A Project Report onWORKING CAPITAL MANAGEMENT IN ZAIN BAJAJ, KASARAGOD

A project report submitted to Kannur University in partial fulfillment of requirement for the award of the

MASTER OF BUSINESS ADMINISTRATIONBySUCHITHRAReg.No.

Under the valuable guidance ofMs.SeemaFaculty, MBA.

Malik Deenar Institute of Management Studies,Kasaragod-May 2012

CERTIFICATE

DECLARATION

I hereby declare that the project report prepared on Working Capital Management has been prepared by me during the year 2012 under the valuable guidance and supervision of Ms.Seema, Lecturer, Malik Deenar Institute of Management Studies in partial fulfillment for the award of MBA.

I also declare that this project is the result of my efforts and has not been submitted to any other university for the award of any degree and diploma.

(SUCHITHRA)

Place: KasaragodDate:

ACKNOWLEDGEMENT

It gives me great pleasure to record my gratitude to Dr. Raja.K.G, Director, Malik Deenar Institute of Management Studies, Kasaragod for giving me an opportunity to take up this project.I am immensely thankful to Ms.Seema, Faculty, who has been magnanimous in guiding, encouraging and supporting me at every stage and whose timely advice and inspiration, has made this task easy.I express my profound gratitude to Mr. -----------------------Financial Analyst, General Electric, Bangalore for his guidance and support and also in collecting information for my project work.I also thank my parents for their support and encouragement.I also thank Mr------------------------- and everyone who has helped directly or indirectly in completing my project work.

CONTENTChapter TitlePage No

1

Introduction and Design of study Introduction Statement of problem. Objectives of the study. Limitations of the study. Methodology. Tools of data collection. Tools of analysis.

2

Literature Survey

3

Industry, Company and Dealers Profile

4

Data Analysis and Interpretation

5

Findings, Suggestions and Conclusion

6

Bibliography

LIST OF TABLES

Sl.no

ParticularsPage Number

4.1

Current Assets

4.2

Current Liabilities

4.3

Current Ratio

4.4

Quick Ratio

4.5

Inventory Turnover Ratio

4.6

Average Inventory Holding Period

4.7

Debtors Turnover Ratio

4.8

Average Collection Period

4.9

Fixed Assets Turnover Ratio

4.10

Working Capital Turnover ratio

4.11

Gross Profit Ratio

4.12

Net Profit Ratio

4.13

Operating Ratio

4.14

Working Capital Statement for 2008-2009

4.15

Working Capital Statement for 2009-2010

4.16

Working Capital Statement for 2010-2011

LIST OF CHARTS

Sl.no

ParticularsPage Number

4.1

Current Assets

4.2

Current Liabilities

4.3

Current Ratio

4.4

Quick Ratio

4.5

Inventory Turnover Ratio

4.6

Average Inventory Holding Period

4.7

Debtors Turnover Ratio

4.8

Average Collection Period

4.9

Fixed Assets Turnover Ratio

4.10

Working Capital Turnover ratio

4.11

Gross Profit Ratio

4.12

Net Profit Ratio

4.13

Operating Ratio

CHAPTER 1Introduction and design of study

IntroductionWORKING CAPITAL MANAGEMENT Working capital typically means the firms holdings of current or short term, assets such as cash, receivables, inventory, and marketable securities. Much academic literature is directed towards gross working capital, i.e., total current or circulating assets. These items are referred to as circulating assets because of their cyclical nature. In a retail establishment, cash is initially employed to purchase inventory which is in turn sold on credit and results in accounts receivables. Once the receivables are collected, they become cash-part of which is reinvested in additional inventory and part (i.e., the amount above cost) going to profit or cash throw-off.Capital required for a business can be classified under two main categories via, 1)Fixed Capital 2)Working Capital Every business needs funds for two purposes for its establishment and to carry out its day- to-day operations. Long terms funds are required to create production facilities through purchase of fixed assets such as plant & machinery, land, building, furniture, etc. Investments in these assets represent that part of firms capital which is blocked on permanent or fixed basis and is called fixed capital. Funds are also needed for short-term purposes for the purchase of raw material, payment of wages and other day to- day expenses etc.These funds are known as working capital. In simple words, working capital refers to that part of the firms capital which is required for financing short- term or current assets such as cash, marketable securities, debtors & inventories.CONCEPT OF WORKING CAPITALThere are two concepts of working capital:1.Gross working capital2.Net working capital The gross working capital is the capital invested in the total current assets of the enterprises. Current assets are those assets which can be converted into cash within a short period normally one accounting year.CONSTITUENTS OF CURRENT ASSETS1)Cash in hand and cash at bank2)Bills receivables3)Sundry debtors4)Short term loans and advances.5)Inventories of stock as:a.Raw materialb.Work in processc.Stores and sparesd.Finished goods6) Temporary investment of surplus funds.7) Prepaid expenses8) Accrued incomes.9) Marketable securities. In a narrow sense, the term working capital refers to the net working. Net working capital is the excess of current assets over current liability, or, say:NET WORKING CAPITAL = CURRENT ASSETS CURRENT LIABILITIES.Net working capital can be positive or negative. When the current assets exceeds the current liabilities are more than the current assets. Current liabilities are those liabilities, which are intended to be paid in the ordinary course of business within a short period of normally one accounting year out of the current assts or the income business.CONSTITUENTS OF CURRENT LIABILITIES1.Accrued or outstanding expenses.2.Short term loans, advances and deposits.3.Dividends payable.4.Bank overdraft.5.Provision for taxation, if it does not amt. to appropriation of profits.6.Bills payable. 7.Sundry creditors. The gross working capital concept is financial or going concern concept whereas net working capital is an accounting concept of working capital. Importance of the working capital The developing economies are generally faced with the problem of inefficient utilization of resources available to them. Capital is the scarcest productive resource in such economies and proper utilization of these resources promotes the rate of growth, cuts down the cost of production and above all improves the efficiency of the productive system. Fixed capital and working capital are the dominant contributors to the total capital of the developing country. Fixed capital investment generates production capacity whereas working capital makes the utilization of that capacity possible. Thus the study of working capital behavior occupies an important place in financial management. Working capital has acquired a great significance and sound position for the twin objects of "Profitability and Liquidity".

CLASSIFICATION OR KIND OF WORKING CAPITAL: Working capital may be classified in two ways: On the basis of concept On the basis of timeOn the basis of concept, working capital is classified as gross working capital and net working capital. The classification is important from the point of view of the financial manager.

On the basis of time, working capital may be classified as: Permanent or Fixed working capital Temporary or Variable working capital.

CLASSIFICATION OF WORKING CAPITAL

1. PERMANENT OR FIXED WORKING CAPITAL:Permanent or fixed working capital is the minimum amount which is required to ensure effective utilization of fixed facilities and for maintaining the circulation of current assets. There is always a minimum level of current assets which is continuously required by the enterprises to carry out its normal business operations.

2. TEMPRORAY OR VARIABLE WORKING CAPITAL:Temporary or variable working capital is the amount of working capital which is required to meet the seasonal demands and some special contingencies. Variables working capital can be further classified as second working capital and special working capital. The capital required to meet the seasonal needs of the enterprises is called the seasonal working capital.Temporary working capital differs from permanent working capital in the sense that is required for short periods and cannot be permanently employed gainfully in the business.

IMPORATNCE OR ADVANTAGE OF ADEQUATE WORKING CAPITALWorking capital is the life blood and nerve centre of a business. Just a circulation of a blood is essential in the human body for maintaining life, working capital is very essential to maintain the smooth running of a business. No business can run successfully without an adequate amount of working capital. The main advantages of maintaining adequate amount of working capital are as follows: Solvency of the Business Goodwill Easy Loans Cash discounts Regular supply of Raw Materials Regular payments of salaries, wages & other day to day commitments. Exploitation of favorable market conditions Ability of crisis Quick and regular return on investments High morals

THE NEED OR OBJECTIVES OF WORKING CAPITAL:

The need for working capital cannot be emphasized. Every business needs some amount of working capital. The need of working capital arises due to the time gap between production and realization of cash from sales. There is an operating cycle involved in the sales and realization of cash. There are time gaps in purchase of raw materials and production, production and sales, And sales, and realization of cash, thus, working capital is needed for the following purposes: For the purchase of raw materials , components and spaces To pay wages and salaries To incur day to day expenses and overhead costs such as fuel, power and office expenses etc. To meet the selling costs as packing, advertising etc. To provide credit facilities to the customers. To maintain the inventories of raw materials, work in- progress, stores and spares and finished stock.

WORKING CAPITAL MANAGEMENTWorking capital management is concerned with the problems that arise in attempting to manage the current assets, the current liabilities, and the inter relationship that exists between them. The term current assets refer to those which in the ordinary course of business can be converted into cash within one year without undergoing a diminution in value and without disrupting the operation of the firm. The major current assets are cash, marketable securities, accounts receivable and inventory.Currents liabilities are those liabilities which are intended at their inception to be paid in the ordinary course of business within a year, out of the current assets or earnings of the concern. The basic current liabilities are accounts payable, bill payable bank overdraft, and outstanding expenses.The goal of working capital management is to management the firms current assets and liabilities in such a way that a satisfactory level of working capital is maintained. This is so because if he firm cannot maintain a satisfactory level of working capital, it is likely to become insolvent and may even be forced into bankruptcy. The current assets should be large enough to cover its current liabilities in order to ensure a reasonable margin of safety. Each of the current assets must be managed efficiently in order to maintain the liquidity of the firm while not keeping too high a level of any one of them. Each of the short-term sources of financing must be continuously managed to ensure that they are obtained and used in the best possible way. The interaction between current assets and current liabilities is therefore the main theme of the theory of working capital management.

CONSEQUENCES OF UNDER ASSESMENT OF WORKING CAPITAL: Growth may be stunted. It may become difficult for the enterprises to undertake profitable projects due to non availability of working capital. Implementations of operating plans may brome difficult and consequently the profit goals may not be achieved. 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. The business may fail to honor its commitment in time thereby adversely affecting its creditability. This situation may lead to business closure.The business may be compelled to by raw materials on credit and sell finished goods on cash. In the process it may end up with increasing cost of purchase and reducing selling price by offering discounts. Both the situation would affect profitable adversely.Now availability of stocks due to non availability of funds may result in production stoppage. While underassessment of working capital has disastrous implications on business over assessments of working capital also has its own dangerous.

CONSEQUENCES OF OUR OWN ASSESMNET OF WORKING CAPITAL: Excess of working capital may result in unnecessary accumulation of inventories. It may lead to offer too liberal credit terms to buyers and very poor recovery system & cash management. It may make management complacent leading to its inefficiency. Over investment in working capital makes capital less productive and may reduce return on investment.Working Capital is very essential for success of business & therefore needs efficient management and control. Each of the components of working capital needs proper management to optimize profit.

STATEMENT OF THE PROBLEMEvery business needs funds for two purposes. One for the establishment & the other to carry out the day to day operations. It needs some amount of working capital to meet daily obligation. The need for working capital arises due to the time gap between the production & realization of cash from sales. Management of working capital is concerned with the problem that arise in attempting to manage current assets, liability & the inter relationship exist between them. Effective & efficient working capital' management of a firm has a great effort on its profitability liquidity & the structural health of the organization.

Objectives of the Study1. To analyze the liquidity position of the Zain Bajaj.2. To identify the turnover ratio of Zain Bajaj.3. To analyze the structure and growth of working capital.4. To study the sources and uses of current assets.5. To give suggestions and recommendations based on the findings foe the good working capital of the firm.

Limitations of the study: Time has been a major constraint for this study. It is assumed that the information given by the company is accurate.Methodology: Literature review heavily relied on published texts, annual reports of Bajaj Auto, accounting and financial database of the company, fact sheets of the company, other manuals, internet and revered journals and case studies in the field of working capital management were constantly reviewed.

Tools of data collection: The project makes use of both the primary as well as secondary data. Primary data were collected by observation and interaction. In the course of time, the finance manager and other executives, provided very appreciable co-operation during the interaction. As for the secondary data, the various published materials were used along with the database. The annual reports, fact-sheets, budgeted manuals and the audited balance sheet and profit and loss account, accounting and financial database of the company.

Tools of analysis: The data were analyzed using the following financial tools and techniques Ratio analysis Common size statements Statement of changes in working capital The application software used for the typing of data, analysis of data, and presentations of different charts, tables, graphs etc is Microsoft Word and Excel. MS Excel made a very handy tool for the analysis of the data. It was rigorously made use of during the calculation and comparisons among the data, graphical and tabular presentation, calculation of various ratios, their analysis etc.

Chapter Scheme:

Chapter 1: Introduction. It includes, Introduction about working capital management. Statement of problem. Objectives of the study. Limitations of the study. Methodology. Tools of data collection. Tools of analysis. Chapter 2: Literature Survey Chapter 3: Industry, Company and Dealers Profile Chapter 4: Analysis and Interpretation of Data Chapter 5: Findings, Suggestions and Conclusion Chapter 6: Bibliography

CHAPTER 2LITERATURE SURVEY

LITARATURE SURVEY ON THE ANALYSIS OF FINANCIALSTATEMENT THROUGH RATIOS Ratio analysis is a widely used tool of the financial analysis. Ratio analysis is one of the techniques of financial analysis to evaluate the financial condition and performance of a business concern. Simply, ratio means the comparison of one figure to other relevant figure or figures.According to Myers, "Ratio analysis of financial statements is a study of relationship among various financial factors in a business as disclosed by a single set of statements and a study of trend of these factors as shown in a series of statements." The relationship between two accounting figures, expressed mathematically, is known as financial ratio (or simply as ratio).A ratio helps the analyst to make qualitative judgment about the firms financial position and performance. It is defined as the systematic use of ratios to interpret the financial statements so that the strength and weakness of a firm as well as its historical performance and current financial condition can be determined. The term ratio refers to the numerical or quantitative relationship between two items/variables.This relationship can be expressed as1. Percentage.2. Fraction.3. Proportion of numbers.In other words, accounting ratios can be expressed in various ways such as.a) A pure ratio say ratio of current assets to current liabilities is 2:1 b) A rate say current assets are two times of current liabilities c) A percentage say current assets are 200% of current liabilities.These alternatives methods of expressing items, which are related to each other, are, for purposes of financial analysis, referred to as ratio analysis.The rational of ratio analysis lies in the fact that it makes related information comparable. A single figure by itself has no meaning but when expressed in terms of a related figure, it yields significant inferences. The ratio analysis, thus, a quantitative tool, enables analyst to draw quantitative answers to questions such as: Are net profit adequate? Are the assets being used efficiency? Is the firm solvent? Can the firm meet its current obligations? And so on Ratio analysis was perhaps the first financial tool developed to analyze and interpret the financial statements and is still used widely for this purpose .Ratio analysis is defined as the systematic use of accounting ratio in order to weigh and evaluate the operating performance of a firm .It is process of determining and interpreted various ratios for helping in making certain decisions.USES OF RATIOSThe main uses of accounting statements for; - Executives: - To formulate policies. Bankers: - To establish basis for Granting Loans. Institutions \ Auditors: - To extend Credit facility to business. Investors: - To assess the prospects of the business and to know whether they can get a good return on their investment. Accountants: - To study the statement for comparative purposes. Government Agencies: - To study from an angle of tax collection duty levee etc.

CHAPTER 3Industry, Company AND DEALERS Profile

Industry Profile

INDUSTRY PROFILE The word automobile is originated from Greek word auto which means self and Latin word Mobile means moving. The history explains about the phases of automobile in the development and modernization process since the first car was shipped to India. The automobile industry has changed the way people live and work. Shortly the first appearance of the car followed in India. As the century turned, there car were imported in Mumbai [India].The dawn of automobile actually goes back to 4000 years when the first two wheels were used for transportation in India. In the beginning of 15th century Portuguese arrived in China and the interaction of the two cultures led to variety of new technologies, including creation of a wheel that turned under its own power. By 1600s small steam powered engine models were developed, but it took another century before a full sized engine Powered vehicle was created. The actual horseless carriage was introduced in the year 1893 by brothers Charles and Frank Duryea. It was the first internal combustion motor car of America, and it was followed by first experimental car that same year. One of the highest rated early luxuries automobile was the 1909 Rolls Royce silver Ghost that featured a quiet six-cylinder engine, leather interior, folding windscreens and hood, and an aluminum body. It was usually driven by chauffeurs and emphasize was on comfort and style rather than speed.During 1920s, the cars exhibited design refinements such as balloon tires, pressed-steel wheels, and four-wheel breaks. Graham Paige DC Phaeton of 1929 featured on 8-cylinder engine and an aluminum body. The 1937 Pontiac De Luxe sedan had roomy interior and rear hinged back door that suited more to the needs of families. In 1930s, vehicles were streamlined than their predecessors. The 1940s saw features like automatic transmission, sealed-beam headlights, and tubeless tires.The year 1957 bought powerful high-performance car, Mercedes-Bens 300SL.It was built on compact and stylized lines, and was capable of 230Kmh.Modern cars are generally light aerodynamically shaped, and compact. INDIAN AUTOMOBILE INDUSTRYThe automobile industry in India is the 10th largest in the world with an annual production of approximately 2 million units. India is expected to overtake China as the worlds fastest growing car market in terms of number of units sold. The automotive industry is one of the fastest growing manufacturing sectors in India. Though several major foreign automakers, like Ford, Hyundai, Suzuki, GM and Honda have their manufacturing bases in India, Indian automobile market is dominated domestic companies. Following economic liberalization in India in1991, the Indian automotive industry has demonstrated sustained growth as a result of increased competitiveness and relaxed restrictions. Several automobile manufacturers such as Tata Motors, Maruthi Suzuki and Mahindra and Mahindra, expanded their domestic and international operations. Indias robust economic growth led to the further expansion of its domestic automobile market which attracted significant India- specific investment by multinational automobile manufacturers. The highest growth in the Indian economy has resulted in many foreign car manufacturers entering to the Indian market. Rolls Royce, Bentley,and May Bach are the few high end automobile manufacturers to enter India in the recent years.In February 2010, monthly sales of passenger cars in India exceeded 100,000units. A well developed transportation system plays a key role in the development of an economy. With the growth of transportation system the Automotive industry of India is also growing at rapid speed, occupying an important place on the canvas of Indian economy. All kinds of vehicles are produced by automobile industry like trucks, passenger cars, buses, defense vehicles, two-wheelers and etc. The Industry can be broadly divided in to: car manufacturing, two-wheeler manufacturing and heavy vehicles.TWO WHEELER MANUFACTURERS IN INDIATwo wheeler sections in India have witnessed one of the more impressive levels of growth vis--vis other segments of the automobile. Among the leading manufacturers who have made them recognized on the Indian roads with the presence of their two wheelers are Bajaj Auto, Hero Honda Motors, Kinetic Motor, Yamaha Motor and TVS Motor. An important aspect that relates to all such leading manufacturers of the Indian two wheelers is that beside being the leaders in the Indian two wheeler market, their product profile includes contemporary and sleek designed two wheelers that are gradually being accepted in the global markets too.Bajaj Auto is one of the oldest and more popular faces of the Indian two wheeler segment. The company that came into vogue in the 1940s has its major plant located at Pune while a new plant has come up at Pantnagar in Uttaranchal. Its product profile includes a range of two wheelers including scooters and motorcycles. The motorcycles include models like Bajaj Platina, Bajaj Avenger DTS-1, Bajaj Pulsar DTS-1, Bajaj CT 100, Bajaj Discover, Bajaj Pulsar 220 DTS-Fi while scooters such as Chetak, Kristal DTS-I are the leading brands that make up the company's two wheeler market. Bajaj Auto has a huge network of dealers and service centers spread all over the country that helps the potential consumers in identifying the best possible two wheelers specifying their requirements. In addition to this, the company has a tie-up with dealers and loan providers and under its own scheme of Bajaj finance, helps getting those loans for the purpose of different Bajaj two-wheelers.Hero Honda is the leading two wheeler manufacturers that is dominating the Indian two wheeler market for quite some time. With a market share close to 41 percent of the total two wheelers in India, this joint venture between the Hero Group of India and Honda of Japan, Hero Honda has quite a number of awards to its credit that include "Bike of the Year" award for its CBZ X-treme, Most Trusted Company of the Year, Number 1 Standard Motorcycle for its CD Deluxe and Auto Tech of the Year award in 2007 alone. The company has a network of dealers and service centers spanning the country that takes care of the customers' choice, their service needs and provide them with the best of Hero Honda's services.A range of mopeds, scooters and motorcycles from the motorcycle manufacturer TVS Motor such as TVS Fiero F2, TVS Fiero FX, Scooty Pep Plus, TVS Victor Edge, TVS Star, TVS Star City, TVS XL Super, TVS Apache RTR are some of the two wheelers that have made TVS one of the lading names to reckon with on the Indian two wheeler scene. The company has a network of dealers and service centers all across the country that ensure the customers have a variety of options, service solutions and advice, if and when needed for any of their TVS Motor two wheelers.Yamaha Motor India is the Indian subsidiary of the Japanese automobile giant, Yamaha. The company has a limited presence on the Indian two wheeler scenes with models like Gladiator, Yamaha G5, Crux and Alba. However, its models are backed by the world renowned Japanese technology and are more fuel efficient though more expensive as compared to other Indian two wheelers. The company has developed a strong network of dealers and service centers that covers the important towns and cities in the country.The Indian two wheeler market has undergone significant transformation in recent times and stylish, fuel-efficient and eco-friendly two wheelers are gaining popularity. In addition to, the markets in Asia, Africa, Middle East, South America and even parts of Europe are gradually emerging as new markets for the Indian two wheelers that indicate their enhanced stature and technological prowess.

Company Profile

BAJAJ AUTO Bajaj Auto is a major Indian automobile manufacturer started by a Rajasthani Merchant. It is Indias second largest two wheeler manufacturer and the worlds 4th largest two-and three wheeler maker. It is based in Pune, Maharashtra, with plants in Akurdi and Chakan (Pune), Waluj (near Aurangabad) and Pantnagar in Uttaranchal. Bajaj auto makes and exports motor scooters, motor cycle and the auto rickshaw. Bajaj auto limited is one of the pioneering companies in the two wheeler industry. Bajaj auto has a vast network of about 1500 service centers and 500 dealers all over India. It has 3 manufacturing plants located at Akurdi, Waluj and Chakan in Maharashtra. The companys technology partner is Kawasaki Heavy Industries, Japan. The company exports to ASIAN region, South America and Africa.The Forbes Global 2000 list for the year 2005 ranked Bajaj auto at 1946Over the last decade, the company has successfully changed its image from a scooter manufacturer to a two wheeler manufacturer. Its product range encompasses Scooterettes, Scooters and Motorcycles. Its real growth in numbers has come in the last four years after successful introduction of a few models in the motorcycle segment.The company is headed by Rahul Bajaj who is worth more than US$1.5 billion. The present chairman of the group, Rahul Bajaj, took charge of the business in 1965. Under his leadership, the turnover of the Bajaj Auto the flagship company has gone up from Rs.72 million to Rs.46.16 billion (US$ 936 million), its product portfolio has expanded and the brand has found a global market. He is Indias one of the most distinguished business leaders and internationally respected for his business acumen and entrepreneurial spirit.

Companys history: Bajaj Auto came into existence on November 19, 1945 as M/s Bachraj Trading Corporation Private Limited. It started off by selling imported two-and three wheelers in India. In 1959, it obtained license from the Government of India to manufacture two-and three wheelers and it went public in 1960. In 1970, it rolled out its 1,00,000th vehicle. In 1977, it managed to produce and sell 1,00,000 vehicles in a single financial year. In 1985 it started producing at Waluj in Aurangabad. In 1986, it managed to produce and sell 5,00,000 vehicles in a single financial year. In 1995, it rolled out its ten millionth vehicle and produced and sold 1 million vehicles in a year. Timeline of new releases: 1960-1970 - Vespa 150 - Under the licence of Piaggio of Italy 1971 - three-wheeler goods carrier 1972 -Bajaj Chetak 1976 -Bajaj Super 1977 -Bajaj Priya 1977 - Rear engineAutorickshaw 1981 -Bajaj M-50 1986 -Bajaj M-80,Kawasaki Bajaj KB100,Kawasaki Bajaj KB125, 1990 -Bajaj Sunny 1991 -Kawasaki Bajaj 4S Champion 1993 -Bajaj Stride 1994 -Bajaj Classic 1995 -Bajaj Super Excel 1997 -Kawasaki Bajaj Boxer, Rear Engine Diesel Autorickshaw 1998 -Kawasaki Bajaj Caliber,Bajaj Legend, 1999 -Bajaj Spirit 2000 -Bajaj Saffire 2001 -Eliminator,Bajaj Pulsar 2003 -Caliber115,Bajaj Wind125,Bajaj PulsarBajaj Endura FX 2004 -Bajaj CT 100, New Bajaj Chetak 4-stroke withWonder Gear,Bajaj Discover DTS-i 2005 -Bajaj Wave,Bajaj Avenger,Bajaj Discover 2006 -Bajaj Platina 2007 -Bajaj Pulsar-200(Oil Cooled),Bajaj Kristal,Bajaj Pulsar 220 DTS-Fi (Fuel Injection),XCD 125 DTS-Si 2008 -Bajaj Discover135 DTS-i - sport (Upgrade of existing 135cc model) 2009 -Bajaj Pulsar 135(December 9) (January), Bajaj XCD135cc, Bajaj Pulsar 150 DTS-i UG IV, Bajaj Pulsar 180 DTS-i UG IV, Bajaj Pulsar 220 DTS-i, Bajaj Discover 100 DTS-Si ,Kawasaki Ninja 250R 2012 -Bajaj RE 60, mini car for intra-city urban transportation 2012 -KTM Duke 200, launch of 200cc bike from the KTM stable 2012 -Bajaj Pulsar 200 NS, launch of 200cc bikeSpinoffs and acquisition The demerger of Bajaj Auto Ltd into three separate corporate entitiesBajaj Finserv Ltd (BFL), Bajaj Auto Ltd (BAL), and Bajaj Holdings and Investment Ltd (BHIL)was completed with the shares listing on 26 May 2008. In November 2007, Bajaj Auto acquired 14.5% stake inKTMPower Sports AG (holding company of KTM Sport motorcycles AG). The two companies have signed a cooperation deal, by which KTM will provide the know-how for joint development of the water-cooled four-stroke 125 and 250cc engines, and Bajaj will take over the distribution of KTM products in India and some other Southeast Asian nations.Bajaj said it is open to taking a majority stake in KTM and is also looking at other takeover opportunities. On 8 January 2008, Managing Director Rajiv Bajaj confirmed the collaboration and announced his intention to gradually increase Bajaj's stake in KTM to 25%.Products Bajaj has made a number of motorcycles, scooters and cars. Motorcycles in current production are theXCD,Platina,Discover,PulsarandAvenger. Bajaj also Distributes many motorcycles in India for other manufacturers, such as theKawasaki Ninja 250R, theNinja 650Rand new for 2012, the KTM Duke 200. Cars include theBajaj ULCultra-low-cost car.Low cost cars In 2010, Bajaj Auto announced the cooperation withRenaultandNissan Motorto develop of a US$ 2,500 car, aiming at a fuel-efficiency of 30kilometers per liter (85mpg-imp; 71mpg-US) (3.3 L/100km), or twice an average small car, and carbon dioxide emissions of 100g/km.On 3 January 2012, Bajaj auto unveiled theBajaj RE60, a mini car for intra-city urban transportation. The target customer group will be Bajaj's three-wheeler customers.According to Managing DirectorRajiv Bajaj, the Bajaj RE60 powered by a new 200 cc rear mounted petrol engine will have a top speed of 70 kilometres per hour (43mph), a mileage of 35kilometres per litre (99mpg-imp; 82mpg-US) and carbon dioxide emissions of 60g/km.

Cars:Bajaj lite conceptBajaj RE60- theTata NanocompetitorMotor cycles:Bajaj Platina100ccBajaj Platina125 DTS-SiBajaj Discover135 DTS-iBajaj XCD125 DTS-SiBajaj XCD135 DTS-SiBajaj Pulsar135 DTSiBajaj Pulsar150 DTSiBajaj Pulsar180 DTSiBajaj Pulsar200 DTSiBajaj Pulsar220 DTS-FiBajaj Pulsar220 DTSiBajaj Avenger 220 DTSiUpcoming Models:Bajaj XCD 125 SprintDiscontinued Models:Bajaj SunnyBajaj ChetakBajaj CubBajaj SuperBajaj Discover110ccBajaj DiscoverDTS-i 125ccBajaj Pulsar200 DTSiBajaj Pulsar220 DTS-FIBajaj XCD 125Bajaj Avenger200 DTS-iBajaj Kawasaki KB 100 RTZKawasaki EliminatorEL-175Bajaj Caliber

Management ProfileNameDesignation

Rahul BajajChairman

Madhur BajajVice Chairman

Rajiv BajajManaging Director

Sanjiv BajajExecutive Director

Abraham JosephVice President(Research & Development)

Pradeep ShrivastavaPresident (Engineering)

S SridharCEO (2WH)

R C MaheshwariCEO ( Commercial Vehicles)

Rakesh SharmaCEO ( International Business)

C P TripathiVice President ( Corporate)

N H HingoraniVice President ( Commercial)

Kevin P DsaVice President ( Finance)

S RavikumarSenior Vice President ( Business Development)

K SrinivasVice President ( Retail Finance)

Amruth RathVice President ( Human Resources)

J SridharCompany Secretary

Eric VasPresident (New Projects)

A P RamanCost Accountant

Board of DirectorsRahul BajajChairman

Madhur BajajVice Chairman

RajivBajajManaging Director

Sanjiv BajajExecutive Director

D S MehtaDirector

Kantikumar R PodarDirector

Shekhar BajajDirector

D J Balaji RaoDirector

J N GodrejDirector

S H KhanDirector

Mrs.Suman KirloskarDirector

Naresh ChandraDirector

Nanoo PamnaniDirector

Manish KejriwalDirector

P MurariDirector

Niraj BajajDirector

Committees of the BoardAudit Committee: S.H Khan Chairman D.J Balaji Rao J.N Godrej Naresh Chandra Nanoo Pamnani

Shareholders and Investors Grievance Committee: D.J Balaji Rao - Chairman J.N Godrej Naresh Chandra S.H Khan

Remuneration Committee: D.J Balaji Rao - Chairman S.H Khan Naresh Chandra

Bankers Central Bank of India State Bank of India Citibank NA Standard Chartered Bank Bank of America ICICI Bank HDFC Bank

Registered under the Companies Act 1956:

Registered OfficeMumbai-Pune Road, Akurdi, Pune 411 035

Works* Mumbai-Pune Road, Akurdi, Pune 411 035* Bajaj Nagar, Waluj,Aurangabad 431 136* Chakan Industrial Area,Chakan, Pune 410 501* Plot No.2, Sector 10, IIE Pantnagar, Udhamsinghnagar, Uttarakhand 263 531

Key Policy

Code of Conduct Bajaj Auto Limited (herein after referred to as the "Company") hereby adopts the following Code of Conduct for Affirmative Action. This will be effective from 1st December 2006. The Company affirms that its competitiveness is interlinked with the well being of all sections of the Indian society. The Company believes that equal opportunity in employment for all sections of the society is a component of its growth and competitiveness. It further believes that inclusive growth is a component of growth and development of the country. The Company affirms the recognition that liersity to reflect socially disadvantages sections of the society in the workplace has a positive impact on business. The Company will not practice nor support conscious discrimination in any form. The Company does not bias employment away from applicants belonging to disadvantaged sections of society if such applicants possess competitive skills and job credentials. The Company's selection of business partners is not based on any considerations other than normal business parameters. In case of equal business offers, the Company will select a business partner belonging to a socially disadvantaged section of society. This Code of Conduct for Affirmative Action will be put up on the company web-site to encourage applications from socially disadvantaged sections of society. The Company makes all efforts for up skilling and continual training of all its employees in order to enhance their capabilities and competitive skills. No discrimination of any type will be shown in this process. The Company may have a partnership programme with educational institution/s to support and aid students from socially disadvantaged sections of society. The Company will maintain records of Affirmative Action. The Company has nominated Mr. Amrut Kumar Rath, Vice President (HR), to oversee and promote the Affirmative Action policies and programmes. He will be accountable to the Chairman. The Company will make available its learning and experiences as a good corporate citizen in Affirmative Action to other companies desiring to incorporate such policies in their own business.

Group of companies Factory Bajaj Auto is the flagship of the Bajaj group of companies. The group comprises of 35 companies and was founded in the year 1926.The companies in the group are: Bajaj Auto Ltd. Bajaj Holdings & Investment Ltd.

Bajaj Finserv Ltd. Bajaj Allianz General InsuranceCompany Ltd.

Bajaj Allianz Life Insurance Co. Ltd Bajaj Financial Solutions Ltd.

Bajaj Auto Finance Ltd. Bajaj Allianz Financial Distributors Ltd.

Bajaj Auto Holdings Ltd. P T Bajaj Auto Indonesia (PTBAI)

Bajaj Auto International Holdings BVBajaj Electricals Ltd.

Hind Lamps Ltd.Bajaj Ventures Ltd.

Mukand Ltd.Mukand Engineers Ltd.

Mukand International Ltd.Bajaj Sevashram Pvt. Ltd.

Jamnalal Sons Pvt. Ltd.Rahul Securities Pvt Ltd

Shekhar Holdings Pvt LtdMadhur Securities Pvt Ltd

Niraj Holdings Pvt LtdShishir Holdings Pvt Ltd

Kamalnayan Investments & Trading Pvt LtdSanraj Nayan Investments Pvt. Ltd.

Hercules Hoists Ltd.Hind Musafir Agency Pvt. Ltd.

Bajaj International Pvt. Ltd.Bachhraj Factories Pvt. Ltd.

Baroda Industries Pvt. Ltd.Jeevan Ltd.

Bachhraj & Co Pvt LtdThe Hindustan Housing Co. Ltd.

Hospet Steels Ltd

PlantsBajaj Auto's has in all three plants, two at Waluj and Chakan in Maharashtra and one plant at Pant Nagar in Uttranchal, western India.Waluj - Bajaj range of motorcycles and three-wheelersChakan - Bajaj range of motorcyclesPant Nagar - Bajaj range of motorcycles

Plant Locations

Bajaj Auto plants are located at:

Bajaj Nagar, Waluj, Aurangabad 431 136.

MIDC, Plot No A1, Mahalunge Village, Chakan 410 501 Dist. Pune.

Plot No. 2, Sector 10 Phase -II - E, Pant Nagar, Sidcul, Rudrapur Dist. Udhamsingh Nagar Uttaranchal.

Awards 2009-2010ProductAwardAward Body

Kawasaki NinjaBike of the YearIMOTY

Pulsar 135LSBike of the YearET NOW - ZigWheels

Discover DTS-Si100cc Bike of the YearET NOW - ZigWheels

Pulsar 135LS150cc Bike of the YearET NOW - ZigWheels

Kawasaki Ninja250cc Bike of the YearET NOW - ZigWheels

Pulsar 135LS 4-VTechnology of the YearET NOW - ZigWheels

Discover DTS-SiMost Value for Money-Bike of the YearET NOW - ZigWheels

Kawasaki NinjaMotorcycle of the Year - Bike upto 250 ccNDTV Profit - Car & Bike

Bajaj Discover DTS-SiMotorcycle of the Year - Bike upto 125 ccNDTV Profit - Car & Bike

Kawasaki NinjaTwo Wheeler of the YearNDTV Profit - Car & Bike

Bajaj Discover And PulsarBest Integrated Campaign - Two wheelersNDTV Profit - Car & Bike

Kawasaki NinjaBike of the YearCNBC - Overdrive

Bajaj DiscoverBest StoryBoard CommercialCNBC - Overdrive

Pulsar135LSBike of the Year 2010UTV Bloomberg-AutoCar

Pulsar135LSViewer's Choice of the YearUTV Bloomberg-AutoCar

Bajaj DiscoverBest TV CommercialAuto India

Kawasaki NinjaBike of the Year 2010BS Motoring

Bajaj AutoBest AdvertisingAuto India

PulsarSilver Effie for PulsarMania AdEffie

Bajaj AutoMost Trusted Brands - Auto Two WheelerBrand Equity

Bajaj AutoMost Popular Two Wheelers Amongst YouthGlobal Youth Marketing Forum 2010

Bajaj AutoChakan Plant - Super Platinum for Manufacturing ExcellenceET - Frost & Sullivan

ProductAwardAward Body

Bajaj Pulsar 135 LSBike of the Year 2010BBC - TopGear

Bajaj PulsarHall of Pride AwardsCNBC - Overdrive

Bajaj Pulsar 135 LSBike of the YearBike India

Bajaj Pulsar 135 LSBike India upto 150 ccBike India

Bajaj Avenger 2202011 Mc of the year upto 250ccNDTV Car & Bike Awards

Bajaj Pulsar 135 LS"Golden Steering Wheel" for Executive MotorcycleAuto Build

Discover 150 DTS-IBest Value for Money Vehicle of the YearET ZigWheels

Awards 2010-2011

Human ResourcesRecruitment Policy: Bajaj Auto is an equal opportunity employer. Selection is based strictly on individual merit. A large number of our recruits are fresh engineers and MBAs. Natural attrition is usually taken care of by promotions and horizontal movements within the organisation to provide career opportunities for our employees. Occasionally, specific skill-sets may warrant lateral recruitment. Entry level recruitment: Engineers: We recruit Engineering Graduates from reputed institutes from all over India. Bajaj Auto enjoys an excellent reputation with all National Institutes of Technology (NITs) and is among the preferred employers for on campus recruitment. The selection process comprises a written test in technical, analytical and logical reasoning, group discussion and personal interview.Management Graduates: We recruit management graduates from reputed management institutes all over India. The selection procedure comprises a written test in analytical and logical reasoning, group discussion and personal interview. All entry-level selections are made through on-campus recruitment only. After recruitment, new entrants undergo a thorough induction-training programme before their placement in the company. Departments are allocated on the basis of the individual recruits aptitude and our requirements. Usually, after completing two years of service they are provided opportunities for job rotation.Work Culture: Their work culture supports and enhances their brand. The Bajaj brand signifies excitement. Bajaj strives to inspire confidence through excitement engineering. The culture is built on core values of learning, innovation, perfection, speed and transparency. Facilitative leadership style helps in developing leaders at all levels and establishes accountability.Brand Values: We live our brand by its values of innovation, perfection and speed. Bajaj will be distinctly ahead through excitement engineering. It is a value that provokes us to reach beyond the obvious in pursuit of that which exceeds the ordinary. Perfection is how we set new standards. It is a value that exhibits our determination to excel by endeavoring to establish new benchmarks all the time. Speed is how we convey clear conviction. It is a value that keeps us sharply responsive, mirroring our commitment towards our goals and processes. Competency Building: Bajaj Auto has a very flat organisation structure with 3 management levels. Each level represents a specific role and hence needs relevant competencies. Competency building at Bajaj Auto is a combination of development for current and future roles. We cater to these needs by using interventions like development centres, need-based training and job-rotation plans. We use different methods of imparting training like lectures, group-discussions, role-plays, seminars, outbound training, assignments and on-the-job tasks.Compensation Philosophy: We strive to be amongst the top quartile in our compensation structure. Competence and performance are the key drivers of our compensation policy. A significant part of the compensation is in the form of variable pay linked to the individuals and the organizations performance. Community Initiatives

Bajaj in the community Bajaj Auto is committed to nation-building and contributing to the uplift and development of the weaker sections of society. This is a legacy of our founders, Jamanalalji, Kamalnayanji and Ramakrishna Bajaj. Jankidevi Bajaj Gram Vikas Sanstha (JBGVS) Samaj Seva Kendra Kamalnayan Bajaj Hospital

Jankidevi Bajaj Gram Vikas Sanstha (JBGVS) Bajaj Autos Corporate Social Responsibility towards the rural poor is carried out by a trust, Jankidevi Bajaj Gram Vikas Sanstha (JBGVS). This trust was formed in 1987. JBGVS acts as catalyst for development at the grass root level in 44 villages around Bajaj Auto plants in Pune and Aurangabad district. Vision Statement of JBGVS:- JBGVS, a registered society and trust, is an apolitical and secular organisation which aims to act as a catalyst for rural and urban development. It assists the resident community of the selected villages and areas, in integrated development, making their villages and areas into models of excellence for others to emulate.

Samaj Seva Kendra (SSK) Samaj Seva Kendra was established in 1975 by Bajaj Auto and is part of JBGVS. SSK provides facilities for social development of the residents of Akurdi, Nigdi and adjoining townships, with the aim of improving their quality of life, through skill development training, hobby centre, nursery education, health care, sports, music, dance and cultural programmes. It has a membership of 1000 families. SSK, also conduct joint programmes with Pimbri Chinchwad Municipal Corporation, Kamgar Kalyan Kendra, Jan Shikshan Sanstan, Shramik Shiksha Board, World Centre of Girl Guides and Scouts. Kamalnayan Bajaj Hospital A modern, 135 bed hospital at Aurangabad in Western Maharashtra, the Kamalnayan Bajaj Hospital provides high-quality secondary and tertiary healthcare and specialist facilities under one roof. Its panel of renowned full-time consultants provides comprehensive multi-specialty care and advanced surgical procedures such as coronary artery bypass, beating heart graft surgeries, joint replacements, complex neurosurgical procedures, kidney transplants. The hospitals well-designed suite of five operation theatres is equipped to cater to complex surgical procedures.

The hospital has state-of-the-art facilities like a cardiac catheterization lab, advanced spiral computer topography(CT) scanner, a color Doppler-all from GE Medical Systems-a Mac 5000 series stress test machine, a holter monitor from GE-Marquette, ultra-touch dialysis equipment from Baxter and an advanced reverse osmosis plant.The hospital offers a specially designed health insurance and annual medical check-up plan in association with Bajaj Allianz General Insurance, which provides cash-less hospitalization and treatment.

Photos of Bajaj Bikes

Bajaj Platina

Bajaj XCD

Bajaj Discover

Bajaj Pulsar

Bajaj Avenger

Dealers Profile

Dealer Profile

Zain Motors Zain Motors was started as a sub dealer for Bajaj Auto in 1994 under the leadership of HAR Sales Corporation, Kannur. Zain Motors was given the district leadership of Kasaragod district in the year 2003 after enjoying rapid growth and establishing a reputation in the market. By this time Kasaragod had become a highly valued market for Bajaj. Zain Motors is headed by managing partner Mr. Abdul Basheer who has been in the field of automobile industry for a decade. The head office of Zain motors is located near the Chandragiri Bridge, a major landmark of Kasaragod. Branches are located at important commercial centers of the district such as Kanhangad Thrikkaripur Cheruvathur Uppala Zain motors retails over a thousand vehicles a year and the total turn- over of the company is over 10 crores.

Nature of activity: Dealers in Bajaj vehicles Dealers in spare parts of Bajaj vehicles

Job undertaking: Servicing of Bajaj vehicles Repair of Bajaj vehicles

CHAPTER 4Analysis and Interpretation of DataGENERAL INDICATORS

COMPONENTS OF CURRENT ASSETS

Current assets means assets that will either be used up or converted into cash within a year's time or normal operating cycle of the business whichever is longer. They include cash and bank balances, marketable securities, inventory of raw materials, semi-finished and finished goods, debtors, bills receivables and pre-paid expenses.

Table 4.1Components of Current AssetsParticulars2008200920102011

Inventories35924358366481262818652032920126.81

Sundry Debtors998896514863293980546414972643

Cash and Bank Balance20650686239122312489861029972756.5

Other Current Assets3552195.014673437.553214232.874273799.34

Total70116204.0180097087.5566104826.8782139325.65

Inference:The table shows the composition of current assets in four years. There has been an increase in current assets in the year 2009 compared to the previous year.. The year 2003 has seen a sharp decrease in current assets. There is a decrease in all the components of current assets right from inventory to loans and advances in 2010. This has led to overall decrease in current assets compared to the previous year and again in 2011 it showed an increase in current assets.

Chart 1 Component of Current Assets

COMPONENTS OF CURRENT LIABILITIES Current liabilities are those liabilities or obligations, which are expected to mature in the next twelve months. They include short-term loans and advances, accounts payable / sundry creditors, provision for taxation, outstanding expenses and dividend payable.

Table 4.2Components of Current LiabilitiesParticulars2008200920102011

Current Liabilities15869314.6920346893.481815326522256554

Provisions1896746.322205983.171653689.733206315.63

Total 17766061.0122552876.6519806954.7325462869.63

Inference:The table shows the composition of current liabilities in four years. There has been an increase in current assets in the year 2009 compared to the previous year. This is due to increase in other liabilities level in that year. The year 2010 has seen a sharp decrease in current liabilities compared to the previous year.

Chart 2 Components of Current Liabilities

Ratio analysis of Zain Bajaj

One of the most important financial tools which have come to be used very frequently for analyzing the financial strengths and weaknesses for the enterprises is ratio analysis. It is the process of determining and presenting an arithmetical term, the relationship between figures and groups of figures drawn from these statements. A ratio expresses simply in one number the result of a comparison between two figures. The following are the study of the financial statements of Zain Bajaj using ratio analysis.

1) Short Term Financial Position:

1. CURRENT RATIO: It is the ratio of total current assets to total current liabilities. It is calculated by dividing current assets by current liabilities.

Current Ratio = Current Assets/ Current Liabilities

The current ratio is an index of the concern's financial stability since it shows the extent of working capital, which is the amount by which the current assets exceed the current liabilities. A very high current ratio would indicate inadequate employment of funds while a poor current ratio is a danger signal to the management.

Table 4.3 Current Ratio

Year Current AssetsCurrent LiabilityRatio

200870116204.0143448530.871.61

200980097087.5553650792.651.49

201066104826.8740904741.361.61

20118213925.6556952575.31.44

Inference:Relatively high current ratio is an indication that the firm is liquid and has the ability to pay its current obligation in time as and when they become due. Here the position of current ratio of is the range of (21.44) to 1.61 times over current liabilities. At the outset current ratio of the firm is high.

Chart 3 Current Ratio

2. QUICK RATIO: Quick ratio otherwise known as Acid test ratio is a measure of liquidity calculated dividing current assets minus inventory and prepaid expenses by current liabilities. It is a measurement of a firms ability to convert its current assets quickly into cash in order to meet its current liabilities. It is calculated by dividing quick assets by the current liabilities.

Quick Ratio = Quick Assets / Current Liabilities

The term quick assets refers to current assets which can be converted into cash immediately or at a short notice without diminution of value. It includes cash and bank balances, short term marketable securities and debtors/receivables.

Table 4.4 Quick RatioYearQuick AssetsCurrent LiabilitiesRatio

200834191846.0143448530.870.78

200943448961.5553650792.650.80

201037918306.8740904741.360.92

201149219198.8456952575.30.86

Inference:The above table and chart indicates that the quick asset ratio of the company shows a increasing trend in all the year under study during 2008-2011. It indicates the quick ratio is below the standard norm 1:1.Chart 4 Quick Ratio

2) Activity Ratios:

a) INVENTORY TURNOVER RATIO: It is computed by dividing the cost of goods sold by the average inventory. It indicates the effectiveness and efficiency of inventory management. It shows how speedily the inventory is turned into accounts receivables through sales. The higher the inventory turnover ratio, the more efficient inventory management. Inventory turnover ratio = Cost of goods sold / Average Inventory

The higher the ratio the better is the performance of the company and vice versa.Table 4.5 Inventory Turnover RatioYearCost of goods soldAverage InventoryRatio

200825202304.48359243580.70

200925291741.64366481260.69

201025563150.18281865200.91

20112611777732920126.810.79

Inference:Inventory turnover ratio indicates the velocity of conversion of stock into sales. Here the ratios range from 0.69 to 0.91.A high ratio indicates efficient management of inventory because the stocks are sold frequently. In the year 2010,the company was performing well and its performance level decreased in the year 2011.

Chart 5 Inventory Turnover Ratio

b) AVERAGE INVENTORY HOLDING PERIOD:

This ratio indicates average time taken for clearing stock. This period is calculated by dividing the number of days by inventory turnover ratio.

Inventory holding period = 360 / Inventory Turnover Ratio

Table 4.6 Average Inventory Holding PeriodYearNo. of daysInventory Turnover RatioPeriod

20083600.70514

20093600.69522

20103600.91396

20113600.79456

InferenceFrom the table, it can be inferred that inventory holding period of the firm is decreasing year by year. It shows the time taken for clearing the stock.

Chart 6 Average Inventory Holding Period

c) DEBTORS TURNOVER RATIO: It is determined by dividing the net credit sales by average debtors outstanding during the year. It indicates the velocity of debt collection of firm.Debtors Turnover Ratio = Net Credit Sales / Average Debtors

Table 4.7 Debtors Turnover RatioYearNet Credit SalesAverage DebtorsRatio

200842251385.1699889654.22

200942254492.23148632932.84

201043269814.6798054644.41

201143543892.29149726432.90

Inference:From the table inferred that debtors turnover ratio stands at 4.41 in the year 2010 compared to the ratio of 2.84 in the year of 2009. This shows that the ratio raised and higher is the ratio, better is the financial position of the company so the company should improve its debtor turnover ratio.

Chart 7 Debtors Turnover Ratio

d) AVERAGE COLLECTION PERIOD

The average collection period represents the average number of days for which a firm has to wait before its receivables are converted into cash.

Average Collection Period = Number of working days / Debtors turnover ratio

Table 4.8 Average Collection PeriodYear Number of daysDebtors turnover ratioPeriod

20083604.2285

20093602.84127

20103604.4182

20113602.90124

Inference:From the table we can understand that the average collection period of the firm is decreasing from 2009 to 2011. During the year 2009 it had the collection period around 127 days but during the year 2011 it shrink down to 124 days. The firm has to take a perfect concentration on this part.

Chart 8 Average Collection Period

e) FIXED ASSET TURNOVER RATIO: The fixed assets turnover ratio underlines the relationship between a companys sales and fixed assets. This ratio will be analyzed further with ratios for each main category of asset. This is a difficult set of ratios to interpret, as asset values are based on historic cost. An increase in the fixed asset figure may result from the replacement of an asset at an increased price or the purchase of an additional asset intended to increase production capacity.

Fixed Asset Turnover Ratio = Net Sales / Fixed Asset

Table 4.9 Fixed Asset Turnover RatioYearNet SalesFixed AssetRatio

200842251385.162127132.9319.86

200942254492.232589650.6316.32

201043269814.6743269814.6723.87

201143543892.293042359.5214.31

Inference:In the study it is found that the company is trying to improve its fixed asset turnover ratio. In the year 2008 the ratio shows 19.86. It decreased in the preceding year to 16.32 in 2009 and increased to 23.87 in 2010. In the year 2011it grew down to14.3.

Chart 9 Fixed Asset Turnover Ratio

f) WORKING CAPITAL TURNOVER RATIO: This ratio indicates whether or not working capital has been effectively utilized in making sales. If a firm makes higher volume of sales with relatively small amount of working capital, it is an indicator of the operating efficiency of the company.

Working Capital Turnover Ratio = Sales / Net Working Capital

Table 4.10 Working Capital Turnover RatioYearSales Net Working CapitalRatio

200842251385.16523501430.807

200942254492.2357544210.90.734

201043269814.6746297872.140.934

201143543892.2956676456.020.768

Inference:The working capital turnover ratio of the firm is average; the number of times the working capital turnover in a course of year is in average rate. The firm should work hard in increasing the assets of the company and also decreasing the liability of the firm. Thus it can bring some improvement in the working capital turnover ratio.

Chart 10 Working Capital Turnover Ratio

3. Analysis of Profitability

a. General Profitability

i. GROSS PROFIT RATIO: Gross Profit Ratio measures the relationship of gross profit to net sales and is usually represented as a percentage. The gross profit represents the excess of sales proceeds during the period under observation over their cost, before taking into account administration, selling and distribution and financing charges. The ratio measures the efficiency of the companys operations and this can also be compared with the previous years result to ascertain the efficiency.

Gross Profit Ratio = Gross profit / Net Sales * 100

Table 4.11 Gross Profit RatioYearGross ProfitNet SalesRatio

20087571607.3142251385.1617.92

20097496074.2042254492.2317.74

20108254723.1443269814.6719.07

20118408351.0543543892.2919.31

Inference:The ratio reflects how efficient the firm is in producing its product. The study shows that the firm is efficient in producing its products and it shows a high gross profit ratio and it is sign of good management.

Chart 11 Gross Profit Ratio

ii. NET PROFIT RATIO: Net profit ratio establishes the relationship between net profit ( after tax ) and sales , and indicates the efficiency of the management in manufacturing, selling administrative and the other activities of the firm. The ratio is the overall measure of the firms profitability.

Net Profit Ratio = Net Profit / Net Sales * 100

Table 4.12 Net Profit Ratio

YearNet ProfitNet SalesRatio

20083864164.1542251385.169.14

20094877973.3342254492.2311.54

20105589821.9243269814.6712.92

20115788073.1043543892.2913.29

Inference:From the above table it is inferred that the net profit ratio, the net profit margin is 13.29 in the year 2011, net profit is 12.92 in the year 2010 and 11.54 in the year 2009. Net profit ratio of the company shows a increase trend from 2008-2011.

Chart 12 Net Profit Ratio

iii. OPERATING RATIO: Operating ratio establishes the relationship between the cost of goods sold and other operating expenses on the one hand and the sales on the other hand. It indicates the operating efficiency of the company. It depicts the cost picture or the debit aspect of the profit margin ratio. It can also be calculated by the formula,

Operating Ratio = 100 Net Profit Ratio

Table 4.13 Operating RatioYearNet Profit RatioRatio

20081009.1490.85

200910011.5488.45

201010012.9287.08

201110013.2986.70

Inference:The above table and chart shows the operating ratio from the year 2008-2011. Here the study shows the firm having a slight decrease trend in operating ratio which ranges from 90.85-86.70.

Chart 13 Operating Ratio

Statement of changes in working capital

In the statement of changes in working capital, all current assets and current liabilities are individually listed. Against each account, the figure pertaining to that account at the beginning and at the end of the accounting period is shown. The net change in its position is also shown. The changes taking place with respect to each account should add up to equal to the net change in working capital.

Increase in current assets and decrease in current liabilities: The acquisition of current assets and repayment of current liabilities will result in funds outflow. The funds may be applied to finance an increase in stock, debtors etc. or to reduce trade creditors, bank overdraft, bills payable etc.

Decrease in current assets and increase in current liabilities: The reduction in current assets e.g., stock or debtors balance will result in release of funds to be applied elsewhere. Short term fund raised during the period by any increase in the current liabilities like trade creditors, bank overdraft and tax dues, means that these sources have lent more at the end of the year than at the beginning.

Basic rules of changes in working capital Increase in current assets will increase in working capital. Decrease in current assets will decrease in working capital. Increase in current liabilities will influence to decrease in working capital. Decrease in current liabilities will increase in working capital.

Table 4.14 Statement Showing Changes In Working Capital (2008-2009)Particulars 20082009Increase Decrease

Current Assets

Inventories359243583664812672376800.00

Sundry debtors998896514863293487432800.00

Cash and bank balance2065068623912231326154500.00

Other current assets3552195.014673437.551121242.5400.00

Total 70116204.0180097087.55

Current liabilities and provisions

Current liabilities15869314.6920346893.4800.004477578.79

Provisions1896746.322205983.1700.00309236.85

Total 17766061.01

22552876.65

Net working capital.52350143

57544210.9

Increase in working capital5194067.9

00.005194067.9

Total 57544210.9

57544210.9

9980883.54

9980883.54

Inference: The study reveals that all current assets have increased. All current liabilities have decreased. Net working capital has increased in this year.

Table 4.15 Statement Showing Changes In Working Capital (2009-2010)Particulars 20092010Increase Decrease

Current Assets

14978639.68Inventories36648126281865208461606

Sundry debtors1486329398054645057829

Cash and bank balance2391223124898610986379

Other current assets4673437.553214232.871459204.68

Total 80097087.5566104826.87

Current liabilities and provisions

Current liabilities20346893.48181532652193628.48

Provisions2205983.171653689.73552293.44

Total 22552876.65

19806954.73

Net working capital.57544210.9

46297872.14

Decrease in working capital11246338.76

11246338.76

Total 57544210.9

57544210.9

14978639.68

14978639.68

Inference: The study reveals that all current assets have decreased. All current liabilities have increased. Net working capital has decreased in this year.

Table 4.16 Statement Showing Changes In Working Capital (2010-2011)Particulars 20102011Increase Decrease

Current Assets

Inventories2818652032920126.814733606.81

Sundry debtors9805464149726435167179

Cash and bank balance2489861029972756.55074146.5

Other current assets3214232.874273799.341059566.47

Total 66104826.8782139325.65

Current liabilities and provisions

Current liabilities18153265222565544103289

Provisions1653689.733206315.631552625.9

Total 19806954.7325462869.63

Net working capital.46297872.1456676456.02

Increase in working capital10378583.88

10378583.88

Total 56676456.0256676456.0216034498.78

16034498.78

Inference: The study reveals that all current assets have increased. All current liabilities have decreased. Net working capital has increased in this year. By comparing the statements of 4 years, working capital of 2008-2009 and 2010-2011 showed increase in working capital and 2009-2010 showed in decrease in working capital.

CHAPTER 5FINDINGS, SUGGESTIONS AND CONCLUSION

Findings: Companys current asset is more than its current liabilities which is a good condition. Quick ratio is below the standard norms; 1:1. Inventory turnover ratio is fluctuating which indicates that company could not sell its inventory comparing to previous years. Company does not follow strict credit policy in terms of collection because debtors collection period is not stable and it has increased in the last year. Working capital turnover ratio is average for the firm. The fluctuating rate of fixed asset turnover ratio indicates the managements inefficiency in managing fixed assets properly.

Suggestions: Since the fixed asset turnover ratio is fluctuating, it shows the company is inefficient in managing fixed assets properly. So the company should concentrate in managing fixed assets efficiently. Company should maintain a stable debtors collection period in order to follow strict credit policy in terms of collection. The firm should work hard in increasing the assets of the company and also decreasing the liability of the firm. So that the firm can bring some improvement in the working capital turnover ratio. The company should try to improve its inventory turnover ratio by selling its inventories very soon.

Conclusion:The detailed study on the working capital management from the Annual reports of Zain Bajaj , Kasaragod for the four year periods from 2008-2011 and made the conclusion. Working Capital Management ensures liquidity and profitability of the business. The provision of sufficient working capital is basis for the success of the business. Efficient management of working capital means the management of various components of working capital in a such a way that adequate amount of working capital is maintained for the smooth running of a firm and for the fulfillment of the twin objective of liquidity and profitability. The study on efficiency of the working capital management in the Zain Bajaj reveals that the working capital position of the study unit is up to the standard and satisfactory. The study also reveals that the liquidity, the company is in good position which has a proper balance of current assets and current liabilities.

Bibliography:1) Financial Management- M.Y Khan and P.K Jain2) I.M.Pandey, 2007. Ninth edition, financial Management3) Dr. Mahashwari, S N, principles of Management Accounting, New Delhi, Sulthan Chand & Sons publications,2000.4) Van Home, James C, Washo Wicz, John M. prentice FINANCIAL MANAGEMENT: Hall New Delhi 1994

Websites:1) www.google.com2) www.bajaj.com

Particulars2008200920102011

INCOME

Sales42,251,385.1642,254,492.2343,269,814.6743,543,892.29

Other Income657,511.97659,012.61663,134.72668372.18

Closing stock44,864,360.0044,893,640.0044,967,453.4545,102,237

Total 87,773,257.1387,807,144.8488,900,402.8489,314,501.01

EXPENDITURE

Opening stock45,314,852.6045,426,400.0045,734,700.3445,998,693

Purchase 24,636,277.8824,653,246.6424,700,533.2425,128,194.23

Direct expense 11553410573595,370.0593,126.65

Administrative & selling expense 10,134,985.3410,125,689.0010,115,076.079,686,136.08

Total 80,201,649.8280,311,070.6480,645,679.7080,906,149.96

Profit before depreciation 7,571,607.317,496,074.208,254,723.148,408,351.05

Less: depreciation499,884.03468,967.51426943461984.95

Profit before tax 5,995,880.157,027,106.697,827,780.147,946,366.10

Less: income tax82,630.000826300

Provision for income tax 2,064,530.002,166,530.002,169,854.222,172,562

Deferred tax -15,444.00-17,396.64-14526-14,269.00

Net profit after tax 3,864,164.154,877,973.335,589,821.925,788,073.10

Balance brought forward 204,878.06288,958.33380,254.78289,805.99

Balance transferred to balance sheet3,659,286.094,589,015.005,209,567.145,498,267.11

Annexure:Income and Expenditure statement of Zain Bajaj, Kasaragod

BALANCE SHEET OF ZAIN BAJAJ,KASARAGOD

Liabilities2008200920102011

Share Capital30000000300000003000000030000000

Reserves and Surplus2769536.163842356.532436891.653991645.98

Current Liabilities15869314.6920346893.481815326522256554

Provisions1896746.322205983.171653689.733206315.63

Unsecured Loans25682469.863109791621097786.6331489705.67

Total76218067.0387493149.1873341633.0190944221.28

Assets

Fixed Assets2127132.932589650.6318127133042359.52

Investments100000100000100000100000

Loans and Advances200000100000100000150000

Current Assets

Inventories35924358366481262818652032920126.81

Sundry Debtors998896514863293980546414972643

Cash and Bank balance20650686239122312489861029972756.5

Other Current Assets3552195.014673437.553214232.874273799.34

Deffered Tax15444173961452614269

Profit and Loss Account3659286.0945890155209567.145498267.11

Total76218067.0387493149.1873341633.0190944221.28