WORKING CAPITAL MANAGEMENT IN TECUMSEH

A PROJECT REPORT ON WORKING CAPITAL MANAGEMENT IN

Masters Degree in Business Administration 2007 – 2009

DECLARATION

I DONTHA RAJESH hereby declare that the project report on “Working Capital Management” submitted by me to the Department Of Business Management, KARUNA PG COLLEGE e as a partial fulfilment for the award of master’s Degree in Business Administration of OSMANIA UNIVERCITYS is of my own and it has not been submitted to any other institute or published any where before.

1

DATE: PLACE:

XYZ H.NO; 093-07-0174

ACKNOWLEDGEMENT I would like to have this opportunity to place it on a record that this project would never been successful without the kind co-operation and support of certain individuals. Though it not possible to name all of them, it would be unpardonable on my part if I do not mention some of the most important persons.

I would like to thank my project guide, Mr.K.VENKATESH Deputy. Manager-Costing, for all his support and cooperation during the course of my study. I would like to thank the Accounts and Finance department members, for giving me this opportunity to understand the various aspects of Financial Management in their organization and understand the subject in a better sense.

It’s my duty to express deep sense of gratitude to (external guide), HOD (MBA) Mr K.VENKATESH for her valuable suggestion and guidance throughout the project.

Last but not the least; I would also like to thank my parents, friends for making this project a successful, as without their support and guidance, this achievement would have been an impossible task.

ABSTARCT The present project is on working capital in Tecumseh share products India ltd. The position of the company was studied data was collected he regarding growth in assets and liabilities. Sales working capital ratio debtors on turnout ratio, current ratio and other ratios was calculated composition current of pass five year was collected sources and funds statement for five years was collected.

Interpreted it was fund that working capital was increasing the begging and latter on it was the declaiming it was suggested to utilize the companies founds properly.

ONTENTS

Page No.

CHAPTER – 1:

7-7

INTRODUCTION

8-8

 NEED FOR THE STUDY

9-9

 OBJECTIVES OF THE STUDY

10 - 10

 METHODOLOGY OF THE STUDY

11 - 11

 FRAMEWORK OF THE STUDY

12 - 12

 LIMITATIONS OF THE STUDY

13 - 13

CHAPTER – 2:

14 - 14

COMPANY PROFILE INDUSTERY PROFILE

15 - 15

 REFRIGERATION COMPRESSOR

16 - 18

 HISTORICAL DEVELOPMENT OF COMPRESSORS

18 - 19

 STRUCTURE OF THE REFRIGERATION COMPRESSOR INDUSTRY

20 - 24

 TECHNOLOGICAL STATUS OF INDIAN INDUSTRY

25 - 28

PROFILE OF TECUMSEH PRODUCTS INDIA

30 - 30

PRIVATE LIMITED, HYD  ORGANIZATION PROFILE

31 - 35

 DEPARTMENTS OF TRIPL

36 - 36

 5-S PHILOSOPHIES

37 - 40

 STRATEGIES AND PROCESSES AT TRIPL

40 - 40

 TRIPL’S VISON AND MISSION

41 - 44

 PRODUCTS AND SERVICES

45 - 45

 COMPETITORS ANALYSIS

46 - 47

Page No

CHAPTER – 3: LITERATURE RIVEW

48 - 48 49 - 49



INTRODUCTION

50 - 51



WORKING CAPITAL CYCLE

52 - 54



CONCEPT OF WORKING CAPITAL

54 - 56



TYPES OF WORKING CAPITAL

56 - 59



COMPOSITION OF WORKING CAPITAL

59 - 62



OBJECTIVES OF WORKING CAPITAL

63 - 63



FACTORS DETERMING WORKING CAPITAL

64 - 66



RATIOS RELATING TO WORKING CAPITAL

67 - 71



SOURCES OF WORKING CAPITAL

71 - 76

CHAPTER – 4: DATA ANALYSIS  CHART OF THE NET WORKING CAPITAL  CHART OF THE SALES TO WORKING CAPITAL TURNOVE

77 - 77 78 - 78 79 - 80

RATIO 81 - 82

 CHART OF THE DEBTORS TURNOVER RATIO

83 - 84

 CHART OF THE CURRENT RATIO

85 - 86

 CHART OF THE QUICK RATIO

87 - 88

 CHART OF THE COMPOSITION OF CURRENT ASSETS

89 - 90

 PROFIT AND LOSS ACCOUNTS

91 - 96

 COMPARATIVE BALANCE SHEETS

97-107

CHAPTER – 5: SUMMARY & FINDINGS

108 - 108 109 - 109



SUMMARY

110 - 115



FINDINGS & SUGGESTIONS

116 - 118



BIBLIOGRAPHY

119 - 119

CHAPTER -1 INTRODUCTION

- NEED FOR THE STUDY - OBJECTIVES OF THE STUDY

- METHODOLOGY OF THE STUDY - FRAMEWORK OF THE STUDY - LIMITATIONS OF THE STUDY

NEED FOR THE STUDY

TRIPL (Tecumseh Products India Pvt. Ltd) is a successfully managed company as evidenced in its financial performance. Evolution of financial performance of company is a continues process for understanding the direction in which the company is moving so as to decide and implement the feature course of action with a view achieves the in the objectives in the best interest of the organization Financial performance can be done from the point of view of various interest groups such as owners, management, leaders, etc.; however, here it is an analysis to understand financial performance of TRIPL by using the technique of the ratio analysis

OBJECTIVES OF THE STUDY

The present study has been conducted to achieve the following objectives.

1. To analysis and portray the existing position of TRIPL 2. To study the short term solvency position of TRIPL 3. To study the leverage position of the TRIPL. 4. Evaluate the efficiency utilization of assets of TRIPL. 5. To identify the problem, if any, in the overall performance of the TRIPL and offer suggestions.

METHODOLOGY OF THE STUDY

With a view to achieve the objectives data and information for the study are collected from both primary and secondary sources. The stress is however more the later.

Primary data The primary data was collected from the discussions with the concerned officers and staff of the organization.

Secondary data The secondary data was gathered from published and unpublished records and annual reports of the company further magazines and the textbooks of financial management and also from web sites of the company and from other sources of secondary data

FRAME WORK OF THE STUDY

In the project report entitled financial performance of Tecumseh Products India Private Limited, Hyderabad, is organized in six chapters.

The first chapter contains a brief description about the Objectives of the study, frame work of the study, need for the study, methodology of the study and Limitations of the study.

The second chapter provides industry profile.

The Third chapter provides the profile of TRIPL, Hyderabad.

The fourth chapter carries the theoretical aspects of the working capital and ratio analysis.

The fifth chapter deals with the financial analysis of the TRIPL. The sixth chapter presents the summary and findings.

LIMITATIONS OF THE STUDY

The study has been conducted in a systematic and comprehensive way so as to make the project work an unable one. However, the topic under my study may not be free from limitations due to the following factors

 The major limitation of the project under study was time. Since it was to be completed within a short period of time, which is not sufficient to undertake a comprehensive study.

 Since the financial matters are sensitive in nature the same could not acquired easily.

 The study is concerned to only the five years of TRIPL.

CHAPTER-2 COMPANY PROFILE & INDUSTERY PROFILE

- REFRIGERATION COMPRESSOR - HISTORICAL DEVELOPMENT OF COMPRESSORS - STRUCTURE OF THE REFRIGERATION COMPRESSOR INDUSTRY - TECHNOLOGICAL STATUS OF INDIAN INDUSTRY

REFRIGERATION COMPRESSOR

Refrigeration compressor is the heart of any refrigeration system. The compressor can be: reciprocating, rotary, centrifugal, screw or an axial flow type, based on the principle of compression. Depending upon the location of the drive, compressors are classified as hermetic, semi-hermetic and open

type. Reciprocating and rotary compressors, which have the compressing element and drive motor sealed in a single, welded-housing, are called hermetically sealed compressors. Instead of single, welded-housing, if the enclosure is bolted together, then the assembly becomes semi-hermetic. In this type, in addition to reciprocating and rotary types, screw and centrifugal compressors are also manufactured. However, if the compressors and drive units are not in single housing, the compressors are called open type.

Compressors manufactured in India are mostly the reciprocating type.

Centrifugal compressors are characterised by large capacity, suitable for extremely low temperatures and ability to carry varying loads. Rotary compressor is a hermetic type compressor where the mechanical structure and motor assembly are directly fitted in the same shell, and where the shell is sealed by means of welding. Rolling piston and sliding vane are the main types of rotary compressors.

In reciprocating compressors, a connecting rod is used to convert the rotary movement of the crankshaft to the reciprocating movement of the piston.

The piston slides, in a cylinder to compress the refrigerant gas. When the difference between condensing temperature and evaporating temperature is high, the pressure ratio for compression also becomes high and conducting compression in two stages becomes desirable. A screw compressor is a

positive displacement rotary machine. Depending upon mountings, there are two types viz. vertical and horizontal screw compressors. Depending upon the number of screws, there are mono- screw and twin-screw compressors.

Application of refrigeration compressors can be: for refrigerators, deepfreezers, water coolers, bottle coolers, room air-conditioners, packaged airconditioners, water chillers, self-contained A/Cs, bus/train/ship airconditioning, refrigerated vans and cold-storages. End-uses of refrigeration compressors can be in: domestic, commercial and industrial sectors. In domestic sectors, the end- uses are for preserving and storing food and for comfort air-conditioning. In the commercial sector, the end-uses are: in central air-conditioning, water coolers, and commercial refrigerators. Enduses in the industrial sector include preservation of food, fruit juice concentrates, and alcoholic drinks; preserving systems for meat, fish, poultry and dairy products. Other applications of refrigeration compressors are process refrigeration such as in the drugs and pharmaceutical industry; textile industry, rubber industry and thermal power generation.

HISTORICAL DEVELOPMENT OF COMPRESSORS For refrigeration compressors, development of technology started around the year 1865. In the period 1865 to 1875, a few types of refrigeration compressors were made each year. These were massive steam-engine driven machines with their weights in tons, considerably in excess of their capacity in tons of refrigeration. Before 1900, some compressors were equipped with cylinder by-pass valves for capacity control. Electric motor belted-drives also started to make their appearance. Rare use of sulphur dioxide as refrigerant was made. In the period from 1900 to 1925, rotating seals were tried in small compressors. Automatic capacity controls were developed.

Operating speed increased to 800 rpm. Compressors came to be directly driven by synchronous motors. During the period 1925 to 1950, reed valves began to appear. The 2-pole electric motors at 3500 rpm were used for drive.

Freon refrigerants such as R-ll, R-114, and R-22 were invented. During the period 1950 to 1975, the refrigerant R-22 was used in place of R-12 and

2-pole motors in place of 4-pole motors were used. The ozone depleting effects of chlorofluorocarbons (CFCs) have resulted in a large number of countries signing the Montreal Convention, according to which the developed countries have to phase out use of R-ll, R-12, R-113, R-114, R115, R-13, R-lll, R-112, R- 211, R-212, R-213, R-214, R-215, R-216 and R217 by the year 2000, and developing countries by the year 2015., The use of new CFCs which are ozone friendly and are under development at present necessitate modifications in compressor designs in some cases. They may also affect the energy efficiency of compressors also. As regards the compressor type wise development; the reciprocating compressors were the pioneers, followed by, centrifugal, rotary and screw compressors. Among these types, the reciprocating compressors have almost reached their technological development limits. Regarding the future trend, scroll and eccentric cam compressors are being developed in advanced countries.

STRUCTURE OF THE REFRIGERATION COMPRESSOR INDUSTRY a) Manufacturers

The manufacture of the refrigeration compressors started in India around the year 1960 for small hermetic compressors for refrigerators as well as the larger capacity open type compressors. Today, a wide variety of compressors are produced in India with the capacity as high as 700 HP. The industry is composed of both organized sector of medium and large-scale manufacturers and an unorganized sector of small-scale units. The small units produce slow-speed compressor models, which are still used in India for limited purposes. There are 14 manufacturers in the organized sector.

They are: i)

Sanden Vikas (India) Ltd., Faridabad (Haryana) - A/C compressor for motor cars.

ii)

Kirloskar Brothers Ltd., Karad (Maharashtra) – Hermetic compressors.

iii)

Shriram Refrigeration Industries Ltd., Hyderabad (A.P.) Hermetic compressors.

iv)

Godrej & Boyce Mfg, Co, Private Ltd Bombay – Hermetic compressors.

v)

Kelvinator of India Ltd., Faridabad (Haryana) – Hermetic compressors.

vi)

Hyderabad Allwyn Ltd., Hyderabad (A.P.) – Hermetic compressors.

vii)

Voltas Ltd., Bombay & Warora (Maharashtra) - Hermetic, Semihermetic and Open type compressors.

viii) Kirloskar Pneumatic Co. Ltd., Pune (Maharashtra) – Open type compressors. ix)

Vulcan Laval Ltd., Satara (Maharashtra) - Open type compressors.

x)

Frick India Ltd., Faridabad (Haryana) - Open type compressors.

xi)

Air Control & Chemical Engineering Co. Ltd., Nandej (Gujarat) Open type compressors.

xii)

Utility Engineers (India) Ltd., Dharuhera (Haryana) – Open type and Semi-hermetic compressors.

xiii) Blue Star Ltd., Bombay (Maharashtra) - Open type compressors. xiv) Batliboi & Co., Udhna (Gujarat) compressors.Semi-hermetic

b) Installed capacity and its utilisation At present, the total licensed capacity of these companies is 13,87,250 Nos. per annum, whereas the total installed capacity is 10,22,170 Nos. As regards the utilization of installed capacity, the industry presents an unbalanced picture for different types of compressors as shown in the following table.

Utilisation of capacity (In Numbers)

Compressor type

Total Production (1985-86)

Total Installed capacity (1985-86)

Capacity utilisation

10,000

25,000

40%

7,78,614

8,81,000

88.4%

2,444

15,440

15.8%

Air-conditioning compressors for automobile Hermetic compressors Open type and Semi hermetic compressors (all varieties)

c) Import and export Refrigeration compressors are imported in India as part of initial import in the phased production programme under the collaboration agreements or some special types or capacities, which are not manufactured in the country.

Some compressors are also imported as part of projects awarded to foreign companies. Export of compressors is usually as a part of an end-project or a part of an air-conditioning or refrigeration project. The export performance of the industry is not very encouraging.

The main reasons for this are:

Price

The international prices are at least 40% cheaper than the Indian export prices.

Quality

The quality of products of advanced countries is superior and more reliable.

Models

The

advanced

countries

do

continuous

product

improvement and are able to bring new models every year in the market.

Marketing

The marketing and after sale service is not properly undertaken by the Indian manufacturers, barring a few exceptions. The Indian manufacturers will have to improve on all these disadvantages with appropriate help from the Government.

d) Financial status and scale of operation: Most manufacturers are multi-product companies producing compressors as one of their products: hence the data of separate investment and costs for compressors vis-a-vis income is not available. The financial health of a company as a whole has, therefore, been studied. It was observed that all companies, except ACCEL, are making profit. ACCEL had been making losses for some years and it has been taken over by Best & Crompton Ltd., since 1986 and is under rehabilitation. Amongst the companies, Frick India Ltd., Vulcan Laval Ltd., Blue Star Ltd., and Kelvinator of India show sound financial health with the return on capital employed is consistently above 10% and return on share capital above 35%.

TECHNOLOGICAL STATUS OF INDIAN INDUSTRY

a) Sources of technology Since the beginning of the refrigeration industry in India, refrigeration compressors have been manufactured with foreign technical collaboration.

Even today, most of the established manufacturers continue to enter into fresh foreign collaborations for producing new types of compressors or for updating and expanding the present range. The only notable exception in this regard is Godrej & Boyce Mfg. Co. Ltd. which has developed a hermetic compressor for its refrigerator entirely with its own research and development. .

There is no example of technology transfer among Indian manufacturers.

Moreover, collaborations with the same foreign companies have been concluded at different times for updating or manufacturing new types of compressors. All this goes to show that there is hardly any original design and development work undertaken in India; or, whatever has been attempted so far has not met with much success. The R&D effort in India is mainly

aimed at indigenisation of the compressors as per the collaborator's specifications and according to the phased manufacturing programme.

b) Selection of foreign collaborator The selection of foreign collaborator was found to be based on many factors such as: i)

Quality of products

ii)

Financial participation of collaborator

iii)

Willingness of collaborator

iv)

Previous trading relations i.e. the Indian company importing the collaborator's compressor for use in own products or projects

v)

Availability of collaborator for collaboration in India.

There are three companies, namely, Sanden Vikas (India) Ltd., Kelvinator of India Ltd. and Frick India Ltd., in which there is a financial participation of the collaborator in addition to technical collaboration.

c) Restrictive clauses in collaboration agreements The restrictive clauses pertain to export, use of collaborator's brand name and transfer of technology to other Indian manufacturers. Regarding exports, most collaborators have barred the Indian manufacturers to export to countries where the collaborators have their own licensing arrangements or trade interests.

Regarding the use of collaborator's brand-name, in most cases the words "manufactured under license of." etc., can be used during the period of agreement.

The transfer of technology has not been allowed during the tenure of agreement in the case of any company. After the tenure is over, the Indian company is free to transfer technology to others.

d) Technical support of collaborator In all the collaborations, the collaborator has agreed to give all technical support for indigenisation of the compressor. Adequate training in collaborator's plant as well as in Indian company's plant is provided.

e) Research and development activities The research and development carried out by the Indian manufacturers is of applied nature. The main effort is to indigenize the collaborator's design within the agreement period. Once this is achieved, many manufacturers have done development in compressor components by way of change of material, little modification in design and such other improvements. Some have developed compressor models of intermediate capacities in the range by making suitable dimensional changes. No manufacturer has designed a compressor on his own except Godrej & Boyce. The reasons for this state of affairs are: i)

The low volume of turnover of business does not permit sizeable investment in original research.

ii)

It is faster to update technology through collaboration than through own research.

PROFILE OF TECUMSEH PRODUCTS INDIA PRIVATE LIMITED, HYD - ORGANIZATION PROFILE - DEPARTMENTS OF TRIPL - 5-S PHILOSOPHIES - STRATEGIES AND PROCESSES AT TRIPL - TRIPL’S VISON AND MISSION - PRODUCTS AND SERVICES - PRODUCT PROFILE - COMPETITORS ANALYSIS

ORGANIZATION PROFILE

Tecumseh Products India private Limited is an ISO 14001 and 9001 certified American based multination company, with as core expertise in manufacturing hermitically sealed compressors. Tecumseh India is a 100% subsidiary to Tecumseh Products Company (TPC) USA, which the world’s only full line independent manufacturer of compressors. TPC has 29 manufacturing locations in four continents. In India the company has 20 sales offices and in extensive networks of over 200 dealers and more than 600 registered small-scale manufacturers.

Tecumseh India is the preferred supplier to the who’s who of the AC & R Industry in India and in the Middle Ease, SAARC courtiers. The company was originally established and registered in 1963 under the name of the Usha Refrigeration

Industries

Limited

(URIL)

started

in

1963.

URIL

manufactured compressors for water coolers, air coolers and air conditioners, Lala Charath Ramji who was from a renowned industrial family of DC and Ceremonial Group of Companies started URIL. In 1970 the URIL was changed to C. Shriram Refrigerations Ltd., and the business was also diversified towards manufacturing of diesel engines and

water coolers. Sriram Industries played a great role in the field and captured more than 50% markets shares in India. Shriram Industries also kept its hands in international trade and were successful in exporting their products to the neighboring countries, Nepal and Bangladesh.

In 1980 Lala Charath Ramji son Mr. Siddharth C Shriram became the chairman cum Managing Director of the Company. The period was sea change in industrial policy, which resulted in a great change in the industrial sector.

In the process for survival, Shriram went to Tech collaboration with Westing House US and was named as Siel Compressors. Siel compressors were the first Indian company to manufacture compressor. Later Westing House stopped manufacturing compressors and Siel went into technological collaboration with Tecumseh Products Company USA in1988. Tecumseh means ‘Crouching Panther’ derived from chief of the Shawnee Tribe (1768 – 1813). It started its operations to offer new state of AW series to Indian customer. Subsequently Tecumseh Products Company took over Siel group in 1997 and Siel Group became 100% subsidiary to Tecumseh Products Company. As soon as Tecumseh took over the company its stopped

manufacturing water coolers restricted its products to CFA / hermitically sealed compressors.

Tecumseh Products Company invested $80 million in Indian operation known as Tecumseh Products India Pvt. Ltd (TRIPL). TRIPL has two states of art manufacturing facilities at Hyderabad, Andhra Pradesh and Ballabgarh, Haryana with a CADEM Center at the Hyderabad plant to meet global engineering needs.

TRIPL has gained core expertise in Research and Development, AW assembly as a AW machine shop such that it acquired a lion’s share of the Indian compressor market by gaining a 50% share.

HYDERABAD PLANT: The Hyderabad plant is on a sprawling 54-acre land at the Balanagar Industrial belt 15 km. Away from Hyderabad city on the highway line going towards HMT Ltd Nassau road. At Hyderabad plant TRIPL manufacturers Air conditioners, from 1200 BTU to 60000 BTU and compressors for deep freezers, bottle cooler and water coolers which are considered to be world’s No. 1 in the 150 million compressor market a year.

The Hyderabad Plant has a capacity of manufacturing more than 3000 units per day. The Hyderabad has a technology development center with full Research and Development facility. The plant is also supported by two service vendors: AW service center and Mc Service center. The Hyderabad plant has 6 regional offices among which four offices are at the Metro cities; Delhi, Mumbai, Kolkata and Chennai and remaining two are at Ahmedabad and Secunderabad. Besides these there are branch offices and depots located in prime cities across the country. The Hyderabad plant also has a network of about 177 dealers across the nation and are proffered

Suppliers to key original equipment manufacturers (OEM’s) like LG, Voltas, Bluster, Gore, Videocon, Fodders, Matrix, Hitachi, etc.,

TRIPL, Hyderabad plant was successful in getting the ISO 9001 certification for maintaining quality of the compressors in 1994 and for the Eco friendly environment maintenance the company has got ISO 14001 certification

The Management has started development activities in the following areas:  Effluent treatment plant  Tree Plantation  Rain Water Harvesting is to increase the ground water level and TRIPL has the distinction of being the first organization in thus record.  Vermi Culture is the process of utilizing the canteen food wastage for converting into natural manner

Department of TRIPL:  Human Resource Management  Accounts Department  Attendance and Pay Office (A&PO)  Export Oriented Unit (AK Kit)  Technology Development Centre (TDC)  Maintenance and Engineering Department  Quality Development of A W assembly  A W Press Shop  A W Machine Shop  Service Center  Dispensary

 Chemical and technological laboratories

TRIPL has a total of 766 permanent employees as on which include o 172 officers o 232 staff o 362 workers

BALLABGARH PLANTS: At Ballabgarh, Haryana TRIPL has invested Rs. 200 crores for manufacturing if Non – CFC Compressors. The Ballabgarh Plant is one of the best compressors manufacturing unit in Asia. The plant is extended on 21 – acre land on the Delhi – Matura National high way. The plant has a capacity to manufacture 25000 units per month.

5 – S Philosophies Tecumseh encourages its employees to follow these philosophies, which is the Japanese way of working.

1) SERI(Sorting Out): a. Look around your work area and ask yourself “Is it really necessary for all items to be there? “ b. Separate items “O. K” re-workable a rejected items c. Re-work there – workable items and dispose off the rejected items

2) SEITION (Systematic Arrangement): a. Items must be place in prefixed locations so that they are accessible and can be easily use

b. Items should be clearly identified by labeling them properly

3) SEISO (Spic and Span): a. Clean the work place yourself b. Clean all the equipment including table etc. yourself

4) SEIKETSU (Serene Atmosphere): a. A clean work place properly selected with a proper arrangement will soon become dirty if SEIRI, SEITON and SEISO are not practiced regularly b. To achieve serene atmosphere the three steps of SEIRI, SEITON and SEISO should be continuously repeated c. We would keep our area of work neat and clean including your own attire

5) SHITSHUKE (Stick to Self Discipline):

a. Follow rules and regulation strictly b. Adhere to timings and respect time. c. Confirm to standards while working d. Follow the prescribed operational standards The company pays a incentives of Rs.75 per month to its employee for following these 5 – S philosophies

ADVANTAGES OF 5’S: By thoroughly enforcing 5-8 in each work area.  Operations can be performed without error proceeding in, wellregulated fashion, resulting in fewer defective items. Thereby increasing the overall quality of product.  Operations can be performed safely and comfortably, reducing the chances of accidents.  Machinery and equipment can be carefully maintained, reducing the number of breakdowns.  Operations can be performed efficiently, eliminating waste thereby increasing the efficiency and productivity.

HOW TO ACHIEVE 5’S: Every employee can achieve ‘5-S’ easily by having a close look at his/her work place. He/she is to ensure that  No rejected /unwanted items are lying at his/her work place.  All items are kept in proper locations/order.  Everybody should co-operative in keeping his/her and other’s area and the Machines clean.  Follow the rules and regulations and maintain required standards.

Strategies and Process of TRIPL  Work place improvements (5 – S philosophies)  Creativity club  KRA’s (improvements / suggestions)  Variable earnings – Sharing of value addition  Agreement process – organization needs  Non – conformance reporting / audits  Open / House communication meetings  Team Assessments and feedback

 Changing life style

TRIPL’S VISION AND MISSION

VISION It is our goal to be the global leader in all of the markets in which we choose to participate. We will pursue disruptive technologies to redefine our products.

MISSION  We will leverage our global expertise in mechanical, electrical, fluid handling, related components and services to provide comprehensive solutions for our customers needs – compressors, engines, electric motors, pumps, electronics, and controls.  We will be best in class and the most effective producer by utilizing the principles of TQM, 6 sigma and lean.  Our organization will modify itself in response to change in environment at a pace and amount of change that can be made without eliminating or impeding our ongoing effectiveness.  Incisive, continuous strategic thinking will be well communicated and shared by the organization.

IMPORTANT EVENTS 2000-01 TECUMSEH FULLY ACQUIRED  SRIRAM, HYDERABAD  WHIRLPOOL’S COMPRESSOR.  Facility at Faridabad, Ballabgarh.

2001-02  Development of plant in Ballabgarh.

2002-03  Amalgamation with TIPL. 2003-04  Voluntary retirement scheme.  Industrial unrest and lockout in the first half of the year.  Export obligations not met during the year & high foreign outgo.  Obligations met towards customers by importing finished goods and selling loss.

2004-05  Setting up of the CADAM center.

2005-06  Setting up of a 100% EOU for export of compressors and its parts.  Expansion in installed capacity at the Hyderabad plant.  Total foreign outgo reduced drastically.  Improvement in the market for compressors as a result of an improvement in market for air-conditioners and refrigerators.

2006-07  This year exports showed a growth of three times over previous years in volumes.  A W capacity has launched two new commercial models of MLA sense country wide competition among the engineering industries.  Won the “GREENTECH environment excellence silver award” in the countrywide competition among the engineering industries.

2007-08  Tecumseh compressors for china.  Tecumseh posts 84% rise in exports earnings.  Tecumseh India to set up rotary compressors unit.

2008-09  Won the “GREENTECH environment award” in the countrywide competition among the engineering industries.

AWARDS AND RECOGNITIONS  Hyderabad plant was awarded the commendation in safety, health & SHE conducted by CII Chennai.  Hyderabad plant achieved the GREENTECH ENVIRONMENT EXCELLENCE GOLD AWARD in the countrywide competition among the engineering achievement in environment management.

Products and Services With a widely used range of Reciprocating, Rotary and Scroll compressors for varied applications, Tecumseh caters to the entire spectrum of cooling needs for Air Conditioning, Refrigeration, and Commercial Refrigeration Application. The superior technology that is built into these compressors ensures that they operate with high-energy efficiency and at low noise levels. Compressors manufactured in India are trivialized to suit the exacting Indian conditions. Which means that they with stand wide voltage fluctuations and perform well even under extreme weather conditions.

The range includes the energy efficient AW Series, super silent AWQ Series, and the study, reliable and eco-friendly MLA series of compressors.

Product Range 1. Refrigerator Compressors.

2. Commercial Refrigeration Compressors.

3. Air-Conditioning Compressors.

4. Commercial Air-conditioning Compressors.

5. Condensing units.

COMPETITORS ANALYSIS In India TRIPL has four man competitors viz., Kirloskar, Volts, Bluestar and Carrier Air Con Ltd. TRIPL is the market leader with an overall 50% market share impressed in terms of valued. In this segment of Air-condition compressor, it has stiff competition with Kirloskar Copeland. The other manufacturers i.e., Carrier Air con is looking for divestment of their compressor division as a part of their comeback strategy they have been on a downside since 1999 it has also delisted its share during their period.

Tecumseh Refrigeration and air condition products have concerned a large chunk of the Indian market as its clients include most of the OEM’s Tecumseh has a 40% of market share of the domestic Air-condition and 30% of the refrigerator compressor market.

Kirloskar is 51:49 joint between Kirloskar brother and Copeland Corporation, a global competitor of TPC, USA. The joint venture company took over the compressors manufacturing and sell business of hermitic compressors division at Karadand a title of Kirloskar brother limited started, production, of hermetic compressor way back in 1996, at Kirloskar Wadi, it was then with a technical collaboration with TPC,USA, Which had not yet entered India, Kirloskar Copeland as part of their strategy to increase their sales have started manufacturing of condensers, which are mainly used in dairies, cold storage, industrial chillers and water coolers. The estimated market size in India being RS.25 Crores.

CHAPTER – 3 LITERATURE REVIEW

- WORKING CAPITAL CYCLE - CONCEPT OF WORKING CAPITAL - TYPES OF WORKING CAPITAL - COMPOSITION OF WORKING CAPITAL - OBJECTIVES OF WORKING CAPITAL - FACTORS DETERMING WORKING CAPITAL - RATIOS RELATING TO WORKING CAPITAL

What is Working Capital?

Firms need cash to pay for all their day-to-day activities. They have to pay wages, pay for raw materials, pay bills and so on. The money available to them to do this is known as the firm’s working capital. The main sources of working capital are the current assets as these are the short-term assets that the firm can use to generate cash. However, the firm also has current liabilities and so these have to be taken account of when working out how much working capital a firm has at its disposal.

Working capital is therefore: WORKING CAPITAL =

Current Assets

-

Current liabilities

|| stock + debtors + cash

Working capital management means management of current assets of the firm. It can be defined in simple terms as excess of current assets over current liabilities. In short it is the difference between inflow and outflow of funds. Working capital includes stock of raw material, semi finished goods including work in progress, cash in hand and bank and debtors after deducting current liabilities i.e. sundry creditors for expenses ex: salaries

and other administration expenses, interest payable to term lending institutions and other financial institutions with in 12 months and creditors for purchase of Raw Material and any short term advances towards sale of goods.

The working capital is an important part of the top half of the firm's balance sheet. It is vital to a business to have sufficient working capital to meet all its requirements. Many businesses have gone under, not because they were unprofitable, but because they suffered from shortages of working capital.

Working Capital Cycle Cash flows in a cycle into, around and out of a business. It is the business's life blood and every manager's primary task is to help keep it flowing and to use the cash flow to generate profits. If a business is operating profitably, then it should, in theory, generate cash surpluses. If it doesn't generate surpluses, the business will eventually run out of cash and expire.

The faster a business expands the more cash it will need for working capital and investment. The cheapest and best sources of cash exist as working capital right within business. Good management of working capital will generate cash will help improve profits and reduce risks. Bear in mind that the cost of providing credit to customers and holding stocks can represent a substantial proportion of a firm's total profits.

There are two elements in the business cycle that absorb cash - Inventory (stocks and work-in-progress) and Receivables (debtors owing you money).

The main sources of cash are Payables (your creditors) and Equity and Loans.

Each component of working capital (namely inventory, receivables and payables) has two dimensions: TIME and MONEY. When it comes to managing working capital - TIME IS MONEY. If you can get money to move faster around the cycle (e.g. collect monies due from debtors more quickly) or reduce the amount of money tied up (e.g. reduce inventory levels relative to sales), the business will generate more cash

or it will need to borrow less money to fund working capital. As a consequence, you could reduce the cost of bank interest or you'll have additional free money available to support additional sales growth or investment. Similarly, if you can negotiate improved terms with suppliers e.g. get longer credit or an increased credit limit; you effectively create free finance to help fund future sales.

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

CONCEPT OF WORKING CAPITAL: There are three types of working capital, Gross working capital, Net working capital and fixed working capital.

1. Gross Working Capital: It refers to the firms investment in current assets i.e., mainly stock, debtors, bills receivables and cash. This is also known as ‘Current capital concept’ or ‘Circulating capital concept’. It is represented by the sum total of the current assets of the

enterprise. It is known as Circulating capital’ because current assets of a company are changed from one form to another, for e.g. from cash to inventories, inventories to receivable to cash.

The Gross capital concept focuses attention on two aspects of current assets management: a). Optimum investment in current assets and b). Financing of current assets.

The gross capital concept takes into consideration that: every increase in the funds of the enterprise would increase its working capital. This concept is more useful in determining the rate of return on investments in working capital.

2. Networking capital: It is Excess of Current Assets over Current Liabilities. Alternatively it is that portion of the firm’s current assets, which is financed by long-term funds.

Net working capital being the difference between current assets and current liabilities is quantitative concepts.  It indicates the liquidity position of the firm.  Suggests the extent to which working capital needs may be financed by permanent sources of funds.

3. Fixed working capital:

Every firm is required to maintain a

minimum balance of cash, inventory etc, in order to meet the business requirement even in the slack seasons. This part of current assets is called as permanent or fixed working capital.

TYPES OF WORKING CAPITAL: Depending upon the nature of the funds blocked, working capital can be of two types 1. PERMANENT OR REGULAR WORKING CAPITAL 2. VARIABLE WORKING CAPITAL

PERMANENT WORKING CAPITAL: The magnitude of the current assets depends upon the firms operating cycle.

The operating cycle is a continuous process and the need for current assets is also continuously. But the level of current assets needed is not always same.

It increases or decreases overtime. However there is always minimum level of current assets which is continues required by a firm to carry out its business operations. The minimum level of current assets is called permanent or fixed working capital.

It represents the minimum amount of investment in current assets that is seemed necessary to carry on operations at time. It is also known as ‘hard core’.

It is of two kinds:

a). INITIAL WORKING CAPITAL: At its inception and during the formation period of its operations, a company must have enough cash funds to meet its obligations. In the initial year it as revenues may not be regular and adequate credit arrangements may not be available from banks, financial institutions, etc till it has established its credit standing, credit may have to be granted on sales to attract the customers.

b). REGULAR WORKING CAPITAL: It is the amount of working capital needed for the continuous operations of the business of the company. It refers to the excess of current assets over the current liabilities so that the process of conversion of cash into stock, stock into sales, receivables and collections is maintained without any breaks.

VARIABLE WORKING CAPITAL: This working capital required over and above the permanent working capital depends upon changes in production and sales are called fluctuating or variable working capital or temporary working capital. There may be changes either increase or decrease in working capital. Many the variable working capital required in season dependent.

It represents additional assets required at different times during the operating year to cover any change or variability from the normal operations. It can be of two parts: A. Seasonal working capital B. Special Working Capital

A. Seasonal working capital: The amount to be blocked due to seasonal nature of industry. Examples are package tours and summer tours. Obviously it refers

to financial

requirement that cope up during that particular season. Beyond their initial and regular circulating capital most business will require at stated intervals a

large amount of current assets to fill the demands of the seasonal busy periods.

B. Special Working Capital: Extra funds are needed to meet contingencies, festivals, and special occasions.

All business enterprises have to be prepared to meet unforeseen eventualities that may arise in the course of their operations. Therefore, they must have extra funds at ‘Unstated Periods’ to meet contingencies.

COMPOSITION OF WORKING CAPITAL: Working capital consists of Current Assets Current Liabilities

Current Assets: Current Assets are those, which can be converted into cash with one year without affecting the operations of the firm.

In the management of working capital, two characteristics of current assets must be borne in mind:

1. Short life span 2. Swift transformation into other asset forms.

The life span of current assets depends upon the time required in the activities of procurement, production, and sales.

List of Current Assets:  Cash and Bank Balances  Investments: a) Government and Other Trustee Securities b) Fixed deposits with Banks  Receivables arising out of Sales  Instalments of

Deferred receivable due within a year

 Raw Material and components used in the process of manufacture including those in transit  Stock in Process including semi-finished goods  Other consumable spares  Advance payment of tax  Advance for purchase of raw materials, components and consumable stores

 Prepaid Expenses  Deposits kept with public bodies for the business operations.

Current Liabilities: Current Liabilities are those, which are expected to fall due or mature for payment in a short period not exceeding a year and represent short term sources of funds.

List of Current Liabilities:  Short term Borrowings (including bills purchased and discounted) from a) Banks and b) Others  Unsecured Loans  Public deposits maturing in one year  Sundry creditors for raw materials and consumable stores and spares  Interest and other charges accrued but not due for payment  Deposits from Dealers, Sellers agents, etc

 Instalments of term Loans, Deferred payments, Credits, Debentures, Redeemable preference shares and long term deposits, payable within one year

 Statutory Liabilities a) P F dues b) Provision for taxation c) Sales tax and excise tax d) Obligations towards workers considered statutory e) Others  Miscellaneous Current Liabilities a) Dividends b) Liabilities for expenses c) Gratuity payable within one year d) Other provisions e) Any other payment due within one year

OBJECTIVES OF WORKING CAPITAL: The main aim of Working Capital Management is to attain a Trade-off between Profitability and Risk. Here Risk refers to profitability that a firm will become technically insolvent. Risk is commonly measured by using the amount of net working capital or the current ratio. Thus, more the new working capital, the more liquid the firm and therefore less likely it is to become technically insolvent. On the other hand, Lower levels of liquidity are associated with increasing levels of Risk. To increase the amount of profits, a firm, may sacrifice solvency i.e. taking risk

of technical

insolvency and maintain relatively low levels of current assets. When the firm does so, its profitability would improve but would be exposed to greater risk of technical insolvency. Thus, if a firm wants to increase profitability it must also increase its risk and if it wants to decrease risk, it must decrease

profitability. Therefore, Working capital management involves a Trade-off between Risk and Profitability.

FACTORS DETERMING WORKING CAPITAL: There are no hard and past rules for determining working capital of the firm.

There are several factors which influence working capital need of the firm and the factors may change from time to time. The following are the factors that generally influence the working capital requirement of firm. a. Nature & size of the business b. Trading & service orient firms have very small investment in fixed assets, but require a large sum of money to be invested in working capital. Manufacturing business requires much working capital but it also depends nature of business.



REVENUE GROWTH: The working capital requirement of the firm increase as it revenue grow. But to establish a direct relationship between volume of

revenue and working capital requires is difficult. Practically current assets will have to employ before revenue growth takes place. It is therefore necessary to make advance planning of working capital requirement for a firm on a continuous basis.



DEMAND CONDITION: Many firms are seasonal in nature and cyclical fluctuations in demand for their products and services. These business variations effect the working capital requirement i.e., temporary requirement of working capital of the firm. Under the boom conditions the firm requires more working capital. As they will invest huge funds infixed assets.

Seasonal fluctuations i.e., peek season demand in more resources a in production, in certain month, will also effect working capital requirement. Therefore financial arrangements for seasonal working capital requirement can be made in advance. The financial plan should be flexible enough to take care of some abrupt seasonal fluctuation.



OPERATING EFFICIENCY AND PERFORMANCE:

The operating efficiency and performance of the firm relates to the optimum utilization of resources at minimum cost. If the firm can efficiently controlling operating costs then it can effectively contributing to its working capital. Better utilization of resources includes profitability and internal cash profit can be utilized as a part of working capital. The availability of cash generated will be available for working capital depends upon taxation, dividend, retention policy and depreciation policy of firm.



FIRM CREDIT POLICY: Every firm must allowed credit to its customers. The credit period depends upon the norms of the industry and market conditions. Effect the credit policy

i.e. credit to customers allowed after properly

accessing the credit worthily ness of the customers and firms collections will maintain the level of book debts which anti effect the working capital of the company.

RATIOS RELATING TO WORKING CAPITAL: To evaluate the financial condition and the purpose of a firm the financial analyst needs certain yardsticks frequently use are a ratio relating two pieces of financial data to each other. Different types of ratios relating to working capital management are

1) CURRENT RATIO: The current ratio is calculated by dividing current assets by current liabilities.

Current ratio =Current assets /Current liabilities Current Assets include cash and those assets, which can be converted into cash within a year, such as marketable securities, debtors, and inventories.

Prepaid expenses are also included in current assets as they represent the payments that will not be made by the firm in the future. All obligations maturing within a year are included in current liabilities. Current liabilities include creditors, bills payable accrued expenses, short-term bank loan, income tax liability, long-term debt5, maturing in the current year.

The current ratio is a measure of firm’s short-term solvency. it indicates the availability of current assets in rupees for every one rupee of current liability. A ratio of greater that one means that the firm has more current assets than current claims against them.

2) QUICK RATIO It establishment a relationship between quick or liquid assets and current liabilities. An asset is liquid if it can be converted into cash immediately or reasonably soon without a loss of value. Cash is the most liquid asset. Other assets, which are considered to be relatively liquid and included in quick assets, are considered to be relatively liquid and included in quick assets, are debtor’s bills receivables

marketable

securities (temporary

quoted

investments). Inventories are considered to be less liquid. Inventories normally require some time to rely into cash; their value also has a tendency to fluctuate. The quick ratio is found out dividing quick assets by current liabilities.

Quick ratio = Current assets – inventories / Current liabilities.

Generally, a quick ratio of 1 to 1 is considered to represent a satisfactory current financial position. Although quick ratio is more penetrating test of liquidity than the current ratio, yet it should be used cautiously. A quick ratio of 1 to 1 or more does not necessarily imply sound liquidity position. A company with a high value of quick ratio can suffer from shortage of funds if it has slow paying its current obligation in time if it has been turning over its inventories efficiency, nevertheless, the quick ratio remains an important indeed of the firm’s liquidity.

3) INVENTORY TURNOVER RATIO: This ratio expresses the relation between the cost of goods sold during a give period and the average amount of inventory outstanding during a period. The formula for these ratios is as follows: Inventory Turnover Ratio = cost of goods sold/Avg. Inventory at cost Avg. Inventory = opening stock + closing stock / 2 Inventory turnover ratio may also be calculated by making use of the following formulation.

Inventory turnover ratio = net sales / Avg. inventory at selling price

Inventory turnover indicates the velocity with which goods move through the business. It gives the rate at which inventories are converted into sales and then into cash. Thus it helps to measure the liquidity of the firm. A high ratio indicates quick movement of inventories and the efficiency of inventory control. A low ratio, on the other hand, indicates existence of slow moving and obsolete stocks.

4) DEBITORS TURNOVER RATIO: This ratio express the relationship between net credit sales of affirm and its trade debtor’s bills receivable there by indicates the rate at which book debts are converted into cash. In other words, it shows how many days credit is outstanding by debtors or the time taken to collect the debts.

Debtors turnover ratio = Net credit sales / Avgas, debtors

To calculate the debt collection period just to following:

Debt collection period = Number of working days in a year / debtors turnover ratio

Usually the number of working days in a year is taken as 365.

The debtor’s turnover ratio or the average collection period should be compared with the period of credit allowed to judge the efficiency of the collection department. As a rule of thumb, the average collection period should no exceed 11/2 times the credit period.

Sources of working capital: Out of the total current requirement of funds some portion of current funds is more of permanent nature and its refers to fixed working capital. Balance portion of funds cyclical and its refers to variable working capital. Every industrial enterprise as to maintaining a minimum stock of raw material, work-in-progress, finished goods. Loose tools and spare parts. It always requires money for the payment of wages and salaries throughout the year.

Funds require for these is known as fixed or permanent working capital.

Depending upon the size and volume of the business, additional working capital is required for buying materials and for meeting the current operational expenses. This is the variable part of the working capital. The fixed working capital should be financed from long-term sources and variables working capital should be financed from short-term sources.

Sources of regular working capital Issue of share: Rising of funds by issue of shares has certain distinct edges over others sources, especially borrowed capital. Once procure it is not refundable except in cash of liquidation and does not create any changes on the assets of the company .so it is advantages for affirm to finance its fixed working capital out of proceeds of the issuing of shares.

Issue of debenture or long term borrowing

Debentures are fixed interest-bearing securities, besides being redeemable at the option of the company. The entire surplus after payment of debentures interest goes to the credit of equity shareholders either in the form of interest goes to the credit of equity shareholders either in the form of increased rates of dividend or in the form of increased relation. Similar advantages are also accrued if working capital is financed by long term borrowing.

Retention Retention in the form of general reserve and or credit balance of profit and loss account may also be used to finance fixed working capital

Sources of seasonal or variable working capital For firms, which are in seasonal character in their business a large amount of working capital, is required for holding inventory in peak period. But as soon as peak period is over, their working capital becomes idle. So such firms may not prefer to finance working capital from long-term sources.

They may find it convenient to meet working capital from short-term

sources may find it convenient to meet their working capital from short-term sources as follows Cash Credit This represent the over draft facilities as the hypothecation of inventories and bad debts. The cash credit system is unique to the Indian banking system. Such as flexible system of bank finance is nowhere in the world.

Discount of bills Banks discount the bills raised on the buyers of companies’ goods. This facility helps in realizing funds without wasting for the credit period to get over.

Bank guarantees A Banks Issues specific guarantee to facilities business transaction between various parts is, including government agencies.

Determination of Working capital The factors, which usually influence working capital needs in manufacturing undertaking, cover;

1. The nature of and size of business.

2. Manufacturing process, technology and facilities.

3. Competitive forces.

4. Speed of operating cycle.

5. Growth and expansion activities 6. Credit terms 7. Dividend policy 8. Production policy 9. Attitude towards policy 10.Inventory

procedures,

management attitude etc.,

depreciation

policy,

business

cycle

11.Infrastructure the abysmal economic and physical infrastructure in India also effects to working capital needs adversely prolonging the operating cycle

Working capital management is an integral part of overall corporate management. The effective management of working capital like other areas of management requires a clear statement of goals to be pursed and responsibility to be allocated. Cash management and short-term loans along with the level of debtors are the responsibility of financial executives. Inventory and credit control are managed in the other departments these division of responsibilities makes a coordinate approach to working capital management.

Profitability and liquidity are the twin objectives of working capital management. Profitability and liquidity frequently conflict with each other. Attempts to procedure maximum profitability and out of various elements of working capital do create severe liquidity problems. At the same time, over concentration on liquidity does dilute profits.

Management of working capital establish the best possible credit off

between the profitability of net current assets employed and the ability to pay current liabilities as there fall due. Working capital management includes 1. Cash management 2. Receivable management 3. Inventory management

CHAPTER - 4 DATA ANALYSIS

- CHART OF THE NET WORKING CAPITAL - CHART OF THE SALES TO WORKING CAPITAL TURNOVER RATIO - CHART OF THE DEBTORS TURNOVER RATIO - CHART OF THE CURRENT RATIO - CHART OF THE QUICK RATIO - CHART OF THE COMPOSITION OF CURRENT ASSETS

- PROFIT AND LOSS ACCOUNTS - COMPARATIVE BALANCE SHEETS

Size and growth of current assets and liabilities and Net working capital of TRIPL during the period 2003-2004 to 2007-2008

(All amounts are in thousands)

Year Current Growth Current Growth Net Assets Rate Liabilities Rate W.C (%) (%) 200405 200506 200607 200708 200809

Growth of W.C (%)

1500977

100

862668

100

638301

100

1688733

112.5

1029208

119

659525

103

2307604

153.74

1155154

134

180

2150110

143.24

1359165

157

115245 0 790945

2011272

133.99

1470284

170

540988

84

123

Asset,libilities And Working Capital

2500000 2000000 1500000 100Rs

Year

1000000

Current Assets Current Liabilities

500000 0 1

2

3 4 5 6 2004-2009 Years

7

WORKING CAPITAL TURNOVER RATIO (All amounts are in thousands)

Year 2004 – 2005 2005 – 2006 2006 – 2007 2007 – 2008 2008 – 2009

Sales

Networking Capital

Ratio

2648791

638309

4.15

3423153

659525

5.19

4225506

1152450

3.69

3901375

790945

4.93

4748354

540988

8.77

Sales To Working Capital Ratio 10 9 8 7 6 5 4 3 2 1 0

2 0 0 9

0 8

–

2 0 0 8 2 0

0 7

–

2 0 0 7 2 0

2 0

0 6

–

2 0 0 6 –

0 5 2 0

2 0

0 4

–

2 0 0 5

Ratio

Turnover Ratio: Debtors Turnover Ratio expresses the relationship between debtors and sales. A high Debtors Turnover Ratio or low Debt collection period is indicative of sound credit management policy.

Table shows Debtors Turnover Ratio of TRIPL during the period 20032004 to 2007-2008 (All amounts are in thousands)

Year

Net Credit Sales

Avg. Debt

Ratio

2004 – 2005

2648791

567931

4.67

2005 – 2006

3043448

682289

4.46

2006 – 2007

3925325

612590

6.24

2007 – 2008

3614471

442498

8.17

2008 – 2009

4417677

47842

9.34

Debitor Turnover Ratio 10 8 6 4 2 0

Ratio

2004 – 2005 – 2006 – 2007 – 2008 – 2005 2006 2007 2008 2009

From the above table, it is observed that the TRIPL’s debtor’s turnover ratio shows a good sigh. The company noted a maximum ratio of 9.34 in the year 2008 – 2009 and the maximum ratio of 4.46 in the year of 2004 -05.

If we observed the above table the ratio is increasing from 4.46 in the year 2005-2006 to 9.34 in the year 2008-09 in the year but it is decreased to 4.46 in the year 2005-06. It shows a good sign for the company.

Current Ratio: It is the ratio of the current assets current liabilities this ratio is used to know the company’s ability to meet its current obligations. The standard norm for the current ratio is 2:1 Current ratio = current Assets / Current liabilities.

Table showing current ratio of TRIPL during the period 2004-2005 to 2008 -2009

(All amounts are in thousands)

Year

Current Assets

Current Liabilities

Ratio

2004 – 2005

1500977

862668

1.74

2005 – 2006

1688733

1029208

1.64

2006 – 2007

2307604

1155154

1.99

2007 – 2008

2150110

1359165

1.54

2008 – 2009

2009547

1427828

1.40

Current Ratio 2.5 2 1.5 1 0.5 0

Ratio

2004 – 2005 – 2006 – 2007 – 2008 – 2005 2006 2007 2008 2009 It is observed that the TRIPL’s current ratioowing a increasing trend;

the company’s liquidity position is satisfactory The current ratio increased slightly up to 2007. But in 2008 it declined because of increase in current liabilities, and then it started to decrease further in2009 as 1.40. if the company maintains to increase the ratio it can meet obligations.

Quick Ratio: Quick ratio is relation between quick assets and current liabilities. The term quick assets, which can be converted into cash with a short notice. This category also includes cash bank balances short – term investments and receivables.

Quick ratio = Quick Assets / current liabilities Table showing quick ratio of TRIPL during the period 2004 - 2005 to 2008– 2009

(All amounts are in thousands)

Current

Year

Current Assets

2004 – 2005

870459

862668

1.01

2005 – 2006

923353

1029208

0.89

2006 – 2007

1056852

1155154

0.91

2007 – 2008

1005863

1359165

0.74

2008 – 2009

1082902

1427828

0.76

Liabilities

Ratio

Quick Ratio 1.5 1

Ratio

0.5 0 2004 – 2005 – 2006 – 2007 – 2008 – 2005 2006 2007 2008 2009

It is observed from the table that the TRIPL’s Quick Ratio is satisfactory.

The company has noted a maximum ratio of 1.01 in the year of 2006 – 2007.

Except the 2004 year, the remaining is below the standard of the norm 1:1.

But we observed the ratio of the company, it is decreasing gradually. so it is a bad sign for the company.

Composition of current Assets (all the amounts are in thousands)

Particulars

2004 – 05 630518

2005 – 06 765380

2006 – 07 1250752

2007 – 08 1144247

2008 – 09 926645

Avg. 48.16

Inventory Sundry

(42%) 708107

(45.32%) 656472

(54.2%) 568707

(53.41%) 316288

(46.07%) 523360

30.17

Debtors Cash and

(47.17%) 56675

(38.87%) 35502

(24.64%) 25034

(14.71%) 58827

(23.02%) 17636

4.11

Bank Loans &

(3.77%) 105677

(2.1%) 29032

(1.08%) 93380

(2.74%) 192467

(2.74%) 204545

6.38

Advances Other

(7.04%) --

(1.71%) 202347

(4.04%) 369731

(8.95%) 438281

(10.62%) 339086

12.94

1500977

1688744

2307604

2150110

2011272

(100%)

(100%)

(100%)

(100%)

(100%)

current Assets Total

PROFIT AND LOSS ACCOUNT:

The income statement is also called as income statement, it is considered to be the most useful of all financial statements. It prepared by a business concern in order to know the profit earned and loss sustained during a specified period. It explains what has happened to a business as a result of operations between two balance sheet dates. For this purpose it matches the revenues and cost incurred in the process of earning revenues and shows the net profit earned or loss suffered during a particular period.

The nature of Income which is a focus of the income statement can be well understood if business is taken as an organization that uses “Input” to produce “Output”. The output of the goods and services that the business provides to its customers. The values of these outputs are the goods and services that the business provides to its customers. The values of these outputs art the amounts paid by the customers for them. These amounts are called “revenues” in the accounting. The inputs are the economic resources used by the business in providing these goods and services. These are termed “expenses” in accounting.

Statements of profit & loss for the year ended Dec 31, 2005 (All amount in thousands of rupees)

PARTICULARS

Schedule

2004

2005

INCOMES sales and services sales (gross) less: excise duty Net sales Add: service Incomes

1,983,391 286,365 1,697,026 224,878 1,921,904 125,693 2,047,597

3,015,714 366,923 2,648,791 173,847 2,822,638 114,172 2,936,810

1,232,971 (93,224) 29,236 426,585 314,637 157,225 24,758 5,300

1,737,661 (28,949) 32,655 482,580 382,604 143,832 25,793 2,759

2,097,488

2,778,935

(49,891) --------

157,875 ----(46,315)

Net profit for the year Profit & loss a/c beginning of the year

(49,891) (420,294)

111,560 (470,185)

Profit & loss a/c end of the year Earnings per share basic & diluted

(470,185)

(358,625) 5.60

other incomes

13 TOTAL(A)

EXPENDITURES Material costs decrease/increase in stock excise duty on stocks, scrap sales etc., employee costs manufacturing and other expenses Depreciation Interest miscellaneous expenditure written off TOTAL(B) profit before tax(A-B) TAXATION Deferred

14 15 16 17 18

Statements of profit & loss for the year ended Dec 31, 2006 (All amounts in thousands of rupees)

PARTICULARS

Schedule

2005

2006

3,015,714 366,923 2,648,791 173,847 2,822,638 114,172 2,936,810

3,423,153 379,705 3,043,448 102,182 3,145,630 258,985 3,404,615

1,737,661 (28,949) 32,655 482,580 382,604 143,832 25,793 2,759

2,219,601 (59,818) 1,933 588,770 378,026 174,202 44,428 ----

2,778,935

3,347,142

157,875

57,473

----(46,315)

(86) (40,971)

Net profit for the year Profit & loss a/c beginning of the year

111,560 (470,185)

16,588 (358,625)

Profit & loss a/c end of the year Earning per share basic & diluted

(358,625) 5.60

(342,037) 0.80

INCOMES sales and services sales (gross) less: excise duty Net sales Add: service Incomes other incomes

13 TOTAL(A)

EXPENDITURES Material costs decrease/increase in stock excise duty on stocks, scrap sales etc., employee costs manufacturing and other expenses Depreciation Interest miscellaneous expenditure written off TOTAL(B) Profit before tax(A-B) TAXATION current(Net of excess provisions of earlier year written back rs.5086(2002 nil) Deferred

14 15 16 17 18

Statements of profit & loss for the year ended Dec 31, 2007 (All amounts in thousands of rupees)

PARTICULARS

Schedule

2006

2007

3,423,153 379,705 3,043,448 102,182 3,145,630 258,985 3,404,615

4,255,506 330,181 3,925,325 66,668 3,991,993 426,626 4,418,619

2,219,601 -59,818 1,933 588,770 378,026 174,202 44,428 -----

3,387,645 -315,934 17,657 668,065 446,527 208,101 36,532 ------

3,347,142

4,448,593

57,473

(29,974)

(86) (40,971)

-----(3,779)

Net profit for the year Profit & loss a/c beginning of the year

16,588 (358,625)

(33,753) (342,037)

Profit & loss a/c end of the year Earnings per share basic & diluted

(342,037) 0.80

(375,790) 1.55

INCOMES sales and services sales (gross) less: excise duty Net sales Add: service Incomes other incomes

13 TOTAL(A)

EXPENDITURES Material costs decrease/increase in stock excise duty on stocks, scrap sales etc., employee costs manufacturing and other expenses Depreciation Interest miscellaneous expenditure written off

14 15 16 17 18

TOTAL(B) Profit before tax(A-B) TAXATION current(Net of excess provisions of earlier year written back rs.5086(2002 nil) Deferred

Statements of profit & loss for the year ended Dec 31, 2008 (All amounts in thousands of rupees) PARTICULARS INCOMES

Schedule

2007

2008

sales and services sales (gross) less: excise duty Net sales Add: service Incomes other incomes

13 TOTAL(A)

4,255,506 330,181 3,925,325 66,668 3,991,993 426,626 4,418,619

3,903,005 288,534 3,614,471 67,362 3,681,833 493,559 4,175,392

EXPENDITURES Material costs decrease/increase in stock excise duty on stocks, scrap sales etc.,

14 15

3,387,645 -315,934 17,657

employee costs manufacturing and other expenses Depreciation Interest miscellaneous expenditure written off

16 17

668,065 446,527 208,101 36,532

2,828,104 186,135 10,414 612,4 67 508,751 240,224 69,032

4,448,593

4,455,127

(29,974)

(279,735)

------(3,779)

(4000) (8056) ----

Net profit for the year Profit & loss a/c beginning of the year

(33,753) (342,037)

(291,791) (375,790)

Profit & loss a/c end of the year Earning per share basic & diluted

(375,790) 1.55

(667,581) 13.25

18

TOTAL(B) Profit before tax(A-B) Provision for taxation Current Tax Fringe benefit Tax Deferred

Statements of profit & loss for the year ended Dec 31, 2009 (All amounts in thousands of rupees) PARTICULARS INCOMES

Schedule

2008

2009

sales and services sales (gross) less: excise duty Net sales Add: service Incomes

3,903,005 288,534 3,614,471 67,362 3,681,833 493,559 4,175,392

4,748,354 330,678 4,417,676 37,428 4,455,104 386,261 4,841,365

2,828,104 186,135 10,414 612,467 508,751 240,224 69,032

3,722,053 88,800 25,085 685,159 466,859 292,689 133,955

4,455,127

5,414,600

Profit before tax(A-B) Provision for taxation current taxation fringe benefit tax

(279,735)

(573,235)

(4000) (8056)

---(7,355)

Net profit for the year Profit & loss a/c beginning of the year

(291,791) (375,790)

(580,590) (667,581)

Profit & loss a/c end of the year Earnings per share basic & diluted

(667,581) 13.25

(1,248,171) 26.37

other incomes

13 TOTAL(A)

EXPENDITURES Material costs decrease/increase in stock excise duty on stocks, scrap sales etc., employee costs manufacturing and other expenses Depreciation Interest miscellaneous expenditure written off

14 15 16 17 18

TOTAL(B)

Balance sheet Balance sheet is a statement of financial position of a business at a specified moment of time. It represents all assets own by the business at a particular

moment of time and the claim of the owners and outsiders against those assets at that time. It in a way of the financial condition of the business at that time.

The important distinct an income statement and balance sheet is that the income statement is for a period while balance which is for a particular date.

Income statement is therefore a flow report, as contrasted with the balance sheet which is a static report

Comparative Balance Sheets The comparative balance sheet analysis is the study of the same items, group of items and computed items in two or more balance sheets of the same enterprise on different dates. The changes in periodic balance sheet items reflect the conduct of a business. The changes can be observed by comparison of the balance sheet at the beginning and at the end of a period and these changes can help in informing an opinion about the progress of and enterprise.

Balance Sheet of Tecumseh Products India Pvt. Ltd. During the year 2003- 2004 **All amounts are in thousands 2003 Amount SOURCES OF FUNDS Share Holders Funds Share Capital Reserves and Surplus Advance share Application Amount

0 143747

(A)

2209181

2352928

143747

(B) (A +B) = ( C )

166539 0 166539 2375720

200909 180000 380909 2733837

34370 180000 214370 358117

25 0 129 15

189464 446313 1448330 3693

1978628 588836 1389792 248639

83985 142523 -58538 212246

856 1485579 1040 0

0 1638431 1040 97432

-856 156852 0 97432

4 32 4 583 10 100 10 0 100

561630 387771 24837 103140

630518 708107 56675 105677

68888 320336 31838 2537

12 83 128 2

1077378

1500977

423599

39

614498 46723 661221 417053 2759 470185

809145 53523 862668 638309 0 358625

194647 6800 201447 221256 -2759 -111560

32 15 30 53 100 24

2375720

2733837

358117

15

(D) (E) (F)

(G) Less: Current Liabilities and Provisions Current Liabilities Provisions (H)

Total

%

1990534 362394

APPLICATION OF FUNDS Fixed Assets Gross block LESS: Accumulated Depreciation Net Block ADD: Capital Work in progress (including Capital Advances), Net Fixed Assets held for disposal

Net Current Assets Miscellaneous Expenditure (written off) Profit and Loss Account

Inc/Dec Amount

1990534 218647

Loan Funds Secured Loans Unsecured Loans

Investments Deferred Tax Asset-Net Current Assets, Loans and Advances Inventories Sundry Debtors Cash and bank balances Loan and Advances other current Assets

2004 Amount

(G - H) = (I) (J)

(D+E+F+I+J)

0 66 7

Interpretation (2003-2004):

1. The comparative balance sheet of the company during the year 20032004 records that the current assets have increased by 423599 thousands i.e.,39% 2. Because of increase in current assets we can say that the short – term solvency of the company is good.

3. The current liabilities have increased by 201447 thousands i.e.,30.4% 4. Fixed assets have decreased by 153708 thousands i.e.,10% 5. The shareholders funds of the company have increased when compared to previous year. So we can say that long-term solvency of the company is satisfactory.

6. There is increase in working capital of 222152 thousands when compared to the previous year. So we can say that the financial position of the company is good.

Balance Sheet of Tecumseh Products India Pvt. Ltd. During the year 2004- 2005 **All amounts are in thousands 2004 Amount SOURCES OF FUNDS Share Holders Funds Share Capital Reserves and Surplus Advance share Application Amount

111461 0

5 0

(A)

2352928

2464389

111461

5

(B) (A +B) = ( C )

200909 180000 380909 2733837

136179 293101 429280 2893669

-64730 113101 48371 159832

-32 63 13 6

1978628 588836 1389792 248639 1638431 1638431 1040 97432

2401884 763652 1638232 197374 1835606 0 1835606 40 56461

423256 174816 248440 -51265 197155 0 197175 -1000 -40971

21 30 18 21 12 0 12 -96 -42

630518 708107 50675 105677 0 1500977

765380 656472 35502 231379 0 1688733

134862 -51635 -15173 125702 0 187756

21 -7 -31 118 0 -13

(G - H) = (I)

809145 53523 862668 638309

904025 125183 1029208 659525

94880 71660 166540 21216

12 134 19 3

(J)

358625

342037

-16588

-5

2733837

2893669

159832

6

(D) (E) (F)

(G) Less: Current Liabilities and Provisions Current Liabilities Provisions (H)

Total

%

2101995 362394

APPLICATION OF FUNDS Fixed Assets Gross block LESS: Accumulated Depreciation Net Block ADD: Capital Work in progress (including Capital Advances), Net Fixed Assets held for disposal

Net Current Assets Miscellaneous Expenditure (written off) Profit and Loss Account

Inc/Dec Amount

1990534 362394

Loan Funds Secured Loans Unsecured Loans

Investments Deferred Tax Asset-Net Current Assets, Loans and Advances Inventories Sundry Debtors Cash and bank balances Loan and Advances other current Assets

2005 Amount

(D+E+F+I+J)

Interpretation (2004-2005) 1. The comparative balance sheet of the company during the years 20042005 records that the current assets have increased by 187756 thousands i.e.,13% 2. Because of increase in current assets we can say that the short – term solvency of the company is good.

3. The current liabilities have increased by 166540 thousands i.e.,19% 4. Fixed assets have decreased by 197175 thousands i.e.,12% 5. The shareholders funds of the company have increased when compared to previous year. So we can say that long-term solvency of the company is satisfactory.

6. There is an increase in working capital of 212216 thousands when compared to the previous year. So we can say that the financial position of the company is good.

Balance Sheet of Tecumseh Products India Pvt. Ltd. During the year 2005- 2006 **All amounts are in thousands 2005 Amount SOURCES OF FUNDS Share Holders Funds Share Capital Reserves and Surplus Advance share Application Amount

99866

5 0

(A)

2464389

2564255

99866

4

(B) (A +B) = ( C )

136179 293101 429280 2893669

324407 549874 874281 3438536

188228 256773 445001 544867

138 88 104 19

2401884 763652 1638232 197374 1835606 0 1835606 40 56461

2733711 964819 1768892 87601 1856493 1081 1857574 40 52682

331827 201167 130660 -109773 20887 1081 21968 0 -3779

14 26 8 -56 1

765380 656472 35502 202347 29032 1688733

1250752 568707 25034 369731 93380 2307604

485372 -87765 -10468 167384 64348 618871

63 -13 -29 83 222 37

(G - H) = (I)

904025 125183 1029208 659525

1001083 154071 1155154 1152450

97058 28888 125946 492925

11 23 12 75

(J)

342037

375790

33753

10

2893669

3438536

544867

19

(D) (E) (F)

(G) Less: Current Liabilities and Provisions Current Liabilities Provisions (H)

Total

%

2201861 362394

APPLICATION OF FUNDS Fixed Assets Gross block LESS: Accumulated Depreciation Net Block ADD: Capital Work in progress (including Capital Advances), Net Fixed Assets held for disposal

Net Current Assets Miscellaneous Expenditure (written off) Profit and Loss Account

Inc/Dec Amount

2101995 362394

Loan Funds Secured Loans Unsecured Loans

Investments Deferred Tax Asset-Net Current Assets, Loans and Advances Inventories Sundry Debtors Cash and bank balances Loan and Advances other current Assets

2006 Amount

(D+E+F+I+J)

1 0 7

Interpretation (2005-2006)

1. The comparative balance sheet of the company during the years 2005-2006 records that the current assets have increased by 618871 thousands i.e.,37% 2. Because of increase in current assets we can say that the short – term solvency of the company is good.

3. The current liabilities have increased by 125946 thousands i.e.,12% 4. Fixed assets have increased by 21968 thousands.

5. The shareholders funds of the company have increased when compared to previous year. So we can say that long-term solvency of the company is satisfactory.

6. There is increase in working capital of 492925 thousands when compared to the previous year. So we can say that the financial position of the company is good.

Balance Sheet of Tecumseh Products India Pvt. Ltd. During the year 2006- 2007 **All amounts are in thousands 2006 Amount

2007 Amount

Inc/Dec Amount

2201861 362394

2201861 362394

0 0

0 0

(A)

2564255

2564255

0

0

(B) (A +B) = ( C )

324407 549874 874281 3438536

384509 1003594 1388103 3952358

60102 453720 513822 513822

19 83 15 15

3441023 1187425 2253598 187512

707312 222606 484706 99911

26 23 27 114

(D) (E) (F)

2733711 964819 1768892 87601 1856493 1081 1857574 40 52682

0 2441110 40 52682

-1081 583536 40 52682

0 31 0 0

(G)

1250752 568707 25034 93380 369731 2307604

1144247 316288 58827 192467 438281 2150110

-106505 -252419 33793 99087 68550 -157494

-9 -44 135 106 19 -7

(H) (G - H) = (I)

1001083 154071 1155154 1152450

1192012 167153 1359165 790945

190929 13082 204011 -361505

19 8 18 -31

(J)

375790

667581

291791

78

(D+E+F+I+J)

3438536

3952358

513822

15

SOURCES OF FUNDS Share Holders Funds Share Capital Reserves and Surplus Advance share Application Amount Loan Funds Secured Loans Unsecured Loans

APPLICATION OF FUNDS Fixed Assets Gross block LESS: Accumulated Depreciation Net Block ADD: Capital Work in progress (including Capital Advances), Net Fixed Assets held for disposal Investments Deferred Tax Asset-Net Current Assets, Loans and Advances Inventories Sundry Debtors Cash and bank balances Loan and Advances other current Assets Less: Current Liabilities and Provisions Current Liabilities Provisions Net Current Assets Miscellaneous Expenditure (written off) Profit and Loss Account

Total

%

Interpretation (2006-2007):

1. The comparative balance sheet of the company during the years 20062007 records that the current assets have decreased by 157494 thousands i.e.,7% 2. Because of decrease in current assets we can say that the short – term solvency of the company is not good.

3. The current liabilities have increased by 204011 thousands i.e., 18% 4. Fixed assets have increased by 583536 thousands i.e.,10% 5. The shareholders funds of the company have increased when compared to previous year. So we can say that long-term solvency of the company did not yield any increase when compared to previous year.

6. There is an decrease in working capital of 361505 thousands compared to the previous year.

7. Hence the financial position of the company is not satisfactory.

Balance Sheet of Tecumseh Products India Pvt. Ltd. During the year 2007 – 2008

**All amounts are in thousands 2007 Amount SOURCES OF FUNDS Share Holders Funds Share Capital Reserves and Surplus Advance share Application Amount

%

2201861 362394

0 0

0 0

(A)

2564255

2564255

0

0

(B) (A +B) = ( C )

384509 1003594 1388103 3952358

318621 1202681 1501302 4145556

-65888 259087 193199 193198

17 26 14 5

3441023 1187425 2253598 187512

3668021 1477290 2190732 70620

226998 289865 -62866 -116892

7 24 -3 -62

0 2441110 40 52682

0 2261352 40 52682

0 -179758 0 0

0 -7 0 0

1144247 316288 58827 438281 192467

926645 629396 17637 231325 204544

-217602 313108 -41190 -206956 12077

-19 99 -70 -47 6

APPLICATION OF FUNDS Fixed Assets Gross block LESS: Accumulated Depreciation Net Block ADD: Capital Work in progress (including Capital Advances), Net Fixed Assets held for disposal (D) (E) (F)

Inc/Dec Amount

2201861 362394

Loan Funds Secured Loans Unsecured Loans

Investments Deferred Tax Asset-Net Current Assets, Loans and Advances Inventories Sundry Debtors Cash and bank balances Loan and Advances other current Assets

2008 Amount

(G)

2150110

2009547

-140563

-7

(G - H) = (I)

1192012 167153 1359165 790945

1225515 202313 14127828 581720

33503 35160 68663 -209225

3 21 5 -26

(J)

667581

1249702

582181

87

3952358

4145556

193198

5

Less: Current Liabilities and Provisions Current Liabilities Provisions (H) Net Current Assets Miscellaneous Expenditure (written off) Profit and Loss Account

Total

(D+E+F+I+J)

Interpretation (2007-2008)

1. The comparative balance sheet of the company during the years 20072008 records that the current assets have decreased by

-157497

thousands i.e.,7% 2. Because of decrease in current assets we can say that the short – term solvency of the company is not good.

3. The current liabilities have increased by 204011 thousands i.e.,18% 4. Fixed assets have decreased by 179758 thousands i.e.,7%

5. The shareholders fund of the company is decreased when compared to previous year.

6. There is a decrease in working capital of 2029225 thousands compared to the previous year.

7. Hence the financial position of the company is not satisfactory.

CHAPTER - 5

SUMMARY & FINDINGS

 SUMMARY  FINDINGS & SUGGESTIONS  BIBLIOGRAPHY

SUMMARY

Tecumseh Products Company’s (TPC) global vision of providing Comfort, health and convenience to million worldwide, gives an impetus for the company’s steady diversification into new frontiers. And today, this cooling giant’s products are available in over a 100 countries across the globe.

TPC entered India through a dual acquisition of SIEL compressors limitedHyderabad and the compressor division of whirlpool India limitedHyderabad and the compressor division of whirlpool India limited at Ballabgrah in July 1997.

Tecumseh products India private limited (TRIPL) is a fully owned subsidiary of TPC. Tecumseh products India private limited is largest independent manufacturer of compressors in the country.

Since acquisition, TPC has invested about US&85 million into its facilities in India for capacity and quality infrastructure improvement.

India’s No.1 Today TRIPL is the largest independent manufacturer of both Air conditioner and Refrigerator compressor in India.

Testimonials to Excellence The superior products and services offered by TRIPL have made it the first choice of leading multinational brands in the Air conditioning and Refrigeration business in India. TRIPL has also begun exports to Middle East, U.S.A, Pakistan, Bangladesh, Sri Lanka and other countries.

Just the Right compressor

Covering the entire gamut of cooling needs, Tecumseh’s range of compressors is widely used in Air conditioners, Refrigerators, and commercial Refrigeration Applications.

Hyderabad facility: This is the first compressor manufacturing facility in India. Built on 55 acres of land, the manufacturing facility at Hyderabad, Andhra Pradesh caters to Air-conditioning and commercial Refrigeration Application. The facility is both ISO 9001 and 14001 certified.

One of the four global technology Development centers (TDS) of TPC is located in this facility.

The in-house Application Engineering testing facility is well equipped to optimize and ensure performance improvement of the appliance.

Ratio Analysis: The ratio analysis is one of the most powerful tools of financial analysis. it is the process of establishing and interpreting various ratios (Quantities relationship between figures and groups of figures).it is with the help of ratios that the financial statements can be analysis more clearly and decision are made from such analyses.

A ratio is simple arithmetic expression of the relationship of one to another.

According to accountants Handbooks by Ixen and Bedford a ratio is an expression of the quantities relationship between two numbers.

Types of Ratios: i. Liquidity Ratios ii. Leverage Ratios iii. Profitability Ratios iv. Activity Ratios

i.

Liquidity Ratio Measures firms ability to meet its obligation; leverage ratios show the proportions of the debt equity in financing the firm’s assets; activity ratios reflect the firm efficiency in utilizing its assets, and profitability ratios measure overall performance and effectiveness of the firm.

ii.

Leverage Ratio

The short-term creditors, like bankers and suppliers of raw materials, are more concerned with the forms current debt paying ability. On the other hand, long term creditors like debenture holder’s financial institution etc. are more concerned with the firm’s long term financial strength. A firm should have strong short as well as long-term financial position.

iii.

Profitability Ratio Profitability refers to net result of business operation two types of ratios are used to measure profitability. These are profit margin ratios rate of return ratios. While profit margin ratios shows the relationship between profit and investment.

The important profit margin ratios are: Gross profit Ratio, Operating profit ratio, Net profit Ratio.

The important rate of return ratios are:

Return on assets Return of capital employed, Return on shareholders’ equity, Return on equity share capital.

iv.

Activity Ratio These ratios are also referred to activity ratios asset management ratios. They measure how efficiency a firm employs the assets. They are based on the relationship between level of activity and levels of various assets. The important turnover ratios are inventory turnover ratio, debtors’ turnover ratio, creditors’ turnover ratio, fixed turnover ratio, total assets turnover ratio.

Comparative balance sheet

The comparative balance sheet analysis is the study of the trend of the same items, group of items and computed items in two or more balance sheets of the same enterprise on different dates. The changes in periodic observed by comparison of the balance sheet at the end of a period and these changes can help in informing an opinion about the progress of and enterprise.

While interpreting comparative balance sheet the interpreter is expected to study the following aspects;-

1. Current interpreting comparative and liquidity position 2. Long term financial position 3. Profitability of the concern

Findings & Suggestions

1. The TRIPL’s net working capital is satisfactory between the years 2003- 2006 since it shows increasing trend ; but after that it is in declining position

2. The current ratio of TRIPL is satisfactory during the period of study 2003 – 2004 to 2005-2006. It is increased from 1.74 to 1.99 but after that it is declining.

3. The average quick ratio of TRIPL is not good though the quick ratio is showing maximum value of 0.91 in the year 2005-06 and then it is declining to be deal 4. Fixed assets turnover ratio of TRIPL increased from .84 times to 1.95.

The company has to maintain this.

5. Inventory turnover ratio of TRIPL is also increased gradually, without any fit falls up to 2005-06. But in the year 2005-06 it is declined to 3.02, and again it has increased to 4.02 in the year 2007-2008. Good inventory management is good sign for efficient management 6. Total Assets turnover ratio of TRIPL is not satisfactory because it is always below one, except in the year 2007 – 2008 having a value of 1.03 7. Return on investment is not satisfactory. This indicates that the company’s funds are not being utilized in a better way.

8. Return on Net worth is not satisfactory since it is decreased from 4.95 to 0.69 in the year 2004 -2005, -1.34 in the year 2005 – 2006, -11.61 in the year 2005 – 2006 and -23.1 in the year 2007 – 2008 9. The TRIPL’S Net Profit Ratio is showing negative profit in the year 2005 – 2006. These event is an expected one because since from the previous two years it is showing the decline stage in Net Profit Ratio 10.The TRIPL’S Gross Profit Margin of TRIPL increases in decreases due to the increase in sales 11.Profit Margin of TRIPL is decreasing and showing negative profit because there is increase in the price of copper 12.The TRIPL’S Net Working Capital Ratio is satisfactory.

13.The total Debt ratio is increased from 0.14 to 0.59 during the years 2001 to 2006 this means the company is borrowing money from the banks well.

14.The TRIPL’s return on Total Assets ratio shows a negative sign in the year 2005 – 2006

15.The Operating Ratio of TRIPL increase from 64.24 to 101.16 in the year 2005 -06, 114.3 in the year 2006-07 and reached to 124.1 in the year 2007-08. So the company has to reduce its operating costs.

16.The Operating Ratio of TRIPL isn’t satisfactory. Due to increase in cost of production, this ratio is decreasing. So the has to reduce its office administration expenses 17.Improve position funds should be utilized properly.

18.Better Awareness to increaser the sales are suggested.

19.Cost cut down mechanics can be employed.

20.Better production technique can be employed.

BIBLIOGRAPHY

www.evanimics.com www.damodaram.com www.investopedia.com

www.valuebasedmanagement.net www.nepz.org www.Lsbn.ac.uk www.lmu.ac.uk www.isixsigma.com www.tecumsehindia.com

BOOKS Financial Management Written By M.Y. Khan & P.K. Jain Financial Management Written By Prasanna Chandra Financial Management Written By I. M. Pandey Financial Management Written By S. N. Maheswari