A STUDY ON CASH MANAGEMENT PRACTICE IN ERF RUBBER

INDUSTRY IN MADURAI
 CHAPTER-I

INTRODUCTION

Cash is both a fundamental resource and the means by which the entity
acquires other resources. To manage cash is to manage the entity's ability to
purchase assets, service debt, pay employees, and control operations. Thus,
effective cash management directly correlates with the entity's ability to realize its
mission, goals, and objectives. The term cash management has been defined in
different ways by different scholars. For instance, Barrett (1999) defines cash
management as the series of processes used by an organization to obtain the
maximum benefit from its flow of cash funds. Storkey (2003) defines cash
management as having the right amount of money in the right place and time to
meet the governments obligations in the most cost-effective way.
The success of any business venture is predicated on how the management
has planned and controlled its cash flows. Cash shortage will disrupts the firms
smooth operation and can even lead to insolvency. Excessive cash will tie down
unnecessarily long-term capital with a result that the return on capital employed
will be low. Thus, cash management assumes more significance than other current
assets because cash is the most important asset that a firm holds.
However, literature revealed that only limited studies have investigated the
relationship between cash management and profitability in Nigeria. Therefore, this
study examined the relationship between cash management and profitability in the
ERF Rubbermanufacturing firms. Correlation and regression analysis were carried
out.

Cash management is essential to every business that desires to meet up with its
short-term financial obligations. Akinsulire (2003) asserts that the success of any
business venture is predicated on how the management has planned and controlled
its cash flows. According to Olowe (2008), cash management is concerned with
the efficient management of cash so as to achieve an optimum level of cash in the
firms working capital. Cash represents the basic input necessary to start and keep
a business running. A company needs to maintain sufficient cash to keep its
business running smoothly. Cash shortage will disrupts the firms operation and
can even lead to insolvency. Excessive cash will tie down unnecessarily long-term
capital with a result that the return on capital employed will be low. A firm thus
needs to maintain sound cash position.

Cash management is necessary service mismatches between the timing of

payments and the availability of cash may interfere with operations of a firm.
Studies have noted that many Rubber have maintained large cash reserves and
liquidity positions within their investment portfolios in an effort to partially
accommodate unforeseen expenditure.
However, inadequate cash management practices among the Rubber has led
to slow rate of service delivery, accompanied with regular strikes of employees,
insufficient medicines and other basic equipment for use in Rubber and employee
strikes which are all linked to management of funds.
The objectives of the study were to identify the effects of preparing cash
budgets on operational performance of ERF Rubber industry, to determine the
effects of operating bank accounts on operational performance of ERF Rubber
industry and to establish the effects of Book Keeping on operational performance
of ERF Rubber industry.
Primary data were collected using a questionnaire. The data were tabulated,
then analyzed using descriptive and inferential statistics with the help of Social
Sciences (SPSS) version 22 software.
 Descriptive statistics involved the use of weighted averages and percentages
while inferential statistics involved the use of ANOVA and regression analysis.
The findings revealed that cash budgets assist in making cash flow projections and
ensures budgetary control and controls a Rubbers spending habits although and
that it does not create competition of resources and politics;operating bank
accounts ensured security of Rubber funds besides helping keep track of Rubber
transactions; the Rubber keep records of all cash payment and receipts on daily
basis, facilitating accountability that improves operational performance of xiii
public funds.
The ANOVA results revealed that, at 5% level of significance, cash budget,
operating bank account(s) and book keeping all have a significant influence in
determining the operational performance of ERF Rubber industry.
The findings from regression analysis realized that cash budgeting account
for 38.9% effect size in influencing operational performance, operating bank
accounts account for 14.1% effect size in influencing operational performance
while book keeping account for 49.3% effect size in influencing operational
performance in ERF Rubber industry. The study findings are helpful to the County
governments in understanding the importance of preparing cash budgets, operating
bank accounts and Book Keeping to improve operational performance of ERF
Rubber industry.
The study will also be helpful to relevant stakeholders in the health sector
and the management of these Rubber on having proper management practices in
their institutions.
CASH MANAGEMENT PRACTICE:

Cash management is the process of ensuring that businesses have good cash
balances to ensure that they continue to stay in business. Thus prudent cash
management ensures that a small business would be able to honour its debt
obligations as and when they fall due and also to facilitate the responsibility of the
firm to pay for its upcoming expenses 14 (Attom, 2014).
Cash management forms an integral part of working capital management.
Hence, it is considered as part of the scope of a good working capital management
in modern businesses (Brealey, Myers & Allen, 2008).
STATEMENT OF THE PROBLEM:

Cash management is necessary because there are mismatches between the

timing of payments and the availability of cash. Even if the annual budget is
balanced, with realistic revenue and expenditure estimates, in-year budget
execution will not be smooth, since both the timing and seasonality of cash inflows
and of expenditures can result in conditions of temporary cash surpluses or
temporary cash shortfalls.
Inadequate cash management practices among the Rubber has led to slow
rate of service delivery, accompanied with regular strikes of employees,
insufficient medicines and other basic equipment for use in Rubber and employee
strikes are all linked to management of funds within ERF Rubber industry.
Improper accounts preparation and inadequate cash management procedure
were some of the major 9 challenges facing organizations leading to close up of the
enterprises. It is for this reason that the study seeks to determine the effects of cash
management practices on operational performance of ERF Rubber industry.
OBJECTIVE OF THE STUDY:
The main objective of the study was to determine the effects of cash
management practices on operational performance of selected Rubber industry in
Madurai. The specific objectives of the study were;
i. To identify the effects of preparing cash budgets on operational
performance of Rubber industry in Madurai.
ii. To determine the effects of operating bank accounts on operational
performance of Rubber industry in Madurai
iii. To establish the effects of Book Keeping on operational performance of
Rubber industry in Madurai.
SIGNIFICANCE OF THE STUDY

The study may enable the government and County government to know the
effects of preparing cash budgets, operating bank accounts and Book Keeping on
operational performance of ERF Rubber Industry.
The study will also help the management of ERF Rubber Industry to know
not only the effect which cash management practices have on financial
performance but also the various cash management practices that are of importance
in tracking financial performance.
The study will also be helpful to relevant stakeholders in the health sector
and the management of these Rubber on having proper management practices in
their institutions. Besides, the research will also help other researchers by forming
a basis for their research.
SCOPE OF THE STUDY
The study focused on determining the effects of cash management practices
on operational performance of ERF Rubber Industry in Madurai where specifically
dealt with forms of cash management practices currently in use, factors influencing
effective cash management practices key indicators and their impact on operational
performance of Rubber and Identifying challenges that Rubber in Madurai are
facing in implementing effective cash management practices.
The study only gathered data from ERF Rubber Industry within Madurai.
Madurai is one of the two Counties in Community. The County has one public
referral Rubber, 7 Sub County Rubber and 24 Dispensaries.
LIMITATIONS OF THE STUDY

The findings of the study would only be generalized to effects of cash

management practices on financial performance of ERF Rubber Industry and
therefore may not apply to private Rubber nor ERF Rubber Industry in other
Counties. Besides, the study confined itself to studying only three of the several
variables that are known to affect cash management of any organization.
This therefore means that there could be other variables, though not within
the scope of this study, which could also have some variables that could be having
significant effects operational performance of the Rubber. Further still, the period
of carrying out this study is limited to three months only.
 CHAPTER-II
INDUSTRY PROFILE
INTRODUCTION TO THE ORGANIZATION

In 1970, ERF had tendered to buy competitor Atkinson. Ultimately the bid
failed and Seddon were the successful buyers, the new company being called
Seddon Atkinson. Many of the old Atkinson workforce did not like change and
some moved across to ERF. One such key engineer was Jack Cooke who's
influence led to the development of another entirely new ground breaking cab.
The steel framed, fibreglass panelled SP (Steel / Plastics) as fitted on the B Series
models.

At the end of 1979 ERF were building 16 trucks a day, in the depth of the
recession it was just 16 a week. The bottom had fallen out of the market and by the
end of 1983, the Sand Bach workforce had been trimmed from 1,400 to just over
600, with the factory on a two day week. An ambitious plan for a Wrexham
assembly plant had to be abandoned and the Fire Engineering Division put up for
sale. What's more, an agreement with Japanese truck maker Hino to manufacture
12 to 15 tonners at Sand Bach was killed off by a change in the value of the Yen.
ERF battled on through these difficult times. Some of the competitors were not so
lucky.

1982 saw the introduction of a revised and updated range. The C Series.
Although similar to the B Series in design and construction, the new range featured
an updated and better appointed SP3 cab, along with detail chassis improvements.
Through the 1980's ERF set up it's own sales and marketing force and rationalised
it's product range, the result of which was the Common Parts CP Series which
would prove highly popular with hauliers. By 1986 ERF had really bounced back
and unveiled the E-Series tractor ranged fitted along with a more refined and
aerodynamic SP4 cab. The E Series was another huge success and in 1988
ERF registered 3,740 trucks in the UK. The next big news was the signing of an
agreement with Austrian truck maker tyre, under which ERF would use tyres all
steel cab and it's ES6 and ES8 trucks.

Stepping into the 1990's and responding to developments and trends, ERF in
May 1993 introduced the EC range. This coincided with the company's diamond
jubilee and used 'Driving the Future' as a theme. Again, the EC used the
established SP technology with new styling, however, this was more than a
revamp. After four years development and a 14 million investment, a new tractor
and rigid truck range was produced. This EC range turned out to be ERF's best
ever selling product.

1996 saw the take over of ERF by Western Star Trucks Holdings based in
British Columbia in Canadian reportedly for 27.4 million, many were surprised of
this decision. ERF also started to diversify into the municipal market with two new
products, the EM central steer cab and the EU. The year 2000 had seen many new
beginnings for ERF, in the March, ERF was bought by German company MAN
and in the summer of 2000 saw ERF launch not one but two new products, the
ECS and ECX. For the first time ERF offered a steel cab to its customers.

ERF started construction on a new factory in ERF Way, Middlewich,

Cheshire, it is believed that 28 million was invested in the new factory and state
of the art production and administration facility, this would bring the company
under one roof for the first time in many years. In August 2000, a celebration was
held Coming Home Moving Home when over 200 ERFs gathered at Sun
Works to cavalcade to the new facilities. Unfortunately in 2002, British ERF
manufacturing ceased just a year before it would have celebrated its 70th
anniversary.

The First Models

1933 - ERF C.I.4 chassis number 63 with Gardner 4LW engine

1939 - The range had grown to include 3 + 4 axle rigid models and the twin axle
tractor unit. A sister 6 wheeler was also built (3 axle). During the war the D.I
model some were fitted with AEC engines in place of the Gardener's.

1948 - The new range designated the V Type was introduced just after the war.

1951 - The steel cab was offered on the V Type, built by Willenhall Motor
Radiator Co.

1954 - The KV range was introduced with a modern oval grill with curved split
screen.

1962 - The LV was introduced with a totally new cab designed by Gerald
Broadbent and made first by Boalloy and then by J H Jennings. The old KV cab
would remain available to order until 1966.

1967 - The LV models were fitted with Fail Safe spring brakes, ERF was the first
British truck manufacturer to adopt spring brakes, all other manufacturers
eventually followed suit. Spring brakes are stll fitted as an industry standard to
HGV's today.
1971 - The A Series came about after a new designer set about to produce a
modular design for mass production. The 34 tonne gross A series tractor unit was
offered with either a 6 cylinder Cummins or a 6 or 8 cylinder Gardner engine. A
38 tonne European version was built with a Motor Panels tilting cab.

The A Series did not replace the LV models as most seem to think. The A Series
were nearly all tractor units (although a handful of 4 x 2 rigid vehicles were built
for drawbar work) and were quickly identified by a 7LV cab (set back fromt axle
and big square grille) and the rear axle springs mounted outboard of the chassis
rails. The chassis frame is also of lighter construction, has chassis rails that are of
parallel depth to the entire length of the vehicle and extend out through the front
lower panel of the cab. The 7LV and the 8LV (cab over axle) cab with big grille
was also fitted to a lot of LV's right up to 1975 when the B Series started to appear
in any number. There were never any eight wheeler or 6 wheeler rigid A Series
built at all, except special experiment vehicles of which none are know to have
survived. All these six and eight wheelers are LV's as are four wheel rigid vehicles
and all tractor units with underslung rear springs, despite sometimes sharing the
7LV cab with the A Series.

1972 - A new chassis number designation system was introduced on all ERF LV
and A Series, replacing the previous 64GXB, 66R, 64CU etc type of model
designation with a new LAC, LAR, LAG, LBC etc style of chassis identification.

1974 - The B Series was introduced with an SP (steel / plastic) cab. It was offered
with Gardner, Cummins and Rolls Royce power units. This was the first
production ERF to have a tilt cab for easy access to the engine. It was available in
the usual day cab configeration or an optional sleeper cab.

There was also the smaller M Series rigid with the walkthrough cab design which
looked like a larger B Series but had the headlamps in the bumper as opposed to
just above. This was the lighter duty vehicle, some were fitted with the Dorman
V8 diesel engine although this was a rare option.

1975 - The confusing LAC, LAR, LBC etc chassis designations were dropped
circa chassis numbers 30,000 to a new simpler system of 28G, 32C, 17P etc style
designations indicating gross vehicle weight and engine type fitted.

Late 1981 - Saw the launch of the C Series. It was a slightly revised B Series, but
the main update was the SP3 cab. C40 refers to a tractor unit but there were also
C32, C28 and other models but this designation badge was dropped from the cab
doors in 1984 which was the year the CP range was launched. CP stands for
'Common Parts' not 'Cummins Powered' as some people think, although all CP's
were Cummins engined. The CP's were all tractor units and all built to a standard
set of specifications depending on what the customer wanted. You could have 10
or 14 litre Cummins engine, an Eaton Fuller 9 speed RTX11609A gearbox and
Rockwell rear axles. They were all 4 x 2, 6 x 2 or 6 x 4 units with a choice of day
or sleeper cabs.

No D Series was ever produced due to the popular Ford truck of the 1960' and 70's,
hence why the E Series was the next generation.

The last Gardner engines were built up until the mid 90's, but the last ERF's to use
them were the late 80's E16 E Series.

The E Series was available with Cummins diesels and Rollls Royce diesels, who
later became owned by Perkins Engines. It was then that the ERF logo was
relocated to the upper left of the grill and a badge denoting the engine size was
placed on the lower right of the grill. The models being E9, E10, E12, E14 etc
meaning E series plus the number denoting the engine size. This idea stayed with
the EC Series and the new style logo stayed until the very last ERF rolled out in
2007 albeit a rebadged MAN from Austria.

The EC Series was launched in 1993, it was the last true ERF design prior to being
taken over by Western Star, they then sold out to MAN of Germany in 2000, this
was when the EC Series production ceased and the company relocated to
Middlewich in Cheshire.

WHAT IS AIRIA?

The All India Rubber Industries Association (AIRIA) is not for profit making body
serving the rubber industry and trade with the objectives of safeguarding and
promoting interests of the industry.
NEED FOR AN ASSOCIATION

To associate is to share, to share is to feel one with all those connected with
the same industry or trade. Out of unity emerges a united voice and strength for the
articulation of problems, for solution and better prospects. For an industry,
progress emanates from better understanding and mutual co-operation amongst its
members.

India's Rubber Producers Under Pressure

Speaking about the challenges being faced by the rubber industry, Niraj
Thakkar, President AIRIA said, Inverted duty structure has been the bane of
Rubber sector in India and has stifled the growth of this vital sector of
manufacturing. Over the last few years, Indias Trade Agreements with Asian
countries have led to a barrage of cheap import of finished rubber goods in India.
 The rubber industry of Madurai is one of its most important industries,
accounting for the major amount of rubber production in Kerala. Rubber is the
major agricultural products of Madurai and almost 90% of the total rubber
production in India is accounted by the state of Kerala. The rubber industry in
Madurai also provides employment to a large number of people of this region.
Almost 15% of the total industrial units are engaged with the production of rubber
in Madurai.

Changanassery is home to a training center, common facility service center and

a field testing laboratory for the rubber and plastic industries. The chief aim behind
this project is to improve the techniques and methods that are adopted for rubber
production and processing in Madurai. Ettumanoor is the base of a rubber
production cum training center of the central government.
The manufacturing industries of rubber in Madurai are in turn of two kinds, based
on the types of raw materials that are used by the industries:

One set of industries that are engaged with the processing of rubber and
include mostly the centrifugal factories, the crumb rubber industries and
industries engaged with creaming of rubber. These industries are mainly
known as the capital intensive industries and produce tubes and tyres,
erasers, automobile parts and molded goods.
The other groups of industries are engaged with the manufacturing of
rubber. These industries base themselves on dry rubber or latex.

Apart from these, the manufacturing based industries are further divided into
two categories based on the type of raw materials used by them. One section
depends on latex, for the production of balloons, gloves, rubber band and latex
foam. The other section uses dry rubber sheets, for the production of tubes and
tyres, erasers, automobile parts and molded goods. The World Bank has conceived
of a project by which it would finance these manufacturing industries. A total of
35,000 products could possibly be made by the manufacturing industries of
rubber.

For the purpose of rubber processing in Madurai, some of the latest techniques
are utilized. The establishment of the rubber tyre industry in Kottayam has resulted
in the growth of the rubber industry as a whole and has also increased the rubber
production. The Rubber Board, which is a research institute owned by the central
government, is situated at Madurai. Apart from being a major rubber producer,
Madurai is also one of the most important traders of rubber and rubber products.

The rubber consuming industries are facing an acute shortage of natural

rubber, and have urged for an independent study to estimate the available stocks.In
a communication to the Rubber board, rubber-based industries stated the domestic
availability of natural rubberhad turned worse in the current financial year.

In May, there was practically no selling of natural rubber (NR) for most part of
the month. The consumers have also termed the stock figures projected by
the Rubber board as divorced from reality, and have asked for a reality check
through an independent study.It is during such precarious times that the available
stock of NR should come into play. The situation has been quite challenging for
the dependant industries, particularly the small and medium enterprises (SMEs),
said Niraj Thakkar, president of the All India Rubber Industries Association
(AIRIA).
 Currently, domestic NR prices are ruling around Rs 30 higher than the
international prices for every kg. The higher domestic prices should be enough
trigger for the stock lying with the dealers to find its way to the market.

Since there is a continued shortage, it lends credence to industrys

contention that the stock position as suggested by the board may be exaggerated,
he said. An independent study to check the stock position will do a lot of good to
the sector in India, Thakkar urged.

The Automotive Tyre Manufacturers Association (ATMA) stated that a virtual

absence of natural rubber in the local markets was playing havoc with the
production schedules of tyre companies. While tyre companies have already tied
up imports to meet the deficit, local availability has been much lower than the
anticipated during the current fiscal. "If the present situation is any reflection, our
added concern is about the likely scenario in the coming months. While tyre
companies do anticipate domestic deficit in NR for which imports are being and
will continue to be tied-up, certain baseline quantity is expected from the domestic
market.

In the absence of such arrivals, the plant level manufacturing is at stake.

Moreover, imports to meet the unanticipated shortfall in availability will take 2-3
months for arrival, which will jeopardise the planned production by the
companies," said RajivBudhraja, director general of ATMA.

Rubber consumers also urged government for revisiting the projected NR

scenario for the fiscal 2014-15 in terms of production, consumption, imports and
exports based on actual scenario as observed during April and June.
INTRODUCTION TO THE INDUSTRY:
HISTORY OF RUBBER

Rubber is one of the most important products to come out of the rainforest.
Though indigenous rainforest dwellers of South America have been using rubber
for generations, it was not until 1839 that rubber had its first practical application
in the industrial world. In that year, Charles Goodyear accidentally dropped rubber
and sulfur on a hot stovetop, causing it to char like leather yet remain plastic and
elastic. Vulcanization, a refined version of this process, transformed the white sap
from the bark of the Hevea tree into an essential product for the industrial age.

With the invention of the automobile in the late 19th century, the rubber
boom began. As demand for rubber soared, small dumpy river towns like Manaus,
Brazil, were transformed overnight into bustling centers of commerce. Manaus,
situated on the Amazon where it is met by the Rio Negro, became the opulent heart
of the rubber trade. Within a few short years Manaus had Brazil's first telephone
system, 16 miles of streetcar tracks, and an electric grid for a city of a million,
though it had a population of only 40,000. Vast fortunes were made by individuals,
and "flaunting wealth became sport. Rubber barons lit cigars with $100 bank notes
and slaked the thirst of their horses with silver buckets of chilled French
champagne. Their wives, disdainful of the muddy waters of the Amazon, sent
linens to Portugal to be laundered...They ate food imported from Europe...[and] in
the wake of opulent dinners, some costing as much as $100,000, men retired to any
one of a dozen elegant bordellos." The citizens of Manaus "were the highest per
capita consumers of diamonds in the world."

Rubber Plantation, Thailand

Rubber Plantation, Thailand

Rubber Plantation, Thailand

Rubber tapper Thailand

Rubber Tapper Thailand

Capacity of Rubber Collection

 The opulence of the rubber barons could only be exceeded by their brutality.
Wild Hevea trees, like all primary rainforest trees, are widely dispersed, an
adaptation that protects species from the South American leaf blight which easily
spreads through and decimates plantations. Thus, to make a profit, the barons had
to acquire control over huge tracts of land. Most did so by by hiring their own
private armies to defend their claims, acquire new land, and capture native
laborers. Labor was always a problem, so barons got creative. One baron created a
stud farm, enslaving 600 Indian women whom he bred like cattle. Other barons
like Julio Cesar Arana simply used terror to acquire and hold on to Indian slaves.
Indians captured usually submitted because resistance only meant more suffering
for the families.

Young girls were sold as whores, while young men were bound, blindfolded,
and had their genitals blasted off. As the Indians died, production soared: in the 12
years that Arana operated on the Putumayo River in Colombia, the native
population fell from over 30,000 to less than 8,000 while he exported over 4,000
tons of rubber earning over $75 million. The only thing that stopped the holocaust
was the downfall of the Brazilian rubber market.

The Brazilian rubber market was crushed by the rapid development of

the more efficient rubber plantations of Southeast Asia. However, the prospects of
developing plantations did not begin on a high note. Rubber seeds, rich with oil
and latex, could not survive the long Atlantic journey from Brazil. Finally, in 1876,
an English planter, Henry Wickham, collected 70,000 seeds and shipped them to
England. This shipment remains "a source of controversy. Brazilians, conveniently
forgetting their entire agricultural economy is based on five imported plants
African oil palm, coffee from Ethiopia, cacao from Colombia and Ecuador,
soybeans from China, and sugarcane from Southeast Asiastill speak of the
"rubber theft" as a moment of infamy. Wickham himself, in his memoirs, lent a
note of mystery to the deed, no doubt intending to elevate his own profile in the
eyes of his peers. In fact, all evidence suggests that the exportation was a
straightforward affair conducted in the open and actively facilitated by the
Brazilian authorities in Belm." In either case, 2,800 of the seeds germinated and
were sent to Colombo, Ceylon (present day Sri Lanka). After several false starts,
including one by a planter in northern Borneo who felled his plantation after
finding no rubber balls hanging from the branches, the prospects were grim. One
major obstacle was that the success of tea (Ceylon) and coffee (Malaya) gave
planters no reason to try an untested crop.

Finally in 1895, Henry Ridley, head of Singapore's botanical garden,

persuaded two coffee growers to plant two acres (.8 ha) of Hevea trees. Twelve
years later more than 300,000 ha of rubber grew in plantations in Ceylon and
Malaya. New innovations increased efficiency, and production doubled every two
years. Rubber could be produced at only a fraction of the cost of collecting wild
rubber in Brazil. By 1910, Brazilian production had fallen 50 percent.

However the Second World War threatened to shift the rubber wealth. With
Japan occupying prime rubber-producing areas in Southeast Asia, the U.S. feared it
would run out of the vital material. Every tire, hose, seal, valve, and inch of wiring
required rubber. The Rubber Development Corporation, the chief overseer of
rubber acquisition, sought out other sources including establishing a rubber
program that sent intrepid explorers into the Amazon seeking rubber specimens
that would be used to produce high yields, superior products, and the possibility of
resistance against leaf blight. The ultimate goal of the program was to establish
rubber plantations close to home. In addition to searching the Amazon and
establishing experimental plantations in Latin America, the program came up with
some novel plans to produce rubber, including planting dandelionstheir milky
sap a small, but useful source of rubberin 41 states. Extensive work on synthetic
rubber yielded a product that, in time, economists predicted, would replace natural
rubber. By 1964 synthetic rubber made up 75 percent of the market.

However, the situation changed drastically with the OPEC oil embargo of
1973, which doubled the price of synthetic rubber and made oil consumers more
conscious of their gas mileage. The concern over gas mileage brought an
unexpected threat to the synthetic market: the widespread adoption of the radial
tire. The radial tire replaced the simple bias tires (which had made up 90 percent of
the market only five years earlier) and within a few years virtually all cars were
rolling on radials. Synthetic rubber did not have the strength for radials; only
natural rubber could provide the required sturdiness. By 1993 natural rubber had
recaptured 39 percent of the domestic market. Today nearly 50 percent of every
auto tire and 100 percent of all aircraft tires are made of natural rubber. Of this
rubber, 85 percent is imported from Southeast Asia, meaning that the U.S. is highly
susceptible to disruptions caused by an embargo, or worse, the unintentional or
intentional introduction of leaf blight into plantations. None of the trees in
plantations across Southeast Asia has resistance to blight so "a single act of
biological terrorism, the systematic introduction of fungal spores so small as to be
readily concealed in a shoe, could wipe out the plantations, shutting down
production of natural rubber for at least a decade. It is difficult to think of any other
raw material that is as vital and vulnerable."

Pre-Columbian peoples of South and Central America used rubber for balls,
containers, and shoes and for waterproofing fabrics. Mentioned by Spanish and
Portuguese writers in the 16th cent., rubber did not attract the interest of Europeans
until reports about it were made (173651) to the French Academy of Sciences by
Charles de la Condamine and Franois Fresneau. Pioneer research in finding
rubber solvents and in waterproofing fabrics was done before 1800, but rubber was
used only for elastic bands and erasers, and these were made by cutting up pieces
imported from Brazil. Joseph Priestley is credited with the discovery c.1770 of its
use as an eraser, thus the name rubber.

The first rubber factory in the world was established near Paris in 1803, the
first in England by Thomas Hancock in 1820. Hancock devised the forerunner of
the masticator (the rollers through which the rubber is passed to partially break the
polymer chains), and in 1835 Edwin Chaffee, an American, patented a mixing mill
and a calender (a press for rolling the rubber into sheets).

In 1823, Charles Macintosh found a practical process for waterproofing

fabrics, and in 1839 Charles Goodyear discovered vulcanization, which
revolutionized the rubber industry. In the latter half of the 19th cent. the demand
for rubber insulation by the electrical industry and the invention of the pneumatic
tire extended the demand for rubber. In the 19th cent. wild rubber was harvested in
South and Central America and in Africa; most of it came from the Par rubber
tree of the Amazon basin.

Despite Brazil's legal restrictions, seeds of the tree were smuggled to

England in 1876. The resultant seedlings were sent to Ceylon (Sri Lanka) and later
to many tropical regions, especially the Malay area and Java and Sumatra,
beginning the enormous East Asian rubber industry. Here the plantations were so
carefully cultivated and managed that the relative importance of Amazon rubber
diminished. American rubber companies, as a step toward diminishing foreign
control of the supply, enlarged their plantation holdings in Liberia and in South
and Central America.

During World War I, Germany made a synthetic rubber, but it was too
expensive for peacetime use. In 1927 a less costly variety was invented, and in
1931 neoprene was made, both in the United States. German scientists developed
Buna rubber just prior to World War II. When importation of natural rubber from
the East Indies was cut off during World War II, the United States began large-
scale manufacture of synthetic rubber, concentrating on Buna S. Today synthetic
rubber accounts for about 60% of the world's rubber production.
Sources

The major commercial source of natural latex used to create rubber is the
Para rubber tree, Heveabrasiliensis (Euphorbiaceae). This is largely because it
responds to wounding by producing more latex. In 1876, Henry Wickham gathered
thousands of seeds of this plant from Brazil, and they were germinated in Kew
Gardens, England. The seedlings were then sent to Colombo, Indonesia, Singapore,
and British Malaya. Malaya later became the biggest producer of rubber.

Other plants containing latex include figs (Ficuselastica), euphorbias, and the
common dandelion. Although these have not been major sources of
rubber, Germany attempted to use such sources during World War II when it was
cut off from rubber supplies. These attempts were later supplanted by the
development of synthetic rubber. Its density is about 920 kilograms/meter3.

Collection of rubber

A woman in Sri Lanka(Ceylon) in the process of harvesting rubber

In places like Kerala, where coconuts grow in abundance, half of a coconut shell is
used as a container to collect the latex. The shells are attached to the tree by a
short, sharp stick, and the latex drips down into it overnight. This usually produces
latex up to a level of half to three quarters of the shell. The latex from multiple
trees is then poured into flat pans, and this is mixed with formic acid, which serves
as a coagulant. After a few hours, the very wet sheets of rubber are wrung out by
putting them through a press, then sent to factories where vulcanization and further
processing is done.

Current sources of rubber

Today, Asia is the main source of natural rubber. Over half of the rubber
used today is synthetic, but several million tons of natural rubber are still produced
annually, and is still essential for some industries, including automotive and
military.

Hypoallergenic rubber can be made from guayule.

Natural rubber is often vulcanized, a process by which the rubber is heated

and sulfur, peroxide or bisphenol are added to improve resilience and elasticity,
and to prevent it from deteriorating. Vulcanization greatly improved the durability
and utility of rubber from the 1830s on. The successful development of
vulcanization is most closely associated with Charles Goodyear. Carbon black is
often used as an additive to rubber to improve its strength, especially in vehicle
tires.

HISTORY OF THE INDUSTRY:

In its native regions of Central America and South America, rubber has
been collected for a long time. The Mesoamerican civilizations used rubber mostly
from the plant species known as Castillaelastica. The Ancient Mesoamericans had
a ball game using rubber balls, and a few Pre-Columbian rubber balls have been
found (always in sites that were flooded under fresh water), the earliest dating to
about 1600 B.C.E. According to Bernal Daz del Castillo,
the Spanish conquistadores were so astounded by the vigorous bouncing of the
rubber balls of the Aztecs that they wondered if the balls were enchanted by evil
spirits. The Maya also made a type of temporary rubber shoe by dipping their feet
into a latex mixture.

Rubber was used in various other contexts as well, such as for strips to hold stone
and metal tools to wooden handles, and padding for the tool handles. While the
ancient Mesoamericans did not know about vulcanization, they developed organic
methods of processing the rubber with similar results, mixing the raw latex with
various saps and juices of other vines, particularly Ipomoea alba, a species of
morning glory. In Brazil, the natives understood the use of rubber to make water-
resistant cloth. One story says that the first European to return to Portugal from
Brazil with samples of such water-repellant, rubberized cloth so shocked people
that he was brought to court on the charge of witchcraft.

The first reference to rubber in England appears to be in 1770, when Joseph

Priestley observed that a piece of the material was extremely good for rubbing out
pencil marks on paper, hence the name "rubber." Around the same time, Edward
Nairne began selling cubes of natural rubber from his shop at 20 Cornhill
in London. The cubes, meant to be erasers, sold for the astonishingly high price of
three shillings per half-inch cube.

The para rubber tree initially grew in South America, where it was the main source
of the limited amount of latex rubber consumed during much of the nineteenth
century. About one hundred years ago, the Congo Free State in Africa was a
significant source of natural rubber latex, mostly gathered by forced labor. The
Congo Free State was forged and ruled as a personal colony by the Belgian King
Leopold II. Millions of Africans died there, as a result of lust for rubber and rubber
profits. After repeated efforts, rubber was successfully cultivated in Southeast
Asia, where it is now widely grown.

In the mid-nineteenth century rubber was a novelty material, but it did not
find much application in the industrial world. It was used first as erasers, and then
as medical devices for connecting tubes and for inhaling medicinal gases. With the
discovery that rubber was soluble in ether, it found applications in waterproof
coatings, notably for shoes and soon after this, the rubberized Mackintosh coat
became very popular.

Nevertheless, most of these applications were in small volumes and the

material did not last long. The reason for this lack of serious applications was the
fact that the material was not durable, was sticky and often rotted and smelled bad
because it remained in its uncured state.

Chemical and physical properties

Rubber exhibits unique physical and chemical properties.

Aside from a few natural product impurities, natural rubber is essentially a

polymer of isoprene units, a hydrocarbon diene monomer. Synthetic rubber can be
made as a polymer of isoprene or various other monomers. Rubber is believed to
have been named by Joseph Priestley, who discovered in 1770 that dried latex
rubbed out pencil marks. The material properties of natural rubber make it
anelastomer and a thermoplastic.

Rubber's stress-strain behavior exhibits the Mullins effect, the Payne effect and is
often modeled as hyperelastic.

Why does rubber have elasticity?

 In most elastic materials, such as metals used in springs, the elastic behavior
is caused by bond distortions. When stress is applied, bond lengths deviate from
the (minimum energy) equilibrium and strain energy is stored electrostatically.
Rubber is often assumed to behave in the same way, but it turns out this is a poor
description. Rubber is a curious material because, unlike metals, strain energy is
stored thermally, as well as electrostatically.

In its relaxed state rubber consists of long, coiled-up polymer chains that are
interlinked at a few points. Between a pair of links each monomer can rotate freely
about its neighbor. This gives each section of chain leeway to assume a large
number of geometries, like a very loose rope attached to a pair of fixed points. At
room temperature rubber stores enough kinetic energy so that each section of chain
oscillates chaotically, like the above piece of rope being shaken violently.

When rubber is stretched the "loose pieces of rope" are taut and thus no
longer able to oscillate. Their kinetic energy is given off as excess heat. Therefore,
the entropy decreases when going from the relaxed to the stretched state, and it
increases during relaxation. This change in entropy can also be explained by the
fact that a tight section of chain can fold in fewer ways (W) than a loose section of
chain, at a given temperature (nb. entropy is defined as S=k*ln(W)). Relaxation of
a stretched rubber band is thus driven by an increase in entropy, and the force
experienced is not electrostatic, rather it is a result of the thermal energy of the
material being converted to kinetic energy. Rubber relaxation is endothermic. The
material undergoes adiabatic cooling during contraction. This property of rubber
can easily be verified by holding a stretched rubber band to your lips and relaxing
it.

Stretching of a rubber band is in some ways equivalent to the compression of an

ideal gas, and relaxation in equivalent to its expansion. Note that a compressed gas
also exhibits "elastic" properties, for instance inside an inflated car tire. The fact
that stretching is equivalent to compression may seem somewhat counter-intuitive,
but it makes sense if rubber is viewed as a one-dimensional gas. Stretching reduces
the "space" available to each section of chain.

Vulcanization of rubber creates more disulfide bonds between chains so it

makes each free section of chain shorter. The result is that the chains tighten more
quickly for a given length of strain. This increases the elastic force constant and
makes rubber harder and less extendable.

When cooled below the glass transition temperature, the quasi-fluid chain
segments "freeze" into fixed geometries and the rubber abruptly loses its elastic
properties, though the process is reversible. This is a property it shares with most
elastomers. At very cold temperatures rubber is actually rather brittle; it will break
into shards when struck. This critical temperature is the reason that winter tires use
a softer version of rubber than normal tires. The failing rubber seals that
contributed to the cause of the space shuttle Challengerdisaster were thought to
have cooled below their critical temperature. The disaster happened on an
unusually cold day.

Synthetic rubber

Synthetic rubber is made through the polymerization of a variety of

monomers to produce polymers. These form part of a broad study covered by
polymer science and rubber technology. Its scientific name is polyisoprene.

Synthetic rubber is any type of artificially made polymeric material that acts
as an elastomer. An elastomer is a material with the mechanical (or material)
property that it can undergo much more elastic deformation under stress than most
materials and still return to its previous size without permanent deformation.
Synthetic rubber serves as a substitute for natural rubber in many cases, especially
when improved material properties are needed.

Natural rubber coming from latex is mostly polymerized isoprene with a

small percentage of impurities in it. This will limit the range of properties available
to it. Also, there are limitations on the proportions of cis and trans double bonds
resulting from methods of polymerizing natural latex. This also limits the range of
properties available to natural rubber, although addition of sulfur and vulcanization
are used to improve the properties.

However, synthetic rubber can be made from the polymerization of a variety

of monomers including isoprene (2-methyl-1,3-butadiene), 1,3-butadiene,
chloroprene (2-chloro-1,3-butadiene), and isobutylene (methyl propene) with a
small percentage of isoprene for cross-linking. Furthermore, these and other
monomers can be mixed in various desirable proportions to be copolymerized for a
wide range of physical, mechanical, and chemical properties. The monomers can
be produced pure and addition of impurities or additives can be controlled by
design to give optimal properties. Polymerization of pure monomers can be better
controlled to give a desired proportion ofcis and trans double bonds.

An urgent need for synthetic rubber that is derived from widely distributed
feedstocks grew out of the expanded use of motor vehicles, and particularly motor
vehicle tires, starting in the 1890s. Political problems that resulted from great
fluctuations in the cost of natural rubber led to enactment of the Stevenson Act in
1921. This act essentially created a cartel which supported rubber prices by
regulating production (see OPEC). By 1925 the price of natural rubber had
increased to the point that companies such as DuPont were exploring methods of
producing synthetic rubber to compete with natural rubber. In the case of Dupont
the effort lead to the discovery of Neoprene which is a synthetic rubber that is too
expensive to be used in tires, but has some very desirable properties that make it
possible to use rubber in applications that would be unsuitable for natural rubber.

Vulcanization

Vulcanization, or curing of rubber, is a chemical process in which

individual polymer molecules are linked to other polymer molecules by atomic
bridges. The end result is that the springy rubber molecules become cross-linked to
a greater or lesser extent. This makes the bulk material harder, much more durable
and also more resistant to chemical attack. It also makes the surface of the material
smoother and prevents it from sticking to metal or plastic chemical catalysts. This
heavily cross-linked polymer has strong covalent bonds, with strong forces
between the chains, and is therefore an insoluble and infusible, thermosetting
polymer or thermoset. The process is named after Vulcan, the Roman god of fire.

Reason for vulcanizing

Uncured natural rubber will begin to deteriorate within a few days, gradually
breaking down into a wet crumbly mess. The process of perishing partly consists
of proteins being broken down (much as milk proteins do) and also of the large
rubber molecules breaking up as they oxidize in the air due to oxygen molecules
attacking the double bonds.

Rubber that has been inadequately vulcanized also may perish, but more
slowly. The process of perishing is encouraged by long exposure to sunlight, and
especially to ultraviolet radiation.

Description

Vulcanization is generally considered to be an irreversible process (see

below), similar to other thermosets and must be contrasted strongly with
thermoplastic processes (the melt-freeze process) which characterize the behavior
of most modern polymers. This irreversible cure reaction defines cured rubber
compounds as thermoset materials, which do not melt on heating, and places them
outside the class of thermoplastic materials (like polyethylene and polypropylene).
This is a fundamental difference between rubbers and thermoplastics, and sets the
conditions for their applications in the real world, their costs, and the economics of
their supply and demand.

Usually, the actual chemical cross-linking is done with sulfur, but there are
other technologies, including peroxide-based systems. The combined cure package
in a typical rubber compound comprises the cure agent itself, (sulfur or peroxide),
together with accelerators and retarding agents.

Along the rubber molecule, there are a number of sites which are attractive
to sulfur atoms. These are called cure sites. During vulcanization the eight-
membered ring of sulfur breaks down in smaller parts with varying numbers
of sulfur atoms. These parts are quite reactive. At each cure site on the rubber
molecule, one or more sulfur atoms can attach, and from there a sulfur chain can
grow until it eventually reaches a cure site on another rubber molecule. These
sulfur bridges are typically between two and ten atoms long. Contrast this with
typical polymer molecules in which the carbon backbone is many thousands of
atomic units in length. The number of sulfur atoms in a sulfur crosslink has a
strong influence on the physical properties of the final rubber article. Short sulfur
crosslinks, with just one or two sulfur atoms in the crosslink, give the rubber a very
good heat resistance. Crosslinks with higher number of sulfur atoms, up to six or
seven, give the rubber very good dynamic properties but with lesser heat
resistance. Dynamic properties are important for flexing movements of the rubber
article, e.g., the movement of a side-wall of a running tire. Without good flexing
properties these movements will rapidly lead to formation of cracks and,
ultimately, to failure of the rubber article. It is very flexible and water resistant.

NATURAL RUBBER

Natural rubber, also called India rubber or caoutchouc, as initially

produced, consists of polymers of the organic compound isoprene, with minor
impurities of other organic compounds plus water. Malaysia is one of the a leading
producers of rubber. Forms of polyisoprene that are used as natural rubbers are
classified as elastomers. Natural rubber is used by many manufacturing companies
for the production of rubber products. Currently, rubber is harvested mainly in the
form of the latex from the para rubber tree or others. The latex is a sticky,
milky colloiddrawn off by making incisions into the bark and collecting the fluid in
vessels in a process called "tapping". The latex then is refined into rubber ready for
commercial processing. Natural rubber is used extensively in many applications
and products, either alone or in combination with other materials. In major areas
latex is allowed to coagulate in the collection cup. The coagulated lumps are
collected and processed in to dry forms for marketing. In most of its useful forms,
it has a large stretch ratio and high resilience, and is extremely waterproof.
 Natural Rubber is produced from the crop harvested from rubber plantations
both in the latex form as well as in the field coagulam form. Latex is a milky white
dispersion of rubber in water and field coagulam is the auto coagulated latex on the
tapping panel (tree lace) and the collection cups (shell scrap and cuplumps). Both
the latex and field coagulam harvested from rubber plantations being highly
susceptible to degradation by contamination on keeping, have to be processed into
marketable forms that will allow safe storage and marketing. The most important
forms in which natural rubber is processed and marketed are Sheets (RSS1 to
RSS5), Crepes (Pale Latex Crepes; Estate Brown Crepes; Thin Brown Crepes;
Thick Blanket Crepes; Flat Bark Crepes; Pure Smoked Blanket Statistics Indian
Rubber Industry Natural Rubber crepe), Block rubber, Technically specified
(SMR, SIR, STR, ISNR), Preserved latex concentrates. Among these forms/types,
the first three are in the dry form and almost 90% of the total natural rubber
produced in the world is at present marketed in these 3 forms. Sheet rubber and
block rubber are the dominant types of dry natural rubber available in the world
market and this dominance reduced the number of grades used in any volume to
the 10-15 within these types. In 1909, a team headed by Fritz Hofmann, working at
the Bayer laboratory in Elberfeld, Germany, succeeded in polymerizing methyl
isoprene, thereby creating the first synthetic rubber. The first rubber polymer
synthesized from butadiene was created by Sergei Vasilyevich Lebedev in 1910. In
1935, German chemists synthesized the first of a series of synthetic rubbers known
as Buna rubbers. These were copolymers, meaning the polymers were made up
from two monomers in alternating sequence. One such Buna rubber, known as
GRS (Government Rubber Styrene), is a copolymer of butadiene and styrene, was
the basis for U.S.

Use

Compared to vulcanized rubber, uncured rubber has relatively few uses. It is

used for cements; for adhesive, insulating, and friction tapes; and for crepe rubber
used in insulating blankets and footwear. Vulcanized rubber, on the other hand, has
numerous applications. Resistance to abrasion makes softer kinds of rubber
valuable for the treads of vehicle tires and conveyor belts, and makes hard rubber
valuable for pump housings and piping used in the handling of abrasive sludge.

The flexibility of rubber is often used in hoses, tires, and rollers for a wide
variety of devices ranging from domestic clothes wringers to printing presses; its
elasticity makes it suitable for various kinds of shock absorbers and for specialized
machinery mountings designed to reduce vibration. Being relatively impermeable
to gases, rubber is useful in the manufacture of articles such as air hoses, balloons,
balls, and cushions. The resistance of rubber to water and to the action of most
fluid chemicals has led to its use in rainwear, diving gear, and chemical and
medicinal tubing, and as a lining for storage tanks, processing equipment, and
railroad tank cars. Because of their electrical resistance, soft rubber goods are used
as insulation and for protective gloves, shoes, and blankets; hard rubber is used for
articles such as telephone housings, parts for radio sets, meters, and other electrical
instruments. The coefficient of friction of rubber, which is high on dry surfaces and
low on wet surfaces, leads to the use of rubber both for power-transmission belting
and for water-lubricated bearings in deep-well pumps.

Problems in Natural Rubber

In recent years, natural rubber production in India is facing sharp decline.

Currently, India is worlds fifth largest natural rubber producer and fourth largest
consumer behind China, the US and Japan. In 2012, however, India was on 4th
rank after Thailand, Indonesia and Malaysia. Before that India ranked third on the
production table after Thailand and Indonesia. The major reason for fall in
production includes:

A serious fall in the productivity per hectare of rubber

Constant fall in prices of natural rubber, coupled with high labour cost has
forced many of the growers (75 per cent small and marginal farmers) to keep away
from tapping

Further, this industry is marred by several problems such as:

Conflict of interests of Rubber Growers and Tyre Companies. The

unrestricted massive imports by larger tyre companies pushed down domestic
demand; however at the same time; MSME and other small industries which
depend on domestic supply of natural rubber demand for urgent measures.
Other reasons including high input costs; bizarre duty structure, cheap imports and
signing of Free Trade Agreements with countries from which import of finished
rubber products to India is encouraged.

The trees will drip latex for about four hours, stopping as latex coagulates
naturally on the tapping cut, thus blocking the latex tubes in the bark. Tappers
usually rest and have a meal after finishing their tapping work, then start collecting
the liquid "field latex" at about midday. Some trees will continue to drip after the
collection and this leads to a small amount of "cup lump" which is collected at the
next tapping. The latex that coagulates on the cut is also collected as "tree lace".
Tree lace and cup lump together account for 1020% of the dry rubber produced.
Latex that drips onto the ground, "earth scrap", is also collected periodically for
processing of low-grade product.

Field coagula

Mixed field coagula.

Smallholder's lump at a remilling factory

There are four types of field coagula, "cuplump", "treelace", "smallholders lump"
and "earth scrap". Each has significantly different properties.

Cup lump is the coagulated material found in the collection cup when the
tapper next visits the tree to tap it again. It arises from latex clinging to the walls of
the cup after the latex was last poured into the bucket, and from late-dripping latex
exuded before the latex-carrying vessels of the tree become blocked. It is of higher
purity and of greater value than the other three types.

Tree lace is the coagulum strip that the tapper peels off the previous cut
before making a new cut. It usually has higher copper and manganese contents
than cup lump. Both copper and manganese are pro-oxidants and can lower the
physical properties of the dry rubber.

Smallholders lump is produced by smallholders who collect rubber from

trees far away from the nearest factory. Many Indonesian smallholders, who farm
paddies in remote areas, tap dispersed trees on their way to work in the paddy
fields and collect the latex (or the coagulated latex) on their way home. As it is
often impossible to preserve the latex sufficiently to get it to a factory that
processes latex in time for it to be used to make high quality products, and as the
latex would anyway have coagulated by the time it reached the factory, the
smallholder will coagulate it by any means available, in any container available.
Some smallholders use small containers, buckets etc., but often the latex is
coagulated in holes in the ground, which are usually lined with plastic sheeting.
Acidic materials and fermented fruit juices are used to coagulate the latex a
form of assisted biological coagulation. Little care is taken to exclude twigs,
leaves, and even bark from the lumps that are formed, which may also include tree
lace collected by the smallholder.
 Earth scrap is the material that gathers around the base of the tree. It arises
from latex overflowing from the cut and running down the bark of the tree, from
rain flooding a collection cup containing latex, and from spillage from tappers
buckets during collection. It contains soil and other contaminants, and has variable
rubber content, depending on the amount of contaminants mixed with it. Earth
scrap is collected by the field workers two or three times a year and may be
cleaned in a scrap-washer to recover the rubber, or sold off to a contractor who will
clean it and recover the rubber. It is of very low quality and under no
circumstances should it be included in block rubber or brown crepe.

Processing

Removing coagulum from coagulating troughs.

The latex will coagulate in the cups if kept for long. The latex has to be
collected before coagulation. The collected latex, "field latex", is transferred into
coagulation tanks for the preparation of dry rubber or transferred into air-tight
containers with sieving for ammoniation. Ammoniation is necessary to preserve
the latex in a colloidal state for longer periods of time.

Latex is generally processed into either latex concentrate for manufacture of

dipped goods or it can be coagulated under controlled, clean conditions using
formic acid. The coagulated latex can then be processed into the higher-grade,
technically specified block rubbers such as SVR 3L or SVR CV or used to produce
Ribbed Smoke Sheet grades.
Naturally coagulated rubber (cup lump) is used in the manufacture of TSR10 and
TSR20 grade rubbers. The processing of the rubber for these grades is a size
reduction and cleaning process to remove contamination and prepare the material
for the final stage of drying.

The dried material is then baled and palletized for storage and shipment in various
methods of transportation.

Transportation

Natural rubber latex is shipped from factories in south-west Asia, South

America, and North Africa to destinations around the world. As the cost of natural
rubber has risen significantly, the shipping methods which offer the lowest cost per
unit of weight are preferred. Depending on the destination, warehouse availability,
and transportation conditions, some methods are more suitable to certain buyers
than others. In international trade, latex rubber is mostly shipped in 20-foot ocean
containers. Inside the ocean container, various types of smaller containers are used
by factories to store latex rubber.

Terms of Reference
Consolidation of list of companies in the states of Maharashtra, Kerala, Tamil
Nadu and Punjab with regard to tyre and non-tyre including specific sub-sectors:

To analyse the entire sector and its characteristics in terms of available sub
sectors, contribution to the industry, demand and supply factors in terms of
employment.
Manpower availability in the sector: Skills available Vs. Skills required
The number of resources existing vs. required across all job roles in the
company across the selected states sub sector wise.
 Identifying gaps with regard to present quality of manpower across all job
roles in the companies across the selected states.
Demographic trends of employment employment concentration city wise
across the states.
To understand the sub-sector wise current employment records both direct
and indirect jobs.
To understand the interdependency and level of commonness in sub sectors
profiles and availability of cross functional workforce requirement in sub
sectors.

ii. Training capacity available in the selected states

Number of students being trained by the available institutes and

infrastructure available with them.
Gap analysis with respect to quality of manpower being trained and skills
required by the industry.
Overview:

The production of rubber and rubber products is a large and diverse industry.
Natural rubber, obtained from plantations in Africa and Asia, accounts for only
about 25% of the rubber used in industry. Synthetic alternatives, developed during
World War II, are the primary sources of raw materials today. Health hazards in
synthetic rubber production are primary related to exposure to monomers. An
excess incidence of leukemia has been observed in styrene/butadiene rubber
production, attributed to exposure to 1,3-butadiene. Excesses of cancer and
respiratory disease have been reported, although specific causative agents are
rarely identified. Exposures have varied greatly over the years, based on changes in
materials used, work practices, and ventilation. In modern industry, exposures to
noise, skin and respiratory irritants, and ergonomic stressors remain important. The
tire industry, in particular, has been studied extensively over the past 50 years.

Rubber industry is more than 100 years old. Industrial rubber industry is
dominated by one major product tires. Tires are used in large numbers on
bicycles, trucks, aircrafts, and automobiles. Automobile tires, inflatable rafts,
conveyor belts, rain coats and waterproof cloth tents are produced by
impregnating fabrics with rubber, using calendaring process. Molding is another
important process in the tire production. Tires are the principal product of
industrial rubber industry. It accounts for approximately three-fourth of total
rubber tonnage.
Production of rubber goods comprises of two stages- first stage is the
production of rubber, either by the natural rubber (which is an agricultural crop)
or from the petroleum products. Second stage is processing of the rubber so
produced into the finished goods form. Processing of rubber into the finished
goods like tires and other products is usually designated as rubber industry.
Synthetic rubbers are produced from petrochemicals by polymerization method.
Rapidly growing automotive sector in developing economies and increased
demand for high-performance tires, sealing products, and tire adhesive are
expected to contribute to the growth of the global industrial rubber market. As on
date, Asia Pacific is the largest producer and consumer of industrial rubber, with
its tire sector exhibiting promising growth rate. Manufacturers have shifted their
production facilities to emerging economies, due to the low labor and operating
costs.
In the industrial rubber industry, construction market is estimated to post the
strongest gain during the forecast period. Other construction-related products like
rubber roofing are projected to register the healthy growth. Mechanical goods is
 expected to account for the largest share of total demand. Suppliers of hose and
belts will gain benefits from increased consumer demand of the durable goods,
particularly machinery and equipment.

Industrial Rubber Market: Drivers & Restraints

Growing automotive industry, rising construction output and manufacturing

activities are some of the key factors driving the growth of the industrial rubber
market.
Volatility of the oil prices, environmental concerns and associated government
regulations, limited number of suppliers and increasing threat from the substitutes
are probable factors negatively impacting the growth of the industrial rubber
market.

Industrial Rubber Market: Segmentation

The global industrial rubber market is broadly classified on the basis of
product type, market and geographies.
Based on product type, the global industrial rubber market is segmented into:
Gaskets
Hoses
Conveyor belts
Sealing products
Footwear
Based on market, the global industrial rubber market is segmented into:
Construction
Manufacturing
Aerospace
 Automotive
Industrial Rubber Market: Overview

With rising automotive sales, growing population, increasing disposable income

and rising urbanization the need for industrial rubber products are increasing. The
global industrial rubber market is expected to expand at a promising CAGR during
the forecast period (2015-2025).

Industrial Rubber Market: Region-wise Outlook

The global industrial rubber market is expected to register a double-digit

CAGR for the forecast period. Depending on geographic regions, global industrial
rubber market is segmented into seven key regions: North America, South
America, Eastern Europe, Western Europe, Asia Pacific, Japan, and Middle East &
Africa. As of 2015, North America dominated the global industrial rubber market
in terms of market revenue followed by Europe. Asia Pacific & Japan are projected
to expand at a substantial growth and will contribute to the global industrial rubber
market value exhibiting a robust CAGR during the forecast period 2015.

Industrial Rubber Market: Key Players

Some of the key market participants in global industrial rubber market are
Goodyear Tire and Rubber Company, Greenville Industrial Rubber & Gasket Co,
Industrial Rubber & Gasket Inc, Continental AG, Bridgestone Corp, Yokohama
Rubber Company Ltd, Toyo Tire and Rubber Co. Ltd.
The research report presents a comprehensive assessment of the market and
contains thoughtful insights, facts, historical data, and statistically supported and
 industry-validated market data. It also contains projections using a suitable set of
assumptions and methodologies. The research report provides analysis and
information according to categories such as market segments, geographies, types
and applications.

The report covers exhaustive analysis on:

Market Segments
Market Dynamics
Market Size
Supply & Demand
Current Trends/Issues/Challenges
Competition & Companies involved
Technology
Value Chain
Regional analysis includes

North America (U.S., Canada)

Latin America (Mexico. Brazil)
Western Europe (Germany, Italy, France, U.K, Spain, Nordic countries,
Belgium, Netherlands, Luxembourg)
Eastern Europe (Poland, Russia)
Asia Pacific (China, India, ASEAN, Australia & New Zealand)
Japan
Middle East and Africa (GCC, S. Africa, N. Africa)
The report is a compilation of first-hand information, qualitative and quantitative
assessment by industry analysts, inputs from industry experts and industry
 participants across the value chain. The report provides in-depth analysis of parent
market trends, macro-economic indicators and governing factors along with
market attractiveness as per segments. The report also maps the qualitative impact
of various market factors on market segments and geographies.

Report Highlights:

Detailed overview of parent market

Changing market dynamics in the industry
In-depth market segmentation
Historical, current and projected market size in terms of volume and value
Recent industry trends and developments
Competitive landscape
Strategies of key players and products offered
Potential and niche segments, geographical regions exhibiting promising growth
A neutral perspective on market performance
Must-have information for market players to sustain and enhance their market
footprint.
COMPANY PROFILE:

Company Profile of Emirates Rubber Factory- Founder of R.

Elayaperumal and CEO - E. Flora Emirates Rubber Factory. The company
Establishment in 2001. This is an unique and specialized factory to fight against
nation threat about enormous heterogeneous waste of tyres. Billions of used tyres
now reside in landfills and illegal dumps causing pollution from release of toxic
chemical which is hazardous to human beings. ERF is recycling used tyres, which
have become a huge, accumulated waste and we help the Government and the
environment by converting this enormous waste into reusable material. Our raw
material and out put is only tyres and we shred these used whole tyres into tire
granulate and crumb rubber (Powder).

Our company is now ready to become a major force for friendly

environment in the global rubber industry. We are the authorized contractor of
RAK Municipality for their dump yard of tyres. Hopefully, our company will be
accredited as GREEN INDUSTRY BY UAE Government as our goal is to reduce
the pollution of the environment. ERF is equipped with the State of art machinery
to shred and produce rubber crumb of 7000 MT per annum.

Welcome to ERF Rubber, a market leader in manufacturing world-class rubber

products and moulded rubber components. For more than four decades, we have
served a large number of reputed clients from automotive, engineering, chemical,
healthcare and other industrial segments and gained in valuable experience. We
remain dedicated to our long-standing mission of delivering high-quality products
on time and at a competitive price.
 The company makes use of leading-edge technology to manufacture a wide
range of products such as O-rings, hydraulic & pneumatic seals, gaskets,
grommets, bushes, bellows, flat washers, s olidtyres, b oots, d iaphragms, aprons,
cots etc. in Nitrile, Polyurethane, Viton, Silicon, Neoprene, EPDM and other
polymers as required by our clients. We also manufacture rubber products and
components as per client specifications.

ERF Rubber Industries became functional under the able leadership of Mr.
K.L. Jain. Production started in a small, rented place with a workforce of only five
people. A period of rapid growth followed and within a short span, the company
expanded manifold in all aspects. At present, a team of more than 30 highly-skilled
professionals work dedicatedly to meet the stringent norms set by the company in
accordance with the requirements of our valued clients.

The high-precision, international-quality rubber products and efficacious

services of ERF have helped us build an impressive client base across the country.
We have carved a niche in the global market as well, working in tandem with
reputed export houses and catering to the quality-conscious markets of Europe and
the USA. The company is also exploring new markets worldwide in order to
expand its business prospects further.
VISION AND MISSION:

Vision

To work as a team and provide a encouraging working environment.

To provide high quality products that combine performance with value

pricing, while establishing a successful relationship with our customers and
our suppliers.

Mission

To stay ahead of the competition by continuous improvement in our services.

Super Springs values its employees, suppliers and its customers and is
committed to cultivate an environment of mutual trust and respect and to
provide necessary resources to achieve its goals
ERF Limited Profile:

Corporate Identification Number : U17111TZ2001PTC013446

Company Name: ERF Rubber Industry
Company Status: Active
ROC: ROC- madurai
Registration Number: 13446
Company Category: Company limited by Shares
Company Sub Category: Non-govt company

Class of Company: Private

Date of Incorporation: 01 September 2005
Age of Company: 13 years, 8 month
Activity: Rubber manufacturing
Company Founder R. Elayaperumal
Managing Director E.Flora
Total Employees 750
HR Manager D.Elayaraj
 CHAPTER-III
REVIEW OF LITERATURE

Cash management is the practice of planning and controlling cash flows into
and out of the business, cash flows within the business, and cash balances held by a
business at a point in time (Pandey, 2004).
Efficient cash management involves the determination of the most
favourablecash to hold by considering the trade-off between the opportunity cost of
holding too much cash and the trading cost of holding too little (Ross et al., 2008
cited in Nyabwanga, et al., 2011).
Cash management is fundamental to every business that desires to meet up
with its short-termfinancial obligations. Cash management consists of taking the
necessary actions to maintain adequate levels of cash to meet operational and
capital requirements and to obtain the maximum yield on short-term investments.
Uwuigbe, Uwalomwa and Egbide (2011) observed that cash management
assumes more significance than other current assets because cash is the
mostimportant asset that a firm holds. Cash, unlike fixed assets or inventories does
not produce goods for resale, notwithstanding managements considerable time is
devoted to managing cash.
The importance of managing cash to a manufacturing organization as
recognized by Alfred(2007) includes the following:
a) Management of cash aids the achievement of liquidity and control.
b) It brings about proper planning with regard to cash disbursement and
receipts over cash positions to keep the firm sufficiently liquid and to use excess
cash in some profitable venture
c) The management of cash is also significant since we cannot rightly
predict accurately cash flow behaviour in the future.
 d) Through cash management, appropriate strategies are developed thereby
providing innovation for cash receipts and payments.
e) It also aidmaintaining adequate control over cash position to keep the firm
sufficiently liquid and to use excess of cash in some profitable ventures.
Bhutto, Abbas, Rehman and Shah, (2011) conducted an investigation on the
relationship betweencash conversion cycle with firm size, working capital
approaches and firms profitability in Pakistan. Secondary data were collected
from the financial statements of 157 non-financial companies comprising on 12
industrial groups listed on the Karachi Stock Exchange, Pakistan for the year 2009.
The firms with negative equity and profitability were excluded from the study.
Data analysis was carried out using Pearson correlation and Analysis of
Variance (ANOVA). The result revealed that length of cash conversion cycle
has negative relationship with sales revenue, return on equity (ROE) and
financing policies of the firms and has positive relationship with total assets, return
on assets. Cash management is usually measured by cash conversion cycle (CCC)
calculated by the number of days between actual cash expenditures on purchase of
raw materials and actual cash receipts from the sale of products or services
(Eljelly, 2004).
Uwuigbe, Uwalomwa and Egbide (2011) carried out an investigation on
cash management and corporate profitability in some selected listed manufacturing
firms in Nigeria. Cash conversion cycle was used as the measure for cash
management. Meanwhile, current ratio, debt ratio and sales growth were used as
control variables. The study utilized secondary data while Pearsons correlation
and regression analysis were used in analyzing the data for a sample of 15 listed
manufacturing companies in Nigeria between 2005-2009.The results of the
empirical findingsshowed that there is a strong negative relationship between cash
conversion cycle and profitability of the firms. The study suggested that managers
could create positive value for theshareholders by reducing the cash conversion
cycle to a possible minimum level and alsoaccounts receivables should be kept at
an optimal level.
Similarly, Falope and Ajilore (2009) used a sample of 50 ERF Rubberquoted
nonfinancial firms for the period 1996 -2005. Their study utilized panel data
econometrics in a pooled regression, where time-series and cross-sectional
observations were combined and estimated. They found a significant negative
relationship between net operating profitability and the average collection period,
inventory turnover in days, average payment period and cash conversion cycle.
Eljelly (2004) carried out an empirical investigation on the relation between
profitability and liquidity on a sample of joint stock companies in Saudi Arabia.
Liquidity was measured by current ratio and cash gap (cash conversion cycle).
Secondary data were obtained from the annual accounts of the selected companies.
Using correlation and regression analysis the study found significant negative
relation between the firms profitability and its liquidity level, as measured by
current ratio. This relationship was more evident in firms with high current ratios
and longer cash conversion cycles. At the industry level, however, the study found
that the cash conversion cycle or the cash gap was of more importance as a
measure of liquidity than current ratio that affects profitability. The size variable
was also found to have significant effect on profitability at the industry level.
Malik, Waseem and Kifayat (2011) carried out an investigation on working
capital management and profitability in the Rubber industry of Pakistan. The
population of the study was the Rubber industry of Pakistan. The study was based
on secondary data collected from listed firms in Karachi stock exchange for the
period of 2001-2006. The effect of working capital management on profitability
was tested using panel data methodology.
 Data analysis was conducted using correlation and regression analysis. The
results of the study revealed that there a strong positiverelationship existed
between profitability and cash, accounts receivable and, inventory while there a
negative relationship was reported between profitability and accounts payable. In
other words, increase in cash, inventory and credit sales will lead to increase
profitability of firm.
Wongthatsanekorn (2010) conducted a study on the impact of cash-to-cash
cycle time, inventory conversion period, receivable conversion period, and payable
deferral period of private Rubberin Thailand. Data for the study were obtained
from the financial reports of listed private Rubberin Stock Exchange of Thailand
across 13 private Rubber populations, from 2002 to 2008. The results of the
regression analysis revealed that s negative relationship existed between payable
deferral period and asset turnover. Meanwhile, no significant relationship was
reported between each of company size, sales growth, financial debt level, and
annual gross domestic product growth.
Raheman and Nasr (2007) carried out a study on the effect of different
variables of working capital management including average collection period,
inventory turnover in days, average payment period, cash conversion cycle, and
current ratio on the net operating profitability of Pakistani firms. Sample firms
included ninety-four Pakistani firms listed on Karachi Stock Exchange for a period
of 6 years from 1999-2004. From result of the regression analysis carried out, they
reported that there was a negative relationship between variables of working
capital management including the average collection period, inventory turnover in
days, average collection period, cash conversion cycle and profitability. Besides,
they also indicated that size of the firm, measured by natural logarithm of sales,
and profitability had a positive relationship.
 Ebben and Johnson (2011) investigated the relationship between cash
conversion cycle and levels of liquidity, invested capital, and performance in small
firms over time. In a sample ofeight hundred and seventy-nine small U.S.
manufacturing firms and eight hundred and thirtythreesmall U.S. retail firms, cash
conversion cycle was found to be significantly related to all three of these aspects.
Firms with more efficient cash conversion cycles were more liquid, required less
debt and equity financing, and had higher returns. The results also indicated that
small firm owners/managers may be reactive in managing cash conversion cycle.
The study highlighted the significance of cash conversion cycle as a proactive
management tool for small firm owners.
Abbasi and Bosra (2012) investigated the effect of the cash conversion cycle
components on the operational gross profit to assets ratio in Tehran. Data for the
study were obtained from one hundred and twelve annual reports of firms listed in
the Tehran stock exchange for the period of 1998 to 2009. The relationship
between cash conversion cycle components and 12 control variables tested using
regression model. The result of first model tested demonstrated that when all of the
cash conversion cycle components entered to the model, the net cash conversion
cycle and the number of days inventory holding did not have significant effect but
number of daysreceivable accounts and number of days payable accounts had
significant negative effect on operational gross profit to assets ratio.
Abioro (2013) indicated that mere availability of cash (liquidity) without
proper management does not necessarily translate into favorable performance for
manufacturing companies. Hence, need for effective cash management for better
performance.
Gachaaga (2014) on the effects of management accounting practices on
financial performance, found out that budgeting practices (budgeting for long-term
(strategic) plans, zero-based budgeting, budgeting for controlling costs, flexible
budgeting, budgeting with what if analysis, budgeting for planning and activity-
based budgeting) were highly used by the Manufacturing Companies in Madurai.

Uwalomwa and Egbide (2011) claims that cash management entails taking
the needed precautionary measures to ensure that adequate cash levels are
maintained in the business so that the operational requirements could be met. This
claim is seconded by Aliet (2012) who indicated that, cash management is the
management of cash to maximise the cash held in the business that is not invested
in buying inventory or fixed assets. In other words, it is the management of cash to
avoid the risk of the business becoming insolvent.

Abioro (2013) advocated for bank concentration which refers to the practice
of moving cash from multiple banks into the firms main account. Local banks
automatically transfer funds, either by wire or by a depository transfer check to a
central concentration bank.
 RESEARCH METHODOLOGY

RESEARCH DESIGN:

A research design is the way or the methods or the procedure followed to

conduct a scientific research. Some of the types of research design are exploratory
research design, descriptive research design and causal research design. Each has
its own meaning. Causal research design helps us to know a cause and effect
relation between two variables, whereas exploratory research design is used to find
new ideas and insight. Descriptive research design is a type of research method
that is used when one wants to get information on the current status of a person or
an object. In this study there only one company and no new ideas are to be found.
The major focus would be on to know current financial position of ERF RUBBER
INDUSTRY, MADURAI. For this a descriptive type of research design is used.

RESEARCH QUESTIONS

To achieve meeting the above objectives, the study sought to answer the following
research questions:

i. What are the effects of preparing cash budgets on operational performance

of ERF Rubber Industry in Madurai?

ii. What are the effects of operating bank accounts on operational

performance of ERF Rubber Industry in Madurai?

iii. What are the effects of book keepingon operational performance of ERF
Rubber Industry in Madurai?
DATA COLLECTION METHOD: -

There are two ways one can collect data i.e. through primary source (which
means generating ones own information by surveys or interviews etc.) or through
secondary source (which are readily available like information in newspaper,
magazines, websites etc.). For this report only secondary data are used as the basic
objective is to study ERF RUBBER INDUSTRY, MADURAI. Financial
position, there is no need to conduct a survey or interviews, which are sources of
primary data.

TYPE OF DATA:-

Data included in the balance sheet, profit and loss account of the company
are used.

METHOD OF ANALYSIS:-

Various financial ratios are used to evaluate the corporate financial positions
along with various graphs and charts.

RESEARCH QUESTION
In order to achieve the objective of this study, the following research
question has been posed:
(i) What is the relationship between cash management and return on assets of ERF
Rubber Industry?
(ii) What is the relationship between cash management and return on equity in ERF
Rubber Industry?
RESEARCH HYPOTHESIS

In order to investigate the nature of relationship that exists between cash

management and profitability, the following hypothesis has been formulated:
Hoi: There is no significant relationship between cash management and return on
assets in ERF Rubber Industry.
Hoiii: There is no significant relationship between cash management and return on
equity in ERF Rubber Industry.

TIME PERIOD:-

Data from 2010 to 2015 are collected to analyze the performance of the ERF
RUBBER INDUSTRY, MADURAI.
 CHAPTER-IV
DATA ANALYSIS AND INTERPRETATIONS

1. COMMON SIZE BALANCE SHEET:

Common Size Balance Sheet means the size of the balance sheet of various
years or items or firms is to brought to a common figure. That is the totals of the
assets and liabilities are considered as 100 and all the items of assets and liabilities
are expressed in terms of percentages. The relationships are established with one
item to its respective total and is compared with another years Balance Sheet.

Alternatively capital employed may also be considered as 100 and all other
items of the balance sheet are expressed in percentages.

This kind of Analysis is helpful to study the Financial Position Liquidity

Solvency etc. of the concern in various years

 COMMON SIZE INCOME STATEMENT

FOR THE YEAR ENDING 31-3-2014-16

2014 2016

Particulars RS % RS %

Sales-cost 274253348 100 256739185 100

of sales
263436810 96 252689320 98

Gross profit
10816538 4.00 4049865 2
operating
9848419 3.6 10967021 4.27
expenses
968119 0.40 -6917156 -2.27

9295525 3.3 -9260319 -3.60

Non
-8327406 -2.98 -16177475 -5.87
operatingexp
12776730 4.65 3012462 1.17

4449324 1.67 -13165013 -5

+Non operating
Incomes

Net profit/loss
 WORKING NOTES:

1.Calculation of cost of goods 2014 2016

sold

Opening stock
55889767 50785141
+purchases
180187848 168779141
-closing stock
50785141 39186088
Material consumed
185292474 180378194

Manufacturing exp
78144336 72311126
Cost of sales
263436810 252689320
COMMON SIZE BALANCA SHEET:

Particular Rs(2014) % Rs(2016) %

s

Liabilities

Sharecapital 81773300 19.7 8177300 19.7

8 0
Reserves 12945560 12945560
3.12 3.12
Other long term 24750232 24628387
loans 1 60.00 0 59.35

Current 68874222 17.00 72678933 17.58

liabilities
100 100

Assets:
180915756 43.60 181211834 43.85
Fixed assets
138299592 33.46 126873621 30.57
Current assets
92431193 22.80 105596206 25.45
P&La/c(loss)
100 100
ANALYSIS:

1.By seeing the above statement we come to know that there is slight
changes in long term liabilities, but in current liabilities is increased to
0.58% in the year 2015.

2. In the 2015 the current assets are less compare to the year 2014. It
shows that the company is not utilizing the working capital
properly.

3.From the common size Income statement we can see that the operating
expenses are increased compare to previous year. It is because of not
control over on expenses

4.This increasing expenses will results in the losses.

INTERPRETATION:
 The above statement reveals that the company is not utilizing the funds
properly. The cost goods sold are increasing . This will results in the loss of
the company.

3. TREND ANASLYSIS:

The trend analysis is another tool of financial analysis. Trend means a

tendency. Trend analysis is review and appraisal of tendency in accounting
variables. This analysis is more suitable for forecasting or budgeting. This
analysis a series of trends information. It discloses the direction of items in
the financial statement either upward , downward on constant over a period
of time.

For the purpose of calculating trend percentages number of years

financial statements are required. Trend ratio are calculated on the basis of
base year information .The trend ratios on popular is statistics and are
similar to index numbers. Which indicate the movement or fluctuation in
various elements financial of statements of the business.

PROCEDURE:

1. Arrangement of years of the financial statements in ascending order.

2. Select a normal year as a base year usually first year may be
considered as the base year.
3. Consider all the figures of base year as 100
4. Conversion of other years figures on the basis of base year percentage.
 5. Study the trend percentages by establishing some relationship among
them.
6. Interpretation of the trend series in simple terms.

FORMULA FOR CALCULATION OF TREND PERCENTAGES.

100 *Next years figures

Base year figures

TREND ANALYSIS:

The following figures are extracted from the annual repots of the ERF Rubber
industry

Particulars 2011 2012 2013 2014 2015

Sales 269932512 231390442 254655866 274253348 256739185

Cost of 267396134 215622553 227364007 263436840 252689320

goods sold

Profit
-7733598 -228728 7421223 4449324 -13165013
TREND RATIOS:(Base year is 2011)

Particular 2011 2012 2013 2014 2015

Sales 100 85.61 94.22 101.47 94.99

Cost of 100 80.42 84.81 98.26 94.25

goods sold

Profit
100 -2.95 95.95 57.53 -170.22
ANALYSIS:

1. The sales is increased constantly except 2012.The cost of goods sold

is increasing as compare to sales. i.e. in the year 2013 the sales are
94.22, the cost of goods sold is 84.81 but in the year 2012 the sales are
85.61 the cost of goods sold is 80.42. by seeing this we come to know
that the cost of sales are increase.
2. The Trend Analysis shows that there is loss in the year 2012 and
2015.

3. The above statement reveals that the sales are decreased but the costs
are same compared to all years.

4. From the above Analysis we come to know that there is a profits in

the year 2013 & 2014. Except these years the company is under loss.
 5. The above statement reveals that the cost of goods are increased
compare to sales.

INTERPRETATION:

The above statements reveals that the company sales is less in the present
year. It indicates that the production is less compare to previous year.

RATIO ANALYSIS:

INTRODUCTION:

The financial statement of a company contains a lot of

information about the Cash Management of the company. Financial
statements mainly consist of the Balance Sheet and Profit and Loss
Accounts. These statements give the overall picture of the company, but to
analyse each aspect of business extensively, financial ratios are used. The
Balance Sheet and the Statement of Income are essential, but they are only
the starting point for successful financial management. Financial Ratio
Analysis derived from Financial Statements analyses the success, failure,
and progress of business.

Ratio Analysis is a very powerful analytical tool useful for

measuring the performance of an organization. The ratio analysis
concentrates on the interrelationship among the figures appearing in the
mentioned financial statements. The ratio analysis helps the management to
analyze the past performance of the firm and to make further projections
 As the organization employs capital on fixed assets for the purpose of
equipping itself with the required manufacturing facilities to produce goods
and services which are saleable to the customers to earn revenue, it is
necessary to measure the degree of success achieved in this bearing. This
ratio establishes the relationship between the amount of sales revenue and
the amount of capital employed on fixed assets.

Ratio refers to the establishment of relationship between any two

inter-related variables .For example, both the amount of profit and the
amount of sales revenue earned are inter-related as one is influenced by
another.

Accounting Ratios shows the inter-relationships that exist among

various accounting data. Accounting Ratios express the relationships, in the
mathematical terms, between two or more items(of financial statements and
others) which have a cause and effect relationship or which are connected
with each other in one way or the other.

Since the Analysis and Interpretation of Financial Statements is made

with the help of ratios it is called Ratio Analysis. The ratio analysis is , an
effective tool or a device to diagnose the financial and operational diseases
of business enterprises. The Ratio Analysis of Financial Statements stands
for the purpose of arrangement of data, computation of ratios, interpretation
of the ratios so computed and projections through ratios.
STEPS IN RATIO ANALYSIS:

1) Collect all the data required for computing the necessary ratios
which in turn depends upon the purpose of calculating the
ratios
2) With the help of above information, compute the necessary
accounting ratios.
3) Compare the ratios so computed either with the ratios of the
same company for the previous year/s.
4) Interpret the ratios in the light of the comparison, draw
inferences, and prepare reports.

Various Accounting Ratios (Functional wise classification)

Liquidity Ratios
Turnover/activity Ratios
Profitability Ratios

LIQUIDITY RATIOS:

Liquidity refers to the ability of the organization to generate cash

internally from business operations or to raise cash externally from the
financial institutions so that it can meet all its cash requirements and
discharge all its current obligations. It is not an exaggeration but a fact
that liquidity is very essential for the very survival of the organization.

The liquidity ratios measure the firms ability to meet its short-term
(less than one year) obligations as and when they become due. Liquidity
ratios establish a relationship between cash and other current assets to
provide a measure of then liquidity of the organization.

The corporate liquidity has two dimensions namely, quantitative and

qualitative concepts. The quantitative concept includes the quantum,
structure and utilizations of liquid assets and in qualitative concepts, it is the
ability to meet all present and potential demands on cash from any source in
manner that minimizes cost and maximize the value of the form. Thus
corporate liquidity is vital facto in business excess liquidity, through a
generator of solvency would reflect lower profitability, deteriorations in
managerial efficiency increased speculation and unjustified expansion,
extension of too liberal credit and dividend policies. Too little liquidity then
may lead to frustrations of business objections, reduced rate of return,
business opportunity missed and weakening of morale. The important ratios
to measure the liquidity of a firm are:

A) Current Ratio
B) Quick/Acid Test Ratio

A) Current Ratio: The ability of a company to meet its short-term

commitment is normally assessed by comparing Current Assets with
Current Liabilities. As the Working Capital is equivalent to the
difference between Current Assets and Current Liabilities, or as the
Working Capital is the excess of Current Assets over Current liabilities,
this ratio is called Working Capital Ratio. This ratio establishes the
relationship between Current Assets and Current Liabilities
CURRENT ASSETS TO CURRENT LIABILITIES

Current Assets / current liabilities

Year Current assets Current Liabilities Ratio

2010-2011 117291902 72046325 1.62

2011-2012 119869315 68946971 1.73

2012-2013 138949815 77335112 1.79

2013-2014 138554890 69425372 1.99

 2014-2015 126873621 72678933 1.74

CHART:

250000000

200000000

Ratio
150000000
Current Liabilities

100000000 Current assets

Year

50000000

0
1 2 3 4 5 6 7 8 9 10

ANALYSIS:

1. The above chart shows that there is a slight fluctuations in the current
assets and current liabilities.
 2. In present year the current ratio is less i.e. 1.74 compare to previous
year.
3. The above chart reveals that the current ratio is increasing year by
year except 2015

INTERPRETATION:

The current ratio is not satisfactory with a standard i.e.2:1.so company

as to maintain standard current ratio. In the present year the current ratio is
not satisfactory.

Quick ratio:

Quick ratio is also known as liquid ratio or acid test ratio or near money
ratio. It is the ratio between quick or liquid assets and quick liabilities. As
pointed out, the current ratio in the study of solvency may be sometimes
misleading due to high ratio of stock to current assets.

Quick assets

Quick ratio=

Quick liabilities

Quick assets = current assets- inventories

Quick liability= current liability- bank over draft

Year Quick assets Quick liabilities Ratio

2010-2011 64343512 59498988 1.08

2011-2012 66826151 68946971 0.96

2012-2013 76593359 77335112 0.99

2013-2014 80483135 69425372 1.16

2014-2015 80584499 72678933 1.11

CHART

160000000

140000000

120000000

100000000 Ratio
Quick liabilities
80000000
Quick assets
60000000
Year
40000000

20000000

0
1 2 3 4 5 6 7

ANALYSIS:
 1. The above chart shows that there is slight fluctuation in Quick assets
and Quick liabilities.
2. In the year 2015 the quick ratio is less i.e. 1.11 compare to 2014 quick
ratio i.e. 1.16. there is slight difference in quick ratio i.e. (0.05)
3. The quick ratio is highest in the year 2010-05 i.e.0.67 comparing to all
next years
4. The above chart reveals that there is not much difference in liquid
ratios of the company.

ITERPRETATION:

In the present year the quick ratio is not satisfactory because the
quick assets is less than the quick liabilities.

TURNOVER/ ACTIVITY RATIOS:

Another important dimension of liquidity or the short term financial

position is the computation of the rates at which different short-term assets
are converted into cash and how promptly the liabilities have been
discharged. The important ratios used for this purpose are Stock Turnover
Ratio, Fixed Assets Turnover Ratio, and Working Capital Turnover Ratio.

1) Inventory/Stock turn over ratio:

This ratio is also known as stock velocity. This ratio is calculated to

consider the adequacy of the quantum of capital and its justification
for investing in inventory. A firm must have reasonable stock in comparison
to sales. It is the ratio of cost of sales and average inventory. This ratio helps
the financial manager to evaluate inventory policy.
 Inventory turnover ratio= cost of goods sold/average stock

Cost of goods sold = op.stock + pur + direct exps cl. Stock

Average stock= op.stock +cl.stock/2

TABLE

Year Cost of Average Ratio

goods sold stock

2010-2011 267396134 46596794.5 0.57

2011-2012 215622553 46438443.5 4.64

2012-2013 227364007 51082152 4.45

2013-2014 263436840 53337453.5 4.93

2014-2015 252689320 44985614.5 5.62

CHART
 350000000
300000000
250000000
200000000
Ratio
150000000
Average stock
100000000 Cost of goods sold
50000000
0

ANALYSIS:

1. From the above chart we come to know that the stock is increased
year by year. The stock ratio is 5.62 in the year 2015 compare to
previous year i.e. 4.93in the year 2014.
2. The increasing stock will be results in raise of cost of production.
3. when the cost of goods sold increases the profitability automatically
decreases
i.e. the company face the problem of loss

4. The above chart shows that the Ratios are increasing year by year.

INTERPRETATION:
The above table realize that the company have a more stock. It is not
favorable for the company because it increases the costs.

GROSS PROFIT RATIO:

It is ratio of Gross profit to net sales expressed as percentage. It

shows the relationship between gross profit and sales.

Gross profit/ sales*100

Year G/P Sales Ratio

2010-2011 2536378 269932512 0.93

2011-2012 15767889 231390442 6.81

2012-2013 27291869 254655866 10.71

2013-2014 10816538 274253348 3.94

2014-2015 4049865 256739185 1.57

CHART
 300000000

250000000

200000000
Ratio

150000000 Sales
G/P
100000000 Year

50000000

0
1 2 3 4 5 6 7 8 9 10 11

ANALYSIS:

1. The above table reveals that the Gross Profit is increased in the year
2012-013. But remaining years it is declining.

2. In the year 2012-013 the sales are good compare to all remaining years.
So the gross profit is increased to 10.71 in this year.

3. In the year 2010-12 the gross profit is less i.e. 0.93 compare to all next
year because of the purchasing costs are more compare to others years.

INTERPRETATION:

The above chart shows that the Gross Profit is declining year by year. It is
decline 1.57 in the 2015. It is not favorable for the company.

2) NET PROFIT RATIO:

It is ratio of Net profit to net sales expressed as percentage. It shows the
relationship between Net profit and sales.

Net profit/ sales*100

TABLE:

Year Net Profit sales Ratio

2010-2011 7733598 269932512 2.86

2011-2012 228728 231390442 0.098

2012-2013 7421223 254655866 2.91

2013-2013 4449324 274253348 1.62

2013-2014 13165013 256739185 5.12

CHART
 100%
90%
80%
70%
Ratio
60%
sales
50%
40% Net Profit

30% Year

20%
10%
0%
1 2 3 4 5 6 7 8 9 10

ANALYSIS:

1.The above chart shows that the company is facing heavy loss in the year
2015.beacuase the reasons behind this is one is the previous year losses and
also the expenses are increased year by year.

2. The above chart reveals that company financial statements it is recovering

losses in the year 2013-14 but it is not possible in the year 2015

3. The above statement reveals that the company is under a loss because of
increase in the costs but the sales are declining.

INTERPRETATION:

The above chart shows that the company is under loss. Because the expenses
are more than the incomes.

CHAPTER-V
 FINDINGS

From the Income performance i found that the operating expenses increased
compare to previous year. There is need of control on expenses.
From the comparative performance of 2014-09 we can find that there is
decrease .(21%) in working capital compare to the year 2014. The current
assets less but the current liabilities are more, so the company have to utilize
funds properly i.e. there is a need of control on expenses
According to comparative performance we come to know that the sales
Gross profit are declining compare to previous year (2014)
Liquidity ratios
Current ratios: The current assets ratio as per calculation it is observed
that, it has been increased by 1.62 to 1.73 to 1.79 to 1.99 to 1.74 from 2011
to 2015. It doesnt reaches the standard ratio, so it is unfavorable to the
company.

Inventory turn over ratio has been increased continuously i.e. 0.57 to 4.64
to 4.45 to 4.93to 5.62 from 2011 to 2015 so it is not favorable to the
Company.
From the above financial analysis I found that in the present year the
company is under loss.
The gross profit is found to be very low compare to previous year. The gross
profit is declining .It reveals that the companies position is not appreciable
The trend analysis reveals that the sales declining year by year but there is
slight fluctuation in costs.
SUGGETIONS:

1. Ratio analysis indicates that the firm is not in good health none of the
ratios are not reaching the standard. It is necessary enhance the operating
efficiency. Hence the firm should concentrate on enhancing the operating
efficiency of the firm for enhancement of shareholders wealth

2. From the study it is found that the funds are used for short term assets
which should be avoided. The long term sources of funds should be used for
long term assets and not for short term assets.

3. The Gross Profit ratio indicates that the gross profit is declining year by
year, it is not good for the company so it as to take measures to control the
operating costs.

4. The company needs to maintain good inventory turnover ratio by

increasing the sales.

5. The current ratio of the company doesnt reach standard ratio, so company
need to concentrate on increasing the current ratio by increasing in current
assets
CONCLUSION:

This study helps to know that the companies financial position. The sales of
the company is decline in the year 2015. There is increases costs in some
years so it is needs to reduce its costs.
As the study helps to know that the changes in Cash Management i.e.
increase or decrease in the liabilities and assets. By the ratio analysis we
come to know that the companies solvency. The company have to take some
measures to control the costs.
This study helps us to know that the companies financial position is not
appreciable because there is loss in the present year due to high expenses. so
it has to control the costs.
By the analysis of financial statements I conclude that, overall Cash
Management of the company is not satisfactory. The company can try to
take a some measures to increase profit i.e. proper utilization of available
resources.
BIBLIOGRAPHY:

Accounting for Managers by J. Made Gowda

Management Accounting by R.S.N.pillai and Bhagavathi
Annual reports of the SKOC,ERF RUBBER INDUSTRY,COIMBATORE
 ANNEXURE:

Income and Expenditure A/C of ERF RUBBER INDUSTRY

Incomes 2010 2011 2012 2013 2013

Sales 269932512 231390442 254655866 274253348 256739185

Less: 15387344 215622553 227363997 263436810 252689320

cost of
goods
sold
13944630 15767889 27291869 10816538 4049865

G/p

283877142 6240291 2961984 12776730 3012462

Other
income

22014180 30253853 23593268 7062327

Total
Expenditure

Administration 8249677 8820456 9571046 7551010 9102073

exp

Interest
13893862 11769457 11436128 9295525 9260319

Depreciation
421916 388323 345205 309944 270661

Provision for
500000 - - -
bad debts and
D.D

1149152 1258671 1480251 1987465 1594287

Maintenance of
vehicles

Net -7733598 -228728 7421223 4449324 -13165013

profit/Loss
BALANCE SHEET IN ERF RUBBER INDUSTRY

2011 2012 2013 2014 2015

Sources Of Funds
Total Share Capital 22.70 22.70 15.13 15.13 15.13
Equity Share 22.70 22.70 15.13 15.13 15.13
Capital
Reserves 1,189.46 906.00 762.18 682.12 667.89
Networth 1,212.16 928.70 777.31 697.25 683.02
Secured Loans 8.38 16.29 43.47 107.43 152.48
Unsecured Loans 0.00 0.04 0.08 0.10 29.25
Total Debt 8.38 16.33 43.55 107.53 181.73
Total Liabilities 1,220.54 945.03 820.86 804.78 864.75
2011 2012 2013 2014 2015
Application Of Funds
Gross Block 589.47 520.74 495.71 513.36 578.88
Less: Accum. 165.52 147.09 121.22 112.36 96.44
Depreciation
Net Block 423.95 373.65 374.49 401.00 482.44
Capital Work in 24.97 8.44 44.11 65.63 6.48
Progress
Investments 501.73 296.31 163.58 80.80 7.08
Inventories 118.45 136.62 112.26 109.41 121.91
Sundry Debtors 56.90 75.22 80.48 78.93 91.08
Cash and Bank 326.09 264.84 279.09 272.48 204.15
Balance
Total Current 501.44 476.68 471.83 460.82 417.14
Assets
Loans and 103.78 105.38 97.95 149.24 166.65
Advances
Total CA, Loans & 605.22 582.06 569.78 610.06 583.79
Advances
Current Liabilities 213.79 178.08 159.63 190.65 142.17
Provisions 121.55 137.36 171.48 162.06 72.87
Total CL & 335.34 315.44 331.11 352.71 215.04
Provisions
Net Current Assets 269.88 266.62 238.67 257.35 368.75
Total Assets 1,220.53 945.02 820.85 804.78 864.75
Contingent 116.95 107.48 93.37 29.25 129.95
Liabilities
Book Value (Rs) 53.41 40.92 51.37 46.08 45.14
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