A STUDY ON CASH MANAGEMENTOFANGLO

FRENCH TEXTILES
SUMMER PROJECT REPORT
Submitted by
K.RAJESH
REGISTER NO: 26348325Under the Guidance of
Mr. D.SARAVANAN MBA, M.PHIL
FACULTY, Department of Management Studies.
In partial fulfillment for the award of the degreeof
MASTER OF BUSINESS
ADMINISTRATIONDEPARTMENT OF
MANAGEMENT STUDIES
SRI MANAKULA VINAYAGAR ENGINEERING
COLLEGEPONDICHERRY
UNIVERSITYPUDUCHERRY, INDIA
OCTOBER - 2007

SRI MANAKULA VINAYAGAR ENGINEERING

COLLEGEPONDICHERRY UNIVERSITY
DEPARTMENT OF MANAGEMENT STUDIES
BONAFIDE CERTIFICATE
This to certify that the project work
e n t i t l e d “ A S T U D Y O N C A S H MANAGE
MENT OF ANGLO- FRENCH TEXTILES” is a
bonafide work
done by K.RAJESH, [ REGISTER NO: 26348325] in par
tial fulfillment of therequirement for the award of
Master of Business Administration by
PondicherryUniversity during the academic year 2007 –
2008
.
GUIDE HEAD OF DEPARTMENT
Submitted for Viva Voce Examination held on
_________
EXTERNAL EXAMINER

CONTENTS
C H A P
T E R T I
T L E P A
G E N O
ACKNOWLEDGEMENTABSTRACTLIST OF
TABLELIST OF
CHARTI I N T R O D U C
T I O N 1.1Profile of an
organizationI I N E E D F O R
T H E S T U D Y I I I R
E V I E W O F L I T
E R A T U R E I V O B J E
C T I V E S O F T H E S T U D
Y V R E S E A R C H
M E T H O D O L O G Y V
I D A T A A N A L Y S I S A N D I N
T E R P R E T A T I O N V I I F I
N D I N G S O F T H
E S T U D Y V I I I S U G G
E S T I O N & R E C O M M E N D
A T I O N I X C O N C L
U S I O N X L I M I T A T I
O N S O F T H E S T U D Y X
I S C O P E F O R F U
R T H E R S T U D Y XIIANN
EXURE1. Questionnaire2. Bibliography

ACKNOWLEDGEMENT
With the divine blessing of God, I express my deep
gratitude to
Mr. N.

KESAVAN
.
Chairman and
Mr. M. DHANASEKARAN
, Managing Director and
S.V. SUGUMARAN
, Vice Chairman,
Sri Manakula Vinayagar Engineering College
.My special thanks to our college Principal
DR. V.S.K

VENKATACHALAPTHY
for extending me moral support during the course of this
work.I wish to place on my records my sincere gratitude
to
Mr. S. JAYAKUMAR
,
Head of theDepartment of Management studies for his
motivation and providing me permission to do
this project work.I wholeheartedly thank my internal
guide
Mr. D.SARAVANAN
for being so resourcefulright from the beginning of this
project and helped to bring out this project successfully
amidst of all odds.I thank
Mr. .velautham
(Personnel) Anglo French Textiles who was kind enough
in permittingme to do my project in Anglo French
Textiles.I thank
Mr. .Veda Raman
(Finance) Anglo French Textiles for helping and guiding
me throughout the project.I am also thankful to all other
faculty members of the department for their constant co-
operationsand encouragement in pursuing my project
work.My heart gratitude to all staffs of A.F.T.Ltd.
Puducherry for providing me details about
thecompany for the completion of project.At this turning
point in my life, my profound thanks goes to my parents,
my brothers and to myfriends who supported me by
giving love and encouragement which I needed the
most, I owedeep sense of gratitude to all of them.

ABSTRACT
The title of the project is “A study on cash management
of Anglo French textiles limited”.The main objective is to
ascertain the cash position of the A.F.T.The research is
based on through secondary data.The need for Cash to
run the day-to-day business activities cannot be
overemphasized.One can hardly find a business firm,
which does not require any amount of Cash. Indeed,
firmsdiffer in their requirements of the Cash.A firm
should aim at maximizing their wealth. In its endeavor to
do so, a firm should earnsufficient return from its
operation. The firm has to invest enough funds in
current asset for generating sales. Current asset are
needed because sales do not convert into cash
instantaneously.There is always an operating
cycle involved in the conversion of sales into cash.The
objectives are to analyze the Cash management and to
determine efficiency in cash,inventories, debtors and
creditors. Further, to understand the liquidity and
profitability position of the firm.These objectives are
achieved by using ratio analysis and then arriving at
conclusions,which are important to understand the
efficiency / inefficiency of Cash.The company goes
in insufficient manner in the past five years. So
the company takes steps toimprove the performance and
concentrate in local areas. The company financial
capacities arelow and borrow funds from the
government and outsiders. It creates liabilities for
thecompany.The working capital is reducing from year to
year. So they should take some necessarysteps for adding
more amounts to working capital.

List of Tables
T a b l e
N o T
i t l e P
a g e N
o
Table 6.1Table 6.2Table 6.3Table 6.4Table 6.5Table
6.6Table 6.7Table 6.8Table 6.9Table 6.10Table
6.11Table 6.1.1Table 6.1.2Table 6.1.3Current ratio.Quick
ratioInventory turn over ratioDebtor turn over
ratioWorking capital turn over ratioRatio of current assets
to fixed assetsCash to working capital ratioCash to sales
ratioCash ratioCurrent assets to total assets ratioLoans
and advances to current assets ratioFunds from operation
and cash fromoperationCash flow statementTrend
analysis
List of charts
T a b l e
N o T
i t l e P
a g e N
o
Table 6.1Table 6.2Table 6.3Table 6.4Table 6.5Table
6.6Table 6.7Table 6.8Table 6.9Table 6.10Table
6.11 Current ratio.Quick ratioInventory turn over
ratioDebtor turn over ratioWorking capital turn over
ratioRatio of current assets to fixed assetsCash to working
capital ratioCash to sales ratioCash ratioCurrent assets to
total assets ratioLoans and advances to current assets ratio

CHAPTER I
INTRODUCTION
1.1 COMPANY PROFILE
At the end of the 19
th
century, puducherry one of the small town within
the French territory,on the southeastern coast of India,
on the bay of Bengal, witnessed the birth of a textile mill
in thenames of Rodier Mills. It was established and
incorporated on England in 1898 by the AngloFrench
Textiles Limited, a British Textile firm.The shareholders
of the mill became restless, as the years want by,
because of the fact
thatt h e i r i n v e s t m e n t w a s l o c a t e d i n a q u i t e f a r
o f f p l a c e , o n a F r e n c h t e r r i t o r y , t h e y w e r e app
rehensive as to the security of their property on
Puducherry.On the departure of the French and
annexation of Puducherry to India in 1958, the mill
wassold off to Best and Crompton, on English
Management Company. In 1963, they sold
their interest in the mill t60 Sri C.R.Ramachaki, a textile
industrialist from Madurai. The mill thrivedwithin the
period under this management managing to expand by
building unit B and C.After the death of Sri C.R.
Ramachaki there developed a lot of mismanagement,
family problemsand persistent labour unrest which led
to the eventual selling of the mill in 1982 to Mr.
Jatia of the somani group, a textile trader from
Bombay. But unfortunately due to continued
labour unrests, Mr. Jatia too failed to manage this mill
and abandoned it in 1983.Due to public appeals the
Puducherry government took over the mill in 1985. It was
not untilJune of 1986 that the mill was opened. The mill
became a government undertaking and a unit
of Pondicherry Textile Corporation Ltd., the government
has injected into it funds for
renovationsimprovements and modernization. Many
Technological advances have been made
by introducing projectile loans from USSR
and returntypes of loans from Lakshmi mills in
Coimbatore.Initially AFT started off with spinning and
weaving departments making only gray fabrics. Itwas
only between 1964 and 1970 that extensive
modernization programme were implemented.This
included the installation of sophisticated automatic loans
and process house, which resultedin increased efficiency
both in production and quality.The raw material used to
produce cloth is cotton and their products are 100%
cotton. Thes e q u e n c e o f o p e r a t i o n s c a r r i e d o u t t
o produce cloth are carding, spinning and we
a v i n g , processing up to godown.The specialty products
of AFT are bed linen, pillow cases, garments include
ready made likecotton shirts, trousers, shorts,
handkerchiefs and kitchen aprons.AFT is dedicated to a
system of quality management, which ensures that its
products andservices meet the requirements of its
customers at all times. Recently AFT got the ISO
9002which is issued by the direction General, Bureau
of Indian standards. It has strong orientationtowards
quality and dedication that has helped the company’s
fabric to weave their way into
thefashion conscious markets of
USA, UK, France, Italy, Switzerland, Belgium, Au
stralia,Germany, Middle East and Africa.
1.2 AFT PRODUCT SPECTRUM
Institutional Fabrics

Entire range of hospital linen.

Linen for hospitals and restaurants.

Uniforms for schools, institutions, factories, defence

and paramilitary organizations.

Fire resistant fabrics.

Strain/water resistant fabrics.

Industrial Fabrics

Form coated cotton curtain lining.

PVC, coated lining.

Recreational and campaign equipment.

Belting.
Shoe uppers.

Consumer products

Household linen of all types.

Dress material in safin, poplin, chambray etc.,

Furnishings and draperies in all ranges.

Specialized fabrics and fashion garments.

Today AFT makes more than 45% of its sales

through exports. It is accelerating towardsgreater
achievements by way of expansion and
modernization although it has a capital
raisingconstraint being a state keen corporation. This
plus the fact that it faces stiff competition
from both local manufactures as well as countries like Ch
ina, Pakistan, Egypt, Far East and Asiancountries. The
driving force leading them towards growth is its
commitments to qualityconsciousness, which is
stressed by the company’s motto.AFT is functionally in
three units A, B, and C. Units A and B are located in
Mudaliyarpet inthe heart of Puducherry town while C
is located in Iyankuttipalayam some distance
towardscuddalore. AFT employs approxiamately
6000 workers and staff. The strength of the
mill’semployees is thus:

The strength of the mill’s employees:

U N I T W O R K
M E N S T A F F
& O F F I C E R

A 3
5 0
5 5
5 0
B
1
0
3
5
6
5
C
6
7
0
3
2
TOTAL
5 2 1
0 6 4
7 At present AFT is managed by Managing
Director and Joint Managing Director, subjected
tocontrol, supervision and management of the Board
of Directors. The Board consists of onechairman and
five other directors. Directors are appointed according
to the company’s Act 1956.
1.3 Managing Director
The managing director Mr. Padmanaban of Puducherry
Textile Corporation was the caretaker of Anglo French
Textiles and is directly appointed by the government of
Puducherry. The M.D.is the supreme power of Aft even if
there is a higher post of chairman. Who is the chief
secretaryof Puducherry Government? The M.D. holds
responsible for the day- to- day affairs of
thecompany. He has the power to dismiss, transfer, take
disciplinary action on any employee of themills, and to
decide the policy matters for the welfare of the
company.The M.D. with the co-ordination of the joint
managing director decides marketing of
clothmaterial, director decides marketing of cloth
materials in all regions of the country and
alsoabroad. The selling price of the finished goods
is determined after arriving the cost of productionand with
the concern of the M.D.

1.4 Performance of AFT

In 1998-1999, the company accumulated loss of Rs.
105.93 crores by end of 99. In warded18.44 crores loss
during the year against 20.83 during 97-98. In 98-99
the loss was reduced byabout Rs.2.39 crores.2000-
2001 -- Accumulated loss of Rs. 122.70 cr by end of
March 2001. During the year lossincurred is 20.27 cr
against Rs.18.44 during 98-99.

2001-2002 – Accumulated loss of Rs. 139.44 crore by end

of 2002. Loss increased is Rs. 17.66cr against the Rs.
20.27 cr during 1999-2000.2002-2003 – Accumulated
loss of Rs. 159.64 cr by end of 2003. During the year
the Loss is20.07 cr against 17.66 cr during 2001-
2002.2003-2004 – Accumulated loss of Rs.
183.91 cr by end of 2004. During the year the
lossIncurred is Rs. 24.43 cr against Rs.20.07 cr during
2001-02.2004-2005 – Accumulated loss of Rs. 222.55
cr by end of 2005. During the year the loss Rs.183.91
cr in 2003-2004.

1.5 PRODUCTIONDEPARTMENT OF AFT

The various departments of AFT are viz:
PRODUCTION DEPARTMENT
1.Spinning department – blow, room, carding
and spinning.2.Weaving preparatory department –
winding, warping and sizing.3.Weaving
department – loom shed4.Processing department –
bleaching, printing and
dyeing5.Warehouse department – examining,
parking and baling
SERVICE DEPARTMENT
6 . M a r k e t i n g d e p a r t m e n t 7.Finance and accounts
department8 . P u r c h a s e a n d s t o r e s 9 . Q u a l i t y
a s s u r a n c e 10.Engineering11.Personnel
SERVICE SECTION
12.EDP 17. Internal audit13.Costing 18. Canteen14.
Dispensary 19. Security15.Horticulture 20. Garment
Factory16.Transport and Automobile

RAW MATERIALS
i ) C o t t o n i i ) N y l o
n
ABOUT THE PRODUCTS
The following products are presently manufactured in
AFT Ltd. (P.T.C.),
Puducherry.1.Cotton clothes 5. Pant and Shirt clot
hes2 . T o w e l s 6 . S c r e e n c l o t h e s 3 . U n i f o r m s 7 .
Bed spread4 . P i l l o w c o v e r s
(AFT MANUFACTURING PROCESS)
Raw
materialB l o w r
o o m C a r d
i n g D r a w
i n g W a r p
i n g W i n d
i n g S p i n
n i n g S i
z i n g W
e a v i n
g D y i n
g B a l i n g
E x a m i n i
n g P r i n t
i n g Fabrics

1.6 OBJECTIVES OF THE COMPANY

•
The main objective of the company can be generally
stared as the manufacturing andselling of cotton yard and
cotton fabrics.
•
To manufacture and market cotton years
•
To manufacture and market cotton Fabrics
•
To manufacturing garments and uniforms for various
agencies and service organization
•
To protect the interest of the employees through welfare
measures
•
To modernized the mills and its systems including
computerization
1.7 SAFETY MEASURES
•
AFT has a full fledged safety department to
monitor the safety in the factory. TheCompany has
been recipient of the state industrial safety for many years
for its excellentin safety protection and preservation of
environment.
1.8 QUALITY POLICY OF AFT LIMITED
•
Anglo French Textile is committed to meet
•
The requirement of its customers
•
And to continually improve its
•
Product and services by Technological
•
Up gradation and enriching the resources
•
With perpetual review of the
•
Quality system
•
Meeting Tomorrows
•
Need Today

1.9 OBJECTIVES OF PERSONAL FUNCTION IN AFT

LTD
1.The personnel office in AFT is fulfilling these
objectives2.Fuller utilization of human
resources3.Establish and an adequate
organization structure4 . S e c u r e s i n t e g r a t i o n 5 . M a
ximum development6 . C o m p e n s a t i o n 7.Moral
and human relation
1.10 FUNCTIONS OF PERSONNEL MANAGEMENT
AND HRD DEVELOPMENT
1 . R e c r u i t m e n t 2.Trainings and
d e v e l o p m e n t 3.Wage and
salary administration4 . L a b o u r w e l f a r e
measures5.Health and safety
m a n a g e m e n t 6.Industrial
relation management7.Compliance of statutory
requirement8 . D i s c i p l i n a r y p r o c e e d i n g s
1.11 STRUCTURE OF THE PERSONNEL
DEPARTMENT
Personnel
DepartmentD e p u t y M a n a g
e r M a n a g e r ( P e
r s o n n e l &
H R D ) ( I R
) Assistant ManagerSafety Manag
e r L a b o u r o f f i c e D e p u t y M a n a g e r (Ca
nteen)S u p e r v i s o r S u p e r v i
s o r A s s i s t a n t L a b o u r
A s s i s t a n t L a b o u r (
7 ) O f f i c e r ( 1 )
W e l f a r e O f f i c e
r ( 4 ) Assistant Labour Welfare Officer(2)

CHAPTER II
NEED FOR THE STUDY
The importance of Cash management in any i
n d u s t r i a l c o n c e r n c a n n o t b e overstressed. Under
the present inflationary condition, management of
Cash is perhaps moreimportant than even
management of profit and this requires greatest
attention and efforts . Itneeds vigilant attention as
each of its components require different types of
treatment and itthrows constant attention on exercise of
skill and judgment, awareness of economic trend etc,
dueto urgency and complicacy the vital importance of
Cash.The anti-
inflationary measure taken up creating a tight mo
ney condition has placedworking capital in the most
challenging zone of management and it requires a unique
skill for itsmanagement. Today, the problem of managing
Cash has got the recognition of separate entity, soits
study and management is of major importance to
both internal and external analyst to judgethe current
position of the business concerns. Hence, the present
study entitled “
A study on CashManagement”
has been taken up.

CHAPTER III
REVIEW OF LITERATURE
Meaning
Cash is the money which a firm can disburse
immediately without any restriction. Theterm cash
includes coins, currency and cheques held by the
firm, and balances in its bank accounts. Sometimes
near-cash items, such as marketable securities or bank
times deposits, arealso included in cash. The basic
characteristic of near-cash assets is that they
can readily beconverted into cash.
FACETS OF CASH MANAGEMENT
Cash management

is concerned with the managing of: (i) Cash flows

into and out of thefirm, (ii) Cash flows within the firm,
and (iii) Cash balances held by the firm at a point of time
byfinancing deficit or investing surplus cash. It can
be represented by a cash management cycle.Sales
generate cash which has to be disbursed out. The
surplus cash has to be invested whiledeficit this
cycle at a minimum cost. At the same time, it also
seeks to achieve liquidity andcontrol. Cash
management assumes more importance than other
current assets because cash isthe most significant and
the least productive asset that a firm’s holds. It is
significant because itis used to pay the firm’s
obligations. However, cash is unproductive
.
Unlike fixed assets or inventories, it does
not produce goods for sale. Therefore, the aim of
cash management is tomaintain adequate control over
cash position to keep the firm sufficiently liquid and to
use excesscash in some profitable way.Cash management
is also important because it is difficult to predict cash
flows accurately, particularly the inflows, and there is no
prefect coincidence between the inflows and
outflows of cash. During some periods, cash outflows will
exceed cash inflows, because payments for
taxes,dividends, or seasonal inventory build up. At
other times, cash inflow will be more than
cash payments because there may be large cash sales and
debtors may be realized in large sums

promptly. Further, cash management is

significant because cash constitutes the smallest portionof
the total current assets, yet management’s
considerable time is devoted in managing
it. Inrecent past, a number of innovations have
been done in cash management
techniques. Anobvious aim of the firm these days is
to manage its cash affairs in such a way as to keep
cash balance at a minimum level and to invest the surplus
cash in profitable investment opportunities.In order to
resolve the uncertainty about cash flow prediction and
lack of
synchronization between cash receipts and payments, the
firm should develop appropriate strategies for cashmanag
ement. The firm should evolve strategies for
cash management. The firm should evolvestrategies
regarding the following four facets of cash management.
•
Cash planning:
Cash inflows and outflows should be planned to project
cash surplus or deficit for each period of the planning
period. Cash budget should be prepared for
this purpose
.
•
Managing the cash flows:
The firm should decide about the properly
managed. Thecash inflows should be accelerated while,
as far as possible, the cash outflows should bedecelerated.
•
Optimum cash level:
the firm should decide about the appropriate leve
l of cash balances. The cost of excess cash and danger of
cash deficiency should be matched todetermine the
optimum level of cash balances
.
•
Investing surplus cash:
The surplus cash balances should be properly
invested to
earn profits. The firms should decide about the division o
f such cash balances betweenalternative short-
term investment opportunities such as bank depo
sits, marketablesecurities, or inter-corporate lending
.MOTIVES FOR HOLDING CASH
The firm’s need to

hold cash may be attributed to the following three

motives:
•
The transactions motive
•
The precautionary motive
•
The speculative motive

TRANSACTION MOTIVE
The transactions motive requires a firm to hold
cash to conduct its business in the
ordinarycourse. The firm needs cash primarily to make
payments for purchases, wages and salaries,
other operating expenses, taxes, dividends etc. The
need to hold cash would not arise if there
were perfect synchronization between cash receipts and c
ash payments, i.e., enough cash is receivedw h e n t h e p a
yment has to be made. But cash receipts
a n d p a y m e n t s a r e n o t p e r f e c t l y synchronized. Fo
r those periods, when cash payments exceed cash
receipts, the firm shouldmaintain some cash balance
to be able to make required payments. For
transactions purpose, afirm may invest its cash in
marketable securities. Usually, the firm will
purchase securitieswhose maturity corresponds with
some anticipated payments, such as dividends or
taxes in thefuture. Notice that the transactions
motive mainly refers to holding cash to meet
anticipated payments whose timing is not perfectly
matched with cash receipts.
PRECAUTIONARY MOTIVE
The precautionary motive is the need to hold cash to
meet contingencies in the
future. It provides a cushion or buffer to withstand some u
nexpected emergency. The precautionaryamount of cash
depends upon the predictability of cash flows. If cash
flows can be predictedwith accuracy, less cash will be
maintained for an emergency. The amount of
precautionary cashis also influenced by the firm’s ability
to borrow at short notice when the need
arises. Stronger the ability of the firm to borrow at
short notice, less the need for precautionary
balance. The precautionary balance may be kept in cash
and marketable securities. Marketable securities playan
important role here. The amount of cash set aside for
precautionary reasons is not expected toearn anything; the
firm should attempt to earn some profit on it. Such funds
should be invested inhigh-liquid and low-risk
marketable securities. Precautionary balances should,
thus, be heldmore in marketable securities and relatively
less in cash.

SPECULATIVE MOTIVE
The speculative motive relates to the holding of
cash for investing in profit-makingopportunity to
make profit may arise when the security prices
change. The firm will hold cash,when it is expected that
interest rates will rise and security prices will
fall. Securities can be purchased when the interest rate
is expected to fall; the firm will benefit by the subsequent
fall ininterest rates and increase in security prices. The
firm may also speculate on materials prices. If it is
expected that materials prices will fall, the firm can
postpone materials purchasing and
make purchases in future when pric4e actually falls. Some
firms may hold cash for speculative purposes. By and
large, business firms do not engage in speculations. Thus,
the primary motivesto hold cash and marketable securities
are: the transactions and the precautionary motives.
CASH PLANNING
Cash flows are inseparable parts of the business
operations of firms. A firm needs cash toinvest in
inventory, receivable and fixed assets and to make
payment for operating expenses inorder to maintain
growth in sales and earnings. It is possible that firm may
be making
adequate profits, but may suffer from the shortage of cash
as its growing needs may be consuming cashvery
fast. The ‘poor cash’ position of the firm cash is corrected
if its cash needs are planned inadvance. At times, a
firm can have excess cash may remain
idle. Again, such excess cash outflows. Such
excess cash flows can be anticipated and properly
invested if cash planning isresorted to. Cash
planning is a technique to plan and control the
use of cash. It helps toanticipate the future cash
flows and needs of the firm and reduces the
possibility of idle
cash balances ( which lowers firm’s profitability ) and cas
h deficits (which can cause the firm’sfailure).Cash
planning protects the financial condition of the firm by
developing a projected cashstatement from
a forecast of expected cash inflows and outflows
for a given period. Theforecasts may be based on the
present operations or the anticipated future
operations. Cash plansare very crucial in developing the
overall operating plans of the firm.

Cash planning may be done on daily, weekly or monthly

basis. The period and frequencyof cash planning
generally depends upon the size of the firm and
philosophy of management.Large firms prepare
daily and weekly forecasts. Medium-size firms usually
prepare weekly andmonthly forecasts. Small firms
may not prepare formal cash forecasts because
of the non-availability of information and small-
scale operations. But, if the small firms prepare
cash projections, it is done on monthly basis. As a firm gr
ows and business operations becomecomplex, cash
planning becomes inevitable for its continuing success.
OTHER FACTORS THAT AFFECT THE SIZE OF
CASH BALANCE
1
. Availability of short-term credit
:To avoid holding unnecessary large balances of
cash, most firms attempt to makearrangements
at borrow money is case of unexpected needs. With
such an agreement, the firmnormally pays interest only
during the period that the money is actually used.2.
Money market rates
:If money will bring a low return a firm may choose not to
invest it. Since the loss or profitis small, it may not be
worth the trouble to make the loan. On the other hand, if
interest rates arevery high, every extra rupee will be
invested.3.
Variation in cash flows
:Some firms experience wide fluctuation in cash
flows as a routine matter. A firm withsteady cash
flows can maintain a fairly uniform cash balance.4.
Compensating balance
:If a firm has borrowed money from a bank, the loan
agreement may require the firm tomaintain a
minimum balance of cash in its accounts. This is
called compensating balance. Ineffect this requires the
firm to use the services of bank a guaranteed deposit on
which it pays nointerest. The interest free deposit is the
bank’s compensation for its advice and assistance.

CASH MANAGEMENT – BASIS STRATEGIES

The management should, after knowing the cash position
by means of the cash budget, work outthe basic strategies
to be employed to manage its cash.
CASH CYCLE:
The cash cycle refers to the process by which cash is
used to purchase materials fromwhich are produced
goods, which are them sold to customers.Cash
cycle=Average age of firm’s inventory+Days to collect its
accounts receivables-Days to pay its accounts
payable.The cash turnover means the numbers of times
firm’s cash is used during each year.360Cash turnover = -
---------------Cash cycleThe higher the cash turnover,
the less cash the firm requires. The firm should,
therefore, try tomaximize the cash turn.

MANAGING COLLECTIONS:
a)
Prompt Billing:
By preparing and sending the bills promptly, without a
time log between the dispatch of goods and sending the
bills, a firm can ensure earlier remittance. b)
Expeditious collection of cheques
:An important aspect of efficient cash management is to
process the cheques receives very promptly.c)
Concentration Banking
:Instead of a single collection center located at the
company headquarters, multiple collectioncenters are
established. The purpose is to shorten the period between
the time customers mail intheir payments and the time
when the company has use of the funds are then to a
concentration bank – usually a disbursement account.d)
Lock-Box System
:With concentration banking, a collection center receives
remittances, processes them anddeposits them in a
bank. The purpose is to lock-box system is to eliminate
the time between thereceipt of remittances by the
company and their deposit in the bank. The company
rents a local post office box and authorizes
its bank in each of these cities to pick up remittances
in the box.The bank picks up the mail several
times a day and deposits the cheque in the
company’saccounts. The cheques are recorded and
cleared for collection. The company receives
a depositsthe cheque in the company’s accounts. The
cheques are recorded and cleared
for collation. Thecompany receives a deposit slip and a
lift of payments. This procedure frees the company
fromhandling a depositing the cheques.

CONTROL OF DISBURSMENT
a) Stretching Accounts Payable
A firm should pay its accounts payables as late as
possible without damaging its creditstanding. It
should, however, take advantages of the cash discount
available on prompt payment.
b) Centralized Disbursement
One procedure for rightly controlling disbursements is to
cenrealise payables in to a singleaccount, presumably
at the company’s headquarters. Such an arrangement
would enable a firmto delay payments and can serve
cash for several reasons. Firstly, it increases transit
time.Secondly, if a firm has a centralized bank account, a
relatively smaller total cash balances will beneeded.
c) Bank Draft
Unlike an ordinary cheque, the draft is not payable
on demand. When it is presented tothe issuer’s bank
for collection, the bank must present it to the issuer for
acceptance. The fundsthen are deposited by
the issuing firm to cover payments of the
draft. But suppliers prefer cheques. Also, bank
imposes a higher service charge to process them since
they require specialattention, usually manual.
d) Playing the float
The amount of cheques issued by the firm but not paid for
by the bank is referred to as the“payment float”. The
differences between “payment float” and “collection
float” are the net float.So, if a firm enjoys a positive
“net float”, it may issue cheques even if it means
having an ever drown account in its books. Such an
action is referred to as “playing the float”, within
limits afirm can play this game reasonably
safely.Thus management of cash becomes
essential and it should be seen to,
that neither excessive nor inadequate cash balances are
maintained.
FLOW OF STATEMENTS

The funds flow statement analyses only the causes of

changes in the firm’s working capital position.
The cash flow statement is prepared to analyze changes
in the flow of each only. Thesestatements fail to consider
the changes in the firm’s total financial resources. They
do not revealsome significant items which do not
affect the firm’s cash or working capital
position, butconsiderably influence the financing
position and asset mix of the firm. For example,
ordinaryshares issued to acquire some asset, say land,
affect the financing and asset mix of the firm.
For example, ordinary shares issued to statement
will not include this transaction as it does
notinvolve any change in cash or working capital
. A comprehensive statement of changes infinanci
al position would disclose or working capital.
A comprehensive statement of changes infinancial
position would disclose this information along with
information on cash or workingcapital changes.The
statement of changes in financial position is an extension
of the funds flow statementor the cash flow statement. It
is more informative and com apprehensive in indicating
the changesin the firm’s financial position. However,
the analysis of changes in the firm’s cash
position or working capital is still very significant.
Therefore, to get better insights, a firm may prep are
acomprehensive, all – inclusive, statement of changes in
financial position incorporating changesin the firm’s
cash and working capital positions. In the following
sections, we illustrate the preparation and use of the
statement of changes in financial position involving:

Changes in the firm’s working capital position

Changes in the firm’s working capital position

Changes in the firm’s total financial resources.

FUNDS FLOW STATEMENT
The statement of changes in financial position,
prepared to determine only the sources anduses of
working capital between dates of two balance
sheets, is known as the funds
flowstatement. Working capital is defined as the
difference between current assets and currentliabi
lities. Working capital determines the liquidity position of
the firm. A statement reporting thechanges in working
capital is useful in addition to the financial statements.
CASH FLOW STATEMENT
An analysis of cash flows is useful for short-run planning.
A firm needs sufficient cash
to pay debts maturing in the future, to pay interest and oth
er expenses and to pay dividends toshareholders. The firm
can make projections of cash inflows and outflows for the
near future todetermine the availability of cash. This cash
balance can be matched with the firm’s need for
cashduring the period, and accordingly, arrangements
can be made the deficit or invest the surpluscash
temporarily. A historical analysis of cash flows
provides insight to prepare reliable cashflow
projections for the immediate future.A statement of
changes in financial position on cash basis. Commonly
known as the cashflow statement, summarizes the
causes of changes in cash position between dates of
the two balance sheets. It indicates the sources and uses
of cash. The cash flow statement is similar to thefunds
flow statement except that it focuses attention
on cash (immediate or near term liquidity)instead of
working capital or funds (potential or medium term
liquidity). Thus, this
statementanalyses changes in non-
current accounts as well as current accounts (oth
er than cash) todetermine the flow of cash.
UTILITY OF CASH FLOW ANALYSIS
A Cash flow analysis is an important financial
tool for the management. Its chief advantages are
as follows.
1. Helps in efficient cash management
Cash flow analysis helps in evaluating financial
policies and cash position. Cash is the basis for all
operation and hence a projected cash flow statement
will enable the management to plan and co-
ordinate the financial operations properly. The manageme
nt can know how muchcash is needed from which source
it will be derived, how much can be generated, how much
can be utilized.

2. Helps in internal financial management

Cash flow analysis information about funds, which
will be available from operations.This will helps the
management in repayment of long-term debt, dividend
policies etc.,
3. Discloses the movements of Cash
Cash flow statement discloses the complete picture
of cash movement. The increase inand decrease of
cash and the reasons therefore can be known. It
discloses the reasons for lowcash balance in spite of
heavy operation profits on for heavy cash balance in spite
of low profits.
4. Discloses success or failure of cash planning
The extent of success or failure of cash planning be
known by comparing the projectedcash flow statement
with the actual cash flow statement and necessary
remedial measures can betaken.
Measurement of Current Ratio
The current ratio is the ratio
of total current assets
to total current liabilities. It iscalculated by dividing
current assets by current
liabilities:C u r r e n t r a t i o = C u r r e n t a s s
e t s Current liabilitiesThe current assets of a firm, as
already stated, represent those assets which can be,
inordinary course of business, converted into cash
within a short period of time, normally notexceeding
one year and include cash and bank balances, marketable
securities, inventory of rawmaterials, semi-finished
(work-in- progress) and finished goods, debtors net of
provision for badand doubtful debts, bills receivable
and pre-paid expenses. The current liabilities defined
asliabilities which are short-term maturing obligations to
be met, as originally contemplated, withina year, consist
of trade creditors, bills payable, banks credit,
provision for taxation, dividends payable and
outstanding expenses.

Acid-Test or Quick Ratio

As observed above, one defect of the current
r a t i o n i s t h a t i t f a i l s t o c o n v e y a n y information
on the composition of the current assets of a firm. A
rupee of cash is consideredequivalent to be rupee
of inventory or receivables. But it is not so. A
rupee of cash is more readily available (i.e. more
liquid) to meet current obligations than a rupee of ,
say, inventory.This impairs the usefulness of the
current ratio. The acid-test ration is a measures of
liquiditydesigned to overcome this defect of the
current ratio. It is often to convert its current
assetsquickly into cash in order to meet its current
liabilities. Thus, it is a measure of quick or
acidliquidity.The acid-test ratio is the ratio between
quick current assets and current assets by thecurrent
liabilities:Quick assets_____ Acid-
test ratio= Current liabilitiesT h e t e r m q u i c k a s s e t s r
efers to current assets which can be converte
d i n t o c a s h immediately or at short notice without
diminution of value.
Inventory Turnover Ratio
It is computed by dividing the cost of goods sold by the
average inventory. Thus,Cost of goods
soldI n v e n t o r y t u r n o v e r r a t i o n = A v e r a g e i n v
e n t o r y The cost of goods sold means, sale minus gross
profit, the average inventory refers to thesimple average
of the opening and closing inventory. The ration
indicates how fast inventory issold. A high ratio to
good from the view point of liquidity and vice versa.
A low ratio wouldsignify that inventory does not sell
fast and stays on the shelf or in the ware-house for a
longtime.

Management of Cash

Introduction
Cash management is one of the key areas of working
capital management. Apart from thefact that it is the most
liquid current asset, cash is the common denominator to
which all currentassets can be reduced because the
other major liquid assets, i.e. receivables and
inventory geteventually converted into cash.
This underlines the significance of cash management.The
present chapter is concerned with a detailed account
of the problems involved inmanaging cash. The main
coverage of this chapter is as follows. The first
section outlines themotives for holding cash followed in
section two by the objectives of cash management. The
nextsection presents an in-depth discussion of the
methods to plan and determine the cash needsthrough
cash budgets. The basic strategies for efficient
management of cash are the subject’smatter of the
subsequent section. We then explain specific
techniques to manage cash. Theremainder of the
chapter is devoted to the discussion of
marketable securities. The chapter concludes with
the major points.
MOTIVES FOR HOLDING CASH
The term cash with reference to cash management is used
in two senses. In a narrow senseit is used broadly to
cover currency and generally accepted equivalents
of cash such as cheques,drafts and demand deposits
in banks. The broader view of cash also includes
near-cash assets,such as marketable securities and time
deposits in banks. The main characteristics of these is
thatthey can be readily sold and converted into cash.
They serve as a reserve pool of liquidity that provides
cash quickly when needed. They also provide a short-term
investment outlet for excesscash and are also useful
for meeting planned outflow of funds.
We employ the term cashmanagement in the
broader sense. Irrespective of the form in which it is
held, a distinguishingfeature of cash, as an asset, is that
it has no earning power. If cash does not earn any return,
why

is it held by firms? There are four primary motives for

maintaining cash balances: (i) Transactionmotive; (ii)
Precautionary motive; (iii) Speculative motive; and (iv)
Compensating motive
Transaction Motive
An important reason for maintaining cash balances is the
transaction motive. This refersto the holding of cash, to
meet routine cash requirements to finance the transaction
which a firmcarries on in the ordinary course of
business. A firm enters into a variety of
transactions toaccomplish its objectives which
have to be paid for in the form of cash. For
example,
cash payments have to be made for purchases, wages, op
erating expenses, financial charges, likeinterest, taxes,
dividends, and so on. Similarly, there is a regular inflow
of cash to the firm fromsales operation, returns on
outside investments, etc. these receipts and payments
constitute acontinuous two-way flow of cash. But the
inflows (receipts) and outflows (disbursements) do
not perfectly coincide or synchronise, i.e. they do not exac
tly match. At times, receipts coincide or outflows
while, at other times, payments exceed inflows.
To ensure that situation in which disbursements are
in excess of the current receipts, it must have and
adequate cash balance. Therequirement of cash balances
to meet routine cash needs is known as the transaction
motive andsuch cash balances are termed as transaction
balances. Thus, the transaction motive refers ot
theholding of cash to meet anticipated obligations whose
timing is not perfectly synchronized withcash receipts.
If the receipts of cash and its disbursements could
exactly coincide in the normalcourse of operation, a
firm would not need cash for transaction purposes.
Although a major partof transaction balances are
held in cash, a part may also be in such marketable
securities
whosematurity conforms to the timing of the
anticipated payments, such as payment, of taxes,
dividends, etc.
Precautionary Motive
In addition to the non-synchronizations of
anticipated cash inflows and outflows in theordinary
course of business, a firm may have to pay cash for
purposes which cannot be predictedor anticipated. The
unexpected cash needs at short notice may be the result
of:(i) floods, strikes and failure of important
customers;(ii) Bills may be presented for settlement
earlier than expected;

(iii) Unexpected slow down in collection of accounts

receivable;(iv) Cancellations of some order for goods as
the customer is not satisfied;(v) Sharp increase in cost of
raw materials.The cash balances hold in reserve for
such random and unforeseen fluctuations in
cashflows are called as precautionary balances. In other
words, precautionary motive of holding cashimplies the
need to hold cash to meet unpredictable obligations. Thus,
precautionary cash balanceserves to provide a cushion
to meet unexpected contingencies. The
more unpredictable the cashflows, the larger the need
for such balances. Another factor which has a
bearing on the level of such cash balances is the
availability of short-term credit. If a firm can borrow at
short notice to pay for unforeseen obligations, it will
need to maintain a relatively small balance and vice-
versa.Such cash balances are usually held in the
form of marketable securities so that they earn
areturn.
Speculative Motive
It refers to the desire of a firm to take advant
a g e o f o p p o r t u n i t i e s w h i c h p r e s e n t themselves
at unexpected moments and which are typically o
utside the normal course of business. While the prec
autionary motive is defensive in nature, in that, firms mus
t make provisions to tide over unexpected contingencies,
the speculative motive represents a positive andaggressive
approach. Firms aim to exploit profitable opportunities
and keep cash in reserve to doso. The speculative motive
helps to take advantage
of:( i ) a n o p p o r t u n i t y t o p u r c h a s e r a w m a t e r i a l
s a t a r e d u c e d p r i c e o n p a y m e n t o f immediate
cash;(ii) a chance to speculate on interest rate mo
vements by buying securities wheninterest rates are
expected to decline;(iii) delay purchases of raw materials
on the anticipation of decline in prices; and(iv) to make
purchases at favorable prices.
Compensation Motive
Yet another motive to hold cash balances is to
compensate banks for providing certainservices and
loans.Banks provide a variety of services to business
firms, such as clearance of cheque, supplyof credit
information, transfer of funds, e tc. while for
some of the services banks charge a commission or
fee, for others they seek indirect compensation.
Usually clients are required tomaintain a minimum
balance of cash at the bank. Since this balance
cannot be utilized by thefirms for transaction
purposes, the banks themselves can use the amount
to earn a return. To beco,pensated for their services
indirectly in this form, they require the clients to
always keep
a bank balance sufficient to earn a return equal to the cost
of services. Such balances arecompensating
balances.Compensating balances are also required by
some loan agreements between a bank and itscustomers.
During periods when the supply of credit is restricted
and interest rate during the period when the loan will
be pending.The compensating cash balances can take
either of two forms: (i) an absolute minimum,say,
Rs. 5 lakhs, below which the actual bank balance
will never fall; (ii) a minimum
average balance, say, Rs. 5 lakhs over the month. The firs
t alternative is more restrictive as the averageamount of
cash held during the month must be above Rs.5 lakhs
by the amount of transaction balance. From the firm’s
view point this is obviously dead money. Under
the second alternative,the balance could fall to zero
one day provided it was Rs. 1 0 lakhs some other
day with theaverage working to Rs. 5 lakhs.Of the four
primary motives of holding cash balances the two
most important are thetransactions motive and the
compensation motive. Business firms normally do not
speculate andneed not have speculative balances. The
requirement of precautionary balances can be met out
of short –term borrowings.

CASH MANAGEMENT: TECHNIQUES/ PROCESSES

The basic strategies of cash management have been
outlined in the preceding section.
Ithas been shown that the strategic aspects of eff
icient cash management are: (1) efficientinventory
management, (2) speedy collection of accounts
receivable, and (3) delaying paymentson accounts
payable. The main elements of an efficient management
of inventory are discussed
ins o m e d e t a i l . T h e r e a r e s o m e s p e c i f i c t e c h n i
q u e s a n d p r o c e s s e s f o r s p e e d y c o l l e c t i o n o f re
ceivables from customers and slowing disbursements. We
discuss them in the present section.
Speedy Cash Collections
In managing cash efficiently, the cash inflow
p r o c e s s c a n b e a c c e l e r a t e d t h r o u g h systematic
planning and refined techniques. There are two broad
approaches to do this. In thefirst place, the customers
should be encouraged to pay as quickly as possible.
Secondly, the payment from customers should be
converted into cash without any delay.

CHAPTER IV
OBJECTIVES OF THE STUDY

To meet the Cash Disbursement needs

To know the sources of Cash Inflow and uses of Cash

Outflow in AFT

To determine how short term / current obligations of the

Company are met by the Liquidity Ratio.

To know the short term Solvency Position and the trend

To make suggestion and recommendation to improve

the cash position of A.F.T ltd
CHAPTER V
RESEARCH METHODLOGY
Research design
The research approach used for the study is descriptive.
The form of the study is on the cashmanagement in
general and specific to the financial position.
Data collectionPrimary data
The study has been made using secondary data, which are
obtained from annual reports andstatements of accounts.
Secondary data
The study is period for the annual reports and statement of
accounts extended from the year 2000-2001 to 2005-
2006.
Analytical tools for the study
During the course of research for the researcher for
analysis and interpretation of data is given below has
applied various tools.

Cash flow statement analysis

Funds from operations

Ratio analysis.

Trend analysis
CHAPTER VI
DATA ANALYSIS AND
INTERPRETATIONCURRENT RATIOTable
Number: 6.1
Y E A R C U R R E N T A S S
E T S C U R R E N T LIABLITIESRATI
OS
2 0 0 0 -
2 0 0 1 6 5 , 8 4 .
6 2 2 0 , 3 2 . 2 7
3 . 2 4 2 0 0 1 -
2 0 0 2 6 8 , 9 9 .
6 6 2 9 , 6 1 . 1 2
2 . 3 3 2 0 0 2 -
2 0 0 3 5 8 , 7 1 .
0 6 2 6 , 1 6 . 3 7
2 . 2 4 2 0 0 3 -
2 0 0 4 5 6 , 4 8 .
3 7 2 6 , 8 4 . 7 3
2 . 1 0 2 0 0 4 -
2 0 0 5 6 0 , 0 9 .
8 3 4 5 , 3 6 . 0 9
1 . 8 9
Interpretation:-
The above ratio shows the position of the firm. The
standards norm for this ratio is 2:1. Fromthe above table
the current ratio for the year 2000- 2001 is normally 3.24
and 2004 -2005 it was1.89. It is not good position.

Chart Title: Current RatioChart Number: 6.1

3.242.332.242.11.8900.511.522.533.52 0 0
1 2 0 0 2 2 0 0 3
2 0 0 4 2 0 0 5 2001200220
0320042005

QUICK RATIOTable Number: 6.2

Y E A R C U R R E N T ASSETSCU
RRENTLIABILITIESS T O C K R A
T I O
2 0 0 0 -
2 0 0 1 6 5 , 8 4 . 6 2 2
0 , 3 2 . 2 7 3 6 , 3 2 .
1 1 1 . 4 5 2 0 0 1 -
2 0 0 2 6 8 , 9 9 . 6 6 2
9 , 6 1 . 1 2 2 9 , 6 3 .
4 4 1 . 3 3 2 0 0 2 -
2 0 0 3 5 8 , 7 1 . 0 6 2
6 , 1 6 . 3 7 2 1 , 7 7 .
1 5 1 . 4 1 2 0 0 3 -
2 0 0 4 5 6 , 4 8 . 3 7 2
6 , 8 4 . 7 3 2 5 , 9 3 .
7 5 1 . 1 4 2 0 0 4 -
2 0 0 5 6 0 , 0 9 . 8 3 4
5 , 3 6 . 0 9 3 0 , 8 8 .
8 9 0 . 9 2
Interpretation:-
The standard norms for the quick ratio are 1:1. From the
above table the quick ratio for theyear 2001 – 2004
are satisfactory position and 2005 - 2006 it was
0.99:1. This level is notsatisfactory level.

Chart Title: Quick RatioChart Number: 6.2

1.451.331.411.140.9200.20.40.60.811.21.41.62
0 0 1 2 0 0 2 2 0 0 3
2 0 0 4 2 0 0 5 RATIOS

INVENTORY TURNOVER RATIO

Table Number:
6.3Y E A R C O S T O F S
A L E S A V E R A G E STOCK R
ATIO
2 0 0 1 1 0 ,
1 5 . 9 9 3 9
, 5 4 . 1 1 0
. 2 5 2 0 0 2
9 2 , 1 5 . 0
9 2 5 , 7 0 .
2 9 3 . 5 9 2
0 0 3 9 1 , 1
9 . 1 0 2 5 ,
7 0 . 2 9 3 .
5 5 2 0 0 4 9
0 , 7 9 . 1 0
2 8 , 4 1 . 3
2 3 . 2 0 2 0
0 5 9 3 , 8 8
. 6 4 2 8 , 4
1 . 3 2 3 . 3
0
Interpretation:-

Inventory turnover ratio represent operational

efficiency of the contend. From the abovetable, it
shows in the year 2001 the ratio is 0.25 times and it
is show very poor performance of sales. But in year
2002, the ratio is 3.59; it is a good inventory
management. In the year 2005,the ratio is 3.30 but
compare to the year 2002 it is reduce.

Chart Title: Inventory Turnover Ratio.Chart Number: 6.3

0.253.593.553.23.300.511.522.533.542 0 0
1 2 0 0 2 2 0 0 3
2 0 0 4 2 0 0 5 RATIO

DEBTOR TURNOVER RATIO

Table Number:
6.4Y E A R N E T
S A L E S D E B
T O R R A T I O
2 0 0 0 -
2 0 0 1 8 3 , 9 4
. 0 8 8 , 1 9 . 8
4 1 0 . 2 4 2 0 0
1 -
2 0 0 2 7 1 , 9
4 . 5 2 7 , 2 6 .
8 6 9 . 9 0 2 0
0 2 -
2 0 0 3 6 6 , 7
7 . 5 7 7 , 1 1 .
8 1 9 . 3 8 2 0 0
3 -
2 0 0 4 7 0 , 1 1
. 2 5 5 , 8 2 . 9
3 1 2 . 0 3 2 0 0
4 -
2 0 0 5 7 5 , 9 3
. 3 1 1 0 , 6 6 .
8 3 7 . 1 2
Interpretation:-
From the above table, the ratio is decreased
gradually from year to year (2001-2002). Itshows,
low turnover ratio and minimize bad debts and minimize
the capital interest loss.

Chart Title: Debtor Turnover RatioChart Number: 6.4

10.249.99.3812.037.12024681012142 0 0 1
2 0 0 2 2 0 0 3 2 0 0
4 2 0 0 5 RATIO

WORKING CAPITAL TURNOVER RATIO

Table Number: 6.5

Y E A R S A L
E S W O R K I
N G CAPITALRATIO
2 0 0 0 -
2 0 0 1 8 3 , 9 4
. 0 8 1 3 , 9 4 8
. 8 0 2 . 1 3 2 0
0 1 -
2 0 0 2 7 1 , 9
4 . 5 2 3 , 4 9
. 0 6 2 . 0 6 2
0 0 2 -
2 0 0 3 6 6 , 7 7
. 5 7 2 7 , 6 0 .
2 5 2 . 4 2 2 0 0
3 -
2 0 0 4 7 0 , 1 1
. 2 5 1 2 1 , 5 4
. 5 9 3 . 2 5 2 0
0 4 -
2 0 0 5 7 5 , 9 3
. 3 1 1 3 , 5 0 .
7 8 5 . 6 2
Interpretation:-
From the above table, the working capital turnover ratio
in the year 2005 is 5.62. A very highturnover of working
capital is 2.13 to 5.62. Under this concept it is not
effective one.
Chart Title: Working Capital Turnover Ratio

Chart Number: 6.5

2.132.062.423.255.6201234562 0 0 1 2
0 0 2 2 0 0 3 2 0 0 4 2
0 0 5 RATIO
RATIO OF CURRENT ASSET TO FIXED ASSET

Table Number: 6.6

Y E A R C U R R E
N T ASSETSF I X E D A S S E
T S R A T I O
2 0 0 0 -
2 0 0 1 6 5 , 8 4
. 6 2 3 5 , 5 4 .
9 7 1 . 8 5 2 0 0
1 -
2 0 0 2 6 8 , 9 9
. 6 6 3 4 , 5 2 .
2 8 1 . 9 9 2 0 0
2 -
2 0 0 3 5 8 , 7 1
. 0 6 3 3 , 9 4 .
3 1 1 . 7 3 2 0 0
3 -
2 0 0 4 5 6 , 4 8
. 3 7 3 4 , 9 1 .
1 3 1 . 6 2 2 0 0
4 -
2 0 0 5 6 0 , 0 9
. 8 3 3 7 , 8 1 .
8 8 1 . 5 9
Interpretation:-
From the above table show that, the relationship between
current assets to fixed asset. TheCurrent Asset to Fixed
Asset turnover ratio in all the year from 1.62 to 1.85
times. It is not aneffective operation of a business.
Chart Title: Ratio of Current Assets to Fixed AssetsChart
Number: 6.6

1.851.991.731.621.5900.20.40.60.811.21.41.61.82
2 0 0 1 2 0 0 2 2 0 0 3
2 0 0 4 2 0 0 5 RATIO
CASH TO WORKING CAPITAL RATIO
Table number: 6.7

Y E A R C A
S H W O R K
I N G CAPITALRATIO
2 0 0 0 -
2 0 0 1 1 5 8 9 .
0 0 1 3 9 4 8 . 8
0 0 . 1 1 2 0 0 1
-
2 0 0 2 1 7 8 4
. 2 1 3 9 4 0 . 6
6 0 . 4 5 2 0 0
2 -
2 0 0 3 2 5 9 0
. 9 6 2 7 6 0 . 2
4 0 . 9 3 2 0 0 3
-
2 0 0 4 4 8 6 9 .
3 5 1 2 1 5 4 . 5
9 0 . 4 0 2 0 0 4
-
2 0 0 5 2 4 7 5
. 0 3 1 3 5 0 . 7
8 1 . 8 3
-----
Interpretation:-
From the above table, the ratio is decreased gradually
from year to year (2001-2004) it shows,low cash to
working capital ratio minimize working capital and the
ratio is decreasing.
Chart title: cash to working capital ratioChart number: 6.7

0.110.450.930.41.8300.20.40.60.811.21.41.61.822
0 0 1 2 0 0 2 2 0 0 3
2 0 0 4 2 0 0 5 20012002200320042
005
CASH TO SALES RATIO
Table number: 6.8

Y E A R C
A S H S A
L E S R A
T I O
2 0 0 0 -
2 0 0 1 1 5 8 9
. 0 0 8 3 9 4 . 0
0 0 . 1 8 2 0 0
1 -
2 0 0 2 1 7 8 4
. 2 1 7 1 9 4 . 5
2 0 . 2 4 2 0 0
2 -
2 0 0 3 2 5 9 0
. 9 6 6 6 7 7 . 5
7 0 . 3 8 2 0 0
3 -
2 0 0 4 4 8 6 9
. 3 5 7 0 1 1 . 2
4 0 . 6 9 2 0 0
4 -
2 0 0 5 2 4 7 5
. 0 3 7 5 9 3 . 3
1 0 . 3 2 InterpretationFrom the
above table the cash to sales ratio is raising from the year
of 2000-2004 and at the endof the year it decrease. So the
cash to sales ratio is not in a good manner.
Chart title: cash to sales ratioChart number: 6.8

0.180.240.380.690.3200.10.20.30.40.50.60.72 0
0 1 2 0 0 2 2 0 0 3 2
0 0 4 2 0 0 5 20012002200320042005
CASH RATIOTable number: 6.9

Y E A R C A
S H C U R R
E N T LIABILITIESRATIO
2 0 0 0 -
2 0 0 1 1 5 8 9
. 0 0 2 0 3 2 . 2
7 0 . 7 8 2 0 0
1 -
2 0 0 2 1 7 8 4
. 2 1 2 9 6 1 . 1
2 0 . 6 0 2 0 0
2 -
2 0 0 3 2 5 9 0
. 9 6 2 6 1 6 . 3
7 0 . 9 9 2 0 0
3 -
2 0 0 4 4 8 6 9
. 3 5 2 6 8 4 . 7
3 1 . 8 1 2 0 0
4 -
2 0 0 5 2 4 7 5
. 0 3 4 5 3 6 . 0
9 0 . 5 4
Interpretation
From the above table it is proved that the cash to current
liabilities are not in a constant the ratioschanges for each
and every year. The ratio is not decreasing.
Chart title: cash ratioChart number: 6.9

0.780.60.991.810.5400.20.40.60.811.21.41.61.822
0 0 1 2 0 0 2 2 0 0 3
2 0 0 4 2 0 0 5 20012002200320042
005
CURRENT ASSETS TO TOTAL ASSESTS
RATIOTable number 6.10

Y E A R C U R R
E N T ASSETST O T A L A S S E T S
RATIO
2 0 0 0 -
2 0 0 1 6 5 8 4 .
6 2 1 0 1 3 9 . 5
9 0 . 6 4 2 0 0 1
-
2 0 0 2 6 8 9 9 .
6 6 1 0 3 5 1 . 9
4 0 . 6 6 2 0 0 2
-
2 0 0 3 5 8 7 1
. 0 6 9 2 6 5 . 3
7 0 . 6 3 2 0 0
3 -
2 0 0 4 5 6 8 4
. 3 7 9 1 3 9 . 5
0 0 . 6 2 2 0 0
4 -
2 0 0 5 6 0 0 9
. 8 3 9 7 9 1 . 7
1 0 . 6 1
Interpretation:
the ratios shows the relationship between the current
assets to total assets. There is no muchdifferences
between the ratios from each year.
Chart title: current assets to total assets ratioChart
number: 6.10
0.640.660.630.620.610.580.590.60.610.620.630.640.65
0.662 0 0 1 2 0 0 2 2 0 0
3 2 0 0 4 2 0 0 5 200120022003
20042005
LOANS AND ADVANCES TO CURRENT ASSETS
RATIO
Table number: 6.11

Y E A R L O A N S
A N D ADVANCESCURRENTASSETS
RATIO
2 0 0 0 -
2 0 0 1 5 4 3 6
. 5 0 6 5 8 4 . 6
2 0 . 8 2 2 0 0
1 -
2 0 0 2 4 8 7 3
. 3 7 5 9 8 1 . 7
2 0 . 7 3 2 0 0
2 -
2 0 0 3 3 9 1 1
. 3 3 5 8 7 1 . 0
6 0 . 6 6 2 0 0
3 -
2 0 0 4 2 6 5 4
. 0 8 5 4 8 3 . 1
7 0 . 4 8 2 0 0
4 -
2 0 0 5 1 1 0 3
. 0 3 6 0 0 9 . 8
3 0 . 1 8
Interpretation:
The above table shows the relationship between loans and
advances to current assets ratio andratios gradually
decreases from the year of 2000 to the end of the year.
Chart title: loans and advances to current assets ratioChart
number: 6.11

0.820.730.660.480.1800.10.20.30.40.50.60.70.80.9
2 0 0 1 2 0 0 2 2 0 0 3
2 0 0 4 2 0 0 5 20012002200320
042005
CALCULATION OF FUNDS FROM OPERATION AND
CASH FROM OPERATIONFOR THE YEAR.

Table 6.1.1P A R T I C U L A R S 2 0 0 0 -
2 0 0 1 2 0 0 1 - 2 0 0 2 2 0 0 2 -
2 0 0 3 2 0 0 3 - 2 0 0 4 2 0 0 4 - 2 0 0 5
Net
profit139,45,65159,64,21183,91,41204,59,27222,54,59(
a d d )
d e p r e c i a t i o n 2 8 , 2 3 , 6
4 0 5 6 , 3 9 9 7 , 5 8 , 4 8 4 4 , 5
8 , 0 7 7 2 0 , 9 7 , 9 7 3 Funds
fromoperation4 2 , 1 8 , 2 0 5 1 6 , 5 2 ,
8 2 0 2 5 , 9 7 , 6 2 5 2 5 , 0 4 , 0 0
4 4 3 , 2 3 , 4 3 2
P A R T I C U L A R S 2 0 0 0 -
2 0 0 1 2 0 0 1 - 2 0 0 2 2 0 0 2 -
2 0 0 3 2 0 0 3 - 2 0 0 4 2 0 0 4 - 2 0 0 5
Current
assetsI n v e n t o
r i e s 4 , 1
6 , 5 9 , 9 8
7 4 , 9 5 , 1
3 , 5 3 5 S
u n d r y
d e b t
o r s 4 ,
8 3 , 8 9
, 4 6 0 C a s h a
n d b a n k 9 , 1 2 , 2 2 , 3 5 6 1 1 , 4 0 , 9 3
, 7 1 9 Loans
anda d v a n c e s 5 8 , 2 9 ,
9 2 2 O t h e r l i a b i l i t
i e s 4 , 0 5 , 4 3 , 0 0 0 2 , 3
0 , 2 5 , 0 0 0 (less)
currentliabilitiesO t h e r l i a b
i l i t i e s 9 , 5 0 , 4 2
, 0 0 0 1 , 3 7 , 8 0 , 0 0
0 1 1 , 6 5 , 2 6 , 0 0 0 I
n v e n t o r i e s 6 , 4 3 , 9 8 , 6 5 6 6
, 6 8 , 6 7 , 0 6 1 7 , 8 6 , 2 8 , 8 0 7 S
u n d r y d e b t o r s 1 , 5 4 , 7 4 , 5 7
5 9 2 , 9 8 , 0 6 1 1 5 , 0 5 , 1 8 4 1 , 2 8
, 8 7 , 7 6 1 C a s h a n d
b a n k 1 , 3 8 , 9 8 ,
3 5 9 4 , 7 7 , 7 7 , 0
0 4 1 3 , 6 2 , 1 1 , 0
6 8 Loans
andadvances6 4 , 2 3 , 9 8 0 8 8 , 2 7 , 7
6 5 3 2 , 6 3 , 8 4 5 7 , 4 4 , 5 3 , 8 3
0 C . F . O 8 , 8 6 , 7 1 , 1 9 7 6 , 3
4 , 3 7 , 8 7 7 7 , 9 8 , 3 5 , 1 1 5 3
, 6 0 , 4 8 , 6 6 3 8 , 0 3 , 8 0 , 2 4
3
Cash flow statement

I n f l o w 2 0 0 0 -
2 0 0 1 2 0 0 1 - 2 0 0 2 2 0 0 2 -
2 0 0 3 2 0 0 3 - 2 0 0 4 2 0 0 4 -
2 0 0 5
Opening balance32,56,91,32043,67,54,4921,59,64,21,899
183,91,41,943204,59,27,460C . F . O 8 , 8 6 ,
7 1 , 1 9 7 6 , 3 4 , 3 7 , 8 7 7 7 , 9
8 , 3 5 , 1 1 5 3 , 6 0 , 4 8 , 6 6 3 8 ,
0 3 , 8 0 , 2 4 3 Increasein
loanf u n d s 4 , 0 4 , 6
1 , 7 9 8 8 2 , 4 6 , 4
9 5 7 5 , 7 8 , 5 9 5 Sale
of a s s e t s 2 4 , 8 2 , 2 9 9
5 2 , 9 0 , 4 7 6 2 1 , 4 4 , 7
8 1 2 1 , 8 5 , 0 0 5 1 7 , 0
9 , 7 5 4 Increasein
sharec a p i t a l 1 9 , 1 6 , 0 1 , 9 0 6 2 6 , 7
2 , 4 9 , 5 4 4 1 5 , 3 5 , 3 8 , 8 6 1 1 7 , 6 4
, 0 0 , 0 0 0 1 2 , 5 4 , 0 8 , 0 0 0 Total70
,89,08,52077,27,32,3891,84,01,
87,1572,06,13,54,2062,25,34,25
, 4 5 7 OutflowP u r c h a s e 2 7 , 2 1 , 5 4 ,
0 2 8 6 8 , 7 5 , 6 2 , 3 6 3 1 0 , 4 6 , 0 0 8
1 , 5 4 , 2 6 , 7 4 6 2 , 5 5 , 2 9 , 2 2 9 Decr
easei n l o a
n 1 3 , 6 1
, 2 7 , 1 4
7 2 4 , 3 6
, 5 6 3 Closing balance43,67,
54,4921,59,64,21,8991 , 8 3 , 9 1 , 4 1 , 9 4 3 2 , 0 4 , 5 9 , 2
7,4602,22,54,59,665T o t a l 7 0 , 8 9 , 0 8 , 5
2077,27,32,3891,84,01,87,1512,
06,13,54,2062,25,34,25,457
Inference
:

This table shows that the cash flow statements of ANGLO

FRENCH TEXTILES are to beefficient. The cash inflow
of the company is to be increased for year after year. The
fund fromoperation is also to differ from every year. The
company should increase their share capital .Itsmust be
used as efficient for the next year for decrease their loan
amount.
TREND ANALYSIS

Trend analysis is very helpful in making a

comparative study of the financial statement
of several years. Under this technique, information for a
number of years is taken up and one year (usually the first
year) is taken as the base year. Each items of the base
year is taken as 100 andon that basis; the percentage for
other year are calculated.In trend analysis the
information contained in balance sheet is suitable for
analysis. Such presentation helps in a better
understanding of the financial statements.
TREND ANALYSIS OF ANGLO FRENCH TEXTILE

FOR THE YEAR ENDED OF 31-03-2000 TO 31-03-

2005Trend % Base year
2000A S S E T S
2 0 0 0 2 0 0
1 2 0 0 2 2 0
0 3 2 0 0 4 2
0 0 5 CURRENTASSETSI
n v e n t
o r i e s
1 0 0 8 5
7 0 5 1 6
1 7 3 S u n
d r y d e b
t o r s 1 0 0
1 2 4 1 1 0 1
0 8 8 8 1 6 1
C a s h &
b a n k 1
0 0 2 3 5 4
0 4 3 8 3 3
1 3 1 1 1 L
o a n a d
v a n c e s
1 0 0 1 1 2
9 9 8 1 7 4
2 2 8 1 0
0 1 0 8
1 1 3 9
7 9 3 9
9 FIXED
ASSETSL a n d
1 0 0 1 0
3 1 0 3 1
0 3 1 0 3
1 0 2 L
e a s e
h o l d 1
0 0 9 9 9
8 9 7 9 6
9 5 B u
i l d i
n g 1 0
0 9 1 8
7 8 3 8
1 7 7 R
a i l w a
y 1 0 0 8
5 7 0 5 5
- - - - -
- - -
p l a n
t 1 0 0
8 8 1 0
2 8 9 1
1 0 1 3
7 F u r
n i t u r
e 1 0 0
8 4 8 0
6 9 5 4
5 3 O f f i
c e e q u i
p m e n t 1
0 0 9 5 8 7
7 8 7 0 6 2
M o t o r v
e h i c l e s
1 0 0 6 7 1 7
4 1 7 9 2 1 1
4 9 3 Computerequipment1
0 0 1 7 9
1 4 3 1 7
7 2 9 3 2
3 8 Interpretation:-
a)The current assets are fluctuations in all the years
(2000 – 2005). The percentage in 2005is 99. When
compared to 100 in 2000. The difference is 1%. When
compared to 2002 itshows 113% it is the highest current
assets percentages.

b)The fixed assets are decrease in 2003 it

was 99%. When compared to 2000 it is 100. In2004 and
2005 the Anglo French Textiles Limited is increased to
utilize the fixed assets.In 2004, the utilization of fixed
asset is 103. in 2005, it was increased the percentage
of fixed asset is 106.c)The company has incurred
loss for all the years. So, the firm has increase the
utilizationof fixed assets in proper manner and increases
the current assets. It will give gain for thefirm
.
CHAPTER VII
FINDINGS OF THE STUDY

The standards norms for the current ratio are

2:1
. But in AFT the current ratio is not efficient
manner. So the short term solvency position of
the company is not good position.

The standard norms for the quick ratio are 1:1. The
AFT limited quick ratio is belowstandard norms. So,
the financial soundness of Anglo-French Textiles
Limited is noteffective one.

The company does not utilize the inventory in

proper manner. The company should concentrate on
sales.
The debt-equity ratio

is decreasing position in each the past five years. It

shows theunsoundness of the long-term financial position
of the Anglo-French Textiles..

The cash to sales has been decreased gradually from each

year. In the year 2005, it is low(0.32). It shows the
inefficiency and performances of the firm.

From the analysis of Trend Analysis tools we found that,

The current assets are decreased when compared to base

year.

The fixed asset increased in the year 2005(106), when

compared to the base year and thecontinuous several
years (2001, 2002, 2003, 2004).
CHAPTER VIII
SUGGESTION AND RECOMMENDATION
1.AFT may try to reduce its level of inventories to a
reasonable level. It will create liquidity position and
also the increase in profitability of the concern.
2.The concern may try to
maximize the sales through new design and
h i g h p r o m o t i o n a l activities. It will create good
results.3.The company may try to improve its
working capital position through long
term sources. Itwill create free flow of funds. So that the
cash management and the company performancewill be in
a good position.4.The company should provide
more credit facilities to the customers. It will
create goodsales and also to yield a good profit.5.The
company should concentrate on local sales over
sales by export. It will improve thesales and
profitability of the concern.6.The current ratio below
2:1. Incase of inadequacy, arrangement can be made
for improvingthe working capital position. It will create
good result.7.The company can try to utilize the fixed
assets in efficient manner. It will create a
higher productivity and also create profit..
CHAPTER IX
CONCLUSION
From the critical analysis depicted through out of the
study. It is evident that the over all cashmanagement
of the company with regard to profitability is not
satisfactory but still, the companycan be maximize
through stringent measures which will enhances the
operating of the company.
Since the company faces losses management has to
take several steps in order to improve
the profitability. The clothes are one of the basic needs of
human beings; I deduce that A.F.Tsickness is not
terminal. The cure for such sickness is if the company
adopts the prescription andif its applies recommendation
of the study towards its management of the company will
be back on to a profitable position within no time.
CHAPTER X
LIMITATIONS OF THE STUDY

Difficulty of getting access to some important data

due to its sensitivity and secretivenature.

The non- uniformity in the accounting periods of the

years under study made it difficult tointerpret the data
concisely.

It took time to collect data from the finance departments.

CHAPTER XII
SCOPE FOR FURTHER STUDY

This study helps to take short term financial decision

It indicates the cash requirement needed for plant or
equipment expansion programmes.

To find strategies for efficient management of cash.

It helps to meet routine cash requirement to finance the

transaction.

It reveals the liquidity position of the firm by highlighting

the various sources of cash andits uses.
CHAPTER XII
ANNEXURE-I
BALANCE SHEET AT THE YEAR OF 31-03-2004 TO
31-03-2005
S c h e d u l e 3 1 -
0 3 - 2 0 0 5 3 1 -
0 3 - 2 0 0 4

S. OF FUNDS
C a p i t a l 1 2 1 4
, 0 1 , 6 4 , 0 0 0 2
0 1 , 4 7 , 5 6 , 0 0
0 R & S 2 4 0 , 2 1 , 7 7 , 6 4 9 2 ,
5 4 , 2 3 , 4 1 , 6 4 0 4 0 , 2 3 , 7 7
, 6 4 9 2 4 1 , 6 9 , 3 3 , 6 4 9
LOANFUNDS
S e c u r e d l o
a n s 3 1 6 7 4 3 0
9 7 4 1 2 3 9 1 4 8
2 0 U n s e c u r e d 4 7
6 7 0 7 7 1 0 2 4 4 1 3 8 6
8 4 1 2 2 6 6 0 4 2 7 2 4 6
5 7 5 2 4 7
TOTAL
2 7 8 6 4 8 0 3 3 3 2
6 6 3 5 0 8 8 9 6
APP. FUNDS
Fixed assets
G r o s s b l o
c k 7 5 4 4 3 9 3
6 8 7 3 1 0 7 4 7
1 3 ( -
) d e p 3 9
5 1 7 7 9 5 5
3 8 4 2 8 5 2
5 9 Net
block359261413346789454C a p i t a l
w - i -
p 1 8 9 2 7 3 3 3 3 7 8 1
8 8 7 4 6 2 3 2 4 0 1 1 3
4 9 1 1 3 4 6 5 I
n v e s
t m e n
t s 5 0
0 0 5 0
0 0
Current assets
I n v e n t o r i
e s 3 0 8 8 8 9 0
6 4 2 5 9 3 7 5 5
2 9 S u n d r y
d e b t o r s 1 0 6
6 8 3 2 7 7 5 8 2
9 3 8 1 7 C a s h
& B a n k 7
5 1 0 7 9 2 9 2
1 1 3 1 8 9 9 7
L o a n s 1
1 0 3 0 3 2
9 6 3 5 8 4
9 4 6 6 (-)
CurrentLiabilities
C L 3 1 7 7
2 6 4 9 4 2
6 8 4 7 3 5
2 5 P r o v i s
i o n s 1 3 5 8
8 2 5 7 8 2 7 9
0 1 3 1 3 Net
CA147374494268462971M i s
c e l l a n e
o u s 3 5 4
5 2 4 2 8 - -
- - - - - -

Profit & Loss

2 2 2 5 4 5 9
6 6 5 2 0 4 5
9 2 7 4 6 0
Total
2 7 8 6 4 8 0
3 3 3 2 6 6 3
5 0 8 8 9 6
ANNEXURE-II
BIBILIOGRAPHY
1. FINANCIAL MANAGEMENT -
M.Y.KHANP.K.JAIN
1.
COST AND MANAGEMENT ACCOUNTING -
A. MURTHY.S. VISWANATHAN (printer
& publishers)

2. FINANCIAL ACCOUNTING - S. CHANDS. CHAND

& COMPANY LTD3. WEBSITES -
WWW.UNIXI.COM WWW.BRINGCO.COM WWW.BI
ZZER.COM WWW.AFT.COM WWW.ANSWERS.CO
M