Vous êtes sur la page 1sur 67

Effectiveness of Cash Management

Electronics is the fastest growing segment in Indian industry both in terms of production and exports. Today, the electronics industry is completely developed with the exception of aerospace and defense electronics along with the liberalization in foreign investment and export import policies of the entire economy. This sector is attracting considerable interest not only as a vast market but also as potential production base by international companies.

Consumer Electronics:
This sector has been a leading catalyst for Indian electronics industry, contributing about 40% of the total electronics hardware production. This sector is on a growth path. Continued growth in domestic market has enabled number of companies in achieving economies of scale of production. Due to huge demand for consumer electronic products, manufacturers have established themselves as suppliers of quality products. Some of the leading Indian consumer electronics companies have established themselves as OEM suppliers. Exports of consumer electronic goods from India are established at Rs. 3000 crore for the year 2009-2010. The major items of export are black and white TVs, color TVs, tape recorders, clocks, watches, amplifiers, blank and pre recorded audio/video and CDs.

Electronic Components
The production of electronic components in the year 2008-2009 was Rs.11000 crore. The export of electronic component during 2008-2009 was Rs.10500 crore. India has well-developed electronic components industry catering to the requirements of consumer electronics, telecom, defense and IT. The components production in India today include TV picture tubes, monitor tubes, diodes and transistors, power devices, hybrid micro circuits, resistors, capacitors, connectors etc.. A number of components units have got ISO 9000 certification and other approval like UL, UDE. Technological changes coupled with Vaishnavi Institute of Technology, Tirupati. Page 1

Effectiveness of Cash Management

market competitiveness have forced the industry to read just and upgrade itself to bridge the demand-supply gap, considerable scope exists for setting up globally competitive plants in this sector. Investment opportunity exists in the area of surfaces mount components, display devices, micro-electronic, and opt electronic devices and modern components.

Industrial Electronics:
The industrial electronics sector includes process control instrumentation, automation systems, test and measuring instrument and medical instruments. To meet the growing competition, flexibility of operations with higher productivity, energy conservation and compliance with environmental and safety regulations are the prime needs of advanced process automation solutions. In the Indian scenario such solution continues to be adopted in various process industries like steel, chemicals, petroleum, pulp and paper, power generation, transmission and distribution etc.

Electronics Export:
India has taken important policy initiatives since July 1991 to prepare for a period of rapid export growth and to become a major player in an increasingly interdependent world economy. Economic goods and software have been identified as thrust areas for exports,

which already have achieved certain measures of success. Major destinations of exports for electronic hardware are USA and Canada, Singapore, Hong Kong, South Asian countries and Europe. Major destinations of exports of computer software and services are USA and Canada, Europe, Japan, Korea and Far East countries.

Vaishnavi Institute of Technology, Tirupati.

Page 2

Effectiveness of Cash Management

1. BACKGROUND AND INCEPTION: Wep peripherals ltd is a leading computer & internet peripherals company in India with annual sales of USD 64 million. Wep commenced operations in 1986 as a peripherals division of Wipro Info Tech, one of the largest IT companies in India and has become independent legal entity in year 2000. Wep peripheral ltd is one of the largest employee owned company in the country and has a track record of uninterrupted growth for the last 14years. Wep is known for its quality with six sigma initiative and ISO 9000 standards of certifications for its product development, manufacturing, marketing and support and its unique 30 day money back offer. Wep has three state-of-the art manufacturing facilities one at Mysore producing over 1,20, 000 dot matrix printers per annum, another at Hyderabad producing over 2,00, 000 products and third manufacturing facility was started in Himachal Pradesh in northern India a year back for manufacture dot matrix printers. The meaning of Wep is, W- Upholds the legacy of Wipro and core values for the foundation of the company E- Denotes employees and co-owners P- Denotes passion which has been the hallmark of the way in which employees handle

Vaishnavi Institute of Technology, Tirupati.

Page 3

Effectiveness of Cash Management


Web peripherals is a product oriented industry .The robust predictions for growth of PCs and the growth of the IT business in the country augurs well for the printer and peripheral business to introduction of vat in 21 states will give a boost to our printer business as there are prospectus of more invoice and bill printing. The growth in the telecom and Broad casting sectors will also be leveraged with our new product offer. The company R&D has been able to add substantial value printers which have new added features and high speeds, offered at the same or lower costs. It enables us to effectively compete with imported products even in the zero duty regimes. Programs are under way for developing and launching new product platforms in printers, UPS and keyboards. To newly introduced point of scale, being sold though retail distribution channel with innovate marketing is expected to generate substantial revenues in the fiscal. In the cable and satellite set top boxes our company has introduced newer products for the Direct Home Access (DHA) for the free air channels our company expects good revenues growth from these fast growing areas. To EMS group, launched in 2001 presents a god growth opportunity for the company. EMS is primarily engaged in contract manufacturing, post manufacturing and product design that carry brand names of our customers EMS Business group services several Electronics product and Technology markets.


Vision is to be Indias most valuable Tech Fantasy products solutions and services enterprise

Vaishnavi Institute of Technology, Tirupati.

Page 4

Effectiveness of Cash Management

Be responsive to customer needs and develop, manufacture and quality products and services to enhance their productivity and reduce costs Train motivates and provides a growth oriented environment to employees and encourage team work.

Wep peripherals ltd is committed to deliver tech fantasy products & services that exceed customer requirements and achieve customer satisfaction and excellence in quality. This will be achieved by Being proactive in understanding consumer needs and desires Constantly upgrading & implementing system standards in line with international best practices. Leveraging on cutting edge technology and innovation for speedy delivery of consumers tech fantasy Measuring and continually improving the critical business processes

Wep peripherals ltd is a leading computer & internet peripherals company in India. Its products are as follows, Products Product name

Dot Matrix Printers

Vaishnavi Institute of Technology, Tirupati.

Page 5

Effectiveness of Cash Management

Line Matrix Printers

Retail Billing Printers


DOT MATRIX PRINTERS: Serial, parallel and USB interfaces Highly reliability of 1000POH Fast printing Lowest cost price per unit Price 10,800/LINE MATRIX PRINTERS: 100% duty cycle at 1000 times per unit Top and rear paper exit Upgrade capacity 90 million Ultra capacity 90 million characters Million ribbon road Price 9,450

Vaishnavi Institute of Technology, Tirupati.

Page 6

Effectiveness of Cash Management

RETAIL BILLING PRINTERS: Works without PC Stores up to 2000 printers Has provision to include NAT, TAX, and CST Price 7,650 UPS: Compact, stylish & reliable Line-Interactive UPS Care of your precious data while sudden power shut down Backup up to 20 minutes

Global: Wep is into contract manufacturing and exports to prestigious customers like Seiko precision and triumph Adler/bandermann for European markets and export their printers to china, Sri Lanka, Dubai, Nepal and other south East Asian countries. Regional: Wep peripheral limited is operating at two branches, one at North India and another at South India. National: Wep peripherals limited operation takes place at two different parts of India. It has its two manufacturing units one at Mysore and another at Baddi (Himachal Pradesh). Corporate office Mallige Hall, 3rd Floor 40/1A, Basappa Complex, Lavelle Road, Bangalore-1

Vaishnavi Institute of Technology, Tirupati.

Page 7

Effectiveness of Cash Management

Regional office

312, Hebbal Industrial area, Mysore,Karnataka

National office

Plot No.87, Export Promotion Industrial Park, Phase I, Jhamajri Tehsil Nalagarh, Baddi, Solan District, Himachal Pradesh - 174 103

Global office

China , Srilanka , Dubai , Nepal and in other South East Asian countries


Board of Directors Managing Director Ram N Agarwal

Vaishnavi Institute of Technology, Tirupati.

Page 8

Effectiveness of Cash Management

CEO Director

Gopalakrishnan.P.K Dr. A L Rao A.V. Sridhar Samir Kumar Anil K Jain Saravanam M

Company Secretary

Corporate Accountant

Hemachandra C S


Infrastructural plays a very important role in any organization. Wep peripherals are having a well developed and systematic infrastructural facility which helps its employees to work efficiently. The infrastructural of Wep includes. 1. Pantry It is the facility where all the employees are provided with the coffee, tea, and milk. Employees can use pantry facility whenever they need. 2. Canteen

Vaishnavi Institute of Technology, Tirupati.

Page 9

Effectiveness of Cash Management

This is the most important part in any organization. Wep provides its Employee with healthy and hygienic food through its canteen facility. 3. Cabins Concentration is needed in all the work which an employee does. Hence, Wep have provided all its employees with separate cabin facility to work with concentration. 4. Conference rooms Wep has a spacious, well furnished conference rooms for the meetings and discussions which would take place in the organization. 5. First-aid facility There are first aid facilities like first aid boxes, Fire Extinguishing Machines located in every corner of the organization .Employee safety is the responsibility of the organization.

6. Garden Wep has a beautiful garden in front of its administrative block. It has green lawn with flowering shrubs and show plants. 7. Machinery Wep is into manufacturing hence it comprises of well equipped machineries to manufacture High quality products.

8. Sports and cultural activities

To break stress which is faced by their employees, Wep sponsors sports activities within their employees and organizes cultural activities.

Vaishnavi Institute of Technology, Tirupati.

Page 10

Effectiveness of Cash Management

9. AWARDS AND ACHIEVEMENTS: Awards received for Business Performance are: Nomination for NDTV profit Leadership award in IT Hardware category July06 No 1 peripherals vendor: FY96, FY97-dataQuest. Outstanding sales award for Line Matrix Printers in Asia Pacific - Printronix .5th largest customer worldwide, largest in Asia Pacific (including China, Japan). Techies award for best peripherals vendor (1999) MAIT Excellence award for hardware exports 2001-200. Wep was short-listed, under the "IT Hardware" vertical for the second "Avaya Global Connect Customer Responsiveness Awards 2006" in association with The Economic Times. Wep nominated for the Avaya Global Connect - Customer Responsive Award 2007. Wep Peripherals Limited was short-listed, under the "IT Hardware" vertical for the second "Avaya Global Connect Customer Responsiveness Awards 2006" in association with The Economic Times.

Dot Matrix Printers: CRN Award - Most admired company Silver Category 2003 - 2004. Laser Printers: Best Bhoomi Brand in the country in 2004 & 2005 award presented by 360 magazine.

Export Award: Vaishnavi Institute of Technology, Tirupati. Page 11

Effectiveness of Cash Management

Performance of Excellence Award for being the Second Top Exporter - Hardware Sector by Government of Andhra Pradesh in 2006.

Awards received for Quality Initiatives are:1992: ISO 9002 Certification for factory in manufacturing. 1993: ISO 9001 Certification for Design & Development for Factory. 1993: Rajiv Gandhi National Quality award. 1995: ISO 9002 Certification for support covering all regional offices. 1998: ISO 9002 Certification for Sales & Marketing covering all regional offices. 1999: Elcina award for Excellence in Quality in recognition of Wipro ePeripherals commitment to Quality 2001-02: MAIT (Manufacturers Association of Information Technology) Recognition for Business Excellence (Level 1) 2003: ISO 9001-2000 certification for factories. 2007: ISO 14001:2004 for Himachal Factory. 2007: ISO 9001-2000 for support function. Export Award Performance of Excellence Award for being the Second Top Exporter - Hardware Sector by Government of Andhra Pradesh in 2006.

Awards received for HR Excellence are:WEP Peripherals Ltd, founded in the year 2000, was assessed for the CII Southern Region Human Resources Excellence Award in April 2004. The company was recommended by the jury for their Strong Commitment to HR Excellence. WeP Peripherals was the youngest organization among the 7 companies across industries to be recognized by CII for their progress towards HR Excellence. 11th best employer in the country in Data Quest - IDC survey 2003.

Vaishnavi Institute of Technology, Tirupati.

Page 12

Effectiveness of Cash Management

9. WORK FLOW MODEL: Feed back

Production control

Methods engineering

Material control

Production planning


Supply the material

Quality control Marketing

Receipt and issue

Authorized Demand dealers

Retail shops


Vaishnavi Institute of Technology, Tirupati.

Page 13

Effectiveness of Cash Management

Production control: Control of the work orders which product to be manufacturer and how much quality is required by customers. Methods engineering: Preparation of drawings send to production planning and list of material required for product sent to material control department. Production planning: Productions planning to be manufacture plan the product, and send the full details of the product to production department. Material control: Purchase of material dispatch to production department. 10. FUTURE GROWTH AND PROSPECTS Wep has a future plan for action. due to over capacity of the machine and company wants to be a leading computer and internet peripherals company in India. Companies decide to expand and develop its business by the following things. Expansion of Retail products range and solutions with Augmentation of features. Company has a future plan of development of wireless application devices. It has plan to investment on high speed non impact printing technology. It had planned application of Print Head technology to related areas

Vaishnavi Institute of Technology, Tirupati.

Page 14

Effectiveness of Cash Management


INTRODUCTION: The 7-s model is better known as McKenzie 7s. This was developed by Tom Peters and Robert Waterman who had been consultants at the firm McKenzie. They published their 7-S model in their article Structure is not Organization (1980) and in their books The Art of Japanese Management(1981) and In Search of Excellence (1982). Just as the s7wonders of the world serve as the mirror to worlds beauty, so does these 7elements constitute the entire company as a whole. The mode consists of 7 elements. Those 7 elements are distinguished in so called hard Ss and soft Ss The hard elements are feasible and easy to identify. They are strategy, structure and system of the organization. The four soft Ss are hardly feasible. They are highly determined by the people at work in the organization i.e., style , staff , skills and shared values.

The mo del star ts on the pre cise that an organization is consists of 7 elements:1. 2. Structure Skills Page 15

Vaishnavi Institute of Technology, Tirupati.

Effectiveness of Cash Management

3. 4. 5. 6. 7.

Style Strategy System Staff Shared values

They argued when things went wrong, these Ss were manipulated to give a solution. Out of the 7S the Three Ss across the top of the model are described as Hard Ss. Strategy, structure, system. The Four Ss across the bottom of the model Skill, staff, style, shared values. Are less tangible more cultural in nature. And were termed Soft Ss. By Mckinsey. These are describing since capabilities, values. STRUCTURE The Wep Peripherals Ltd. has a very well developed structure. It consists of various departments which contribute towards the operations of the organization. It consists of the departments such as HR dept., Finance dept., Production control dept., Material control dept., and Research & development dept., Quality control dept., Engineering dept.

Vaishnavi Institute of Technology, Tirupati.

Page 16

Effectiveness of Cash Management























Vaishnavi Institute of Technology, Tirupati.

Page 17

Effectiveness of Cash Management

Manufacturing system in Wep peripherals ltd:

Based on the marketing departments requirement and on the documents received by production planning and materials control department. The production activity is undertaken. Based on the requirements on the production department the stamping division plans the production activity.

Production planning and control:

Production planning and control receive annual production and sales plan from the marketing department along with the following materials: Project wise complete list of indents Bill of materials Design drawings Time estimates In charge of production, planning and control raises work order for standard products as per weekly schedule to respective work centers. The details of work order are maintained in work order register In charge of production planning and control. Obtains materials from stores as per bill of materials by raising materials by rising materials information requisition In charge of production planning and control obtains manufacturing drawings and related documents on requisition from drawings office in consultation with project concerned.

Research & Development department:

Vaishnavi Institute of Technology, Tirupati.

Page 18

Effectiveness of Cash Management

The Company has a robust Research and Development team involved in developments, customization and deployment of products and in providing enhanced features in existing products. Design & Development of low footprint, high throughput printers Design & Retail Billing Products & Solutions Design & Development of Power products. Product Engineering Services for lifestyle products, hi-tech and automotive electronics

Engineering department:
Engineering department prepared to the of drawings send to production planning department and list of material required for product sent to the material control department.

Finance department:
As concerned to Wep peripherals Ltd, the company has followed the efficient and smooth norms of finance activities and effectively utilized the resources from time to time and period to period.

Vaishnavi Institute of Technology, Tirupati.

Page 19

Effectiveness of Cash Management

Organization Chart of the department

General Manager

Deputy Manager

Assistant Manager

Senior executive


A skill is the ability, Knowledge, Understanding and judgment to accomplish a task. Skill may be defined as what the company does best, the distinctive capabilities and competencies that reside in the organization. The job requirements, type of job gives rise to different skills in the different jobs and different department of the company. In wep peripherals limited employees are to be recruited on the basis of their Qualifications. They prefer freshers with technical skills and managerial skills. Technical skills: A technical skill is required for proper maintenances of the machine that produce the productive products. Technical skills are required from an individual as per the project requirements. For technical skills employee should be engineer/ diploma holder. For clerical work candidate should be B.com/BBM. Vaishnavi Institute of Technology, Tirupati. Page 20

Effectiveness of Cash Management

Managerial skills: Managerial skill is required for the company because to proper guidance for the employees.

The integrated vision and direction of the company, as well as the manner in which it derives, articulates, communicates and implements that vision and direction. The main strategy is to ensure maximum utilization of available resources. For this purpose the company believes in mainly promoting from within the organization and there by encourage its people to strive for higher management stability. The set up also allows them to take the advantage of common pool of technical and marketing talent of the highest quality. Lead to the level of efficiency and effectiveness desired. Best utilize the organizational strength. Focusing on higher takeoff the companys products . Efforts to achieve cost reduction by value engineering and improving the performance of its products.

System refers to the procedure and the process such as the information system, manufacturing process, budgeting and the control process. The managerial function of controlling or the measurement and correction of the performance in order to ensure that the enterprise objectives and plans devised to attain them are being accomplished. It is a function of every manager from the president to the supervisor. Management Information System: System function is responsible for the following:

Vaishnavi Institute of Technology, Tirupati.

Page 21

Effectiveness of Cash Management

Provide all hardware and software and other facilities concerned with data transmission. Protect the entire information heritage and guarantee the data, integrity, confidentiality and selected access to the information. Budgeting System: Budgeting is a process of doing the projection for the future. Wep peripherals ltd has its budgetary system into five phases as follows: Marketing system forecasts for sales. Production department takes the decision regarding their in house production and outsourcing. Planning department plans for the resources like machinery, raw materials, human resource required for production.

The Style in an organization, according to McKinseys frame work refers to the Participative style of work. Participative style: Wep peripherals limited follows participative style, that is company give an

opportunities to participating subordinate in decision making. Top management relations with his subordinates they give supportive supervision to help and guide the subordinate communication system is open and effective. STAFF The person in an organization is called staff. Here it is very useful to think not about individual personality but corporate demographics. Wep peripherals Ltd. consists of three kinds of staff. Top Managers, Middle Managers, Supervisory Managers.

Vaishnavi Institute of Technology, Tirupati.

Page 22

Effectiveness of Cash Management

Top level consists of the board of directors managing director; they are required to make major decision. Middle level consists of department heads they are required to take particular department decision. Lower level consists of the supervisors, departmental assistants; they are responsive for the operating of machine. HR department -02 Finance department -07 Logistics department-27 Production department -20 Engineering department- 20 Quality control department-26 Research and development department-28 Customer care call centers 38 Sales call centers 32

The values that go beyond, but might well include simple goal statement in determining corporate destiny. To fit the concept, these values must be shared by most people in the organization. Wep peripherals has its own organization culture which is helpful in the growth of the organization, such as free form of communication in the organization, cross functional forums, employee involvement in the management, mutual trust and respect. Vaishnavi Institute of Technology, Tirupati. Page 23

Effectiveness of Cash Management

SWOT Analysis refers to the analyzing the strength, weakness, opportunity and threat of the organization. (Company) SWOT is a compound of two factors namely external factors and internal factors. Strength and weakness are the internal factor which can be controlled by the technical and personnel departments. Opportunity and threat are the external factors, which cannot be controlled by the company. External factors may include political factors, Socio-Cultural factors, Technical factors, demography, Environmental factors etc.

Good relation between workers and management. Skilled and effective work force. Collaboration with foreign countries.

Vaishnavi Institute of Technology, Tirupati.

Page 24

Effectiveness of Cash Management

Idle capacity. Not able to meet the market demand fully for keyboards.

There is a good market segment for the company. There is a fair opportunity for company to enter in to new product segment. Company has good opportunity from overseas market.

Company is facing threats from many new emerging firms who are offering the same products at lower rates. Threats from the technological advanced companies

Vaishnavi Institute of Technology, Tirupati.

Page 25

Effectiveness of Cash Management


RATIOS: Sl. No. Particulars Profitability ratios 1. 2. Gross profit 30.10% margin (%) Net profit margin 2.31% (%) Liquidity ratios 3. 4. Current ratio Quick ratio 1.52:1 0.91:1 1.58:1 0.87:1 32.04% 2.14% 2010 2011

From the above data it is seen that Gross profit ratio has been increased from 30.10% to 32.04% in the year 2010-11 but net profit ratio is decreased from 2.31% to 2.14% due to increase in the operating expenses in the company. In the liquidity ratios, the current ratio position is below standard (2:1) but it is improved when compared to 2009-10. Quick ratio is also below standard (1:1) due to lack of maintenance of inventory.

Vaishnavi Institute of Technology, Tirupati.

Page 26

Effectiveness of Cash Management

I reported to Wep peripherals Ltd which gave instruction on how to behave in the company and instructed me to follow the rules and regulations of the organization. There is a strict rules followed in HR department and attendance was taken daily to check the regularity. I learnt how the relationship affects the smooth functioning of an organization. During the company adoption of new technology, management provides more training skills to the workers for the efficient work and work position. Finally, In this competitive world it is very much important to have experience of working in an organization and this project helped me to gain experience. This project work gave me the clear idea about the working condition in the organization..

Vaishnavi Institute of Technology, Tirupati.

Page 27

Effectiveness of Cash Management


Every firm tries to achieve financial stability. Financial stability is achieved when a firm is able to repay its current outstanding debts from the income currently collected from its customer and meets future debts from future income in addition, it must have adequate liquidity for meeting unplanned needs which may come up from time to time in the life of the firm hence which may come up from time to time in the life of the firm is the management of its working capital i.e., the management of the current assets and liabilities which also include the management of cash. This report on the management of cash deals with: The fundamentals of cash understanding the need of the management of cash and credit. The choice of polices to adopt while estimating requirement of the cash, monitoring the success of these policies through the measurement of ratios. The operating cycle method to compute working capital of firm. The management of assets that affects liquidity cash inventory etc., Analysis of cash ratios. Analysis of cash flow statement.

Vaishnavi Institute of Technology, Tirupati.

Page 28

Effectiveness of Cash Management


The need for Cash to run the day-to-day business activities cannot be overemphasized. One can hardly find a business firm, which does not require any amount of Cash. Indeed, firms differ in their requirements of the Cash. It was noticed in the study that the company had utilized its Cash efficiently and can also try to get more effective values by working on it. The cash required to meet out the current liabilities is maintained at a normal level that shows the company follows an average policy.


The study carried out in wep peripherals limited has been presented in this report mainly to bring forth the importance of efficient and planned cash management in any firm.

To analyze the efficiency of the liquidity management. To analyze the different cash flow streams like Operating activities, Investing activities & Financing activities. To analyze to Receipts & payments of the firm.


The study has been conducted in wep peripherals limited. The study was confined to the department of finance. This study covers the calculations of the Cash related ratios, preparation

of cash flow statement and cash Budget reports, which determines the efficiency, liquidity & optimality of cash.

Since the value of any systematic and scientific research lies in its methodology, giving a clear idea of the form of study, procedure adopted in conducted it and staking the purpose become the essential parts of every study.

This report is being prepared with the help secondary data. Vaishnavi Institute of Technology, Tirupati. Page 29

Effectiveness of Cash Management

The secondary data is collected in the form of balance sheets, profit and loss accounts and financial statements from the annual reports published by the company and through other record documents, journal facts and figures of the company.


The study has its own limitations. They are: First and foremost is certain matters which are of confidential nature are not revealed by the company. The report has been prepared with limited of list provided by the company The report has been prepared with limited time span. The recommendation and conclusions are based on the observations.

Vaishnavi Institute of Technology, Tirupati.

Page 30

Effectiveness of Cash Management

Cash management is one of the key areas of working capital management. Apart from the fact that it is the most liquid current asset. Cash is the common denominator to which all current assets can be reduced because the other major liquid assets that receivables and inventory get eventually converted into cash. This underlines the significance of the cash management. Cash management is concerned with the managing of:
1. Cash flows into and out of the firm 2. Cash flows within the firm 3. Cash balance on a specified data maintained by the firm 4. Cash balance held by the firm at a point of time by financing deficit or investing surplus cash.


Cash Collections

Information and



Cash Payments

Vaishnavi Institute of Technology, Tirupati.

Page 31

Effectiveness of Cash Management


The term cash with reference to cash management is used in 2 senses. In a narrow sense, it is used broadly to cover currency and generally accepted equivalents of cash such as cheques, drafts and demand deposits in bank. The broad view of also includes near cash assets, such as marketable securities and time deposits in banks. The main characteristic of these is that they can get readily sold and converted into cash. They serve as a reserve pool of liquidity that provides cash management to be employed in broader sense. Irrespective of the form it is held a distinguishing feature of cash as an asset that it has no earning over, if cash does not earn any return, why is it held? There are 4 primary motives for maintaining cash balance. 1. Transaction motive 2. Precautionary motive 3. Speculative motive 4. Compensating motive

1. Transaction motive
An important reason for maintaining cash balance is the transaction motive. This refers to holding of cash to meet routine cash requirements to finance the transaction, which a firm carries on in the ordinary course of business.

2. Precautionary motives
In addition to the non-synchronization of anticipated cash inflows of outflows in the ordinary course of business, a firm may have to pay cash for purposes, which cannot be predicated or anticipated. The unexpected cash needs at short notice may be the result of Floods, strikes and failure of important customers, Bills may be presented for settlement earlier than expected Unexpected slow down in collection of accounts receivable Cancellation of some order for goods as the customers is not satisfied and Sharp increase in cost of raw materials.

Vaishnavi Institute of Technology, Tirupati.

Page 32

Effectiveness of Cash Management

3. Speculative motive
It refers to the desires of a firm to take advantage of opportunities which present themselves to unexpected moments and which are typically outside the normal course of the do so. The speculative motive helps to take advantage of An opportunity to purchase raw material at a reduced price on payment of immediate cash.

4. Compensating motive
Another motive to hold cash balance is to compensate banks for providing certain services and loans. Banks provide a variety of services to business firms, such as clearance of cheques, supply of credit information, transfer of funds and so on.


After the examination of the pertinent consideration and cost that determine cash needs next aspect to the determining of cash needs. There are three approaches to derive an optimal cash balances namely; Minimizing cost cash models Cash planning Cash budget A. CASH MANAGEMENT/CONVERSION MODELS While it is true that financial managers need not necessarily follow cash management models exactly but a familiarity with them provides an insight into the normative framework as to how cash management should be conducted. This section, therefore attempts to outline the following analytical models for cash management. BAUMOL MODEL MILLER-ORR MODEL Vaishnavi Institute of Technology, Tirupati. Page 33

Effectiveness of Cash Management

1. BOUMOL MODEL :- The purpose of this model to determine the minimum cost
amount of cash that a financial manager can obtain by converting securities to cash, considering the cost of conversion and the counter-balancing cost keeping idle cash balances which otherwise could have been invested in marketable securities. The total cost associated with cash management, according to this model, has two elements: Opportunity cost/holding cost This type of cost is the nothing but benefit forgone due to holding of cash balance. Holding cost= k(C/2) Transaction cost The firm incurs a transaction cost whenever it converts its marketable securities to cash. Total number of transaction during the year will be, Total funds required/cash balance Or T/C If per transaction cost is C the transaction cost will be Total cost=c*T/C Total cost = HC+TC TC= k(C/2)*c(T/C)


The objective of cash management, according to miller Orr ,is to determine the optimum cash balance level which minimize the cost of cash management. Vaishnavi Institute of Technology, Tirupati. Page 34

Effectiveness of Cash Management


Cash budget is the most significant device to plan for the control cash receipts and payments. A cash budget is a summary statement of the firms expected cash inflows and outflows over a projected time period. It gives a information on the timing and magnitude of expected cash flows and cash balances over the projected period. This information helps the financial manager to determine the future cash needs of the firm, plan for the financing of these needs and excising control over the cash and liquidity of the firm.


It is comparatively easy to make short term forecast the important functions of carefully developed short-term cash forecasts are To determine operation cash requirements To anticipate short term financing To manage investment of surplus cash The short term forecast helps in determining the cash requirement for a predetermined period to run a business. If the cash requirements are not determined it would not be possible for the management to know how much cash balances to keep in hand to what extent bank financing be depended upon and whether surplus funds would be available to invest in marketable securities.


This is prepared to give idea of the company financial requirements is distant future. They are not as detailed as the short term forecasts are once a company has developed long term cash forecast, it can be used to evaluate. The impact of say new product developments is plant acquisitions on the firm financial condition three or more years in the future. The major uses of long term cash forecast are: It indicates, as company future financial needs especially for its working capital requirements. It helps to evaluate proposed capital projects. Vaishnavi Institute of Technology, Tirupati. Page 35

Effectiveness of Cash Management

The cash budget is probably the most important tool in cash management. It is a device to help a firm to plan and control the use of cash. It is a statement showing the estimated cash inflows and cash outflows over the planning horizon. In other words, the net cash position (surplus or deficiency) of a firm as it moves from one budgeting sub period to another is highlighted by the cash budget. To co- ordinate the timing of cash needs. It identifies the period when there might either be shortage or cash or abnormally larger cash requirements. It pinpoints the period when there is likely to be excess cash. It helps to arrange needed funds on the most favorable terms and payments that accumulations of excess funds.


The higher the cash turnover the less is the cash a firm requires. A firm should therefore, try to maximize the cash turnover. But it is must maintain a minimum amount of operating cash balance so that it does not run out of cash. The minimum level of operating cash is determined by dividing the total operating annual outlays by the cash turnover rates. Cash management strategies are interested is intended to minimize the operating cash balance requirement. The basic strategies that can be employed to do the needful are as follows: Stretching accounts payable, Efficient collection of accounts receivables, Speedy collection of accounts receivables and Combined cash management strategies.

Vaishnavi Institute of Technology, Tirupati.

Page 36

Effectiveness of Cash Management

TOOLS OF CASH CONTROL:Proper cash control is possible only when there is person responsible for planning and controlling the cash, government policies and business strategies should also be taken into account while planning the control of cash. The following tools are generally used to control the cash position.


Cash budget is also a good tool control, for the purpose a cash budget is proposed as a supplement to cash budget. It presents a comparison between actual and budgeted cash receipts and payments locating the points of deviations if any. The management may find out the resigns for deviations ad take necessary action to remove them.


In order to check the diminution in cash flow statement is prepared. It helps in controlling inflows and outflows of cash.

Cash ratios are also important tools of cash control. Various cash ratios are used which explain the efficiency of cash management. Current Ratio Quick ratio Gross profit ratio Net profit ratio

DETERMINING THE OPTIMAL CASH BALANCE:One of the primary responsibilities of the financial manager is to maintain a sound liquidity position of the firm, so that dues may be settled in time. The firm needs cash not only to purchase raw materials and pay wages but also for payments of dividend, interest taxes and countless other

Vaishnavi Institute of Technology, Tirupati.

Page 37

Effectiveness of Cash Management

purposes. The test of liquidity is really the availability of cash to meet the firms obligations when they becomes due. The operating cash balance is maintained for transaction purposes and an additional amount may be maintained as a buffer or safety stock. The financial manager should determine the appropriate amount of cash balance such a decision is influenced by a tradeoff between risk and return if the firm maintains a small cash balance, its liquidity positions weakness and it suffer from a paucity of cash to make payments.

CASH FLOW STATEMENT:Cash flow means actual movement of cash in and out of an enterprise. Cash refers to actual cash in hand, bank balance and mere cash items. When cash come in it is called positive cash flow and when cash goes out, it is known as negative cash flow. The difference between cash inflow and cash outflow represents net cash flow.

UTILITY OF CASH FLOW STATEMENTS:A cash flow statement is useful for short term planning. A business enterprise needs sufficient cash to meet its various obligations in the near future such as payment for purchase of fixed assets, payment of debts maturing in the near future, expenses of the business etc. It is also helpful to the management in reviewing its decisions regarding the raising and utilization of cash. It is also helpful to the management in projecting the future cash flow, which helps the management in maintaining the cash resources at desirable levels. Thus, cash flow statement is an important tool for short term financial analysis.

SOURCES OF CASH FLOW STATEMENT:The following are the sources of cash: The profitable operation of the firm. Decrease in assets (except cash) Increase in liabilities. Sale proceeds from an ordinary or preference share issue.

Vaishnavi Institute of Technology, Tirupati.

Page 38

Effectiveness of Cash Management

USES OF CASH FLOW STATEMENT ARE: The loss from operations. Increase in assets (except cash). Decrease in liabilities. Reduction of redeemable preference shares. Cash dividends.

BASIC PROBLEM OF CASH MANAGEMENT:Cash management faces certain basic problem, which are enumerated below: 1. Control in level of cash:That is the decide the minimum level of cash balance by taking in to account such factors as unpredictable inflow and out flow of cash source of funds inside and outside business and relation with banks. 2. Controlling inflow of cash:That is to control cash inflow not only to prevent fraudulent diversion of cash receipts but also to collect cash specially. 3. Controlling outflow of cash:That is to control all cash payments through proper channel, with cash payment, use of float and accurate method etc., are followed for this purpose. 4. Optimal investment of surplus cash:That is investing surplus cash in short term as long assets giving due weight age to security, liquidity and maturity.

Vaishnavi Institute of Technology, Tirupati.

Page 39

Effectiveness of Cash Management


Marketable securities:These are securities, when can be converted in to cash in short period of time,

typically a few days. To be liquid, a security must two basic characteristics, a ready market and safety of principle.
Ready market ability minimizes the amount of time required to convert security in to cash. A ready market should have both breadths in the sense of large number of participant scattered over a

wide geographical area as well as depth as determined by its ability to absorb the purchase sale of large amount of securities.


Among the different tools used to control the cash. We can say that wep peripherals limited controls cash by way of cash flow statements. It should be noted that cash flow statements is one of the tools used to control cash at wep peripherals limited along with this ratios may also be based.


Cash ratio is the ratio which expresses the relationship between absolute liquid assets i.e., cash and near cash and current liabilities.

Cash Ratio

Cash 100 Current Liabilities

Cash = cash in hand in the transit + cash at bank

Vaishnavi Institute of Technology, Tirupati.

Page 40

Effectiveness of Cash Management


RATIO ANALYSIS: Current Ratio : current assets Current liabilities


(Rs. in 000) YEAR CURRENT ASSETS 2006-2007 1026777 CURRENT LIABILITIES 677442 CURRENT RATIO 1.52:1

2007-2008 2008-2009 2009-2010 2010-2011

606260 526772 538717 577525

381026 302503 352575 364486

1.59:1 1.74:1 1.52:1 1.58:1

Vaishnavi Institute of Technology, Tirupati.

Page 41

Effectiveness of Cash Management

Graph 1 : CURRENT RATIO FROM 2006-07 TO 2010-11

Current ratio
1.75 1.7 1.65 1.6 1.55 1.5 1.45 1.4 20062007 20072008 20082009 20092010 20102011 Current ratio

There is no high rate of fluctuations in the current ratio of the company. It is observed that a low current ratio in the 2006-07 & 2009-10, due to low current assets and high current liabilities.

Vaishnavi Institute of Technology, Tirupati.

Page 42

Effectiveness of Cash Management

Quick Ratio: current assets Current liabilities

Table- 2 : QUICK RATIO






2007-2008 2008-2009

319500 337289

381026 302503

0.84:1 1.12:1

2009-2010 2010-2011

321006 316472

352575 364486

0.91:1 0.87:1

Vaishnavi Institute of Technology, Tirupati.

Page 43

Effectiveness of Cash Management

Graph -2 : QUICK RATIO FROM 2006-07 TO 2010-11

INTERPRETATION The above data shows the quick ratio is decreased in the year 2007-2008, 2010-2011, as compared to 2006-2007, 2008-2009, and 2009-2010. In 2008-09 firm achieved higher Quick ratio.

Vaishnavi Institute of Technology, Tirupati.

Page 44

Effectiveness of Cash Management

GROSS PROFIT RATIO: Gross Profit Ratio = Gross profit / Sales*100 Where Gross profit = Sales Cost of Goods Sold


(Rs. in 000) YEAR GROSS PROFIT 2006-2007 938265 3630393 25.84% SALES GPR

2007-2008 2008-2009 2009-2010 2010-2011

562061 510966 477839 497852

1754106 1559521 1587995 1554047

32.04% 32.76% 30.10% 32.04%

Vaishnavi Institute of Technology, Tirupati.

Page 45

Effectiveness of Cash Management

Graph- 03

INTERPRETATION From the above data it is seen that the percentage of gross profit is fluctuating over the years. In the year 2006-2007 low gross profit Ratio is observed even though the gross profit amount is more.

Vaishnavi Institute of Technology, Tirupati.

Page 46

Effectiveness of Cash Management


NPR = Profit after tax / Sales*100


(Rs. in 000)
YEAR PROFIT AFTER TAX 2006-2007 2007-2008 30151 20661 SALES NPR

3630393 1754106 1559521 1587995 1554047

0.83% 1.17%

2008-2009 2009-2010 2010-2011

-11336 36674 33282

-0.72% 2.31% 2.14%

Vaishnavi Institute of Technology, Tirupati.

Page 47

Effectiveness of Cash Management


INTERPRETATION From the above data it is seen that the percentage of net profit is fluctuating over the years. In the year 2008-2009 shows negative net profit ratio for the later years its shows positive Net profit ratio.

Vaishnavi Institute of Technology, Tirupati.

Page 48

Effectiveness of Cash Management

Cash ratio Table 5: Cash Ratio= cash/current liabilities*100


CASH 5823

RATIO IN % 0.86%


















Vaishnavi Institute of Technology, Tirupati.

Page 49

Effectiveness of Cash Management


INTERPRETATION The cash ratio of the company is fluctuating over the years. It can see that, very less cash ratio 0.86% in the year 2006-2007. It can be observed that in the years 2008-09 & 2009-10 there is high cash & bank balances in the firm.

Vaishnavi Institute of Technology, Tirupati.

Page 50

Effectiveness of Cash Management

CASH TO CURRENT ASSETS Table 6: Cash to current assets= cash/current assets*100

(Rs. in 000) YEAR CASH 2006-2007 5823 CURRENT ASSETS 1026777 PERCENTAGE 0.56%

















Vaishnavi Institute of Technology, Tirupati.

Page 51

Effectiveness of Cash Management


INTERPRETATION From the about data it is seen that the percentage of cash to current assets is fluctuating over this year. In this year 2006-2007 and present financial year shows the low % of cash locked on current assets when compared other 2008-2009 & 2009-2010.

Vaishnavi Institute of Technology, Tirupati.

Page 52

Effectiveness of Cash Management

OPENING BALANCE (+) RECEIPTS/INFLOWS Domestic sales Exports Others TOTAL RECEIPTS (-)PAYMENTS/OUTFLOWS Payment to creditorsraw 7242 6500 7000 75000 2400 614 78014 60000 5000 614 65614 80000 5000 614 85614 1000

(Rs. in 000)

MAY 2012

JUNE 2012

materials direct Payment to creditors-Raw

materials LC Payment to creditors-Others Payable to job workers

25000 1200 4500

25000 1200 4500

25000 1200 4500

Vaishnavi Institute of Technology, Tirupati.

Page 53

Effectiveness of Cash Management

Electricity/water charges Salaries, wages & allowances Administrative overheads Excise duty including service tax Income tax(TDS) Sales tax Bank Charges Freight Charges Marketing expenses TOTAL PAYMENTS CLOSING BALANCE

994 8200 10000 500 500 1700 210 1872 300 62218 16796.00

994 8200.00 102 500 1300 210 1700 400 60704 21706.00

994 8200.00 10500 2500 500 1800 210 1900 350 64654 42666.00

Vaishnavi Institute of Technology, Tirupati.

Page 54

Effectiveness of Cash Management


INTERPRETATION From the above chart, the expected receipts in the month of May have been decreased, at the same time there is also decrease in the payment in that month. But company expected more receipts in the month of June 2012.

Vaishnavi Institute of Technology, Tirupati.

Page 55

Effectiveness of Cash Management


Particular A) CASH FLOW FROM OPERATING ACTIVITIES Profit Before Tax Add : Depreciation Amortization of (62) stock compensation Provision for diminution in value of investments Provision for doubtful debts and advances Loss on Sale of Investments Interest on Borrowings Less : Profit / (Loss) on Sale of Fixed Assets Less : Profit / (Loss) on Sale of Investments (339) (858) 1,197 39,675 48,851 45,577 44,254 116,946 42,788 41,059 (14,795) 25,261 27,131 2010-2011 2009-2010 2008-2009

(Rs. in 000)
2007-2008 2006-2007

(658) 23,289 659

(2,378) 78 22,716 316

3,760 22,943 988

(708) 3,687 11,028 1,379


23,071 325



Vaishnavi Institute of Technology, Tirupati.

Page 56

Effectiveness of Cash Management

Less: Dividend Income Less: Interest Operating Profit Before Working Capital Changes Working Capital Changes Inventories Receivables Other Current Assets Add / (Less) : Increase /(Decrease) in Current Liabilities Cash Generated from Operations Direct taxes paid NET CASH FROM OPERATING ACTIVITIES B) CASH FLOW FROM INVESTING ACTIVITIES Purchase of Fixed Assets / Advance for purchase of Fixed Assets Proceeds from Sale of Fixed Assets Sale/(Purchase) of Investments (Net) Profit / (Loss) on Sale of Investments Dividend Received from Mutual Funds Interest Received

536 540 102,612

447 851 107,854

7 473 57,214

66 81,898

724 185,276

(43,342) (19,293) (14,128)

(28,228) 13,457 8,812

97,275 16,105 2,834

16,778 533 (14,579)

60,967 89,408 (70,062)






40,376 (4,208)

154,862 (3,966)

93,394 (3,299)

46,618 (3,162)

242,461 (7,000)






















536 540

447 851

7 473


724 -

Vaishnavi Institute of Technology, Tirupati.

Page 57

Effectiveness of Cash Management

NET CASH FLOW / (USED IN) INVESTING ACTIVITIES C) CASH FLOW FROM FINANCING ACTIVITIES Proceeds from Issue of Equity shares Premium received on issue of Equity shares Payment of Dividend Corporate tax on Dividend Interest paid Increase/(decrease) in deferred payment liability Proceeds from / (Repayments of) Borrowings NET CASH / (USED IN) FINANCING ACTIVITIES NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS - ( A + B +C) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR. CASH AND CASH EQUIVALENTS AS AT March 31, 2011








(9,785) (1,625) (22,572) 43,369 (1,957) (333) (22,716) (1,957) (333) (22,943)

712 (14,535) (2,530) (11,028) -

1,450 (28,675) (4,022) (23,071) -


























Vaishnavi Institute of Technology, Tirupati.

Page 58

Effectiveness of Cash Management


INTERPRETATION From the above chart, cash from operating activities shows high rate of fluctuations in the cash flows. It can be observed that in the year 2006-07 there is high cash from operating activities, but in the year 2007-08 it came down later it shows increase in the year 2008-09. In the present year, cash flow from operating activities is very low.

Vaishnavi Institute of Technology, Tirupati.

Page 59

Effectiveness of Cash Management


INTERPRETATION The cash flow from investing activities shows higher fluctuations. In the year 2006-07 company made higher investment on fixed assets, but later it decreased its investment criteria on fixed assets.

Vaishnavi Institute of Technology, Tirupati.

Page 60

Effectiveness of Cash Management


INTERPRETATION Cash from financing activities is also shown higher rate of fluctuations. This is due to interest on loans & Repayment of Borrowed funds. In the year 2006-07 & 2009-2010 shows negative flow.

Vaishnavi Institute of Technology, Tirupati.

Page 61

Effectiveness of Cash Management


NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS(A+B+C) (10,309) 11,939 36,566 3,434 (37,461) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR. 16,132 719 12,658 49,224 52,658

(Rs. in 000)


2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

5823 12658 49224 52658 15197

Vaishnavi Institute of Technology, Tirupati.

Page 62

Effectiveness of Cash Management


INTERPRETATION: The cash and bank balance held by the company are fluctuating over the years as seen from the above chart. The companys cash and bank balance was high Rs. 52,658 during the year 2009-2010 and low in 2006-2007 (5823 Rs).
Further, the company holds a large amount of cash in hand which has been higher in the year 2009-2010 as Rs. 52,658.

Vaishnavi Institute of Technology, Tirupati.

Page 63

Effectiveness of Cash Management

FINDINGS: There is low current ratio in the 2009-2010 & 2010-2011 is due to low stock of inventories. But there is high current ratio in the year 2008-2009 because of decreased current liabilities and it is observes the current ratios &quick ratios are below standards. Company gained good gross profit but net profit after tax is very poor in all the years. The main reason is to increased operating expenses, interest & depreciation. In the year 2008-2009 there was high cash & bank balances, where as in 2006-2007 it has worst cash balances. The cash budget shows that there is low receipts & payments in the month of march due to decreased in sales & raw materials consumption. Company has higher rate of fluctuations in the cash from operating activities. This indicates that business fluctuation is more. In the year 2006-07, company invests more on fixed assets & investments. But later it decreased its investments. Due to repayment of loans & the interest on securities in the year 2008-07 & 2009 -10 companies has negative cash from financing activities.

Vaishnavi Institute of Technology, Tirupati.

Page 64

Effectiveness of Cash Management

SUGGESTIONS: The company has to increase its net worth. The company should see that there should not be any inadequate of cash for the smooth running of the organization. Company should develop long term relationship with vendors. This would help in improving quality and delivery. .

RECOMMENDATIONS: The company should try to reduce its cash in hand. The company has to hold adequate cash reserves to meet its liabilities since inventory takes lot of time to get converted into cash. The company should try to maintain the net profit. The management should prepare periodical cash reports in order to have control over the cash position in the company.

Vaishnavi Institute of Technology, Tirupati.

Page 65

Effectiveness of Cash Management

3. CONCLUSION:The basic aim of the study was to know more about cash management especially with reference to Wep peripherals Limited. The management of money has become a major pre- occupation of management. The rapid changes call for a fresh thinking on the tools and techniques to be applied for a better financial appraisal to have adequate for a better financial appraisal to have adequate cash in these days of inflation and rapidly changing business conditions. Wep peripherals Ltd is declaring dividend since many years. It means that the company was making profit and it was channelized towards right direction. Regarding the cash position, the study reveals that the major position of cash is been put in inputs and part of the remaining is muster into banks and hence interest is earned unit. It can see that only a maximum amount of cash is kept in hand this is a very healthy sign.

Vaishnavi Institute of Technology, Tirupati.

Page 66

Effectiveness of Cash Management

4. BIBLIOGRAPHY: www.wepindia.com Wikipedia.com Annual reports of the company Books Referred are: Financial management (Prasanna Chandra)

Vaishnavi Institute of Technology, Tirupati.

Page 67