CHAPTER-1 INTRODUCTION

CHAPTER-1
INTRODUCTION

Finance is one of the major elements. Which activities the overall growth of the economy, Finance is regard as the lifeblood of a business enterprise. This is because in the modem money-oriented economy finance is one the basic foundations of all kinds of economic activities. It is the master key which provides the access to all the sources for being employed in manufacturing and merchandising activities. It has rightly been said that business needs money to take more money. How ever it is also prove that so money will get more money. Only when it is properly managed. A business unit requires two types of finance namely, long term finance and short term finance. Long term finance is required to meet capital expenditure requirements. Short term finance is needed to meet the day-to-day requirements of a business unit. The exploitation of capital assets can be had only by working capital. It lubricates the wheel of fixed assets. This facilitates the industrial units to have continuous production.

The essence of effective management is the synchronization of the rates of inflow of receipts with the outflow of cash disbursements. Planning for cash requirements is an essential management function of any business. Cash resources should be planned to finance a cash flow, without which many otherwise efficient and profitable business have encountered financial difficulties. The creditworthiness of business is one of its most valuable assets. A management should, therefore, ensure that there are no hold-ups in the payment of its dues because it would earn the reputation of being a bad paymaster or else, its creditors may resort to litigation. Unfortunately the inflow and outflow of funds cannot be synchronized completely. If this were possible, it would not be necessary to maintain more than a minimum of cash or near cash resources.

The accomplishment of the prime objective of profit maximization in business depends largely on how their cash is managed. It involves the management of current assets, i.e. cash, accounts receivables and inventory. Inadequate as well as redundant cash management is

disastrous. Both situations are not warranted in a sound organization. Liquidity and profitability of a business can be achieved if cash were managed properly.

Cash Management
Cash is the most liquid asset that a business owns. It includes money and such instruments as cheques, money orders and bank drafts. Cash in the business enterprise may be compared to the blood in the human body. The cash impacts life and strength, profits and solvency to the business organization. Cash is the most important current assets for the operations of the business. Cash is the basic input needed to keep the business running on a continuous basis it is also the ultimate output expected to be realized by selling the service or product manufactured by the firm. The firm should keep sufficient cash neither more or less

Cash management services can be costly but usually the cost to a company is outweighed by the benefits: cost savings, accuracy, efficiencies, etc. Cash shortage will disrupt the firm manufacturing operation while exessive cash will remain idle without contributing any thing towards the firms profitably this is major function of the financial management is to maintain a sound cash position. The essence of effective management is the synchronization of the rates of inflow of receipts with the outflow of cash disbursements. Planning for cash requirements is an essential

management function of any business. Cash resources should be planned to finance a cash flow, without which many otherwise efficient and profitable business have encountered financial difficulties. The creditworthiness of business is one of its most valuable assets. A management should, therefore, ensure that there are no hold-ups in the payment of its dues because it would

earn the reputation of being a bad paymaster or else, its creditors may resort to litigation. Unfortunately the inflow and outflow of funds cannot be synchronized completely. If this were possible, it would not be necessary to maintain more than a minimum of cash or near cash resources.

Cash resources should be planned to finance a cash flow, without which many otherwise efficient and profitable business have encountered financial difficulties. The creditworthiness of business is one of its most valuable assets. A management should, therefore, ensure that there are no hold-ups in the payment of its dues because it would earn the reputation of being a bad paymaster or else, its creditors may resort to litigation. Unfortunately the inflow and outflow of

funds cannot be synchronized completely.

If this were possible, it would not be

necessary to maintain more than a minimum of cash or near cash resources.

Hence efficient management of every business enterprises is closely linked with efficient management of finance.

Spontaneous financing
Spontaneous financing refers to the automatic sources of short term funds. The major sources of such financing are trade credit (creditors and bill payable) and outstanding expenses. Spontaneous sources of finance are cost free therefore, as much as possible, every firms is expected to utilize spontaneous sources to the full extent. Thus the reek chance of financing current assets is between short-term and long-term sources.

Someone lend some money, what conditions would you attach to it. First, hopefully, you would set the time they had to pay it back. Secondly you may decide to attach further conditions like paying interest or perhaps even a penalty clause if they failed to pay up on time (though stick here to financial penalties rather than physical ones that may be illegal). The same is true of any business. If they sell goods and offer a period of credit then they have to ensure that all the debts are paid and that they are paid on time. This is known as debt / credit control.

Management of cash flows :

A business firm can improve it cash management effectively by various collection and disbursement methods. The management of cash flows through speeding up cash inflows and delaying cash out flows to the extent possible maximize the availabity of cash and lesser the permanent in cash..

Efficiency of cash management:

1) Percentage of cash to Current Assets. 2) Percentage of cash to Total Assets. 3) Rate of rotation of cash. This is calculated by dividing the annual sales with average cash balance. This is also called velocity. 4) Percentage of cash to the net annual sales. 5) Number of days sales the cash balance represents.

Cash managemetn techniques:

1. Controlling the level of cash Preparing the cash budget Providing for the unpredicatable discrepancies Availability of other sources of fund 2. Controlling in flow of cash Concentration banking Lock box system 3. Control over cash out flow Centralized disbursement Payment of cash on due dates

Playing flot

Various aspects to the firms cash management:

Liquidity Investment Cash flow

Liquidity
Firm has to ensure that it has sufficient cash for all its day-to-day activities. It needs to be able to pay its bills when they are due and pay its staff and so on. It therefore needs to have sufficient of its cash in a liquid form to cope with all contingencies. However, the more liquid a form the cash is in the less it will be earning for the firm. Firm could check this by trying to compare the rates that a bank or building society offer for money that is tied up for different time periods.

Investment
Investment is linked in with the notion of liquidity. If the firm has surplus cash for its day-to-day needs it should perhaps think about investing it. This investment could be a financial one (portfolio investment), or it could perhaps be investment in fixed assets (productive / direct investment). Either of these will make the money work harder than it will in a more liquid form.

The firm does, however, need to plan carefully to ensure that it has planned as necessary for its future cash needs.

Cash flow
A firm is constantly receiving cash (from sales, debtors and perhaps even from interest), and constantly using cash (paying bills, paying staff and so on) it needs to ensure that the two balance out. The consequences of a mismatch of the two should be obvious. Think of it in terms of firm own bank account and will see what it means. More money going out than coming in quickly leads to bouncing cheques and 'persuasive letters' from the bank manager. The same will happen to a firm and it will run into cash flow problems.

Need and importance of cash flow

There is always a time gap between the sale of goods and the receipts of sale proceeds. During this period working capital is needed for sustaining the sales activities. If adequate working capital is not maintained for this period, the firm will not be able to sustain or maintain the sales, since, it may not be in a position to purchase raw materials, pay wages and other expenses and produce the goods required for the sales. Thus, every firm requires adequate working capital to run its business smoothly and successfully.

Objectives of cash management

A highly liquid, vital asset is cash. It is needed to meet every type of expenditure. Hence it should be sufficiently managed. If a firm fails to provide funds to meet its obligation, it will be clear indication of technical insolvency of the firm. If the cash position of the firm is strong, it can command the business operations. Cash discounts can be obtained on purchase obligations if it cans ve met immediately. Cost of capital will be minimized keeping these two views, namely liquidity and profitability; the following objectives can be identified of cash managements.

 To make cash payments To maintain minimum cash reserve

To make cash payments

The objective of holding cash is to meet the various types of expenditure to be incurred in business operations. The firm should remain liquid to meet the obligations, otherwise the business suffers. It is observed that cash is oil to lubricate the ever-turning wheels of business without it; the process grinds to a stop. Thus one of the basic objectives of cash management is to maintain the image of the organization by making prompt payment to creditors and avail cash discount facilities.

To maintain minimum cash reserve:

Another important objective of cash management is to maintain minimum reserves. It means, in the process of meeting obligations on time, the firm should not unnecessarily maintain heavy cash reserves. It cannot keep cash idle. Excess cash balance should be made productive. Maintaining minimum cash reserve is made possible by synchronizing cash inflows and outflows through cash budgeting. Thus as far as possible the firm should maintain minimum cash reserve to attain the objectives of profitability.

Motives of holding cash

1. Transaction motive 2. Precautionary motive 3. Speculative motive

1. Transaction Motive
Transaction motive requires a firm to hold cash to conduct its business in the ordinary course. The firm needs cash to make payments for purchase, wages, operating expenses and

other payments. The need to hold cash arises because cash receipt and cash payments are not perfectly synchronized.

2. Precautionary motive
Cash is also maintained by the firms and even by individuals to meet unforeseen expenses at a future date. There are uncontrollable factors like government policies, competition, natural calamities, and labour unrest, consumer behavior that will have heavy impact on business operations. In such case firm may require cash reserves should be maintained at minimum levels.

3. Speculative motive
To make advantage of unexpected opportunities, a firm holds cash for investing in profitmaking opportunities. Such a motive is purely speculative in nature. For example holding cash to take advantage of an opportunity to purchase raw material at a reduced price on payment of immediate cash or delay purchases of materials in anticipation of declining price

Importance of cash management:

Cash management assumes more importance than current assets because cash is the most significant and the least productive asset that the firm holds. It is significant because it is used to pay firms obligations.

Management of cash is also important because it is difficult to predict cash flows accurately and that there are no perfect coincidence between cash inflows and cash outflows. Cash management is also important because cash constitutes the smallest portion of the total current sales, even them; considerable time of management is devoted for it.

Tools employed in cash management:

Various tolls employing in cash management are; 1) Cash budget. 2) Cash flow statement

Cash Budget:
Cash budget is a comparison of estimated cash inflows and out flows for a particular period. Such as, day, week, month, quarter etc. a cash budget is an estimate of the recepits and payments for the each month or other period forming part of the whole budger period. The cash budget may be employed by the managemetn in planning its cash needs. However after the budget has been prepared it may serve as a control device.

Cash flow statement.

Cash flow analysis is very useful as it shows the amount of cash coming from operations and shows the balance between various sources of cash under the cash concept, the cash flow statement lists various items, which cause the change in cash balances between

Cash management at BEML Company:

The BEML is a firm where the cash flow IN & OUT in large volumes. Cash also forms an important item in the current assets. Therefore, management of cash is very much essential. At BEML CO. the term cash implies. 1. Cash on hand 2. Remittance-in-transit and cheques on hand. The BEML is a big firm; the inflows are mostly from the sale of goods. The finished products are sold in the market throughout south India through tenders. Towards the outflow side, the company incurs all types of outflows cash will have to pay for purchasing raw-materials, spares and to meet all types of expenses. To meet these expenses and to overcome unknown expenses the BEML prepares the projected cash flow statement for complete year as well as for a month. As per the monthly cash flow statement, the modes of making payments are as follows: Since, the company enjoys speedy collections of cash from the customers; it doesnt utilize the working capital sanction from banks. If the outflow is sufficient, it doesnt borrow. But, if the cash inflow is inadequate it borrows for working capital requirements from the Government and sale of products. The sales prices of the companys product are inclusive of all cost. Hence, the cash from sales is helpful to meet them day to day affairs.

CHAPTER-2 RESEARCH METHODOLOGY

CHAPTER-2 RESEARCH METHODOLOGY

Research design
Title of the study: A report on cash management techniques and its impact on liquidity positions.

Statement of the problem:

The efficient cash management is one of the important factors for success of any organization. Management of capital is one of the most important areas with regard management of costs. Through efficient management of components of working capital management like receivables, inventories, and cash an enterprise can minimize costs and increase profitability. Hence there is a need to study the various aspects relating to working capital of the business enterprise. Higher the cash management of the business enterprise, higher will be the profits. A systematic forecasting of working capital needs and proper management of each of the components of cash management will be extremely beneficial for the co. Therefore there is a need to study the management of cash management.

Objectives of the study:

The primary aim of the study is to evaluate the cash management in CIPLA CO LTD. More specially, the study aims at, 1. To study the background of cash management in BEML ltd. 2. Knowing how cash management has contributed to the profit or loss of the company. 3. Knowing how efficiently working capital was managed at the BEML ltd. 4. To know the requirement of cash in the BEML ltd. 5. Find out the deficiencies and give the suitable suggestions. 6. To study the performance of the company for the given 3 year balance sheet.

Scope of the study:

This study tries to cover all aspects of cash management in the BEML LTD. It studies the important areas to establish a better control over all the components of requirements in an industry.

This study tries to identify optimum working capital requirements for the BSNL co ltd. And various sources available for financing the working capital in general.

Limitations:
The period of study is restricted for a period of 4 years only, i.e., from 2007-08 to 200910. Analysis of data is made based on the information collected from the company and its respondents. The scope of the study is restricted to only the capital aspects of The BEML LTD with relevant analysis, the study does not attempt about the corporate performance. The attempt has been to include all factors affecting the case study before putting it into writing; there is possibility of the some factors being left out due to the policy of the management to keep them confidential. The conclusions which have arrived are based only on the data that was available & which was provided by the company. Lastly, the study is purely an economic. This experience makes this analysis less precise when compared with professional.

Sources of data
The primary data were collected from the unit taken up or study, i.e.,BEML ltd Through personnel inquiry & the information regarding their policies, procedures, techniques adopted, the measures taken by the official relating to the working capital.

The secondary data were collected from the annual reports provided by the officials at The BEML LTD. This project report also relies on the information collected from relevant text books on the subject matters & other verified documents available.

PRIMARY SOURCES OF DATA

Personal interview with CAO and other top-level officers

SOURCES OF DATA

Company annual reports

SECONDARYS OURCES OF DATA

Journals

Magazines

Statistical Tools:
In this study the analysis is prepared based on the information collected through primary and secondary data. For this analysis and interpretations the statistical tools used are tables and ratio analysis.

Chapter scheme

Chapter1: Introduction
This chapter explains about the basic concepts of cash management. Introduction to cash management. Need and importance of cash management. Types of working capital. Tolls employing in cash management.

Chapter2: Research design

Title of the study Statement of the problem Objectives of the study Scope of the study Limitation of the study Operational definitions Chapter scheme

Chapter3: Profile of the company

History Milestones

Competitors Chapter4: Analysis and interpretation of data

 Ratio Analysis. Statement of cash management.

Chapter5: Summary of findings, suggestions and conclusion and bibliography

CHAPTER-3 INDUSTRY PROFILE

CHAPTER-3
INDUSTRY PROFILE History

Standards of Financial Proprieties:

Ever officer incurring or authorizing expenditure from public funds should be guided by high standards of financial propriety. Every officer should also enforce financial order and strict economy at every step and see that all relevant financial rules and regulations are observed, by his own officer and by subordinates disbursing officers. Among the principles on which emphasis is generally laid are the following: 1. Every officer is expected to exercise the same vigilance in respect of expenditure incurred from public moneys as a person of ordinary prudence would exercise in respect of expenditure of his own money. 2. The expenditure should be prima-facie more that the occasion demands. 3. No authority should exercise its powers of sanctioning expenditure to pass an order which be directly or indirectly to its own advantages. 4. Expenditure from pubic moneys should not be incurred for benefit of a person or section of the people unless. a claim for the amount could be enforce in a Court of Law, or b. the expenditure is in pursuance of a recognized policy or custom.

5. The amount of allowances granted to meet expenditure of a particular type should be so regulated that the allowances are not on the whole a source of profit to the recipients. 6. The responsibility and accountability of every authority delegated with financial powers to procure any item or service on Government account is total and indivisible. Government expects that the authority a concerned will have the public interest uppermost in its mind while making a procurement decision. The responsibility is not discharged merely by the selection of the cheapest offer. 7. Whenever called for, the concerned authority must place on record in precise terms, the considerations which weighed with it while talking the procurement decision.

Milestones
1935 Dr K A Hamied sets up "The Chemical, Industrial and Pharmaceutical Laboratories Ltd." in a rented bungalow, at Bombay Central. 1941 As the Second World War cuts off drug supplies, the company starts producing fine chemicals, dedicating all its facilities for the war effort. 1952 Sets up first research division for attaining self-sufficiency in technological development. 1960 Starts operations at second plant at Vikhroli, Mumbai, producing fine chemicals with special emphasis on natural products.

1968 Cipla manufactures ampicillin for the first time in the country. 1972 Starts Agricultural Research Division at Bangalore, for scientific cultivation of medicinal plants. 1976 Cipla launches medicinal aerosols for asthma. 1980 Wins Chemexcil Award for Excellence for exports. 1982 Fourth factory begins operations at Patalganga, Maharashtra. 1984 Develops anti-cancer drugs, vinblastine and vincristine in collaboration with the National Chemical Laboratory, Pune. Wins Sir P C Ray Award for developing inhouse technology for indigenous manufacture of a number of basic drugs. 1985 US FDA approves Cipla's bulk drug manufacturing facilities. 1988 Cipla wins National Award for Successful Commercialisation of Publicly Funded R&D. 1991 Lauches etoposide, a breakthrough in cancer chemotherapy, in association with Indian Institute of Chemical Technology. The company pioneers the manufacture of the antiretroviral drug, zidovudine, in technological collaboration with Indian Institute of Chemical Technology, Hyderabad. 1994 Cipla's fifth factory begins commercial production at Kurkumbh, Maharashtra.

1997 Launches transparent Rotahaler, the world's first such dry powder inhaler device now patented by Cipla in India and abroad. The palliative cancer care centre set up by the Cipla Foundation, begins offering free services at Warje, near Pune. 1998 Launches lamivudine, becoming one of the few companies in the world to offer all three component drugs of retroviral combination therapy (zidovudine and stavudine already launched). 1999 Launches Nevirapine, antiretroviral drug, used to prevent the transmission of AIDS from mother to child. 2000 Cipla became the first company, outside the USA and Europe to launch CFC-free inhalers ten years before the deadline to phase out use of CFC in medicinal products. 2002 Four state-of-the-art manufacturing facilities set up in Goa in a record time of less than twelve months. 2003 Launches TIOVA (Tiotropium bromide), a novel inhaled, long-acting anticholinergic bronchodilator that is employed as a once-daily maintenance treatment for patients with chronic obstructive pulmonary disease (COPD). Commissioned second phase of manufacturing operations at Goa. 2005 Set-up state-of-the-art facility for manufacture of formulations at Baddi, Himachal Pradesh. 2007 Set-up state-of-the-art facility for manufacture of formulations at Sikkim. 2010

Set up state-of-the-art facility for manufacture of formulations at Indore

VISION To heal South Africa and to become the biggest and the most admired pharmaceutical company in South Africa. MISSION Cipla Medpro commits itself to endeavour to satisfy our customers' needs in every manner possible: through excellent service, by developing and marketing an effective, safe, quality product and by offering our product at a price affordable to all patients. We further commit ourselves to contributing to continued medical education and research into new drug delivery systems in the belief that this contribution will improve technical know-how and ultimately benefit all patients in South Africa. We intend to be the employer of choice in the pharmaceutical sector developing our most valuable asset, human capital, irrespective of race, colour or creed so that they may realise their full potential and ambitions. We pledge personal respect, fair compensation and a clean and safe working environment.

It is our wish that we be recognised as innovators in the field of pharmaceutical marketing rather than just followers, be the investors pick and achieve sustainable above average returns to the investor. It is our dream that through our policy of dedication and commitment we will create an environment whereby Cipla Medpro will come to be recognised as the preferred partner in medicine.

Top Cipla Limited Competitors

Companies
Dr. Reddy's Laboratories Ltd. GlaxoSmithKline plc Ranbaxy Laboratories Limited Competitor on file

Location
Hyderabad, Andhra Pradesh London, United Kingdom Gurgaon, Haryana Petah Tikva, Israel

Ranks within this company's industry group: Sales: 32 Profits: 32 Insurance/HMO/PPO Drugs Equipment/Supplies Insurance Manufacturer Y Manufacturer Managed Care Distributor Distributor Utilization Management Specialty Pharmacy Y Leasing/Finance Payment Processing Vitamins/Nutritionists Information Systems Clinical Trials Hospitals/Clinics Services Health Care Acute Care Diagnostics Home Health Sub-Acute Labs/Testing Long-Term Care Outpatient Surgery Staffing Physical Therapy Physical Rehab. Ctr. Waste Disposal Physician Practice Mgmt. Psychiatric Clinics Specialty Services

Performances of cipla
02 March 2011 Cipla introduces new pain free screening technology for early detection of breast cancer in India - No Touch Breast Scan 30 November 2010 Cipla extends an innovative Mother-Baby Pack for preventing mother-tochild transmission of HIV/AIDS 20 October 2010 Cipla launches the worlds first generic Pirfenidone in India, giving hope to sufferers of IPF (Idiopathic Pulmonary Fibrosis) 06 July 2010 Life sciences industry in Asia grew 3.4% in 2009: survey 10 April 2010 Public Notice 23 March 2010 Piramal Healthcare Acquires "i-pill", a Leading Emergency Contraceptive Brand from Cipla 12 November, 2009 Cipla launches generic drug to treat H1N1 25 September, Pharmaceuticals Export Promotion Council Awards 2009 15 July, 2009 Cipla FY09 net up 10% at Rs 771 cr