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    A

    SUMMER TRAINING

    PROJECT REPORT

    ON

    WORKING CAPITAL

    OF

    HMT

    IN THE PARTIAL FULFILLMENT OF THE REQUIREMENT OF THE DEGREE OF MBA

    MASTER OF BUSINESS ADMINISTERATION

    (2011-2013)

    Submitted to: - Submitted By:

    Miss GAGANDEEP KAUR POOJA RANI

    MBA-3rd

    Sem.

    SWAMI DEVI DYAL INSTITUTE OF ENGINEERING& TECHNOLOGY

    BARWALA, PANCHKULA

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    ACKNOWLEDGEMENT

    Gratitude is the hardest of emotions to express and often one does not find adequate words to

    convey that entire one feels.

    I am extremely grateful to the management of HMT Ltd PINJORE, for giving me an opportunity

    to pursue Summer Training at the factory.

    Its my proud privilege & pleasure to express a deep sense ofgratitude to Mr. J.K Jain (JGM

    Finance), Mr. Dharmveer (Manager Accounts) for their pin point guidance, help, active

    cooperation encouragement & supervision throughout this project.

    The assistance & cooperation extended by other staff member helped me to successfully

    accomplish this project report and its objectives.A special thanks to all my trainee friends whose company made the working atmosphere cheerful

    and helped me to complete the project .

    (Nidhi Dixit)

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    PREFACE

    MBA is the stepping stone to the management carrier and to develop good managers is necessary

    that the theoretical must be supplement with exposure to the real environment.

    Theoretical knowledge just provides the base and it is not sufficient to produce a good manager

    thats why the practical knowledge is needed.

    Therefore the summer training and project report is an essential requirement for the MBAs

    student. The objective of this training is to make the person aware about the corporate world

    their problems, their rules. It raise the level of performance is one or more of its aspects and this

    may be achieved by providing new knowledge and information relevant to the job.

    This project report helps the student to utilize his skills properly and learn field realities but alsoprovide a chance to the organization to find out talent among the building managers in the very

    beginning.

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    TABLE OF CONTENTS

    SL NO. CONTENTS PAGE NO

    Chapter 1

    Certificate of company

    Declaration

    Acknowledgement

    Preface

    List of contents

    List of graphsINTRODUCTION

    Introduction to topic Statement of problem

    Introduction to the company

    2

    3

    4

    5

    6

    7

    8

    11

    15

    Chapter 2 REVIEW OF LITERATURE 21

    Chapter 3 RESEARCH METHODOLOGY Research design Objectives of study

    Scope of the study Data collection techniques Limitation of the study

    23

    24

    2526

    27

    Chapter 4 DATA ANALYSIS AHD INTERPRETATION 31

    Chapter 5 FINDINGS & SUGGESSTIONS 68

    Chapter 6 CONCLUSION 71

    Chapter 7 BIBLIOGRAPHY 73

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    CHAPTER-1

    INTRODUCTION

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    1.1 INTRODUCTION OF FINANCE

    Finance is the life blood of business. It is rightly termed as the science of money. Finance is very

    essential for the smooth running of the business. According to Wheeler, Finance is that business

    activity which is concerned with the organization and conversation of capital funds in meeting

    financial needs and overall objectives of a business enterprise.Financial management is that

    managerial activity which is concerned with the planning and controlling of a firm financial

    reserve. Financial management as a academic discipline, has undergone fundamental changes as

    regards its scope and coverage. In the early years of its evolution it was treated synonymously

    with the raising of funds. In the current literature pertaining to this growing academic discipline,

    a broader scope so as to include in addition to procurement of funds, efficient use of resources is

    universally recognized. Financial analysis can be defined as a study of relationship between

    many factors as disclosed by the statement and study of the trend of these factors. The basis for

    financial planning, analysis and decision-making is the financial information. Financial

    information is needed to predict, compare and evaluate the firms earning ability. It is also

    required to aid in economic decision making investment and financing decision making. The

    financing information of an enterprise is contained in the financial statements or accounting

    reports.

    FINANCE DEPARTMENT

    Any business for the matter whether large or small, profit motive is considered to be afinancial

    concern and its success or failure to a large extent depends on its financialdecisions. Efficiency

    of the organization is brightened only when there is efficientmanagement of its finance.Financial

    pans may take many forms but any good plan must be related to thecompanies eisting strengths

    and weaknesses. The strengths must be understood if theyare to be used to proper advantages and

    weaknesses must be recognized and correctmeaures is to be taken in accordance with theforecasting and budgeting procedures,but the plan must begin with financial analysis. Financial

    analysis is the evaluation andintepretaiton of a companys fiscal position and operaitons.

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    9.GMs sanction for purchase

    10. Placement of order

    11. Confirmation of order

    12. Follow up

    13. Receipt at stores

    14. Preparation of material inwards slip

    15. Inward inspection

    PRODUCITON DEPARTMENT

    Production is the process of converting the raw materials into finished products. HMThas been designed

    & built using modern production engineering techniques. It has aflow production technique employed all

    stages to ensure high quality at low cost. Theplant is equipped with special purpose production units, test

    equipment and massproduction machinery. HMT follows batch production.

    MATERIAL MANAGEMENT DEPARTMENT

    For manufacture of finished goods raw material are required by assembling manycomponents. Finished

    goods are manufactured so in order to check and control thevarious activities right from the purpose of

    the raw material to disposals of finishedgoods to customer. Materialdepartment carries this out. HMT

    started with one product in 1953 and is now dealingwith 26 products. Total machines are 426 in that 250are idle.The main reasons for idle machines are:Reduction in manpower Reduction in sales turnover. Each

    material has BOM (bill of material).

    RATIO ANALYSIS

    MEANING: Ratios are simply a means of highlighting in arithmetical terms the relationship

    between figures drawn from financial statements. In simple words, ratio is a simple expression of

    the relationship of one number to another number.

    A financial ratio is a relationship between two accounting figures expressed mathematically. A

    ratio can also be expressed as percentage by multiplying the ratio by 100. Ratio provides clues

    about the financial position of a concern. These are the indicators of financial strength,

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    soundness, position or weakness of an enterprise. One can draw the exact conclusions about the

    financial position of the concern with the condition over time as a way of identifying and

    evaluating performance trends.

    SIGNIFICANCE OF RATIO ANALYSIS

    It is helpful in decision making.

    It is helpful in simplifying financial statements.

    It is helpful in controlling costs.

    It is helpful in locating weak spots.

    It is helpful in preparing comparative statements.

    It is helpful in measuring efficiency.

    LIMITATIONS OF RATIO ANALYSIS

    Limited use of a single ratio.

    Lack of adequate standards.

    Wrong ratio based on wrong data.

    Change in accounting figures (window dressing).

    Incorrect comparisons & difficulty in forecasting.

    LIQUIDITY RATIOS OF HMT LTD.

    Liquidity refers to the ability of a concern to meet its current obligations. These obligations can

    be met by current assets. Thus, liquid ratios indicate the ease of turning assets into cash. If

    current assets can pay off current liabilities then the liquid position will be satisfactory. On the

    other hand if current liabilities cannot be easily met out of current assets then liquidity position

    will be treated as bad.

    By interpreting these ratios we can determine the degree to which assets, which are quickly

    convertible into cash, exceed the liabilities which require almost immediate cash payments.

    These ratios are very useful to bankers, suppliers, other short-term creditors and all financial

    statements users.

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    These liquid ratios are:-

    Current Ratio

    Quick Ratio

    Absolute Liquid Ratio

    A) CURRENT RATIO OF HMT LTD.

    It is a traditional ratio used to measure a companys liability and establishes the relationship

    between Current assets and Current liabilities.

    The formula for calculating the ratio is:

    Current ratio = Current assets

    Current liabilities

    CURRENT ASSETS = CASH + BANK + DEBTORS + SHORT-TERM INVESTMENTS +

    PRE PAID EXPENSES + STOCK

    CURRENT LIABILITIES = CREDITORS + BANK OVERDRAFT + SHORT-TERM

    LOANS + OUTSATNDING EXPENSES + BILL PAYABALE

    B) QUICK RATIO OF HMT LTD.

    With the help of this ratio the capacity of the firm to pay off its current liabilities within a month

    or immediately is measured.

    This ratio expresses the relationship between the liquid assets and current liabilities. Liquid

    assets are those assets which can be converted into cash quickly without much loss of time and

    value.

    Quick ratio sometimes called Acid Test Ratio and is one of the best measures of liquidity. It

    is a supplementary test of the ability of a business to meet its current obligations. The quick ratio

    is much more an exact measure than current ratio, by excluding inventories and prepaid

    expenses.

    Quick ratio = Liquid assets

    Current liabilities

    LIQUID ASSETS = CURRENT ASSETSPREPAID EXPENSESSTOCK

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    The HMT division has a capacity of manufacturing 18,000 tractors.

    The company has introduced 350 range of Citizen watches in Mumbai along with its latest Eco-

    Drive models, which absorb power thorough any source of light.

    The company has entered into a manufacturing and marketing alliance with Tennmax Industrial

    Ltd. of Hong Kong.

    HMT Ltd has been named as one of the top ten brands in India by a recent survey conducted by

    A&M-ORG-MARG. HMT has been ranked as the top seventh brand among the main brands in

    the annual survey that covers 60 brands from all over the country. HMT is also the only public

    sector company whose brand has features among the top ten in the survey. The brand has

    emerged as seventh from the 22nd position held last year.

    The company also proposes to convert 30% of the loan component into equity.

    Citizen Watches (India) Limited, is a joint venture between the Citizen Watch Company, Japan

    which holds a 51 per cent stake and Doshi Time Industries holding 49 per cent stake. It has a

    total paid up capital of Rs eight crores.

    An MoU (memorandum of understanding) signed between the Government and HMT has

    delegated power to HMT to sanction schemes for incentives cum rewards.

    1999 - The Industry Ministry has directed the state-owned Hindustan Machine Tools to explore

    possibilities of joint venture formation for its watch division.

    The company has tied up with Tennmax of Hong Kong and is currently marketing the HMT-

    Tennmax brand in India.

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    After Kenya and Nigeria, HMT had signed a MoU for setting up a watch assembly unit

    Zimbabwe.

    The shareholders of Hindustan Machine Tools Ltd (HMT) approved a proposal to increase the

    company's authorised share capital to Rs 200 crores from the present Rs 135 crores.

    2000 - Icra has assigned an LAAA (SO) rating and an MAAA (SO) rating to the Hindustan

    Machine Tools (HMT) bonds of Rs 469 crore 10-year tenure and Rs 40.43 two-year tenure.

    HMT (International) Ltd., a wholly owned subsidiary of HMT Ltd., has been awarded the EEPC

    trophy for its achievements in export of technical services during the year 1998-99.

    2001- Mr Manohar Joshi, Union Minister for Heavy Industries and Public Enterprises, has

    unveiled the HMT 4922 tractor at a launch ceremony organised at Pinjore, Chandigarh. With the

    introduction of the new actor,

    2002

    HMT Ltd has informed that consequent upon relinquishing of the charge of Chairman &

    Managing Director, Tractor, upon resignation by Mr R A Sharma on July 04, 2002 Mr M SZahed, Director, Organisation & Management has taken additional charge of the post of

    Chairman & Managing Director, Tractor of the Company.

    2003

    HMT Ltd has informed BSE that pursuant to Order dated January 9, 2003 from the Department

    of Heavy Industry, Ministry of Heavy Industries & Public Enterprises, Government of India,

    New Delhi, Shri M.S. Zahed, Chairman & Managing Director (Acting) and Director

    (Organisation & Management) has been appointed as Chairman & Managing Director of the

    Company for a period of 5 years from the date he assumes charge of the post or till the date of

    his superannuation or until further orders, whichever is earlier. Shri.M.S Zahed assumed charge

    of the post of January 09, 2003.

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    HMT enters into Memorandum of Understanding with PNB, UCO Bank and State Bank of

    Mysore and has launched SBM-HMTAgri Farm Scheme to promote Agriculture mechanisation

    in south India.

    Pinjore Unit of HMT at Chandigarh is facing a financial crisis and turnover has dropped to 50-

    60cr .

    Shri Naresh Chaturvedi has been appointed as a part time official Director on the Board of

    Directors.

    Shri Navin Kumar, Joint Secretary to GOI has been appointed as Part Time Official Director on

    the Board of Directors of the company.

    2004

    HMT Ltd. has informed that the equity shares of the Company have been delisted from the

    Bangalore Stock Exchange Limited, the Regional Exchange for HMT Limited, with effect from

    January 3, 2004.

    HMT signs agreement with UK-based Trantor for high power tractors

    HMT bags CMTI-PMT Trust Award

    HMT enters into a Technology Collaboration Agreement with M/s Trantor Vehicles Ltd

    HMT Ltd. enters into a Technology Collaboration Agreement with Trantor Vehicles Ltd. U.K.

    Signs MoU with State Bank of India (SBI) for tractor finance

    2005

    HMT inks agreement with ONGC, MRPL

    HMT in dialogue with Japanese co for MUV

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    AWARDS OVER THE YEARS

    YEAR DESCRPITION

    1982-1983NPC AWARD FOR PRODUCTIVITY TO MACHINE TOOLS

    1984-1985AWARD FOR LONGEST ACCIDENT FREE PERIOD BY NATIONAL

    SAFETY COUNCIL

    1984-1985AWARD FOR HIGHEST REDUCTION IN ACCIDENT FREQUENCY

    RATE BY HARYANA LABOUR DEPARTMENT

    1985-1986FIE FOUNDATION/PMT TRUST AWARD TO MACHINE TOOLS

    1985-1986AWARD FOR BEST CANTEEN ARRANGEMENT BY HARYANA

    LABOUR DEPARTMENT

    1986-1987CII AWARD FOR EXCELLENCE IN PRODUCTIVITY TO TRACTORS

    1987-1988RUNNERS UP NATIONAL SAFETY AWARD OF GOVT. OF INDIA /

    MINISTRY OF LABOUR

    1988-1989INDIRA GANDHI MEMORIAL AWARD OF AP PUBLIC ENTERPRISES

    EMPLOYEES FEDERATION TO TRACTOR DIVISION

    1989-1990SECOND BEST AWARD FROM NPC TO TRACTOR DIVISION

    1991-1992BEST PRODUCTIVITY AWARD FROM NPC TO TRACTOR DIVISION

    1993-1994SECOND BEST AWARD FROM NPC TO MACHINE TOOLS DIVISION

    1994-1995FIE / PMT CMTI TRUST AWARD IN IMTEX-95 FOR HMC-320 HM/C

    1995-1996HARYANA STATE AWARD FOR PROMOTION OF SMALL SCALE AND

    ACCILLARIES TO TRACTOR DIVISION

    1997-1998 FIE AWARD IN IMTEX-98 FOR HMC-400 EM/C TO MACHINE TOOL

    2000-2001 ISO-9001 CERTIFICATION FROM KEMA, HOLLAND

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    Structure of HMT tractors

    HMT TRACTORS

    MANUFACTURINGUNITS

    HMT TRACTORRSPINJORE HARYANA

    HMT TRACCTORSMOHALI, PUNJAB

    HMT TRACTORSHYDRABAD, A.P.

    MARKETINGDIVISION

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    VISION AND MISSION

    Our Corporate Vision Our Corporate Mission

    To establish ourselves as one of the worlds

    premier companies in the engineering field

    having strong international competitiveness

    To achieve market leadership in India

    through ensuring customer satisfaction by

    supplying internationally competitive products

    and services

    To achieve sustained growth in the earnings

    of the group on behalf of shareholders

    CORPORATE OBJECTIVES AND GOALS

    To encourage the modernization of Indian Industry through the supply of engineering

    goods and services of world class excellence To maintain technological leadership through continuous efforts to update product

    technology and manufacturing methods

    To globalize our operations by developing a mix of international markets and businesses

    To ensure a satisfactory return on capital employed, to meet the growth needs and the

    aspirations of our stakeholders.

    To present an active, pleasant and productive environment.

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    PRODUCTS AND SERVICES

    WATCHES

    The Mechanical Range

    Hand wound Gents & Ladies - Desh Ki Dhadkan

    Automatic Day-date- The Watch that lasts & lasts

    Series of Quartz Watches

    Elegance - Its all about YOU

    Roman - ONLY For MEN

    Utsav - The Well Dressed Watch

    Sangam - Absolutely Modern, Absolutely Indian

    Lalit- Value for Money, For those who value

    Money

    Pace - For cute faces

    Swarna- Good as Gold

    Shreyas - Sign of Good Times

    Chandan - The fragrance watch

    http://www.hmti.com/Html/Dsp_SubIndex.asp?sType=Whttp://www.hmti.com/Html/Dsp_SubIndex.asp?sType=Whttp://www.hmti.com/watches_gallery.htmlhttp://www.hmti.com/watches_gallery.htmlhttp://www.hmti.com/watches_gallery.htmlhttp://www.hmti.com/watches_gallery.htmlhttp://www.hmtindia.com/html/historyoftime.htmhttp://www.hmtindia.com/html/historyoftime.htmhttp://www.hmtindia.com/html/historyoftime.htmhttp://www.hmtindia.com/html/historyoftime.htmhttp://www.hmtindia.com/html/historyoftime.htmhttp://www.hmtindia.com/html/historyoftime.htmhttp://www.hmtindia.com/html/historyoftime.htmhttp://www.hmtindia.com/html/historyoftime.htmhttp://www.hmtindia.com/html/historyoftime.htmhttp://www.hmtindia.com/html/historyoftime.htmhttp://www.hmtindia.com/html/historyoftime.htmhttp://www.hmtindia.com/html/historyoftime.htmhttp://www.hmti.com/watches_gallery.htmlhttp://www.hmti.com/watches_gallery.htmlhttp://www.hmti.com/Html/Dsp_SubIndex.asp?sType=W
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    TRACTORS

    MODEL HP RANGE MAIN FEATURE

    2522 25 AVL fuel efficient engine & New Style Bonnet

    3022 30 Fuel efficient engine (HMT Design); New Style Bonnet

    3522 35 AVL adapted fuel efficient engine & New Style Bonnet

    5022 50 HMT Design

    6522 65 Heavy Duty Tractor

    7511 75 HMT Design; Power steering & ROPS

    2522 OS 25 Low height and width for orchard applications

    3522 CS 35 Wetland cultivation

    3522 DX 35 Direct Axle Drive

    6522 CS 65 Wetland cultivation

    4922 EDI 49 AVL adapted fuel efficient engine & New Style Bonnet

    ENGINES 25, 30, 35, 45 & 58 Gen-set & Commercial applications

    CS: Coastal Special DX: Direct Axle OS: Orchard Special

    http://www.hmti.com/Html/Dsp_SubIndex.asp?sType=Trhttp://www.hmti.com/Html/Dsp_SubIndex.asp?sType=Trhttp://www.hmti.com/Html/Dsp_SubIndex.asp?sType=Tr
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    1982 Watch Factory V Ranibagh Uttar Pradesh

    1982 Specialized Watch Case Division Bangalore Karnataka

    1983 Stepper Motor Division Tumkur Karnataka

    1985 Ball Screw Division Bangalore Karnataka

    1986 CNC Systems Division Bangalore Karnataka

    1991 Central Re-conditioning Division Bangalore Karnataka

    TRACTOR SPARE PARTS

    MANUFACTURING & OFFERING TRACTOR SPARE PARTS & ACCESSORIES FOR

    ALL TYPES OF TRACTORS MANTION BELOW :-

    MASSEY FERGUSON TRACTOR

    MAHINDRA & MAHINDRA TRACTOR

    SWARAJ TRACTOR

    EICHER TRACTOR

    ESCORT TRACTOR

    SONALIKA TRACTOR

    FORD TRACTOR

    ZETOR (HMT) TRACTOR

    NEW HOLLAND TRACTOR

    FARMTRAC TRACTOR

    POWETRAC TRACTOR

    ETC

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    Brake Drum for Zetor (HMT) Tractor

    BRAKE DRUM FOR ZETOR OR HMT TRACTOR

    we are the leading providers of comprehensive range of Brake Drum. These brake drums are

    manufactured by using high quality raw material which is procured from the reliable vendors. A

    Brake Drum is a brake in which the friction is caused by a set of shoes or pads that press against

    the inner surface of a rotating drum. The drum is connected to a rotating wheel. Our MAK

    Brake drums are well known for their flexibility, low maintenance and high operating speed and

    to deliver consistent performance.

    Brake Drums

    We are engaged into offering a brake drums for all tractors mf, ford, mahindra, swaraj,

    escort, eicher, hmt and others.

    Payment Terms: L/C (Letter of Credit), T/T (Bank Transfer), Other

    Front Wheel Hubs For All Tractors

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    Chapter-2

    REVIEW

    OF

    LITERATURE

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    REVIEW OF LITERATURE

    India is mainly an agricultural country. Agriculture in India is unique in its characteristics,where

    over 250 crops are cultivated in its varied agro-climatic regions, unlike 25-30 cropsgrown in

    many of the developed nations of the world. Tractors are part of agricultural machinery industry

    and forms an integral part of farm mechanization and plays a very crucial role in increasing

    productivity. Tractor is used for multitude of uses; it is used in agriculture for both land

    reclamation and for carrying outcultivation of various crops. It is also employed for carrying out

    various operations related to raising of crops by attaching suitable implements and to provide the

    necessary energy for performing various crop production operation involved in the production of

    agricultural crops.Tractors are capital intensive, labour displaying used as a mode of transport, inelectricitygeneration, in construction industry and for haulage operation.As a Green Revolution in the

    sixties, the total food grain production increased from a mere50.8 million tones during 1950-51

    to 217 million tons in 2009-10 and productivityincreased from 522 kg/ha to more than 1,500

    kg/ha. The increase in production of food grainswas possible as a result of adoption of quality

    seeds, higher dose of fertilizer and plant protection chemicals. Irrigation played a major role in

    increasing the productivity. Increasedcropping intensity and higher quantity of inputs can no

    longer be effectively managed byanimal power alone and, therefore, farmers adopted tractors,

    irrigation pumps, harvesters and power threshers extensively.

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    3.1 NATURE OF RESEARCH

    This research employed four type of research:

    Descriptive research.

    Analytical research.

    Qualitative research.

    Quantitative research.

    DESCRIPTIVE RESEARCH OR EX-POST FACT RESEARCH

    To conduct the research work accurately, we conducted descriptive research. It includes surveys

    and fact finding inquires of diff. Kinds.

    It is done to know following fact:

    The HMT sales are move influenced by quality.

    Frequency of using HMT product.

    Liking in respect of quality.

    Media for awareness of schemes.

    ANALYTICAL RESEARCH

    In it, we have to use facts and information already available and analysis these to make an

    evaluation for project.

    QUALITATIVE RESEARCH

    In selecting the approximate research design of the study and the type of data needed, the choice

    of data collection techniques is four grouped. It is done for:

    Consumers needs.

    Consumers preference for brand.

    In depth understanding of consumers.

    Availability for consumers.

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    QUANTITATIVE RESEARCH

    Quantitative research is obtained to rate the different aspect on parameters.

    Image of brand.

    Brand loyalty.

    Expectation of customers.

    Awareness among consumers for schemes

    3.2OBJECTIVE OF THE STUDY

    The main objective of ratio analysis is to show the firms relative strengths and weakness. The objectives of

    ratio analysis are as follows:

    It determines the financial condition and financial performance of the firm.

    It involves comparison for a useful interpretation of the financial statements

    It helps in finding solutions to unfavorable financial statements.

    It helps to take suitable corrective measures when the financial conditions and performance are unfavorableto the firm, in comparison to other firms in the same industry.

    The efficiency with which the firm is utilizing its various assets in generating sales.

    The overall operating efficiency and performance of the firm.

    3.3 SCOPE OF THE STUDY:

    This study is about the ratio analysis of HMT LIMITED, which is a part of financial analysis.

    Ratio analysis is perhaps the first financial tool developed to analyze and interpret the financial

    statement and is still used widely for this purpose.

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    The staff members were too bus in their audit work because our training period fallen in

    between their audit period. I could have gained a lot if they could have spared more time

    for me.

    Some officers were too busy to give a sincere response and hence their response may not

    relate to real picture.

    Other private players are entering into joint ventures with foreign partners. Thus these

    competitors are getting sophisticated technologies that HMT is not able to do.

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    CHAPTER4

    DATAANALYSIS&INTERP

    RETAION

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    RATIO ANALYSIS OF DATA OF HMT LTD.

    Ratio analysis is a means of better understanding of financial strengths & weaknesses of a

    concern. And hence, my study is based on the data related to last 4 years and all the financial

    analysis are made on the basis of these ratios only. These are as Follows:ANALYSIS OF

    SHORT TERM FINANCIAL POSITION OF

    HMT

    ANALYSIS OF LIQUIDITY RATIOS OF HMT LTD.

    Short term obligation of a concern can be met only if there is sufficient amount of liquid assets.

    Liquidity refers to the ability of a concern to meet its current obligations. These obligations can

    be met by current assets. Thus, liquid ratios indicate the ease of turning assets into cash. If

    current assets can pay off current liabilities then the liquid position will be satisfactory. On the

    other hand if current liabilities cannot be easily met out of current assets then liquidity position

    will be treated as bad.

    By interpreting these ratios we can determine the degree to which assets, which are quicklyconvertible into cash, exceed the liabilities which require almost immediate cash payments.

    These ratios are very useful to bankers, suppliers, other short-term creditors and all financial

    statements users.

    SHORT TERM FINANCIAL

    POSITION

    LIQUIDITY EFFICIENCY / ACTIVIRY

    RATIOS

    PROFITABILITY

    RATIOS

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    These liquid ratios are:-

    Current Ratio

    Quick Ratio

    Absolute Liquid Ratio

    A) CURRENT RATIO OF HMT LTD.

    It is a traditional ratio used to measure a companys liability and establishes the

    relationship between Current assets and Current liabilities.

    It indicates the general liquidity or short term financial position of a company. It is

    calculated by dividing total current assets by total current liabilities. An ideal current ratio is 2:1.

    The formula for calculating the ratio is:

    Current ratio = Current assets

    Current liabilities

    Where,

    CURRENT ASSETS = CASH + BANK + DEBTORS + SHORT-TERM INVESTMENTS +

    PREPAID EXPENSES + STOCK

    CURRENT LIABILITIES = CREDITORS + BANK OVERDRAFT + SHORT-TERM

    LOANS + OUTSATNDING EXPENSES + BILL PAYABLES

    COMPARISON OF CURRENT RATIOS OF HMT LTD.

    Year 2008-09 2009-10 2010-11 2011-12

    current assets 17562.05 16629.92 19433.19 19846.50

    Current

    liabilities

    12822.52 12561.91 15439.99 16160.56

    current ratio 1.36:1 1.32:1 1.26:1 1.23

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    B) QUICK RATIO OF HMT LTD.

    With the help of this ratio the capacity of the firm to pay off its current liabilities within a month

    or immediately is measured.

    This ratio expresses the relationship between the liquid assets and current liabilities. Liquidassets are those assets which can be converted into cash quickly without much loss of time and

    value.

    Quick ratio sometimes called Acid Test Ratio and is one of the best measures of liquidity. It

    is a supplementary test of the ability of a business to meet its current obligations. The quick ratio

    is much more an exact measure than current ratio, by excluding inventories and prepaid

    expenses. It concentrates on the really liquid assets, with values that are fairly certain.

    An ideal quick ratio is said to be 1:1. The idea is that for every rupee of current liabilities, there

    should be at least one rupee of liquid assets.

    Quick ratio = Liquid assets

    Current liabilities

    LIQUID ASSETS = CURRENT ASSETSPREPAID EXPENSESSTOCK

    LAST FOUR YAERS COMPARISON OF QUICK RATIOS OF HMT LTD.

    Year 2008-09 2009-10 2010-11 2011-12

    Liquid assets 13475.26 12604.93 15794.42 16467.76

    Current

    liabilities

    12822.52 12561.91 15439.99 1616056

    Quick ratio 1.05:1 1.003:1 1.0229:1 1.0191:1

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    GRAPH SHOWING LIQUID AND CURRENT ASSETS OF HMT

    .

    GRAPH SHOWING QUICK RATIOS OF HMT

    INTERPRETATION

    An acid test or quick ratio of 1:1 is considered satisfactory. As above diagram and calculation

    shows that quick ratio of HMT is more than 1:1. So it is satisfactory. But it is constantly

    decreasing. So it should be considered that it shouldnt declines.

    SUGGESTIONS

    Company should maintain the standard. It should not be more than that nor be less than

    standard ratio.

    Company should try to make good investments in short term assets.

    0

    5000

    10000

    15000

    20000

    2008-09 2009-10 2010-11 2011-12

    liquid assets

    current liabilities

    0.97

    0.980.99

    1

    1.01

    1.02

    1.03

    1.04

    1.05

    1.06

    2008-09 2009-10 2010-11 2011-12

    quick ratio

    quick ratio

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    GRAPH SHOWING ABSOLUTE LIQUID ASSETS AND CURRENT

    ASSETS OF HMT

    GRAPH SHOWING ABSOLUTE LIQUID

    RATIO

    INTERPRETATION

    As above calculation and diagram stated that absolute liquidity ratio is less than 0.5:1 and it is

    constantly decreasing. So it shows that there is inadequacy of cash and short-term securities.

    SUGGESTIONS

    Company should maintain the standard rate of this ratio.

    Company should try to reduce its liabilities.

    Absolute liquid ratio

    0

    0.05

    0.1

    0.15

    0.2

    0.25

    0.3

    2008-09

    2009-10

    2010-11

    2011-12

    Years

    Absolute liquidRatio

    ALR

    Absolute liquid assets/current liabilities

    0

    5000

    10000

    15000

    20000

    2008-

    092009-

    10

    2010-

    112011-

    12

    Years

    Absolute liquidAssets

    Current liabilities

    AL / CL

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    Formula to compute this ratio is:-

    Inventory turnover ratio = Cost of goods sold

    Average stock or inventory

    COST OF GOODS SOLD = OPENING STOCK + PURCHASES + DIRECT EXPENSES -

    CLOSING STOCK

    AVERAGE STOCK= (OPENING STOCK + CLOSING STOCK) / 2

    Inventory conversion period = Days in year

    Inventory turnover ratio

    LAST FOUR YEARS COMPARISON OF STOCK TURNOVER RATIO OF

    HMT LTD.

    Year 2008-09 2009-10 2010-11 2011-12

    COGS 12982.2 17918.1 21854.44 20312.77

    Average Inventory 4195.88 4055.89 3831.88 3408.75

    Invtry. Turnoverratio 3.09:1 4.41:1 5.70:1 5.96:1

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    GRAPH SHOWING COST OF GOODS SOLD & AVERAGE INVENTORY

    OF HMT

    GRAPH SHOWING STOCK TURNOVER RATIO

    INTERPRETATION

    The conversion of stock into sales is measured by inventory turnover ratio. As above calculation

    and diagram shows that inventory turnover ratio of HMT is not satisfactory it is decreasing

    continuously but last few years it is increasing. It means we are able to effective utilization of

    inventory.

    SUGGESTIONS

    Company should take care of stock turnover ratio and try to increase it.

    Company should decrease its conversion period.

    Inventory turnover ratio

    0

    12

    3

    4

    5

    6

    7

    2008-09

    2009-10

    2010-11

    2011-12

    Year

    Inventory turnoverRatio

    COGS/Average inventory

    0

    5000

    10000

    15000

    20000

    25000

    2008-09

    2009-10

    2010-11

    2011-12

    Years

    COGS

    AverageInventory

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    B) DEBTOR TURNOVER RATIO OF HMT LTD.

    This ratio indicates the speed with which the amount is collected from debtors. The higher the

    ratio, the better it is, since it indicates that amount from debtors is being collected more quickly.

    A lower debtor turnover ratio will indicate the inefficient credit sales policy of the management.It means that credit sales have been made to customer who does not deserve much credit.

    Trade debtors are expected to be converted into cash within a short period and are included in

    current assets. Hence, the liquidity position of a concern to pay its short term obligations in time

    depends upon the quality of its trade debtors. Two kinds of ratios can be computed to evaluate

    the quality of debtors:-

    Debtors Turnover Ratio

    Average Collection Period

    Formula for its computation is:-

    Debtors Turnover Ratio = Net credit sales

    Average debtors

    NET CREDIT SALES = TOTAL CREDIT SALESRETURN INWARDS

    AVERAGE DEBTORS = (OPENING DEBTORS + CLOSING DEBTORS) / 2

    LAST FOUR YEARS COMPARISON OF DEBTORS TURNOVER RATIO

    OF HMT (All amount in Lakhs)

    Years 2008-09 2009-10 2010-11 2011-12

    Net credit sales 13536.4 19472.39 24460.57 22214.08

    Average Debtors 12918.12 9964.48 11307.53 13015.99

    Debtor turnover ratio 1.047:1 1.954:1 2.16:1 1.71:1

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    DEBTOR COLLECTION PERIOD

    This ratio shows the time in which the customer is paying for credit sales. Increase in

    this ratio indicted the excessive blockage of funds with debtors; increase the chances of bad

    debts. On the other hand, if there is a decrease in debts collection period, it indicates promptpayment by debtors, which reduces the chances of bad debts.

    Average Collection Period = No. of days in a year

    Debtors turnover ratio

    LAST FOUR YEAR COMPARISON OF DEBTOR COLLECTION PERIOD

    OF HMT LTD.

    Year 2008-09 2009-10 2010-11 2011-12

    Debtor collection period 348 187 169 213

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    GRAPH SHOWING AVERAGE COLLECTION PERIOD OF HM

    INTERPRETATION

    As the calculation and diagram shows the debtor collection of HMT Ltd. Is high which indicates

    the blockage of fund in debtors, which increases the chances of bad debts

    SUGGESTIONS

    Company should decrease the credit period which is allowed to the customers. Company should increase those schemes by which they can collect money easily and

    soon.

    It can also implement discount schemes.

    Debtor collection period

    0

    50

    100

    150

    200

    250

    300

    350400

    2008-09

    2009-10

    2010-11

    2011-12

    Year

    Debtor collectionPeriod

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    GRAPH SHOWING COGS & WORKING CAPITAL OF HMT

    GRAPH SHOWING WORKING CAPITAL TURNOVER RATIO

    INTERPRETATION

    This ratio also indicate the weak position of working capital but as compare to 2008-09,present position of working capital ratio in HMT is much better. So this ratio indicates the under

    utilization of working capital.

    SUGGESTIONS

    Company should try to improve its working capital management.

    0

    1

    2

    3

    4

    5

    6

    2008-09 2009-10 2010-11 2011-12

    working capital turnover ratio

    working capital turnover ratio

    Working capital

    0500

    100015002000250030003500400045005000

    2008-

    09

    2009-

    10

    2010-

    11

    2011-

    12

    Years

    Working capital

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    ANALYSIS OF PROFITABILITY RATIO OF HMT LTD

    Profitability is a measure of efficiency and control. Earnings of more and more profits with the

    optimum utilization of available resources of business are called profitability. It expresses

    efficiency and effectiveness of business with which business has been operated. All parties to aconcern whether outsiders or insiders to the business are interested in the profitability of the

    business.

    Profitability of a business is generally represented by its net profits.

    NET PROFIT RATIO OF HMT LTD.

    Net profit ratio establishes a relationship between net profit and sales. Sales provide a primary

    appraisal of net profits related to investments. It indicates the efficiency of the management in

    manufacturing, selling, administrative and other activities of the firm. This ratio is overall

    measure of firms profitability.

    Formula for the computation of net profit ratio is:-

    Net profit Ratio = Net profit

    Net sales

    LAST FOUR YEARS COMPARISON OF NET PROFIT RATIO OF HMT

    LTD.(Amount in Lakhs)

    Year 2008-09 2009-10 2010-11 2011-12

    Net profit (5108.84) (3297.59) (3196.83 (4222.50)

    Net sales 13536.4 19472.39 24435.96 21963.21

    Net profit ratio (37.74%) (16.93%) (13.1%) (19.1%)

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    GRAPH SHOWING PROFIT/LOSS & NET SALES OF HMT

    GRAPH SHOWING NET PROFIT RATIO

    INTERPRETATION

    Above diagram and calculation shows that HMT Ltd is suffering from losses continuously. It is

    very critical situation. But after2008-09 the loss ratio is decreasing it shows that HMT is in better

    condition from the previous situation. A lot if amount is blocked in inventories and creditors.

    Management should consider of there things so that HMT will again come back in its profit

    Net profit ratio

    -40.00%

    -35.00%

    -30.00%

    -25.00%

    -20.00%

    -15.00%

    -10.00%

    -5.00%

    0.00%

    2008-

    092009-

    102010-

    112011-

    12

    Years

    Net profit ratio

    P & L / Net sales

    -10000

    -5000

    0

    5000

    10000

    15000

    20000

    2500030000

    2008-09 2009-10 2010-11 2011-12

    Years

    Net profit

    Net sales

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    CHAPTER-5

    FINDINGS &

    SUGGESTIONS

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    5.1 FINDINGS:

    In the year2005-06 the ratio has been increased to 2.38 but it has comedown to 1.60 in the year 2006-

    07. Hence the company must takenecessary measures to meet standard ratio.

    The working capital turnover ratio has decreased to 3.36 in the year 2006-07 when compared to the

    base year 2004-05 which indicates that the ratiois not satisfactory.

    .The fixed asset turnover ratio has been increased in the year 2005-06when compared to base year i.e.

    2004-05 but it has got down in the year 2006-07. Hence the company must utilize the assets efficiently.

    The debt equity ratio has decreased gradually during the 3 years. So thecompany must repay the

    borrowings within given time.

    The proprietary ratio has increased in 3 years. Hence, the long termsolvency is satisfactory.

    Gross profit ratio is increased to 64.95 in the year 2006-07 whencompared to the year 2004-05. Hence,

    the gross profit ratio is highlysatisfactory.

    The net profit ratio is also highly satisfactory. By this the company canenjoy huge profits and it al so

    indicates growth trend of the company.

    The operating ratio is favorable because it has crossed 100%.

    The return share holders fund has increased gradually which measure its profitability from the

    shareholders point of view.

    The increase in return on equity indicates that the company is performing well and the equity share

    holders can get back high returns. This helps the company to gain popularities.

    The return on assets has increased gradually which shows the unfavorab le situation for the company.

    Hence the total assets must beutilized effectively.

    The companys cash profit ratio was gone down to 34.95 in the year 2005-06 when compared to base

    year. But the company has taken measures to change the depreciation method which has led the

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    5.2 Suggestions:

    In HMT collection period is very high which may result in bad debts for company. So it

    should be controlled.

    HMT needs to reduce payment period so that company should pay debt in time & credit

    worthless in not spoiled.

    No purchases should be made till stock is disposed off.

    Worker participation in management should be encouraged. Training should be given to

    them so as to make them aware of new technologies.

    Input Output ratio should be increased.

    Vendor development should be corrected.

    Optimum utilization of Man- Power The product of HMT is good. But main problem is related to inadequacy of funds. So

    management should stress on sufficient funds, so that supply can be according to

    demand.

    Advertising budget of Rs.2crore in HMT is as follows

    Press 40%

    Outdoor 30%

    Print 10%

    Exhibition 20%

    So abovebudget states that there is no place for electronic media i.e. T.V, Radio,

    advertisement. So HMT Ltd. should plan for electronic media because these days electronic

    media has major place in advertisements.

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    BIBILIOGRAPHY

    1. Sharma, R.K., and Gupta, Shashi K., Management Accounting and Business Finance,

    New Delhi, Kalyani Publishers, Eleventh Edition, 2001.

    2. Pandey, I.M. Financial Management,New Delhi Vikas Publishing house.

    3. Ramachandran, N, and Kalkani, Ram Kumar, Financial AccountingForManagement, New

    Delhi, Tata McGraw Hill

    4. D. K. Goel, Rajesh Goel, Shelly Goel, Management Accounting and

    FinancialManagement, New Delhi, Avichal Publishing Company.

    5. Cooper, Donald R-and Pamels Schindler, Business Research Methods, TataMcGraw Hills, New Delhi.

    6. Kothari , C.R., Research Methodology

    BOOKS

    Research Methodology by C.R.Kothari

    Marketing Research by D.D Sharma

    Financial management by I.M Pandey

    WEBSITES

    www.hmttractor.org

    www.google.com

    www.wikipaedia.org

    www.google.com

    123oye.com

    www.wikipedia.comb i li

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