RESEARCH METHODOLOGY

CHAPTER 1

RESEARCH METHODOLOGY

Chapter Index

Sr. No. Content

1.1 Introduction

1.2 Identification of Problem

1.3 Review of Existing Literature

1.4 Objectives of the Study

1.5 Hypotheses of the Study

1.6 Research Design

1.6.1 Data collection and Period of the Study

1.6.2 The Sample

1.6.3 Tools and techniques

1.7565 Conceptual Framework of Performance Evaluation through Cash

Management
1.8
Layout of the Study
1.9
Significance of the Study
1.10
Limitations of the Study
1.11
Future Scope of The Study

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CHAPTER 1

RESEARCH METHODOLOGY

1.1 Introduction

The Greek “autos” (self) has been used to create the word automotive and the
Latin word motives (of motion) to represent any form of self-powered vehicle was
added to it. Automobiles sector, one of the most important economic sectors by
revenue, began in the 1890s with hundreds of manufacturers that pioneered the
horseless carriage. Around the world, there were about 806 million cars and light
trucks on the road in 2007. Global production of vehicles (cars and commercial
vehicles) rose to 89,747,430 in 2014 from 54,434,000 in 1997. Amongst global
manufacturers, Tata Motors Ltd. of India stood at 19th position with a production of
1,062,654 units in the year 2013.

In 1897, the first car ran on the Indian road. An embryonic automotive
industry emerged in India in the 1940s with launching of Hindustan Motors in 1942
and Premier in 1944. However, growth was relatively slow in the 1950s and 1960s
due to nationalisation and licensing restrictions. The automotive industry in India is
one of the largest in the world with an annual production of 23.37 million vehicles in
FY 2014-15. Also in FY 2014-15, automobile exports of India grew by 15 percent
over the last year.

In the last few decades, the Automotive Industry of India has been recording
tremendous growth and has emerged as a major contributor to India’s GDP. This
dynamic Industry currently accounts for almost 7 percent of India’s GDP and
employing about almost 19 million people. Also contribution of Indian Automotive
Industry to Global Auto Industry Development is increasing significantly. In India,
since the de-licensing of the sector in 1991 and the subsequent opening up of 100
percent FDI through automatic route, Indian Automobile Sector has come a long way.
Today almost every global auto major has set up facilities in the country.

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In India, automotive is one of the largest industries showing impressive

growth over the years and has been significantly making increasing contribution to
overall industrial development in the country. This move is further enhanced by
Government’s support towards setting up centers for development and innovation. In
order to further accelerate and sustain advancements in the auto sector, the department
has undertaken several policy measures and incentives. The most important being the
announcement of Auto policy of 2002, which aimed to establish a globally
competitive automotive industry in India and double its contribution to the economy.
Another milestone in this field had been the launch of the National Automotive
Testing and R&D Infrastructure Project (NATRIP) which aimed to create core global
competencies in automotive sector. Besides, the announcement of Automotive
Mission Plan for the period 2006-2016 is a major step taken to make India a global
automotive hub.

As a result, India is emerging as strong automotive Research and Development

(R&D) hub with foreign players like Hyundai, Suzuki, and General Motors setting up
their base in India. Tata Nano’s successful entry in the market steamed up the
opportunities of growth available in alternative segments like electric cars, vehicles
run on natural gas etc. All such initiative indicates that the Indian Automotive
Industry has been emerging as a sunrise sector of the economy. It is not only meeting
the growing domestic demands, but also gradually increasing its penetration in the
international market.

Talking about the numbers, the production of passenger vehicles in India was
recorded at 3.23 million in 2012-13 and is expected to grow at a compound annual
growth rate (CAGR) of 13 per cent during 2012-2021, as per data published by
Automotive Component Manufacturers Association of India (ACMA).

Passenger car sales stood at 1.89 million units in 2012-13. Additionally, share
of luxury cars to the total passenger car market of India is expected to increase to four
per cent by 2020. The total number of passenger cars in India is likely to touch around
8 million units by 2020, as per Mr. Boris Fitz, Director, Sales and Network
Development, Mercedes-Benz India.

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The industry produced 1.74 million vehicles in May 2013. The export of
passenger vehicles and three- wheelers grew by 7.34 percent and 26.53 percent
respectively during the April-May 2013, as per data released by Society of Indian
Automobile Manufacturers’ (SIAM).

Furthermore, the amount of cumulative FDI inflow into the Indian automobile
industry during April 2000 to April 2013 was worth US$ 8.32 million, amounting to 4
per cent of the total FDI inflows (in terms of US$), as per data published by
Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce.

Table 1.1 Automobile Production Trend

CATEGORY 2010-11 2011-12 2012-13 2013-14 2014-15

Passenger 29,82,772 31,46,069 32,31,058 30,87,973 32,20,172

Commercial 7,60,735 9,29,136 8,32,649 6,99,035 6,97,083

Three 7,99,553 8,79,289 8,39,748 8,30,108 9,49,021

Wheelers

Two Wheelers 1,33,49,349 1,54,27,532 1,57,44,156 1,68,83,049 1,84,99,970

Grand Total 1,78,92,409 2,03,82,026 2,06,47,611 2,15,00,165 2,33,66,246

Source: Society of Indian Automobile Manufacturer

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Figure 1.1 Automobile Production Trend

Source: Society of Indian Automobile Manufacturer

Table 1.2 Automobile Sales Trend

CATEGORY 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15

Passenger 1951333 2501542 2629839 2665015 2503509 2601111

Commercial 532721 684905 809499 793211 632851 614961

Three 440392 526024 513281 538290 480085 531927

Wheelers

Two 9370951 11768910 13409150 13797185 14806778 16004581

Wheelers

Grand Total 12295397 15481381 17361769 17793701 18423223 19752580

Source: Society of Indian Automobile Manufacturer

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Figure 2 Automobile Sales Trend

Source: Society of Indian Automobile Manufacturer

Table 1.3 Automobile Exports Trend

CATEGORY 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15

Passenger 446145 444326 508783 559414 596142 622470

Commercial 45009 74043 92258 80027 77050 85782

Three Wheelers 173214 269968 361753 303088 353392 407957

Two Wheelers 1140058 1531619 1975111 1956378 2084000 2457597

GRAND TOTAL 1804426 2319956 2937905 2898907 3110584 3573806

Source: Society of Indian Automobile Manufacturer

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Figure 1.3 Automobile Exports Trend

Source: Society of Indian Automobile Manufacturer

Table 1.4 Gross Turnover of Automobile Manufacturers in India (In USD

Million)

Year 2008-09 2009-10 2010-11 2011-12 2012-13 2012-14

In USD Million 36612 33250 43296 58583 66264 67607

USD Conversion Rate 40 46 47 46 47 50

Source: Society of Indian Automobile Manufacturer

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Figure 1.4 Gross Turnover of Automobile Manufacturers in India

Source: Society of Indian Automobile Manufacturer

In recent years India has been developing as a market potential for

automobiles due to rise in demand and as a result there is an increased production to
tap the growing demand both at home and in the foreign markets. This is reflected in
the production figures of the industry especially remarkable in the passenger vehicle
and three wheeler divisions, where production raised from 1,209,876 vehicles in the
year 2004-05 to 3,072,651 vehicles in the year 2013-14. In recent years India has been
developing as a market potential for automobiles due to rise in demand and as a result
there is an increased production to tap the growing demand both at home and in the
foreign markets. This is reflected in the production figures of the industry especially
remarkable in the passenger vehicle and three wheeler divisions, where production
raised from 1,209,876 vehicles in the year 2004-05 to 3,072,651 vehicles in the year
2013-14. The sales figure of the industry states that sales of commercial vehicles have
decreased. The analysis of the ten year data of the industry indicates that the sale of
the industry is quite satisfactory. The exports of made in India rose by 31% in
financial year 2004-05 as passenger cars, two and three wheelers, commercial and
multi utility vehicles continue to charm overseas buyers. A total of 1.2 million units
were shipped during financial year 2007-08 over 1 million units exported in the
financial year 2006-07. This figures says it all about the Indian automobile industry.

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1.2 Identification of Problem

Though being a part of working capital management, cash management has a

very broad area to cover. Cash management is mainly a thing of primary observation,
though with the help of few financial ratios, performance of the firms can be
evaluated. Cash is of course the lifeblood of any business. Not just business, but apart
from food, water and shelter, now even the cash is a vital thing to survive on this
earth. In these days of globalization, foreign exchange is also traded in the open
market. Day by day cash is becoming a bit complicated matter. So is going to be its
impact on the performance of any firm’s business. So it is very essential to have a
check on the cash management performance of any company. Mismanagement of
cash and cash equivalents may lead a company to very tough situations, sometimes,
resulting into insolvency.

Cash management is a broad term that refers to the collection, concentration,

and disbursements of cash. The management goal is to manage the cash balance of an
enterprise in such a way as to cash not invested in fixed assets or inventories and to
reduce risk of insolvency. In some ways, managing cash flow is the most important
job of business managers. If at any time a company fails to pay an obligation due to
lack of cash, company may become insolvent. Insolvency is the primary reason for
business getting bankrupt. Obviously, the prospect of such a dire consequence should
compel companies to manage their cash with care. Moreover, efficient cash
management means more than just preventing bankruptcy. Efficient cash management
improves the profitability and reduces the risk to which the firm is exposed.

Cash management is particularly important for new growing business. The

management of cash flow without margin of safety creates numerous problems.
Management also may experience trouble in finding the funds for innovation or
expansion. It is somewhat ironically, easier to borrow money when you have money.
In addition to this, poor cash flow makes it difficult to hire and retain good
employees. The major business expenses are incurred in the production of goods and
the provision of services. So these factors are essential part of any business financial
planning. Cash is the lifeblood of a business, so is essential for success.

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Thus researcher would like to conduct the research study in automotive

industry with special reference to cash management. In this research, researcher will
try to analyze the cash management performance of sample companies, working
capital of sample companies, cash position as well as impact of cash position on
profitability of sample companies. Conclusively, in this research, researcher will try to
show the whole picture of automobile industry considering the cash management as a
key factor.

1.3 Review of Existing Literature

Agarwal, N. K., examined working capital management on the basis of sample

of 34 large manufacturing and trading public limited companies in ten various
industries of private sector for the period of 11 years from 1966-67 to 1976-77. Ratio
analysis tool has been used for the purpose of analysis. The study concluded that
although the working capital per rupee of sales exhibited a declining trend over the
years, but still there appeared enough scope for reduction in investment in almost all
the segments of working capital. A downward trend in cash turnover and an upward
trend in cash to current assets ratio showed the accumulation of idle cash in industry.
Almost all the industries had overstocking of inventories. It also showed that long
term funds as a percentage of total working capital reported upward trend, which was
mainly due to restricted flow of bank credit to the industries.

Aruna Saini and Ram Saini conducted an empirical study on “Analysis of

liquidity management and trade off between liquidity, risk and profitability”. The
period of the study was 1999-2000 to 2008-09. Their purposes of the study were to
measure and evaluate the efficiency of liquidity management by using ratio analysis
and to assess the trade-off between profitability and risk. The sample for the study
was Infosys Technologies Ltd. The research was mainly based on ratio analysis and
statistical techniques like measures of central tendency, measures of Dispersion,
Spearman’s Rank Correlation etc. The study of the liquidity with the help of net
working capital evidenced a sound position of the company. The average collection
period indicated a liberal collection policy which can affect the cash management.
The degree of association between liquidity and profitability of the company was
negative, therefore it can be concluded that excessive liquidity might lead to lower

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profitability.

Barua, S. and Saha A.K., in presented an article comparing traditional ratios

with cash flow ratios. The primary objective of the study was to establish usefulness
of the cash flow based ratios in today’s competitive business world. Another objective
was to suggest a list of cash flow ratios to be included in financial analysis. In this
research paper financial statements for ten years have been evaluated by means of
suggested cash flow ratios. Samples were chosen from Banking, Insurance and
Finance Sector of Bangladesh. The researchers concluded that cash flow information
has explanatory power. The ratios that are suggested in this study, if used in
conjunction with traditional balance sheet and income statement that will lead to a
better indication of the financial strength and weaknesses of an entity. It also has the
potential to serve as an early warning of financial distress and bankruptcy.

Beaver in his research paper reported that cash flow from operations, proxied by
net income plus depreciation, depletion and amortisation, to total debt had the lowest
misclassification error relative to common accrual measures of financial health.
However, his univariate approach to analysing financial distress was seldom followed
because while one ratio would indicate failure another could indicate non-failure.

Chadmiya B. P., (2007) in his [Link] project report on “A Study of Management

of Cash with reference to selected I. T. Companies” (A Comparative study of Infosys
Ltd. & Wipro Ltd.), described the cash and liquidity position of the selected units and
to give the suggestions for improvement of cash. Cash Flow based measures are
employed to evaluate the cash management performance as well as liquidity position
of the selected companies. The researcher used ratio analysis and cash flow statement
to know the cash management performance of Infosys Ltd. and Wipro Ltd.

Dr. N. Pasupathi carried out a study on Operational Adequacy of Working

Capital Management of selected units of Indian Automobile Industry – A Bivariate
Discriminant Analysis. The study in general aimed at making a study of the
management performance relating to working capital of selected units of Indian
Automobile Industry and also evaluating working capital management policies of
those selected units. The period of the study undertaken was 1992-93 to 2006-07.

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Here the researcher reported that the comparison of good and poor risk units as per
the current ratio and as per the discriminate score showed that the misclassification of
units was noticed in all the years.

Ghosh, S. (2011), in her research article on “Cash Management Performance

Evaluation”, in Indian journal of accounting volume XLII (1) December 2011
attempted to evaluate the cash management performance of two leading companies in
the Indian Steel Industry namely SAIL and TSL during the period 2003-04 to 2009-
10. This study describes the comparison between SAIL & TSL. The empirical
findings of the study reveal that TSL on the average has utilized its cash more
efficiently in comparison to SAIL. TSL has better capacity to correct its sales into
cash than that of SAIL.

Helen Kwok and Tuen Mun (2002) undertook the study “The effects of cash
flow statement on Lenders‟ decisions” . The researchers mentioned that bank officers
use cash flow statement as an important document while taking decisions about
lending loans. The reason being it provides very crucial information about cash inflow
and cash outflow. Auditors, accounting academies, financial analysts and bank loan
officers were taken up as samples. Each of them were given annual reports of two
loan applicant companies and were asked to make independent lending decisions on
whatever data was provided. This data included the cash flow statement of one
company was given in the direct format and the other was presented in the indirect
format. The latter format was used as an addition to the fund flow statement. The
result that was presented clearly indicated that a majority of the subject obtained
information from the Balance sheet. However, it was also found that the cash flow
statement was the second most used financial information base. Even notes to the
financial statements were taken into account almost ignoring the cash flow statements.
No subject was found to be using fund flow statements as the base of their financial
reports.

International Financial Reporting Standard (IFRS) no. 107 is relating to the cash
flow statements. It provides the guideline that cash flow statement is an integral part
of the firm’s financial statements. It also provides that “Information about cash flow is
very useful in predicting the enterprise’s ability to generate cash and cash equivalents.

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In this study, an attempt is made to find out the predictive ability of the operating cash
flow and data based on accrual accounting to predict future cash flow from operating
activities. For this study, Multivariate Regression Models and Panel data were used.
In this study, 173 companies were taken as sample from the companies which were
listed on the Bursa Malaysia. In this study, to predict future cash flows from operating
cash flow during the period 1997-2005, following three predictor variables have been
used: (i) Net income before extraordinary items (NI) (ii) Net income before
extraordinary items + Depreciation and Amortization (NDA) (iii) Cash flow from
Operating Activities (CFO).

Jani Virendra (2007) conducted a research work on “Working Capital

Management of Fertilizer Industry of Gujarat”. This study includes position of
Working Capital Management, tendency of raw material, credit tendency, cash
tendency and tendency of suppliers of the unit under study. The period of the study
was 1996-97 to 2004-05. The samples selected were GNVFC, GFSC, Liberty and
IFFCO. With the analysis it was found that the cash position ratio of all the companies
varies. Here, in context to Cash Management, the researcher has analyzed the Cash &
Bank amount, current liabilities, cash ratio, cash ratio index and trend value.

Jill Andresky Fraser’s classic articles on the topic “THE ART OF CASH
MANAGEMENT” included finance business – cash management and learning how to
handle a cash crisis. Assembled here are practical pieces of advice, tips and tricks
from CEOs, and tools that you can use to get handle on business cash.

John Sagan in his study on “Toward a Theory of Working Capital

Management”, disclosed mainly the role and function of the manager who is directly
interested in the management of cash that is generated during the transactions of
business. He emphasized that more importance was laid on the manager’s job. He
concluded that preparation and analysis of cash flow schedule was a basic factor to
attain a sound program of money management. Researcher also found out that the
level of operational cash needs depends on the level of sales. His study stated that the
level of working capital is a function of sales.

M. Subramanya Sarma and Thiruvengala Chary conducted a study on “Working

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Capital Management in Vazir Sultan Tobacco & Company Ltd.”. The objective of the
study was to understand the trends in current assets investing and financing policy of
working capital management with the help of selected accounting ratios in the sample
company. The period of study was from 1989 to 1996. The methodology of the study
was based on interpretation of the annual reports of the company. There was not
proportionate increase in current assets investment in relation to sale resulting into
rapid decline in working capital turnover ratio. There was no consistent policy of
working capital management. It was found that during the last two years of the study
period, the quick ratio was much higher than generally accepted norms and that was
due to the sudden decline of inventory and rapid increase in current assets. Credit
policy was highly volatile with increasing risk of bad debts. These were some of the
main findings of the study. They also suggested that the company needed to improve
its management of cash and credit policy in order to have adequate profitability.

Muthumoni A., (2008), “A Study on the Performance Appraisal of Indian

Automobile Industry” Ph.D. Thesis, Adirampattinam, Tamilnadu, in this research
work, the performance of Indian Automobile Industry is analyzed on the basis of
production trend, sales trend, profitability analysis, financial structure, financial
performance, assessment of financial health, Economic Value Added (EVA) and
Market Value Added (MVA). On the basis of the analysis, the researcher has arrived at
the fruitful findings and offered useful suggestions for the growth of Indian
automobile industry. Naveen D. Daniel, David J. Denis, Lalitha Naveen conducted a
survey on “Sources of Financial Flexibility: Evidence from Cash Flow Shortfalls”. They
mentioned that the firms which are facing shortage of cash for payment of dividend and
for investment purposes have to adopt any one of the various options such as reduction in
dividends, reduction in investments, to sell the securities and to raise more funds, sale of
assets, to reduce the cash reserves. The results of this study revealed that only 6% firms
adopted the option of reducing the dividends. On the other hand, a large group of 68%
firms reduced the level of investment. Half of the cash shortfall was covered by reducing
the investment whereas the other half was covered by obtaining debt from outside
sources. Some options like issue of equities, cash balance reduction and sale of assets
were not much important and were not taken into consideration seriously in reducing the
cash shortfall.

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Paghadar A.A., “A Research Dissertation on Performance Evaluation through

Cash Management”, [Link]. Research Dissertation, Saurashtra University, Rajkot,
2013. This research dissertation is an attempt to make comparison between samples of
Food Processing Industry namely, Kohinoor Foods Ltd., Himalaya International Ltd.,
Tasty Bites Eatables Ltd. And Mount Everest on cash management policy.

Patel, J. R., (2011), “A Study of Working Capital Managment in Cement

Industry in India”, the researcher analyzed and evaluated working capital
management with respect to trade off between liquidity and profitability, to study the
various factors affecting working capital requirements in cement industry, to assess
the relative significance of various sources of financing working capital.

Popat. Pravin H. (2011) A study on Working Capital Management and its Impact
on Profitability of Selected Fertilizer Units of Gujarat State. This study revealed the
trend of working capital in Gujarat State Fertilizer Company and Gujarat Narmada
Valley Fertilizer Company during the study period, to measure the efficiency of
working capital management.

Rakesh Kumar Manjhi carried out a study on “An In-depth Study of Working
Capital Policy and Management of Selected Textile Manufacturing Companies in
Gujarat”. The period of the study undertaken was 1999-00 to 2010-11. The study
proposed to examine the policy prevailing in the management of working capital in
Textile Companies of Gujarat and to examine management performance in this regard
and also to look at possible remedial measures on the basis of which funds tied up in
working capital could be used efficiently and effectively. Here, in context to cash
component, the researcher has used Total Cash to Total Sales Ratio, Cash Turnover
Ratio, Cash Conversion Cycle, Net Cash Flow Analysis, and Net Cash Flow to
Current Liabilities ratio for analysing the cash management performance. On
establishing a relationship between the volume of sales and the size of cash balance,
the researcher found that there was a positive relationship between the size of cash
balance and the volume of sales.

Rana A.S., (2008), “Shareholder Value Creation in Automobile Industry in

India”, Ph.D. Thesis, Saurashtra University. This Research shows the shareholder

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value creation by the companies in the automobile industry in India by comparing

between Tata Motors Ltd. and Mahindra & Mahindra Ltd. analyzing Value Based
Management, Economic Value Added and Market Value Added.

Ross Kirkham conducted a survey on “Liquidity Analysis Using Cash Flow Ratios
and Traditional Ratios: The Telecommunications Sector in Australia”. The objective of
this study was to undertake the liquidity analysis of the companies. This was done by
using the traditional ratios as well as the latest cash flow ratios. In the study, a comparison
was made between the traditional ratios and cash flow ratios. For this, a period of five
years and a sample of 25 companies were taken from the telecommunication sector in
Australia. The data was taken from the database of financial analysis. The Current ratio,
Quick ratio, Interest coverage ratio, Cash flow ratio, Critical needs cash coverage ratio,
Cash interest coverage ratio were examined. The results of the study explained the
differences between the traditional ratios and cash flow ratios for liquidity analysis. The
researcher here proved that if the decision about the liquidity was taken only on the basis
of traditional ratios, the results could have been misleading. In some cases, it might
happen that even if company is facing problems of cash flow, it seems to be liquid. In the
same way, it might also happen that even if company is having enough cash flow, it may
not seem to be liquid.

Sanghani, D. D., (2013), in his research paper “Performance Evaluation through

Cash Management” Educare International Journal, made an attempt of comparison
between Bajaj Auto and Hero Motocorp on cash management policy and also evaluate
the liquidity position and positive relationship between cash balance and profitability
performance of Bajaj auto and Hero Motocorp.

Sudarshana Reddy G., Sivarami Reddy C. and Mohan Reddy P., in “A case
Study of Andhra Pradesh Paper Industry”, evaluated the performance of the debtor’s
management of the paper industry in Andhra Pradesh. For complying this, the analysis
of trends in sales and debtors, debtor’s size, turnover, collection period and aging of
receivables had been carried out. The foregoing analysis reveals that the sample mills
adopted liberal credit policy, which had a favorable effect on sales. This definitely has
a direct effect on the overall profitability performance. But though they suggested
reducing the collection period, the collection and follow up efforts of trade debtors
should be rationalized and slackness should altogether be removed.

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Vijaykumar and Venkatachalam made an important study on the “Demand for

Working Capital in Private Sector Sugar Industries of Tamilnadu. The study was an
empirical analysis. The study was conducted in order to probe the requirement for
cash, inventories, receivables, gross working capital and net working capital. Models
of economics were used to describe the demand for working capital and its various
components. The study revealed empirically whether transactions relating to working
capital including cash and inventories direct proportionate or not to change in the
volume of sales. They found that the transactions for cash are proportionately higher
than the changes in the volume of the sales. Sales elasticity was more than unity
indicating the diseconomies of scale with respect to investment of working capital and
its components. The sales elasticity of cash and inventories were more than unity
showed that fluctuation in cash and inventories levels depended significantly on
fluctuation in their financing carrying costs, the capital cost on receivables, gross
working capital and net working capital showed that the sign of interest rate of
coefficient was not only negative but also statistically significant in all these cases
except receivables, etc. were also important findings. They suggested that the demand
for working capital and its components was a function of sales and its holding cost.

Walker E. W., in his study “Towards a Theory of Working Capital”, showed

betterment upon the Sagan’s study. His main disceptation was that it was possible to
develop a theory of working capital. In this connection, he formulated the following
propositions which imply a risk return trade off of working capital.

Yucel, T, and kart, p. (2010) examined the relationship of cash conversion cycle
(CCI) with profitability, Liquidity cycle debt structure for a sample of 167 firms
during the period 1995 to 2000.

1.4 Objectives of the Study

After the review of existing literature on the topic and about the industry, research has
developed the following objectives:

1. To know the Cash Management Performance of the selected samples of Indian

Automobile Industry.

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2. To analyze the Working Capital Management of selected samples of Indian

Automobile Industry.

3. To analyze the cash flow cycle of selected samples of Indian Automobile

Industry.

4. To evaluate the cash flow from operating activity, financing activity and
investing activity of selected samples of Indian Automobile Industry.

5. To analyze the relationship between availability of cash and profitability

performance of selected samples of Indian Automobile Industry.

6. To analyze the cash conversion cycle of selected samples of Indian

Automobile Industry.

7. To make suggestions for improvement of cash management for selected

samples of Indian Automobile Industry.

1.5 Hypotheses of the Study

For the present study the researcher has formulated two hypotheses, null
hypotheses and alternate hypotheses. Hypotheses are tested with One-way ANOVA.

1. H0: There would be no significant difference in Cash to total assets amongst

selected samples of Indian Automobile Industry.

H1: There would be significant difference in Cash to total assets amongst

selected samples of Indian Automobile Industry.

2. H0: There would be no significant difference in Cash to Current Assets

amongst selected samples of Indian Automobile Industry.

H1: There would be significant difference in Cash to Current Assets amongst

selected samples of Indian Automobile Industry.

3. H0: There would be no significant difference in Cash to Sales amongst

selected samples of Indian Automobile Industry.

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H1: There would be significant difference in Cash to Sales amongst selected

samples of Indian Automobile Industry.

4. H0: There would be no significant difference in Cash Ratio amongst selected

samples of Indian Automobile Industry.

H1: There would be significant difference in Cash Ratio amongst selected

samples of Indian Automobile Industry.

5. H0: There would be no significant difference in Cash Return on Assets Ratio

amongst selected samples of Indian Automobile Industry.

H1: There would be significant difference in Cash Return on Assets Ratio

amongst selected samples of Indian Automobile Industry.

6. H0: There would be no significant difference in Cash Profit Ratio of selected

samples of Indian Automobile Industry.

H1: There would be significant difference in Cash Profit Ratio of selected

samples of Indian Automobile Industry.

7. H0: There would be no significant difference in Cash Flow Margin Ratio of

selected samples of Indian Automobile Industry.

H1: There would be significant difference in Cash Flow Margin Ratio of

selected samples of Indian Automobile Industry.

8. H0: There would be no significant difference in Cash Turnover Ratio of

selected samples of Indian Automobile Industry.

H1: There would be significant difference in Cash Turnover Ratio of selected

samples of Indian Automobile Industry.

9. H0: There would be no significant difference in Cash Flow Liquidity Ratio of

selected samples of Indian Automobile Industry.

H1: There would be significant difference in Cash Flow Liquidity Ratio of

selected samples of Indian Automobile Industry.

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10. H0: There would be no significant difference in Cash Flow per Share of
selected samples of Indian Automobile Industry.

H1: There would be significant difference in Cash Flow per Share of selected
samples of Indian Automobile Industry.

11. H0: There would be no significant difference in Working Capital Turnover

Ratio of selected samples of Indian Automobile Industry.

H1: There would be significant difference in Working Capital Turnover Ratio

of selected samples of Indian Automobile Industry.

12. H0: There would be no significant difference in Current Ratio of selected

samples of Indian Automobile Industry.

H1: There would be significant difference in Current Ratio of selected samples

of Indian Automobile Industry.

13. H0: There would be no significant difference in Quick Ratio of selected

samples of Indian Automobile Industry.

H1: There would be significant difference in Quick Ratio of selected samples

of Indian Automobile Industry.

14. H0: There would be no significant difference in Cash Flow from Operating
Activities of selected samples of Indian Automobile Industry.

H1: There would be significant difference in Cash Flow from Operating

Activities of selected samples of Indian Automobile Industry.

15. H0: There would be no significant difference in Cash Flow from Investing
Activities of selected samples of Indian Automobile Industry.

H1: There would be significant difference in Cash Flow from Investing

Activities of selected samples of Indian Automobile Industry.

16. H0: There would be no significant difference in Cash Flow from Financing
Activities of selected samples of Indian Automobile Industry.

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 RESEARCH METHODOLOGY

H1: There would be significant difference in Cash Flow from Financing

Activities of selected samples of Indian Automobile Industry.

17. H0: There would be no significant difference in Net Cash Flow of selected
samples of Indian Automobile Industry.

H1: There would be significant difference in Net Cash Flow of selected

samples of Indian Automobile Industry.

18. H0: There would be positive relationship between availability of cash and
profitability performance amongst selected samples of Indian Automobile
Industry.

H1: There would be negative relationship between availability of cash and

profitability performance amongst selected samples of Indian Automobile
Industry.

19. H0: There would be no significant difference in Cash Conversion Cycle

amongst selected samples of Indian Automobile Industry.

H1: There would be significant difference in Cash Conversion Cycle amongst

selected samples of Indian Automobile Industry.

1.6 Research Design

1.6.1 Data collection

This study is based on secondary data. The data is collected from published
annual reports of Automobile Companies. Other information related to Companies is
collected from official websites and internet sources, reference books, journals, media
reports, press releases etc.

1.6.2 Period of the Study

The time period of the study is from 2008-2009 to 2012-13.

1.6.3 The Sample

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 RESEARCH METHODOLOGY

The universe of the study is taken as all the companies registered in India
under corporate sector. Population of the study is taken as all the companies registered
under Automobile segment of Bombay Stock Exchange. Top ten companies of
universe are selected for the study based on their turnover of 2012-13. Escorts Ltd.
and Eicher Ltd., though being in top ten are not selected as they are having a different
financial period than the other companies of the universe.

BSE Listed Automobile Segment Companies:

There are total 5 industries segmented in the BSE related to Automobile Industry in
India
a) 2/3 Wheelers
b) Auto Parts and Equipments
c) Auto Tyres and Rubber Products
d) Cars & Utility Vehicles
e) Commercial Vehicles

Out of the above, three segments are related to vehicles and the two segments are
related to auto components. Here, 2/3 wheelers; Cars & Utility Vehicles; and
commercial vehicles segments are chosen representing the automobile (vehicles)
industry o f India.

a) 2/3 Wheelers Industry

There are in total 13 company registered under 2/3 wheelers segment of the
Bombay Stock Exchange.

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 RESEARCH METHODOLOGY

Table 1.5 2/3 Wheelers

Scrip Scrip Id Scrip Status G Face ISIN Industry Instru

Code Name r Value No ment
o
u
p
500182 HEROM HERO Active A 2.00 INE158 2/3 Equity
OTOCO MOTOCO A0102 Wheelers
RP LTD. 6
500240 KINETI KINETIC Active B 10.00 INE266 2/3 Equity
CE ENGINEE B01017 Wheelers
RING LTD.
500255 LML LML LTD. Active B 10.00 INE862 2/3 Equity
A0101 Wheelers
5
500266 MAHSC MAHARA Active B 10.00 INE288 2/3 Equity
OOTER SHTRA A0101 Wheelers
SCOOTER 3
S LTD.
500267 MAJES MAJESTIC Active T 10.00 INE201 2/3 Equity
AUT AUTO B01022 Wheelers
LTD.-$
505029 ATLAS ATLAS Active B 10.00 INE446 2/3 Equity
CYCLE CYCLES A0101 Wheelers
(HARYAN 7
A) LTD.
505141 SCOOT SCOOTER Active T 10.00 INE959 2/3 Equity
ER S INDIA E01011 Wheelers
LTD.
505200 EICHER EICHER Active A 10.00 INE066 2/3 Equity
MOT MOTORS A0101 Wheelers
LTD. 3
522015 VCCLL VCCL Active T 10.00 INE460 2/3 Equity
TD LTD. E01010 Wheelers
531035 TOBUE TOBU Active T 10.00 INE432 2/3 Equity
NT ENTERPRI F01016 Wheelers
SES LTD.

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 RESEARCH METHODOLOGY

531795 ATULA ATUL Active B 10.00 INE951 2/3 Equity

UTO AUTO D0101 Wheelers
LTD.-$ 0
532343 TVSMO TVS Active B 1.00 INE494 2/3 Equity
TOR MOTOR B01023 Wheelers
COMPAN
Y LTD.
532977 BAJAJA BAJAJ Active A 10.00 INE917 2/3 Equity
UTO AUTO I01010 Wheelers
LTD.

(Source: BSE official Website)

b) Cars and Utility Vehicles

There are in total 4 companies registered under Cars and Utility Vehicles
segment of the Bombay Stock Exchange.
Table 1.6 Cars & Utility Vehicles

Scrip Scrip Id Scrip Name Status G Fac ISIN Industry Instr

Code ro e No ume
u Val nt
p ue
50003 FORCE FORCE Active B 10. INE45 Cars & Equit
3 MOT MOTORS 00 1A010 Utility y
LTD.-$ 17 Vehicles
50050 HINDM HINDUSTAN Active B 5.0 INE25 Cars & Equit
0 OTOR MOTORS 0 3A010 Utility y
LTD. 25 Vehicles
50052 MNM MAHINDRA Active A 5.0 INE10 Cars & Equit
0 & 0 1A010 Utility y
MAHINDRA 26 Vehicles
LTD.

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 RESEARCH METHODOLOGY

53250 MARUT MARUTI Active A 5.0 INE58 Cars & Equit

0 I SUZUKI 0 5B010 Utility y
INDIA LTD. 10 Vehicles
(Source: BSE official Website)

c) Commercial Vehicles

There are in total 19 companies registered under commercial vehicles segment

of the Bombay Stock Exchange.
Table 1.7 Commercial Vehicles

Scrip Scrip Id Scrip Name Status Gr Face ISIN Industry Instru

Code oup Valu No ment
e

50004 BEML BEML LTD. Active T 10.0 INE2 Commer Equity

8 0 58A0 cial
1016 Vehicles

50019 HMT HMT LTD. Active B 10.0 INE2 Commer Equity

1 0 62A0 cial
1018 Vehicles

50047 ASHOK ASHOK Active A 1.00 INE2 Commer Equity

7 LEY LEYLAND 08A0 cial
LTD. 1029 Vehicles

50049 ESCOR ESCORTS Active B 10.0 INE0 Commer Equity

5 TS LTD. 0 42A0 cial
1014 Vehicles

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 RESEARCH METHODOLOGY

50057 TATAM TATA Active A 2.00 INE1 Commer Equity

0 OTORS MOTORS 55A0 cial
LTD. 1022 Vehicles

50519 SMLISU SML ISUZU Active T 10.0 INE2 Commer Equity

2 ZU LIMITED 0 94B0 cial
1019 Vehicles

50565 SKYLM SKYLINE Active B 1.00 INE1 Commer Equity

0 ILAR MILLARS 78E0 cial
LTD. 1026 Vehicles

50569 BRADY BRADY & Active T 10.0 INE8 Commer Equity

0 M MORRIS 0 56A0 cial
ENGINEERI 1017 Vehicles
NG [Link].

50585 TRF TRF LTD.-$ Active B 10.0 INE3 Commer Equity

4 0 91D0 cial
1019 Vehicles

52200 CRANE CRANEX Active T 10.0 INE6 Commer Equity

1 X LTD. 0 08B0 cial
1010 Vehicles

52208 STONEI STONE Active T 10.0 INE2 Commer Equity

5 N INDIA LTD.- 0 90C0 cial
$ 1015 Vehicles

52221 GUJAP GUJARAT Active B 10.0 INE8 Commer Equity

7 OIND APOLLO 0 26C0 cial
INDUSTRIES 1016 Vehicles
LTD.

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 RESEARCH METHODOLOGY

53126 VSTTIL [Link] Active T 10.0 INE7 Commer Equity

6 L RS 0 64D0 cial
TRACTORS 1017 Vehicles
LTD.-$

53260 BHARS BHARATI Active T 10.0 INE6 Commer Equity

9 HIP SHIPYARD 0 73G0 cial
LTD. 1013 Vehicles

53268 ABGSHI ABG Active B 10.0 INE0 Commer Equity

2 P SHIPYARD 0 67H0 cial
LTD. 1016 Vehicles

53296 TITAGA TITAGARH Active T 10.0 INE6 Commer Equity

6 RHWAG WAGONS 0 15H0 cial
LTD. 1012 Vehicles

53327 CEBBC COMMERCI Active T 10.0 INE2 Commer Equity

2 O AL 0 09L0 cial
ENGINEERS 1016 Vehicles
&BODY
BUILDERS
CO. LTD.

53766 SIVI Si. Vi. Active M 10.0 INE9 Commer Equity

9 Shipping 0 20P0 cial
Corporation 1019 Vehicles
Ltd

57000 TATAM Tata Motors Active B 2.00 IN91 Commer Equity

1 TDVR Ltd – DVR 55A0 cial
1020 Vehicles

(Source: BSE official Website)

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 RESEARCH METHODOLOGY

1.6.4 Tools and techniques

1.6.4 (A) Tools

a) Ratio analysis:

For the analysis of financial statement many tools are used like common size
statement analysis, comparative analysis, trend analysis, and ratio analysis. The ratio
analysis is most acceptable tools for the analysis of financial statements. Present study
also used various ratios for financial analysis like profitability ratios, liquidity ratios
and assets management ratios.

b) Mean:

The mean is used in order to set the bench mark and analyse the performance
of the industry during the research period. The mean is used for comparison between
performances of all the units during the study period.

c) Comparative Analysis:

A comparative analysis is done between the cash size of the firms; cash flow
statements; and cash conversion cycle of all the companies.

1.6.4 (B) Statistical techniques

a) Analysis of variance (ANOVA):

Professor R. A. fisher man to use that term variance and in fact it was he who
developed a very elaborate theory concerning ANOVA explaining its usefulness in
practical field. Later on Professor Snedecor and many other contributed to the
development of this technique. ANOVA is essentially a procedure for testing the
difference among different groups of data for homogeneity. “The essence of ANOVA
is that total amount of variation in a set of data is broken down into two types, that
amount which can be attributed to chance and that amount which can be attributed to
specified causes.” There may be variation between samples and also within sample
items. ANOVA consists in splitting the variance for analytical purposes. Hence, it is a

28
 RESEARCH METHODOLOGY

method of analyzing the variance to which a response is subject into its various
components corresponding to various source of variation. Thus in general through
ANOVA technique one can, investigate any number f factors which hypothesize or
said to influence the dependent variable. One may as well investigate the differences
amongst various categories within each of these factors which may have a large
number of possible values. If we take only one factor and investigate the differences
amongst its various categories having numerous possible values, we are said to use
one-way ANOVA and in case we investigate two factors at the same time, then we
use two-way ANOVA. In two ways ANOVA, the interaction of inter-relationship of
two factors affecting the value of a variable can as well be studied for better decision.

b) Multiple Comparison applying post hoc tests using Tukey’s Honestly

Significant Difference (HSD):

For the probabilities associated with the contrast test to be properly used in
report of our findings, it is important that contrast strategy be devised ahead of the
testing. Comparisons after the results are compared require the post hoc tests. Hence,
multiple comparisons by applying post hoc using Tukey’s HSD is to be carried out in
order to find out exactly which pair of means differ.

c) Correlations and Correlations Matrix:

The mode of relation and degree of relationship are measure through

Correlations. The matrix Correlation is used for measuring interrelationship between
more than two variables. The present study also used correlation for deciding
Correlation between Return of equity and other selected variable. Matrix Correlation
used for measuring interrelationship between twenty five financial variables.

d) Standard Deviation:

In the present 0study Standard deviation has been used as one of the statistical
techniques for deciding how the variables are far from the mean.

1.7 Conceptual Framework of Performance Evaluation through Cash

Management

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 RESEARCH METHODOLOGY

Cash is the most liquid asset in any firm’s balance sheet and so is its vital
importance in the daily business operations. Cash is the basic input required to start as
well as run the business despite of size of the business. And also it is the ultimate
output expected by selling the product or providing services. There are basically three
primary motives of holding cash: (1) to meet the needs of day-to-day transactions; (b)
to protect the firm against uncertainties characterising some of its cash flows; and (c)
to take advantage of unexpected inc=vestment opportunities. While, cash serves these
functions, it is an idle resource with an opportunity cost. The liquidity provided by
holding cash is at the expenses of profits that could accrue from alternative
investment opportunities. Hence, it is very crucial for firm to plan and control cash
carefully. 1

The term cash with reference to cash management is used in two senses. In a
narrow sense, it is used broadly to cover cash (currency) and generally accepted
equivalent of cash, such as cheques, bank drafts and demand deposits on banks. The
broader view of cash also includes near cash assets such as marketable securities and
time deposits in banks. The main characteristics of these assets are that they can be
readily sold and converted into cash. They also provide a short term investment outlet
for excess cash and are also useful to meet a planned outflow of funds. 2 Cash
management thus is concerned with the managing of:

(i) Cash flows into and out of the firm;

(ii) Cash flows within the firm; and
(iii)Cash balance held by the firm at a point of time by financing deficit or
investing surplus cash.

In order to overcome the problem of uncertainty in cash flow estimates and

lack of coordination between cash inflows and cash outflows, the firm has to develop
certain strategies for effective cash management. General facets of cash management
for which the management has to evolve strategies are (a) Cash Planning; (b)
Managing the Cash Flows; (c) Optimum Cash level; and (d) Investing Idle Cash.
These are the classical functions of cash management.

1
Chandra, P., Finance Sense – Finance for non-finance executives
2
Shah, P. P., Financial Management

30
 RESEARCH METHODOLOGY

In maintaining an optimum balance, we have till now studied Baumol’s model

as well as Miller-Orr’s Model. Further, there are various aspects of managing the cash
flows such as accelerating cash collection by concentration banking or lock box
system, which helps in accumulating cash inflows. But just not ends with
accumulating the cash flows. In addition to that effective control of disbursements can
result in conserving cash and reducing the financial requirements. Trade credit is a
source of funds to the firm and disbursements arise due to this source. It is vital to
monitor the cash collections and disbursements. Prasanna Chandra in his book
“Finance Sense” has suggested Prompt Billing; Expeditious Collection of Cheques;
control of payables; paying the Float; investment of surplus funds; ready forwards;
Commercial Paper; Inter-Corporate Deposits; and bill discounting. Paying the Float is
another way of maximizing the cash availability. The float is the difference between
the total amount of cheques drawn and the actual amount shown in the bank account.
Further, we also know that the cash budget is one of the most important tools in the
budgeting tools of the financial management. Cash forecasting is most important in
order to prepare a cash budget.

In short, it can be derived that cash flow has a strong impact on the turnover,
liquidity, share-holder’s value creation and profitability of the firm. Hence, it is
equally important to evaluate the cash management performance the firms. Above all
mentioned facets of the cash management are generally of primary nature. Now in
order to evaluate the performance of the companies, researcher has opted for the
secondary database i.e. financial statements obtained from the annual reports of the
selected sample companies.

In order to justify the objectives of the research, researcher has tried to

establish the usefulness of the cash flow based ratios. Researcher believes that cash
flow information is also useful in complementing the information already provided by
the financial statements. The usefulness of cash flow information also includes its
ability to generate cash flows from internal sources, to service obligation from
internal cash flows and to rely on outside financing. The study aims to investigate the
abilities of cash management of the Indian automobile industry based on the selected
top performing companies during the research period. There are many cash flow
based ratios available as suggested by many authors like Beaver, Lee, Dambolena and

31
 RESEARCH METHODOLOGY

Sulman, Sharma and Iselin, Stanko and Zeller and Mills and Yamamura.

Cash Management performance of each selected sample is first tested with the
help of following ratios based on Cash flow:

1. Cash Ratio
2. Cash Return on Assets Ratio
3. Cash Profit Ratio
4. Cash Flow Margin Ratio
5. Cash Turnover
6. Cash Flow Liquidity Ratio
7. Cash Flow per Share

Above ratios are based on cash flow and average of opening and closing cash
and cash equivalents. Cash flow can be obtained from the cash flow statement. The
advantage of cash flow statement is that it provides information that enables users to
evaluate the change in the net assets, its financial structure (like liquidity and
solvency) and its ability to affect the amounts and timing of cash flow in order to
change the circumstances and opportunities. Sometimes due to accrual basis of
accounting a company may have satisfactory net income but one and only cash flow
statement can tell us how many cash is generated from this sales and other operation.
If most of the sales are on credit then it means a risk is associated with this. So any
decision based on only income statement can sometimes be overestimated or
underestimated. If cash flow information is useful but unused, the logical conclusion
is that the analysts are not analyzing available data properly. While there is no general
consensus on appropriate cash flow ratios, this study will explore the relative utility of
newly derived cash flow ratios in financial analysis and will determine if the potential
exists to predict financial failure.

An examination was made of the usefulness of the cash flow statement and a
brief review was given of the importance of cash flow ratios for financial analysis.
The main focus of the cash flow statement is to determine whether an entity can
generate positive cash flows from its normal operations. However, this does not
provide a full assessment of the liquidity and viability of an entity. The cash flow

32
 RESEARCH METHODOLOGY

statement must be related to other figures in the financial statement to arrive at an

adequate picture of the cash generating ability of an entity. Ratio analysis is a useful
and efficient tool for analyzing financial information. To date, neither text writers nor
analysis have developed ratios for effective evaluation of the cash flow statement.
Such ratios, used in conjunction with traditional balance sheet and income statement
ratios, should lead to a better understanding of the financial strengths and weaknesses
of an entity. 3

Further, as cash being a part of working capital, each sample is tested through
Working Capital Turnover Ratio, Current Ratio and Quick Ratio with its graphical
representation. Further, one of the most important financial statements, i.e. Cash Flow
Statement has been analysed and tested of each of the sample. Further researcher has
tried to establish a relationship between availability of cash and its impact on the
profitability. And in last in order to check the cash conversion ability of the samples,
cash conversion cycle was analysed and tested.

1.8 Layout of the Study

This study is presented in eleven different chapters. The highlight of each

chapter is as under:

Chapter – 1

This chapter deals with research methodology adopted by researcher which

includes introduction on the title, identification of the problem, review of existing
literature on the subject, objectives of the study, hypotheses of the study, research
design adopted for the study, significance of the study and limitations of the study.

Chapter – 2

This chapter deals with an overview of the world automobile industry and
Indian automobile industry. This chapter includes history of the world automobile

3
Barua, S., Saha A. K., Traditional Ratios vs. Cash Flow based Ratios: Which One is Better
Performance Indicator? Advances in Economics and Business 3(6), 2015, pp :232-251.

33
 RESEARCH METHODOLOGY

industry as well as Indian automobile industry. Also overview of automobile sector in

India and about vibrant Indian economy is presented in this chapter. Further Car
Classification, Current Status of Automobile Industry in India, Growth and
Development of Automobile Industry in India, Gross Turnover of Automobile Sector,
Market Size of Automobile industry, Installed Capacity, Investments in Automobile
Sector, Government Initiatives for Automobile Sector, details of Modernization of
Vehicle Fleet due to increasing problem of pollution and global warming, Report of
the Working Group on Automotive Sector for the 12th Five Year Plan (2012-2017),
National Automotive Testing and R&D Infrastructure Project (NATRIP), Economics
Affairs like various taxes, Make In India On Automobiles, a briefing on Automotive
Mission Plan, 2006-16, Automotive Mission Plan 2016-26, an overview of the
National Mission for Electric Mobility 2020, and details of Pilot electric vehicle
projects has been discussed in this chapter.

Chapter – 3

This chapter deals with the information regarding the chosen sample. This
chapter gives a brief profile of all the sampled companies, collected and compiled
from the annual reports and official websites of the companies.

Chapter – 4

This chapter deals with the size of the cash maintained by the companies as a
percentage of total assets, current assets and sales. It is very important to maintain a
certain level of cash. Hypotheses were developed accordingly and were further tested
through One-way ANOVA test with the help of the SPSS. If companies are found to
be having significant differences, the pair of means creating the difference will be
found out using multiple comparison analysis applying Posthoc using Tukey’s HSD.

Chapter – 5

This chapter deals with the analysis of cash management performance with the
help of the ratio analysis. Cash management is a wider term and concept. But when it
comes to financial point of view, certain ratios related liquidity, profitability, turnover
etc. based on the cash flows can judge the quality of the cash management of the

34
 RESEARCH METHODOLOGY

company. Comparison will be done between the companies with the help of the mean.
Hypotheses are developed accordingly and are further tested through One-way
ANOVA test with the help of the SPSS. If companies are found to be having
significant differences, the pair of means creating the difference is found out using
multiple comparison analysis applying Posthoc using Tukey’s HSD.

Chapter – 6

This chapter deals with analysing the working capital management of the
selected samples during the research period. It is very important to analyse the
working capital management as cash is an important portion of working capital. Here
also performances of companies are compared with the help of the mean. Hypotheses
are developed accordingly and are further tested through One-way ANOVA test with
the help of the SPSS. If companies are found to be having significant differences, the
pair of means creating the difference is found out using multiple comparison analysis
applying Posthoc using Tukey’s HSD.

Chapter – 7

This chapter deals with analysing the cash flow statement of the selected
samples during the research period. Cash flow being the most important financial
factor is analysed in this chapter. Cash flow statement is divided into three parts vis.
Cash flow from operating activities, cash flow from investing activities and cash flow
from financing activities. Further, Net cash flow from all the three activities was
analyzed. Performances of the companies are compared with the help of the mean.
Hypotheses are developed accordingly and are further tested through One-way
ANOVA test with the help of the SPSS. If companies are found to be having
significant differences, the pair of means creating the difference is found out using
multiple comparison analysis applying Posthoc using Tukey’s HSD.

Chapter – 8

In this chapter, researcher has tried to find out whether there is any
relationship between availability of the cash and profitability performance or not.
Hypothesis is developed accordingly and tested through linear correlation. Here,

35
 RESEARCH METHODOLOGY

industrial average cash balance and industrial average profit is taken into
consideration.

Chapter – 9

This chapter deals with the analysis of the cash conversion cycle of all the
selected samples. Cash conversion cycle is one of the liquidity metric. Cash
conversion cycle expresses the number of days that a company uses to sell inventory,
collect receivables and pay its accounts payable. The cash conversion cycle measures
the number of days a company's cash is tied up in the production and sales process of
its operations and the benefit it gets from payment terms from its creditors. The
shorter this cycle, the more liquid the company's working capital position is.
Hypotheses are developed accordingly and are further tested through One-way
ANOVA test with the help of the SPSS. If companies are found to be having
significant differences, the pair of means creating the difference is found out using
multiple comparison analysis applying Posthoc using Tukey’s HSD.

Chapter – 10

This chapter is about performance evaluation of the selected samples and the
overall industry. The sampled units are ranked by Multiple Comparison applying post
hoc tests using Tukey’s HSD. Further with the help of the correlation matrix
relationship has been found out between various factors related to cash management.

Chapter – 11

This chapter deals with summary, findings and suggestions made based on the
observations during the research study.

1.9 Significance of the Study

Automobile industry is one of the sunrise industries in India which has a

very large investment of the country. The significance of the study is as follows:

1. Analysis is done in various aspects like Cash Management, profitability

performance, working capital management, cash flow performance and cash

36
 RESEARCH METHODOLOGY

conversion cycle. So relevant information can be furnished to its various users

for their decision making.

2. It is also necessary to find out some important factor which effect internal
decision of industry. Also, cash management of top performing companies are
taken into consideration, so a certain kind of ideal behavioral pattern is found
out which will be useful for the other units of the industry. So research will be
useful to automobile industry itself.

3. Automobile industry is obviously one of the most happening sectors

contributing to India’s Global Trade and so to improve the level of liquidity
based on cash management, analyzed data of this research will be of much
use.

4. The thesis will be a guiding path for the analysis of the study of the units
which are not undertaken for this research.

5. The study has helped improving the researcher himself to further enhance his
own research abilities.

1.10 Limitations of the Study

1. The study will be based on secondary data taken from published annual report
and website. Secondary data collected for the research study is collected from
the annual reports, websites and various published reports and as such finding
will depend entirely on the accuracy of such data.
2. Apart from the tools and techniques used by the researcher, there are still more
tools and techniques available.
3. The present study is based on ratio analysis and it has its own limitation that
applies to this study also.
4. Financial statements are normally prepared on the concept of historical cost.
They do not reflect values in terms of current cost. Thus, financial analysis on
such financial statements or accounting figures would not portray the effects
of price level changing over the period.

37
 RESEARCH METHODOLOGY

5. Cash Balance is taken as an average of opening and closing cash and cash
equivalents, whereas other variables are total of all the transactions during the
year.
6. The individual effort will be limited so it is also limitation of the study.
7. Personal view may be different from others.
8. The study is done on few samples of the Industry. Analysis of same might not
apply to the other units of the Industry.

1.11 Future Scope of the Study

The future scope of the study will be wide in this area of study.

This study includes few companies of the industry; however, other units can
be considered reviewing the performance of industry. The cash management
performance of the companies has been analyzed from various areas, but remaining
aspect of these units such as profitability, social responsibility, human resources
management, costing methods, market policies, dividend policies and leverage etc.
can be studied in future. There are great scopes for further research.

This study is limited for five year period i.e. from 2008-09 to 2012-13. So
study could be conducted with the remaining of the period too. This study is based on
secondary data. But, the same aspect could also be analysed on the primary database.

In this study, comparative analysis has been made with certain tool and
hypothesis. Other tools and techniques could also be applied for analysis to derive
more meaningful conclusion. So there is great-scope in various aspects in different
area with variation in aspect of data. The study will be useful for future research as an
empirical literature review.

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 RESEARCH METHODOLOGY

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 Arora, M. N. “Management Accounting” 2nd Edition, Year – 2009, Biztantra

Management for the Flat World.

 Bajkowski, J., A Look at the Corporate Cash Flow Statement, AAII Journal,
1999, pp. 26-29.

 Barua, S., Saha A. K., Traditional Ratios vs. Cash Flow based Ratios: Which
One is Better Performance Indicator? Advances in Economics and Business
3(6), 2015, pp :232-251.

 Beaver, W. H. Financial ratios as predictors of failure. Journal of Accounting

Research, 1966, pp. 71-111.

 Chadmiya B. P., A Study of Management of Cash with reference to selected I.

T. Companies (A Comparative study of Infosys Ltd. & Wipro Ltd.), M. Phil
Project Report, 2007.

 Cooper, D. R., and Schindler P.S., Business Research Methods, International

Edition 2003, Tata Mcgraw Hill.

 Dr. Barad, M. “Liquidity Management”, Shanti Prakashan, Haryana.

 Dr. Maheshwary, S.N. “Management accounting and financial control”,

Sultanchand & Sons, New Delhi.

 Ghosh, S., Cash Management Performance Evaluation, Indian journal of

accounting volume XLII (1) December 2011.

 Gupta, R. L. and Gupta, V. K., “Accountancy Principles and Practices”, 3rd

Edition, Sultanchand and Sons, New Delhi.

 Jani, V. C., Working Capital Management of Fertilizer Industry of Gujarat,

thesis PhD, Saurashtra University, 2007.

 Kishore, R. M., “Accountancy and Financial Management” 3rd edition,

Taxmann Allied Services (P) Ltd.

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 RESEARCH METHODOLOGY

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