Asset Mgmt 3rd Review

8/2/2019 Asset Mgmt 3rd Review

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A STUDY ON ASSET MANAGEMENTOF SHANTHIGRAM DAIRY

PROMOTION AT NATHAM


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OBJECTIVES OF THE STUDY

To study the assets management of the firm.

To analyze the changes that has been taken place in

relation to assets.

To study the cash position of the firm.

To assess the inventory level of the firm.

To study the performance efficiency of the debtors

through receivables management of the firm.


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SCOPE OF THE STUDY

The scope is to drive meaningful applicationof theory for actual implementation. As the studyis focus on identifying the present potential of the

companys asset management methods and aims.The asset management of company can bemeasured through ratio analysis, correlationanalysis, trend analysis and common size

statement analysis. This study also gives the ideaabout industrial focus and efficient managementof assets.


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NEED FOR THE STUDYAssets are essential that should be properly

safeguarded and correctly accounted. Proper control

of assets can make a substantial contribution to the

efficiency of a business. The study is helpful tomanagement in reduction of cost to manage their

assets. The researcher made efforts to identify the

performance of the asset management in Shantigram

Dairy Promotion. The study facilitates themanagement to identify unprofitable operations and

improve overall profitability.


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RESEARCH METHODOLOGY

Research Design

Analytical Research

Method of Data CollectionSecondary Data

Period of study

01st January 2011 to 30th April 2011


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Tools for Analysis

Ratio analysis,

Common size statement analysis,

Trend Percentage Analysis,

Correlation analysis.


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Data Analysis and Interpretations


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RATIO ANALYSIS1. Asset Turnover Ratio

2. Fixed Asset Turnover Ratio

3. Receivable Turnover Ratio

4. Accounts Payable Turnover Ratio

5. Inventory Turnover Ratio

6. Cash Conversion Cycle (Operating Cycle)

7. Days Inventory Outstanding (DIO)

8. Days Payable Outstanding (DPO)

9. Days Sales Outstanding (DIO)
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Asset Turnover Ratio

SalesAsset turnover ratio=-------------------------------

Total Assets

Year

Sales

( )

Total Assets

( )

Total Asset

Turn Over

Ratio (%)

2006-07 61096902 8039257.07 7.592007-08 76883826 11022527.5 6.98

2008-09 102667346 13865007 7.41

2009-10 136337560 14915281 9.14

2010-11 153531070 16891827.85 9.09
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INTERPRETATION:

From the above table its shows that the Assets turnoverratio during the study period. During this study period Asset

turnover ratio is in fluctuating trend ranges from 6.98

percentages in 2007-08 and 9.14 percentages in 2009-10 due tothe efficiency of machinery is decreased and the sales level is

increased year to year.


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Receivable Turnover Ratio

Credit sales

Receivable turnover ratio = ---------------------------------------------

Average Accounts Receivables

Year Sales

( )

Closing

Debtors( )

Debtor Turnover Ratio

(%)

2006-07 61096901.97 2494448.88 24.49

2007-08 76883825.94 4412345.9 17.42

2008-09 102667345.5 6571894.92 15.62

2009-10 136337560 6361720 21.43

2010-11 153531069.8 7538576.6 20.36
http://e/Lakshmanaraj%20Project%20Works/Asset%20Management/asset%20mgt/Asset%20management%20ratios.htmhttp://e/Lakshmanaraj%20Project%20Works/Asset%20Management/asset%20mgt/Asset%20management%20ratios.htm


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INTERPRETATION

The above table shows that the receivable turnover ratio is

fluctuating trend during the study period. During the study period

the debtor turnover ratio is fluctuating trend ranges from 15.62

percentages in 2008-09 and 24.49 percentages in 2006-07 due to the

company collection policy is changed for the firm maintenance.


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Accounts Payable Turnover Ratio

Net Credit Purchases

Accounts payable Turnover Ratio = -------------------------------------Average Creditors

Year

Net credit

purchase

( )

Average accounts

payable

( )

Creditor Turnover

Ratio

(%)

2006-07 68563912.02 8162448.71 8.39

2007-08 80338742.45 9653868.19 8.32

2008-09 96965088.02 12478579.28 7.77

2009-10 135368410 14219240 9.52

2010-11 141142482.9 15477915.66 9.12


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INTERPRETATION

The above table shows that the creditor turnover

ratios in the fluctuating trend due to fluctuating in the credit purchase

and average accounts payable at cost. The lowest payables turnover

ratio recorded in the year of 2008-09(7.77%) and the highest payables

turnover ratio has recorded in the year 2009-2010(9.52%) due to the

company income is increased in the year 2009-10 and 2010-11.


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Inventory Turnover Ratio

Sales

Inventory Turnover Ratio =---------------------------------------Inventory

Year

Sales

( )

Inventory

( )

Inventory Turnover

Ratio

(%)

2006-07 61096901.97 1253412.28 48.74

2007-08 76883825.94 1399513.6 54.94

2008-09 102667345.5 1195270.69 85.89

2009-10 136337560 1599599 85.23

2010-11 153531069.8 1517271 101.19


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INTERPRETATION

The above table shows that the overall inventory turnover

ratio during the study period. During this study period over all

inventory turnover ratios is an increasing trend ranges from 48.74

percentages in 2006-07 and 101.19 percentages in 2010-11due to

the company is concentrated to satisfy the customer level through

maintaining good inventory level .


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Fixed Asset TurnoverRatio

SalesFixed asset turnover ratio = ----------------------------------------------

Fixed Assets

Year

Sales

( )

Net fixed asset

( )

Fixed Asset

Turnover Ratio

(%)

2006-07 61096901.97 1132863.23 53.93

2007-08 76883825.94 1092765.23 70.35

2008-09 102667345.5 1805071.98 56.87

2009-10 136337560 2962784 46.02

2010-11 153531069.8 3329646.46 46.11


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INTERPRETATION

The above table shows that the fluctuating trend in the

Fixed asset turnover ratio . The lowest fixed asset turnover ratio

has shown in the year 2009-10(46.02) and highest in the year

2007-08(70.35) due to the replacement of fixed asset is placed in

the year of 2009-10 and the depreciation low in the year of 2010-

11.


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Days Inventory OutstandingAverage Inventory

Average Age Of Inventory = ---------------------------------------------------

Average Daily Purchase of Inventory

Year

Average

inventory

( )

Average Daily

Inventory ( )

Days Inventory

Outstanding

2006-07 1179128 3434.006247 343

2007-08 1326462.94 3834.283836 346

2008-09 1297392.145 3274.714219 396

2009-10 1397434.845 4382.463014 319

2010-11 1558435 4156.906849 375

INTERPRETATION


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INTERPRETATION

The above table it shows that the fluctuating trend of average

age of inventory. It indicates that the lowest age of inventory shown in

the year 2006-2007(343) and highest in the year of 2008-09(396).


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Days Sales Outstanding

Average Account ReceivablesAverage Age Of Receivables = ----------------------------------------

Average Daily collection of Receivables

Year

Average

Debtor

( )

Average Daily

Sales ( )

Average Collection

Period(Days)

2006-07 2101183.22 167388.77 13

2007-08 3453397.39 210640.61 172008-09 5492097.91 281280.3 20

2009-10 6466807.5 373527.56 18

2010-11 6950147.3 420633.068 16


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INTERPRETATION

The above table it shows that the fluctuating trend of

average collection period of receivables. It indicates that the

lowest in the year of 2006-07(13 days) and the highest

collection period of receivables shown in the year 2008-2009(20

days) due to the company has concentrated on current assets and

the debtor level is increased year to year.


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Days Payable Outstanding (DPO)

Average Account Payables

Average Age Of Payables = -----------------------------------------------Average Daily Payment

Year

Average

accountspayable( )

Average daily

CreditPurchase( )

Average

PaymentPeriod(Days)

2006-07 8162448.71 187846.3343 43

2007-08 9653868.19 220106.1437 442008-09 12478579.28 265657.7754 47

2009-10 14219240 370872.3562 38

2010-11 15477915.66 386691.7341 40
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Interpretation

The above table shows that the fluctuating trend of

average payment period of payables . It indicates that the lowest

in the year of 2009-10(38 days) and highest payment period of

payables shown in the year 2008-2009(47 days) due to income of

company is increased in the year of 2009-2010 as compared to the

previous year.


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Cash Conversion Cycle(Operating Cycle)

Operating Cycle = Number of Days in Receivables + Number ofDays in Inventory

YearNumber Of Days in

ReceivablesNumber of Days

in InventoryCash

Conversion

Cycle(Days)2006-07 13 343 3562007-08 17 346 3632008-09 20 396 4162009-10 18 319 3372010-11 17 375 392


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INTERPRETATION

The above table shows that the cash conversion cycle of

the firm during the study period. It indicates the fluctuating trend

appears in the operating cycle of the firm year to year. The lowest

level of operating cycle is present in the year of 2009-10(337

Days) and the highest level of the operating cycle present in the

year of 2008-09(416 Days) due to the debtors level is increased

year to year.

Fi di


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Findings The Assets turnover ratio is in fluctuating trend ranges from

6.98 percentages in 2007-08 and 9.14 percentages in 2009-10.

The receivable turnover ratio is fluctuating trend ranges from

15.62 percentages in 2008-09 and 24.49 percentages in 2006-

07.

The creditor turnover ratio is in the fluctuating trend ranges

from 7.77% year of 2008-09 and 9.52% year 2009-2010.

The overall inventory turnover ratio is an increasing trend

ranges from 48.74 percentages in 2006-07 and 101.19

percentages in 2010-11.


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The Fixed asset turnover ratio is in fluctuating trend. The

lowest fixed asset turnover ratio has shown in the year 2009-

10(46.02) and highest in the year 2007-08(70.35).

The average age of inventory is in fluctuating trend. the lowest

age of inventory shown in the year 2006-2007(343) and

highest in the year of 2008-09(396).

The average collection period of receivables is in fluctuating

trend. The lowest in the year of 2006-07(13 days) and the

highest collection period of receivables shown in the year

2008-2009(20 days).


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The average payment period of payables is in fluctuating trend. the

lowest in the year of 2009-10(38 days) and highest payment period

of payables shown in the year 2008-09(47 days).

The cash conversion cycle of the firm is in fluctuating trend ranges

from 337 Days is present in the year of 2009-10 and 416 Days

present in the year of 2008-09.

The correlation value(r) is positive (0.7117), there is a low degree of

positive relationship exist between the two variables inventory and

sales.

The fixed asset level has decreased in absolute figures in

2007(14.09) as compared to 2008(9.91) in total assets. The current

asset level has increased 85.91% to 90.09%.


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The fixed asset level has increased in absolute figures in 2008-

09(13.09%) as compared to 2007-08(9.91%) in total assets. The

current asset level has decreased 90.09% to 86.98%.

The fixed asset level has increased in absolute figures in 2009-

10(19.86%) as compared to 2008-09(13.02%) in total assets. The

current asset level has decreased 86.98% to 80.14%.

The fixed asset level has decreased in absolute figures in 2010-

11(19.86) as compared to 2010(19.81) in total assets. The current

asset level increased in the year of 2010-11(80.29%) as compared

to 2009-11 (80.14%).


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The company has followed a mixed type of credit policy during

the year 2006-07 to 2010-11 credit policy was most conservative.

It was moderate during 2010-11 liberal during the year 2006-07.

The receivable outstanding started going up along with the

increase in sales every year. The highest percentage of

receivables outstanding from the year 2006 as on 31 st march

belonged to the age class 45-90 days .This percentage steadily

increasing and has reached up to 78.40% in the year 2010-11.


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In trend percentage analysis the fixed asset level has decreased

in the year of 2007-08 and other years are continuously

increased as compared to the year of 2006-07.Investments and

total asset level have increased continuously. The trend of

provision level is fluctuated. In the year of 2010-11 all items are

increased except inventory level and provision.

The credit policy adopted by the company was good since the

average collection period was 15 days therefore this will help in

increasing the cash balances of company.


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Suggestions

The organization may increase the fixed assets reliability

through purchase of high level standard machines to decrease

the maintenance charges and increase the productivity.

The liquidity position of the organization may improved to

meet its short term obligations through increase the sales and

utilizing the inventory effectively.


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The organization may increase the working capital through

decrease purchase on the credit and maintain the collectionpolicy effectively.

The company can improve the current asset through

effectively utilize the cash, inventory and managing thedebtors.

C l i


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ConclusionFrom the critical analysis throughout the study, it is

evident that the overall asset position of the company with regards

to payables management and cash management is not satisfactory.

But still it is seen that the organization is more efficiently using its

credit period, the longer the company stretching out the payments.

Though it is advantageous to the company it is important to

maintain smooth relationship with the creditors and debtors. Assets

management is affected by increased cash flows in inventories and

receivables and payables, so the company is required to plan and

control these activities in such a way that there is positive cash flow

hich o ld help the management of assets

Asset Mgmt 3rd Review

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