working capital management

INTRODUCTION
FINANCIAL MANAGEMENT:
Management of funds is an important aspect of Financial Management.
Management of funds act as the primary concern whether it may be in a business
undertaking or in an educational institution. Financial Management, which is simply meant
dealing with Management of money matters.
Financial Management is that managerial activity concerned with a planning and
controlling of the firm's financial resources. It was a branch of economics till 1890, and as a
separate discipline, it is of recent origin. Still it has no unique body of knowledge of its own
and draws heavily on economics for its theoretical concepts even today.
The subject of financial management is of immense interest to both academicians and
practicing managers. It is a great interest to academicians because the subject is still
developing and there still certain areas where controversies exist for which no unanimous
solutions have been reached as yet practicing managers are interested in this subject because
among the most crucial decisions of the firm are those which relate to finance and an
understanding of the theory of financial management provides them with conception and
analytical insights to make those decisions skillfully
DEFINITION:
According to Phillippatus, “Financial Management is concerned with the Manage
trial decisions that results in the acquisition and financing of short term and long term credits
for the firm”.
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SCOPE OF FINANCE FUNCTIONS:-
Three most important activities of business firm are
 Finance
 Production
 Marketing
The firm secures capital it needs and employ in its activities which generates returns
on invested capital. A business firm is and entity that engages in activities to perform the
functions of finance, production and Marketing.
The raising of capital funds and using them for generating returns and paying returns
to the supplies of funds is called the finance function of the firm. The main function of the
financial managers is to plan for analyzing and utilizing funds to make the maximum
contribution for the operation of the organization.
It realizes knowledge of the financial market from which the funds are drawn; it
realizes knowledge of how to make sound investment decisions and to simulate efficient
operations on the organization. A large number of alternate choices involved in financial
decisions. The choices include the use of internal resources, external funds and long-term
funds.
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FUNCTIONS OF FINANCE
 Investment decisions
 Working capital Management
 Financing decisions
 Dividend policy decisions
 Liquidity decisions
Investment decisions (or) capital budgeting involve the decision of allocation of
capital or commitment of funds to long – term assets that would yield benefits in the future.
Tow importance aspects of the investment decision are:
 The evaluation of the prospective profitability of new investments.
 The measurement of a cut–off against that the prospective return of new
investment could be compared.
Financial Decision is the important function to be performed by financial manager.
He must strive to obtain the best financing mix or the optimum capital structure of the firm.
The firm’s capital structure is considered to be optimum when the market value of shares is
maintained.
Dividend decision deals whether the firm should distribute all profits or distribute a
portion and retain the balance. The optimum dividend policy is one that maximizes the
marker value of the firm’s shares.
Liquidity decision shows the current assets of the firms and its movement.
Investment in current assets affects the firm’s profitability liquidity and risk. A conflict
exists between profitability and liquidity while managing current assets. In order to ensure
that neither insufficient nor unnecessary funds are invested in current assets. The financial
manager should develop sound techniques.
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FUNDS FLOW STATEMENT
INTRODUCTION:
The basic financial statements i.e., the Balance Sheet and Profit & Loss A/c or
Income Statement of business reveals the net effect of various transactions on operational
and financial position of the company. The balance sheet gives a summary of the assets &
liabilities of an undertaking at a particular point of time.
There are many transactions that take place in an undertaking and which do not operate
Profit & Loss A/c. Thus another statement has to be prepared to show the change in Assets
& Liabilities from the end of one period of time to the end of another period of time. The
statement is called a statement of changes in financial position or a Funds Flow Statement.
The Funds Flow Statement is a statement which shown the movement of funds and is
a report of financial operations of business undertaking. In simple words it is a statement of
source and application of funds.
MEANING & CONCEPT OF FUNDS
The term “Fund” has been defined and interpreted differing by different experts.
Broadly the term fund refers to all the financial resource of the company on the other
extreme fund has been understood as cash only. The most acceptance meaning of the “fund”
is “working capital”.
Working capital is excess of current assents over current liability.
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THE TERM FUND HAS A VARIETY OF MEANING.
A) CASH FUND OR NARROW SENSE
In a narrow sense, funds mean only cash. ‘Cash flow statement portrays net effect of
various business transactions cash into account receipts & disbursement of cash. The concept
of preparing funds from statement is not accepted, as there are many such transactions that
do not affect cash but represent the flow of fund.
For Ex: Purchase of furniture on credit does not affect cash but there is flow of fund.
B) CAPITAL FUND (or) BROADER SENSE:
Here funds means all financial resources used in business, whether in the form of
men, money, material, machine & others.
C). NET WORKING CAPITAL (or) POPULAR SENSE
Networking capital means differences between current assets & liabilities. A fund
generally refers to cash or cash equipment or to working capital. In any business we cannot
under estimate the flow of funds from two operations. The business runs with funds but the
organization knows how to flow of funds.
The Funds Flow Statement is concerned with sources and applications of
organization. Statement of changes in working capital shows the increase or decrease in the
working capital.
“Funds from Operations” statement shows how much funds from operations.
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NEED AND IMPORTENCE OF STUDY
Many business owners disregard the importance of Funds flow statements because
they unwittingly believe that their current financial standing can be construed from other
financial reports and projections. Unfortunately, however, a Funds flow statement is
necessary to adequately assess the incoming and outgoing flow of Funds and other resources
in a business.
Not only will a business owner with a Funds flow system be more aware of his or her
financial standing, but it will also help investors to make educated decisions on future
investments. A business with regular and reliable Funds flow statements shows more
economic solvency, and is more attractive to investors.
A Funds flow statement documents the incoming and outgoing Funds in plain terms.
Future sales and sales made for credit (unless they have been paid off) are not included in the
Funds flow statement, and most of the data will come from core operations. Payables and
receivables should be expressly defined, as should depreciation of product value and
inventory that has not yet been moved. This will allow a business owner to compare past
periods with the current financial standing and determine whether your receivables have
increased or decreased.
This can also help to track your investments next to your receivables and payables.
Are your investments increasing or decreasing in value? And has your inventory moved at a
steady pace? New or expanding businesses can expect to see a decrease in Funds flow, but
this doesn’t mean that the business is going under. More stables businesses should see a
steadily increase in Funds flow over a period of several months or years. There are typically
five different sections in a Funds flow statement, though large businesses might have more
complex Funds flow systems as required.
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OBJECTIVES OF THE STUDY
 To know the operational efficiency of hero monocarp ltd limited (phoenix motors
pvt ltd)
 To study & prepare Funds Flow Statements.
 To analyze the movement of funds between the dates of two balance sheets in period
of study 2009-2013.
 To identify the changes in the elements of focus and uses of working capital in
between above mentioned year.
To improve the financial performance of the company.
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RESEARCH METHODOLOGY
PRIMARY DATA:
The present study is mainly based on primary and secondary sources of Data collection.
The primary data was directly collected by observations, Interviews questionnaire etc.
SECONDARY DATA:
The secondary data was collected form already published sources such as annual reports,
returns and internal records.
THE DATA COLLECTION INCLUDES:
a. Data collected from annual reports of hero motorcar ltd (phoenix motors pvt ltd).
b. Reference form textbooks relating to financial management.
RESEARCH TOOLS:
Various statistical tools such as percentages averages were used to process the date, of
effectiveness of funds flow in organization & management in Hero MotoCorp Ltd (phoenix
motors pvt ltd).
Research Design: Analytical Study
Data Sources : Secondary Data
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SCOPE OF THE STUDY
Financial analysis consists of ratio analysis and funds flow analysis. To know funds
flow from one to one, as the time available is very li8mite3d and the subjects are very vast,
the study is continued to overall financial condition of a firm. This study is to know working
capital increase or decrease funds from operation, sources and application of funds of m/s
hero motorcar ltd (phoenix motors pvt ltd).
Financial analysis consists of funds flow analysis. To know funds flow from one to
one, as the time available is very limited and study is continued to over all financial
condition of a firm. The study to know working capital increase or decrease, funds from
operation, source and application of funds
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LIMITATIONS OF THE STUDY
 The study is only pertaining to Hero MotoCorp ltd (phoenix motors pvt ltd).
 The period of study is of 5 years and the performance evaluation is also
limited to 5 years.
 The study is purely based on the data available the form of annual reports..
.
 Analysis is only means and not an end itself; different people interpret the
same analysis in different ways.
 The over all financial performance is taken into consideration with out taking
into account the minute values or individual values.
This study is conducted with in a short period. The time factor is also a limitation.
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ORGANIZATION OF THE STUDY
Organization of the study deals with the arrangement of the entire study
Chapter-I:
It Deals with need and Importance, Object of the study and scope of the study and
also the methodology of the study and limitations of the study.
Chapter-II:
 Present frame work regarding research design of the study
 Explore a study on funds flow statement in hero motorcar ltd (phoenix motors pvt
ltd), Hyderabad.
Chapter-III:
 The profile of the company: It explains the total process of organization and also the
history including the future in the organization
Chapter-IV:
Data Analysis and Interpretation: It explains the total Practical analysis of our raw data given
by the organization with the help of formulas and theory’s.
Chapter-V:
 Highlight summary of findings and conclusions
 Offer suggestions and recommendations
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CHAPTER-II
INDUSTRY PROFILE& COMPANY PROFILE OF
AUTOMOBILE INDUSTRY IN INDIA:
The cumulative production data for April-March 2012 shows production growth of
13.83 percent over same period last year. In March 2012 as compared to March 2011,
production grew at a single digit rate of 6.83 percent. In 2011-12, the industry produced
20,366,432 vehicles of which share of two wheelers, passenger vehicles, three wheelers and
commercial vehicles were 76 percent, 15 percent, 4 percent and 4 percent respectively.
DOMESTIC SALES
The growth rate for overall domestic sales for 2011-12 was 12.24 percent amounting
to 17,376,624 vehicles. In the month of only March 2012, domestic sales grew at a rate of
10.11 percent as compared to March 2011.
Passenger Vehicles segment grew at 4.66 percent during April-March 2012 over
same period last year. Passenger Cars grew by 2.19 percent, Utility Vehicles grew by 16.47
percent and Vans by 10.01 percent during this period. In March 2012, domestic sales of
Passenger Cars grew by 19.66 percent over the same month last year. Also, sales growth of
total passenger vehicle in the month of March 2012 was at 20.59 percent (as compared to
March 2011). For the first time in history car sales crossed two million in a financial year.
The overall Commercial Vehicles segment registered growth of 18.20 percent during
April-March 2012 as compared to the same period last year. While Medium & Heavy
Commercial Vehicles (M&HCVs) registered a growth of 7.94 percent, Light Commercial
Vehicles grew at 27.36 percent. In only March 2012, commercial vehicle sales registered a
growth of 14.82 percent over March 2011.
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Three Wheelers sales recorded a decline of (-) 2.43 percent in April-March 2012 over same
period last year. While Goods Carriers grew by 6.31 percent during April-March 2012,
Passenger Carriers registered decline by (-) 4.50 percent. In March 2012,
Total Three Wheelers sales declined by (-) 9.11 percent over March 2011.Total Two
Wheelers sales registered a growth of 14.16 percent during April-March 2012. Mopeds,
Motorcycles and Scooters grew by 11.39 percent, 12.01 percent and 24.55 percent
respectively. If we compare sales figures of March 2012 to March 2011, the growth for two
wheelers was 8.27 percent.
EXPORTS:
During April-March 2012, the industry exported 2,910,055 automobiles registering a
growth of 25.44 percent. Passenger Vehicles registered growth at 14.18 percent in this
period. Commercial Vehicles, Three Wheelers and Two Wheelers segments recorded growth
of 25.15 percent, 34.41 percent and 27.13 percent respectively during April-March 2012. For
the first time in history car exports crossed half a million in a financial year.
In March 2012 compared to March 2011, overall automobile exports registered a
growth of 17.81 percent.
HISTORY OF THE TWO WHEELERS:
The Britannica Encyclopedia a motorcycle as a bike or tricycle propelled by an
internal –combustion engine (or, less often by an electric engine). The automobile was the
reply to the 19th
–century reams of self-propelling the horse-drawn bikeriage. Similarly, the
invention of the motorcycle created the self –propelling bicycle. The first commercial
design was three-wheeler built by Edward Butler in Great Britain in 1884. This employed a
horizontal single-cylinder gasoline engine mounted between two steer able front wheels and
connected by a drive chain to the rear wheel. The 1900s saw the conversion of many
bicycles or pedal cycles by adding small, centrally mounted spark ignition engine engines.
There was then felt the need for reliable constructions. This led to road trial tests and
competition between manufacturers. Tourist Trophy (TT) races were held on the Isle of
main in 1907 as reliability or endurance races. Such were the proving ground for many new
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ideas from early two-stroke-cycle designs to supercharged multivalent engines mounted on
aerodynamic, bike on fiber reinforced bodywork.
INVENTION OF TWO WHEELERS:
The invention of two wheelers is a much-debated issue. “Who invented the first
motorcycle?” May seem like a simple question, “safety”, bicycle, i.e., bicycle with front
and rear wheels of the same size, with a pedal crank mechanism to drive the rear wheel.
Those bicycles in turn described from high-wheel bicycles. The high –wheelers descended
from an early type of pushbike, without pedals, propelled by the rider’s feet pushing against
the ground. These appeared around 1800, used iron banded wagon wheels, and were called
“bone-crushers”, both for their jarring ride, and their tendency to toss their riders. Gottiieb
Daimler (who credited with the building the first motorcycle in 1885, one wheel in the front
and one in the back, although it had a smaller spring-loaded outrigger wheel on each side. It
was constructed mostly of wood, the wheels were of the iron-banded wooden-spooked
wagon-type and it definitely had a “bone-crusher” chassis!
FURTHER DEVELOPMENTS:
Most of the developments during the early phase concentrated on three and four-wheeled
design since it was complex enough to get the machines running with out having to worry
about them falling over. The next notable two-wheeler though was the Hildebrand & Wolf
Mueller, patented in Munich in 1894. In 1895, the French firm of Deion-button built and
engine that was to make the mass production and common use of motorcycle possible. The
first motorcycle with electric start and a fully modem electrical system; the Hence special
from the Indian Motorcycle Company astounded the industry in 1931. Before World War 1,
IMC was the largest motorcycle manufacturer in the world producing over 20000 bikes per
year.
INCREASING POPULARITY:
The popularity of the vehicle grew especially after 1910, in 1916; the Indian
motorcycle company introduced the model H racer, and placed it on sale. During World
War 1, all branches of the armed forces in Europe used motorcycles principally for
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dispatching. After the war, it enjoyed a sport vogue until the Great Depression began in
motorcycles lasted into the late 20th
century; weight the vehicle being used for high-speed
touring and sport competitions. The more sophisticated of a 125cc model. Since then, an
increasing number of powerful bikes have blazed the roads.
HISTORICAL INDUSTRY DEVELOPMENTS:
Indian is the second largest manufacturer and producer to two wheelers in the World.
It stands next only to Japan and China in terms of the number of V produced and domestic
sales respectively. This destination was achieved due to variety of reason like restrictive
policy followed by the government of India towards the passenger bike industry, rising
demand for personal transport, inefficiency in the public transportation system etc. The
Indian two-wheelers industry made a small beginning in the early 50s when Automobile
products of India (API) started manufacturing scooters in the country. Until 1958, API and
Enfield were the sole producers.
The two –wheelers market was opened were opened to foreign competition in the
mid-80s. And the then market leaders-Escorts and Enfield – were caught unaware by the
onslaught of the 100cc bikes of the four Indo- Japanese joint ventures. With the availability
of fuel-efficiency low power bikes, demand swelled, resulting in Hero Honda –then the only
producer of four stroke bikes (100cc category), gaining a top slot.
The first Japanese motorcycles were introduced in the early eighties. TVS Suzuki
and Hero Honda brought in the first two-stroke and four-stroke engine motorcycles
respectively. These two players initially started with assembly of CKD Kits, and later on
progressed to indigenous manufacturing.
The industry had a smooth ride in the 50s, 60s and 70s when government prohibited
new entries and strictly controlled capacity expansion. The industry saw a sudden growth in
the 80s. The industry witnessed a steady of 14% leading to a peak volume of 1.9 mn
vehicles in 1990.
In 1990 the entire automobile industry saw a drastic fall in demand. This resulted in a
decline of 15% in 1991 and 8% in 1992, resulting in a production loss of 0.4mn vehicles.
Barring Hero Honda, all the major producers suffered from recession in FY93 and FY94.
Hero Honda showed a marginal decline in 1992.
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The reason for recession in the sector were the incessant rise in fuel prices, high input
costs and reduced purchasing power due to significant like increased production in 1992, due
to new entrants coupled with recession in the industry resulted in companies either reporting
losses or a fall in profits.
CONCLUSION:
The two-wheelers market has had a perceptible shift from a buyers market to a sellers
market with a variety of choice, players will have compete on various fronts viz. pricing,
technology product design, and productivity after sale service, marketing and distribution.
In the short term, market shares of individual manufacturers are going to be sensitive to
capacity, product acceptance, pricing and competitive pressures from other manufacturers.
As incomes grow and people grow and people feel the need to own a private means of
transport, sales of two-wheelers will rise. Penetration is expected to increase to
approximately to more than 25% by 2005.
The motorcycle segment will continue to lead the demand for two-wheelers in the
coming years. Motorcycle sale is expected to increase by 20% yoy as compared to 1%
growth in the scooter market and 3% by moped sales respectively for the next two years.
The four-stroke scooters will add new dimension to the two-wheeler segment in the coming
future.
The Asian continent is that largest user of the two-wheelers in the world. This is due to poor
road infrastructure and low per capita income, restrictive policy on bike industry. This is due
to oligopoly between top five players in the segment, compared to thirsty manufacturers in
the bike industry.
Hero Honda motors LTd., is one of the leading companies in the two-wheeler
industry. At present it is the market leader in the motorcycle segment with around 47% the
market share during FY 2000 –01. During the year, company posted a 41.15% yoy rise in
turnover to Rs.31, 686.5mn in motorcycles which driven by a 35.17% yoy rise in Motorcycle
sales volumes. The company has emerged as one of the most successful players, much ahead
of its competitions an account of its superior and reliable product quality complemented with
excellent marketing techniques. The company has been consistently addressing the growing
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demand for motorcycles and has been cumulative customer base of over 4 million customers,
which is expected to reach 5min mark with rural and semi-urban segment being the new
class of consumers.
CHAPTER-III
COMPANY PROFILE:
Hero Motorcar Ltd. (Formerly Hero Honda Motors Ltd.) is the world's largest
manufacturer of two - wheelers, based in India. In 2001, the company achieved the coveted
position of being the largest two-wheeler manufacturing company in India and also, the
'World No.1' two-wheeler company in terms of unit volume sales in a calendar year. Hero
MotoCorp Ltd. continues to maintain this position till date. Today, every second motorcycle
sold in the country is a Hero bike. Every 30 seconds, someone in India buys Hero's top-
selling motorcycle – Splendor.
Vision:
The story of Hero Honda began with a simple vision - the vision of a mobile and an
empowered India, powered by its two wheelers. Hero MotoCorp Ltd., company's new
identity, reflects its commitment towards providing world class mobility solutions with
renewed focus on expanding company's footprint in the global arena.
Mission:
Hero MotorcarPS mission is to become a global enterprise fulfilling its customers'
needs and aspirations for mobility, setting benchmarks in technology, styling and quality so
that it converts its customers into its brand advocates. The company will provide an engaging
environment for its people to perform to their true potential. It will continue its focus on
value creation and enduring relationships with its partners
Strategy:
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Hero MotorcORPS’s key strategies are to build a robust product portfolio across
categories, explore growth opportunities globally, continuously improve its operational
efficiency, aggressively expand its reach to customers, continue to invest in brand building
activities and ensure customer and shareholder delight.
Manufacturing:
Hero Motorcar two wheelers are manufactured across 3 globally benchmarked
manufacturing facilities. Two of these are based at Gurgaon and Dharuhera which are
located in the state of Haryana in northern India. The third and the latest manufacturing plant
is based at Hardwar, in the hill state of Uttrakhand.
Technology:
In the 1980’s Hero Honda pioneered the introduction of fuel-efficient, environment friendly
four-stroke motorcycles in the country. Today, Hero Honda continues to be technology
pioneer. It became the first company to launch the Fuel Injection (FI) technology in Indian
motorcycles, with the launch of the Glamour FI in June 2006.
Products:
Hero Honda's product range includes variety of motorcycles that have set the industry
standards across all the market segments. The company also started manufacturing scooter in
2006. Hero Honda offers large no. of products and caters to wide variety of requirements
across all the segments.
Distribution:
The Company's growth in the two wheeler market in India is the result of an intrinsic ability
to increase reach in new geographies and growth markets. Hero MotoCorp’s extensive sales
and service network now spans over to 6000 customer touch points. These comprise a mix of
authorized dealerships, service & spare parts outlets and dealer-appointed outlets across the
country.
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BRAND
The new Hero is rising and is poised to shine on the global arena. Company's new
identity "Hero MotoCorp Ltd." is truly reflective of its vision to strengthen focus on mobility
and technology and creating global footprint. Building and promoting new brand identity
will be central to all its initiatives, utilizing every opportunity and leveraging its strong
presence across sports, entertainment and ground-level activation
GREEN IT
A MISSION TO MAINTAIN HIGH ECOLOGICAL STANDARDS
Target Key Areas for Maximum Impact
Though according to some estimates today IT contributes to around 2-3% of Global
Carbon Emissions and we need to control that, IT has the potential and power to impact the
remaining 97-98% as well. The critical element in this entire journey is the Green IT
intervention strategy where everyone agrees on plan on areas where IT could influence the
environment.
Actions Speak Louder Than Plans
Here are some Green IT Initiatives that we have taken or are underway at Hero MotoCorp:
1. Green IT as a focus area in the IT Policy
2. New, energy efficient datacenter with power management features
3. Virtualization and server consolidation
4. Use of TFTs in place of CRTs for displays
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5. Reduction of printers
6. Video conferencing / Collaboration tools - to reduce travel
7. Buying of energy certified equipment - replacing old inefficient equipment
8. Creating Awareness in organization
9. Usage of e-learning to reduce trainee or trainer travel
10. New IT initiatives to cut paper consumption such as;
Reaping Benefits:
Implementing Green IT initiatives benefits not only the environment but the enterprise as
well. Here are some positive outcomes that we saw after embarking on our Green IT
mission: Focus on Green IT provided excellent means for opportunity to care for the society
and environment
1. For the employees, it gave a sense of satisfaction and ownership as they feel that they
are also trying to contribute at their level in saving the environment
2. Many initiatives also helped to improve productivity in the organization - e.g. video
conferencing, workflow automation, customer loyalty program automation,
electronic transfer of funds, digital signatures etc
3. Green IT has helped the IT team in day to day management - e.g. number of servers
to be managed reduced as we used virtualization, or number of printers to be
managed have reduced
4. There were direct savings in power consumption and cost thereof - whether at
datacenter or at user end it was not just considering power consumption by
equipment but also considering lower heat generation as the room requires reduced
air-conditioning.
5. Other savings include space, power and administrative cost savings at the datacenter,
reduced paper consumption costs, etc.
Today doing our bit for protecting the environment is something that touches every heart at
Hero MotoCorp and each and every employee is trying to contribute to this initiative for a
cleaner, greener planet.
HERO'S MANDATE;
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Hero is a world leader because of its excellent manpower, proven management, extensive
dealer network, efficient supply chain and world-class products with cutting edge technology
from Company, Japan. The teamwork and commitment are manifested in the highest level of
customer satisfaction, and this goes a long way towards reinforcing its leadership status
BRIEF PROFILE OF DIRECTORS:
Mr. Brijmohan Lall Munjal is the founder Director and Chairman of the Company
and the $ 3.2 billion Hero Group. He is the Past President of Confederation of Indian
Industry (CII), Society of Indian Automobile Manufacturers (SIAM) and was a Member of
the Board of the Country's Central Bank (Reserve Bank of India). In recognition of his
contribution to industry, Mr. Munjal was conferred the Padma Bhushan Award by the Union
Government.
Mr. Brijmohan Lall Munjal is currently on the board of the following companies:
No. Name of Company Nature of Office
1 Hero Honda Motors Limited Chairman and Whole-time Director
2 Hero Honda Finlease Limited Chairman and Director
3 Munjal Showa Limited Chairman and Director
4 Easy Bill Limited Director
5 Rockman Industries Limited Director
6 Shivam Autotech Limited Director
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KEY MILESTONES OF HERO HONDA
Year Event
1983 Joint Collaboration Agreement with Honda Motor Co. Ltd. Japan signed
Shareholders Agreement signed
1984 Hero Honda Motors Ltd. incorporated
1985 First motorcycle "CD 100" rolled out
1987 100,000th motorcycle produced
1989 New motorcycle model - "Sleek" introduced
1991 New motorcycle model - "CD 100 SS" introduced
500,000th motorcycle produced
1992 Raman Munjal Vidya Mandir inaugurated - A School in the memory of founder Managing
Director, Mr. Raman Kant Munjal
1994 New motorcycle model - "Splendor" introduced
1,000,000th motorcycle produced
1997 New motorcycle model - "Street" introduced
Hero Honda's 2nd manufacturing plant at Gurgaon inaugurated
1998 2,000,000th motorcycle produced
1999 New motorcycle model - "CBZ" introduced
Environment Management System of Dharuhera Plant certified with ISO-14001 by DNV
Holland
Raman Munjal Memorial Hospital inaugurated - A Hospital in the memory of founder Managing
Director, Mr. Raman Kant Munjal
2000 4,000,000th motorcycle produced
Environment Management System of Gurgaon Plant certified ISO-14001 by DNV Holland
Splendor declared 'World No. 1' - largest selling single two-wheeler model
"Hero Honda Passport Programme" - CRM Programme launched
2001 New motorcycle model - "Passion" introduced
One million production in one single year
New motorcycle model - "Joy" introduced
5,000,000th motorcycle produced
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2002 New motorcycle model - "Dawn" introduced
New motorcycle model - "Ambition" introduced
Appointed Virender Sehwag, Mohammad Kaif, Yuvraj Singh, Harbhajan Singh and Zaheer
Khan as Brand Ambassadors
2003 Becomes the first Indian Company to cross the cumulative 7 million sales mark
Splendor has emerged as the World's largest selling model for the third calendar year in a row
(2000, 2001, 2002)
New motorcycle model - "CD Dawn" introduced
New motorcycle model - "Splendor +" introduced
New motorcycle model - "Passion Plus" introduced
New motorcycle model - "Karizma" introduced
2004 New motorcycle model - "Ambition 135" introduced
Hero Honda became the World No. 1 Company for the third consecutive year.
Crossed sales of over 2 million units in a single year, a global record.
Splendor - World's largest selling motorcycle crossed the 5 million mark
New motorcycle model - "CBZ*" introduced
Joint Technical Agreement renewed
Total sales crossed a record of 10 million motorcycles
2005 Hero Honda is the World No. 1 for the 4th year in a row
New motorcycle model - "Super Splendor" introduced
New motorcycle model - "CD Deluxe" introduced
New motorcycle model - "Glamour" introduced
New motorcycle model - "Achiever" introduced
First Scooter model from Hero Honda - "Pleasure" introduced
15 million production milestone achieved
New 'Splendor NXG' launched
New 'CD Deluxe' launched
New 'Passion Plus' launched
New motorcycle model 'Hunk' launched
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2008 Hero Honda Haridwar Plant inauguration
New 'Pleasure' launched
Splendor NXG lauched with power start feature
New motorcycle model 'Passion Pro' launched
New 'CBZ Xtreme' launched
CD Deluxe lauched with power start feature
New 'Glamour' launched
2009
2010
2011
Hunk' (Limited Edition) launched
Splendor completed 11 million production landmark
New motorcycle model 'Karizma - ZMR' launched
Silver jubilee celebrations
New model Splendor Pro launched
Launch of new Super Splendor and New Hunk
New licensing arrangement signed between Hero and Honda
Launch of new refreshed versions of Glamour, Glamour FI, CBZ Xtreme, Karizma
Crosses the landmark figure of 5 million cumulative sales in a single year
2012 Migration of all products to Brand Hero.
Launch of Impulse, Maestro and Ignitor.
Debut in the AMA Superbike Racing in the US.
Strategic partnership with Erik Buell Racing (EBR) of USA.
2013 Neemrana Plant Foundation Stone laid.
Global Parts Centre Foundation Stone laid.
50 Million cumulative 2 wheelers production.
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PROMINENT AWARDS TO THE COMPANY
Year Awards & Recognitions
2013
2012
2011
2010
• Green Pioneer Award - 2013
• "Business Leader of the Year" Award by Hon'ble President of India, Shri. Pranab
Mukherjee, at the AlMA Managing India Awards 2013 on April 11, 2013 (Conferred
on Mr. Pawan Munjal)
• "Business Leader of the Year" Award in the Auto (Two Wheelers) category by
Deputy Chairman of the Planning Commission Mr. Montek Singh Ahluwalia, at the
NDTV Business Leadership Awards 2013 (Conferred on Mr. Pawan Munjal)
• CFO of the year Award (Conferred on Mr. Ravi Sud)
 Business Leader in Automobiles (two-wheelers) at the NDTV Profit Business Leadership
Awards 2012 (Conferred upon Mr. Pawan Munjal)
 Best value for Money Bike Maker and Best Advertising in Two Wheelers Category at the
Auto India Best Brand Awards 2012
 Digital Advertiser of the year at the Indian Digital Media Awards (IDMA) 2012
 Three awards (Launch Event of the year, Rural Engagement Progamme and Live Patron
Award for Marketing Excellence) at the WOW Awards organised by EventFAQs
Two-wheeler Manufacturer of the Year award by Bike India magazine.
Adjudged the "Bike Manufacturer of the Year" at the Economic Times ZigWheels Car and
Bike Awards.
- CNBC Awaaz - Storyboard special commendation for "Effective rebranding of a new
corporate entity" by CNBC Awaaz Consumer Awards
- "Most Recommended Two-Wheeler Brand of the Year" award by CNBC Awaaz
Consumer Awards
- Colloquy Loyalty Awards "Innovation in Loyalty Marketing International 2011" for
Hero GoodLife
- "Best Activity Generating Short or Long-Term Brand Loyalty" by the Promotion
Marketing Award of Asia Order of Merit for Hero GoodLife
- Ranked No 1 brand in the Auto (Two-Wheelers) category in the Brand Equity "Most
Trusted Brand" 2011 survey
Company of the Year awarded by Economic Times Awards for Corporate Excellence 2008-
09.
CNBC TV18 Overdrive Awards 2010 'Hall of Fame' to Splendor
25

NDTV Profit Car & Bike Awards 2010 -
• Two-wheeler Manufacturer of the Year
• CnB Viewers' Choice Two-wheeler of the Year (Karizma ZMR)
Bike Maker of the Year by ET-ZigWheels Car & Bike of the Year Awards 2009
2009 'Two-wheeler Manufacturer of the Year' by NDTV Profit Car & Bike Awards 2009 and
Passion Pro adjudged as CNB Viewers' Choice two-wheeler
Top Indian Company under the 'Automobile - Two-wheelers' sector by the Dun &
Bradstreet-Rolta Corporate Awards
Won Gold in the Reader's Digest Trusted Brand 2009 in the 'Motorcycles' category
NDTV Profit Business Leadership Awards 2009 - two-wheeler category
2008 NDTV Profit Business Leadership Award 2008 - Hero Honda Wins the Coveted "NDTV
Profit Business Leadership Award 2008"
TopGear Design Awards 2008 - Hunk Bike of the Year Award
NDTV Profit Car India & Bike India Awards - NDTV “Viewers’ Choice Award” to Hunk
in Bike category
IndiaTimes Mindscape and Savile Row ( A Forbes Group Venture ) Loyalty Awards -
“Customer and Brand Loyalty Award” in Automobile (two-wheeler) sector
Asian Retail Congress Award for Retail Excellence (Strategies and Solutions of business
innovation and transformation) - Best Customer Loyalty Program in Automobile category
NDTV Profit Car India & Bike India Awards - Bike Manufacturer of the year
Overdrive Magazine - Bike Manufacturer of the year
TNS Voice of the Customer Awards:
• No.1 executive motorcycle Splendor NXG
• No.1 standard motorcycle CD Deluxe
• No. premium motorcycle CBZ Xtreme
2007 The NDTV Profit Car India & Bike India Awards 2007 in the following category:
• Overall "Bike of the Year" - CBZ X-treme
• "Bike of the Year" - CBZ X-treme (up to 150 cc category)
• "Bike Technology of the Year" - Glamout PGM FI
"Auto Tech of the Year" - Glamout PGM FI by Overdrive Magazine.
26

"Bike of the Year" - CBZ X-treme by Overdrive Magazine.
Ranked CBZ X-treme "Bike of the Year" - by B S Motoring Magazine
“Most Trusted Company” , by TNS Voice of the Customer Awards 2006.
CD Deluxe rated as "No 1 standard motorcycle" by TNS Voice of the Customer Awards
2006.
2006 Adjudged 7th Top Indian Company by Wallstreet Journal Asia (Top Indian Two Wheeler
Company).
One of the 8 Indian companies to enter the Forbes top 200 list of world’s most reputed
companies.
No. 1 in automobile industry by TNS Corporate Social Responsibility Award.
Best in its class awards for each category by TNS Total Customer Satisfaction Awards
2006:
• Splendor Plus (Executive)
• CD Deluxe (Entry)
• Pleasure (Gearless Scooters)
Splendor & Passion - Top two models in two wheeler category by ET Brand Equity Survey
2006.
Adjudged 7th Top Indian Company by Wallstreet Journal Asia (Top Indian Two Wheeler
Company).
Top Indian company in the Automobile - Two Wheeler sector by Dun & Bradstreet -
American Express Corporate Awards 2006.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
STAKEHOLDER TIES AT THE GRASSROOTS
Hero Honda Motors takes considerable pride in its stakeholder relationships,
especially ones developed at the grassroots. The Company believes it has managed to bring
an economically and socially backward region in Dharuhera, Haryana, into the national
economic mainstream.
27

An Integrated Rural Development Centre has been set up on 40 acres of land along
the Delhi-Jaipur Highway. The Centre-complete with wide approach roads, clean water, and
education facilities for both adults and children-now nurtures a vibrant, educated and healthy
community.
The Foundation has adopted various villages located within vicinity of the Hero Honda
factory at Dharuhera for integrated rural development. This includes:
• Installation of deep bore hand pumps to provide clean drinking water.
• Constructing metalled roads and connecting these villages to the National Highway
(NH -8).
• Renovating primary school buildings and providing hygienic water and toilet
facilities.
• Ensuring a proper drainage system at each of these villages to prevent water-logging.
• Promoting non-conventional sources of energy by providing a 50 per cent subsidy on
biogas plants.
The Raman Munjal Vidya Mandir began with three classes (up to class II) and 55
students from nearby areas. It has now grown into a modern Senior Secondary, CBSE
affiliated co-educational school with over 1200 students and 61 teachers. The school has a
spacious playground, an ultra-modern laboratory, a well-equipped audio visual room, an
activity room, a well-stocked library and a computer centre.
The Raman Munjal Sports Complex has basketball courts, volleyball courts, and hockey
and football grounds are used by the local villagers. In the near future, sports academies are
planned for volley ball and basket ball, in collaboration with National Sports Authority of
India.
Vocational Training Centre
In order to help local rural people, especially women, Hero Honda has set up a
Vocational Training Centre. So far 26 batches comprising of nearly 625 women have been
trained in tailoring, embroidery and knitting. The Company has helped women trained at this
28

centre to set up a production unit to stitch uniforms for Hero Honda employees.
Interestingly, most of the women are now self-employed.
Adult Literacy Mission
This Scheme was launched on 21st September, 1999, covering the nearby villages of
Malpura, Kapriwas and Sidhrawali. The project started with a modest enrolment of 36
adults. Hero Honda is now in the process of imparting Adult Literacy Capsules to another
100 adults by getting village heads and other prominent villagers to motivate illiterate adults.
Marriages of underprivileged girls
Marriages are organized from time to time, particularly for girls from backward
classes, by the Foundation by providing financial help and other support to the families.
Rural Health Care
Besides setting up a modern hospital, the Foundation also regularly provides doorstep
health care services to the local community. Free health care and medical camps are now a
regular feature in the Hero Group's community outreach program
KEY POLICIES AN ENVIRONMENTALLY AND SOCIALLY,
AWARE COMPANY
At Hero Honda, our goal is not only to sell you a bike, but also to help you every step of
the way in making your world a better place to live in. Besides its will to provide a high-
quality service to all of its customers, Hero Honda takes a stand as a socially responsible
enterprise respectful of its environment and respectful of the important issues.
Hero Honda has been strongly committed not only to environmental conservation
programmers but also expresses the increasingly inseparable balance between the economic
29

concerns and the environmental and social issues faced by a business. A business must not
grow at the expense of mankind and man's future but rather must serve mankind.
"We must do something for the community from whose land we generate our wealth."
A famous quote from our Worthy Chairman Mr.Brijmohan Lall Munjal. Environment
Policy.We at Hero Honda are committed to demonstrate excellence in our environmental
performance on a continual basis, as an intrinsic element of our corporate philosophy.
To achieve this we commit ourselves to:
• Integrate environmental attributes and cleaner production in all our business
processes and practices with specific consideration to substitution of hazardous
chemicals, where viable and strengthen the greening of supply chain.
• Continue product innovations to improve environmental compatibility.
• Comply with all applicable environmental legislation and also controlling our
environmental discharges through the principles of "alara" (as low as reasonably
achievable).
• Institutionalise resource conservation, in particular, in the areas of oil, water,
electrical energy, paints and chemicals.
• Enhance environmental awareness of our employees and dealers / vendors, while
promoting their involvement in ensuring sound environmental management.
Quality Policy:
Excellence in quality is the core value of Hero Honda's philosophy:
We are committed at all levels to achieve high quality in whatever we do, particularly in
our products and services which will meet and exceed customer's growing aspirations
through:
• Innovation in products, processes and services.
• Continuous improvement in our total quality management systems.
• Teamwork and responsibility.
30

Safety Policy
Hero Honda is committed to safety and health of its employees and other persons
who may be affected by its operations. We believe that the safe work practices lead to better
business performance, motivated workforce and higher productivity. We shall create a safety
culture in the organization by:
• Integrating safety and health matters in all our activities.
• Ensuring compliance with all applicable legislative requirements.
• Empowering employees to ensure safety in their respective work places.
• Promoting safety and health awareness amongst employees, suppliers and
contractors.
• Continuous improvements in safety performance through precautions besides
participation and training of employees.
INTRODUCTION ABOUT PHOENIX DEALER PROFILE (PHOENIX
MOTORS)
phoenix motors pvt ltd is dealership type of business. phoenix motors pvt ltd. is
established on 21st
march 2003. the business is running by only one man. the owner name is
ch .madhu mathi the firm is located at habitude in Hyderabad. generally the sale will be
either on cash basis or on institutional basis. Bank like icici, hdfc and centurion are providing
loans to customers.
Advertising strategy of phoenix motors They are giving the ads through newspapers,
wall paintings, hoardings and field staff. They are upgrading sales by introducing the
schemes, group bookings, institutional sales and customer door-to-door activities.
Categorization of Staff members:
31

Staff members are categorized for technicians, 25 members are allotted for field staff,
5 members are recruited for sales for persons, 5 persons are placed for evaluating for spare
parts, 5 members are allotted for managerial accounts and another 3 persons for cash
transaction and other members are allotted for remaining work.
Customer relationship:
They entertain the showroom providing a customer’s huge having pool game,
internet facility and television with home there system. they provide bile maintenance
programs on every week.according to other dealers phoenix motors in first in sales and best
in service. they treat customer, is the very important person at phoenix motors customer
satisfaction is their motto, why because, they will satisfied customer is the best
advertisement. they provide better value for the customers and as well as employees also. at
phoenix motors the customer is the boss.
SALES STRATEGY OF PHOENIX MOTORS:
Average they are selling 28 vehicles per day. PHOENIX motors PVT L.T.D is the
A.P s NO.1 dealership in sales and other activities? It is a QLAD (qualify leader through
quality dealer). At PHOENIX motor they gave the quality service to the customers why
because ‘the cost is long forgotten but the quality is remembered for ever”. They treat quality
has a...
Q Quest for excellence
U Understanding customer’s needs
A Action to achieve customer’s appreciation.
L Leadership determined to be a leader
I involving all the people
T Team spirit to work for a common goal
Y Yard sticks to measure programs.
WARRANTY ON PROPRIETARY ITEMS:
Warranty on proprietary items like Tyros, Tubes and Battery etc, will be directly
handled by the respective original manufactures (OEM’s) except AMCO for batteries and
32

Dunlop and Falcon tires and Tubes. In case of any defect in proprietary items, other than the
above two mentioned OEM’S the dealers must approach the Brach office dealer of the
respective manufacture. For AMCO batteries and Dunlop and falcon tires, tubes claims will
be accepted at our authorized dealerships per the mutually agreed terms and conditions
between HERO and of these two OEM’s in case the claim is not accepted for invalid
reasons. Then the claim along with the refusal note form the OEM can be sent to the
warranty section at gorgon plan after due to recommendation of the area service engineer.
If any other six services or subsequent paid services is not availed as per the
recommended schedule given in the owner’s manual. If HERO recommended engine oil is
not used. To normal wear & tear components like bulbs, electric wiring, filters, spark plug,
clutch plates, braded shoes, fasteners, shim washers, oil seals, gaskets, rubber parts (other
than tyre and tube) plastic components, chain$ sprockets and in case of wheel rim
misalignment or bend.
If there is any damage due o modification or fittings of accessories other than ones
recommended by HERO? If the motor has been used in any competitive events like tracking
races or rallies. If there is any damage to the painted surface due to industrial pollution or
other extraneous factors. For clams made for any consequential damage due to any previous
malfunction. For normal phenomenon like noise, vibration, oil seepage, which do not affect
the performance of the motorcycles?
SOCIAL SERVICE ACTIVITIES
phoenix motors participate and conduct social service activities. recently the phoenix
motors organized a blood donation camp for the trust on 21st
january 2006.they motivated on
the consumers to participated in this camp and also provide certificate for the customers
THE MARKETED BIKES OF PHOENIX (All Hero Moto Corp.)
33

CUSTOMER RELATIONSHIP:
To entertain the customers the showroom providing a customers huge having pool game,
internet facility and television with home theatre system. they provide bike maintenance
programs on every week. according to other dealers phoenix motors in first in sales and
best in service. they treat customer, is the very important person at phoenix motors customer
satisfaction is their motto, why because, the well satisfied customer is the best advertisement.
they provide better value for the customers and as well as employees also. at phonix motors
the customer is the boss.
SOCIAL SERVICE ACTIVITIES
phoenix motors participates in social service activities. the phoenix motors organize a blood
donation camp for the trust in every year. they motivated on the customers to participated in
this camp and also provide certificate for the customers.
39

CHAPTER-Iv
REVIEW OF LITERATURE:
In every concern, the funds flow in form different sources and similarly funds are
invested in various sources of investment. It is continuous process. The study and control of
this funds-flow process (i.e., the uses and sources of funds) is the main objective of financial
management to assess the soundness and the solvency of the enterprise.
The funds-flow-statement is a report on financial operations changes, flow or movements
during the period. It is a statement which shows the sources an application of funds or it
shows how the activities of a business are financed in a particulate period. In other words,
such a statement shows how the financial resources have been used during a particular
period of time. It is, thus, a historical statement showing sources and application of funds
between the two dates designed especially to analyse the changes in the financial conditions
of an enterprise. In the words of Foulke, it is-
“a statement of sources and application of funds is a technical device designed to analyse the
changes in the financial condition of a business enterprises between two dates.”
Funds Flow Statement is not an income statement. Income statement shows the items of
income and expenditure of a particular period, but the Funds flow statement is an operating
statement as it summaries the financial activities for a period of time. It covers all
movements that involve an actual exchange of assets.
Various titles are used for this statement such as 'Statement of sources and Application of
Funds', 'Summary of Financial operations,' 'Changes in Financial Position', 'Fund received
and Disbursed', 'Funds Generated and Expended', Changes in Working Capital”, “Statement
of Fund' etc. Title of Funds Flow Statement has been modified from time to time. Really it is
very difficult to find a short time for such statement which carries much to the readers
regarding its contents an functions.
40

A new interpretation of the term 'funds, has now been adopted as to include assets or
financial resourceful which do not flow through the working capital accounts. It seems to be
the most suitable meaning fort the term 'funds' but the most commonly used interpretation of
the term 'funds' is 'working capital'
Distinction Between funds Flow Statement and Balance Sheet :
There is also a difference between meaning, purpose and importance of Funds Flow
Statement and Balance Sheet although both are prepared with the same accounting data.
A summary of main points of differences between these two is give below:-
(i) Balance sheet is a statement showing the financial position of the concern on a particular
date. The asset side portrays the development of resources in various type of properties an
liabilities side indicates the manner in which these resources are obtained. It shows all assets
and liabilities whether current or fixed, tangible or intangible etc., while Funds Flow
Statement shows the changes in current assets an current liabilities during a particular period
of time.
(ii) Balance Sheet shows the total financial position on a particular date and in this way, it is
of a historical nature an therefor, its utility is very limited for the management. On the other
hand, Funds Flow Statement is a comparative statement of assets and liabilities and depicts
the changes in working capital during the period of two Balance sheets.
(iii) Funds Flow Statement is an analysis and control device for the management.
Management can ensure the long term an the short term solvency of the firm by studying the
internal funds flow cycles. It is a modern technique of knowing the inflows and outflows of
funds during a particular period. Balance Sheet represents the balance of various assets an
liabilities and does not present analysis of any kind.
(iv) There are two views of h financial position of the firm-long term an short-term. Short-
term financial position means the technical solvency of the firm in the near future while on
the other hand, long-term financial position means future financial structure of the firm. Both
41

are inter-relate but there is a differences in their analysis. The short-term view of the
financial position of the firm ca not be had from the Balance Sheet.
Distinction between funds flow statement and cash flow statement :
We have fully explained the meaning and importance of both the statements-Funds Flow an
Cash Flow statements.
A distinction between these two statements may be briefed as under:-
(i) Funds Flow Statement is concerned with all items constituting funds (Working
Capital)for the business while Cash Flow Statement deals only with cash transactions. In
other words, a transaction affecting working capital other than cash will affect Funds
statement, and not the Cash Flow Statement.
(ii) In Funds Flow Statement, net increase or decrease in working capital is recorded while in
Cash Flow Statement, individual item involving cash is taken into account.
(iii) Funds Flow statement is started with the opening cash balance and closed with the
closing cash balance records only cash transactions.
(iv) Cash Flow Statement is started with the opening cash balance and closed with ht closing
cash balance while there a no opening or closing balances in Funds Flow Statement.
A fund flow statement, better known as a cash flow statement, is an important document in
the accounting world. A fund flow statement shows a company's inflows and outflows of
funds. It is used to show investors, stakeholders or owners where the company's money came
from and where it went.
42

MEANING & CONCEPT OF FLOW OF FUNDS:
The term flow means movement & includes both ‘inflow’ & ‘outflow’. The term
flow of funds means transfer of economic values from one asset of equity to another. Flow
of funds is said to have taken place when any transaction makes changes in amount of funds
available before happening of transactions. If the effect of transaction results in increase of
funds. It is called a “source of funds” and it is results in decrease of funds, it is known as an
application of funds.
RULE
The flow of funds occurs when a transaction changes on one hand a non-current A/c
and on the other a current A/c and Vice-versa. According to working capital concept of
funds the term “Flow o Funds” return to movement of funds in working capital.
If any transaction results in increase in working capital. It is said to be a “source” or
“inflow of funds” and if it results in decrease of working capital, it is said to be “application”
or “out flow of funds”.
CURRENT ASSETS
Current Assets are those assets, which in the ordinary course of business can be or
will be converted into cash with in a short period of normally one accounting year.
CURRENT LIABILITIES
Current liabilities are those liabilities which are intended to be paid in ordinary
course of business with in short period of normally one accounting year out of the current
assets or the income of the business.
43

DIFFERENCES BETWEEN CURRENT LIABILITIES & CURRENT
ASSETS
CURRENT LIABILITIES CURRENT ASSETS
1. Bills Payable 1. Cash in Hand
2. Sundry Creditors 2. Cash at Bank
3. Accrued or O/s Expenses 3. Bills Receivable
4. Dividends Payable 4. Sundry Debtors or A/c’s receivable
5. Bank Overdraft 5. Short term loans & advances
6. Short term loans, advances & deposits 6. Short term investment
7. Provision for taxation. 7. Inventories or stock
8. Proposed Dividend 8. Prepaid Expenses
9. Accrued incomes.
44

45
FLOW OF FUNDS
No Yes
When both
current (and) non
current A/c’s are
involved
When both
current (and)
other non current
A/c’s are
involved

MEANING & DEFINITION OF FUNDS FLOW STATEMENT
Funs Flow Statement is a method by which we study changes in the financial position
of business enterprise beginning & ending financial statement dates. It is a statement
showing sources & uses of funds for a period of time.
FOUIKE DEFINES
“A statement of sources & application of funds is technical devices designed to
analyses the changes in the financial condition of business enterprise between two date’
ANTHONY DEFINES
“The Funds Flow Statement describes the sources from which additional funds were
derived and the use to which these sources were put.
I.C.W.A IN GLOSSARY OF MANAGEMENT ACCOUNTING TERMS
DEFINES FUNDS FLOW STATEMENT
• Funds Flow Statement as “a statement either prospective or retrospective setting out
of sources & application of the funds of an enterprise.
• The purpose of statement is to indicate clearly the requirement of funds and how they
are proposed to be raised and efficient utilization & application of the same.
• Funds Flow statement is called by various names such as sources and application of
funds, statement of changes in financial position, sources and uses of funds, summary
of financial operations, movement of working capital, movement of funds statement,
sources of increase and application of decrease etc…
46

USES, SIGNIFICANCE AND IMPORTANCE OF FUNDS FLOW
STATEMENT
A Funds Flow Statement is an essential too for the financial analysis and is of
primary importance to financial management. Now a day it is being widening used by the
financial analysis.The basic purpose of funds flow statement is to reveal the changes in
working capital on 2 balance sheets
47

DIFFERENCE BETWEEN FUNDS FLOW STATEMENT & CASH
FLOW STATEMENT
48

BASIS OF DIFFERENCE FUNDS FLOW STATEMENT CASH FLOW STATEMENT
1.Basis of concept It is based on a wider concept
of funds, i.e., working capital.
It is based on a narrower concept of
funds, i.e., cash.
2. Basis of Accounting It is based on accrual basis of
accounting
It is based on cash basis of accounting.
3. Schedule of changes in
working capital
Schedule of changes in working
capital is prepared to show the
changes in current assets and
current liabilities.
No such Schedule of changes in
working
Capital is prepared.
4. Method of preparing Funds flow statement reveals
the sources and applications of
funds. The net difference between
sources and applications of funds
represent net increase or decrease
in working capital.
It is prepared by classifying all
cash inflows and outflows in terms of
operating, investing and financing
activities. The net difference
represents the net Increase or decrease
in Cash and cash equivalents.
A5. Basis of usefulness. It is useful in planning
intermediate and long term
financing.
It is more useful for short-term
analysis and cash planning of the
business.
49

LIMITATIONS OF FUNDS FLOW STATEMENT:
The funds flow statement has a number of uses, however, it has certain limitations
also, which are listed below.
1. It should be remembered that a funds flow statement is not a substitute of an income
statement or a balance sheet. It provides only some additions information as regards
charges in working capital.
2. Cannot reveal continuous changes.
3. It is not an original statement but simply is arrangement of data given in financial
statements.
4. It is essentially historic in nature and projected funds flow statement cannot be prepared
with much accuracy.
5. Change in cash is more important & relevant for financial management than the working
capital.
51

PROCEDURE FOR PREPARING A FUNDS FLOW STATEMENT:
Funds flow Statement is a method by which we study changes in financial position of
business enterprise between beginning & ending financial statement dates. Hence the funds
flow statement is prepared by comparing two balance sheets and any of such other
information derived from the Accounts as may be needed
the preparation of funds flow statement consists of two parts.
A. Statement or schedule of changes in working capital.
B. Statement of sources & application of fund.
A.) STATEMENT OR SCHEDULE OF CHANGES IN W.C.
Working Capital means the excess of current assets over current liabilities.
Statement of changes in working capital is prepared to show the changes in working capital
between two balance sheet dates.
This statement is prepared with help of current assets and current liabilities derived from two
balance sheets.
Working capital = Current Assets – Current Liabilities
An increase in current assets increases W.C.
A decrease in current assets decreases W.C.
An increase in current liabilities decreased W.C.
A decrease in current liabilities increases W.C.
52

STATEMENT OF SCHEDULE OF CHANGES IN WORKING
CAPITAL
Particulars
Previous
Year
Current
Year
Effect of W.C.
Increase Decrease
Current Assets :
Cash in Hand xx xx xx
Cash at Bank xx xx xx
Bills Receivable xx xx Xx
Sundry Debtors xx xx Xx
Temporary investments xx xx xx
Stock / Inventions xx xx xx
Prepaid Expenses xx xx xx
Accrued Incomes xx xx Xx
Total Current Assets xxx xxx
Current Liabilities :
Bills Payable xx xx xx
Sundry Creditors xx xx Xx
Outstanding Expenses xx xx Xx
Bank Overdraft xx xx xx
Short term Advances xx xx xx
Dividend Payable xx xx Xx
Proposed Dividend xx xx Xx
Provision for Taxation xx xx Xx
Total Current Liabilities xxx xxx
Working Capital (C.A. – C.L.) xxx xxx
Net increase or decrease in W.C xxx Xxx
xxxx xxxx xxxx Xxxx
STATEMENT OF SOURCES & APPLICATION OF FUNDS. :
Funds flow statement is a statement, which indicates various sources from which
funds (W.C.) have been obtained during a certain period and uses or applications to which
these funds have been put during that period.
Generally this statement is prepared in two formats.
53

a) T Form (or) An A/c Form (or) Self Balancing Type
b) Report Form.
A.) T FORMS AN ACCOUNT FORM
(FOR THE YEAR ENDED)
Sources Rs. Applications Rs.
Funds from operations xx Funds lost in operations Xx
Issue of share capital
xx Redemption of preference
share
Xx
Issue of Debentures xx Capital Xx
Raising of long term loans xx Redemption of debentures Xx
Sale of non current (fixed)
assets
xx
Repayment of long term loan
Xx
Non-trading receipts such as
dividends
xx Purchase of long term
investments
Xx
Scale of long term investments xx Non-trading payments Xx
Net decrease in working capital xx Payment of Dividends Xx
xx Payment of Tax Xx
xx Net increase in working capital Xx
xxx Xxx
REPORT FORM OF FUNDS FLOW STATEMENT
SOURCES OF FUNDS
Funds from Operation Xx
Issue of Share Capital Xx
Raising of long term loans Xx
Receipts from partly paid shares Xx
Sale of non-current (fixed) assets Xx
Non trading receipts, such as dividends Xx
Sale of investment (long term) Xx
Decrease in working capital Xx
Total Xxx
APPLICATION OR USES OF FUNDS :
Funds lost in operations Xx
54

Redemption of preference share capital Xx
Redemption of debentures Xx
Repayment of long term loans Xx
Purchase of non current (fixed) assets Xx
Purchase of long term investments Xx
Non-trading payment Xx
Payment of dividends Xx
Payment of tax Xx
Increase in working capital Xx
Total Xxx
THERE ARE TWO METHODS OF CALCULATING FUNDS FROM OPERATION.
a. FUNDS FROM OPERATION.
B.ADJUSTED PROFIT & LOSS A/C
FUNDS FROM OPERATION
Closing Balance of Profit & Loss A/c Xxx
Add: Non-fund or Non-operating items Depreciation Xx
Loss on sale of fixed assets Xx
Under Writing Commission Xx
Discount on issue of shares & debentures Xx
Preliminary exp. Written off Xx
Deferred revenue expenses Xx
Goodwill Written off Xx
Patent or trade mark Xx
Provision for taxes Xx
Proposed Dividend Xx
Transfer to resure Xx
Provision for doubtful debts. Xx
Less: Non-operating Income Xx
Profit / Gain on scale of fixed assets Xx
55

Dividend Received Xx
Dividend Received Xx
Interest Received on Investments Xx
Profit on revaluation of assets Xx
Fund from operations Xxx
CHAPTER-V
DATA ANALYSIS AND INTERPRETATION:
Composition of current Assets
(All the amounts are in Cr)
Particulars 2008-09 2009-10 2010-11 2011-12 2012-13 Avg.
Inventory 326.83 436.4 524.93 675.57 636.76
2600.49
Sundry
Debtors
149.94 108.39 130.59 272.31 665.00 1326.23
Cash and
Bank
219.57 1907.21 71.52 56.10 181.04 2435.44
Loans &
Advances
311.26 405.76 728.66 926.99 1401.95 3774.62
Other
current
Assets
5.89 24.82 48.87 20.72 0.00 100.30
Total 1013.49 2882.58 1504.57 1951.69 2884.75
56

The income statement is also called as income statement, it is considered to be the
most useful of all financial statements. It prepared by a business concern in order to know
the profit earned and loss sustained during a specified period. It explains what has happened
to a business as a result of operations between two balance sheet dates. For this purpose it
matches the revenues and cost incurred in the process of earning revenues and shows the net
profit earned or loss suffered during a particular period.
The nature of Income which is a focus of the income statement can be well
understood if business is taken as an organization that uses “Input” to produce “Output”. The
output of the goods and services that the business provides to its customers. The values of
these outputs are the goods and services that the business provides to its customers. The
values of these outputs art the amounts paid by the customers for them. These amounts are
called “revenues” in the accounting. The inputs are the economic resources used by the
business in providing these goods and services. These are termed “expenses” in accounting.
57

STATEMENT OF CHANGES IN WORKING CAPITAL
Rs in Crors
Working capital turnover ratio 2013
Working capital turnover ratio 2012 2013
Total current Assets
Inventories 675.57 636.76
Sundry Debtors 272.31 665.00
Cash and Bank Balances 56.10 181.04
Other Current Assets 20.72 0.00
Loans and Advances 926.99 1401.95
Total 1951.69 2884.75
Total Current Liabilities
Current Liabilities 3520.66 2893.39
Provisions 1090.07 1439.86
58

Total 4610.73 4333.25
Net working capital -2659.04 -1448.50
Increasedecrease in net working
capital -1210.54
Interpretation:
The networking capital of Hero MotoCorp Ltd has been decreased to 1210.54 Cr the
financial position i.e. the performance of Hero MotoCorp Ltd has increased and the current
assets defects its current liability.
59

STATEMENT OF SOURCES AND APPILICATION OF
FUNDS FOR THE PERIOD (2012-13)
Rs in cr
TABLE-2
Source Rs. Application Rs.
Issue of share capital 45.69 Funds lost in operation 0.00
Raising of long term loans 42.57
loans
5324.51
Sale of non-current (fixed) assets 498.62
Purchase of long term
investments
-2324.340
Non-trading receipts 0.00
Sale of investment 3623.83
Decrease in working capital -1210.54
3000.17 3000.17
60

Analysis:
From the table it is observed that the working capital of company shows decreased trend. The
current Asset of the company has decreased Rs 1210.54 in 2012-2013. But the item cash balance
showing increasing trend. The current liabilities of company are decreased in 2011 2012.In the
net working capital of company stood -2324.34 It is decreased in 2012-13. The decreasing net
working capital. Regarding the application of funds 49.61 % used for investment in fixed assets
and funds used for working capital purpose. Constitute 38.67 % respectively
INTERPRETATION
It is concluded that during the period 2012-13 Increasing gross block and net Decreasing in
working capital.
61

Rs in Crors
Total 1510.52 1951.69
Provisions 1081.07 1090.07
62

Total 6144.75 4610.73
capital -1981.17
Interpretation:
The networking capital of Hero MotoCorp Ltd has been decreased to 2659.04 Cr the
financial position i.e. the performance of Hero MotoCorp Ltd has increased and the current
assets defects its current liability.
63

STATEMENT OF SOURCES AND APPILICATION OF FUNDS FOR
THE PERIOD (2011-12)
Rs in cr
TABLE-2
loans
4987.36
investments
-2507.91
2479.45 2479.45
64

Analysis:
current Asset of the company has decreased Rs 2659.04 in 2011-2012 is 1951.69. But the item
cash balance showing increasing trend. The current liabilities of company are decreased in 2011
2012.In the net working capital of company stood -1981.17 It is decreased in 2011-12. The
decreasing net working capita Regarding the application of funds 41.21 % used for investment
in fixed assets and funds used for working capital purpose. Constitute 34.59 % respectively
INTERPRETATION
working capital.
65

Rs in Crors
Total 2882.58 1504.54
Provisions 1026.35 1081.07
Total 4831.41 6144.75
capital -2691.38
66

Interpretation:
The networking capital of Hero MotoCorp Ltd has been decreased to 2691 Cr the financial
position i.e. the performance of Hero MotoCorp Ltd has increased and the current assets
defects its current liability.
67

Rs in cr
TABLE-2
Analysis:
loans
4699.94
investments
-1765.05
2934.89 2934.89
68

current Asset of the company has decreased Rs 2882.58 in 2010-2011 is 1504.54. But the item
cash balance showing increasing trend. The current liabilities of company are decreased in 2011
2011.In the net working capital of company stood -2691.38. It is decreased in 2010-11. The
decreasing net working capital is Rs 2691.38
Regarding the application of funds 33.71% used for investment in fixed assets and
funds used for working capital purpose. Constitute 30.77% respectively
INTERPRETATION
working capital.
69

Rs in crs
Inventories
326.83 436.4
Sundry Debtors
149.94 108.39
Cash and Bank Balances
219.57 1907.21
Other Current Assets
311.26 405.76
Loans and Advances
5.89 24.85
Total 1013.49 2882.61
Provisions 526.97 1026.35
Total 2052.82 4831.4
Increasedecrease in net working capital -909.46
70

Interpretation:
The networking capital of Hero MotoCorp Ltd has been decreased to 909 Cr the financial
71

Rs in lakhs
Raising of long term loans 66.03 Redemption of pre share capital 0.00
Sale of non-current (fixed) assets 340.61 Repayment of long term loan 16098.79
Non-trading receipts 100.41 Purchase of long term investments -20675.43
Decrease in working capital -909.46 Dividend Paid 4939.11
-362.47 -362.47
TABLE 2
72

Analysis:
From the table it is observed that the working capital of company shows decreased
trend. The current Asset of the company has decreased Rs 7885.65 to Rs 1013.49 in 2009-10.
Regarding the application of funds 17.13% used for investment in fixed assets and funds used
for working capital purpose. Constitute 0.84% respectively
INTERPRETATION
The working capital of company shows decreased trend. The current Asset of the company
has decreased and current liabilities are increased in the year.
73

Rs in lakhs
Inventories
317.1 326.83
Sundry Debtors
297.44 149.94
Cash and Bank Balances
131.09 219.57
Other Current Assets
185.46 311.26
Loans and Advances
5.69 5.89
Total 936.78 1013.49
Provisions 499.76 526.97
Total 1824.74 2052.82
Increasedecrease in net working capital -151.37
74

Interpretation:
The networking capital of Hero MotoCorp Ltd has been decreased to 151.37Cr the financial
75

Rs in lakhs
Raising of long term loans 39.94 Funds lost in operation 0.00
Sale of non current (fixed) assets 246.09 Repayment of long term loans 4032.32
Non-trading receipts 109.09 Purchase of long term investments -3788.57
243.75 243.75
TABLE 3
ANALYSIS:
76

From the table it is observed that the working capital of company shows decreased
trend. The current Asset of the company has decreased Rs 936.78 in 2008-2009 to Rs 1013.49 in
2007-08. Regarding the application of funds 2.29% used for investment in fixed assets and
funds used for working capital purpose. Constitute 1.57% respectively.
INTERPRETATION
The working capital of company shows decreased trend. The current Asset of the company
has decreased and the current liabilities of company are increased.
77

NET DECREASE IN WORKING CAPITAL
Rs in Lakhs
Year Increase/Decrease Amount
2008-09 Decrease -151.37
2009-10 Decrease -909.46
2010-11 Decrease -2691.38
2011-12 Decrease -1981.17
2012-13 Decrease -1210.54
TABLE 7
INTERPRETATION
The above table we observed that 2008-09 would be decreased by Rs. 151.37 In the
year 2009-10 the working capital has been decreased by Rs. 909.46. In the year 2010-11 the
working capital is Rs. 2691.38. In 2011-12 Rs.1981.17 has decreased the working capital.
CHAPTERVI
FINDINGS
78

1. The Hero MotoCorp Ltd net working capital is satisfactory between the years 2009-
13 since it shows decreasing trend ; but after that it is in declining position.
2. The current assects of Hero MotoCorp Ltd is satisfactory during the period of study
2008-09 to 2012-13. It is increased but after that it is declining.
3. The average quick assects of Hero MotoCorp Ltd is not good though the quick ratio
is showing maximum value of 6.09 in the years and then it is declining to be deal.
4. Fixed assets turnover of Hero MotoCorp Ltd increased. The company has to maintain
this.
5. Inventory turnover of Hero MotoCorp Ltd is also increased gradually, without any fit
falls up to 2008-09. But in the year 2008-09 it is declined, and again it has increased
in the year 2012-13. Good inventory management is good sign for efficient
management
6. Total Assets turnover of Hero MotoCorp Ltd is not satisfactory because it is always
below one, except in the year 2012-13 having a value of 1.17
7. Return on investment is not satisfactory. This indicates that the company’s funds are
not being utilized in a better way.
79

CONCLUSION
The Hero MotoCorp Ltd net working capital is satisfactory between the years since it
shows increasing trend; but after that it is in declining position Profit Margin of Hero
MotoCorp Ltd is decreasing and showing negative profit because there is increase in the
price of copper The Hero MotoCorp Ltd Net Working Capital Ratio is satisfactory.
The Operating Ratio of Hero MotoCorp Ltd isn’t satisfactory. Due to increase in cost of
production, this ratio is decreasing. So the has to reduce its office administration expenses
Improve position funds should be utilized properly. Better Awareness to increase the sales is
suggested. Cost cut down mechanics can be employed. Better production technique can be
employed.
80

SUGGESTIONS
 Net working capital is very low; it is suggested to maintain sufficient net working
capital.
 Effective inventory management is needed in the company
 The firm should increase investment in current assets to create sufficient securities
for the current liabilities
 For the improving the financial performance of the company the following
suggestions are made.
 In order to reduce the outside borrowings in the company has to acquire. The capital
from equity sources. Keeping in view the debt equity the proportion as normal.
 The liquidity of the company should be improved by maintaining the optimum
current assets and liquid assets according to standard norms.
 The quantum of the sales generated should be improved impressively in order to
attain higher return on investment.
 To improve the financial health of the company and maximizing the time between the
source mobilization and utilization the management must introduce the new cost
saving techniques.
81

BIBLIOGRAPHY
• FINANCIAL MANAGEMENT - I.M.PANDEY
• FINANCIAL MANAGEMENT - PRASANNA CHANDRA
• FINANCIAL MANAGEMENT - KHAN & JAIN
• ADVANCED MANAGEMENT - R.K. SHARMA
• ANNUAL REPORTS OF HERO MOTOCORP LTD 2009-2013
www.hero.com
www.ponexherohonda.com
www.indianauto.com
82

working capital management

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