Old Cash Management Analysis Project

A STUDY OF CASH MANAGEMENT ANALYSIS WITH REFERENCE TO
YAMAHA MOTORS SHOWROOM 2019-20
CHAPTER NO. I
INTRODUCTION
EXECUTIVE SUMMARY
Some of the major players that dominate the global Motorcycle market are Honda,
Yamaha, Suzuki, Kawasaki, and Kinetic. Whereas the Indian market shows
dominance of players like Hero Honda, Honda, Bajaj Auto Ltd, TVS motors and
Yamaha. The focus of the study is India Yamaha Motors which holds
approximately 3.5 % market share in the Indian Motorcycle industry whereas it is
the second biggest player in the International Motorcycle Industry. India Yamaha
Motor (IYM) is a 100% subsidiary of Yamaha Motor Corporation of Japan. Its
manufacturing unit is in Surajpur while Faridabad Plant mainly caters to spare parts
and paint shop. These two plants support the production of motorcycles for
domestic as well as overseas market. Presently 8 models roll out of these two plants.
The infrastructure at both the plants supports production of motorcycles and its
parts for the domestic as well as overseas market. At the core are the 5-S and TPM
activities that fuel lean Manufacturing Processes. The plants have In-house facility
for Machining, Welding processes as well as finishing processes of Electroplating
and Painting till the assembly line. The stringent Quality Assurance norms ensure
that their motorcycles meet the reputed International standards of excellence in
every sphere. The purpose of the project was to study the positioning of brand
image in the minds of the customers and also to study the colour preferences of the
motorcycle customers. Consumers should have favorable awareness of brand.
Brand awareness and the ensuing positioning in the minds of consumers
differentiates successful organization from failed organization. Harley Davidson
has a sort of cult following among its customers. It is only because the company
has successfully ingrained its brand awareness in the psyche of people. To succeed,
in today’s rapidly evolving market place organizations should strive continuously
to increase awareness of their brands for the good.
SANT RAWOOL MAHARAJ MAHAVIDYALAYA, KUDAL. 1 | P A G E

INTRODUCTION
Cash is the important current asset for the operations of the business. Cash is the
basic input needed to keep the business running on a continuous basis; it is also the
ultimate output expected to be realized by selling the service or product
manufactured by the firm. The firm should keep sufficient cash, neither more nor
less. Cash shortage will disrupt the firm’s manufacturing operations while
excessive cash will simply remain idle, without contributing anything towards the
firm’s profitability. Thus, a major function of the financial manager is to maintain
a sound cash position. Cash is the money which a firm can disburse immediately
without any restriction. The term 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 time’s deposits, are also included in cash. The basic
characteristic of near-cash assets is that they can readily be converted into cash.
Generally, when a firm has excess cash, it invests it in marketable securities. This
kind of investment contributes some profit to the firm.
MEANING AND DEFINATION OF CASH

 In the words of I. M. Pandey:
“The term 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 time-deposits are also included in cash. The
basic characteristics of near cash assets is that they can readily be converted
into cash. Generally, when a firm has excess cash, it invests it in marketable
securities. This kind of investment contributes some profits to the firm.”
Cash is both the beginning and the end of the working capital cycle, i.e.,
cash, inventories, receivables and cash. While the management of all firms
should strive hard to secure larger cash at the end of the working capital
cycle than what had been invested in to it at its beginning, they must also
make it a best possible minimum. This is required to optimally utilize the
cash and to avoid the situation of idle cash balances. Its effective
management is the key determinant of sufficient working capital
management.

 In the words of P. V. Kulkarni:

“Cash in the business enterprise may be compared to the blood of the human
body; blood gives life and strength to the human body, and cash imparts life
and strength to the business organization”.
 According to J. M. Keyens:
“It is the cash which keeps a business going. Hence every enterprise has
hold necessary cash for its existence”. In a business firm, ultimately, a
transaction results in either an inflow or an outflow of cash. In an efficiently
managed business, static cash balance situation generally does not less.
Cash shortage will disrupt the firm’s manufacturing operation, while
excessive cash will simply remain idle, without contributing anything
towards the firm’s profitability. Therefore, for its smooth running and
maximum profitability proper and effective cash management in a business
is of paramount importance.
WHAT IS CASH MANAGEMENT?

Cash management is the process of collecting and managing cash flows. Cash
management can be important for both individuals and companies. In business, it
is a key component of a company's financial stability. For individuals, cash is also
essential for financial stability while also usually considered as part of a total wealth
portfolio. Individuals and businesses have a wide range of offerings available
across the financial marketplace to help with all types of cash management needs.
Banks are typically a primary financial service provider for the custody of cash
assets. There are also many different cash management solutions for individuals
and businesses seeking to obtain the best return on cash assets or the most efficient
use of cash comprehensively. Cash management is a broad term that refers to the
collection, concentration, and disbursement of cash. The goal is to manage the cash
balances of an enterprise in such a way as to maximize the availability of cash not
invested in fixed assets or inventories and to do so in such a way as to avoid the
risk of insolvency. Factors monitored as a part of cash management include a

company's level of liquidity, its management of cash balances, and its short-term
investment strategies. In some ways, managing cash flow is the most important job
of business managers. If at any time a company fails to pay an obligation when it
is due because of the lack of cash, the company is insolvent. Insolvency is the
primary reason firms go bankrupt. Obviously, the prospect of such a dire
consequence should compel companies to manage their cash with care.
Moreover, efficient cash management means more than just preventing bankruptcy.
It improves the profitability and reduces the risk to which the firm is exposed. Cash
management is particularly important for new and growing businesses. Cash flow
can be a problem even when a small business has numerous clients, offers a product
superior to that offered by its competitors, and enjoys a sterling reputation in its
industry. Companies suffering from cash flow problems have no margin of safety
in case of unanticipated expenses. They also may experience trouble in finding the
funds for innovation or expansion. It is, somewhat ironically, easier to borrow
money when you have money. Finally, poor cash flow makes it difficult to hire and
retain good employees. It is only natural that major business expenses are incurred
in the production of goods or the provision of services.
In most cases, a business incurs such expenses before the corresponding payment
is received from customers. In addition, employee salaries and other expenses drain
considerable funds from most businesses. These factors make effective cash
management an essential part of any business's financial planning. Cash is the
lifeblood of a business. Managing it efficiently is essential for success. When cash
is received in exchange for products or services rendered, many small business
owners, intent on growing their company and tamping down debt, spend most or
all of these funds. But while such priorities are laudable, they should leave room
for businesses to absorb lean financial times down the line. The key to successful
cash management, therefore, lies in tabulating realistic projections, monitoring
collections and disbursements, establishing effective billing and collection
measures, and adhering to budgetary restrictions.

UNDERSTANDING CASH MANAGEMENT

Cash is the primary asset individuals and companies use to pay their obligations on
a regular basis. In business, companies have a multitude of cash inflows and
outflows that must be prudently managed in order to meet payment obligations,
plan for future payments, and maintain adequate business stability. For individuals,
maintaining cash balances while also earning a return on idle cash are usually top
concerns. In corporate cash management, also often known as treasury
management, business managers, corporate treasurers, and chief financial officers
are typically the main individuals responsible for overall cash management
strategies, cash related responsibilities, and stability analysis.
Many companies may outsource part or all of their cash management

responsibilities to different service providers. Regardless, there are several key
metrics that are monitored and analyzed by cash management executives on a daily,
monthly, quarterly, and annual basis. The cash flow statement is a central
component of corporate cash flow management. While it is often transparently
reported to stakeholders on a quarterly basis, parts of it are usually maintained and
tracked internally on a daily basis. The cash flow statement comprehensively
records all of a business’s cash flows. It includes cash received from accounts
receivable, cash paid for accounts payable, cash paid for investing, and cash paid
for financing. The bottom line of the cash flow statement reports how much cash a
company has readily available.
KEY TAKEAWAYS
 Cash management is the process of managing cash inflows and outflows.
 There are many cash management considerations and solutions available in

the financial marketplace for both individuals and businesses.
 For businesses, the cash flow statement is a central component of cash flow
management.

THE CASH FLOW STATEMENT

The cash flow statement is broken down into three parts: operating, investing, and
financing. The operating portion of cash activities will vary based heavily on net
working capital which is reported on the cash flow statement as a company’s
current assets minus current liabilities. The other two sections of the cash flow
statement are somewhat straighter forward with cash inflows and outflows
pertaining to investing and financing.
INTERNAL CONTROLS
There are many internal controls used to manage and ensure efficient business cash
flows. Some of a company’s top cash flow considerations include the average
length of account receivables, collection processes, write-offs for uncollected
receivables, liquidity and rates of return on cash equivalent investments, credit line
management, and available operating cash levels. In general, cash flows pertaining
to operating activities will be heavily focused on working capital which is impacted
by accounts receivable and accounts payable changes. Investing and financing cash
flows are usually extraordinary cash events that involve special procedures for
funds.
WORKING CAPITAL
A company’s working capital is the result of its current assets minus current
liabilities. Working capital balances are an important part of cash flow management
because they show the amount of current assets a company has to cover its current
liabilities. Companies strive to have current asset balances that exceed current
liability balances. If current liabilities exceed current assets a company would likely
need to access its reserve lines for payables.
In general working capital includes the following:

 Current assets: cash, accounts receivable within one year, inventory.
 Current liabilities: all accounts payable due within one year, short-term debt
payments due within one year.

Current assets minus current liabilities results in working capital. On the cash flow
statement, companies usually report the change in working capital from one
reporting period to the next within the operating section of the cash flow statement.
If net change in working capital is positive a company has increased its current
assets available to cover current liabilities which increases total cash on the bottom
line. If a net change in working capital is negative, a company has increased its
current liabilities which reduces its ability to pay them as efficiently.
A negative net change in working capital reduces the total cash on the bottom line.
There are several things a company can do to improve both receivables and
payables efficiency, ultimately leading to higher working capital and better
operating cash flow. Companies operating with invoice billing can reduce the day’s
payable or offer discounts for quick payments. They may also choose to use
technologies that facilitate faster and easier payments such as automated billing and
electronic payments. Advanced technology for payables management can also be
helpful. Companies may choose to make automated bill payments or use direct
payroll deposits to help improve payables cost efficiency.
CASH COLLECTION AND DISBURSEMENT

Cash collection systems aim to reduce the time it takes to collect the cash that is
owed to a firm. Some of the sources of time delays are mail float, processing float,
and bank float. Obviously, an envelope mailed by a customer containing payment
to a supplier firm does not arrive at its destination instantly.
The payment is not processed and deposited into a bank account the moment it is
received by the supplier firm. And finally, when the payment is deposited in the
bank account oftentimes the bank does not give immediate availability of the funds.
These three "floats" are time delays that add up quickly, and they can force
struggling or new firms to find other sources of cash to pay their bills. Cash
management attempts, among other things, to decrease the length and impact of
these "float" periods. A collection receipt point closer to the customer-;perhaps
with an outside third-party vendor to receive, process, and deposit the payment

(check)-;is one way to speed up the collection. The effectiveness of this method
depends on the location of the customer; the size and schedule of its payments; the
firm's method of collecting payments; the costs of processing payments; the time
delays involved for mail, processing, and banking; and the prevailing interest rate
that can be earned on excess funds. The most important element in ensuring good
cash flow from customers, however, is establishing strong billing and collection
practices. Once the money has been collected, most firms then proceed to
concentrate the cash into one center. The rationale for such a move is to have
complete control of the cash and to provide greater investment opportunities with
larger sums of money available as surplus.
There are numerous mechanisms that can be employed to concentrate the cash, such
as wire transfers, automated clearinghouse (ACH) transfers, and checks. The
tradeoff is between cost and time. Another aspect of cash management is knowing
a company's optimal cash balance. There are a number of methods that try to
determine this magical cash balance, which is the precise amount needed to
minimize costs yet provide adequate liquidity to ensure bills are paid on time. One
of the first steps in managing the cash balance is measuring liquidity, or the amount
of money on hand to meet current obligations. There are numerous ways to measure
this, including: the Cash to Total Assets ratio, the Current ratio, the Quick ratio and
the Net Liquid Balance. The higher the number generated by the liquidity measure,
the greater the liquidity-; and vice versa. However, there is a tradeoff between
liquidity and profitability which discourages firms from having excessive liquidity.
CASH MANAGEMENT IN TROUBLED TIMES

During downturns in the economy, declines in sales and poor cash management can
spell the death knell to a small or startup business. In tough times, such as the
recession of 2008-09, banks may tighten up the revolving credit or short-term loans
that businesses often rely on to sort out cash management troubles. Some business
owners resort to trying to keep their companies afloat by raiding their personal
finances mortgaging their homes, maxing out credit cards. At times like these,
business managers or owners need to sit down and undertake cash management

analysis so that they can address shortfalls, increase revenues, and cut spending --
before it's too late. They need to meet with department heads and employees and
take control and adopt a better cash management plan. The plan may call for some
harsh measures, but if employees are involved they will understand that these are
needed for the business's survival. But entrepreneurs and managers can take steps
to minimize the impact of such problems and help maintain the continued viability
of the business. Suggested steps to address temporary cash flow problems include:
 Create a realistic cash flow budget that charts finances for both the short
term (30-60 days) and longer term (1-2 years).
 Redouble efforts to collect outstanding payments owed to the company.

"Bill promptly and accurately," counseled the Journal of Accountancy.
"The faster you mail an invoice, the faster you will be paid. If deliveries do
not automatically trigger an invoice, establish a set billing schedule,
preferably weekly." Businesses should also include a payment due date.
 Offer small discounts for prompt payment.
 Closely monitor and prioritize all cash disbursements.
 Contact creditors and attempt to negotiate mutually satisfactory

arrangements that will enable the business to weather its cash shortage. In
some cases, you may be able to arrange better payment terms from suppliers
or banks. "Better credit terms translate into borrowing money interest-free,"
states the Journal of Accountancy.
 Consider compromising on some billing disputes with clients. Small

business owners are understandably reluctant to consider this step, but in
certain cases, obtaining some cash-; even if your company is not at fault in
the dispute-; for products sold/services rendered may be required to pay
basic expenses.

OBJECTIVES OF THE STUDY

 To understand how cash is being managed.
 To gain knowledge about the system prevailing in Banks.
 To suggest methods for improving cash management in Banks.
NEEDS OF CASH MANAGEMENT

Cash management is concerned with management of cash in such a way as to
achieve the generally accepted objectives of the firm- maximum profitability with
maximum liquidity of the firm. It is the management's ability to recognize cash
problems before they arise, to solve them when they arise and having made solution
available to delegate someone carry them out. An effective and efficient cash
management is considered to be important for the following reasons:
 Cash management helps to meet obligatory cash out flows when they fall
due.
 Cash management ensures that the firm has sufficient cash during peak
times for purchase and for other purposes.
SCOPE OF CASH MANAGEMENT

Cash is first of all a very important asset for a firm.it helps the firm to meet their
immediate obligations such as payment of salary, rent, wages, etc. Holding cash is
important for the firm but holding excessive cash causes loss of interest to the
firm.so when firm has excessive cash, it should invest it in marketable securities
and earn interest. But by investing the firm has to meet fixed transaction cost. So
cash management is a very important aspect in financial management. All the firms
must see their total cash requirement and thereafter invest their money keeping in
mind prospects of the company.

LIMITATIONS OF THE STUDY

Following are the limitations faced by me during this project:
 The study was relatively insufficient, keeping in mind the long duration it
can take at times, to close a particular corporate deal.
 The study might not produce absolutely accurate results as it was based on
a sample taken from the population.
 It was difficult getting time and access to senior level Finance / HR

managers (who had to be talked to, to get required information) due to their
busy schedules and prior commitments.
 A few of the managers refrained from giving the required information as he

considered me to be from their confidential domains.
RESEARCH METHODOLOGY
 Research Design
Research is a systematic process of collecting and analyzing information
(data) in order to increase our understanding of the phenomenon about
which we are concerned or interested. A Research Design is the framework
or plan for a study which is used as a guide in collecting and analyzing the
data collected. It is the blue print that is followed in completing the study.
The basic objective of research cannot be attained without a proper research
design. It specifies the methods and procedures for acquiring the
information needed to conduct the research effectively. It is the overall
operational pattern of the project that stipulates what information needs to
be collected, from which sources and by what methods.
 Types of Data Collected

There are two types of data used. They are primary and secondary data.
Primary data is defined as data that is collected from original sources for a
specific purpose. Secondary data is data collected from indirect sources.

 Primary Sources
These include the Balance sheet and Profit and loss Account
method.
 Secondary Sources
These include books, the internet, company brochures, the company
website, competitor’s websites etc. newspaper articles etc.

CHAPTER NO. II
THEORETICAL BACKGROUND
MOTIVES FOR HOLDING CASH

 The Transaction Motives:
The transaction motive requires a firm hold cash to conduct its business in
the ordinary course. The firms need cash primarily to make payment for
purchases, wages, operating expenses, taxes, dividends etc. A firm needs a
pool of cash because its receipts and payments are not perfectly
synchronized. A pool of cash is also known as ‘transaction balance’. A cash
budget is often used to decide what the transaction balance should be.
 The precautionary motive:

The precautionary motive is to hold cash to meet any contingencies in
future. It provides a cushion or buffer to withstand some unexpected
emergency. The precautionary amount of cash depends upon the
predictability of cash flows. If cash flows can be predicted with accuracy,
less cash will be maintained against an emergency. On other hand,
unpredicted the cash flows, the larger the need for such balances.
 The speculative Motives:

The financial manager would like to take advantage of unexploited
opportunities. Some reserve of money is always essential to enable the firm
to take advantage of cash when such opportunities arise. The speculative
motives helps to take advantage of:
 An opportunity to purchase raw materials at a reduced price on
payment of immediate cash.
 A chance to speculate on interest rate movements by buying

securities when interest rates are expected to decline.
Three primary motives of holding cash balance, the two of them are
important viz.: the transaction motive and the precautionary motive.

Business firm normally do not speculate and need not have speculative
balances. The firm must decide the quantum of transitions and
precautionary balance to be held. This depends upon the following factors:
 The expected cash inflows and outflows based on the cash budget
and forecasts, encompassing long and short term cash requirements
of the firm.
 The degree of deviation between the expected and actual net cash
flows.
 The firm’s ability to borrow at short notice, in the event of any

emergency.
 The philosophy of management regarding liquidity and risk of

insolvency.
All these factors, analyses together, will determine the appropriate level of the
transactions and precautionary balances.
FACETS OF CASH MANAGEMENT

Cash management is concerned with the managing of:
 Cash flows into and out of the firm
 Cash flows within the firm
 Cash balances held by the firm

At a point of time by financing deficit or investing surplus cash. Sales generate cash
which has to be disbursed out. The surplus cash has to be invested while deficit has
to be borrowed. Cash management seeks to accomplish this cycle at a minimum
cost. At the same time, it also seeks to achieve liquidity and control. Cash
management assumes more importance than other current assets because cash is
the most significant and the least productive asset that a firm holds. It is significant

because it is 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 to maintain adequate control over cash position to
keep the firm sufficiently liquid and to use excess cash 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 perfect coincidence between the
inflows and outflows of cash. During some periods, cash outflows will exceed cash
inflows, because payment of taxes, dividends, or seasonal inventory builds 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 portion of the total
current assets, yet management’s considerable time is devoted in managing it. In
recent past, a number of innovations have been done in cash management
techniques. An obvious 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.
 Optimum Utilisation of Operating Cash

Implementation of a sound cash management programmed is based on rapid
generation, efficient utilisation and effective conversation of its cash
resources. Cash flow is a circle. The quantum and speed of the flow can be
regulated through prudent financial planning facilitating the running of
business with the minimum cash balance. This can be achieved by making
a proper analysis of operative cash flow cycle along with efficient
management of working capital.
 Cash Forecasting
Cash forecasting is backbone of cash planning. It forewarns a business
regarding expected cash problems, which it may encounter, thus assisting it
to regulate further cash flow movements. Lack of cash planning results in
spasmodic cash flows.

 Cash Management Techniques:

Every business is interested in accelerating its cash collections and
decelerating cash payments so as to exploit its scarce cash resources to the
maximum. There are techniques in the cash management which a business
to achieve this objective.
 Liquidity Analysis:
The importance of liquidity in a business cannot be over emphasized. If one
does the autopsies of the businesses that failed, he would find that the major
reason for the failure was their inability to remain liquid. Liquidity has an
intimate relationship with efficient utilisation of cash. It helps in the
attainment of optimum level of liquidity.
 Profitable Deployment of Surplus Funds

Due to non-synchronization of ash inflows and cash outflows the surplus
cash may arise at certain points of time. If this cash surplus is deployed
judiciously cash management will itself become a profit center. However,
much depends on the quantum of cash surplus and acceptability of market
for its short-term investments.
 Economical Borrowings
Another product of non-synchronization of cash inflows and cash outflows
is emergence of deficits at various points of time. A business has to raise
funds to the extent and for the period of deficits. Raising of funds at
minimum cost is one of the important facets of cash management. The ideal
cash management system will depend on the firm’s products, organization
structure, competition, culture and options available. The task is complex,
and decisions taken can affect important areas of the firm. For example, to
improve collections if the credit period is reduced, it may affect sales.
However, in certain cases, even without fundamental changes, it is possible
to significantly reduce cost of cash management system by choosing a right
bank and controlling the collections properly.

FUNCTIONS OF CASH MANAGEMENT

In order to resolve the uncertainty about cash flow prediction and lack of
synchronization between cash receipts and payments, the firm should devlope some
strategies for cash management. Efficient cash management requires proper cash
planning, an organisation for managing receipts and disbursement, and an efficient
control and review mechanism. The firm should evolve strategies regarding the
following four function of cash management:
1. Cash planning
Cash planning can help anticipate future cash flows and needs of the firm
and reduces the possibility of idle cash balances and cash deficits. Cash
planning is a technique for planning and controlling the use of cash. Cash
plans are 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 frequency of cash planning generally depends upon the size of the firm
and philosophy of management. Cash budget should be prepared for this
proposes.
In the words of Van Horne:

“A cash budget is a summary statement of the firm’s expected cash inflows
and outflows over a projected time period. It gives information on the
timing and magnitude of expected cash flows and cash balances over the
projected period. The information helps the financial manager to determine
the future cash needs of the firm, plan for financing of these needs, and
exercise control over the cash and liquidity of the firm”. Cash forecasts are
needed to prepare cash budget. Cash forecasting may be done on a short-
term or long-term basis. It is comparatively easy to make short-term
forecasts. Short-terms cash forecasts, routinely prepared by business firms,
are helpful in:
 Estimating cash requirements
 Planning short-term financing

 Scheduling payments in connection with capital expenditure

projects
 Planning purchases of materials
 Developing credit policies
 Checking the accuracy of long –term forecasts.
Long-term cash forecasts are generally prepared for a period ranging from
2 to 5 years and serve to provide a rough picture of firm’s financing needs
and availability of investable surplus in future. Long-term cash forecasts are
helpful in:
 Planning the outlays on capital expenditure projects
 Planning the rising of long-term funds.
1. Managing the cash flows:

The twin objectives in managing the cash flows are: cash inflows and cash
outflows. The inflows of cash should be accelerated while, as far as
possible, the out flow of the cash should be decelerated. A firm can conserve
cash and reduce its requirements for cash balances, if it can speed up its
cash collections. Cash collections can be accelerated by reducing the lay or
gap between the time a customer pays his bills and the time the cheque is
collected and funds become available for the firms use. Within this time
gap, the delay is caused by the mailing time, e.g., the time taken by cheque
in transit and the processing time, e.g., the time taken by the firm processing
cheque for internal accounting purpose. The amount of cheques sent by
customers but not yet collected is called deposit floats. The greater will be
the firm’s deposit float, the longer the time taken in converting cheques into
usable funds. In India, these floats can assume sizeable proportions, as

cheques normally take a longer time to go realised, than in most countries.

An efficient financial manager will attempt to reduce the firm’s deposits
float by speeding up the mailing, processing and collections time. There are
mainly two techniques which can be used to save mailing and processing
times decentralized collections and lock box system. In decentralisation
collection system affirm sets up collection centers in various marketing
centers of the country instead of a single collection center. The customers
are instructed to remit their payments to the collection center of their region.
The collection center deposits the cheques in the local bank.
These cheques are collected quickly because many of them originate in the
very city in which the bank is located. Surplus money of the local bank can
then be transferred to the company’s main bank. Another technique of
speeding up mailing processing and collection times is ‘Lock Box System’.
In this system, the local post office box is rented by the company in a city
and customers of the nearby area are asked to send their remittances to it.
Local bank is authorised to pick up remittances from the box and deposit
them in the account of the company, ultimately to be transferred to the
central bank account of the company. It may be concluded that the major
advantage of accelerating collections is to reduce the firm’s total financing
requirements.
2. Determining the optimum cash balance:

One of the primary responsibilities of the financial manager is to maintain
a sound liquidity position of the firm so that dues may be settled in time.
The test of liquidity is really the availability of cash to meet the firm’s
obligations when they become due. Thus, cash balance is maintained for
day to day transactions and an additional amount may be maintained as a
buffer or safety stock. The financial manager should determine the
appropriate amount of cash balance. Such a decision is influenced by a
tradeoff between risk and return. If the firm maintains a small cash balance,
its liquidity position becomes week and suffers from a paucity of cash to
make payments. But at the same time a higher profitability can be attained

by investing runs out of cash it may have sell its marketable securities,
released funds in some profitable opportunities. When the firm runs out of
cash it may have to sell its marketable securities, if available, or borrow.
This involves transaction costs. On the other hand, if the firm maintains
cash balance at a high level, it will have a sound liquidity position but forgo
the opportunities to earn interest. The potential interest lost on holding large
cash balance involves an opportunity cost to the firm. Thus, the firm should
maintain an optimum cash balance, neither a small nor a large cash balance.
To find out the optimum cash balance, the transaction costs and risk of too
small a balance should be matched with the opportunity costs of too large a
balance. But the opportunity costs would increase. At point x the sum of
the two costs is minimum. This is the point of optimum cash balance which
a firm should seek to achieve.
3. Investing Idle Cash:

The idle cash or precautionary cash should be properly and profitably
invested. The firm should decide about the division of cash balances
between marketable securities and bank deposits. The management of the
investment in marketable securities is an important financial management
responsibility because of the close relationship between cash and
marketable securities. Therefore, the investment in marketable securities
should be properly managed. Excess cash should normally be invested in
marketable securities which can be conveniently and properly managed.
Excess cash should normally be invested in marketable securities which can
be covalently and promptly converted into cash.
Cash in excess of working capital cash balance requirements of firm may

fluctuate because of the element of seasonality and business cycles.
Secondly, excess cash may be as a buffer to meet unpredictable financial
needs. A firm holds extra cash because cash-flows cannot be predicated
with certainty. Cash balance held to cover the future exigencies is called the
precautionary balance ad usually is invested in marketable securities until
needed. Instead of holding excess cash for the above mentioned purpose,

the firm may meet its precautionary requirements as and when they arise by
making short-term borrowings. The choice between the short-term
borrowings and liquid asset holding will depend upon the firm’s policy
regarding the mix of short-term and long-term financing.
GENERAL PRINCIPLES OF CASH MANAGEMENT:

Harry Gross has suggested certain general principles of cash management that,
essentially add efficiency to cash management. These principles reflecting cause
and effect relationship having universal applications give a scientific outlook to the
subject of cash management. While, the application of these principles in
accordance with the changing conditions and business environment requiring high
degree of skill and tact which places cash management in the category of art. Thus,
we can say that cash management like any other subject of management is both
science and art for it has well-established principles capable of being skill fully
modified as per the requirements. The principles of management are follows as
1. Determinable Variations of Cash Needs:

A reasonable portion of funds, in the form of cash is required to be kept
aside to overcome the period anticipated as the period of cash deficit. This
period may either be short and temporary or last for a longer duration of
time. Normal and regular payment cf cash leads to small reductions in the
cash balance at periodic intervals. Making this payment to different
employees on different days of a week can equalize these reductions.
Another technique for balancing the level of cash is to schedule I cash
disbursements to creditors during that period when accounts receivables
collected amounts to a large sum but without putting the goodwill at stake.
2. Contingency Cash Requirement:

There may arise certain instances, which fall beyond the forecast of the
management. These constitute unforeseen calamities, which are too
difficult to be provided for in the normal course of the business. Such
contingencies always demand for special cash requirements that was not

estimated and provided for in the cash budget. Rejections of wholesale

product, large amount of bad debts, strikes, lockouts etc. are a few among
these contingencies. Only a prior experience and investigation of other
similar companies prove helpful as a customary practice. A practical
procedure is to protect the business from such calamities like bad-debt
losses, fire etc. by way of insurance coverage.
3. Availability of External Cash:

Another factor that is of great importance to the cash management is the
availability of funds from outside sources. There resources aid in providing
credit facility to the firm, which materialized the firm's objectives of
holding minimum cash balance. As such if a firm succeeds in acquiring
sufficient funds from external sources like banks or private financers,
shareholders, government agencies etc., the need for mash reserves
diminishes.
4. Maximizing Cash Receipts

Every financial manager aims at making the best possible use of cash
receipts. Again, cash receipts if tackled prudently results in minimizing cash
requirements of a concern. For this purpose, the comparative cost of
granting cash discount to customer and the policy of charging interest
expense for borrowing must be evaluated on continuous basis to determine
the futility of either of the alternative or both of them during that particular
period for maximizing cash receipts. Yet, the under mentioned techniques
proved helpful in this context:
 Concentration Banking:
Under this system, a company establishes banking centers for collection
of cash in different areas. Thereby, the company instructs its customers
of adjoining areas to send their payments to those centers. The collection
amount is then deposited with the local bank by these centers as early
as possible. Whereby, the collected funds are transferred to the
company's central bank accounts operated by the head office.

 Local Box System:

Under this system, a company rents out the local post offices boxes of
different cities and the customers are asked to \ forward their
remittances to it. These remittances are picked by the authorized lock
bank from these boxes to be transferred to the company's central bank
operated by the head office.
 Reviewing Credit Procedures:

It is aids in determining the impact of slow payers and bad-debtors on
cash. The accounts of slow paying customers should be reviewed to
determine the volume of cash tied up. Besides this, evaluation of credit
policy must also be conducted for introducing essential amendments.
As a matter of fact, too strict a credit policy involves rejections of sales.
Thus, the curtailing the cash inflow.
 Minimizing Credit Period:

Shortening the terms are allowed to the customers would definitely
accelerate the cash inflow side-by-side revising the discount offered
would prevent the customers from using the credit for financing their
own operations profitably.
 Others:
Introducing various procedures for special handling of large to very
large remittances or foreign remittances such as, persona! Pick up of
large sum of cash using airmail, special delivery and scimitars
techniques to accelerate such collections.
 Minimizing Cash Disbursements:

The motive of minimizing cash payments is the ultimate benefit derived
from maximizing cash receipts. Cash disbursement can be brought
under control by preventing fraudulent practices, serving time draft to
creditors of large sum, making staggered payments to creditors and for
payrolls etc.

 Maximizing Cash Utilization:

Although a surplus of cash is a luxury, yet money is costly. Moreover,
proper and optimum utilization of cash always makes way for
achievement of the motive of maximizing cash receipts and minimizing
cash payments. At times, a concern finds itself with funds in excess of
its requirement, which lay idle without bringing any return to it. At the
same time, the concern finds it unwise to dispose it, as the concern shall
soon need it. In such conditions, efforts should be made in investing
these funds in some interest bearing securities. There are certain basic
strategies suggested by Gitman, which prove evidently helpful in
managing cash if employed by the cash management. They are: "Pay
accounts payables as late as possible without damaging the firm's credit
rating, but take advantage of the favorable cash discount, if any. Collect
accounts receivables as early as possible without losing future loss sales
because of high-pressure collections techniques. Cash discounts, if they
are economically justifiable, may be used to accomplish this objective.
ADEQUACY OF CASH
Adequacy of cash resources has to be judged in relation to operational and liquidity
requirements of a firm. Both these functions are of great significance for smooth
functioning and well-being. Sufficiency of cash for operational requirement of a
firm’s judged by computation of turnover ratio of cash. The resultant turnover rate
divided into 365, gives the number of days for which the available cash resources
were sufficient to finance the normal operational requirements of the firm.
 In the word of Hunt etal:

“Financial analyst uses various liquidity ratios as through indices of the
likely most widely used ratio is the current ratios and acid test ratio.”
 Professor James E. Walter:

Has proposed that instead of matching current assets with current liabilities,
i.e. current ratio or quick assets with current liabilities, i.e. quick ratio, better

results can be obtained by matching current obligations with net cash flows.
In growing concern net cash flows are more important since they are flows,
whereas current liabilities only indicate the outstanding obligations on
particulars date which are continuously being replaced. In this context, he
has also suggested the computations of coverage of current liabilities ratio,
which takes into account the turnover rate of current liabilities and margin
of profit on sale. Coverage of current liabilities is the product of turnover of
current liabilities and profit margin. Professor Walter calls these
computations as test actual liquidity while current and quick ratios are
classified as test of only technical liquidity and solvency.
CASH PLANNING
Cash flows are inseparable parts of the business operations of firms. A firm needs
cash to invest in inventory, receivable and fixed assets and to make payment for
operating expenses in order to maintain growth in sales and earnings. It is possible
that firm may be taking adequate profits, but may suffer from the shortage of cash
as its growing needs may be consuming cash very fast. The ‘cash poor’ position of
the firm can be corrected if its cash needs are planned in advance. At times, a firm
can have excess cash with it if its cash inflows exceed cash outflows. Such excess
cash may remain idle. Again, such excess cash flows can be anticipated and
properly invested if cash planning is resorted to.
Cash planning is a technique to plan and control the use of cash. It helps to
anticipate the future cash flows and needs of the firm and reduces the possibility of
idle cash balances (which lowers firm’s profitability) and cash deficits (which can
cause the firm’s failure). Cash planning protects the financial condition of the firm
by developing a projected cash statement from a forecast of expected cash inflows
and outflows for a given period. The forecasts may be based on the present
operations or the anticipated future operations. Cash plans are very crucial in
developing the operating plans of the firm. Cash planning can be done on daily,
weekly or monthly basis. The period and frequency of 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 and
monthly forecasts. Small firms may not prepare formal cash forecasts because of
the non-availability of information and small-scale operations. But, if the small firm
prepares cash projections, it is done on monthly basis. As a firm grows and business
operations become complex, cash planning becomes inevitable for its continuing
success.
CASH FORECASTING AND BUDGETING

 Cash budget
Cash budget is the most significant device to plan for and control cash
receipts and payments. A cash budget is a summary statement of the firm’s
expected cash inflows and outflows over a projected time period. It gives
information on the timing and magnitude of expected cash flows and cash
balances over the projected period. This information helps the financial
manager to determine the future cash needs of the firm, plan for the
financing of these needs and exercise control over the cash and liquidity of
the firm. The time horizon of the cash budget may differ from firm to firm.
A firm whose business is affected by seasonal variations may prepare
monthly cash budgets. Daily or weekly cash budgets should be prepared for
determining cash requirements if cash flows show extreme fluctuations.
Cash budgets for a longer intervals may be prepared if cash flows are
relatively stable.
 Cash forecasts
Cash forecasts are needed to prepare cash budgets. Cash forecasting may be
done on short or long-term basis. Generally, forecasts covering periods of
one year or less are considered short-term; those exceeding beyond one year
are considered long term.
SHORT-TERM CASH FORECASTS

It is comparatively easy to make short-term cash forecasts. The important functions
of carefully developed short-term cash forecasts are:

 To determine operating cash requirements
 To anticipate short-term financing
 To manage investment of surplus cash.
The short-term forecast helps in determining the cash requirements for a

predetermined period to run a business. If the cash requirements are not determined,
it would not be possible for the management to know-how much cash balance is to
be kept in hand, to what extent bank financing be depended upon and whether
surplus funds would be available to invest in marketable securities. To know the
operating cash requirements, cash flow projections have to be made by a firm. As
stated earlier, there is hardly a perfect matching between cash inflows and outflows.
With the short-term cash forecasts, however, the financial manager is enabled to
adjust these differences in favor of the firm. It is well known that, for their
temporary financing needs, most companies depend upon banks. One of the
significant roles of the short-term forecasts is to pinpoint when the money will be
needed and when it can be repaid. With such forecasts in hand, it will not be
difficult for the financial manager to negotiate short-term financing arrangements
with banks. This in fact convinces bankers about the ability of the management to
run its business. The third function of the short-term cash forecasts is to help in
managing the investment of surplus cash in marketable securities. Carefully and
skillfully designed cash forecast helps a firm to:
 Select securities with appropriate maturities and reasonable risk.
 Avoid over and under-investing.
Short-run cash forecasts serve many other purposes. For example, multi-divisional
firms use them as a tool to coordinate the flow of funds between their various
divisions as well as to make financing arrangements for these operations. These
forecasts may also be useful in determining the margins or minimum balances to
be maintained with banks. Still other uses of these forecasts are:

 Planning reductions of short and long-term debt
 Scheduling payments in connection with capital expenditures programmers
 Planning forward purchases of inventories
 Checking accuracy of long-range cash forecasts.
 Taking advantage of cash discounts offered by suppliers
SHORT-TERM FORECASTING METHODS

Two most commonly used methods of short-term cash forecasting are:
 The receipt and disbursements method
 The adjusted net income method.

The receipts and disbursements method is generally employed to forecast for
limited periods, such as a week or a month. The adjusted net income method, on
the other hand, is preferred for longer durations ranging between few months to a
year. Both methods have their pros and cons. The cash flows can be compared with
budgeted income and expenses items if the receipts and disbursements approach is
followed. On the other hand, the adjusted income approach is appropriate in
showing a company’s working capital and future financing needs.
RECEIPTS AND DISBURSEMENTS METHOD:

Cash flows in and out in most companies on a continuous basis. The prime aim of
receipts and disbursements forecasts is to summarize these flows during a
predetermined period. In case of those companies where each item of income and
expense involves flow of cash, this method is favored to keep a close control over
cash. Three broad sources of cash inflows can be identified:
 Operating
 Non-operating
 Financial

Cash sales and collection from customers form the most important part of the
operating cash inflows. Developing a sales forecast is the first step in preparing
cash forecast. All precautions should be taken to forecast sales as accurately as
possible. In case of cash sales, cash is received at the time of sale. On the other
hand, cash is realized after sometime if sale is on credit. The time realizing cash on
credit sales depends upon the firm’s credit policy reflected in the average collection
period. It can easily be noted that cash receipts from sales will be affected by
changes in sales volume and the firm’s credit policy.
To develop a realistic cash budget, these changes should be accounted for. If the
demand for the firm’s products slackens, sales will fall and the average collection
period is likely to be longer which increases the chances of bad debts. In preparing
cash budget, account should be taken of sales discounts, returns and allowances and
bad debts as they reduce the amount of cash collections from debtors. Non-
operating cash inflows include sale of old assets and dividend and interest income.
The magnitude of these items is generally small. When internally generated cash
flows are not sufficient, the firm resorts to external sources. Borrowings and
issuance of securities are external financial sources. These constitute financial cash
inflows. The next step in the preparation of a cash budget is the estimate of cash
outflows. Cash outflows include:
 Operating outflows: cash purchases, payment of payables, advances to

suppliers, wages and salaries and other operating expenses
 Capital Expenditures
 Contractual payments: repayment of loan and interest and tax payments
 Discretionary payments: ordinary and preference dividend.
 In case of credit purchases, a time lag will exist for cash payments. This will
depend on the credit terms offered by the suppliers.

It is relatively easy to predict the expenses of the firm over short run. Firms usually
prepare capital expenditure budgets; therefore, capital expenditures are predictable
for the purposes of cash budget. Similarly, payments of dividend do not fluctuate
widely and are paid on specific dates. Cash out flow can also occur when the firm
repays its long-term debt. Such payments are generally planned and, therefore,
there is no difficulty in predicting them. Once the forecasts for cash receipts and
payments have been developed, they can be combined to obtain the net cash inflow
or outflow for each month. The net balance for each month would indicate whether
the firm has excess cash or deficit.
The peak cash requirements would also be indicated. If the firm has the policy of
maintaining some minimum cash balance, arrangements must be made to maintain
this minimum balance in periods of deficit. The cash deficit can be met by
borrowings from banks. Alternatively, the firm can delay its capital expenditures
or payments to creditors or postpone payment of dividends. One of the significant
advantages of cash budget is to determine the net cash inflow or out flow so that
the firm is enabled to arrange finances. However, the firm’s decision for appropriate
sources of financing should depend upon factors such as cost and risk. Cash budget
helps a firm to manage its cash position. It also helps to utilize ideal funds in better
ways. On the basis of cash budget, the firm can decide to invest surplus cash in
marketable securities and earn profits. The virtues of the receipt and payment
methods are:
 It gives a complete picture of all the items of expected cash flows.
 It is a sound tool of managing daily cash operations. This method, however,

suffers from the following limitations
 Its reliability is reduced because of the uncertainty of cash forecasts. For

example, collections may be delayed, or unanticipated demands may cause
large disbursements.
 It fails to highlight the significant movements in the working capital items.

ADJUSTED NET INCOME METHOD:

This method of cash forecasting involves the tracing of working capital flows. It is
sometimes called the sources and uses approach. Two objectives of the adjusted net
income approach are:
 To project the company’s need for cash at a future date
 To show whether the company can generate the required funds internally,
and if not, how much will have to be borrowed or raised in the capital
market.
As regards the form and content of the adjusted net income forecast, it resembles
the cash flow statement discussed previously. It is, in fact a projected cash flow
statement based on preformat financial statements. It generally has three sections:
sources of cash, uses of cash and the adjusted cash balance. This procedure helps
in adjusting estimated earnings on an accrual basis to a cash basis. It also helps in
anticipating the working capital movements. In preparing the adjusted net income
forecasts items such as net income, depreciation, taxes, dividends etc., can easily
be determined from the company’s annual operating budget.
Normally, difficulty is faced in estimating working capital changes; especially the

estimates of accounts receivable (debtors) and inventory pose problem because they
are influenced by factors such as fluctuations in raw material costs, changing
demand for the company’s products and possible delays in collections. Any error
in predicting these items can make the reliability of forecast doubtful. One
popularly used method of projecting working capital is to use ratios relating
accounts receivable and inventory to sales. For example, if the past experience tells
that accounts receivable of a company range between 32 percent to 36 percent of
sales, an average rate of 34 percent can be used. The difference between the
projected figure and that on the books will indicate the expected increase or
decrease in cash attributable to receivable. The benefits of the adjusted net income
method are:

 It highlights the movements in the working capital items, and thus helps to
keep a control on s firm’s working capital.
 It fails to trace cash flows, and therefore, its utility in controlling daily cash
operations is limited.
LONG-TERM CASH FORECASTING

Long-term cash forecasts are prepared to give an idea of the company’s financial
requirements in the distant future. They are not as detailed as the short-term
forecasts are. Once a company has developed long-term cash forecast, it can be
used to evaluate the impact of, say, new product developments or plant acquisitions
on the firm’s financial condition three, five, or more years in the future. The major
uses of the long-term cash forecasts are:
 It indicates as company’s future financial needs, especially for its working

capital requirements.
 It helps to evaluate proposed capital projects. It pinpoints the cash required

to finance these projects as well as the cash to be generated by the company
to support them.
 It helps to improve corporate planning. Long-term cash forecasts compel

each division to plan for future and to formulate projects carefully.
Long-term cash forecasts may be made for two, three or five years. As with the
short-term forecasts, company’s practices may differ on the duration of long-term
forecasts to suit their particular needs. The short-term forecasting methods, i.e., the
receipts and disbursements method and the adjusted net income method, can also
be used in long-term cash forecasting. Long-term cash forecasting reflects the
impact of growth, expansion or acquisitions; it also indicates financing problems
arising from these developments.

FEATURES OF INSTRUMENTS OF COLLECTION IN INDIA
POINTS PROS CONS
 No charge  Can bounce

 Collection times can be
 Payable through clearing
long
Cheques
 Can be discounted after
 Collection charge
receipts
 Low discounting charge
 Payable in local clearing  Cost of collection
Drafts  Chances of bouncing are  Buyers account debited on
less day one
 Not payable through
 Low discounting charge
clearing
 Theoretically, goods are
Documentar not released till payments
 High collection cost
y bills are made or the bill is
accepted
 Long delays
 No charge except stamp  Procedure is relatively

duty cumbersome
 Buyers are reluctant to
Trade bills  Can be discounted accept the due date
discipline
 Discipline of payment on
due date
DETERMINING THE OPTIMUM CASH BALANCE

One of the primary responsibilities of the financial manager is to maintain a sound
liquidity position of the firm so that the dues are settled in time. The firm needs
cash to purchase raw materials and pay wages and other expenses as well as for
paying dividend, interest and taxes. The test of liquidity is the availability of cash
to meet the firm’s obligations when they become due. A firm maintains the
operating cash balance for transaction purposes. It may also carry additional cash
as a buffer or safety stock. The amount of cash balance will depend on the risk-
return trade-off.

OPTIMUM CASH BALANCE UNDER CERTAINTY:

BAUMOL’S MODEL
The Baumol model of cash management provides a formal approach for
determining a firm’s optimum cash balance under certainty. It considers cash
management similar to an inventory management problem. As such, the firm
attempts to minimize the sum of the cost of holding cash (inventory of cash) and
the cost of converting marketable securities to cash. The Baumol’s model makes
the following assumptions:
 The firm is able to forecast its cash needs with certainty.
 The firm’s cash payments occur uniformly over a period of time.
Baumol’s model for cash balance
Cash balance
C/2
Average
Time
0 T1 T2 T3
The firm incurs a holding cost for keeping the cash balance. It is an opportunity
cost; that is, the return foregone on the marketable securities. If the opportunity cost
is k, then the firm’s holding cost for maintaining an average cash balance is as
follows:
Holding cost = k(C/2) (1)

The firm incurs a transaction cost whenever it converts its marketable securities to
cash. Total number of transactions during the year will be total funds requirement,
T, divided by the cash balance, C, i.e. T/C. The per transaction cost is assumed to
be constant. If per transaction cost is c, then the total transaction cost will be:
Transaction cost = c(T/C) (2)
The total annual cost of the demand for cash will be:
Total cost = k(C/2) + c(T/C) (3)
What is the optimum level of cash balance, C*? We know that the holding cost
increases as the demand for cash, C, increases. However, the transaction cost
reduces because with increasing C the number of transactions will decline. Thus,
there is a trade-off between the holding cost and the transaction cost.
Cost trade-off: Baumol’s model
Cost
Total cost
Holding cost
Transaction cost
Cash balance

OPTIMUM CASH BALANCE UNDER UNCERTAINTY:

THE MILLER-ORR MODEL
The limitation of the Baumol model is that it does not allow the cash flows to
fluctuate. Firms in practice do not use their cash balance uniformly nor are they
able to predict daily cash inflows and outflows. The Miller-Orr (MO) model
overcomes this shortcoming and allows for daily cash flow variation. It assumes
that net cash flows are normally distributed with a zero value of mean and standard
deviation. The MO model provides for two control limits—the upper control limit
and the lower control limit as well as a return point. If the firm’s cash flows
fluctuate randomly and hit the upper limit, then it buys sufficient marketable
securities to come back to a normal level of cash balance (the return point).
Similarly, when the firm’s cash flows wander and hit the lower limit, it sells
sufficient marketable securities to bring the cash balance back to the normal level
(the return point).
Miller- Orr model
Cash balance
Upper limit
Purchase of securities
Return
point Sale of securities
Lower point
Time

The firm sets the lower control limit as per its requirement of maintaining minimum
cash balance. At what distance the upper control limit will be set? The difference
between the upper limit and the lower limit depends on the following factors:
 The transaction cost (c)
 The interest rate, (i)
 The standard deviation of net cash flows.
The formula for determining the distance between upper and lower control limits
(called Z) is as follows:
(Upper Limit—Lower Limit) =

(3/4 * transaction cost * cash flow variation/ interest per day)⅓ (5)
We can notice from equation (5) that the upper and lower limit will be far off from
each other (i.e. Z will be larger) if transaction cost is higher or cash flows show
greater fluctuations. The limits will come closer as the interest increases. Z is
inversely related to the interest rate. It is noticeable that the upper limit is three
times above the lower control limit and the return point lies between the upper and
the lower limit. Thus,
Upper Limit = Lower Limit + 3Z (6)
Return point = Lower Limit + Z (7)
The net effect is that the firms hold the average cash balance equal to:
Average Cash Balance = Lower Limit +4/3 Z
The MO model is more realistic since it allows variation in cash balance within
lower and upper limits. The financial manager can set the lower limit according to

the firm’s liquidity requirement. The past data of the cash flow behavior can be
used to determine the standard deviation of net cash flows. Once the upper and
lower limits are set, managerial attention is needed only if the cash balance deviates
from the limits. The action under these situations are anticipated and planned in the
beginning.
INVESTING SURPLUS CASH IN MARKETABLE

SECURITIES
There is a close relationship between cash and money market securities or other
short-term investment alternatives. Investment in these alternatives should be
properly managed. Excess cash should normally be invested in those alternatives
that can be conveniently and promptly converted into cash. Cash in excess of the
requirement of operating cash balance may be held for two reasons. First, the
working capital requirements of the firm fluctuate because of the elements of
seasonality and business cycles.
The excess cash may build up during slack seasons but it would be needed when
the demand picks up. Thus, excess cash during slack season is idle temporarily, but
has a predictable requirement later on. Second, excess cash may be held as a buffer
to meet unpredictable financial needs. A firm holds extra cash because cash flows
cannot be predicted with certainty. Cash balance held to cover the future exigencies
is called the precautionary balance and is usually invested in the short-term money
market investments until needed. Instead of holding excess cash for the above-
mentioned purpose, the firm may meet its precautionary requirements as and when
they arise by making short-term borrowings.
The choice between the short-term borrowings and liquid assets holding will
depend upon the firm’s policy regarding the mix of short-term financing. The
excess amount of cash held by the firm to meet its variable cash requirements and
future contingencies should be temporarily invested in marketable securities, which
can be regarded as near moneys. A number of marketable securities may be
available in the market.

TYPES OF SHORT-TERM INVESTMENT OPPORTUNITIES

The following short-term investment opportunities are available to companies in
India to invest their temporary cash surplus:
 Treasury bills
Treasury bills (TBs) are short-term government securities. The usual
practice in India is to sell treasury bills at a discount and redeem them at par
on maturity. The difference between the issue price and the redemption
price, adjusted for the time value of money, is return on treasury bills. They
can be bought and sold any time; thus, they have liquidity. Also, they do
not have the default risk.
 Commercial papers
Commercial papers (CPs) are short-term, unsecured securities issued by
highly credit worthy large companies. They are issued with a maturity of
three months to one year. CPs are marketable securities, and therefore,
liquidity is not a problem.
 Certificates of deposits
Certificates of deposits (CDs) are papers issued by banks acknowledging
fixed deposits for a specified period of time. CDs are negotiable instruments
that make them marketable securities.
 Bank deposits
A firm can deposit its temporary cash in a bank for a fixed period of time.
The interest rate depends on the maturity period. For example, the current
interest rate for a 30 to 45 days deposit is about 3 percent and for 180 days
to one year is about 6-7 percent. The default risk of the bank deposits is
quite low since the government owns most banks in India.
 Inter-corporate deposits
Inter-corporate lending borrowing or deposits (ICDs) is a popular short-
term investment alternative for companies in India. Generally a cash surplus

company will deposit (lend) its funds in a sister or associate companies or

with outside companies with high credit standing. In practice, companies
can negotiate inter-corporate borrowing or lending for very short periods.
The risk of default is high, but returns are quite attractive.
 Money market mutual funds

Money market mutual funds (MMMFs) focus on short-term marketable
securities such as TBs, CPs, CDs, or call money. They have a minimum
lock-in period of 30 days, and after this period, an investor can withdraw
his or her money any time at a short notice or even across the counter in
some cases. They offer attractive yields; yields are usually 2 percent above
than on bank deposits of same maturity. MMMFs are of recent origin in
India, and they have become quite popular with institutional investors and
some companies.
CASH MANAGEMENT SERVICES GENERALLY OFFERED

The following is a list of services generally offered by banks and utilised by larger
businesses and corporations:
 Account Reconcilement Services:
Balancing a checkbook can be a difficult process for a very large business,
since it issues so many checks it can take a lot of human monitoring to
understand which checks have not cleared and therefore what the company's
true balance is. To address this, banks have developed a system which
allows companies to upload a list of all the checks that they issue on a daily
basis, so that at the end of the month the bank statement will show not only
which checks have cleared, but also which have not.
 Armored Car Services:

Large retailers who collect a great deal of cash may have the bank pick this
cash up via an armored car company, instead of asking its employees to
deposit the cash.

 Advanced Web Services:

Most banks have an Internet-based system which is more advanced than the
one available to consumers. This enables managers to create and authorize
special internal logon credentials, allowing employees to send wires and
access other cash management features normally not found on the consumer
web site.
 Automated Clearing House:

Services are usually offered by the cash management division of a bank.
The Automated Clearing House is an electronic system used to transfer
funds between banks. Companies use this to pay others, especially
employees (this is how direct deposit works). Certain companies also use it
to collect funds from customers (this is generally how automatic payment
plans work). This system is criticized by some consumer advocacy groups,
because under this system banks assume that the company initiating the
debit is correct until proven otherwise.
 Balance Reporting Services:

Corporate clients who actively manage their cash balances usually
subscribe to secure web-based reporting of their account and transaction
information at their lead bank. These sophisticated compilations of banking
activity may include balances in foreign currencies, as well as those at other
banks.
 Cash Concentration Services:

Large or national chain retailers often are in areas where their primary bank
does not have branches. Therefore, they open bank accounts at various local
banks in the area. To prevent funds in these accounts from being idle and
not earning sufficient interest, many of these companies have an agreement
set with their primary bank, whereby their primary bank uses the Automated
Clearing House to electronically "pull" the money from these banks into a
single interest-bearing bank account.

 Lockbox services:
Often companies which receive a large number of payments via checks in
the mail have the bank set up a post office box for them, open their mail,
and deposit any checks found. This is referred to as a "lockbox" service.
 Positive Pay:
Positive pay is a service whereby the company electronically shares its
check register of all written checks with the bank. The bank therefore will
only pay checks listed in that register, with exactly the same specifications
as listed in the register. This system dramatically reduces check fraud.
 Sweep Accounts:
Are typically offered by the cash management division of a bank. Under
this system, excess funds from a company's bank accounts are automatically
moved into a money market mutual fund overnight, and then moved back
the next morning. This allows them to earn interest overnight. This is the
primary use of money market mutual funds.
 Zero Balance Accounting:

Can be thought of as somewhat of a hack. Companies with large numbers
of stores or locations can very often be confused if all those stores are
depositing into a single bank account. Traditionally, it would be impossible
to know which deposits were from which stores without seeking to view
images of those deposits. To help correct this problem, banks developed a
system where each store is given their own bank account, but all the money
deposited into the individual store accounts are automatically moved or
swept into the company's main bank account. This allows the company to
look at individual statements for each store. U.S. banks are almost all
converting their systems so that companies can tell which store made a
particular deposit, even if these deposits are all deposited into a single
account. Therefore, zero balance accounting is being used less frequently.

 Wire Transfer:
A wire transfer is an electronic transfer of funds. Wire transfers can be done
by a simple bank account transfer, or by a transfer of cash at a cash office.
Bank wire transfers are often the most expedient method for transferring
funds between bank accounts. A bank wire transfer is a message to the
receiving bank requesting them to effect payment in accordance with the
instructions given. The message also includes settlement instructions. The
actual wire transfer itself is virtually instantaneous, requiring no longer for
transmission than a telephone call.
 Controlled Disbursement:
This is another product offered by banks under Cash Management Services.
The bank provides a daily report, typically early in the day, that provides
the amount of disbursements that will be charged to the customer's account.
This early knowledge of daily funds requirement allows the customer to
invest any surplus in intraday investment opportunities, typically money
market investments. This is different from delayed disbursements, where
payments are issued through a remote branch of a bank and customer is able
to delay the payment due to increased float time.
In the past, other services have been offered the usefulness of which has diminished
with the rise of the Internet. For example, companies could have daily faxes of their
most recent transactions or be sent CD-ROMs of images of their cashed checks.
PURPOSE OF CASH MANAGEMENT

Cash management is the stewardship or proper use of an entity’s cash resources. It
serves as the means to keep an organization functioning by making the best use of
cash or liquid resources of the organization. The function of cash management at
the U.S. Treasury is threefold:
 To eliminate idle cash balances. Every dollar held as cash rather than used
to augment revenues or decrease expenditures represents a lost opportunity.
Funds that are not needed to cover expected transactions can be used to buy
back outstanding debt or can be invested to generate a flow of funds into

the Treasury’s account. Minimizing idle cash balances requires accurate

information about expected receipts and likely disbursements.
 To deposit collections timely. Having funds in-hand is better than having

accounts receivable. The cash is easier to convert immediately into value or
goods. A receivable, an item to be converted in the future, often is subject
to a transaction delay or a depreciation of value. Once funds are due to the
Government, they should be converted to cash-in-hand immediately and
deposited in the Treasury's account as soon as possible.
 To properly time disbursements. Some payments must be made on a

specified or legal date, such as Social Security payments. For such
payments, there is no cash management decision. For other payments, such
as vendor payments, discretion in timing is possible. Government vendors
face the same cash management needs as the Government. They want to
accelerate collections. One way vendors can do this is to offer discount
terms for timely payment for goods sold.

CHAPTER NO. III
COMPANY PROFILE
INFORMATION
 Type : Public (K.K.)
 Traded as : TYO 7272
 Industry : Automotive
 Founded : July 1, 1955
 Headquarters : Iwata, Shizuoka, Japan
 Area Served : Worldwide
 Key people : Yoshihiro Hidaka

(President & Representative Director)
 Products : Motorcycles,
Commuter Vehicles & Scooters,
Recreational Vehicles, Boats, Marine
Engines, Snowmobiles,
Small Tractors, Personal Watercraft,
Electrically Power Assisted Bicycles,

Automobile Engines, Unmanned Aerial

Vehicles
 Owner : Yamaha Corporation (9.92% 2017) Toyota

Group (2.8%)
 Number of employees : 52,664 (as of December 31, 2014)
 Subsidiaries : Minarelli MBK
 Website : Yamaha Motor Global
YAMAHA MOTOR COMPANY LIMITED

Yamaha is a Japanese manufacturer of motorcycles, marine products such as boats
and outboard motors, and other motorized products. The company was established
in 1955 upon separation from Yamaha Corporation (however Yamaha Corporation
is still the largest shareholder with 9.92%, as of 2017) and is headquartered
in Iwata, Shizuoka, Japan.
The company conducts development, production and marketing operations through

109 consolidated subsidiaries as of 2012. Led by Genichi Kawakami, the
company’s first president, Yamaha Motor began production of its first product, the
YA-1, in 1955. The 125cc motorcycle won the 3rd Mount Fuji Ascent Race in its
class. The company's products includes motorcycles, scooters, motorized bicycles,
boats, sail boats, personal water craft, swimming pools, utility boats, fishing boats,
outboard motors, 4-wheel ATVs, recreational off-road vehicles, go-
kart engines, golf carts, multi-purpose engines, electrical generators, water
pumps, snowmobiles, small snow throwers, automobile engines, surface mounters,
intelligent machinery, industrial-use unmanned helicopters, electrical power units
for wheelchairs and helmets. The company is also involved in the import and sales
of various types of products, development of tourist businesses and management of
leisure, recreational facilities and related services. Yamaha’s motorcycle sales are

the second largest in the world outboard motor and Yamaha is the world leader in
water vehicle sales.
HISTORY
 Beginnings: 1955
The motorcycle division of Yamaha was founded in 1955, and was headed
by Genichi Kawakami. Yamaha's initial product was a 125 cc (7.6 cu in)
two-cycle, single cylinder motorcycle, the YA-1, which was a copy of the
German DKW RT 125. The YA-1 was a competitive success at racing from
the beginning, winning not only the 125cc class in the Mt. Fuji Ascent, but
also sweeping the podium with first, second and third place in the All Japan
Autobike Endurance Road Race that same year. Early success in racing set
the tone for Yamaha, as competition in many varieties of motorcycle racing
has been a key endeavor of the company throughout its history, often fueled
by a strong rivalry with Honda and other Japanese manufacturers.
Yamaha began competing internationally in 1956 when they entered the

Catalina Grand Prix, again with the YA-1, at which they placed sixth. The
YA-1 was followed by the YA-2 of 1957, another 125cc two stroke, but
with significantly improved frame and suspension. The YD-1 of 1957 was
a 250cc two-stroke twin cylinder motorcycle, resembling the YA-2, but
with a larger and more powerful motor. A performance version of this bike,
the YDS-1 housed the 250cc two-stroke twin in a double downtube cradle
frame and offered the first five-speed transmission in a Japanese
motorcycle. This period also saw Yamaha offer its first outboard marine
engine.
 Success And Growth In The 1960

By 1963 Yamaha's dedication to both the two-stroke engine and racing paid
off with their first victory in international competition, at the Belgium GP,
where they won the 250cc class. Success in sales was even more impressive,
and Yamaha set up the first of its international subsidiaries in this period

beginning with Thailand in 1964, and the Netherlands in 1968. 1965 saw
the release of a 305cc two-stroke twin, the flagship of the company's lineup.
It featured a separate oil supply which directly injected oil into the gasoline
prior to combustion (traditionally riders had to pre-mix oil into gasoline
together before filling the gas tank on two stroke engines). In 1967 a new
larger displacement model was added to the range, the 350cc two stroke
twin R-1. In 1968 Yamaha launched their first four-stroke motorcycle, the
XS-1. The Yamaha XS-1 was a 650cc four-stroke twin, a larger and more
powerful machine that equaled the displacement and performance of the
popular British bikes of the era, such as the Triumph Bonneville and BSA
Gold Star. Yamaha continued on with both the two-stroke line and four-
stroke twins at a time that other Japanese manufacturers were increasingly
moving to four cylinder four-stroke machines, a trend led by Honda in 1969
with the legendary CB-750 four-stroke four-cylinder cycle.
 Four Stroke Era Begins: The 1970

Not until 1976 would Yamaha answer the other Japanese brands with a
multi-cylinder four stroke of their own. The XS-750 (and later 850) a 750cc
triple cylinder machine with shaft final drive was introduced almost seven
years after Honda's breakthrough bike. Yamaha's first four-cylinder model,
the XS-1100 followed in 1978, again with shaft drive. Despite being
heavier and more touring oriented than its rivals it produced an impressive
string of victories in endurance racing. The 1970s also saw some of the first
dedicated off-road bikes for off-road racing and recreation. Yamaha was an
early innovator in dirt-bike technology, and introduced the first single-
shock rear suspension, the trademarked "Monoshock" of 1973. It appeared
in production on the 1974 Yamaha YZ-250, a model which has continued
in production, with many updates, until 2015, making it Yamaha's longest
continuous model and name.Yamaha continued racing throughout the
1960s and 1970s with increasing success in several formats. The decade of
the 1970s was capped by the XT500 winning the first Paris-Dakar Rally in
1979.

 1980s: Diversification And Innovation

By 1980 the combination of consumer preference and environmental
regulation made four strokes increasingly popular. Suzuki ended production
of their GT two stroke series, including the flagship water-cooled two-
stroke 750cc GT-750 in 1977. Kawasaki, who had considerable success
throughout the 1970s with their two-stroke triples of 250cc, 350cc, 500cc
and 750cc ended production of road-going two strokes in 1980. Yamaha
bucked this trend and continued to refine and sell two-strokes for the street
into the 1980s.
These bikes were performance oriented, water-cooled twin cylinder

machines, designed to achieve excellent performance taking advantage of
the lower weight of two strokes. The RZ-250 of 1980 was the progenitor of
this series. The RZ-350, the largest displacement model, was a popular hot-
rod bike of the 1980s and continued to be sold in some countries into the
early 1990s. Throughout the 1980s the motorcycle industry gradually went
from building a few basic but versatile models designed to work well in
many roles, to offering many more specialized machines designed to excel
in particular niches. These included racing and performance street riding,
touring, motocross racing, enduro and recreational off-road riding, and
cruising. Yamaha branched out from the relatively small number of UJMs
(Universal Japanese Motorcycle) at the start of the decade to a much larger
set of offerings in several clearly defined markets at the end of the decade.
The XV750 of 1981 featured an air-cooled V-twin four stroke engine and
cruiser styling, and was one of the first Japanese cruiser style motorcycles.
By the end of the 1980s Yamaha had offered dozens of cruiser styled bikes
in a variety of displacements and engine configurations. The RZV500 was
one of the first "repli-racers", a near copy of Kenny Roberts competition GP
bike, it featured a liquid-cooled two-stroke motor of 500cc displacement in
a V4 configuration, along with a perimeter frame and full fairing. A more
popular and practical high-performance model for the street was introduced
in 1985, the FZ750.

 The 1990s: Performance bikes and a spin-off brand

In 1998 Yamaha marketed a 1000cc four cylinder road bike called the YZF
'R1', this model introduced a new style of gearbox design which shortened
the overall length of the motor/gearbox case, to allow a more compact unit.
This, in turn allowed the motor to be placed in the frame further forward,
designed to improve handling in a short wheel-based frame. In 1995,
Yamaha announced the creation of Star Motorcycles, a new brand name for
its cruiser series of motorcycles in the American market. In other markets,
Star motorcycles are still sold under the Yamaha brand.
 The 2000s: Expansion and consolidation

In 2007, Yamaha established the Philippine operations and distributes
Yamaha motorcycles under the corporate name of Yamaha Motor
Philippines, Inc., one of more than 20 worldwide subsidiaries operating on
all continents.
INDIA YAMAHA MOTOR PRIVATE LIMITED (IYM)

India Yamaha Motor Private Limited is the wholly owned Indian subsidiary of
Yamaha Motor company, headquartered at Chennai, India. Yamaha Motor
Company Japan made its initial foray into India in 1985 as a joint-venture with
Escorts Group. In August 2001, it became a 100% subsidiary of Yamaha Motor
Co., Ltd. Japan (YMC). In 2008, Mitsui & Co., Ltd. entered into an agreement with
YMC to become a joint-investor in India. It produces a range of motorcycles for
domestic consumption and export including the FZ, SZ, Saluto, Fazer, and YZF.
Yamaha own three plants for manufacture of two-wheelers in India: one in
Faridabad, Haryana, one in Surajpur, Uttar Pradesh, and one in Chennai,
Tamilnadu. It is from these three plants that Yamaha handles production of
motorcycles and parts for both domestic as well as overseas markets. While the
Faridabad plants was started in 1965, the Surajpur plants followed with its inception
in 1984 and Chennai in 2014. The scooters manufactured by Yamaha in India are
the Yamaha Ray and its upgrade, the Yamaha Ray Z, Alpha, Fascino.

MOTORCYCLE RACING HIGHLIGHT

In motorcycle racing Yamaha has won 39 world championships, including 6
in Moto GP and 9 in the preceding 500 cc two-stroke class, and 1 in World
Superbike. In addition Yamaha have recorded 208 victories at the Isle of Man
TT and head the list of victories at the Sidecar TT with 40.[16]Past Yamaha riders
include: Jarno Saarinen Giacomo Agostini, Bob Hannah, Heikki Mikkola, Bruce
Anstey, Kenny Roberts, Eddie Lawson, Wayne Rainey, Jeremy McGrath, Stefan
Merriman, Dave Molyneux, Ian Hutchinson, Phil Read, Chad Reed, Ben
Spies and Jorge Lorenzo. Their current lineup consists of nine-time world
champion Valentino Rossi and Maverick Viñales.
The Yamaha YZ450F won the AMA Supercross Championship two years in a row,
in 2008 with Chad Reed, and 2009 James Stewart. Yamaha was the first to build a
production monoshock motocross bike and one of the first to have a water-cooled
motocross production bike. Yamaha's first Motocross competition four-stroke bike,
the YZ400F, won the 1998 USA outdoor national Championship with factory rider
Doug Henry. Since 1962, Yamaha made production road racing Grand
Prix motorcycles that any licensed road racer could purchase. In 1970, non-factory
privateer teams dominated the 250 cc World Championship with Great
Britain's Rodney Gould winning the title on a Yamaha TD2. Yamaha also sponsors
several professional ATV riders in several areas of racing, such as cross country
racing and motocross. Yamaha has had success in cross country with their YFZ450,
ridden by Bill Ballance, winning 9 straight titles since 2000. Yamaha's other major
rider, Traci Cecco, has ridden the YFZ450 to 7 titles, with the first in 2000. In ATV
motocross, Yamaha has had success with Dustin Nelson and Pat Brown, both who
race the YFZ450.
DIVISIONS
Yamaha Motors is a highly diversified company which produces products for a
large number of industries and consumer market segments:
 Motorcycles: Sport bikes, Star Cruiser bikes, trail bikes, road racers and
motocross racers

 Commuter vehicles, including scooters
 Recreational vehicles: All-terrain vehicles and snowmobiles
 Boats: Powerboats, sailboats, utility boats and custom boats
 Marine engines: Outboard motors, electric marine motors, marine diesel

engines and stern drives
 Personal watercraft
 Electric bicycles
 Automobile engines
 Industrial-use unmanned helicopters
 Golf cars
 Power products: generators, multipurpose engines, water pumps and snow

throwers
 Swimming pools, waterslides and pool-related equipment
 Intelligent machinery, including compact industrial robots
 Electric wheelchairs and wheelchair electric drive units
 Yamaha parts and accessories, apparel, cycle helmets and motor oil
 Industrial robots and surface counters

AUTOMOBILE ENGINES
Yamaha has built engines for other manufacturers' vehicles beginning with the
development and production of the Toyota 2000GT (1967). The cylinder head from
the Toyota 4A-GE engine was developed by Yamaha and built at Toyota's
Shimayama plant alongside the 4A and 2A engines. In 1984, executives of the
Yamaha Motor Corporation signed a contract with the Ford Motor Company to
develop, produce, and supply compact 60° 3.0 Liter DOHC V6 engines
for transverse application for the 1989–95 Ford Taurus SHO. From 1993 to 1995,
the SHO engine was produced in 3.0 and 3.2 Liter versions. Yamaha jointly
designed the 3.4 Liter DOHC V-8 engine with Ford for the 1996–99 SHO. Ford
and Yamaha also developed the Zetec-SE branded 4-cylinder engines used in
several Ford cars like the small sports car Ford Puma.
From 2005 to 2010, Yamaha produced a 4.4 Litre V8 for Volvo.

The B8444S engines were used in the XC90 and S80 models, whilst also adapted
to 5.0L configuration for Volvo's foray into the V8 Supercars with the S60. British
sportscar maker Noble also uses a bi-turbo version of the Volvo V8 in their M600.
All performance-oriented cylinder heads on Toyota/Lexus engines were designed
and/or built by Yamaha. Some examples are the 1LR-GUE engine found on the
2010–2012 Lexus LFA, the 2UR-GSE found in Lexus ISF, the 3S-GTE engine
found on the Toyota MR2 and Toyota Celica Toyota Celica GT4/All-Trac,
the 2ZZ-GE engine found on the 1999–2006 Toyota Celica GT-S and Lotus
Elise Series 2, and the Toyota 4GR-FSE engine found on the Lexus IS250. Yamaha
also tunes engines for manufacturers, such as Toyota, so Yamaha logos are
on Toyota S engines.
SNOWMOBILES
In 2007, Yamaha became the only snowmobile manufacturer to use a four-stroke
only across its line-up (in the United States only – the VK 540 model remained
available as a 2-stroke in other markets). Yamaha had introduced 4-strokes to their
line-up in 2003 with the release of the RX-1. This 4 cylinder model became the first
performance-oriented 4-stroke snowmobile on the market (it was not the first

modern 4-stroke snowmobile produced - that honor belongs to Arctic Cat for their
Yellowstone Special (released in 2000), which was designed as a rental sled that
could meet Yellowstone National Park's stringent emission requirement).
However, Yamaha received much criticism for its weight disadvantage when
compared to similar 2-strokes, despite its fuel economy and low-range torque.
Yamaha further used 4-stroke technology to introduce the 80FI engine equipped in
the Phazer and Venture Lite models in order to provide small displacement, lower
horsepower models marketed towards smaller riders.
This engine had one of the highest specific output of any 4-stroke in production,
with 160 HP/L. Yamaha achieves this even without the use of a forced
induction system. Yamaha is also a key player in the "4-Stroke Wars", which are a
series of advertisements from opponent Ski-Doo, who claim their E-Tec-equipped
2-strokes are still cleaner and more efficient than 4-strokes, while Yamaha claims
the 4-strokes are cleaner and more reliable. Yamaha also broke a multi-year
absence from sno-cross in the winter of 2006/2007 with their introduction of a
factory race team headed by former Arctic Cat racer Robbie Malinoski. Yamaha
was the first brand to win with a 4-stroke snowmobile in a professional snow cross
race during 2006 at the WPSA Snow cross Championship.
CURRENT 2019 LINE-UP

In a partnership with Arctic Cat (now owned by Textron), Yamaha Motor Company
supplies the 1,050cc 3-cylinder (135+ HP) and 998cc 3-cylinder turbocharged
(180+ HP) engines for use in a collaborative chassis sold under each brand name.
While there are similarities between the respective manufacturers' models, small
differences can be noted. SR Viper (Arctic Cat 7000-series equivalent) and
SideWinder (Arctic Cat 9000-series equivalent) models are equipped with Yamaha
clutches and changes to certain plastic body panels (such as the color, suspension
set-up, windshield and intercooler housing on turbocharged models). The
suspension layout, chassis, gauge package, and handlebar switchgear remain the
same for both Yamaha and Arctic Cat snowmobiles. This partnership was
established for the 2014 model year with the introduction of the 2014 SR Viper and

Arctic Cat 7000-series line-up. In 2017, Arctic Cat and Yamaha introduced the
world's most powerful snowmobile engine with the release of the SideWinder and
9000-series line-ups. Sidewinder SRX LE (Spring Order only) Sidewinder LTX LE
(Spring Order only), LTX SE (In-Season "Sport"), & LTX DX (In-Season
"Comfort") Sidewinder XTX LE (Spring Order only) & XTX SE (In-Season)
Sidewinder BTX LE (Spring Order only) Sidewinder MTX LE (Spring Order only)
SR Viper LTX (In-Season) VK 540 (In-Season) Sno Scoot 120 & Sno Scoot 200
Historic "Japan Built" models (such as the Apex and RS Vector lineups) and most
SR Viper models were removed from production to support the sale of "hold-over"
units from previous models years at MSRP.
ALL-TERRAIN VEHICLES (ATV) VEHICLES

 Raptor 50  Moto-4 225
 YFZ50 (2017)  Tri Moto 225
 Tri-Zinger 60  Pro Hauler 230
 YT70  Bear Tracker 250
 Badger 80  Moto-4 250
 Moto-4 80  Timber wolf 250
 Grizzly 80  Tri-Z 250
 Raptor 80  Big Bear 350
 Raptor 90 (2016)  Grizzly 350
 Champ 100  Moto 4 350
 Breeze 125  Raptor 350
 Grizzly 125  Terrapro 350
 Raptor 125  Warrior 350
 Tri Moto 125  Wolverine 350
 Tri Moto 175  Big Bear 400
 Moto-4 200  Grizzly 400
 Tri Moto 200  Kodiak 400
 YFM200E "Yama hauler"  Grizzly 450

CHAPTER NO. IV
DATA ANALYSIS AND INTERPRETATION
1. Balance sheet

2. PROFIT AND LOSS ACCOUN

YAMAHA MOTORS SHOWROOM 2019 – 20
DATA ANALYSIS AND INTERPRETATION

1. CURRENT RATIO
Formula
Current Assets
Current Ratio =
Current Liabilities
Table No. 4.1

Particulars Years
2017 2016 2015
Current Assets
Current Liabilities
Total Ratio
Graph No. 4.1
Current Ratio
32% 35%
2017
2016
2015
33%
Interpretation:-
This graph is shows to current financial position of Yamaha Motors Showroom
on the basis of current ratio. In 2015 the current ratio is 32 % and 2016 the
current ratio is 33% will be increase with the value of 1 % on previous year. In
2017 the current ratio is 35% will be increase with the value of 2 % on previous
year.

2. QUICK RATIO
Formula:-
Quick Assets
Quick ratio =
Quick Liabilities
Table No. 4.2

Particulars Years
2017 2016 2015
Quick Assets
Quick Liabilities
Total Ratio
Graph NO. 4.2
Quick Ratio
25%
39% 2017
2016
2015
36%
Interpretation:-
This graph is related to quick ratio of Yamaha Motors Showroom. In 2015 the
quick ratio is 25 % and 2016 the quick ratio is 36 % will be increase with the
value of 11 % on previous year. In 2017 the quick ratio 39 % will be increase
with the value of 3 % on previous year.

3. DEBT-EQUITY RATIO
Formula:-
Long term loan
Debt-equity ratio =
Shareholders fund
Table No. 4.3

Particulars Years
2017 2016 2015
Long Term Loan
Shareholders’ funds
Total Ratio
Graph No. 4.3
Debt-Equity Ratio
31%
37%
2017
2016
2015
32%
Interpretation:-
This graph shows debt-equity ratio of Yamaha Motors Showroom. In 2015 the
debt-equity ratio is 31 % and 2016 the debt-equity ratio is 32 % will be increase
with the value of 1 % on previous year. In 2017 the debt-equity ratio 37 % will
be increase with the value of 5 % on previous year.

4. DEBT TO CAPITAL EMPLOYED RATIO
Formula:-
Long term debt

Debt to capital employed ratio =
Capital employed (net assets)
Table No. 4
Particulars Years
2017 2016 2015
Long Term Debt
Net Assets
Total Ratio
Graph No. 4.4
Debt to Capital Employeed Ratio
15%
2017
45%
2016
2015
40%
Interpretation:-
This graph shows debt to capital employed ratio of Yamaha Motors Showroom.
In 2015 the debt to capital employed ratio is 45 % and 2016 the debt to capital
employed ratio is 40 % will be decrease with the value of 5 % on previous year.
In 2017 the debt to capital employed ratio 15 % will be decrease with the value
of 25 % on previous year.

5. PROPRIETARY RATIO
Formula:-
Shareholders’ funds
Proprietary ratio =
Capital employed (net assets)
Table No. 4.5

Particulars Years
2017 2016 2015
Shareholders’ Funds
Net Assets
Total Ratio
Graph No. 4.5
Proprietary Ratio
13%
2017
47%
2016
2015
40%
Interpretation:-
This graph shows proprietary ratio of Yamaha Motors Showroom. In 2015 the
proprietary ratio is 47 % and 2016 the proprietary ratio is 40% will be decrease
with the value of 7 % on previous year. In 2017 the proprietary ratio 13 % will
be decrease with the value of 27% on previous year.

6. TOTAL ASSETS TO DEBT RATIO:-
Formula:-
Total assets
Total assets to debt ratio =
Long term debts
Table No. 4.6

Particulars Years
2017 2016 2015
Total Assets
Long Term Debtors
Total Ratio
Graph No. 4.6
Total Assets To Debt Ratio
29%
36%
2017
2016
2015
35%
Interpretation:-
This graph shows total asset to debt ratio of Yamaha Motors Showroom. In
2015 the total asset to debt ratio is 36 % and 2016 the total asset to debt ratio is
35% will be decrease with the value of 1 % on previous year. In 2017 the total
asset to debt ratio 29 % will be decrease with the value of 6 % on previous year.

7. INVENTORY TURNOVER RATIO
Formula:-
Cost of revenue from operations

Inventory turnover ratio =
Average inventory
Table No. 4.7

Particulars Years
2017 2016 2015
Cost of Revenue From Operation
Average Inventory
Total Ratio
Graph No. 4.7
Inventory Turnover Ratio
28%
2017
2016
53%
2015
19%
Interpretation:-
This graph shows inventory turnover ratio of Yamaha Motors Showroom. In
2015 the inventory turnover ratio is 53 % and2016 the inventory turnover ratio
is 19% will be decrease with the value of 34 % on previous year. In 2017 the
inventory turnover ratio 28 % will be increase with the value of 9% on previous
year.

8. TRADE RECEIVABLES TURNOVER RATIO
Formula:-
Net credit revenue from operations

Trade receivable turnover ratio =
Average trade receivable
Table No. 4.8

Particulars Years
2017 2016 2015
Net Credit Revenue From
Operations
Average Trade Receivable
Total Ratio
Graph No. 4.8
Trade Receivable Turnover Ratio
27%
2017
2016
54%
2015
19%
Interpretation:-
This graph shows trade receivable turnover ratio of Yamaha Motors Showroom.
In 2015 the trade receivable turnover ratio is 27 % and 2016 the trade receivable
turnover ratio is 19% will be decrease with the value of 28 % on previous year.
In 2017 the trade receivable turnover ratio is 54 % will be increase with the
value of 31 % on previous year.

9. GROSS PROFIT RATIO
Formula:-
Gross profit
Gross Profit Ratio = X 100
Net revenue of operations
Table No. 4.9

Particulars Years
2017 2016 2015
Gross Profit
Net Revenue of
Operation
Total Ratio
Graph No. 4.9
Gross Profit Ratio
32% 34%
2017
2016
2015
34%
Interpretation:-
This graph shows gross profit ratio of Yamaha Motors Showroom. In 2015 the
gross profit ratio is 32 % and 2016 the gross profit ratio is 34% will be increase
with the value of 1 % on previous year. In 2017 the gross profit ratio 34 % will
be the same value of the previous year.

10. NET PROFIT RATIO
Formula:-
Net Profit
Net Profit Ratio = X 100
Revenue from operations
Table No. 4.10

Particulars Years
2017 2016 2015
Net Profit
Net Sales
Total Ratio
Graph No. 4.10
Net Profit Ratio
22%
41% 2017
2016
2015
37%
Interpretation:-
This graph shows net profit ratio of Yamaha Motors Showroom. In 2015 the net
profit ratio is 41 % and 2016 the net profit ratio is 37% will be decrease with
the value of 7 % on previous year. In 2017 the net profit ratio 22 % will be
decrease with the value of 15% on previous year.

CHAPTER NO. V
FINDINGS AND SUGGESTIONS
1. FINDINGS

2. SUGGESTIONS

CHAPTER NO. VI
CONCLUSION
The cash management Analysis done on the financial position of the company has
provided a clear view on the activities of the futuristic Yamaha Showroom .the use
of the cash flow Statement, Cash inflow & outflow and ratio calculations of ratio.
Financial management helped in this study to find out the financial soundness of
the company. This project was very for the judgment of the financial status of the
company from the management point of view .this evaluation proved a great deal
to the management to make a decision on the regulation of the funds to increase the
sales and bring profit to the company before I conclude. I wish to convey my
thankfulness in regard to the training given to me in Futuristic Yamaha Showroom.
It gave me extreme satisfaction and particle knowledge of the financial activities
carried out in the company. The kindness, attention and immense co-operation
extended to me buy all the officials in the company made my project easy &
comfortable. Really it was a very pleasant experience in Futuristic Yamaha
Showroom.

ANNEXURE
1. BIBLIOGRAPHY
 Reference Books:-
i. Financial Accounting
ii. Financial Management
2. WEBLOGRAPHY
 Source of internet
 www.google.co.in
 www.wekipedia.org
 www.scribd.com
 www.slideshaer.net

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A STUDY OF CASH MANAGEMENT ANALYSIS WITH REFERENCE TO

YAMAHA MOTORS SHOWROOM 2019-20

SANT RAWOOL MAHARAJ MAHAVIDYALAYA, KUDAL. 1 | P A G E

MEANING AND DEFINATION OF CASH

SANT RAWOOL MAHARAJ MAHAVIDYALAYA, KUDAL. 2 | P A G E

 In the words of P. V. Kulkarni:

WHAT IS CASH MANAGEMENT?

SANT RAWOOL MAHARAJ MAHAVIDYALAYA, KUDAL. 3 | P A G E

SANT RAWOOL MAHARAJ MAHAVIDYALAYA, KUDAL. 4 | P A G E

UNDERSTANDING CASH MANAGEMENT

Many companies may outsource part or all of their cash management

 There are many cash management considerations and solutions available in

SANT RAWOOL MAHARAJ MAHAVIDYALAYA, KUDAL. 5 | P A G E

THE CASH FLOW STATEMENT

In general working capital includes the following:

SANT RAWOOL MAHARAJ MAHAVIDYALAYA, KUDAL. 6 | P A G E

CASH COLLECTION AND DISBURSEMENT

SANT RAWOOL MAHARAJ MAHAVIDYALAYA, KUDAL. 7 | P A G E

CASH MANAGEMENT IN TROUBLED TIMES

SANT RAWOOL MAHARAJ MAHAVIDYALAYA, KUDAL. 8 | P A G E

 Redouble efforts to collect outstanding payments owed to the company.

 Offer small discounts for prompt payment.

 Closely monitor and prioritize all cash disbursements.

 Contact creditors and attempt to negotiate mutually satisfactory

 Consider compromising on some billing disputes with clients. Small

SANT RAWOOL MAHARAJ MAHAVIDYALAYA, KUDAL. 9 | P A G E

OBJECTIVES OF THE STUDY

 To gain knowledge about the system prevailing in Banks.

 To suggest methods for improving cash management in Banks.

NEEDS OF CASH MANAGEMENT

SCOPE OF CASH MANAGEMENT

SANT RAWOOL MAHARAJ MAHAVIDYALAYA, KUDAL. 10 | P A G E

LIMITATIONS OF THE STUDY

 It was difficult getting time and access to senior level Finance / HR

 A few of the managers refrained from giving the required information as he

 Types of Data Collected

SANT RAWOOL MAHARAJ MAHAVIDYALAYA, KUDAL. 11 | P A G E

SANT RAWOOL MAHARAJ MAHAVIDYALAYA, KUDAL. 12 | P A G E

MOTIVES FOR HOLDING CASH

 The precautionary motive:

 The speculative Motives:

 A chance to speculate on interest rate movements by buying

SANT RAWOOL MAHARAJ MAHAVIDYALAYA, KUDAL. 13 | P A G E

 The firm’s ability to borrow at short notice, in the event of any

 The philosophy of management regarding liquidity and risk of

FACETS OF CASH MANAGEMENT

 Cash flows within the firm

 Cash balances held by the firm

SANT RAWOOL MAHARAJ MAHAVIDYALAYA, KUDAL. 14 | P A G E

because it is used to pay the firm’s obligations. However, cash is unproductive.

 Optimum Utilisation of Operating Cash

SANT RAWOOL MAHARAJ MAHAVIDYALAYA, KUDAL. 15 | P A G E

 Cash Management Techniques:

 Profitable Deployment of Surplus Funds

SANT RAWOOL MAHARAJ MAHAVIDYALAYA, KUDAL. 16 | P A G E

FUNCTIONS OF CASH MANAGEMENT

In the words of Van Horne:

 Planning short-term financing

SANT RAWOOL MAHARAJ MAHAVIDYALAYA, KUDAL. 17 | P A G E

 Scheduling payments in connection with capital expenditure

 Planning purchases of materials

 Developing credit policies

 Checking the accuracy of long –term forecasts.

 Planning the outlays on capital expenditure projects