Description
Asset Management is an important part of the financial sector throughout the world. It manages huge amounts of investments and helps clients reach a financial goal within a specific period of time. It offers a wide range of investment options. However, with the growing complexity in financial markets, investors are demanding more options.
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A STUDY ON ASSET MANAGEMENT OF SELECTED AUTOMOBILE
COMPANIES IN INDIA
DR.M. DHANABHAKYAM*; S.KAVITHA**
*Assistant Professor,
Department of Commerce,
Bharathiar University,
Coimbatore - 46.
**M.Phil Scholar,
Department of Commerce,
Bharathiar University,
Coimbatore - 46.
ABSTRACT
Asset Management is an important part of the financial sector throughout the world. It
manages huge amounts of investments and helps clients reach a financial goal within a
specific period of time. It offers a wide range of investment options. However, with the
growing complexity in financial markets, investors are demanding more options. Asset
Management is a system in which large or small organizations keep an updated and detailed
list of everything the organization owns and spends. The study is based on secondary data
and tools used for analysis are Ratio Analysis and Correlation Analysis. Asset management
can help to improve the strength and growth of your organization by tracking wasteful
investments. It also helps to reduce wasteful spending and improve more profitable and
productive investment and also help in making long and short term goals easier and more
profitable for your organization. It will also help to keep your organization organized and
running as smoothly as possible, making it easy to make an educated decision for your
organization based on concrete facts rather than guess work.
KEYWORDS: Clients, complexity, investment, investors, productive, tracking.
___________________________________________________________________________
INTRODUCTION
ASSET MANAGEMENT
"Asset management is managing infrastructure assets to minimize the total cost of owning
and operating them while continuously delivering the service levels customer’s desire."
-- From the publication, Managing Public Infrastructure Assets
Asset Management may be defined as a comprehensive and structured approach to
the long term management of assets as a tool for the efficient and effective delivery of
community benefits. The emphasis is on the assets being a means to an end, not an end in
themselves (Austroads, 1997). Asset management refers to a systematic process of effectively
maintaining, upgrading and operating assets , combining engineering principles with sound
business practice and economic rationale and providing the tools to facilitate a more
organized and flexible approach for making decisions necessary to achieve expectations of
stake holders and the public.
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FIXED ASSET MANAGEMENT
Assets of the type which we are considering here are physical items such as plant,
machinery, buildings, vehicles, pipes and wires, and associated information and technical
control and software systems that are used to serve a business or organizational function. A
Fixed asset (also called non-current asset) is a physical item which has value over a period
exceeding one year, for example, land, buildings, plant and machinery. When fixed assets are
acquired, their cost cannot be counted as expense for tax purposes in the year of acquisition
when we buy or sell fixed assets we are regarded as having swapped one asset-money- for
another asset, a machine. For example. Only the depreciation of the machine in any given
year is considered to be an expense in the year. This is important as far as tax treatment is
concerned. Slow moving spares which normally held for longer than one year should be
regarded as fixed assets.
CURRENT ASSET
Current asset is an asset which is expected to be sold or otherwise used up in the near
future, usually with one year. Current assets includes cash, cash equivalents, accounts
receivable, inventory, the portion of prepaid accounts which will be used with in a year and
short term investments, these all should be effectively managed. Current assets are all assets
that a person can readily convert to cash to pay outstanding debts and cover liabilities without
having to sell fixed assets. The current assets are therefore ones that can be quickly realized
and changed frequently. The main current assets are stock, debtors and cash. Current asset
management plays an important role in decision making.
AUTOMOBILE INDUSTRY
The automotive industry in India is one of the largest industries and a key sector of
the economy. The Indian automotive industry started from 1991 with the government’s de-
licensing of the sector and subsequent opening up for 100 percent FDI through automobile
route. Since then many large global companies have set up their facilities in India taking the
production of vehicle from 2 million in 1991 to 9.7 million in 2006. It contributes about 4
percent in India’s gross domestic product (GDP) and 5 percent in India’s industrial
production.
The annual growth rate in automobile industry is between 16% to 18% passenger
car market in India remains very attractive on the back of robust economic growth, rising
disposal incomes and abundance of finance at reasonable rates of interest. Auto industry has
achieved a cumulative annual growth rate (CAGR) by 22 percent between 1992-1997
outstripping industries production growth by about 30 percent. In 2009, a monthly sale of
passenger cars in India exceeded 100,000 units and has since grown rapidly to a record
monthly high of 182,992 units. From 2003 to 2010, car sales in India have progressed at a
CAGR of 13.7%, and with only 10% of Indian households owning a car in 2009. The well
developed automotive industry ably fulfills this catalytic role by producing a wide variety of
vehicles like passenger cars, medium and heavy commercial vehicles, multi-utility vehicles
such as jeeps, scooters, motor cycles, mopeds, three wheelers, tractors etc.
A well developed transportation system plays a key role in the development of an
economy and India is no exception to it. With the well developed transportation system the
auto industry of India is also growing at rapid speed, occupying an important place on the
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canvas of Indian economy. Advanced materials and manufacturing technologies for using
alternative fuels, emission abatement, fuel economy improvement, safety enhancement,
engine management systems and embedded vehicle control system are some of the area
where effort must be taken.
OBJECTIVES OF THE STUDY
The major objective of the study is to analyze the efficient asset utilization of the
selected automobile companies. The following are the specific objectives of the study.
1) To assess the efficient utilization of the assets of the selected automobile companies.
2) To determine the financing pattern of the assets of the selected automobile companies.
3) To offer suggestions on the basis of the results of the study.
METHODOLOGY
To achieve the above mentioned objectives of the study the following methodology has
been adopted. Ratio analysis and Correlation Analysis is used to assess the utilization and
financing pattern of the assets.
FRAMEWORK OF ANALYSIS
To analyze the Asset Management of Auto Mobile Industry, Ratio analysis has been
applied as a prime tool. Further Mean, Standard deviation, Co-efficient of Variation,
Compound Annual Growth Rate (CAGR).
RATIO ANALYSIS
? Inventory Turnover Ratio.
? Debtors Turnover Ratio.
? Working Capital Turnover Ratio.
? Fixed Assets Turnover Ratio.
? Total Asset Turnover Ratio.
? Sales to Capital Employed.
SOURCES OF DATA
This study covers the period of ten years from 2001-2010. The data used in this study
are secondary in nature. The financial data of companies belonging to automobile companies
are taken from Capital Line plus Database.
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REVIEW OF LITERATURE
Parvinder Aroa And Bhavna Rajan(2005) in their study” The asset and liability management
practices in commercial banks in India exhibited that asset and liability management provides
solutions to a number of problems encountered by banks-test had been used for analyzing the
asset and liability management position in commercial banks. Some of the reasons for
increased importance of asset and liability management are financial volatility, introduction
of new financial products and heightened awareness of the top management.The risk arises
from holding from holding assets with different amounts when the bank has negative
mismatch that is its maturing liabilities are more than assets, its net interest margin or
earnings will decline in a rising interest rate and reverse will happen in a falling interest rate.
Kapil Sharma And P.R. Kulkarni (2006) in their study “Asset liability management approach
in Indian banks “Focused asset and liability management as a part of overall risk management
system. Correlation and multiple regression analysis were used and ten Indian banks were
taken for the study. It attempts to provide a degree of protection for the institution and makes
risk acceptable. The scope of asset and liability management includes liquidity risk
management, management of market risks, capital planning and profit planning.The usage of
asset and liability management in banks is not much beneficial now. It is better to give a
standard model so as to overcome the deficiencies. Banks should prepare contingency plans
to measure their ability in assets and liabilities. The supervisors would require developing
skills in strengthening the asset and liability management.
TABLE 1
INVENTORY TURNOVER RATIO
YEAR Apollo
Ashok Bharat Bosch Cummins
2000-01 7.35 5.50 5.89 2.27 5.45
2001-02 9.67 4.87 5.43 7.84 6.55
2002-03 11.32 6.24 6.52 10.88 6.88
2003-04 9.68 8.71 7.00 11.38 6.33
2004-05 8.99 9.13 8.25 10.33 6.34
2005-06 8.03 8.43 7.74 10.02 6.92
2006-07 8.68 8.63 7.28 9.58 8.04
2007-08 8.82 8.01 7.39 9.78 8.73
2008-09 9.80 5.35 6.03 9.94 9.22
2009-10 11.22 5.44 5.09 9.29 6.95
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Mean 9.36 7.03 6.66 9.13 7.14
SD 1.26 1.69 1.04 2.59 1.17
CV 0.14 0.24 0.16 0.28 0.16
CAGR 0.04 -0.01 -0.01 0.15 0.02
Source: Compiled and Calculated from the data published in CMIE
Table 1 reveals the inventory turnover ratio of selected automobile companies in India
from 2000-2001 to 2009-2010.The inventory turnover ratio ranges between 6.66 percent and
9.36 percent. The lowest inventory turnover ratio is found in Bharat Forge Ltd and the
highest inventory turnover ratio is found in Apollo Tyres Ltd. The companies namely Bharat
forge Ltd, and Ashok Leyland Ltd show low inventory turnover ratio when compared to other
companies.
The standard deviation of inventory turnover ratio ranges between 1.04 percent and
2.59 percent. The lowest standard deviation is found in Bharat Forge Ltd and the highest
standard deviation is found in Bosch Ltd. It shows high variation in the inventory turnover
ratio. The co-efficient of variation of inventory turnover ratio ranges between 0.14 percent
and 0.24 percent. The lowest co-efficient of variation is found in Apollo Tyres Ltd and the
highest co-efficient of variation is found in Ashok Leyland Ltd.
It is also inferred that the compound annual growth rate of inventory turnover ratio
has been registered from 0.02 to 0.15.
TABLE 2
DEBTORS TURNOVER RATIO
YEAR Apollo
Ashok Bharat Bosch Cummins
2000-01 5.26 3.21 4.34 5.87 3.23
2001-02 6.81 4.18 3.67 5.45 3.01
2002-03 10.12 4.53 4.38 6.52 3.81
2003-04 9.17 6.47 4.01 7.52 3.8
2004-05 10.07 6.34 3.92 7.46 3.33
2005-06 9.29 9.06 4.11 6.38 3.52
2006-07 9.8 8.21 4.05 6.37 3.72
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Source: Compiled and Calculated from the data published in CMIE
Table 2 reveals the debtor turnover ratio of selected automobile companies in India
from 2000-2001 to 2009-2010. The debtor turnover ratio ranges between 3.63 percent and
10.36 percent. The lowest debtor turnover ratio is found in Cummins India Ltd and the
highest debtor turnover ratio is found in Apollo Tyres Ltd. The companies namely Bharat
Forge Ltd and Cummins India Ltd show low debtor turnover ratio when compared to other
companies.
The standard deviation of debtor turnover ratio ranges between 0.35 percent and 3.29
percent. The lowest standard deviation is found in Bharat Forge Ltd and highest standard
deviation is found in Apollo Tyres Ltd. It shows high variation in the debtor turnover ratio.
The co-efficient of variation of debtors turnover ratio ranges between 0.09 percent and 0.42
percent. The lowest co-efficient of variation is found in Bharat Forge Ltd and highest co-
efficient of variation is found in Ashok Leyland Ltd.
It is also inferred that the compound annual growth rate of debtors has been registered
from 0.01 to 0.10.
TABLE 3
WORKING CAPITAL TURNOVER RATIO
YEAR Apollo
Ashok Bharat Bosch Cummins
2000-01 2.7 2.55 4.8 4.75 2.61
2001-02 5.96 2.65 4.38 4.41 2.77
2002-03 -77.04 3.77 4.72 4.2 3.63
2003-04 -7.36 5.23 6.33 3.55 3.97
2004-05 -4.044 4.17 4.13 3.92 3.09
2007-08 13 12.42 3.5 6.21 3.61
2008-09 16.66 5.16 3.66 5.57 4.06
2009-10 13.4 5.82 3.32 6.55 4.23
MEAN 10.36 6.54 3.90 6.39 3.63
SD 3.29 2.73 0.35 0.69 0.37
CV 0.32 0.42 0.09 0.11 0.10
CAGR 0.10 0.06 -0.03 0.01 0.03
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2005-06 -3 5.83 1.78 4.12 3.51
2006-07 -2.13 9.34 1.7 4.09 3.63
2007-08 -1.9 18.67 2.71 4.18 4.66
2008-09 -1.79 7.36 1.76 2.88 4.45
2009-10 1.59 7.36 1.95 3.31 4.49
MEAN -8.70 6.69 3.43 3.94 3.68
SD 24.30 4.75 1.65 0.55 0.72
CV -2.79 0.71 0.48 0.14 0.20
CAGR -0.05 0.11 -0.09 -0.04 0.06
Source: Compiled and Calculated from the data published in CMIE
Table 3 reveals the working capital turnover ratio of selected automobile companies
in India from 2000-2001 to 2009-2010. The working capital turnover ratio ranges between
3.43 percent and 6.69 percent. The lowest working capital turnover ratio is found in Bosch
Ltd and the highest working capital turnover ratio is found in Ashok Leyland Ltd. The
companies namely Bharat Forge Ltd and Cummins India Ltd shows low working capital
turnover ratio when compared to other companies.
The standard deviation of working capital turnover ratio ranges between 0.55 percent
and 24.30 percent. The lowest standard deviation is found in Bosch Ltd and highest standard
deviation is found in Apollo Tyres Ltd. It shows high variation in the working capital
turnover ratio. The co-efficient of variation of working capital turnover ratio ranges between
0.14 percent and 0.71 percent. The lowest co-efficient of variation is found in Bosch Ltd and
highest co-efficient of variation is found in Ashok Leyland Ltd.
The Compound annual growth rate of Working Capital turnover ratio has been
registered from 0.06 to 0.11.
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TABLE 4
FIXED ASSET TURNOVER RATIO
YEAR Apollo
Ashok Bharat Bosch Cummins
2000-01 2.23 1.61 0.77 1.22 2.14
2001-02 2.53 1.52 0.64 1.16 1.92
2002-03 2.62 1.68 0.88 1.2 2.02
2003-04 2.23 2.04 0.99 1.46 2.16
2004-05 2.16 2.32 1.07 1.68 2.67
2005-06 2.17 2.65 1.04 1.73 3.26
2006-07 2.4 2.81 1.01 1.92 3.8
2007-08 2.56 2.55 0.96 1.93 4.06
2008-09 2.15 1.14 0.72 1.77 4.91
2009-10 1.84 1.22 0.65 1.72 3.92
MEAN 2.29 1.95 0.87 1.58 3.09
SD 0.24 0.61 0.16 0.30 1.05
CV 0.10 0.31 0.19 0.19 0.34
CAGR -0.02 -0.03 -0.02 0.03 0.06
Source: Compiled and Calculated from the data published in CMIE
Table 4 reveals the fixed assets turnover ratio of selected automobile companies in
India from 2000-2001 to 2009-2010. The fixed assets turnover ratio ranges between 0.87
percent and 3.09 percent. The lowest fixed assets turnover ratio is found in Bharat Forge Ltd
and the highest fixed assets turnover ratio is found in Cummins India Ltd. The companies
namely Bharat Forge Ltd and Ashok Leyland Ltd shows low debt collection period when
compared to other companies.
The standard deviation of fixed assets turnover ratio ranges between 0.16 percent and
1.05 percent. The lowest standard deviation is found in Bharat Forge Ltd and highest standard
deviation is found in Cummins India Ltd. It shows high variation in the fixed assets turnover
ratio. The co-efficient of variation of fixed assets turnover ratio ranges between 0.19 percent
and 0.31 percent. The lowest co-efficient of variation is found in Bharat Forge Ltd and
highest co-efficient of variation is found in Ashok Leyland Ltd.
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The Compound annual growth rate of fixed assets turnover ratio has been registered
from 0.06 to 0.03.
TABLE 5
TOTAL ASSETS TURNOVER RATIO
YEAR Apollo
Ashok Bharat Bosch Cummins
2000-01 1.28 1.01 0.72 1.69 1.19
2001-02 1.63 1 0.63 1.47 1.00
2002-03 1.72 1.29 0.79 1.3 0.97
2003-04 1.45 1.55 0.82 1.29 1.05
2004-05 1.48 1.44 0.81 1.19 1.22
2005-06 1.42 1.67 0.54 1.19 1.42
2006-07 1.47 1.88 0.54 1.26 1.49
2007-08 1.5 1.64 0.59 1.21 1.46
2008-09 1.44 0.86 0.51 1.13 1.65
2009-10 1.22 0.86 0.43 1.02 1.28
MEAN 1.46 1.32 0.64 1.28 1.27
SD 0.15 0.37 0.14 0.19 0.23
CV 0.10 0.28 0.22 0.15 0.18
CAGR -0.01 -0.02 -0.05 -0.05 0.01
Source: Compiled and Calculated from the data published in CMIE
Table 5 reveals the Total assets turnover ratio of selected automobile companies in
India from 2000-2001 to 2009-2010. The total assets turnover ratio ranges between 0.64
percent and 1.46 percent. The lowest total assets turnover ratio is found in Bharat Forge Ltd
and the highest total assets turnover ratio is found in Hero Honda Motors Ltd. The companies
namely Bharat Forge Ltd, Bosch Ltd and Cummins India Ltd show inefficiency in using the
assets for achieving higher sales of the company when compared to other companies.
The standard deviation of total assets turnover ratio ranges between 0.14 percent and
0.28 percent .The lowest standard deviation is found in Bharat Forge Ltd and the highest
standard deviation is found in Apollo Tyres Ltd. It shows high variation in the total assets
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turnover ratio. The co-efficient of variation of total assets turnover ratio ranges between 0.10
percent and 0.28 percent. The lowest co-efficient of variation is found in Apollo Tyres Ltd,
and the highest co-efficient of variation is found in Ashok Leyland Ltd.
The Compound annual growth rate of total assets turnover ratio has been registered
from -0.01 to 0.01.
TABLE 6
SALES TO CAPITAL EMPLOYED
YEAR Apollo
Ashok Bharat Bosch Cummins
2000-01 2.37 1.41 1.45 3.04 1.47
2001-02 3.67 1.58 1.12 2.42 1.3
2002-03 3.52 1.9 1.47 2.27 1.44
2003-04 2.88 2.67 1.83 2.13 1.56
2004-05 3.23 2.46 1.69 1.89 1.85
2005-06 2.97 2.99 0.89 1.94 2.08
2006-07 3.08 3.8 0.87 1.89 2.21
2007-08 3.04 3.18 0.89 1.73 2.36
2008-09 2.52 1.7 0.68 1.53 2.61
2009-10 2.14 1.81 0.59 1.4 1.95
MEAN 2.94 2.35 1.15 2.02 1.88
SD 0.49 0.80 0.43 0.47 0.44
CV 0.17 0.34 0.38 0.23 0.23
CAGR -0.01 0.03 -0.09 -0.07 0.03
Source: Compiled and Calculated from the data published in CMIE
Table 6 reveals the Sales to capital employed of selected automobile companies in
India from 2000-2001 to 2009-2010. The Sales to capital employed ranges between 1.15
percent and 2.94 percent. The lowest Sales to capital employed is found in Bharat Forge Ltd
and the highest Sales to capital employed is found in Apollo Tyres Ltd. The companies
namely Bharat Forge Ltd, Cummins India Ltd show that capital employed was not properly
used in generating sales when compared to other companies.
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The standard deviation of Sales to capital employed ranges between 0.43 percent and
0.80 percent. The lowest standard deviation is found in Bharat Forge Ltd and the highest
standard deviation is found in Ashok Leyland Ltd. It shows high variation in the Sales to
capital employed. The co-efficient of variation of Sales to capital employed ranges between
0.23 percent and 0.38 percent. The lowest co-efficient of variation is found in Bosch Ltd and
Cummins India Ltd and the highest co-efficient of variation is found in Bharat Forge Ltd.
The Compound annual growth rate of Sales to capital employed has been registered
from -0.01 to 0.03.
TABLE 7
CORRELATION ANALYSIS OF APOLLO TYRES LTD
** Correlation is significant at the 0.01 level (2-tailed).
*Correlation is significant at the 0.05 level (2-tailed).
Table: 7 reveals the correlation between the independent variables namely, Inventory
turnover ratio, Debtors turnover ratio, Fixed asset turnover ratio ,Total assets turnover ratio
and Sales to capital employed as well as the correlation between the dependent variable,
“Working Capital Turnover Ratio” of Apollo Tyres Ltd. It can be seen from the above table
that the positive correlation is between Total assets turnover ratio to Sales to capital
Employed (.924) at 1 per cent level of significance, however the negative correlation records
between Working capital turnover ratio to Inventory turnover ratio (-.532) at 5per cent level
of significance. However, there is a moderate level of correlation between dependent variable
and independent variables.
WCTR ITR DTR FATR
TATR STCE
WCTR Pearson Correlation 1
ITR Pearson Correlation
-.532* 1
DTR Pearson Correlation
-.019 .459 1
FATR Pearson Correlation
-.462 -.033 -.281 1
TATR Pearson Correlation
-.620 .292 -.105 .841
**
1
STCE Pearson Correlation
-.409 .094 -.330 .790
**
.924
**
1
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TABLE 8
CORRELATION ANALYSIS OF ASHOK LEYLAND LTD
** Correlation is significant at the 0.01 level (2-tailed).
*Correlation is significant at the 0.05 level (2-tailed).
Table:8 reveals the correlation between the independent variables namely, Inventory
turnover ratio, Debtors turnover ratio, Fixed asset turnover ratio , Total assets turnover ratio
and sales to capital employed as well as the correlation between the dependent variable,
“Working Capital Turnover Ratio” of Ashok Leyland Ltd. It can be seen from the above
table that the positive correlation is between fixed asset turnover ratio to total assets turnover
ratio (.966) at 1 per cent level of significance and there is no negative correlation between the
dependent variable and independent variables. However, there is a moderate level of
correlation between dependent variable and independent variables.
TABLE 9
CORRELATION ANALYSIS OF BHARAT FORGE LTD
WCTR ITR DTR FATR
TATR STCE
WCTR Pearson Correlation 1
ITR Pearson Correlation
-.020 1
DTR Pearson Correlation
.436 .315 1
FATR Pearson Correlation
.055 .968
**
.413 1
TATR Pearson Correlation
-.889
**
.359 .614 .396 1
STCE Pearson Correlation
.908
**
.341 .600 .398 .980
**
1
**Correlation is significant at the 0.01 level (2-tailed).
Table:9 reveals the correlation between the independent variables namely, Inventory
turnover ratio, Debtors turnover ratio, Fixed asset turnover ratio , Total assets turnover ratio
and sales to capital employed as well as the correlation between the dependent variable,
WCTR ITR DTR FATR
TATR STCE
WCTR Pearson Correlation 1
ITR Pearson Correlation
.308 1
DTR Pearson Correlation
.868
**
.643
*
1
FATR Pearson Correlation
.414 .875
**
.740
*
1
TATR Pearson Correlation
.407 .896
**
.714
*
.966
**
1
STCE Pearson Correlation
.588 .843
**
.819
**
.912
**
.939
**
1
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“Working Capital Turnover Ratio” of Bharat Forge Ltd. It can be seen from the above table
that the positive correlation is between Total assets turnover ratio to Sales to capital
Employed (.980) at 1 per cent level of significance, however the negative correlation records
between Working capital turnover ratio to total assets turnover ratio (-.889) at 1 per cent level
of significance. However, there is a moderate level of correlation between dependent variable
and independent variables.
TABLE 10
CORRELATION ANALYSIS OF BOSCH LTD
** Correlation is significant at the 0.01 level (2-tailed).
*Correlation is significant at the 0.05 level (2-tailed).
Table:10 reveals the correlation between the independent variables namely, Inventory
turnover ratio, Debtors turnover ratio, Fixed asset turnover ratio ,Total assets turnover ratio
and Sales to capital employed as well as the correlation between the dependent variable,
“Working Capital Turnover Ratio” of Bosch Ltd. It can be seen from the above table that the
positive correlation is between Total assets turnover ratio to Sales to capital Employed (.972)
at 1 per cent level of significance, however the negative correlation records between
inventory turnover ratio to sales to capital employed (-.705) at 5 per cent level of
significance. However, there is a moderate level of correlation between dependent variable
and independent variables.
TABLE 11
CORRELATION ANALYSIS OF CUMMINS INDIA LTD
WCTR ITR DTR FATR
TATR STCE
WCTR Pearson Correlation 1
ITR Pearson Correlation
.739
*
1
DTR Pearson Correlation
.835
**
.495 1
FATR Pearson Correlation
-.747
*
.853
**
.618 1
WCTR ITR DTR FATR
TATR
STCE
WCTR Pearson Correlation 1
ITR Pearson Correlation
-.560 1
DTR Pearson Correlation
-.166 .499 1
FATR Pearson Correlation
-.456 .418 .162 1
TATR Pearson Correlation
.766
**
-.780
**
-.324 -.710
*
1
STCE Pearson Correlation
.785
**
-.705
*
-.179 -.786
**
.972
**
1
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TATR Pearson Correlation
.515 .766
**
.378 .926
**
1
STCE Pearson Correlation
.691
*
.859
**
.511 .961
**
.961
**
1
*Correlation is significant at the 0.05 level (2-tailed).
**Correlation is significant at the 0.01 level (2-tailed).
Table:11 reveals the correlation between the independent variables namely, Inventory
turnover ratio, Debtors turnover ratio, Fixed asset turnover ratio ,Total assets turnover ratio
and Sales to capital employed as well as the correlation between the dependent variable,
“Working Capital Turnover Ratio” of Cummins India Ltd. It can be seen from the above
table that the positive correlation is between Fixed asset turnover ratio and Total assets
turnover ratio to Sales to capital Employed (.961) at 1 per cent level of significance, however
the negative correlation records between Working capital turnover ratio to fixed asset
turnover ratio (-.747) at 5 per cent level of significance. However, there is a moderate level of
correlation between dependent variable and independent variables.
SUGGESTIONS
The following suggestions are made so as to improve the financial strength of automobile
industry in India.
? Investment in current assets should be reduced and to proportional volume of sales.
? Collection policy may be modified for speeding up of receivables.
? Inventory turnover ratio has to be increased in order for efficient management of
stock and increase the profit.
? The automobile companies should try to plough back for expansion and
diversification and avoid dependence on external borrowings. This will improve
profits.
? Cost cutting measures must be taken by the automobile companies in order to increase
their profits by avoiding wastages and by reducing unproductive expenses.
CONCLUSION
The Asset Management of the selected automobile industry has been analyzed using
different parameters. The selected automobile companies are Apollo Tyres Ltd, Ashok
Leyland Ltd, Bharat forge Ltd, Bosch Ltd, Cummins India Ltd. The globalization is pushing
auto majors to consolidate, upgrade technology, enlarge product range, access new markets
and cut costs. The selected automobile companies has performed well in efficient utilization
of asset and financing pattern of asset and this will help the companies to take the important
financial decisions on the fixed and current assets. The asset management is a process of
continuous improvement. Its aim is always to optimize asset related activities to achieve the
primary goal of asset management and it helps to take decisions efficiently to avoid loss in
assets. The automotive industry across the world has great potential to trigger sustained
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employment, mobility, inter-sectoral industry growth and thus conduce conditions for general
economic and social well being. There is need of co-ordinate research and development,
standardization of designs and broader technologies, effective cost cutting and loosening of
barriers across the globe.
REFERENCES
? Khan M.Y and Jain P.K ,” Financial Management: text and problems”, Tata MC Grew
Hill Publications, New Delhi
? Parvinder Aroa, Bhavna Rajan (2005),” The asset and liability management practices
in commercial banks in India” the ICFAI journal of applied finance, vol.13, no.10,
pp.84-96
? Kapil Sharma And P.R. Kulkarni (2006),” Asset liability management in Indian
banks”, the journal of accounting and finance, vol.20, no.2, pp.4-13
? Maheswari S.N,” Principles of Management Accounting”, Sultan Chand & Sons
Educational Publishers”, New Delhi.
? OmPrakash,” Ratio Analysis for Management in new prospective- Management
ratio”, Himalaya publishing House, New Delhi.
? Ravi M. Kishore,” Financial Management”, Taxmann Allied services Pvt Ltd.
JOURNALS AND MAGAZINES
? The Hindu Survey of Indian Industry 2008.
? The Journal of Financial Management
? The ICFAI Journal of Management Research
WEBSITES
? www.automobile industry.com
? www.infoshine.com
? www.bileindustry.com
? www.google.com
doc_702157240.pdf
Asset Management is an important part of the financial sector throughout the world. It manages huge amounts of investments and helps clients reach a financial goal within a specific period of time. It offers a wide range of investment options. However, with the growing complexity in financial markets, investors are demanding more options.
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A STUDY ON ASSET MANAGEMENT OF SELECTED AUTOMOBILE
COMPANIES IN INDIA
DR.M. DHANABHAKYAM*; S.KAVITHA**
*Assistant Professor,
Department of Commerce,
Bharathiar University,
Coimbatore - 46.
**M.Phil Scholar,
Department of Commerce,
Bharathiar University,
Coimbatore - 46.
ABSTRACT
Asset Management is an important part of the financial sector throughout the world. It
manages huge amounts of investments and helps clients reach a financial goal within a
specific period of time. It offers a wide range of investment options. However, with the
growing complexity in financial markets, investors are demanding more options. Asset
Management is a system in which large or small organizations keep an updated and detailed
list of everything the organization owns and spends. The study is based on secondary data
and tools used for analysis are Ratio Analysis and Correlation Analysis. Asset management
can help to improve the strength and growth of your organization by tracking wasteful
investments. It also helps to reduce wasteful spending and improve more profitable and
productive investment and also help in making long and short term goals easier and more
profitable for your organization. It will also help to keep your organization organized and
running as smoothly as possible, making it easy to make an educated decision for your
organization based on concrete facts rather than guess work.
KEYWORDS: Clients, complexity, investment, investors, productive, tracking.
___________________________________________________________________________
INTRODUCTION
ASSET MANAGEMENT
"Asset management is managing infrastructure assets to minimize the total cost of owning
and operating them while continuously delivering the service levels customer’s desire."
-- From the publication, Managing Public Infrastructure Assets
Asset Management may be defined as a comprehensive and structured approach to
the long term management of assets as a tool for the efficient and effective delivery of
community benefits. The emphasis is on the assets being a means to an end, not an end in
themselves (Austroads, 1997). Asset management refers to a systematic process of effectively
maintaining, upgrading and operating assets , combining engineering principles with sound
business practice and economic rationale and providing the tools to facilitate a more
organized and flexible approach for making decisions necessary to achieve expectations of
stake holders and the public.
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FIXED ASSET MANAGEMENT
Assets of the type which we are considering here are physical items such as plant,
machinery, buildings, vehicles, pipes and wires, and associated information and technical
control and software systems that are used to serve a business or organizational function. A
Fixed asset (also called non-current asset) is a physical item which has value over a period
exceeding one year, for example, land, buildings, plant and machinery. When fixed assets are
acquired, their cost cannot be counted as expense for tax purposes in the year of acquisition
when we buy or sell fixed assets we are regarded as having swapped one asset-money- for
another asset, a machine. For example. Only the depreciation of the machine in any given
year is considered to be an expense in the year. This is important as far as tax treatment is
concerned. Slow moving spares which normally held for longer than one year should be
regarded as fixed assets.
CURRENT ASSET
Current asset is an asset which is expected to be sold or otherwise used up in the near
future, usually with one year. Current assets includes cash, cash equivalents, accounts
receivable, inventory, the portion of prepaid accounts which will be used with in a year and
short term investments, these all should be effectively managed. Current assets are all assets
that a person can readily convert to cash to pay outstanding debts and cover liabilities without
having to sell fixed assets. The current assets are therefore ones that can be quickly realized
and changed frequently. The main current assets are stock, debtors and cash. Current asset
management plays an important role in decision making.
AUTOMOBILE INDUSTRY
The automotive industry in India is one of the largest industries and a key sector of
the economy. The Indian automotive industry started from 1991 with the government’s de-
licensing of the sector and subsequent opening up for 100 percent FDI through automobile
route. Since then many large global companies have set up their facilities in India taking the
production of vehicle from 2 million in 1991 to 9.7 million in 2006. It contributes about 4
percent in India’s gross domestic product (GDP) and 5 percent in India’s industrial
production.
The annual growth rate in automobile industry is between 16% to 18% passenger
car market in India remains very attractive on the back of robust economic growth, rising
disposal incomes and abundance of finance at reasonable rates of interest. Auto industry has
achieved a cumulative annual growth rate (CAGR) by 22 percent between 1992-1997
outstripping industries production growth by about 30 percent. In 2009, a monthly sale of
passenger cars in India exceeded 100,000 units and has since grown rapidly to a record
monthly high of 182,992 units. From 2003 to 2010, car sales in India have progressed at a
CAGR of 13.7%, and with only 10% of Indian households owning a car in 2009. The well
developed automotive industry ably fulfills this catalytic role by producing a wide variety of
vehicles like passenger cars, medium and heavy commercial vehicles, multi-utility vehicles
such as jeeps, scooters, motor cycles, mopeds, three wheelers, tractors etc.
A well developed transportation system plays a key role in the development of an
economy and India is no exception to it. With the well developed transportation system the
auto industry of India is also growing at rapid speed, occupying an important place on the
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canvas of Indian economy. Advanced materials and manufacturing technologies for using
alternative fuels, emission abatement, fuel economy improvement, safety enhancement,
engine management systems and embedded vehicle control system are some of the area
where effort must be taken.
OBJECTIVES OF THE STUDY
The major objective of the study is to analyze the efficient asset utilization of the
selected automobile companies. The following are the specific objectives of the study.
1) To assess the efficient utilization of the assets of the selected automobile companies.
2) To determine the financing pattern of the assets of the selected automobile companies.
3) To offer suggestions on the basis of the results of the study.
METHODOLOGY
To achieve the above mentioned objectives of the study the following methodology has
been adopted. Ratio analysis and Correlation Analysis is used to assess the utilization and
financing pattern of the assets.
FRAMEWORK OF ANALYSIS
To analyze the Asset Management of Auto Mobile Industry, Ratio analysis has been
applied as a prime tool. Further Mean, Standard deviation, Co-efficient of Variation,
Compound Annual Growth Rate (CAGR).
RATIO ANALYSIS
? Inventory Turnover Ratio.
? Debtors Turnover Ratio.
? Working Capital Turnover Ratio.
? Fixed Assets Turnover Ratio.
? Total Asset Turnover Ratio.
? Sales to Capital Employed.
SOURCES OF DATA
This study covers the period of ten years from 2001-2010. The data used in this study
are secondary in nature. The financial data of companies belonging to automobile companies
are taken from Capital Line plus Database.
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REVIEW OF LITERATURE
Parvinder Aroa And Bhavna Rajan(2005) in their study” The asset and liability management
practices in commercial banks in India exhibited that asset and liability management provides
solutions to a number of problems encountered by banks-test had been used for analyzing the
asset and liability management position in commercial banks. Some of the reasons for
increased importance of asset and liability management are financial volatility, introduction
of new financial products and heightened awareness of the top management.The risk arises
from holding from holding assets with different amounts when the bank has negative
mismatch that is its maturing liabilities are more than assets, its net interest margin or
earnings will decline in a rising interest rate and reverse will happen in a falling interest rate.
Kapil Sharma And P.R. Kulkarni (2006) in their study “Asset liability management approach
in Indian banks “Focused asset and liability management as a part of overall risk management
system. Correlation and multiple regression analysis were used and ten Indian banks were
taken for the study. It attempts to provide a degree of protection for the institution and makes
risk acceptable. The scope of asset and liability management includes liquidity risk
management, management of market risks, capital planning and profit planning.The usage of
asset and liability management in banks is not much beneficial now. It is better to give a
standard model so as to overcome the deficiencies. Banks should prepare contingency plans
to measure their ability in assets and liabilities. The supervisors would require developing
skills in strengthening the asset and liability management.
TABLE 1
INVENTORY TURNOVER RATIO
YEAR Apollo
Ashok Bharat Bosch Cummins
2000-01 7.35 5.50 5.89 2.27 5.45
2001-02 9.67 4.87 5.43 7.84 6.55
2002-03 11.32 6.24 6.52 10.88 6.88
2003-04 9.68 8.71 7.00 11.38 6.33
2004-05 8.99 9.13 8.25 10.33 6.34
2005-06 8.03 8.43 7.74 10.02 6.92
2006-07 8.68 8.63 7.28 9.58 8.04
2007-08 8.82 8.01 7.39 9.78 8.73
2008-09 9.80 5.35 6.03 9.94 9.22
2009-10 11.22 5.44 5.09 9.29 6.95
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Mean 9.36 7.03 6.66 9.13 7.14
SD 1.26 1.69 1.04 2.59 1.17
CV 0.14 0.24 0.16 0.28 0.16
CAGR 0.04 -0.01 -0.01 0.15 0.02
Source: Compiled and Calculated from the data published in CMIE
Table 1 reveals the inventory turnover ratio of selected automobile companies in India
from 2000-2001 to 2009-2010.The inventory turnover ratio ranges between 6.66 percent and
9.36 percent. The lowest inventory turnover ratio is found in Bharat Forge Ltd and the
highest inventory turnover ratio is found in Apollo Tyres Ltd. The companies namely Bharat
forge Ltd, and Ashok Leyland Ltd show low inventory turnover ratio when compared to other
companies.
The standard deviation of inventory turnover ratio ranges between 1.04 percent and
2.59 percent. The lowest standard deviation is found in Bharat Forge Ltd and the highest
standard deviation is found in Bosch Ltd. It shows high variation in the inventory turnover
ratio. The co-efficient of variation of inventory turnover ratio ranges between 0.14 percent
and 0.24 percent. The lowest co-efficient of variation is found in Apollo Tyres Ltd and the
highest co-efficient of variation is found in Ashok Leyland Ltd.
It is also inferred that the compound annual growth rate of inventory turnover ratio
has been registered from 0.02 to 0.15.
TABLE 2
DEBTORS TURNOVER RATIO
YEAR Apollo
Ashok Bharat Bosch Cummins
2000-01 5.26 3.21 4.34 5.87 3.23
2001-02 6.81 4.18 3.67 5.45 3.01
2002-03 10.12 4.53 4.38 6.52 3.81
2003-04 9.17 6.47 4.01 7.52 3.8
2004-05 10.07 6.34 3.92 7.46 3.33
2005-06 9.29 9.06 4.11 6.38 3.52
2006-07 9.8 8.21 4.05 6.37 3.72
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Source: Compiled and Calculated from the data published in CMIE
Table 2 reveals the debtor turnover ratio of selected automobile companies in India
from 2000-2001 to 2009-2010. The debtor turnover ratio ranges between 3.63 percent and
10.36 percent. The lowest debtor turnover ratio is found in Cummins India Ltd and the
highest debtor turnover ratio is found in Apollo Tyres Ltd. The companies namely Bharat
Forge Ltd and Cummins India Ltd show low debtor turnover ratio when compared to other
companies.
The standard deviation of debtor turnover ratio ranges between 0.35 percent and 3.29
percent. The lowest standard deviation is found in Bharat Forge Ltd and highest standard
deviation is found in Apollo Tyres Ltd. It shows high variation in the debtor turnover ratio.
The co-efficient of variation of debtors turnover ratio ranges between 0.09 percent and 0.42
percent. The lowest co-efficient of variation is found in Bharat Forge Ltd and highest co-
efficient of variation is found in Ashok Leyland Ltd.
It is also inferred that the compound annual growth rate of debtors has been registered
from 0.01 to 0.10.
TABLE 3
WORKING CAPITAL TURNOVER RATIO
YEAR Apollo
Ashok Bharat Bosch Cummins
2000-01 2.7 2.55 4.8 4.75 2.61
2001-02 5.96 2.65 4.38 4.41 2.77
2002-03 -77.04 3.77 4.72 4.2 3.63
2003-04 -7.36 5.23 6.33 3.55 3.97
2004-05 -4.044 4.17 4.13 3.92 3.09
2007-08 13 12.42 3.5 6.21 3.61
2008-09 16.66 5.16 3.66 5.57 4.06
2009-10 13.4 5.82 3.32 6.55 4.23
MEAN 10.36 6.54 3.90 6.39 3.63
SD 3.29 2.73 0.35 0.69 0.37
CV 0.32 0.42 0.09 0.11 0.10
CAGR 0.10 0.06 -0.03 0.01 0.03
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2005-06 -3 5.83 1.78 4.12 3.51
2006-07 -2.13 9.34 1.7 4.09 3.63
2007-08 -1.9 18.67 2.71 4.18 4.66
2008-09 -1.79 7.36 1.76 2.88 4.45
2009-10 1.59 7.36 1.95 3.31 4.49
MEAN -8.70 6.69 3.43 3.94 3.68
SD 24.30 4.75 1.65 0.55 0.72
CV -2.79 0.71 0.48 0.14 0.20
CAGR -0.05 0.11 -0.09 -0.04 0.06
Source: Compiled and Calculated from the data published in CMIE
Table 3 reveals the working capital turnover ratio of selected automobile companies
in India from 2000-2001 to 2009-2010. The working capital turnover ratio ranges between
3.43 percent and 6.69 percent. The lowest working capital turnover ratio is found in Bosch
Ltd and the highest working capital turnover ratio is found in Ashok Leyland Ltd. The
companies namely Bharat Forge Ltd and Cummins India Ltd shows low working capital
turnover ratio when compared to other companies.
The standard deviation of working capital turnover ratio ranges between 0.55 percent
and 24.30 percent. The lowest standard deviation is found in Bosch Ltd and highest standard
deviation is found in Apollo Tyres Ltd. It shows high variation in the working capital
turnover ratio. The co-efficient of variation of working capital turnover ratio ranges between
0.14 percent and 0.71 percent. The lowest co-efficient of variation is found in Bosch Ltd and
highest co-efficient of variation is found in Ashok Leyland Ltd.
The Compound annual growth rate of Working Capital turnover ratio has been
registered from 0.06 to 0.11.
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TABLE 4
FIXED ASSET TURNOVER RATIO
YEAR Apollo
Ashok Bharat Bosch Cummins
2000-01 2.23 1.61 0.77 1.22 2.14
2001-02 2.53 1.52 0.64 1.16 1.92
2002-03 2.62 1.68 0.88 1.2 2.02
2003-04 2.23 2.04 0.99 1.46 2.16
2004-05 2.16 2.32 1.07 1.68 2.67
2005-06 2.17 2.65 1.04 1.73 3.26
2006-07 2.4 2.81 1.01 1.92 3.8
2007-08 2.56 2.55 0.96 1.93 4.06
2008-09 2.15 1.14 0.72 1.77 4.91
2009-10 1.84 1.22 0.65 1.72 3.92
MEAN 2.29 1.95 0.87 1.58 3.09
SD 0.24 0.61 0.16 0.30 1.05
CV 0.10 0.31 0.19 0.19 0.34
CAGR -0.02 -0.03 -0.02 0.03 0.06
Source: Compiled and Calculated from the data published in CMIE
Table 4 reveals the fixed assets turnover ratio of selected automobile companies in
India from 2000-2001 to 2009-2010. The fixed assets turnover ratio ranges between 0.87
percent and 3.09 percent. The lowest fixed assets turnover ratio is found in Bharat Forge Ltd
and the highest fixed assets turnover ratio is found in Cummins India Ltd. The companies
namely Bharat Forge Ltd and Ashok Leyland Ltd shows low debt collection period when
compared to other companies.
The standard deviation of fixed assets turnover ratio ranges between 0.16 percent and
1.05 percent. The lowest standard deviation is found in Bharat Forge Ltd and highest standard
deviation is found in Cummins India Ltd. It shows high variation in the fixed assets turnover
ratio. The co-efficient of variation of fixed assets turnover ratio ranges between 0.19 percent
and 0.31 percent. The lowest co-efficient of variation is found in Bharat Forge Ltd and
highest co-efficient of variation is found in Ashok Leyland Ltd.
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The Compound annual growth rate of fixed assets turnover ratio has been registered
from 0.06 to 0.03.
TABLE 5
TOTAL ASSETS TURNOVER RATIO
YEAR Apollo
Ashok Bharat Bosch Cummins
2000-01 1.28 1.01 0.72 1.69 1.19
2001-02 1.63 1 0.63 1.47 1.00
2002-03 1.72 1.29 0.79 1.3 0.97
2003-04 1.45 1.55 0.82 1.29 1.05
2004-05 1.48 1.44 0.81 1.19 1.22
2005-06 1.42 1.67 0.54 1.19 1.42
2006-07 1.47 1.88 0.54 1.26 1.49
2007-08 1.5 1.64 0.59 1.21 1.46
2008-09 1.44 0.86 0.51 1.13 1.65
2009-10 1.22 0.86 0.43 1.02 1.28
MEAN 1.46 1.32 0.64 1.28 1.27
SD 0.15 0.37 0.14 0.19 0.23
CV 0.10 0.28 0.22 0.15 0.18
CAGR -0.01 -0.02 -0.05 -0.05 0.01
Source: Compiled and Calculated from the data published in CMIE
Table 5 reveals the Total assets turnover ratio of selected automobile companies in
India from 2000-2001 to 2009-2010. The total assets turnover ratio ranges between 0.64
percent and 1.46 percent. The lowest total assets turnover ratio is found in Bharat Forge Ltd
and the highest total assets turnover ratio is found in Hero Honda Motors Ltd. The companies
namely Bharat Forge Ltd, Bosch Ltd and Cummins India Ltd show inefficiency in using the
assets for achieving higher sales of the company when compared to other companies.
The standard deviation of total assets turnover ratio ranges between 0.14 percent and
0.28 percent .The lowest standard deviation is found in Bharat Forge Ltd and the highest
standard deviation is found in Apollo Tyres Ltd. It shows high variation in the total assets
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turnover ratio. The co-efficient of variation of total assets turnover ratio ranges between 0.10
percent and 0.28 percent. The lowest co-efficient of variation is found in Apollo Tyres Ltd,
and the highest co-efficient of variation is found in Ashok Leyland Ltd.
The Compound annual growth rate of total assets turnover ratio has been registered
from -0.01 to 0.01.
TABLE 6
SALES TO CAPITAL EMPLOYED
YEAR Apollo
Ashok Bharat Bosch Cummins
2000-01 2.37 1.41 1.45 3.04 1.47
2001-02 3.67 1.58 1.12 2.42 1.3
2002-03 3.52 1.9 1.47 2.27 1.44
2003-04 2.88 2.67 1.83 2.13 1.56
2004-05 3.23 2.46 1.69 1.89 1.85
2005-06 2.97 2.99 0.89 1.94 2.08
2006-07 3.08 3.8 0.87 1.89 2.21
2007-08 3.04 3.18 0.89 1.73 2.36
2008-09 2.52 1.7 0.68 1.53 2.61
2009-10 2.14 1.81 0.59 1.4 1.95
MEAN 2.94 2.35 1.15 2.02 1.88
SD 0.49 0.80 0.43 0.47 0.44
CV 0.17 0.34 0.38 0.23 0.23
CAGR -0.01 0.03 -0.09 -0.07 0.03
Source: Compiled and Calculated from the data published in CMIE
Table 6 reveals the Sales to capital employed of selected automobile companies in
India from 2000-2001 to 2009-2010. The Sales to capital employed ranges between 1.15
percent and 2.94 percent. The lowest Sales to capital employed is found in Bharat Forge Ltd
and the highest Sales to capital employed is found in Apollo Tyres Ltd. The companies
namely Bharat Forge Ltd, Cummins India Ltd show that capital employed was not properly
used in generating sales when compared to other companies.
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The standard deviation of Sales to capital employed ranges between 0.43 percent and
0.80 percent. The lowest standard deviation is found in Bharat Forge Ltd and the highest
standard deviation is found in Ashok Leyland Ltd. It shows high variation in the Sales to
capital employed. The co-efficient of variation of Sales to capital employed ranges between
0.23 percent and 0.38 percent. The lowest co-efficient of variation is found in Bosch Ltd and
Cummins India Ltd and the highest co-efficient of variation is found in Bharat Forge Ltd.
The Compound annual growth rate of Sales to capital employed has been registered
from -0.01 to 0.03.
TABLE 7
CORRELATION ANALYSIS OF APOLLO TYRES LTD
** Correlation is significant at the 0.01 level (2-tailed).
*Correlation is significant at the 0.05 level (2-tailed).
Table: 7 reveals the correlation between the independent variables namely, Inventory
turnover ratio, Debtors turnover ratio, Fixed asset turnover ratio ,Total assets turnover ratio
and Sales to capital employed as well as the correlation between the dependent variable,
“Working Capital Turnover Ratio” of Apollo Tyres Ltd. It can be seen from the above table
that the positive correlation is between Total assets turnover ratio to Sales to capital
Employed (.924) at 1 per cent level of significance, however the negative correlation records
between Working capital turnover ratio to Inventory turnover ratio (-.532) at 5per cent level
of significance. However, there is a moderate level of correlation between dependent variable
and independent variables.
WCTR ITR DTR FATR
TATR STCE
WCTR Pearson Correlation 1
ITR Pearson Correlation
-.532* 1
DTR Pearson Correlation
-.019 .459 1
FATR Pearson Correlation
-.462 -.033 -.281 1
TATR Pearson Correlation
-.620 .292 -.105 .841
**
1
STCE Pearson Correlation
-.409 .094 -.330 .790
**
.924
**
1
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TABLE 8
CORRELATION ANALYSIS OF ASHOK LEYLAND LTD
** Correlation is significant at the 0.01 level (2-tailed).
*Correlation is significant at the 0.05 level (2-tailed).
Table:8 reveals the correlation between the independent variables namely, Inventory
turnover ratio, Debtors turnover ratio, Fixed asset turnover ratio , Total assets turnover ratio
and sales to capital employed as well as the correlation between the dependent variable,
“Working Capital Turnover Ratio” of Ashok Leyland Ltd. It can be seen from the above
table that the positive correlation is between fixed asset turnover ratio to total assets turnover
ratio (.966) at 1 per cent level of significance and there is no negative correlation between the
dependent variable and independent variables. However, there is a moderate level of
correlation between dependent variable and independent variables.
TABLE 9
CORRELATION ANALYSIS OF BHARAT FORGE LTD
WCTR ITR DTR FATR
TATR STCE
WCTR Pearson Correlation 1
ITR Pearson Correlation
-.020 1
DTR Pearson Correlation
.436 .315 1
FATR Pearson Correlation
.055 .968
**
.413 1
TATR Pearson Correlation
-.889
**
.359 .614 .396 1
STCE Pearson Correlation
.908
**
.341 .600 .398 .980
**
1
**Correlation is significant at the 0.01 level (2-tailed).
Table:9 reveals the correlation between the independent variables namely, Inventory
turnover ratio, Debtors turnover ratio, Fixed asset turnover ratio , Total assets turnover ratio
and sales to capital employed as well as the correlation between the dependent variable,
WCTR ITR DTR FATR
TATR STCE
WCTR Pearson Correlation 1
ITR Pearson Correlation
.308 1
DTR Pearson Correlation
.868
**
.643
*
1
FATR Pearson Correlation
.414 .875
**
.740
*
1
TATR Pearson Correlation
.407 .896
**
.714
*
.966
**
1
STCE Pearson Correlation
.588 .843
**
.819
**
.912
**
.939
**
1
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“Working Capital Turnover Ratio” of Bharat Forge Ltd. It can be seen from the above table
that the positive correlation is between Total assets turnover ratio to Sales to capital
Employed (.980) at 1 per cent level of significance, however the negative correlation records
between Working capital turnover ratio to total assets turnover ratio (-.889) at 1 per cent level
of significance. However, there is a moderate level of correlation between dependent variable
and independent variables.
TABLE 10
CORRELATION ANALYSIS OF BOSCH LTD
** Correlation is significant at the 0.01 level (2-tailed).
*Correlation is significant at the 0.05 level (2-tailed).
Table:10 reveals the correlation between the independent variables namely, Inventory
turnover ratio, Debtors turnover ratio, Fixed asset turnover ratio ,Total assets turnover ratio
and Sales to capital employed as well as the correlation between the dependent variable,
“Working Capital Turnover Ratio” of Bosch Ltd. It can be seen from the above table that the
positive correlation is between Total assets turnover ratio to Sales to capital Employed (.972)
at 1 per cent level of significance, however the negative correlation records between
inventory turnover ratio to sales to capital employed (-.705) at 5 per cent level of
significance. However, there is a moderate level of correlation between dependent variable
and independent variables.
TABLE 11
CORRELATION ANALYSIS OF CUMMINS INDIA LTD
WCTR ITR DTR FATR
TATR STCE
WCTR Pearson Correlation 1
ITR Pearson Correlation
.739
*
1
DTR Pearson Correlation
.835
**
.495 1
FATR Pearson Correlation
-.747
*
.853
**
.618 1
WCTR ITR DTR FATR
TATR
STCE
WCTR Pearson Correlation 1
ITR Pearson Correlation
-.560 1
DTR Pearson Correlation
-.166 .499 1
FATR Pearson Correlation
-.456 .418 .162 1
TATR Pearson Correlation
.766
**
-.780
**
-.324 -.710
*
1
STCE Pearson Correlation
.785
**
-.705
*
-.179 -.786
**
.972
**
1
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TATR Pearson Correlation
.515 .766
**
.378 .926
**
1
STCE Pearson Correlation
.691
*
.859
**
.511 .961
**
.961
**
1
*Correlation is significant at the 0.05 level (2-tailed).
**Correlation is significant at the 0.01 level (2-tailed).
Table:11 reveals the correlation between the independent variables namely, Inventory
turnover ratio, Debtors turnover ratio, Fixed asset turnover ratio ,Total assets turnover ratio
and Sales to capital employed as well as the correlation between the dependent variable,
“Working Capital Turnover Ratio” of Cummins India Ltd. It can be seen from the above
table that the positive correlation is between Fixed asset turnover ratio and Total assets
turnover ratio to Sales to capital Employed (.961) at 1 per cent level of significance, however
the negative correlation records between Working capital turnover ratio to fixed asset
turnover ratio (-.747) at 5 per cent level of significance. However, there is a moderate level of
correlation between dependent variable and independent variables.
SUGGESTIONS
The following suggestions are made so as to improve the financial strength of automobile
industry in India.
? Investment in current assets should be reduced and to proportional volume of sales.
? Collection policy may be modified for speeding up of receivables.
? Inventory turnover ratio has to be increased in order for efficient management of
stock and increase the profit.
? The automobile companies should try to plough back for expansion and
diversification and avoid dependence on external borrowings. This will improve
profits.
? Cost cutting measures must be taken by the automobile companies in order to increase
their profits by avoiding wastages and by reducing unproductive expenses.
CONCLUSION
The Asset Management of the selected automobile industry has been analyzed using
different parameters. The selected automobile companies are Apollo Tyres Ltd, Ashok
Leyland Ltd, Bharat forge Ltd, Bosch Ltd, Cummins India Ltd. The globalization is pushing
auto majors to consolidate, upgrade technology, enlarge product range, access new markets
and cut costs. The selected automobile companies has performed well in efficient utilization
of asset and financing pattern of asset and this will help the companies to take the important
financial decisions on the fixed and current assets. The asset management is a process of
continuous improvement. Its aim is always to optimize asset related activities to achieve the
primary goal of asset management and it helps to take decisions efficiently to avoid loss in
assets. The automotive industry across the world has great potential to trigger sustained
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employment, mobility, inter-sectoral industry growth and thus conduce conditions for general
economic and social well being. There is need of co-ordinate research and development,
standardization of designs and broader technologies, effective cost cutting and loosening of
barriers across the globe.
REFERENCES
? Khan M.Y and Jain P.K ,” Financial Management: text and problems”, Tata MC Grew
Hill Publications, New Delhi
? Parvinder Aroa, Bhavna Rajan (2005),” The asset and liability management practices
in commercial banks in India” the ICFAI journal of applied finance, vol.13, no.10,
pp.84-96
? Kapil Sharma And P.R. Kulkarni (2006),” Asset liability management in Indian
banks”, the journal of accounting and finance, vol.20, no.2, pp.4-13
? Maheswari S.N,” Principles of Management Accounting”, Sultan Chand & Sons
Educational Publishers”, New Delhi.
? OmPrakash,” Ratio Analysis for Management in new prospective- Management
ratio”, Himalaya publishing House, New Delhi.
? Ravi M. Kishore,” Financial Management”, Taxmann Allied services Pvt Ltd.
JOURNALS AND MAGAZINES
? The Hindu Survey of Indian Industry 2008.
? The Journal of Financial Management
? The ICFAI Journal of Management Research
WEBSITES
? www.automobile industry.com
? www.infoshine.com
? www.bileindustry.com
? www.google.com
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