start Maximum Speed 52 Km / Hour Fuel Tank 10 Ltr Capacity Seating Capacity For Passenger Carrier- Driver + 6

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Passenger For Goods Carrier - Driver + 1 Pickup / Delivery Van, Garbage Applications Carrier , Sewage Cleaning, Poultry / Milk Van, Gas Cylinder / Bottle Carrier,

Postal Van etc.

Vikram 450D

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A premiere product from the family of "Vikram" vehicles. It is sturdy, highly fuel efficient, easily maintainable and meets latest emission norms. It is highly cost effective and being used as bread earner for many families . Application :Passenger Carrier, Load Carrier, Delivery Van etc. Specifications Engine 4 Stroke, Single Cylinder Diesel

Engine ; Air Cooled / Water Cooled Fuel Diesel Displacement 395cc Bore 86mm Stroke 68mm Maximum Power 5.51KW @ 3600 rpm Maximum Torque 16.7Nm @ 2200-2800 rpm Compression Ratio 18 : 1 Recommended 990 kgs G.V.W 625 kgs for Passenger Carrier, 320 Kg Kerb Wt. for Goods Carrier Wheel Track 1168 mm Wheel Base 1950 mm Ground Clearence 140 mm Tyre Size 4.5 x 10 " , 8 ply Steering Sterring Wheel and Handle Bar Hydrualic brakes for simultaneous Brakes action on all 3 wheels Front coil spring with hydraulic damper Suspension . Rear leaf spring with hydraulic damper. Gear Box Constant mesh type ; Four forward and one reverse gear. Clutch Wet Type Starting Electric Start Maximum Speed 483 Km / Hour Fuel Tank Capacity 10 Ltr
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For Passenger Carrier - Driver + 3 Sitting Capacity Passenger For Goods Carrier - Driver + 1 Pickup / Delivery Van, Garbage Carrier , Sewage Cleaning, Poultry / Milk Applications Van, Gas Cylinder / Bottle Carrier, Postal Van etc.

Vikram 410G

Based on Italian design, improved with English, American & Japanese technology to suit rough roads and driving conditions - VIKRAM 410CNG is equipped with welded steel cabin, electronic ignition, turn

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signal indicators, wind screens wiper, rear view mirror, speedometer, indicator lights. Specifications Engine 2 Stroke, Single Cylinder air cooled Bore 66mm Stroke 58mm Displacement 198cc Output 9.8 BHP Maximum RPM 4800 Maximum Speed 55 2 km/hr Fuel CNG Gas By means of electronics device and Ignition HT coil fed by specify fly wheel magneto Multiple plate oil immersed wet type Clutch clutch arrangement Constant mesh type 4 forward and Gear Box one reverse gear. Wheel Tracks 1168 mm. Wheel Base 1864 mm. CNG Cylinder of 22.5ltr and petrol Fuel Tank Capacity tank of 3ltr for limphome only Recommended 975 Kgs. G.V.W. Pay Load Capacity 550 Kgs. Lighting & Single head lamp, centrally located, Signaling 12V 35W with front & rear turn signals, parking and brake stop lights. Steering Handle bar. Brakes Hydraulic brakes for simultaneous action on all 3 wheels. Suspension Front coil spring with hydraulic
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damper. Rear leaf spring with hydraulic damper. Starting Kick start Applications Delivery, Sewage Cleaning Poultry, Milk Van, Bottle carrier

VIKRAM EV

Scooters India Limited is the one and only organistion to bring the revolution in the automobile field by designing and developing this Electric Maestro. In this age of pollution this electric vehicle is exceptionally pollution free as it is totally working on 12 batteries. It has stylish and bold masculine bodyline which makes it a different and attractive looks from others. The design is based on the concept " Man maximum Machine minimum " that allows spacious interior having ample space for entire family. This three wheeler has been launched

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on trial basis in the heart of Lucknow & Delhi. Successfully. For product details click on the product options Specifications Vehicle Model Vehicle Type Seating Capacity Wheel base Wheel track Length Width Height Ground clearance Turning radius Maximum Gradebility Body type Frame type Suspension Vikram EV Electrical Three Wheeler 7 Passenger & Driver 2270 mm 1316 mm (rear) 3179 mm 1480 mm 1885 mm 140 mm 3.5 mts. 12 % FRP Welded channel steel space frame Front trailing link Rear under slung type with semi elliptical leaf spring & hydraulic shock absorber 4.5 x 10" 8 ply Dual circuit hydraulic drum brake No. of batteries Twelve 12 volts rechargeable Charging time 6-8 hrs for 100% charging Total distance covered 80 Km.@30-35km/hr Tyre Size by single charging

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INTRODUCTION

40

TO WORKING CAPITAL

Working Capital:The life blood of business, as is evident, signified funds required for day-to-day operations of the firm. The management of working capital assumes great importance because shortage of working capital funds is perhaps the biggest possible cause of failure of many business units in recent times. There it is of great importance on the part of management to pay particular attention to the planning and control for working
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capital. An attempt has been made to make critical study of the various dimensions of the working capital management of SIL. Decisions relating to working capital and short term financing are referred to as working capital management. These involve managing the relationship between a firm's short-term assets and its short-term liabilities. The goal of Working capital management is to ensure that the firm is able to continue its operations and that it has sufficient money flow to satisfy both maturing short-term debt and upcoming operational expenses.

Working Capital
Every business needs investment to procure fixed assets, which remain in use for a longer period. Money invested in these assets is called Long term Funds or Fixed Capital. Business also needs funds for short-term purposes to finance current operations. Investment in short term assets like cash, inventories, debtors etc., is called Short-term Funds or Working Capital. The Working Capital can be categorized, as funds needed for carrying out day-to-day operations of the business smoothly. The management of the working capital is equally important as the management of long-term financial investment.

Every running business needs working capital. Even a business which is fully equipped with all types of fixed assets required is bound to collapse without
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o adequate supply of raw materials for processing; o cash to pay for wages, power and other costs; o creating a stock of finished goods to feed the market demand regularly; and, o The ability to grant credit to its customers.

All these require working capital. Working capital is thus like the lifeblood of a business. The business will not be able to carry on dayto-day activities without the availability of adequate working capital.

Working capital cycle involves conversions and rotation of various constituents Components of the working capital. Initially cash is converted into raw materials.

Subsequently, with the usage of fixed assets resulting in value additions, the raw materials get converted into work in process and then into finished goods. When sold on credit, the finished goods assume the form of debtors who give the business cash on due date. Thus cash assumes its original form again at the end of one such working capital cycle but in the course it passes through various other forms of current assets too. This is how various components of current assets keep on changing their forms due to value addition. As a result, they rotate and business operations continue. Thus, the working capital cycle involves rotation of various constituents of the working capital.
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While managing the working capital, two characteristics of current assets should be kept in mind viz. (i) short life span, and (ii) swift transformation into other form of current asset.

Each constituent of current asset has comparatively very short life span. Investment remains in a particular form of current asset for a short period. The life span of current assets depends upon the time required in the activities of procurement; production, sales and collection and degree of synchronization among them. A very short life span of current assets results into swift transformation into other form of current assets for a running business.

These characteristics have certain implications:

Decision regarding management of the working capital has to be taken frequently and on a repeat basis.

The various components of the working capital are closely related and mismanagement of any one component adversely affects the other components too.

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The difference between the present value and the book value of profit is not significant.

The working capital has the following components, which are in several forms of current assets:

o Stock of Cash

o Stock of Raw Material

o Stock of Finished Goods

o Value of Debtors

o Miscellaneous current assets like short term investment loans & Advances A number of definitions have been formulated: perhaps the most widely acceptable would be;

WORKING CAPITAL represents the excess of CURRENT ASSETS over CURRENT LIABILITIES
45

The same may be designated in the following equation: WORKING CAPITAL= CURRENT ASSETS CURRENT LIABILITIES: Funds thus invested in current assets keep revolving fast and are being constantly converted in to cash and this cash flows out again in exchange for other current assets. Thus it is known as revolving or circulating capital or short term capital.

These are two concepts of working capital:-

a. b.

Gross Working Capital. Net Working Capital.

Gross working capital is the total of all current assets. Net working capital is the difference between current assets and current liabilities. Though the later concept of working capital is commonly used it is an accounting concept with little sense to say that a firm manages its net working capital. What a firm really does is to take decisions with
46

respect to various current assets and current liabilities. The constituents of current assets and current liabilities are shown in table A.

Constituents of Current Assets and Current Liabilities

Current Assets

Inventories Raw materials and components, Work in

progress, Finished goods, other.

Trade Debtors. Loans and Advances. Investments. Cash and Bank balance.

Current Liabilities
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Sundry Creditors. Trade Advances. Borrowings. Provisions.

The working capital needs of a business are influenced by numerous factors. The important ones are discussed in brief as given below:

Nature of Enterprise

The nature and the working capital requirements of an enterprise are interlinked. While a manufacturing industry has a long cycle of operation of the working capital, the same would be short in an enterprise involved in providing services. The amount required also varies as per the nature; an enterprise involved in production would require more working capital than a service sector enterprise.

Manufacturing/Production Policy Each enterprise in the manufacturing sector has its own production policy, some follow the policy of uniform production even if the demand varies from time to time, and others may follow the principle
48

of 'demand-based production' in which production is based on the demand during that particular phase of time. Accordingly, the working capital requirements vary for both of them. Working Capital Cycle In manufacturing concern, working capital cycle starts with the purchase of raw materials and ends with realization of cash from the sale of finished goods. The cycle involves the purchase of raw materials and ends with the realization of cash from the sale of finished products. The cycle involves purchase of raw materials and stores, its conversion in to stock of finished goods through work in progress with progressive increment of labor and service cost, conversion of finished stick in to sales and receivables and ultimately realization of cash and this cycle continuous again from cash to purchase of raw materials and so on.

Operations The requirement of working capital fluctuates for seasonal business. The working capital needs of such businesses may increase considerably during the busy season and decrease

during the slack season. Ice creams and cold drinks have a great demand during summers, while in winters the sales are negligible.

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Market Condition

If there is high competition in the chosen product category, then one shall need to offer sops like credit, immediate delivery of goods etc. for which the working capital requirement will be high. Otherwise, if there is no competition or less competition in the market then the working capital requirements will be low. Credit Policy The credit policy is concerned in its dealings with debtors and creditors influence considerably the requirements of the working capital. A concern that purchases its requirements on credit and sells its products/services on cash requires lesser amount of working capital. On the other hand a concern buying its requirements for cash and allowing credit to its customers, shall need larger amount of funds are bound to be tied up in debtors or bills receivables.

Business Cycle Business Cycle refers to alternate expansion and contraction in general business activities. In a period of born i.e. when the business is prosperous there is a need for larger amount of working capital due to
50

increase in sales, rise in prices, optimistic expansion of business etc. On the country at he time of depression i.e. when there is a down swing of the cycle, business

contracts, sales decline, difficulties are faced in collections from debtors and firms may have a large amount of working capital lying idea.

Availability of Raw Material If raw material is readily available then one need not maintain a large stock of the same, thereby reducing the working capital investment in raw material stock. On the other hand, if raw material is not readily available then a large inventory/stock needs to be maintained, thereby calling for substantial investment in the same.

Growth and Expansion Growth and expansion in the volume of business results in enhancement of the working capital requirement. As business grows and expands, it needs a larger amount of working capital. Normally, the need for increased working capital funds precedes growth in business activities.

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Earning Capacity and Dividend policy Some firms have more earning capacity than others due to the quality of their products, monopoly conditions etc. Such firms with high earning capacity may generate cash profits from operations and contribute to their capital. The dividend policy of a concern also influences the requirements of the working capital. A firm that maintains steady high rate of cash dividend irrespective of its generation of profits needs more capital than the firm retains larger part of its profits and does not pay high rate of cash dividend.

Price Level Changes Generally, rising price level requires a higher investment in the working capital. With increasing prices, the same level of current assets needs enhanced investment.

Manufacturing Cycle

The manufacturing cycle starts with the purchase of raw material and is completed with the production of finished goods. If the manufacturing cycle involves a longer period, the need for working capital would be more. At times, business needs to estimate the requirement of working capital in advance for proper control and management. The factors discussed above influence the quantum of working capital in the business. The assessment of working capital requirement is made
52

keeping these factors in view. Each constituent of working capital retains its form for a certain period and that holding period is determined by the factors discussed above. So for correct assessment of the working capital requirement, the duration at

various stages of the working capital cycle is estimated. Thereafter, proper value is assigned to the respective current assets, depending on its level of completion. Other Factors Certain other factors such as operating efficiency, management ability, irregularities a supply, import policy, asset structure, importance of labor, banking facilities etc. also influences the requirement of working capital. Component of Working Capital Basis of Valuation

Stock of raw material Purchase cost of raw materials

Stock of work in process At cost or market value, whichever is lower

Stock of finished goods Cost of production

Debtors Cost of sales or sales value

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Cash Working expenses

Each constituent of the working capital is valued on the basis of valuation Enumerated above for the holding period estimated. The total of all such valuation becomes the total estimated working capital

requirement.

The assessment of the working capital should be accurate even in the case of small and micro enterprises where business operation is not very large. We know that working capital has a very close relationship with day-to-day operations of a business. Negligence in proper assessment of the working capital, therefore, can affect the day-to-day operations severely. It may lead to cash crisis and ultimately to liquidation. An inaccurate assessment of the working capital may cause either under-assessment or over-assessment of the working capital and both of them are dangerous.

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WORKING CAPITAL MANAGEMENT

Working Capital Management refers to management of current assets and current liabilities. The major thrust of course is on the management of current assets .This is understandable because current liabilities arise in the context of current assets. Working Capital Management is a significant fact of financial management. Its importance stems from two reasons:

Investment in current assets represents a substantial portion of total investment.

Investment in current assets and the level of current liabilities have to be geared quickly to change in sales. To be sure, fixed asset investment and long term financing are responsive to
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variation in sales. However, this relationship is not as close and direct as it is in the case of working capital components. The importance of working capital management is effected in the fact that financial manages spend a great deal of time in managing current assets and current liabilities. Arranging short term financing, negotiating favorable credit terms, controlling the movement of cash, administering the accounts receivable, and monitoring the inventories consume a great deal of time of financial managers. The problem of working capital management is one of the best utilization of a scarce resource. Thus the job of efficient working capital management is a formidable one, since it depends upon several variables such as character of the business, the lengths of the merchandising

cycle, rapidity of turnover, scale of operations, volume and terms of purchase & sales and seasonal and other variations.

CONSEQUENCES OF UNDER ASSESSMENT OF WORKING CAPITAL

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o Growth may be stunted. It may become difficult for the enterprise to undertake profitable projects due to nonavailability of working capital.

o Implementation of operating plans may become difficult and consequently the profit goals may not be achieved.

o Cash crisis may emerge due to paucity of working funds.

Optimum capacity utilization of fixed assets may not be achieved due to non availability of the working capital.

o The business may fail to honour its commitment in time, thereby adversely affecting its credibility. This situation may lead to business closure.

The business may be compelled to buy raw materials on credit and sell finished goods on cash. In the process it may end up with increasing cost of purchases and reducing selling prices by offering discounts.

o Non-availability of stocks due to non-availability of funds may result in production stoppage.

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CONSEQUENCES OF OVER ASSESSMENT OF WORKING CAPITAL o Excess of working capital may result in unnecessary accumulation of inventories.

o It may lead to offer too liberal credit terms to buyers and very poor recovery system and cash management.

o It may

make

management

complacent

leading

to

its

inefficiency.

o Over-investment in working capital makes capital less productive and may reduce return on investment. Working capital is very essential for success of a business and, therefore, needs efficient management and control.

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The working capital in certain enterprise may be classified into the following kinds.

1. Initial working capital. The capital, which is required

at the time of the commencement of business, is called initial working capital. These are the promotion expenses incurred at the 2. earliest stage of formation of the enterprise which include the incorporation fees. Attorney's fees, office expenses and other expenses. 2. Regular working capital. This type of working capital remains always in the enterprise for the successful operation. It supplies the funds necessary to meet the current working expenses i.e. for purchasing raw material and supplies, payment of wages, salaries and other sundry expenses.

3. Fluctuating working capital. This capital is needed to meet the seasonal requirements of the business. It is used to raise the volume of production by improvement or extension of machinery. It may be secured from any financial institution which can, of course, be met with short term capital. It is also called variable working capital.

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4. Reserve margin working capital. It represents the amount utilized at the time of contingencies. These unpleasant events may occur at any time in the running life of the business such as inflation, depression, slump, flood, fire, earthquakes, strike, lay off and unavoidable competition etc. In this case greater amount of capital is required for maintenance of the business.

Financing Working Capital

Now let us understand the means to finance the working capital. Working capital or current assets are those assets, which unlike fixed assets change their forms rapidly. Due to this nature, they need to be financed through short-term funds. Short-term funds are also called current liabilities. The following are the major sources of raising shortterm funds:

I. Suppliers Credit

At times, business gets raw material on credit from the suppliers. The cost of raw material is paid after some time, i.e. upon completion of the credit period. Thus, without having an outflow of cash the business is in a position to use raw material and continue the activities. The credit
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given by the suppliers of raw materials is for a short period and is considered current liabilities. These funds should be used for creating current assets like stock of raw material, work in process, finished goods, etc.

ii. Bank Loan for Working Capital

This is a major source for raising short-term funds. Banks extend loans to businesses to help them create necessary current assets so as to achieve the Required business level. The loans are available for creating the following current Assets:

Stock of Raw Materials

Stock of Work in Process Stock of Finished Goods Debtors

Banks give short-term loans against these assets, keeping some security margin. The advances given by banks against current assets are short-term in nature and banks have the right to ask for immediate repayment if they consider doing so. Thus bank loans for creation of current assets are also current liabilities.

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iii. Promoters Fund

It is advisable to finance a portion of current assets from the promoters funds. They are long-term funds and, therefore do not require immediate repayment. These funds increase the liquidity of the business.

Management of Inventor.
Inventories constitute the most significant part of current assets of a large majority of companies in India. On an average, inventories are approximately 60 % of current assets in public limited companies in India.

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Because of the large size of inventories maintained by firms maintained by firms, a considerable amount of funds is required to be committed to them. It is, therefore very necessary to manage inventories efficiently and effectively in order to avoid unnecessary investments. A firm neglecting a firm the management of inventories will be jeopardizing its long run profitability and may fail ultimately. The purpose of inventory management is to ensure availability of materials in sufficient quantity as and when required and also to minimize investment in inventories at considerable degrees, without any adverse effect on production and sales, by using simple inventory planning and control techniques. Needs to hold inventories:There are three general motives for holding inventories:

Transaction motive emphasizes the need to maintain inventories to facilitate smooth production and sales operation.

Precautionary motive necessities holding of inventories to guard against the risk of unpredictable changes in demand and supply forces and other factors.

Speculative motive influences the decision to increases or reduce inventory levels to take advantage of price fluctuations

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and also for saving in re-ordering costs and quantity discounts etc.

Objective of Inventory Management:The main objectives of inventory management are operational and financial. The operational mean that means that the materials and spares should be available in sufficient quantity so that work is not disrupted for want of inventory. The financial objective means that investments in inventories should not remain ideal and minimum working capital should be locked in it. The following are the objectives of inventory management:o

To ensure continuous supply of materials, spares and finished goods.

o o

To avoid both over-stocking of inventory. To maintain investments in inventories at the optimum level as required by the operational and sale activities.

o To keep material cost under control so that they contribute in reducing cost of production and overall purchases. o To eliminate duplication in ordering or replenishing stocks. This is possible with the help of centralizing purchases.
o

To minimize losses through deterioration, pilferage, wastages and damages.

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To design proper organization for inventory control so that management. Clear cut account ability should be fixed at various levels of the organization.

To ensure perpetual inventory control so that materials shown in stock ledgers should be actually lying in the stores.

To ensure right quality of goods at reasonable prices.

o To facilitate furnishing of data for short-term and long term planning and control of inventor

Management of cash
Cash is the important current asset for the operation of the business. Cash is the basic input needed to keep the business running in the continuous basis, it is also the ultimate output expected to be realized by selling or product manufactured by the firm. The firm should keep sufficient cash neither more nor less. Cash shortage will disrupt the firms manufacturing operations while excessive cash will simply remain ideal without contributing anything towards the firms 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 account. Sometimes near cash items such as marketing securities or bank term deposits are also included in

65

cash. Generally when a firm has excess cash, it invests it is marketable securities. This kind of investment contributes some profit to the firm.

Need to hold The firms need to hold cash may be attributed to the following three motives:The Transaction Motive: The transaction motive requires a firm to hold cash to conduct its business in the ordinary course. The firm needs cash primarily to make payments for purchases, wages and salaries, other operating expenses, taxes, dividends, etc.

The Precautionary Motive: A firm is required to keep cash for meeting various contingencies. Though cash inflows and outflows are anticipated but there may be variations in these estimates. For example a debtor who pays after 7 days may inform of his inability to pay, on the other hand a supplier who used to give credit for 15 days may not have the stock to supply or he may not be in opposition to give credit at present.
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Speculative Motive: - The speculative motive relates to the holding of cash for investing in profit making opportunities as and when they arise. The opportunities to make profit changes. The firm will hold cash, when it is expected that interest rates will rise and security price will fall.

ACCOUNTING FOR STORES

General Outline of stores Function: a. The authority of receipt, store and issue of all material is centralized in the materials department subject to exception in permitted in certain cases. In certain cases a nominal stock of few consumable items can be permitted with uses departments such as maintenance, laboratory and administration department for meeting emergencies. In addition certain chemicals are permitted to be stored in production department due to the operational needs.

b. The authority of storage of packing materials like bags is vested with bagging department. The bagging department receives the
67

material, gets it inspected in laboratory, issued the same for product bagging and maintains the stocks.

c. Maintenance of records for all quantitative transaction of packing material is the responsibility of bagging department. Similarly the raw materials are handled by production department with all responsibilities in respect of quantity accounting.

Functions of Store Accounting Section The section dealing with accounting of stores in the finance department shall have following functions:Accounting of receipts, issues, return and transfer of materials. Accounting of imported materials for capital works and operations. Associating with stores section for stock verification.

1.

2.

3.

4.Valuation of stores items should do on weighted average basis.

Insurance of Stock & Stores

For stocks of ammonia, naphtha, general stores, bags, phosphoric acid, and finished products held at plants, insurance shall be taken to cover the risks arising out of fire explosion, riot, strike terrorism, malicious damage, earthquake, etc. The stock of finished products

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lying at different marketing warehouses should also be adequately covered through the warehousing agencies. According to the value of stores and finished products keeps on varying from time to time, insurance shall be obtained in the form of declaration policy whereby the average daily stock for each product held during the month shall be declared to the insurers in the first week of the next month. According to the declaration policy, the insured amount for each product shall be stated separately. The liability of the insurers is limited to the insured amount. At any time if it is found that the actual stock is more than the insured amount to avoid less amount of insurance. In case of a declaration policy, insurance premium is payable for minimum 35 % of the insured value. Before insurance is obtained, various categories of stores shall be reviewed with a view to select such items for which insurance is considered necessary.

TECHNIQUES OF INVENTORY CONTROL

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Reduction of surplus stock is an essential requirement inventory control. Various techniques are available to solve the various types of problems associated with inventory control:1) Min-Max plan 2) Order cycling system 3) Fixation of various levels 4) Use of control ratios 5) Review of slow and non-moving items 6) The ABC Analysis

1) Min-Max plan: In this plan analyst lays down a maximum and minimum for each stock item. Minimum level establishes the reorder point and order is placed for quantity of material, which will bring it to the maximum level.

2) Order Cycling System: In this system, quantities in hand of each item or class of stock are reviewed periodically. In that, if it is observed that stock level of a given item will not be sufficient till the next schedule review keeping in view of its probable rate of depletion, an order is placed to replenish its supply.

3) Fixation of Various Levels: Certain stock levels or fixed levels are given below:

70

A). Maximum Level It is the quantity of materials beyond which a firm should not exceed its stocks. If the will be overstocking. quantity exceeds maximum level limit then it

Maximum Level = Re-ordering level + Re-ordering Quantity(Minimum Consumption*Minimum Re-ordering period)

B). Minimum Level It represents the quantity of stock that should be held at all the time, stock level is normally not allowed facing below this level. Minimum Level = Re-order level (Normal consumption*Normal Reorder Period)

C). Safety Level Normal issues of stock usually stopped at this level and made only under specific instructions. Safety stock is a buffer to meet some unanticipated increase in usage.

Safety stock level = Ordering Level (Average rate of consumption * Re-order level) OR
71

= (Maximum rate of consumption Average rate of consumption) * Lead Time.

D). Re-ordering Level When the quantity of materials reaches at a certain figure then fresh order is sent to

get materials again Re-ordering level = Maximum Consumption*Maximum Re-order period 4) Use of Control Ratios: Inventory turnover ratio helps management to avoid capital being locked up unnecessarily. This ratio reveals the efficiency of stock keeping.

Inventory turnover ratio =Cost of materials consumed / Cost of average stock held during the period Where, Cost of average stock = [Cost of opening stock + Cost of closing stock] / 2

Inventory turnover ratio [in days] =Days during the period /Inventory turnover ratio.

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5) Review of slow moving and non- moving items: Stock turnover ratio should be as high as possible. Loss due to obsolescence be eliminated or these items used in some profitable work. Slow moving stock should be identified and speedily disposed off. The speed of movement should be increased. The turnover of different items of stock can be analyzed to find out the moving stocks.

The percentage of slow moving stores = Slow moving stores / Total Inventory

Components of working capital are calculated as follows: 1) Raw Materials Storage Period=Average stock of raw materials/Average cost of raw material consumption per day. 2.) W-I-P Holding period=Average w-i-p in inventory/Average cost of production per day. 3.) Stores and spares conversion period= Average stock of Stores and spares/ Average consumption per day.

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4.) Finished goods conversion period= Average stock of finished goods/Average cost of goods sold per day. 5.) Debtors collection period=Average book debts/Average credit sales per day. 6.) Credit period availed=Average trade creditors/Average credit purchase per day.

Management of Receivables
A sound managerial control requires proper management of liquid assets and inventory. These assets are a part of working capital of the business. An efficient use of financial resources is necessary to avoid financial distress. Receivables result from credit sales. A concern is required to allow credit sales in order to expand its sales volume. It is not always possible to sell goods on cash basis only.
74

Sometimes other concern in that line might have established a practice of selling goods on credit basis. Under these circumstances, it is not possible to avoid credit sales without adversely affecting sales. The increase in sales is also essential to increases profitability. After a certain level of sales the increase in sales will not proportionately increase production costs. The increase in sales will bring in more profits. Thus, receivables constitute a significant portion of current assets of a firm. But for investment in receivables, a firm has to insure certain costs. Further, there is a risk of bad debts also. It is therefore, very necessary to have a proper control and management of receivables. Needs to hold cash: Receivables management is the process of making decisions relating to investment in trade debtors. Certain investments in receivables are necessary to increase the sales and the profits of a firm. But at the same time investment in this asset involves cost consideration also. Further, there is always a risk of bad debts too. Thus, the objective of receivable management is to take a sound decision as regards investments in debtors. In the words of Bolton, S.E., the

need of receivables management is to promote sales and profits until that point is reach where the return of investment in further funding of receivables is less than the cost of funds raised to finance that additional credit.
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Important Terms
Working Capital Cycle

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Cash flows in a cycle into, around and out of a business. It is the business's life blood and every manager's primary task is to help keep it flowing and to use the cash flow to generate profits. If a business is operating profitably, then it should, in theory, generate cash surpluses. If it doesn't generate surpluses, the business will eventually run out of cash and expire. The faster a business expands , the more cash it will need for working capital and investment. The cheapest and best sources of cash exist as working capital right within business. Good management of working capital will generate cash will help improve profits and reduce risks. Bear in mind that the cost of providing credit to customers and holding stocks can represent a substantial proportion of a firm's total profits. There are two elements in the business cycle that absorb cash Inventory (stocks and work-in-progress) and Receivables (debtors owing you money). The main sources of cash are Payables (your creditors) and Equity and Loans.

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Each component of working capital (namely inventory, receivables and payables) has two dimensions ........TIME ......... and MONEY. When it comes to managing working capital - TIME IS MONEY. If you can get money to move faster around the cycle (e.g. collect monies due from debtors more quickly) or reduce the amount of money tied up (e.g. reduce inventory levels relative to sales), the business will generate more cash or it will need to borrow less money to fund working capital. As a consequence, you could reduce the cost of bank interest or you'll have additional free money available to support additional sales growth or investment. Similarly, if you can negotiate improved terms with suppliers e.g. get longer credit or an increased credit limit; you effectively create free finance to help fund future sales. If you....... Collect receivables (debtors) faster Collect receivables (debtors) slower Then...... You release cash from the cycle Your receivables soak up cash
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Get better credit (in terms of duration or You increase your cash amount) from suppliers resources You free up cash You consume more cash

Shift inventory (stocks) faster Move inventory (stocks) slower

It can be tempting to pay cash, if available, for fixed assets e.g. computers, plant, vehicles etc. If you do pay cash, remember that this is now longer available for working capital. Therefore, if cash is tight, consider other ways of financing capital investment - loans, equity, leasing etc. Similarly, if you pay dividends or increase drawings, these are cash outflows and, like water flowing downs a plug hole, they remove liquidity from the business.

More businesses fail for lack of cash than for want of profit.

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STORE SECTION
Store of any organization is of vital importance. It is the responsibility of stores to receive the material required by the organizations operations to keep it properly & to issue it as when required. The stores are divided in two subsections for greater flexibility like receipt and custody section. In SCOOTER INDIA LTD. there are two stores. a. Store A for Aonla-1( this store contains that spares which are used by Aonla-1) b. Store B for Aonla-2 unit.( it contains mainly catalysts used by Aonla-2 ) Store has the following warehouses: B. RECEIPT SECTION This section is responsible for receiving the materials and inspecting them. The process involves following steps. Main Store Cement godown Petrol Pump Cable yard Chemical godown Paint godown PDIL store

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1)

The document regarding the material may be sent to the stores, purchase, concerned department. But ultimately they have to be send to stores. The documents may be:

2)

Goods receipt / railway receipt / challan Form Excise duty

The particulars of the document are noted in the carrier receipt register (CRR).

3)

After the entry in the register, the document is given to an agent termed as handling contractor. He will collect the material.

4)

Consignments cases are intact. If not he will ask for open delivery. Then he has to deliver the goods to stores. In case of damage he has to give a certificate. Some consignment may without document i.e. door delivery and is some cases it may be face to face delivery.

5)

If any discrepancy is found during checking, the accounts section is informed for necessary action and getting claim from insurance company. The date of receipt is filled in CRR.

6)

The next operation is filling the stores receipt vouchers (SRV). Here the quantity mentioned in challan and purchase order are compared, SRV Has 7 copies, two for accounts and one for each purchase, stores, indenter, master file & custody section.

7)

Inspection is done by the indenter:

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Suppose all items are accepted then the material is handed to custody section after putting identification & giving a SRV control number.

If some items are defective then the accepted items will be sent to custody and for defective ones, information is sent to supplier, accounts, indenter & insurance company and the particulars noted in rejection register.

If there is some breakage then either item may be replaced by company or claim against insurance is obtained, when an item is replaced, its dispatch advice is made.

Direct charge SRV (DCSRV) is prepared when indenter wants material directly from receipt section.

CUSTODY SECTION This section is responsible for proper keeping of materials and issuing them when required by different department and contractors. The material received here is first checked as per SRV for every material there is a card. These cards are located in bins according to code of material is received in custody the card information is updated. When someone wants to issue certain material he has to fill the store issue voucher (SIV). Once the item is issued again information is updated in the kardex. When a particular part is returned then this received in stores, by internal stores return voucher (ISRV). After
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issuing the material the number of issue and the quantity issued is noted in SIV control registers. Custody section takes care of spares. SPARES About 36848 spares of Aonla Unit-1 are housed in store and 17799 spares of Aonla Unit-2 are housed in store. Spares have been classified plant wise. The first digit of the code of item is numbered according to given criterion Ammonia Urea Product handling Power Sp. Equipments General items

In SCOOTER INDIA LTD. inventory is divided into two types: i. ii. General and Spares General are those inputs which can be used at various sites as wire, pipe etc. Spare are those inputs which are specific to a particular plant and are of particular size.

Sources of Additional Working Capital

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Sources of additional working capital include the following:

Existing cash reserves Profits (when you secure it as cash!) Payables (credit from suppliers) New equity or loans from shareholders Bank overdrafts or lines of credit Long-term loans

If you have insufficient working capital and try to increase sales, you can easily over-stretch the financial resources of the business. This is called overtrading. Early warning signs include: Pressure on existing cash Exceptional cash generating activities e.g. offering high discounts for early cash payment
o

o o

Bank overdraft exceeds authorized limit

o o o o

Seeking greater overdrafts or lines of credit Part-paying suppliers or other creditors Paying bills in cash to secure additional supplies Management managing pre-occupation with surviving rather than

Frequent short-term emergency requests to the bank (to help pay wages, pending receipt of a cheque
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Handling Receivables (Debtors)

Cash flow can be significantly enhanced if the amounts owing to a business are collected faster. Every business needs to know.... who owes them money.... how much is owed.... how long it is owing.... for what it is owed.

Late payments erode profits and can lead to bad debts.

Slow payment has a crippling effect on business; in particular on small businesses who can least afford it. If you don't manage debtors, they will begin to manage your business as you will gradually lose control due to reduced cash flow and, of course, you could experience an increased incidence of bad debt.

The following measures will help manage your debtors: 1. Have the right mental attitude to the control of credit and make sure that it gets the priority it deserves. 2. Establish clear credit practices as a matter of company policy.

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3. Make sure that these practices are clearly understood by staff, suppliers and customers. 4. Be professional when accepting new accounts, and especially larger ones. 5. Check out each customer thoroughly before you offer credit. Use credit agencies, bank references, industry sources etc. 6. Establish credit limits for each customer... and stick to them. 7. Continuously review these limits when you suspect tough times are coming or if operating in a volatile sector. 8. Keep very close to your larger customers. 9. Invoice promptly and clearly. 10. Consider charging penalties on overdue accounts. 11. Consider accepting credit /debit cards as a payment option. 12. Monitor your debtor balances and ageing schedules, and don't let any debts get too large or too old. Recognize that the longer someone owes you, the greater the chance you will never get paid. If the average age of your debtors is getting longer, or is already very long, you may need to look for the following possible defects:

poor collection procedures lax enforcement of credit terms slow issue of invoices or

statements
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errors in invoices or statements Customer dissatisfaction.

Debtors due over 90 days (unless within agreed credit terms) should generally demand immediate attention. Look for the warning signs of a future bad debt. For example.........

longer credit terms taken with approval, particularly for smaller orders

use of post-dated checks by debtors who normally settle within agreed terms

evidence of customers switching to additional suppliers for the same goods

o o

new customers who are reluctant to give credit references Receiving part payments from debtors.

Profits only come from paid sales.

The act of collecting money is one which most people dislike for many reasons and therefore put on the long finger because they convince themselves there is something more urgent or
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important that demand their attention now. There is nothing more important than getting paid for your product or service. A customer who does not pay is not a customer.

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Managing Payables (Creditors)

Creditors are a vital part of effective cash management and should be managed carefully to enhance the cash position. Purchasing initiates cash outflows and an over-zealous purchasing function can create liquidity problems. Consider the following: Who authorizes purchasing in your company - is it tightly managed or spread among a number of (junior) people?
o o

Are purchase quantities geared to demand forecasts? Do you use order quantities which take account of stock-holding and purchasing costs?

o o

Do you know the cost to the company of carrying stock? Do you have alternative sources of supply? If not, get quotes from major suppliers and shop around for the best discounts, credit terms, and reduce dependence on a single supplier.

o o

How many of your suppliers have a returns policy? Are you in a position to pass on cost increases quickly through price increases to your customers?

If a supplier of goods or services lets you down can you charge back the cost of the delay?

Can you arrange (with confidence!) to have delivery of supplies staggered or on a just-in-time basis?
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There is an old adage in business that if you can buy well then you can sell well. Management of your creditors and suppliers is just as important as the management of your debtors. It is important to look after your creditors - slow payment by you may create ill-feeling and can signal that your company is inefficient (or in trouble!).

Remember, a good supplier is someone who will work with you to enhance the future viability and profitability of your company

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Key Working Capital Ratios

The following, easily calculated, ratios are important measures of working capital utilization. Ratio Formulae Result Interpretation On average, you turn over the value of your entire stock every x days. You may need to Average Stock * Stock 365/ Turnover Cost of Goods (in days) Sold overall stock turnover days. Faster production, fewer product lines, just in time ordering will reduce average days. It takes you on average x days to collect monies due to you. If youre official credit terms are 45 Receivables Debtors * 365/ Ratio Sales (in days) average days. Effective debtor management will Payables Ratio (in days) minimize the days. Creditors * 365/ = x days On average, you pay your suppliers every x Cost of Sales (or Purchases) days. If you negotiate better credit terms this will increase. If you pay earlier, say, to get a discount this will decline. If you simply defer paying your suppliers (without agreement) this will also increase - but your reputation, the
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break this down into product groups for effective stock management. = x days Obsolete stock, slow moving lines will extend

day and it takes you 65 days... why? = x days One or more large or slow debts can drag out the

quality of service and any flexibility provided by your suppliers may suffer. Current Assets are assets that you can readily turn in to cash or will do so within 12 months in the course of business. Current Liabilities are Total Current Current Ratio Assets/ Total Current Liabilities =x amount you are due to pay within the coming 12 months. For example, 1.5 times means that you

times should be able to lay your hands on $1.50 for every $1.00 you owe. Less than 1 times e.g. 0.75 means that you could have liquidity problems and be under pressure to generate sufficient cash to meet oncoming demands.

(Total Current Assets =x Quick Ratio Inventory)/ times Total Current Liabilities (Inventory + Working Capital Ratio Receivables Payables)/ Sales As % A high percentage means that working capital Sales needs are high relative to your sales. inventory into cash. the fact that it may take time to convert Similar to the Current Ratio but takes account of

Other working capital measures include the following:

Bad debts expressed as a percentage of sales.

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Cost of bank loans, lines of credit, invoice

discounting etc.

Debtor concentration - degree of dependency on

a limited number of customers.

Once ratios have been established for your business, it is important to track them over time and to compare them with ratios for other comparable businesses or industry sectors. When planning the development of a business, it is critical that the impact of working capital be fully assessed when making cash flow forecasts.

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OBJECTIVES OF THE RESEARCH

The following are the main objective which has been undertaken in the present study: 1. To determine the amount of working capital requirement and to calculate various ratios relating to working capital. 2. To make an item wise study of the components of the working capital. 3. To suggest the steps to be taken to increase the efficiency in management of working capital. 4. How to make the inventory system more efficient and effective? 5. By which way the cost can be minimized that is invested in the inventory and how to regulate the whole inventory system in a better way. 6. How SCOOTER INDIA LTD. can ensure the interrupted supply without making over investment in the inventories. As we know that SCOOTER INDIA LTD. has large machineries due to which it has to retain too much stock of spares to avoid the interruption? 7. As we know that SCOOTER INDIA LTD. is a very big organization and it is typical to coordinate with all the
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employees who are working there. But for the effective inventory system there should be coordination between the store, purchase department and finance department. So what should be done for the coordination between the departments to make the inventory system effective? 8. To analyze the working of various departments that work in coordination with Finance department as payroll section, bill section, taxation section etc.

OBJECTIVE OF STUDY The main aim of study is to check the efficiency and effectiveness of inventory management system. Investment in inventory incurs a high cost. Therefore effective management is necessary to minimize the cost and ultimately increases profitability of an organization. A part from our main objective our main objectives are: 1) To analyze the level of investment in inventory by SCOOTER INDIA LTD.. 2) To analyze the financial position of the company. 3) To give suggestion if any, regarding effective inventory management. Or To give suggestions to ensures smooth and uninterrupted supply without making unnecessary investment of funds in inventory.
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HYPOTHESIS

SCOOTER INDIA LTD. is a big organization. It is very typical for it to manage the inventory. This report is basically concerned on how to manage inventory in a more effective way. There are many alternatives by which it can be managed in a better way or the traditional inventory management is better.

This section deals with the methodology used in my study. It describes the nature of study, data collecting method, accounting procedure of inventories, valuation and verification of inventories etc. The data used in study was manually collected from the employees of SCOOTER INDIA LTD. as well as from the net. The questionnaire is built
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considering the availability of data and convenience. Data were collected through the inventory software, databases, net and by asking questions. The collected data is captured into the questionnaire for the analysis. There is no manual coding. I have also included some financial data with the help of annual report. The data is collected with the help of questionnaire and observation. In the questionnaire all the relevant questions regarding the inventory management are included. Here we have used convenience sampling that is we have selected the data according to our convenience. I have followed that results which are quite similar in responses.

RESEARCH METHODOLOGY
It is well known fact that the most important step in marketing research process is to define the problem. Choose for investigation because a problem well defined is half solved. That was the reason that at most care was taken while defining various parameters of the problem. After giving through brain storming session, objectives were selected and the set on the base of these objectives. A questionnaire was designed major emphasis of which was

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gathering new ideas or insight so as to determine and bind out solution to the problems.

Study design and methodology:Two types of data are collected, one is primary data and second one is secondary data. The primary data were collected from the Department of finance, SIL. The secondary data were collected from the Annual Report of SIL, SIL website, etc.

Place of study:The project study is carried out at the Finance Department of SIL office Situated at Lucknow, U.P. The study is undertaken as from 25 JUNE 2011 to 5 AUGUST 2011 in the form of summer placement.

DATA ANALYSIS AND INTERPRETATION

(Rs in crores)

2007 2009
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2008

A: CURRENT ASSETS: Inventories: 19.71 Sundry debtors: 3.54 Cash and bank balance: 18.44 Other current assets: 2.12 Loans and advances: 7.35 47.43 5.84 44.07 1.30 5.69 36.38 5.24 24.01 6.89 6.84

TOTAL: 51.16

104.33

79.36

B: CURRENT LIABELITIES:
Acceptances: 2.82 Sundry creditors: a) Total Dues of SSI Undertakings: b) On others: 13.23 Other liabilities: 4.68 Advance and Deposits: 5.79 16.90 9.91 3.85 14.74 7.79 4.18 7.31 2.53

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Int. Accrued & Amt. Rec. 4.97 Provisions: 19.07

4.4 11.85

3.81 14.69

TOTAL: 50.56
WORKING CAPITAL (A-B):

54.22 50.11

47.74 31.62

0.06

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5 YEARS PERFORMANCE HIGHLIGHTS

1. SALES Rs.crores

11910 8528

12790

4982 2863

2004-05

2005-06

2006-07

2007-08

2008-09

INTERPRETATION It was found that the sales for the financial year 2004-05 was rs 2863(crores) and it doubled in 2005-06. It was seen that the company has increased its sales during the last few years which has reached rs
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12790(crores) in 2008-09. This shows company has really worked hard to increase its sales year on year .

2. SOURCES - RsLakhs

663244 568528 485638

626124 559793

2005

2006

2007

2008

2009

INTERPRETATION The sources of funds required for the financial running of the company was rs 485638(lakhs) in 2005 it reached highest in 2007 for rs 663244(lakhs) and according to the working requirements it got down to rs 559793(lakhs) in 2009

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3. FIXED ASSETS - Rs.

46384 45931 49348

54563

65262

2005

2006

2007

2008

2009

INTERPRETATION The companies fixed assets were rs 46384(lakhs) in 2005 and on year on year basis it reached tremendously rs 65262(lakhs) in 2009. This shows that company has also increased its fixed assets during the last past years.

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4. LIABILITIES-Rs.

305633 293813 253875 257230 195455

2005

2006

2007

2008

2009

INTERPRETATION The company has taken liabilities for its business expansion plans which was rs 195455(lakhs) in 2005 but due to competitive environment the liabilities raised to rs 305633(lakhs) in 2009.

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IMPORTANT RATIOS OF SIL

1. CURRENT RATIO (%)

192.41 166.23 101.10

2008

2009

2010

INTERPRETATION The ideal ratio of current assets:current liabilities should be 2:1.The above ratio was well till 2008 but it has reached 1:1 for CA & CL in 2010 which is not healthy sign for the company.

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2. Quick Ratio (%)

104.97 90.02 62.20

2008

2009

2010

INTERPRETATION The liquid assets were well enough to cope up with the current liabilities in the year 2008 which was at rs 104.97(lakhs) and with
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the passage of time this ratio has also declined to rs 62.20(lakhs) in 2010 which again is not a good sign but company should work hard to payback its current liabilities.

RATIO ANALYSIS OF SCOOTER INDIA LTD.

A ratio is a simple arithmetical expression of the relationship of one number to another. It may be defined as the indicated quotient of two mathematical expressions. One of the most important financial tools which have come to be used very frequently for analyzing the financial strengths and weaknesses of the enterprise is ratio analysis. Ratio analysis a technique of analysis and interpretation of financial statements. It is the process of establishing and interpreting various ratios for helping in making certain decisions. Financial ratio analysis is the calculation and comparison of ratios which are derived from the information in a company's financial statements. The level and historical trends of these ratios can be used to make inferences about a company's financial condition, its operations and attractiveness as an investment.
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Financial ratios are calculated from one or more pieces of information from a company's financial statements. A financial ratio can give a financial analyst an excellent picture of a company's situation and the trends that are developing. A ratio gains utility by comparison to other data and standards. Ratio analysis can also help us to check whether a business is doing better this year than it was last year; and it can tell us if our business is doing better or worse than other businesses doing and selling the same things. Financial ratio analysis groups the ratios into categories which tell us about different facets of a company's finances and operations. An overview of some of the categories of ratios is given below.
1.

Leverage Ratios which show the extent that debt is used in a company's capital structure.

2.

Liquidity Ratios which give a picture of a company's short term financial situation or solvency.

3.

Operational Ratios which use turnover measures to show how efficient a company is in its operations and use of assets.

4.

Profitability Ratios which use margin analysis and show the return on sales and capital employed.

5.

Solvency Ratios which give a picture of a company's ability to generate cashflow and pay it financial obligations. Ratios are always expressed as a decimal value, such as 0.10, or

the equivalent percent value, such as 10%. Financial ratios allow for comparisons
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between companies between industries between different time periods for one company between a single company and its industry average

HOW A RATIO IS EXPRESSED?

As Percentage - Such as 25% or 50%. For example if net profit

is Rs.25, 000/- and the sales is Rs.1, 00,000/- then the net profit can be said to be 25% of the sales.
As Proportion

- The above figures may be expressed in terms

of the relationship between net profits to sales as 1: 4.

As Pure Number /Times - The same can also be expressed in

an alternatively way such as the sale is 4 times of the net profit or profit is 1/4th of the sales

FINDINGS OF THE STUDY

Some organizations invest 60 to 70 % of its capital in inventories. Thus it is very important for the organization to manage its inventory through effective inventory control systems. The findings of studying inventory management of SCOOTER INDIA LTD. are as follows: 1) There is used one inventory software (PSL) by the employees for efficient inventory management and to remove the paper work. But there are some employees including managers who
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do not know how to operate that inventory software while it should be known by all the employees that are related to inventory management segment. 2) I have also observed one thing that there was not coordination among the employees even between those who lies in the same level. This feeling of human characteristics is normally seen but it is not good for the organization. For the better productivity there should be proper coordination. And through the coordination an organization can manage its all functioning including inventory management. 3) SCOOTER INDIA LTD. is a semi-government organization. So there were some employees who have got the senior position because of experience. Even after having experience those people were not able to operate all the functions and work related to inventory. It was due to change in the technology. 4) Firstly in SCOOTER INDIA LTD. paper work pattern was followed but now it has converted in soft form that is computers are provided to the employees. Now the 5) kardex and other documents and details are entered in the computer as well as in the files. But due to lack of knowledge about new software, the working is not proper. 6) The inventories of SCOOTER INDIA LTD. are divided into three parts that are111

I. II. III.

Inventory of raw materials Inventory of finished goods Inventory of spares Here I have studied the inventory of spares. Because the raw material that is used in SCOOTER INDIA LTD. are gases and the measurement of its inventory level is very typical.

7) In the SCOOTER INDIA LTD. the inventory are divided into spares and generals. Generals are those parts which are used normally in various machines, offsite while spares are unique to its machines. There are two stores in SCOOTER INDIA LTD.. In one store the inventory of Aonla Unit 1 is stored while in other catalysts and various chemicals are stored. For the transfer of spares from one store to another, a voucher is used that is store transfer voucher (STV). 8) It clears that the person who raises the indent for the required material is known as indentor. Indentor plays an important role in this. The indentor checks whether that material that has purchased is according to his requirement or not. Indentor can be any person. 9) Before the purchasing of the material, firstly enquiry takes place. This enquiry can be done in two ways. Through the eprocurement or manual. After this enquiry a QCS (quotations
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comparative statement) is prepared in which normally technically acceptable lowest bidder is chosen. Thus the purchasing process completes and the working of store department starts. Now the storing and issuing is the responsibility of stores. 10) There is followed a coding pattern in SCOOTER INDIA LTD. that is good for the proper inventory management. It helps the stores employees in identifying the spares and generals. This coding is of 12 digits. It avoids the confusion. Hence it is good for the organization to do coding of the inventory. It highlights the inventory management. 11) There are various formats as STV, ISIRV, DCSRV, SAI, SIV etc which are used for different purposes as for issuing the material from the store, store receipt voucher (SRV) is used, for the adjustment of the materials, the store adjustment voucher (SAV) is used. 12) The whole study shows that there is a good inventory management system but nothing is perfect that why there are also some limitations. In SCOOTER INDIA LTD. a history book of spares is used. It is prepared in both the form as a soft copy and a hard copy. 13) For the controlling of the inventory a technique is used in SCOOTER INDIA LTD. that is ABC analysis. In ABC analysis spares and generals are divided in three categories on the basis
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of their values. Some items have 70% value while their quantity is 20%. The spares whose value comes under 20%, its quantity is present in 70%. While there are some spares whose value is 20% as well as quantity is also 20%. 14) For the verification of inventories a technique is used in which the material whose value is more is more than 50000, are verified 100%, the materials whose value comes under 10001 to 50000 are verified 70% and the remaining materials whose value is less than 10000 are verified 30%. 15) There is a company SCOOTER INDIA LTD.- TOKIO General Insurance Company which is responsible for the insurance of damaged and short materials. Firstly there were different cooperatives which were associated with this task. 16) As we know that with the passage of time, some items becomes outdated or of no use. They are known as obsolete items. The items which do not move up to 7 years are not valued according to its original value. Theres 40% value is written off while they are valued at the 60% of their face value. The items which do not move up to 7 to 10 years, are valued at 55% of their original value while 45% of its value is written off. And the items which do not move more than 10 years, are valued at the 50% of their face value and 50% is written off. 17) In SCOOTER INDIA LTD. to ensure the availability of items or spares, they are inventoried. There are decided various levels
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which shows the level of items that are stored in it. These levels are minimum level, maximum level and reorder level. Re-order level is that level at which new order is placed. These three levels are different for different items. The item which are frequently used that is generals have the high level of reorder. 18) Effective inventory management enables an organization to meet or exceed customers expectations of product availability while maximizing net profits or minimizing costs. And the annual report shows that the inventory has decreased. It shows that they are managing inventory in a better way due to which it has decreased in compare to last year. 19) In SCOOTER INDIA LTD. there is three type of inventory but SCOOTER INDIA LTD. does not preserve the finished goods inventory. SCOOTER INDIA LTD. is a cost centre. Hence they do production but just after accomplishing the whole process i.e. after packing the urea, they transfer it in the rail bogie and send it to its marketing channel. And the responsibility of Bareilly unit completes. They have owned its own rail bogies and engine. 20) According to balance sheet I found that the production has increased in compare to last year because of capacity enhancement and increased demand. Thats why the

consumption of raw material as well as the inventory of raw material has also increased. It is good for the organization.
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21) In SCOOTER INDIA LTD. the stock has decreased and current assets have also decreased. It shows that the management has handled the inventory in the better and efficient way. It is good for the organization as well as for the management. 22) The ideal current ratio is 2:1 and the calculation as per the balance sheet shows that the current ratio is almost same as the ideal ratio. It shows that management of SCOOTER INDIA LTD. is handing the all inventory, sales, and machines in a great way. Even in the current year the current ratio has decreased as compared to previous year but the organization is even in a good position. 23) The cost of production of urea is much more than its selling price. This difference in the cost is provided by the government that is subsidy from government.The whole report clears that the management of SCOOTER INDIA LTD. is handling the inventory in efficient ways even there is also some drawbacks but even after the management is running the organization in a good way. The annual reports shows that 24) the inventory is decreasing in compare to last year and there is no interruption in the production which shows the unavailability of inventory. It is an indication that management is handling the inventory in a better way in compare to previous year. And the investment has decreased in the inventory. This capital may be used in some other productive work.
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CONCLUSION
After studying the components of working capital management system of SIL. It is found that the company has a sound and effective policy and its performance is very good even in this bad recession situation
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company has managed to post good profit. Company is competing well at the domestic as well as the international level and it is among the low cost producers of Vehicles in the world only because of its proper management of finance, specially the short term finance known as the working capital. The company is a matured one and it has contributed well in the countries growth and development and will also continue to perform and contribute to the whole nation. In conclusion ,we can say that the companies management is an effective one and knows well the management of finance, its working capital management system is very good because of which only the company has got the status of a well renowned company.

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RECOMMENDATIONS
Every week a report should be produced listing the status of every product that has been in stock for less than six months. The report should list the following informationa. Items number and description b. Total consumption of items ( in units) c. Current-on-hand quantity d. Minimum stock level of the item e. Maximum stock level of the item f. Re-order level of the item g. Any new item that is required h. Reason why that item was added to stock 1) Detailed record should be maintained by the management of store as well as purchase department, for new stock items that do not meet six months consumption. Because in the organization the number of obsolete items has increasing because of outdated technology. Due to which the store department has to bear the maintenance cost and carrying cost of obsolete items. Thus the management should review the record time to time.
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2) The management of SCOOTER INDIA LTD. should conduct some development employees. programmes INDIA for the knowledge of LTD. conduct various

SCOOTER

programmes for the farmers knowledge and their awareness but not for their employees. As I have observed that there were some managers who do not know the operation of inventory software due to which the working was hampering. And the remaining employees have to take extra load of that work. It should not be there. 3) The management should not add new inventory. If it is deciding to store any new inventory then the management should give the reason why management is going to add new inventory. Thus the reason should be clearly stated. 4) If the cost of any inventory is high, then the management should find the substitute material to decrease the cost of inventory. 5) The management should provide the necessary information to the supplier. As I have noticed that the management of SCOOTER INDIA LTD. tries to reserve its all information. Thus the management should provide the necessary information to the supplier so that the supplier can send the materials according to the requirement. 6) The business owner will need to do an initial count of everything in stock. The count of all items in stock should be completely documented as well as all items that are ready for
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sale. A recount can ensure accuracy. This will give the business owner a starting point for inventory tracking. At this point, it may prove to be an advantage for the business owner to use some kind of inventory tracking software application. 7) When new inventory is added to existing inventory, the first thing a business owner should do is to check it for quality. Are any of the items dented or damaged? If so, they will need to be returned so that the business can get appropriate credit damaged items do no good sitting on storeroom or warehouse shelves. 8) The new inventory should be added to the count of the existing inventory, particularly in the business documentation. This will help the business owner to keep an adequate count of what is in stock 9) When ordering it is advised not to over order or to under order stock; however, this does not mean that the business owner shouldnt take full advantage of whats available to them in terms of sales and discounts. If items bought in bulk are less expensive, it is sometimes a good idea to purchase them that way. Essentially, the business owner will need to make a judgment call and take the perish-ability of the product into consideration. 10) When ordering stock it is important that a business owner does not substitute quality for quantity. In other words, cheap
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inventory is not necessarily good inventory and buying less expensive products to increase ones inventory could result in profit loss. No matter what measures of inventory control that one puts in place, its always imperative that quality products remain the first and foremost concern of the business. 11) Getting the right amount of inventory is going to require a bit of speculative projection on behalf of the business owner. The business operator is going to need to guess how much they think they may sell in the coming months in order to order the amount they need. By tracking inventory on a weekly or monthly basis, the business owner will be able to identify predictable patterns of product use and sale. They can then base their ordering process on such predictions. The end result is that over stock and under stock of inventory is minimized. 12) Diligent and regular tracking of inventory is recommended at all times. Further, when counting inventory in a warehouse or business location it is imperative that all counts are accurate. What good is inventory tracking if the calculations are all wrong? Essentially, inaccurate calculations of inventory result in significant losses of time and money for a business. Thus the calculation should be accurate and right. There should not be any deviation. 13) With so many other things that the business owner should be responsible for how will they manage the time for inventory
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control? Small inventories are usually fairly easy to manage, but what about warehouses and larger supplies? So the owner and the store manager should take care of it. 14) Inventory management is not a process that can or should be avoided; it may be a good idea for business owners to hire someone to be responsible for large inventories. The management should hire one inventory consultant. Because he can give better suggestion for inventory control. Inventory consultants know in a better way how to handle and in how much quantity they should be stored. 15) The manager should be responsible for weekly or monthly stock counts and for ordering and reordering products. This allows for the business owner to focus on other aspects of the business operation. Thus the manager should take care of it. 16) The management should follow all the rules and instructions. Documents should be released at the issuing and other formalities. The management including the employees should be aware of all functions of software. 17) The management should do contract with the inventory consultancy. An inventory-consulting agency can provide a business owner with a complete print out of their current inventory. Thus, business owners have access to vital business documents and the information they provide. When it comes time to insure the business or to run an inventory check, a
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business owner can feel confident in knowing precisely what they are expected to have. Some inventory consulting agencies will actually handle all of the ordering for the business. While this may seem like too much control to give to another agency, some business professionals like they idea of relying on a company to manage inventory. It leaves the business operator free to manage other aspects of the business. 18) Another factor that every business owner must consider is the cost to insure inventory. Lets face it; the bigger the inventory the higher the premiums are for insurance. Paying out additional funds for inventory can prove rather costly in the long run. Again, to save businesses money, good inventory and warehouse management are a must. Thus the management should take care that they should not order too much heavy inventory. If yes then it should be insured. 19) The store manager must decide firstly what products they will need in the future and precisely how much product to order. Thus they should order according to the requirement. 20) As we know that there is coding system in the SCOOTER INDIA LTD.. They make the process of inventory simple. Items that are sold can be automatically subtracted from the existing count. Some software applications automatically create and print a reordering document. This type of software should be
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installed in SCOOTER INDIA LTD.. Even there is PSL inventory software but the entry should be renewing time to time. 21) The consumption of all materials do not remain same overall the year. Thus the maximum level, minimum level and reorder level should be review time to time. Depending on the situation these levels should be flexible. 22) The purchasing process is directly related to the consumption and it can be easily recognized only by reviewing their level in the store time to time. Before purchasing any material first of all the purchase department should conduct enquiry to know whether that material is present in the store or not. If present then in which amount that material is present. It will help the management to reduce the overinvestment in the inventory. 23) The materials which are not in use due to outdated technology, they should not be kept because they cover the unnecessary place of the stores. I have seen that there was a crane in the SCOOTER INDIA LTD. and it was of no use because of outdated technology. But even after that they have kept it. They should sell it to get some money to reduce its maintenance and carrying cost. If the management of SCOOTER INDIA LTD. will follow these instructions then it can handle or manage the inventory in a better way.
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Damaged/ Rejected Equipments

If the materials are received short or in damaged condition, there are some conditions in this regard. In cases where the responsibility for the transit insurance is on SCOOTER INDIA LTD., a claim should be lodged with insurance company for the value of material plus incidentals. This insurance is done by SCOOTER INDIA LTD.. As soon as the shortage per damage of the materials is noticed the material department will lodge the provisional claim with the underwriters and pass on the relevant papers to the finance & accounts department for lodging monetary claim.

In respect of transit insurance claims bill section will pass an adjustment Entry debiting claim recoverable account and credit the Advance to Vendors account. After the adjustments the bill section sent the copy of journal voucher along with all necessary details such as P.O. No. , MRR No. quantity and value, name of the supplier to the insurance section for following up the claim with the insurance company.

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 Where the responsibility for short supply or damages in transit is of the suppliers, the material department should take up the matter with the supplier for arranging replacement. A report is prepared in this case. Its copies are sent to the supplier, purchase department and finance and account department.

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 Research work was carried out in Lucknow only the finding may not be applicable to the other parts of the country because of social and cultural differences. Research work was done during the internship which may not provide much correct information

Shortage of time is also reason for incomprehensiveness.

The views of the people are biased therefore they may depend on different sources which may vary.
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QUESTIONNAIRE (to collect secondary data based on the following questions)

1) How is the Item coding done in SCOOTER INDIA LTD.?

2) What is the normal classification methods of inventory followed in SCOOTER INDIA LTD.? a. b. Finished Goods Raw Materials
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c.

Utility items

3) What are the documents received along with the consignment ? 4) How is the sampling for inspection done? 5) At what stage of goods arrival, inspection is done? a. Before unloading b. Before Storing to final place c. After storage 6) What are the internal documents made from the time of receiving materials till goods are moved to final location? 7) How do you handle rejections? Do you send materials back? 8) Do you allow sorting / repair? If yes, where is repair carried out? If repair is carried out at vendor site, what are the documents made for goods transfer and receipt? 9) Do you have expiry dates for the materials? 10) Do you perform Inventory adjustments, value based or quantity based? 11) What the various types of analysis used for inventory management? 12) Do you use re-ordering methods? 13) How do you determine the ordering quantity? 14) Do you perform 100 % item checks or random? If Random, what are the criteria for selecting items? 15) Which inventory software is used for the convenience in inventory control?

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BIBLIOGRAPHY

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1. Financial Management..Prasanna Chandra

2. Financial Management.I.M.Pandey

3. Annual Report of SIL.

4. Auditors Report, Directors Report and Investors Report.

5. SILs official website.www.scootersindia.com

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