A STUDY OF CASH MANAGEMENT ANALYSIS WITH REFERENCE TO

YAMAHA MOTORS SHOWROOM 2019 – 20

1.1 EXECUTIVE SUMMARY

This project is based on the study of cash management analysis. “The corporate
process of collecting, managing and (short-term) investing cash. A key component
of ensuring a company’s financial stability and solvency. Frequently, corporate
treasurers or a business manager is responsible for overall cash
management.” Without a cash management system or at least closely monitoring
cash, a business can become non-solvent very quickly because they do not have
available cash for regular or unforeseen expenses.

Cash management is very important because it allows businesses to be solvent

enough to keep the company in business even during slow activity or economic
downturns. The largest goal of good cash management systems is to reduce or
eliminate any surprises when meeting cash requirements. Good cash management
influences the efficiency of operations and reduces overall cost of doing business.
Internship is such a program which make a student experience life of the first time.
I was an assigned as intern under finance division. This report is prepare on the
basis of my 45 days practical experience cash management analysis solutions. This
internship program helped me to learn about the practical scenario of business. This
is summer internship program with Yamaha Motors Ramkrishna Auto service,
Kudal. Which is based on automobile sector as automobile sector is growing at very
good pace.

The project titled is “A study of cash management analysis with reference to

Yamaha Motors”. Is being conducted to identify and analysis cash management
analysis of Yamaha Motors Ramkrishna auto-Services at all parts of Kudal city.
This project report begins with a brief overview of the product category being dealt
with mainly all category bikes. It also dwells briefly on the history of the company
and its current position and activities.

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1.2 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.

1.2.1 Meaning and Definition 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. Cash management is one of the key areas of
working capital management. A part from the fact that it is the most liquid current
assets, cash is the common denomination to which all current assets can be reduced
because the other major liquid assets that are receivables and inventory get
eventually converted into cash. Cash flow is the money that is moving (flowing) in
and out of your business in a month. Although it does seem sometimes that cash
flow only goes one way - out of the business - it does flow both ways. Cash is

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coming in from customers or clients who are buying your products or services. If
customers don't pay at the time of purchase, some of your cash flow is coming from
collections of accounts receivable. Cash is going out of your business in the form
of payments for expenses, like rent or a mortgage, in monthly loan payments, and
in payments for taxes and other accounts payable. A cash flow in its narrow sense
is a payment (in a currency), especially from one central bank account to another;
the term 'cash flow' is mostly used to describe payments that are expected to happen
in the future, are thus uncertain and therefore need to be forecast with cash flows.
A cash flow is determined by its time t, nominal amount N, currency CCY and
account A; symbolically CF = CF(t, N,CCY,A). Cash flows are narrowly
interconnected with the concepts of value, interest rate and liquidity.

A cash flow that shall happen on a future day tN can be transformed into a cash
flow of the same value in to. Cash Management comprises of a series of activities
aimed at efficiently handling the inflow and outflow of cash. This mainly involves
diverting cash from where it is to where it is needed. In other words, cash
management is the optimization of cash flows, balances and investments. Cash‟ in
this context, may refer either to cash in the form of currency, or to other equivalents
such as cheques, drafts, deposits, among others. While organizations may hold
other assets which can potentially be converted to cash, cash management
essentially deals with the management of liquid cash and near-cash assets such as
marketable securities and time deposits, which can be readily converted to cash. It
is crucial to organizations for three main reasons:

 Transaction: Ready cash balances are vital for routine transactions

including purchases, operating expenses, wages, and other payments such
as dividends, taxes and so on.

 Precaution: There may be unanticipated cash requirements as a result of

sudden increase in inventory costs, delay in collection of receivables,
among others. And maintaining ready cash balances is essential to deal with
such unforeseen expenses.

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 Speculation: Reserving cash balances is also crucial when firms anticipate

decline in prices of raw materials, reduction in interest rates for buying
securities, availing early payment discounts, among others.

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.

1.3 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

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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.

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1.4 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.

1.4.1 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.

1.5 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

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statement are somewhat straighter forward with cash inflows and outflows
pertaining to investing and financing.

1.6 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.

1.7 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

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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.

1.8 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

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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. 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.

1.9 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 (1-3 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

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automatically trigger an invoice, establish a set billing schedule, preferably

weekly." Businesses should also include a payment due date.

 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.

 Contact creditors and attempt to negotiate mutually satisfactory

arrangements that will enable the business to weather its cash shortage.

1.10 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.
 To study the Cash Management System.
 To study different aspects of Cash Management System.
 To understand different Payment modes; Speed clearing.

1.11 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.

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1.12 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. Cash management solutions are now widely being
adopted, and hence there is likely to be an increase in the number of vendors
offering these solutions. Correspondingly, corporate customers are also likely to
become more demanding, thereby promoting more intense competition amongst
vendors. Here are some areas with scope for improvement which vendors can focus
on, to provide better services than their competitors:

 Eliminating Disparate Systems:

Different cash management solutions are being offered for diverse segments.
And as businesses grow, managing these disparate systems is increasingly
becoming a challenge. Hence vendors should come up with a single platform
which can support various cash management products and services as the
business grows.

 Customizable Solutions:
Banks today offer similar solutions to all corporate customers irrespective of
their size and business. Hence vendors should try to come up with a
customizable platform which can cater to the specific needs of different
businesses.

 Unified System:
Integration of corporate customer systems with banking systems can be very
helpful in reconciliation of internal systems with banking systems, and can
support account management between the bank and customer. And this offers

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great scope for vendors. Today, banks are leveraging cash management systems
as a tool to build long-term trust with corporate customers, because these
systems will empower bank’s customers to be empowered and manage their
liquidity position at any given time, thus building a trust and strengthening the
relationship that goes beyond transaction banking

1.13 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.

1.14 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.

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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.

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COMPANY PROFILE

 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

 Owner : Yamaha Corporation (9.92% 2017) Toyota

Group (2.8%)

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 Number of employees : 52,664 (as of December 31, 2014)

 Subsidiaries : Minarelli MBK

 Website : Yamaha Motor Global

2.2 INTRODUCTION OF YAMAHA MOTOR

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.

2.3 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

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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

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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

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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,
endure 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’s 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.

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2.4 YAMAHA MOTORS PRODUCTS

Bike: Yamaha FZ Version 3.0

Price: 1.07 lakh

Bike: Yamaha MT 15
Price: 1.49 lakh

Bike: Yamaha Saluto RX

Price: 57,695 – 61,338

Bike: Yamaha SZ-RR V2.0

Price: 72,395 – 73,453

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Bike: Yamaha YZF R1

Price: 19.24 lakh

Bike: Yamaha Cygnus Alpha

Price: 55,342 – 58,786

Bike: Yamaha Fascino

Price: 61,629 – 66,167

Bike: Yamaha MT-09

Price: 10.13 lakh

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Bike: Yamaha Ray Z

Price: 54,439

Bike: Yamaha Saluto

Price: 57,695 – 61,338

Bike: Yamaha YZF R15

Price: 19.24 lakh

Bike: Yamaha YZF-R3

Price: 3.77 lakh

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2.5 YAMAHA MOTORS SWOT ANALYSIS

Yamaha motors SWOT Analysis, Competitors & USP. SWOT Analysis is a proven
management framework which enables a brand like Yamaha to benchmark its
business & performance as compared to the competitors and industry. Yamaha is
one of the leading brands in the automobiles sector. Below is the Strengths,
Weaknesses, and Opportunities & Threats (SWOT) Analysis of Yamaha motors.

Strengths:
 Excellent branding, advertising and global distribution.

 Yamaha Motor Corporation has over 39,000 employees.

 One of the major brand in motorsport like MotoGP, World superbike etc.

 Yamaha produces scooters from 50 to 500 cc, and a range of motorcycles

from 50 to 1,900 cc, including cruiser, sport touring, sport, dual-sport, and
off-road.

 Extremely high Size and reach of company.

Weaknesses:
 Bikes like R15, R1 are quite expensive.

Opportunities:
 Two-wheeler segment is one of the most growing industries.

 Export of bikes is limited i.e. untapped international markets.

Threats:
 Strong competition from Indian as well as international brands.

 Dependence on government policies and rising fuel prices.

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2.6 CORPORATE VISION AND MISSION

Vision:
Vision we constantly deliver best-fit global it services and solutions to improve
client’s competitive advantage.

Mission:
Kando is a Japanese word used by Yamaha to describe their corporate mission.
Kando in translation describes the sensation of profound excitement and
gratification derived from experiencing supreme quality and performance. Some
reasonable English synonyms are "emotionally touching" or "emotionally moving".
Stated by the president of Yamaha, Takuya Nakata, Yamaha looks to maintain
dominance above its competition through creativity and innovation.

2.7 MAIN ACTIVITIES OF YAMAHA MOTORS

Providing New Excitement:
Yamaha’s corporate mission of being a “Kando Creating Company” is an
expression of our desire to offer our customers around the world products and
services that bring joy and unexpected exhilaration of the kind that enriches their
lives with new fulfillment, in harmony with society and the environment. Being
such a company requires us to constantly uphold our standing as an excellent
engineering, manufacturing and marketing enterprise with a prominent global
presence. Product creation begins with the customer. Our task as a manufacturer is
to enhance our competitiveness by maximizing and optimizing the value of the
products we provide to customers, in terms of their appeal, reliability and cost
performance, in ways that exceed customer expectations.

Approach to Quality:
Yamaha Motor is working daily to improve quality and to provide customers with
peace of mind and confidence as well as a sense of excitement. The Basic Policies
for Quality form the standard against which these activities are judged. As Yamaha
Motor’s president has declared, these are Group wide policies under which “To
constantly provide peace of mind, confidence and a sense of excitement to

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customers, we strive to achieve the best quality possible, by creating suitable

standards of safety and reliability to realize high-quality products and services
effectively, taking a customer-oriented approach that emphasizes a deep sense of
emotion in accordance with the spirit of the Yamaha Brand Charter.”Under these
policies, we formulated the YQ2021 Companywide medium-term quality policy
covering the years 2019-2021, which sets three specific goals for our business
activities: quality that provides exceptional excitement; quality that challenges; and
quality that is trusted.In addition, the Yamaha Group's Quality Assurance Standards
conforming to ISO9001 form the basis for continuous improvement to quality
management systems.

Structure for Improving Quality:

The Product Assurance Committee is the highest organization for determining
quality assurance Companywide. This committee deliberates policies and measures
for quality, the formulation, revision, and abolishment of Quality Assurance
Standards, and responses to quality-related issues. Its decisions are passed on to
persons responsible for quality management at operating divisions and
administrative divisions at Quality Assurance Meetings, and implemented at
manufacturing sites. We have also established a Market Quality Information
Oversight Committee, which is authorized by the President and CEO to investigate
and make reports, for the purpose of appropriately maintaining market quality
information processing operations including information regarding product defects
in each market and information regarding maintenance covered by product
guarantees.

Quality Enhancement Activities:

To ensure that employees have ingrained, quality-related knowledge and skills,
training for quality is annually held for new hires, for employees related to
manufacturing two to five years after being hired, and for persons newly appointed
to management positions. In addition, education and training programs are annually
in place to enhance the skills of employees, to ensure that they are technologically
proficient with regard to quality related specifically to their type of work and
specialization. With those programs as a base, all employees undertake the “I am

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Yamaha” activities for enhancing quality during their actual work. These activities
encourage a strong sense of ownership in every employee, so that each individual
believes, “It is I, and no one else, who is personally responsible for making the
Yamaha brand shine.” This attitude, along with a customer-oriented approach,
allows employees to refine their powers of perception (ability to make discoveries)
and to enhance the quality of their work. Both as an organization and as individuals,
we will strive to further improve quality by working to:
 Enhance our customer sense
 Increase interaction
 Learn from mistakes
 Do high-quality work
Specifically, this includes the operation of a Learning through Experience Hall that
uses product and panel displays to learn from past mistakes, planning events for
interaction with other companies, issuing educational leaflets, and conducting
awareness surveys. Moreover, product divisions undertake their own effective
activities based on their respective circumstances, to further increase awareness and
create more opportunities for learning.

Approach to Service:
The Yamaha Motor Group views after sales service as an important aspect of
quality, and that principle is laid out in our Basic Policies for Quality as “To
constantly provide peace of mind, confidence and a sense of excitement to
customers, we strive to achieve the best quality possible, by creating suitable
standards of safety and reliability to realize high-quality products and services
effectively.” Under these policies, we have introduced the slogan “One to One
Service” for the active creation of positive relationships with each individual
customer. Accordingly, we operate the Yamaha Technical Academy (YTA)
program around the world to train service technicians as per our proprietary unified
global standard. Trainers in each country who have been trained by headquarters
hold regular classes for the service staff in their country, so that they acquire
technical skills that are up to Yamaha’s unified global standard. This program has
three levels of accreditation – Bronze, Silver, and Gold – and dealers display
certificates showing the level that the dealership has received. In 2018, the

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percentage of technicians in our 24 major countries with YTA certification was

76% (of a targeted 80%), and the percentage of dealerships with a certified
technician was 84%. In addition, the Yamaha Parts & Accessories Academy is a
similar training program covering the parts and accessories that are essential for
after sales service.

Yamaha World Technician Grand Prix:

The Yamaha World Technician Grand Prix is one of our activities to deliver even
greater customer satisfaction by enhancing the technical abilities used in daily work
by service staff who have been trained at the YTA. The top finishers at regional
preliminary rounds gather at our headquarters once every two years to compete in
a contest to determine the world champions in the areas of “high level of technical
skills,” “easy-to-understand explanations,” and “Kando response.” Service staff
from around the world participates in this competition, and their motivation to be a
top finisher is reflected in their daily service activities.

Responding to Customers:
We want customers to use our products with peace of mind for a long time. This
makes a stable supply of parts indispensable. To prevent shortages for motorcycles,
we maintain a minimum of a 10-year supply of parts, and have built a system where
customers can order parts online and have them delivered quickly. For customer
convenience, we also keep a parts list published on the website, so that customers
can use a personal computer or smartphone to identify the parts they need and order
them from dealers.Our service activities also include a “time commitment service,”
mainly in the ASEAN region where many people use motorcycles as a means of
daily transportation. For example, we tell the customer, “A regular inspection will
take this long,” or “An oil change will take this long,” committing to the amount of
time the customer has given us and not causing stress for the customer by saying,
“We don’t know when it will be finished.”

Use of Customer Information:

The Yamaha Motor Group views opinions and requests from customers as
expressions of their expectations for our products and services, so we carefully

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respond to each opinion and request we receive, in the belief that raising the level
of customer satisfaction will lead to trust. Based on this spirit, we undertake various
activities to know how customers evaluate and use our products, and to learn how
to improve our products and what kinds of products to make in the future. For
example, we send an Internet survey to customers who have purchased a new
product, and in some cases, we may ask the customer in person for a more detailed
evaluation. Our Customer Communication Centre (available only in Japan) handles
customer inquiries related to our products and services, including motorcycles,
marine products, electrically power assisted bicycles, generators, and snow
throwers. Comments received from customers are stored in a database, and are
made available within the Company so that they can be used to develop and
improve our products and enhance our services.

Riding Safety Promotion Activities:

Customer safety is our first priority, and in addition to enhancing product quality,
we continue to put our maximum effort into activities which explain to customers
in an appropriate manner how to use our products correctly.These efforts include
the publication of catalogues and brochures that convey the attractiveness of our
products and product manuals that explain correct product use, as well as safety
promotion activities such as riding schools that allow customers to gain first-hand
knowledge about using our products. The following is an introduction of some of
the activities organized by our various businesses that help customers understand
how to use our products properly.

2.8 FOUR PILLARS OF YAMAHA COMPANY

Yamaha is one of the most renowned Motorcycle manufacturing companies in the
world, with its product mix also comprising an array of other products. Founded in
1887, Yamaha Motor has a very extensive network that comprises of at least 140
subsidiaries together with affiliates for manufacturing and sales of Yamaha
products across the world. Having been founded by Torakusu Yamaha, the
company is today headquartered in Hamamatsu Shizuoka Japan and employs at
least 20,000 people across the world.

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Product in the Marketing Mix of Yamaha:

The company is well known for its machinery production, and as a global leading
motorcycle manufacturer. Other than motorcycles, other products within its product
line include four-wheel ATVs. Scooters, racing & golf carts, leisure & fishing
boats, electric hybrid bicycles, robots, electric wheelchairs, snowmobiles,
helicopter drones for use in agricultural spraying, engines and other machinery.
Yamaha has about 15% USA market share with overseas markets accounting for
about 90% of sales. In total, about 70% of all the company’s sales are from
motorcycles. Yamaha motorcycle product brands include the Yamaha VMAX, the
Yamaha Crux, The Yamaha RI, the Yamaha FZ and lastly, the Yamaha YBR. Other
predominant products in addition to the motorcycles include power sports
equipment, musical instruments, and electronics. It is the largest manufacturer of
pianos in the world and is a major Nikkei 225 constituent.

Price in the Marketing Mix of Yamaha:

Yamaha employs the competitive price strategy on its products. This is not at the
expense of quality. In fact, Yamaha products have the best price to performance
ratios in the world. Product price difference is based on the product’s power and
type. Together with the pricing, some special financing options are offered thus
psyching up people to buy Yamaha.

Place in the Marketing Mix of Yamaha:

Yamaha mainly targets the middle-class people who are looking for something
stylish, offering good mileage guarantee and will not break the bank. It also targets
youths who are within the 25-35 year group bracket. Fortunately, the biggest part
of the population today comprises of the middle class, with the youth age group
also taking a great claim of the population. The company has one of the most
excellent advertisements, branding, global distribution and promotion strategies
that have enabled it to be present in almost all the countries in the world. Yamaha’s
presence is well felt mainly in the North American continent, Europe, and Asia
especially Japan. Its presence in Africa is not as formidable but very considerable.
Yamaha is available in a number of subsidiaries with some of its groups including
Yamaha Fine Technologies Co Ltd, Yamaha Pro Audio, Yamaha Golf Cart

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Company, Yamaha Music Communications Company Ltd, Yamaha Motor

Company, Yamaha Mechanic Corporation and Yamaha Living Tec Corporation
etc.

Promotions in the Marketing Mix of Yamaha

Yamaha has a very heart touching tagline in the form of “Yes Yamaha;
touching your heart”. This is one of the aspects of the company’s promotion
mix that have been able to attract a lot of potential customers. Its dedication
to producing competitive products for globally visible activities such as in
motorsports has enabled it to cut and edge for itself. The World Superbike
and the Moto GP are some very popular brands within these sporting
activities thus helping the company in their promotion mix. Yamaha is
involved in corporate missions where it strives to ensure that the society is
emotionally moved and touched by its CSR activities. It’s Yamaha Music
Foundation has also given back to the community by promoting music
popularisation and music education in Japan since 1966.

2.9 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.

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2.10 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. 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 Balance, 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.

2.10.1 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

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 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

 Power products: generators, multipurpose engines, water pumps

 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

2.11 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

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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 sports car 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.

2.12 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

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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
Malinowski. 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.

2.13 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.

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THEORETICAL BACKGROUND

3.1 INTRODUCTION
Cash management refers to a broad area of finance involving the collection,
handling, and usage of cash. It involves assessing market liquidity, cash flow, and
investments. In banking, cash management, or treasury management, is a marketing
term for certain services related to cash flow offered primarily to larger business
customers. It may be used to describe all bank accounts (such as checking accounts)
provided to businesses of a certain size, but it is more often used to describe specific
services such as cash concentration, zero balance accounting, and clearing house
facilities. Sometimes, private banking customers are given cash management
services. Financial involved in cash management include money market funds,
treasury bills, and certificates of deposit.

3.2 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.

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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.

3.3 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

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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.

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.

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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.

3.4 WHY CASH MANAGEMENT

Complete Visibility:
Corporate customers increasingly expect superior cash forecasting ability, for
which they need complete enterprise level visibility into cash balances and
movement of cash. This is provided by banks in the form of status reports, direct
enquiry, and through consolidated view of accounts held with branches/banks
across the globe.

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Rich Reporting Modules:

In order to make corporate customers understand the need to adopt cash
management services, banks are showing cost-benefit analysis reports, and
demonstrating the benefits offered by cash management using graphs and
illustrations.

Integrated Services:
Corporate customers prefer a single platform for all their financial needs in place
of disparate systems. Hence the focus is on integrating cash management systems
with other activities involving the bank. For example, linking of ERP solutions with
banking systems facilitates cash management by enabling effective trade finance
process and investment management, among others.

Remote Deposit Capture and Straight:

Through Processing - (STP): In order to accelerate transactions businesses are
looking for solutions that offer straight through processing capability. For example,
corporate customers are trying to streamline their transactions and reduce
downtime, for which banks offer STP services which enable businesses to conduct
entire trade processes and payments electronically. And to better serve the needs of
corporate customers, banks look to technology vendors who offer optimal solutions
that can enable more efficient cash management.

3.5 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.

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

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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.
o 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.

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

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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.

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

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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.

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

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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.

3.6 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.

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.

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 of 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

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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.

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.

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.

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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.

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3.7 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.

3.8 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

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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.

3.9 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.

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.

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3.10 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

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 Planning forward purchases of inventories

 Checking accuracy of long-range cash forecasts.
 Taking advantage of cash discounts offered by suppliers

3.11 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.

3.12 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

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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.

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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. 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.
 Its reliability is reduced because of the uncertainty of cash forecasts.
 It fails to highlight the significant movements in the working capital items.

3.13 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 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. To project the company’s need for cash at a future date. As regards the
form and content of the adjusted net income forecast, it resembles the cash flow
statement discussed previously.

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

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sales, an average rate of 34 percent can be used. 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.

3.14 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.

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3.15 FEATURES OF INSTRUMENTS OF COLLECTION IN

INDIA

POINTS PROS CONS

 No charge  Can bounce

 Payable through clearing  Collection times can be long
Cheques
 Can be discounted after receipts Collection charge
 Low discounting charge
 Payable in local clearing  Cost of collection
Drafts  Buyers account debited on day
 Chances of bouncing are less
one
 Low discounting charge  Not payable through clearing
 Theoretically, goods are not
Documentary  High collection cost
released till payments are made
bills or the bill is accepted
 Long delays

 Procedure is relatively
 No charge except stamp duty
cumbersome
 Buyers are reluctant to accept the
Trade bills  Can be discounted
due date discipline
 Discipline of payment on due
date

3.16 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.

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3.17 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.

3.18 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.

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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.

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.

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3.19 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 Certain companies
also use it to collect funds from customers.

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.

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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

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automatically moved or swept into the company's main bank account. This allows
the company to look at individual statements for each store.

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.

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.

3.20 TECHNIQUES OF CASH MANAGEMENT

Cash management is vital in the business world, and it is equally as important at
home. Young families can get ahead of the game by learning to manage their cash
wisely, keeping expenses low while consistently setting aside money for savings,
investments and bills. Several simple techniques of cash management can help you
to make strides in this challenging area.

Bank Accounts
Depositing all of your income into a single bank account can make it a bit easier
for cash to slip through your fingers. Setting aside specific amounts of money into
savings accounts or secondary checking accounts can help you to stick to your
budget.

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Time-Bound Investments
Placing your money in a time-bound investment can help to keep it safe while
earning a reasonable return. Certificates of deposit (CDs) and bonds are two ideal
options for making your cash productive over a set period of time. Choose
investments that either cannot be withdrawn for some time or that incur large early-
withdrawal penalties to discourage you from dipping into your funds for
“emergencies” that could be handled in other ways.

Tracking Expenses
Get in the habit of asking for and keeping receipts for every purchase you make.
List your expenses by name in categories to get a clear view of exactly where your
cash is going each week.

Shopping
Become a savvy shopper to cut down on your expenses across the board. Try
generic products rather than name brands; certain products do not lend themselves
well to generic production, while other products can be duplicated with an
equivalent or higher quality at a much lower price. Take advantage of coupons and
bulk-purchase promotions. Find alternatives for entertainment expenses.

Debit Card
A large number of people have a tendency to spend actual cash much more easily
than cash in an account with a debit card. For those of us with holes in our wallets,
keeping the majority of our money in the bank and only taking out a minimum
amount of cash each pay period can help to avoid impulse purchases and other
unnecessary spending.

3.21 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:

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 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.

 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.

3.22 COMPONENTS OF CASH MANAGEMENT

Account Reconciliation:
Managing cheques, monitoring their clearance, and keeping track of the true cash
balance can be an overwhelming task for businesses because of the huge number
of cheques that are processed on a daily basis. Hence banks offer account
reconcilement services wherein corporate customers can upload details about the
cheques issued on a daily basis. And at the end of the month, the bank statement
shows information on cheques which have been cleared and those which have not.
This system is also helpful in the process known as „positive pay‟, used by banks
to prevent cheques from being fraudulently cashed if they are not on the list.

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Cash Concentration:
This is a quick and cost-effective method of moving funds from different accounts
spread across the country to a single monitored and managed account. This allows
businesses to maximize the use of available cash, and to optimize returns on
consolidated balances.

Financial Risk Management:

Risk management is the process of measuring risk, and developing and
implementing strategies to manage and mitigate risk. Financial risk management
plays an important role in cash management, because it focuses on managing risks
in relation to changes in interest rates, commodity prices, stock prices, exchange
rates, among others.

Liquidity Management:
Forecasting the cash needs of a business is essential for managing cash flows, short-
term borrowings, among others in an efficient manner, in order to ensure that such
cash needs can be met if and when they arise. This requirement is addressed through
liquidity management services offered by banks. Liquidity management comprises
of activities that release the investments locked in working capital, enabling it to
contribute to higher profits.

Complete Visibility:
Corporate customers increasingly expect superior cash forecasting ability, for
which they need complete enterprise level visibility into cash balances and
movement of cash. This is provided by banks in the form of status reports, direct
enquiry, and through consolidated view of accounts held with branches/banks
across the globe.

Rich Reporting Modules:

In order to make corporate customers understand the need to adopt cash
management services, banks are showing cost-benefit analysis reports, and
demonstrating the benefits offered by cash management using graphs and
illustrations.

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Integrated Services:
Corporate customers prefer a single platform for all their financial needs in place
of disparate systems. Hence the focus is on integrating cash management systems
with other activities involving the bank. For example, linking of ERP solutions with
banking systems facilitates cash management by enabling effective trade finance
process and investment management, among others.

Remote Deposit Capture and Straight-

Through Processing - (STP): In order to accelerate transactions businesses are
looking for solutions that offer straight through processing capability. For example,
corporate customers are trying to streamline their transactions and reduce
downtime, for which banks offer STP services which enable businesses to conduct
entire trade processes and payments electronically.

3.23 CASH MANAGEMENT AND FRAUD

According to International Standard on Auditing 315 (ISA 315), an important
management responsibility is to establish and maintain internal control on an
ongoing basis. Management’s monitoring of controls includes considering whether
they are operating as intended and that they are modified as appropriate for changes
in conditions. Hence, the accuracy and completeness of the accounting records are
the responsibility of the Company's management. Even though internal control over
financial reporting may appear to be well designed and effective, controls that are
otherwise effective can be overridden by management in every entity.

Many financial statements frauds have been perpetrated by intentionally overriding

the substance by senior management of what might otherwise appear to be effective
internal controls. Because management is primarily responsible for the design,
implementation, and maintenance of internal controls, the entity is always exposed
to the danger of management override of controls, whether the entity is publicly
held, private, not-for-profit, or governmental. When the opportunity to override
internal controls is combined with powerful incentives to meet accounting
objectives, senior management may engage in fraudulent financial reporting. Thus,

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otherwise effective internal controls cannot be relied upon to prevent, detect, or

deter fraudulent financial reporting perpetrated by senior management (AICPA;
2005). The auditors’ responsibility is to report to the members of the company
whether the financial statements give a true and fair view of the state of the
Company's affairs and of the profit or loss for the year, and whether they are
properly prepared in accordance with law. Organisation should use as little number
of banks as possible that suits nature of business, and requirements to achieve
enhanced manageable cash. The more banks an organisation maintains, the more
the cost of servicing the accounts and the more the control system is weakened.

3.24 CREATIVE CASH FLOWS REPORTING

Cash flows statement, the third major component of financial statements, is
categorisation of cash flow activities into operating, investing, financing and
change in cash and cash equivalent over a financial period. Operating cash flows
mirror the sustainable cash generating ability more than the others categories;
hence, financial analysts consider operating cash flows as a leading signal of
liquidity sustainability. Accounting standards are flexible on certain issues.
Accountants can work within the standards, by taking advantage of the flexibility
in accounting standards, or work out of the standards to prepare cash flows
statement.

Manipulation by taking opportunity of accounting standards only increase reported

cash flow but factually overstate sustainable cash flow position. Cash equivalents
such as investments can be debt/equity security held either for trading purposes or
as available for sale. Creativity comes in when instruments with fixed maturity date,
not held to take advantage of short-term price swings are classified as operating
rather than investing activities. This is common with non-financial enterprises
because such cash equivalents are not part of their normal operation. Another
instance is capitalisation of costs, which hitherto expenses, thereby moving cash
outflows from operating activities to investing activities, hence, inflate free cash
flow. Besides the above weaknesses that can be utilised, enterprises can boost
operating cash flow through acquisitions because operating results, as well as

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weaknesses therein, are included in the acquirer’s results. Obliquely, financing cash
flows can be coined as part of operating cash flows by manipulating reported
operating activities, thereby overstating sustainable cash flows reported. Financing
cash inflow can be moved to operating activities by increasing trade and non-trade
creditors, overdrafts. The qualities of cash flows is in operating and free cash flows,
which is cash flows after deducting investing cash flows from operating cash flows
and show the cash available to pay the financier of the enterprise. Imagine
enterprise with no cash available to pay shareholders and creditors but claim to be
highly profitable. Therefore, cash is a better measure of performance in the end
than profitability.

3.25 USE OF COMMUNICATION AND PUBLIC RELATIONS

SKILL FOR CASH MANAGEMENT
Enterprise should avoid the practice of getting in touch with client/customer on
credit control, solitary when the need arise for client to make payments. Courteous
e-mails, telephone calls, Short Message Service (SMSs), visits to express
appreciation are treasured gift of gratitude and kindness. Additionally, yearend gift
of souvenir, which at the same time serves as publicity and promotional tool, and
presence at the ceremonial events of client/customer and their key officers are
qualitative mechanisms that can assist cash inflow, reduce bad debts and cost of
collecting debts.

Contemporary business is built on relationship; good rapport with client/customer

and every source of inflow is crucial. A dedicated well-polished professional(s) can
handle credit control function adequately, and bring into play timely follow up that
closes the gap in a professional manner that does not present an outlook of
pestering. Close working relationship with bankers is pertinent for cash
management. Ability of a treasury person to work into the bank and come out with
result is a measure of efficiency. In organisation, staff and management are less
concern about how finance is managed; their important concern is timely provision
of cash for remuneration, operations, projects, office maintenance, and others as
need arise. The survival of every firm depends greatly on cash inflow.

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3.26 FOREIGN CURRENCY CASH MANAGEMENT

Foreign exchange rate fluctuation can push a bottom line from profit unto loss.
Contrary to the believe by some finance folks that exchange difference is an
ordinary paper profit/loss, the risk of foreign exchange is basically on profit and it
is real. The main issue on foreign currency management is hedging of exposure to
adverse foreign exchange difference and encouragement of currency speculation
for profit. Generally, foreign exchange risk hedging is either forward contract or
option rate. To reduce inherent foreign exchange risk conversion, enterprise can
hedge the risk by forward contracts, fixed forward or floating/option contracts;
invoicing foreign clients/customers in local currency; and matching income against
expense/expenditure in the domiciliary bank account.

Other strategies are protection clause on sale price in foreign currency or adjusted
exchange rate moves outside a defined range; invoicing in a strong currency; and
pricing policy, by building extra profit margin into selling price to act as a cushion
in the event that exchange rates move adversely. Superior foreign exchange
management utilises innovation to strategically manage cash to achieve
organisation’s objectives by adopting integrated liquidity and investment to
optimise cash and enhance efficient allocation of resources. The basic manual to
unleash the immense opportunity is the central/reserve bank’s foreign exchange
manual as updated from time to time. For instance, proceeds of export in the
domiciliary account afford exporters (of goods/services) unfettered access to funds
like ability to make offshore fund transfer above the statutory limit.

Another example is the opportunity to transfer cash above the statutory limit as
invisible transaction. To hedge losses that can result from foreign exchange
transactions, This will drastically reduce bank charges and interests on domiciliary
accounts. Corporations should take advantage of Society for Worldwide Interbank
Financial Telecommunication (SWIFT) and others such as NIFT, NEFT, CIFTS,
RTGS through their bankers to achieve effective and efficient foreign currency
exchange management.

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3.27 CASH VERSUS PROFITABILITY

One major problem with the current global capitalism is the wrong impression that
earnings are the acme of organization success. This overreliance and pressure has
considerably dwindled the quality of earnings. Besides, profit is short term and
therefore imposes myopic insight into business vision. While cash is like blood,
profit is like water to every enterprise. Organization could utilize the duo as
performance metrics. However, better decision would be made using cash when
liquidity is the key limiting factor. Profit, alongside other variables such as cash
management, is the determinant of cash flows.

Enterprise can operate where profitability is dying, but cannot continue as a going
concern with no cash because bills cannot be paid with profit, but profitability will
catch up eventually when margin loss stifles out cash. The ravaging global
meltdown is a result of every individual selling without recourse to corporate
governance, credit risks, profitability, until the liquidity disappeared completely
from the market. Net cash flows is a more appropriate measure of profitability in
the end because in the long term it is accurately done; for a good enterprise, in the
end, cash flows must be positive. The two basic underlying assumptions of financial
reporting are accruals and going concern. The real measure of organisation
performance is cash. Organisational performance is evaluated by ability and
certainty to generate cash. No matter the immensity of profit/reserve or asset,
convertibility to cash or cash equivalent is critical.

Enterprise must be cautious about cash flow; quest for profitability should not be
allowed to kill cash flow requirement because it is vital for organisation’s solvency
and survival. Profitability is not all that matters; cash-generating capability is
germane, a profitable venture that generates less cash than the cash consume is a
bubble. That is, Cash flow is a major determinant of going concern status of
enterprise. While cash is essential for organisation survival and short-term nature,
profitability is a basic requirement for growth and development in the long term.

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3.28 RECOMMENDATIONS
Cash management is a technical and sensitive function that requires well-trained
professional to be in charge. It is a complex and evolving aspect of finance that is
on reducing cash conversion cycle to achieve efficiency and effectiveness in the
management of the most liquid asset of every entity through forecasting and
planning, internal control, cash management tools, and other models. Cash flows
ratios, that are recently popularised, assist management and financial analysts to
decipher the facts behind the figures on the financial statements.

This ratios are so powerful that they can reveal SWOT (strengths, weaknesses,
opportunities and threats), errors, creativity and avert corporate failures.
Management should institute sturdy internal control. Safeguard of cash comes in
strongly because an entity can only manage what it has. The five components of
control namely; control environment, risk assessment, information system, control
activities, and monitoring control should be in place to ensure cash is safeguarded.
Management should be wary about an employee, particularly the one in charge of
cash, getting exclusive understanding and capacity on the system as this can
heighten the tendency to commit irregularities. Countless number of corporate
failures were a result of imprudent management of cash.

Accountant could be skimpy, they could work within the accounting standard or
work out of accounting standards to increase reported cash flows. Hence, the
sustainability cash flows position would be distorted not enhanced. Good working
relationship with clients/customers and other medium of cash inflows is vital for
cash management; moreover, a good sales day is the good day in finance. The
fundamental secret of a successful credit control/management is relationship.
Similarly, close working relationship with bankers is pertinent for cash
management. Though treasury is powerful, it should rather be used to build an
adoring brand for the entity before stakeholders. Furthermore, Profitability as the
acme of organisational success has imposed myopic insight into business vision.

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3.29 CASH MANAGEMENT IN INDIA

India is rapidly abandoning its paper-based clearing mechanism, with the Reserve
Bank of India introducing initiatives covering cheque-imaging, real time gross
settlement and electronic fund transfer. This trend is expected to increase further
with the introduction of the Information Technology Act, a clearing corporation, a
centralised fund management service, and use of the Structured Financial
Messaging Solution for intra and interbank messages. India stride further into the
new millennium riding on a wave of optimism. A decade of reforms has propelled
the economy onto a new growth trajectory today.

India is a mature and stable economy. There is now healthy competition among
different Indian States to attract foreign investments, and India has joined the
league of the fastest growing economies in the world, being next only to China and
Korea. The resurgence of the Indian economy has been sustained in the face of
difficult international developments. Even as global growth has declined, India’s
GDP growth has accelerated in 2002 and reached to 6% in the 2003 fiscal year.
Despite the worst drought in two decades in 2002, inflation rates have declined
further and interest rates have softened. The momentum of the record inflow of FDI
has continued and foreign exchange reserves were at all-time high.

Indian economy is a market-driven economy. Due to the efforts taken by the

Securities and Exchange Board of India (SEBI), the equity markets are matures,
regulated and offer a wide range of equity and debt-linked products. India has a
well-established legal system with an independent judiciary. Indian corporates have
had increased access to global capital markets. This has driven conformity with
international accounting standards, greater transparency and a focus on corporate
governance. The government has accelerated the disinvestment process,
demonstrating its commitment to the economy. The banking structure in India is
complex and spread over a wide geographical area. There are about 65,000 bank
branches, and the central bank is the RBI. The composition of banks in India is:
 Scheduled commercial banks – 296,
 Foreign banks – 42

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 Public sector banks – 27

 Private sector banks – 31
 Regional rural banks – 196
 Schedule cooperative banks – 67
The Central Board of Direct Tax (CBDT) is the governing body for the direct taxes
in India. Similarly, the Central Board for Customs and Excise (CBCE) is the main
governing body for indirect taxes. India had traditionally a paper based clearing
system. As of 2002, India has -about 1,047 clearing houses and 65,000 bank
branches. The total value of the cheques processed through these centers surpassed
INR 1,21,000 by in the year 2001-02. The paper based clearing system passes such
inherent issues as a high cost of processing fragility of the system and security risks.

Cheque -Imaging:
In some countries, cheques deposited in banks are scanned and stored with the
bank. Instead of sending physical cheques to the clearing house, the scanned copy
of the cheques are transmitted. This level of cheque-imaging reduces clearing cycle,
enables faster returns-processing better customer service and availability of images
for audit trails. In India, 15 clearing houses, now have cheque-imaging. However,
the images are now stored only for reconciliation and resolving clearing house
differences. The legal framework is undergoing changes to adopt cheque imaging.
The Negotiable Instruments Act was amended in 2002, and has extended the
definition of a cheque to include electronic cheques and the electronic images of
truncated cheques. The act now also defines the material alternation of an electronic
image of a truncated cheque. Availability of adequate technical infrastructure at
cleaning houses and banks is a prerequisite for expanding the network and
exploiting the full benefits of cheque-imaging.

Real-Time Gross Settlement—(RTGS):

It is a payment mechanism that eliminates settlement risk by settling payments in
real time. This is in contrast to the existing net settlement system, where interbank
settlement takes place at the end of the batch. The RBI has implemented a national
RTGS system that allows all banks in India to make secure inter-bank payments
across the country. The RTGS work flow involves transaction queuing and

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processing on a first-in- first out basis. RTGS provide significant benefits to

individuals and businesses by allowing instant transfer of funds between banks thus
expediting electronic payments.

Integration with Enterprise Resource Planning System (ERP):

Organisations are migrating from their existing accounting procedures to enterprise
resource planning system. This has fuelled the need to integrate the banks cash
management systems with corporates *ERP packages and key cash management
providers now offer complete integration of cash management solution with ERP
system. Straight-through processing (STP) has historically been regarded as an area
focused on by banks for streamlining their processes.

Electronic Banking:
The Government has supported the growth of e-commerce in India by enacting the
Information Technology Act 2000. There are more people connected to the Internet
in India today than in past owing to improving personal computer penetration,
availability of brand width and power. However, despite the growing internet
population, India is still witnessing modest e-commerce activity. E-commerce
activity was estimated to be in the region of about US$ 300 m, almost half that of
China.. Business-to-business e-commerce implementation is low-except in certain
verticals such as the automobile sector and banking and finance. With recent
technological advancements, the implementation of Internet banking and electronic
banking has increased greatly. The private sector and foreign banks in India are at
the forefront in offering online banking services on internet. This service is in
addition to existing offsite delivery channels such as automated letter machines,
electronic banking and mobile banking.

3.30 REGULATORY CHANGES AND THEIR IMPACT ON

CASH MANAGEMENT:
Information Technology Act 2000:
Business and consumers are increasingly using computers to create, transmit and
store information in electronic format instead of traditional paper documents. Since

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e-commerce eliminates paper based transactions the need for legal changes became
a necessity. The Indian Parliament gave its assent to the Information Technology
Act on 9 June 2000. The Act deals with defining the common terminology used in
respect of computers, giving legal recognition to electronic records and digital
signatures. The act further defines when digital signatures or electronic records can
be termed secure for transmission over the internet.

Centralized Funds Management Service:

The Centralized Fund Management Service (CFMS) introduced by the RBI,
enables commercial banks to obtain the funds position of their accounts with the
RBl’s Deposits Accounts Department (DAD) at 17 locations in India. Bank will
not only be able to enquire about their funds balance in DAD accounts, but also
transfer funds across their DAD accounts in different cities. CFMS allow banks to
reduce their cost of fund by better management of fund flows.

Clearing Corporation of India LTD:

Recognised the need for upgrading the country’s financial infrastructure in respect
of the clearing and settlement of debt instruments and Fix (FOREX) transactions,
the RBI initiated the more to set up the Cleaning Corporation of India Limited
(CCIL). The primary objective of setting up the CCIL has been to establish a safe
institutional structure for the clearing and settlement of trades in Fx money, and
debt markets so as to bring efficiency into the transaction settlement process, and
insulate the financial system from stocks emanating from operations-related issues.
The CCIL was incorporated in 2001 and commenced operations from 15 Feb. 2002.

Structured Financial Messaging Solution:

The Structured Financial Messaging Solution (SFMS) is the communication
protocol introduced by the RBI for intra-bank and inter-bank messages within
India. It incorporates templates and fixed message formats for affecting STP among
member banks SFMS is broadly similar to SWIFT message formats. These message
formats will be used for RTGS and other interbank communication. SFMS
protocols will facilitate STP in the Indian banking industry for domestic payments
and transactions, reducing transaction costs for customers.

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Latest Cash Management Products:

In India Cash Management has predominantly been associated with collections
products. Subsequently, cash management provides have diversified their product
portfolio to include payments, account services and delivery management. This
enables corporate treasurers to concentrate on their core functions and outsource
non-core activities to banks. Banks are increasingly shifting towards enabling their
cash management operations to use more STP.

Electronic Fund Transfer:

The RBI introduced the Electronic Fund Transfer (EFT) system in 2001. EFT
allows the electronic transfer of funds across 14 locations and 13,000 banks
branches in India. It eliminates the burden of writing cheques and allows the
transfer of funds within 24 hours anywhere within its current coverage.

Special Electronic Funds Transfer:

In April 2003 the RBI introduced the special electronic funds transfer (SEFT)
system, which is the enhanced version of EFT. SEFT now covers 97 cities, 24 banks
and 2,500 bank branches across India. The coverage of SEFT is much larger than
that offered by EFT.

Payment Outsourcing:
Cheque and drafts remain a popular payment method in India, but involve time-
consuming and laborious manual processes. Payment out servicing to banks allows
corporates to focus on their core competencies, reduce overheads costs and benefit
from speed, accuracy and enhanced security and fraud control.

Electronic Invoice Presentment & Payment:

Cash management providers in India have started offering electronic invoice
presentment and payment (EIPP). EIPP offers the facility of presenting the invoice
by supplier to their client over the internet. The product also provides the facility
to the client to view, dispute and pay the invoice electronically through payment
gate ways.

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Continuous Linked Settlement:

The Continuous Linked Settlement (CLS) service offered by CLS Bank provides a
global infrastructure for multi-currency payment cleaning and settlement services.
It is a real-time cross broader settlement system that eliminates settlement risk
caused by delay arising from time-zone difference by the simultaneous setting of
Fx payment instructions. CLS enables banks to expand their Fx businesses with
CLS participating contemporary banks by making it possible to increase limits due
to reductions in settlement risk moreover its delivers the benefits of STP.

3.31 UTILITY OF CASH FLOW ANALYSIS

A Cash flow analysis is an important financial tool for the management. Its chief
advantages are as follows.

Helps in efficient cash management

Cash flow analysis helps in evaluating financial policies and cash position. Cash
is the basis for all operation and hence a projected cash flow statement will enable
the management to plan and co-ordinate the financial operations properly. The
management can know how much cash is needed from which source it will be
derived, how much can be generated, how much can be utilized.

Helps in internal financial management

Cash flow analysis information about funds, which will be available from
operations. This will helps the management in repayment of long-term debt,
dividend policies etc.

Discloses the movements of Cash

Cash flow statement discloses the complete picture of cash movement. The
increase in and decrease of cash and the reasons therefore can be known. It
discloses the reasons for low cash balance in spite of heavy operation profits on for
heavy cash balance in spite of low profits.

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Discloses success or failure of cash planning

The extent of success or failure of cash planning be known by comparing the
projected cash flow statement with the actual cash flow statement and necessary
remedial measures can be taken.

Cash Management Bills (Cmb)

Cash Management Bills was introduced on 11.08.2011, is a short term security to
be sold by Government of India to raise temporary money for cash management
needs.

Features
 CMBs are in nature similar to Treasury Bills.
 The tenure of CMBs is less than 91 Days, but the amount and date of issue
depend upon the requirements.
 It is issued at a discount on Face Value.
 The announcement is made One day prior to the auction
 The settlement of the auction is on T+1 Basis.
 It is Tradable
 Investment in them is eligible in Government securities by banks for SLR
purpose

3.32 CASH MANAGEMENT OPERATIONS

Cash Management services include local and cross border payments, collections,
information management and investment services for both corporate, Institutions
and individual clients. As part of Standard Charterer’s global transaction solutions
to Corporate, Institutions and individual, they provide Cash Management,
Securities Services and Trade Services through their strong market networks in
Asia, Africa, the Middle East and Latin America. SCB also provide a connection
to these markets for clients from other region of the world. They are committed to
providing with
 Integrated, superior cross-border and local services
 Efficient transaction processing

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 Innovative products
 World-class clearing services

Cash Management Operations Department

Inward Telegraphic Transfer (ITT)
ITT is a unit under Cash Management Operations department. When the bank
receives remittance on behalf of the customer, it is inward remittance / Inward
telegraphic transfer. The bank receives the remittance instruction through SWIFT
message, and then the following steps are taken by ITT unit:
 Receive ITT instruction via SWIFT in MT103, 202, 101 formats. Different
message type indicates the remitting form

 Sort messages

 Generate pre-advice and inform customer about remittance and receive

supporting documents from customer for the payments

 Verify details / checking for confirmations

 Payment instruction / encashment to customer’s account

Outward Telegraphic Transfer (OTT)

OTT unit processes outward remittances where fund is transferred from accounts
held with SCB Bangladesh. Though the telegraphic system has been
decommissioned for such transfers, the term ‘telegraphic transfer’ broadly is being
used throughout the banking industry. OTT unit works in following steps:
 Receive OTT instruction
 Verify details
 Reject / input OTT transaction
 Check and approve transaction
 Generate and send payment message
 Prepare customer advice.

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Local Collection Unit (LCU)

Local Collection Unit collects local cheque of other bank. When local cheques are
received by local cheque collection unit then the following steps are followed:
 Receive other bank local cheque
 Verify details
 Reject / input cheque transaction
 Check and approve transaction
 Generate and send payment message

Foreign Collection Unit (FCU)

Foreign Collection Unit also works under cash management operations department.
FCU collects foreign cheques, inward cheques and process in the following steps:
 Receive other bank foreign cheque
 Collects inward cheque
 Verify details
 Reject / input cheque transaction
 Check and approve transaction
 Generate and send payment message

Bills Pay
Bills pay, the most convenient way to settle monthly utility bills. Bills pay unit not
only provide convenience but also allow flexibility to pay customer bills as and
when chosen. Once who sign up for the services, customer will no longer have to
go out of his way to pay bills for electricity, mobile phones, internet, etc., every
month. Bills pay provides one-stop payment solution where the department will
debit customers’ account to pay bills.

Premium Service-Banking (PSB)

Premium Service-Banking offers a choice of service improvements which can be
tailored to individual business needs. These service enhancements collectively
allow managing business finances and cashing resources more effectively and
conveniently. PSB unit works in following steps:
 Receive daily fax of routine transaction of ITT, OTT, PODD units

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 Entry all the transaction into the system with CMO suite software
 Verify and forward each transaction to the related unit
 When other units clear the transaction / credit amount to the customer the
status updated by PSB unit in CMO suite
 PSB unit also allows customer to full range of transaction banking enquiry
relating to balances, account statements, cheque payment status and other
transactions.

Ops, Risk & MIS

This unit at CMO department maintains and upgrades Database and provides MIS
updates on different issues to Management, Branches & different teams on a routine
basis. The unit generates and updates different Management Information reports
regarding ITT, OTT, STS/PODD customer’s information and clarification etc. This
unit also verifies operational activities and risk on overall CMO department’s
activities.

3.33 ROLE OF TECHNOLOGY IN OPTIMIZING CASH

MANAGEMENT:
Cash management solutions are not new. The market is mature and many banks
offer efficient cash management solutions. But market forces, economic conditions,
and changing corporate trends have generated opportunities for further innovations
in this space.

3.34 SCOPE OF PROJECT:

Cash management solutions are now widely being adopted, and hence there is
likely to be an increase in the number of vendors offering these solutions.
Correspondingly, corporate customers are also likely to become more demanding,
thereby promoting more intense competition amongst vendors. Here are some areas
with scope for improvement which vendors can focus on, to provide better services
than their competitors:

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Eliminating Disparate Systems:

Different cash management solutions are being offered for diverse segments. And
as businesses grow, managing these disparate systems is increasingly becoming a
challenge. Hence vendors should come up with a single platform which can support
various cash management products and services as the business grows.

Customizable Solutions:
Banks today offer similar solutions to all corporate customers irrespective of their
size and business. Hence vendors should try to come up with a customizable
platform which can cater to the specific needs of different businesses.

Unified System:
Integration of corporate customer systems with banking systems can be very
helpful in reconciliation of internal systems with banking systems, and can support
account management between the bank and customer. And this offers great scope
for vendors.

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DATA ANALYSIS AND INTERPRETATION

BALANCE SHEET
Particulars Years
2017 2016 2015
Equity and liabilities
Shareholders’ funds
Share capital 1,039,939,765 1,039,939,765 1,039,939,765
Reserve and surplus 1,289,920,931 1,330,242,671 1,410,215,741
2,329,860,696 2,370,182,436 2,450,155,506
Share application money pending
allotment
Non-current liabilities
Long term borrowing 375,971,569 355,690,357 346,441,847
Deferred tax liabilities (net) - -
Other long term liabilities 218,124,972 32,57,88,979 372,623,974
Long term provisions 27,321,161 25,228,322 26,682,000
621,417,702 706,707,658 747,747,821
Current liabilities
Short term borrowing 368,495,542 300,023,735 304,516,203
Trade payables 1,245,675,628 1,986,490,310 1,967,479,731
Other current liabilities 150,822,775 39,530,439 73,078,406
Short term provisions 134,135,450 136,119,389 116,664,877
1,899,129,395 2,462,163,873 246,17,39,216
Total 4,850,407,793 5,539,053,967 565,96,42,543
Assets
Non-current assets
a) Fixed assets
i) Tangible assets 2,477,506,139 2,314,858,681 2,280,511,429
ii) Intangible assets 4,163,925 5,656,703
iii) Capital work in progress 176,337,360 191,824,040
2,481,670,064 2,496,852,743 2,472,335,469
b) Non-current investments 21,476,940 21,476,940 21,476,940
c) Deferred tax assets (net) 1,78,03,360 36,108,849
d) Long term loans and advances 184,974,747 191,934,988 188,055,228
e) Other non-current assets 66,464,805 281,516,301 422,055,338
2,754,586,556 3,009,584,333 3,140,031,824
Current assets
a) Current investments
b) Inventories 1,087,588,405 1,356,407,164 1,664,150,391
c) Trade receivables 400,497,644 659,223,336 411,433,969
d) Cash and cash equivalents 18,566,728 29,996,457 25,768,781
e) Short term loans and advances 304,298,359 184,714,405 157,518,135
f) Other current assets 28,4,870,101 299,128,273 260,739,443
2,095,821,237 2,529,469,634 2,519,610,720
Total 4,850,407,793 5,539,053,967 5,659,642,543

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PROFIT AND LOSS ACCOUNT

Sr.
Particulars Years
No.
2017 2016 2015
Income
1 Revenue from operation (gross) 5,734,806,718 6,336,048,456 10,944,649,232
Less:- Excise duty 6,05,143,905 497,174,792 560,098,922
Revenue from operation (net) 512,96,62,813 583,88,73,663 10,384,550,310
2 Other income 52,146,810 104,709,272 99,003,129
3 Total revenue (1+2) 5,181,809,623 5,943,582,936 10,483,553,439
4 Expenditure
a) Cost of materials consumed 3,805,290,777 3,163,101,843 4,434,090,575
b) Purchase of stock in trade 323,565,623 1,770,185,893 5,073,013,743
c) Changes in investments of
finished goods, work in progress and -333,578,325 -335,995,134 -589,541,198
stock in trade
d) Employee benefits expense 178,732,303 213,615,124 207,677,447
e) Finance costs 110,298,251 98,572,432 94,797,735
f) Depreciation and amortization
153,088,368 179,198,892 183,628,723
expense
g) Other expenses 923,639,402 832,308,251 1,017,816,953
Total expenses 5,161,033,399 5,920,987,301 10,421,483,978
Profit/loss before exceptional and
5 20,776,224 22,595,635 62,069,461
extraordinary items and tax (3-4)
6 Exceptional items
Profit/loss before extraordinary
7 20,776,224 22,595,635 62,069,461
items and tax (5+6)
8 Extraordinary items
9 Profit/loss before tax (7+8) 20,776,224 22,595,635 62,069,461
10 Tax expenses:-
a) Current tax expenses for current
year
b) Less:- MAT credit ( where
applicable)
c) Current tax expense relating to
-324,625
prior years 430,000
d) Net current tax expense 430,000 -324,625
e) Deferred tax 17,803,360 18,305,489
430,000 17,803,360 17,980,864
11 Profit/loss after tax (9+10) 21,206,224 40,398,995 80,050,325
Earning per equity share of face
value of 1/- each
Basic and diluted (in Rs.) 0.05 0.1 0.2

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DATA ANALYSIS AND INTERPRETATION

1. CURRENT RATIO
Formula:-
Current Assets
Current Ratio =
Current Liabilities

Table:- 4.1
Years Current Assets Current Liabilities Total Ratio
2014-15 2,095,821,237 1,899,129,395 1.1
2015-16 2,529,469,634 2,462,163,873 1.03
2016-17 2,519,610,720 2,461,739,216 1.02

(Source: Annual Report On Yamaha Motors Showroom)

Graph:- 4.1

Current Ratio
1.12
1.1
1.08
1.06
1.04 1.1
1.02
1 1.03 1.02
0.98
2017 2016 2015

Current Ratio

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.

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2. QUICK RATIO

Formula:-
Quick Assets
Quick ratio =
Quick Liabilities

Table:- 4.2
Years Quick Assets Quick Liabilities Total Ratio
2014-15 723,362,731 1,899,129,395 0.38
2015-16 873,934,198 2,462,163,873 0.35
2016-17 594,720,885 2,461,739,216 0.24

(Source: Annual Report On Yamaha Motors Showroom)

Graph:- 4.2

Quick Ratio
0.4
0.35
0.3
0.25
0.2 0.38
0.35
0.15
0.24
0.1
0.05
0
2017 2016 2015

Quick Ratio

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.

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3. DEBT-EQUITY RATIO

Formula:-
Long term loan

Debt-equity ratio =
Shareholders fund

Table:- 4.3

Years Long Term Loan Shareholders’ funds Total Ratio

2014-15 744,467,111 2,329,860,696 0.32
2015-16 655,714,092 2,370,182,436 0.28
2016-17 650,958,050 2,450,155,506 0.27

(Source: Annual Report On Yamaha Motors Showroom)

Graph:- 4.3

Debt-Equity Ratio
0.33
0.32
0.31
0.3
0.29
0.28 0.32
0.27
0.26 0.28
0.27
0.25
0.24
2017 2016 2015

Debt-Equity Ratio

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.

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A STUDY OF CASH MANAGEMENT ANALYSIS WITH REFERENCE TO
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4. DEBT TO CAPITAL EMPLOYED RATIO

Formula:-
Long term debt
Debt to capital employed ratio =
Capital employed (net assets)

Table:- 4.4

Years Long Term Debt Net Assets Total Ratio

2014-15 375,971,569 196,691,842 1.91
2015-16 355,690,357 67,305,761 5.28
2016-17 346,441,847 57,871,504 5.99

(Source: Annual Report On Yamaha Motors Showroom)

Graph:- 4.4

Debt to Capital Employeed Ratio

7
6
5
4
3 5.99
5.28
2
1 1.91
0
2017 2016 2015

Debt to Capital Employeed Ratio

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.

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A STUDY OF CASH MANAGEMENT ANALYSIS WITH REFERENCE TO
YAMAHA MOTORS SHOWROOM 2019 – 20

5. PROPRIETARY RATIO

Formula:-
Shareholders’ funds
Proprietary ratio =
Capital employed (net assets)

Table:- 4.5
Years Shareholders’ Funds Net Assets Total Ratio
2014-15 2,329,860,696 196,691,842 11.85
2015-16 2,370,182,436 67,305,761 35.22
2016-17 2,450,155,506 57,871,504 42.34
(Source: Annual Report On Yamaha Motors Showroom)

Graph:- 4.5

Proprietary Ratio
45
40
35
30
25
20 42.34
35.22
15
10
5 11.85
0
2017 2016 2015

Proprietary Ratio

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.

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A STUDY OF CASH MANAGEMENT ANALYSIS WITH REFERENCE TO
YAMAHA MOTORS SHOWROOM 2019 – 20

6. TOTAL ASSETS TO DEBT RATIO:-

Formula:-
Total assets
Total assets to debt ratio =
Long term debts

Table:- 4.6
Years Total Assets Long Term Debtors Total Ratio
2014-15 4,850,407,793 375,971,569 12.9
2015-16 5,539,053,967 355,690,357 15.57
2016-17 5,659,642,543 346,441,847 16.34

(Source: Annual Report On Yamaha Motors Showroom)

Graph:- 4.6

Total Assets To Debt Ratio

18
16
14
12
10
8 15.57 16.34
6 12.9
4
2
0
2017 2016 2015

2017 2016 2015

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.

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A STUDY OF CASH MANAGEMENT ANALYSIS WITH REFERENCE TO
YAMAHA MOTORS SHOWROOM 2019 – 20

7. INVENTORY TURNOVER RATIO

Formula:-

Cost of revenue from operations

Inventory turnover ratio =
Average inventory

Table:- 4.7
Cost of Revenue
Years Average Inventory Total Ratio
From Operation
2014-15 5,734,806,718 400,497,644 14.32
2015-16 6,336,048,456 659,223,336 9.61
2016-17 10,944,649,232 411,433,969 26.6
(Source: Annual Report on Yamaha Motors Showroom)

Graph:- 4.7

Inventory Turnover Ratio

30

25

20

15
26.6
10
14.32
5 9.61

0
2017 2016 2015

Inventory Turnover Ratio

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.

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A STUDY OF CASH MANAGEMENT ANALYSIS WITH REFERENCE TO
YAMAHA MOTORS SHOWROOM 2019 – 20

8. TRADE RECEIVABLES TURNOVER RATIO

Formula:-

Net credit revenue from operations

Trade receivable turnover ratio =
Average trade receivable

Table:- 4.8
Net Credit Revenue
Years Average Trade Receivable Total Ratio
From Operations
2014-15 10,384,550,310 411,433,969 25.24

2015-16 5,838,873,663 659,223,336 8.86

2016-17 5,129,662,813 400,497,644 12.81

(Source: Annual Report On Yamaha Motors Showroom)
Graph:- 4.8

Trade Receivable Turnover Ratio

30

25

20

15
25.24
10
12.81
5 8.86

0
2017 2016 2015

Trade Receivable Turnover Ratio

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.

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A STUDY OF CASH MANAGEMENT ANALYSIS WITH REFERENCE TO
YAMAHA MOTORS SHOWROOM 2019 – 20

9. GROSS PROFIT RATIO

Formula:-
Gross profit
Gross Profit Ratio = X 100
Net revenue of operations

Chart:- 4.9

Net Revenue of
Years Gross Profit Total Ratio
Operation
2014-15 5,734,806,718 5,129,662,813 1.12
2015-16 6,336,048,456 5,838,873,663 1.09
2016-17 10,944,649,232 10,384,550,310 1.05

(Source: Annual Report On Yamaha Motors Showroom)

Graph:- 4.9

Gross Profit Ratio

1.14

1.12

1.1

1.08

1.06 1.12

1.04 1.09

1.02 1.05

1
2017 2016 2015

Gross Profit

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.

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A STUDY OF CASH MANAGEMENT ANALYSIS WITH REFERENCE TO
YAMAHA MOTORS SHOWROOM 2019 – 20

10. NET PROFIT RATIO

Formula:-

Net Profit
Net Profit Ratio = X 100
Revenue from operations

Table:- 4.10

Years Net Profit Net Sales Total Ratio

2014-15 2,120,622,400 5,129,662,813 0.41
2015-16 4,039,899,500 5,838,873,663 0.69
2016-17 8,005,032,500 10,384,550,310 0.77

(Source: Annual Report On Yamaha Motors Showroom)

Graph:- 4.10

Net Profit Ratio

0.9
0.8
0.7
0.6
0.5
0.4 0.77
0.69
0.3
0.2 0.41
0.1
0
2017 2016 2015

Net Profit Ratio

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.

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A STUDY OF CASH MANAGEMENT ANALYSIS WITH REFERENCE TO
YAMAHA MOTORS SHOWROOM 2019 – 20

FINDINGS AND SUGGESTIONS

FINDINGS AND SUGGESTIONS

FINDINGS
 Current ratio analysis of Yamaha Motors Showroom shows recurring surplus
in itself. Since 2015 it increasing continuously.

 Quick ratio provides positive signs since 2015 it is going increasing

continuously.

 Debt equity proportion of Yamaha Motors Showroom improving year by year

but it is not satisfactory.

 The proportion of debt to capital employed shows distinct losses after 2015.

 The proprietary ratio also decrease at huge proportion.

 The ratio of total asset to long term debts ratio will be decrease with huge losses
on company financial statements.

 Inventory turnover ratio will be not satisfactory for company position that’s
why company faces various losses.

 Due to sudden increment in stock turnover ratio there it also affected to debtors
turnover ratio. It also improve up to 54%.

 There is not satisfactory signs in gross profit ratio. It reducing by 1% in 2016-

17 as compared to in 2015.

 Due to decrement in gross profit it effect net profit of the company but it's no
strongly influence.

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A STUDY OF CASH MANAGEMENT ANALYSIS WITH REFERENCE TO
YAMAHA MOTORS SHOWROOM 2019 – 20

SUGGESTIONS
 Current ratio of Yamaha Motors Showroom its growing good that’s why it is
better for company poisons.

 Quick ratio of possessions is better Yamaha Motors Showroom.

 Debt equity proportion of Yamaha Motors Showroom is not satisfactory but

increases in revenue of Yamaha Motors Showroom can keep the ratio stable.

 The debt to capital employed ratio of Yamaha Motors Showroom is faces huge
losses in company position but company can also manage this ratio with the
help of proper asset management techniques

 The proprietary ratio was not favorable for company position after company
analysis.

 The ratio of total asset to long term debts growing slowly but this situation is
not superior for company growth

 Inventory turnover ratio is not superior for company growth the company will
reduce his non profitable product that time the inventory ratio create positive
signs

 Stock turnover ratio affects to debtors’ turnover ratio that why this ratio is an
growing position and this situation is better for company growth.

 The gross profit ratio proportion of Yamaha Motors Showroom is not

satisfactory but company analyses all profit margins that time company can
keep the ratio on incremental situation.

 Gross profit ratio affects to net profit ratio that why this ratio is an unfavorable
and this situation is not good for company growth but company can remove its
unprofitable product, reduce inventories and reduce overheads that time the net
profit ratio will be superior for company growth.

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A STUDY OF CASH MANAGEMENT ANALYSIS WITH REFERENCE TO
YAMAHA MOTORS SHOWROOM 2019 – 20

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.

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A STUDY OF CASH MANAGEMENT ANALYSIS WITH REFERENCE TO
YAMAHA MOTORS SHOWROOM 2019 – 20

BIBLIOGRAPHY

REFERENCE BOOKS:-
 Financial Accounting
 Financial Management
 Cost Accounting
 Financial Statement And Management Accounting

WEBLOGRAPHY
 www.wikipedia.org
 www.seribid.com
 www.accounting4management.com
 www.lifecarehll.com
 www.ec-finance.com
 www.businessknowhow.com

SANT RAWOOL MAHARAJ MAHAVIDYALAYA, KUDAL. 93 | P A G E