INTRODUCTION:

Indian economy is one of the fastest growing economies in the world. Various sectors contribute to the development of Indian economy. The contribution of service sector to gross domestic product (GDP) is higher than any other sector. Next to this sector manufacturing sector contribute more to GDP followed by agricultural sector. In the aspect of employment next to agricultural sector, manufacturing sector gives more employment to people. There are some industries in manufacturing sector, among them automobile industry is playing prominent role in the aspects of production, sales and employment. Automobile industry is the key driver of Indian economy. It plays a prominent role in the economy and industrial development of India. It supports the development of other industries by procurement of raw material, those basic industries are steel, metal, plastic, petrochemicals, rubber, glass, and so on. These industries give more employment opportunity to people directly and indirectly. Next to agricultural sector the manufacturing sector gives more employment.

The success of an industry depends on industrial units of such industry. Hence the study on companies is getting importance. The automobile industry is one of the fastest growing industries in India. It is also one of the largest in the world. It is the sixth largest in the world in terms of passenger car and commercial vehicle manufacturing. This industry also helps to raise foreign currency by exporting its products, Indian automobile industry exports averagely 1.5 million vehicles every year.

Every business organization needs capital not only for its establishment. It requires capital for its operation also. Capital required for establishment is called fixed capital which is used to acquire building, machinery, land and so on. Capital needed for its day-to-day operation is called working capital which is used to meet out day-to-day expenses of the business such as, for salary, wages, rent, payment to creditors, to settle bills payable and so on. Hence working capital meant by capital required for daily expenses of the business. “Working capital could be defined as the portion of assets used in current operations”. Working capital comprises several components. The important components are inventory, receivables and cash. Overall working capital management could be good when a company manages its components efficiently. Hence it is essential to study the efficiency of working capital components management.

REVIEW OF LITERATURE:

As far as the researcher concerned there were many studies in working capital performance of various industries in India and also in some foreign countries. But studies in the performance of components of working capital were very limited. Some of the selected studies in working capital management are reviewed in this section.

Raghunatha Reddy D and Kameswari P (2004) in their study highlighted fixed and variable entities of the working capital. They had chosen Cipla limited as sample. They found that working capital ratio of the company had slightly fluctuating around the standard ratios of the industry. Sayaduzzaman MD (2006) found highly satisfactory working capital management efficiency of the sample company. The study stated that the positive cash inflow and plant approach in managing the major element of working capital as reasons for the efficient. Amalendu Bhunia (2007) examined the adequacy of the working capital, and liquidity position of two sample companies. The study found lower working capital than estimated. The study also found poor liquidity position and efficient receivable management of both the sample companies. Anup Chowdhury and Muntasir Ammi (2007) analyzed the working capital management Practice of Pharmaceutical companies in Bangladesh. The study found positive correlation between current assets management and financial performance of selected companies. The study also found efficient deal with the liquidity performance and investment criteria of the sample companies. Rajagopalan NVR (2009) has developed profitability scoring multiplier model for analyzing profitability by combining operating and financial variables and identified different profit paths, sales to gross profit, gross profit to operating profit, operating profit to EBIT and EBIT to EBT. He tested the model and found that a better operating performance has been shadowed by a heavy debt structure to take away most of the operating profit and in some year even losses and questioned the excess debt resulted in India cements ltd. Amalendu Bhunia and Islam Uddin khan (2011) tested the association between the liquidity management and profitability. They found lower degree of association between working capital management and profitability. Chanrabai T and Venkata Janardhan K (2011) examined and evaluated the working capital management of ACC Limited. They found satisfactory working capital management of the sample company. They also found good liquidity position and inventory, receivable and cash management. Ashraf Mohammad Salem Alrjoub et al. (2012) found that the size of inventory, size of receivables and receivable to current asset ratio had a significant difference and inventory turnover ratio, inventory to current assets and inventory to working capital ratio did not have significant difference.

STATEMENT OF THE PROBLEM:

India is one of the fastest growing countries in the world. In the past two decades its growth was tremendous. The economic power of the people in India also is growing; many people have started to buy four wheelers. So more companies entered into the automobile industry and existing automobile companies expanded their production level. Hence automobile industry is getting an important role in the economy. Among them Tata Motors limited and Mahindra and Mahindra limited are the leading companies, these two companies are manufacturing both domestic vehicles and commercial vehicles. Automobile companies use more spare parts in manufacturing of vehicles, most of the spare parts are brought from other companies, of which major parts are credit. In working capital management the performance of the components of working capital management determines overall performance of working capital management. So, it is essential to study the performance of the components of working capital. It includes three components, namely inventory, receivables and payables and cash management. Hence the following objectives are framed for this study

OBJECTIVE OF THE STUDY:

1. To assess the inventory management of the select automobile company.

2. To analyse the receivables management of select automobile companies and

3. To analyse the cash management of select automobile companies.

METHODOLOGY:

The study is analytical in nature. It required secondary data for its main analysis part. It used various standard ratios and other statistical tools for analyzing and interpreting the data.

PERIOD OF THE STUDY:

The present study was undertaken for the period of nine years from 2003-2004 to 2011-2012.

SAMPLE OF THE STUDY:

The present study assessed working capital management of automobile companies. For this purpose two companies were selected such as Tata Motors limited and Mahindra and Mahindra limited. There were 19 companies who manufacturing passenger vehicle and 16 companies manufactured commercial vehicles among them these two companies only manufactured both commercial and passenger vehicles, so they were selected for this study.

DATA COLLECTION:

The study mainly depended on secondary data. For this purpose annual financial statements of the selected companies were required, they were taken from annual reports of the respective companies. Annual reports were collected from the official websites of the selected companies.

RESULTS AND DISCUSSION:

The performance of overall working capital management of a company is the result of the management of efficient management of its components such as inventory management, receivables and payables management and cash management. So, it is essential to analyze the management of the components of working capital. In the analysis of the management of components of working capital, it is important to know percentage of the components of current assets. So the percentages of composition of current assets are presented in Table 1.

Table 1 indicates the percentage of composition of current assets of Tata motors limited. Among the components the loans and advances were in high proportion in all the years of the study period. In 2005-2006 and 2006-2007 it was more than 50 per cent of the total current assets. Inventory was the next component which occupied the 2^nd position. It ranged from 20 per cent to 33 per cent of the total current assets. It occupied around one fourth of the total current assets, debtors consisted in current assets from 11 per cent to 21 per cent over the study period, it had major fluctuation over the period of study. Cash and bank balances ranged from 7 per cent to 28 per cent of the total current assets over the period of the study, it also was fluctuating over the study period.

Table 1 also shows the percentage composition of current assets for Mahindra and Mahindra limited. It showed that the component of loans and advances on current assets were higher than other components for M&M. It ranged from 19 per cent to 40 per cent of total current assets of M & M. It was also found that it was in increasing trend. Next to this, inventory occupied major proportion in current assets. It ranged from 20 per cent to 32 per cent. It was more than one fourth of the current assets in all the years except 2009-2010 (20 per cent), 2008-2009 (21 per cent) and 2006-2007 (23 per cent). The composition of debtors in current assets ranged from 19 per cent to 28 per cent over the study period. The figures showed that the company maintained the debtors at average level. The percentage composition of cash and bank balances ranged from 8 per cent to 35 per cent on the total current assets, wide difference between the ranges indicated major fluctuation in holding cash. The higher rate of holding cash was helpful to meet out short term financial obligations, at the same time holding huge amount of cash may be unproductive. During the last 2 years of the study period the company held cash balance with less than 10 per cent. Holding lesser amount of cash is also not advisable in the aspect of risk of short-term liquidity.

INVENTORY MANAGEMENT:

Inventory is one of the essential components of working capital, so it is important to assess the inventory management of the working capital. Total inventory consists raw material, work-in-progress and finished products. Raw material is the raw form of material, which means no production process is undertaken, where work-in-progress is the semi completed goods, which mean a part of production process is completed and the remaining is pending. The finished products are fully completed goods.

Table 2 gives the amount of each component of inventory and percentage of each component on total inventory for the selected automobile companies.

Table 2 indicates that the raw material and finished goods were occupying major part of the total inventory. In case of TATA Motors the raw material was higher than other components in the year 2004-2005, 2005-2006 and 2008-2009. During 2004-2005 it occupied 50 per cent of the total inventory. In all other years finished goods occupied higher proposition of the total inventory. During the year 2007-2008, 2009-2010 and 2011-2012 the proportion of finished goods was more than 50 per cent of the total inventory. It was in lowest proposition during 2004-2005 at 34 per cent. Work- in -progress occupied less than 15 per cent over the period of study except during 2004-2005, in such year it was 17 per cent and during 2011-2012 the proposition of work-in-progress was lowest at 9 per cent. In case of total inventory, it was in increasing trend over the study period. It was Rs.1147crore in the year 2003-2004, it increased toRs.3167crore in 2006-2007. But there were decrease in 2007-2008 (Rs.2422 crore) and in 2008-2009 (Rs.2230 crore). During 2009-2010 on wards it again started to increase, it stood Rs.4588 crore in 2011-2012.

Table 2 reports the particulars of amount of each component of inventory and their percentage on total inventory of Mahindra and Mahindra. It showed that raw material occupied major proposition during five years of the study period (2003-2004, 2005-2006 and 2008 to 2010- 2011). It was more than 50 per cent during 2003-2004, 2009-2010 and 2010-2011 at 54 per cent, 52 per cent and 56 per cent respectively. In other five years the composition of finished goods was higher than raw material and work- in-progress. It was 54 per cent in 2007-2008, 53 per cent in 2011-2012 and 51 per cent in 2006-2007. The composition of work-in-progress on total inventory ranged from 4 per cent to 8 per cent over the study period. The absolute amounts of total inventory constantly increased over the study period. It was Rs.476 crore in 2003-2004 and it was Rs.2358 crore in the year 2011-2012. It had a slight fall in the year 2008-2009. It fell down from Rs.1078 crore to Rs.1054 crore from 2007-2008 to 2008-2009. In all other years it increased over the previous year.

In inventory management it is essential to analyze the inventory conversion period. For this purpose the conversion periods of raw material and work-in-progress and total inventory were calculated and they are presented

in table 3. It gives the inventory conversion periods of Tata Motors limited and Mahindra and Mahindra limited.

Table 3 indicates the conversion periods of raw-material, work-in-progress and total inventory of Tata Motors Ltd. The raw material conversion period ranged from 14 days to 30 days. It was lowest in the year 2011-12 at 14 days followed by 2007-08 and 2009-10 at 18 days each. The conversion period of raw material was high in the year 2005-2006 at 30 days followed by 2006-2007 and 2004-2005 at 27 days and 26 days respectively. It was observed that over the study period in some years they converted raw-material with short span of time and in some years they took around 1 month to convert. Work-in-progress conversion period ranged from 4 days to 9 days. The lowest conversion period was found in the year 2011-2012 at 4 days followed by 2008-2009 at 5 days. The highest conversion period of working-in-progress stood at 9 days each in 2004-2005 and 2005-2006. The conversion period of total inventory was calculated on cost of sales. It ranged from 27 days to 34 days. The lowest conversion period of total inventory stood at 27 days each in 2007-2008 and 2010-2011. The highest conversion period stood at 34 days in 2005-2006 followed by 2006-2007 at 32 days. Unlike the raw-material conversion period its gap between ranges was short. It indicated that averagely it converted the inventory into saleable goods in 30 days. The trend percentage of total inventory conversion period was fluctuating over the study period. It increased in the first 3 years then it started to decrease until the last year of the study period.

Table 3 also shows the conversion period of raw-material, work-in-progress and total inventory for Mahindra and Mahindra limited. It indicated that the raw-material conversion period of M & M was in decreasing trend over the period of study, it ranged from 15 days to 30 days. Except during 2011-2012 in all other years it decreased over the previous year. It means that the production efficiency or capacity of production was improved. The work-in-progress conversion period was also decreased over the study period. It ranged from 2 days to 4 days. Very short conversion period of work-in-progress indicates that the company maintained the work-in-progress which almost finished. Total inventory conversion period was also in decreasing trend over the study period. It was highest in the year 2004-2005 at 42 days and lowest conversion period stood at 22 days in 2009-2010. The trend percentage of total inventory showed the decreasing trend, it was 97 per cent in 2005-2006, it stood 75 per cent in 2008-2009 and ends with 69 percent in 2011-2012.

Table 4 gives the inventory turnover ratio of Tata Motors limited and Mahindra and Mahindra limited.

Table 4 shows that the inventory turnover ratio of Tata Motors Ltd. ranged from 11 times to 13 times over the study period. Very short difference in the range showed that the Tata Motors limited kept inventory level averagely. The inventory turnover ratio was high in the year 2010-2011 at 13.31 times 2005-2006 at 10.76 times.

Inventory turnover ratio of Mahindra and Mahindra limited ranged from 9 times to 17 times. The vast difference in the range indicated that the company did not keep inventory averagely. There was vast variation in holding inventory. The inventory turnover ratio was very high in the year 2009- 2010 at 16.77 times followed by 2010-2011 and 2011-2012 at 14.67 and 14.57 times respectively. Inventory turnover ratio was low in the year 2004-2005 at 8.73 times, it showed that the company held lower level of inventory during that year.

The result of the table 4 showed that the Tata Motors limited was holding inventory averagely unlike Mahindra and Mahindra limited. There was major fluctuation in holding inventory by Mahindra and Mahindra limited.

Receivables Management:

In working capital management both the receivables and payable management are very essential to maintain liquidity. Every company tries to shortening the collection period, for this purpose it implements various policies and strategies to improve the collection efficiency. Were as, it tries to expand the payment period to creditors as long as possible. It follows some techniques to expand the average payment period to possible extent. When the average collection period is shorter than the average payment period it is preferable to the company. On the other side if the average collection period is longer than average payment period is not be favorable to the company. So the study also focused on debtors’ turnover ratio, average collection period and creditors turnover ratio and average payment period.

Table 5 gives the debtors’ turnover ratio, debtors’ collection period and its trend, creditors’ turnover ratio, creditors’ payment period and its trend of Tata Motors limited and Mahindra and Mahindra limited.

Table 1-Percentage of Components of Current Assets:

Year	Debtors		Inventory		Cash and Bank Balance		Loans and advances		Total Current Assets
	TATA	M&M	TATA	M&M	TATA	M&M	TATA	M&M	TATA	M&M
2003-04	16.64	26.26	31.05	31.19	20.85	15.30	31.46	27.25	100	100
2004-05	11.35	22.07	22.41	32.27	28.06	26.93	38.18	18.73	100	100
2005-06	12.25	23.21	22.44	31.66	12.54	26.57	52.77	18.56	100	100
2006-07	10.77	18.70	20.03	23.27	7.30	35.38	61.91	22.66	100	100
2007-08	10.91	27.57	23.38	29.57	23.14	23.63	42.57	19.22	100	100
2008-09	16.05	20.61	23.00	20.82	11.78	31.10	49.16	27.47	100	100
2009-10	20.79	20.81	25.51	19.56	15.24	28.83	38.46	30.81	100	100
2010-11	18.42	22.05	27.62	27.58	17.24	10.00	36.67	40.37	100	100
2011-12	19.75	23.95	33.46	28.41	13.42	7.60	33.54	40.05	100	100

Source: Computed from annual reports

Table 2-Composition of Inventory of TATA Motors Rs. in crore)

Items	2003-2004		2004-2005		2005-2006		2006-2007
	Amt.	%	Amt.	%	Amt.	%	Amt.	%
Raw material	471.28	41.07	790.46	49.36	1084.39	43.71	1302.6	41.13
Work-in-progress	176.64	15.39	264.46	16.51	342.51	13.81	365.1	11.53
Finished goods	499.52	43.53	546.44	34.12	1054.14	42.49	1499.2	47.34
Total inventory	1147.44	100	1601.36	100	2481.04	100	3166.9	100
Raw material	256.48	53.93	366.97	49.08	395.04	45.39	385.58	44.21
Work-in-progress	33.33	7.01	47.30	6.33	47.32	5.44	38.24	4.38
Finished goods	185.79	39.06	333.74	44.60	427.95	49.17	448.33	51.41
Total inventory	475.6	100	748.01	100.01	870.31	100	872.15	100

Table 2-Cont.

Items	2007-2008		2008-2009		2009-2010		2010-2011		2011-2012
Items	Amt.	%	Amt.	%	Amt.	%	Amt.	%	Amt.	%
Raw material	906.33	37.42	1052.58	47.20	996.02	33.93	1623.34	41.72	1754.75	38.24
Work-in-progress	296	12.22	245.95	11.03	342.92	11.68	423.8	10.89	427.55	9.32
Finished goods	1219.5	50.35	931.28	41.76	1596.65	54.39	1844.25	47.39	2405.93	52.44
Total inventory	2421.83	100	2229.81	100	2935.59	100	3891.39	100	4588.23	100
Raw material	445.26	41.31	493.45	46.80	616.05	52.10	952.82	56.24	1008.3	42.75
Work-in-progress	53.1	4.93	89.09	8.45	75.03	6.35	82.14	4.85	99.2	4.21
Finished goods	579.43	53.76	471.81	44.75	491.38	41.56	659.25	38.91	1250.89	53.04
Total inventory	1077.79	100	1054.35	100	1182.46	100.01	1694.21	100	2358.39	100

Source: Computed from annual reports.

Table 3-Inventory Conversion Period (Days):

Year	Raw-material		Work-in progress		Total inventory		Trend % of total inventory
Year	TATA	M&M	TATA	M&M	TATA	M&M	TATA	M&M
2003-04	21	29	8	4	28	36	100	100
2004-05	26	30	9	4	29	42	104	101
2005-06	30	26	9	3	34	35	121	97
2006-07	27	21	7	2	32	29	114	81
2007-08	18	21	6	3	27	32	96	89
2008-09	23	19	5	3	29	27	104	75
2009-10	18	19	6	3	28	22	100	61
2010-11	22	24	6	2	27	25	96	69
2011-12	14	15	4	2	28	25	100	69

Source: Computed from annual reports

Table 4-Inventory Turnover Ratios (Times)

Year	Tata motors ltd	Mahindra and Mahindra ltd
2003-2004	13.25	10.27
2004-2005	12.62	8.73
2005-2006	10.76	10.47
2006-2007	11.36	12.54
2007-2008	11.43	11.48
2008-2009	12.56	13.53
2009-2010	12.91	16.77
2010-2011	13.31	14.67
2011-2012	12.84	14.57

Source: Computed from annual reports

Table 5 shows that the debtors’ turnover ratio of TATA motors ranged from 16 times to 29 times over the study period. Debtors’ turnover ratio was low in the year 2009-2010 at 15.86 times followed by 2008-2009 at 18.02 times.

It was highest in the year 2007-2008 at 28.76 times followed by 2004-2005 and 2003-2004 at 24.92 and 24.73 times respectively. Low debtors turnover ratio indicates that the amount of debtors on sales was high, on the other hand high turnover ratio showed that the amount of debtors was low on the sales. The results showed that the debtors were only 3.5 to 6 per cent on sales. It means the major part of sales of the company were on cash basis. The debtors’ collection period of Tata motors limited ranged from 13 to 23 days during the study period. The short collection Period represented the efficient collection management of the company. The trend of debtors’ collection period was fluctuating during the period of study. It was less than 100 per cent during the year 2004 - 2005 and 2007 -2008, which stood at 99 per cent and 86 per cent respectively. It was highest in the year 2009 - 2010 at 156 per cent followed by 2008- 2009 at 137 per cent.

Creditors’ turnover ratios of Tata motors limited were very low in all the years of the study period. It ranged from 1.72 times to 2.99 times. The highest turnover ratio was present in the year 2006-2007 at 2.99 times followed by 2005-2006 at 2.48 times. The lowest ratio was recorded in the year 2009-2010 at 1.78 times. The low turnover ratio of creditors indicated that the company maintains with large amount of creditors. The creditors’ payment period of TATA motors was very high in all the years of the study period. It ranged from 122 days to 212 days. The high creditors’ payment periods indicated that the company managed its payables efficiently. It delayed the payment to its creditors to the possible extent. The trend of creditors’ payment period was fluctuating during the study period. It decreased up to 2006-2007, it stood at 68 per cent in 2006-2007. It increased up to 2009-2010 and the highest trend per cent stood at 118 per cent in the year 2009-2010.

Table 5 also shows that the debtors’ turnover ratio of Mahindra and Mahindra limited ranged from 12.20 times to 18.34 times. The lowest turnover ratio stood in the year 2003-2004 at 12.20 times followed by 2007-2008 at 12.31 times. The highest ratio stood in the year 2010 2011 at 18.34 times followed by 2011-2012 at 17.28 times. The debtors’ collection period ranged from 20 days to 30 days. The collection period was short during the year 2010-2011 (20 days). It was high during the year 2003-2004 at 30 days. The maximum collection period of the company was one month; it showed the efficient collection management of the company. The trend percentage of the debtors’ collection period was decreasing over the study period. In no year it was more than 100 per cent. It ended at 71 per cent in the year 2011-2012.

The creditors’ turnover ratio of Mahindra and Mahindra limited was ranging from 2.64 times to 3.94 times. The gap between them was very short, it means the company maintained creditors at average level. The creditors’ turnover ratio was low in the year 2008-2009 at 2.64 times. It was high in the year 2004-2005 at 3.94 times followed by 2005-2006 at 3.88 times. The low turnover ratio indicated that the amount of creditors was high. The creditors’ payment period of Mahindra and Mahindra limited ranged from 91 days to 136 days. The average payment period was highest during 2008-2009 at 136 days and lowest was present in 2004-2005 at 91 days. The long payment period represented the efficient management of payments. The trend percentage of creditors’ payment period was fluctuating during the study period. It was more than 100 per cent in the year 2008-2009 at 130 per cent and the lowest was recorded in the year 2004-2005 at 88 per cent.

The overall results of table 5 showed that the average collection periods of both companies were very low, it means their collection management was good. One of the main reasons for this was credit sales were very limited in automobile companies. The customers are getting loans from banks and financial intuitions to buy four wheelers. Even though the company deliver the four wheelers on credit and they collect the amount within a month from the banks or financial institutions which gives loan.

The average payment period was very high for both the companies. It means these companies extended its payment period to creditors as long as possible. The automobile companies are able to do this because the creditors are the suppliers of raw-material (spare parts) which made especially for a particular company and cannot be used by other companies so they are highly depend on the particular automobile company, hence the long average payment period is possible for automobile companies.

Cash Management:

In the analysis of the components of working capital, cash management is one of the important aspects. For this purpose of analyzing cash, cash from operation and cash conversion cycle were calculated and presented tables 6.

Table 6 reveals that the cash turnover ratio of Tata motors was fluctuating over the study period. It ranged from 10 times to 32 times, the difference between the ranges was much wider, which means Tata Motors limited did not keep its cash to turnover uniformly. The company kept better cash balances in the year 2004-2005 and 2007-2008 but it had poor cash position during the years 2011-2012 and 2006-2007. The trend percentage of cash turnover ratio showed that the cash turnover ratio was in fluctuating trend. Cash from operation is the ratio of cash from operation to current assets. Over the study period the company had generated better cash from operation during the years 2003-2004 and 2007-2008 at 0.58 times each, its cash from operation was very poor in the year 2006-2007, it was –0.10 times.

Cash conversion cycle of TATA motors is the result of deducting average payment period from the sum of inventory conversion period and average collection period. It was observed that surprisingly the cash conversion cycle was negative in all the years of the study period. It resulted because of abnormally high average payment period. It indicates that the company managed its cash management in terms of shortening its collection period, quick inventory conversion period and efficient average payment management.

Table 6 also shows that the cash turnover ratio of Mahindra and Mahindra limited was highly fluctuated over the study period. It ranged from 8 times to 54 times. The cash turnover ratio was very high in the year 2011-2012 at 54 times and 40 times in 2010-11, which means the company kept very poor cash balance, it was better in the year 2006-2007 and 2008-2009 at 8 times and 9 times respectively. The trend of cash turnover ratio decreased up to 2008-2009, later it started to increase. It was observed that the company had better cash from operations in all the years of the study period. It ranged from 0.25 times to 0.61 times. Cash conversion cycle of this company was also in negative in all the years of study period. It indicated that the company efficiently managed its receivables, payables and inventory

Table 5-Debtors and Creditors Turnover Ratios

Year	Debtors turnover ratio (times)		Debtors collection period (days)		Trend % of Debtors collection period		Creditors turnover ratio (Times)		Creditors payment (Days)		Trend % of creditors payment period
Year	TATA	M&M	TATA	M&M	TATA	M&M	TATA	M&M	TATA	M&M	TATA	M&M
2003-04	24.73	12.20	14.76	29.51	100	100	2.04	3.44	179.00	104.65	100	100
2004-05	24.92	12.77	14.65	28.20	99	96	2.22	3.94	164.51	91.38	92	88
2005-06	19.71	14.29	18.52	25.20	125	85	2.48	3.88	147.26	92.83	82	89
2006-07	21.13	15.61	17.28	23.06	117	78	2.99	3.54	122.25	101.64	68	97
2007-08	28.76	12.31	12.69	29.24	86	99	2.22	3.48	164.28	103.44	92	99
2008-09	18.02	13.67	20.26	26.33	137	89	1.86	2.64	196.50	136.17	108	130
2009-10	15.86	15.76	23.02	22.84	156	77	1.72	3.70	211.65	97.29	118	93
2010-11	19.90	18.34	18.34	19.63	124	67	2.61	3.54	139.58	101.62	78	97
2011-12	21.76	17.28	16.78	20.84	114	71	1.78	3.50	204.61	102.72	114	98

Source: Computed from annual reports

Table 6-Cash Turnover and Cash from Operations

Year	Cash Turnover Ratio (times)		Trend % of Cash Turnover Ratio (times)		Cash From Operations (times)		Cash Conversion Cycle (Days)
Year	TATA	M&M	TATA	M&M	TATA	M&M	TATA	M&M
2003-04	19.74	20.94	100	100	0.58	0.61	-136.71	-39.61
2004-05	10.08	10.47	51	50	0.19	0.34	-120.95	-21.39
2005-06	19.26	12.48	98	60	0.01	0.33	-94.82	-32.77
2006-07	31.16	8.25	158	39	-0.10	0.44	-72.83	-49.48
2007-08	13.57	14.36	69	69	0.58	0.25	-124.41	-42.40
2008-09	24.54	9.06	124	43	0.12	0.34	-147.18	-82.86
2009-10	21.63	11.38	110	54	0.37	0.45	-160.37	-52.69
2010-11	21.32	40.43	108	193	0.09	0.44	-93.81	-57.11
2011-12	32.00	54.48	162	260	0.19	0.31	-159.40	-56.83

Source: Computed from annual reports.

The cash conversion cycles of the two companies were negative in all the year of study period. The reason for this was it had shorter collection period, inventory conversion period and longer payment period. Both the companies extended its payment period to the possible extent. It was possible because the suppliers of the automobile companies are most dependent on the respective companies.

CONCLUSION:

The study has attempted to assess the management of working capital components of Tata motors limited and Mahindra and Mahindra limited. The study found efficient management of collections and payables by both the companies. The study found negative cash conversion cycle during all the years of the study period by both the companies. It showed very short debtors collection period and inventory conversion period and long creditors’ payment period. It was possible because the suppliers (creditors) of automobile companies are most depended, because they produce spare parts specifically for a particular company and it cannot be supplied to any other company, so automobile companies are able to extent creditors’ payment period as long as possible. Hence they are able to maintain negative cash conversion cycle. Both of the selected companies had managed their components of working capital such as inventory, receivables and payables and cash efficiently.

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Received on 11.08.2013 Modified on 01.09.2013

Asian J. Management 4(4): October –December, 2013 page 301-307