Introduction

INTRODUCTION

Debtor management means the process of decisions relating to the investment in business debtors. In credit selling, it is certain that we have to pay the cost of getting money from debtors and to take some risk of loss due to bad debts. To minimize the loss due to not receiving money from debtors is the main aim of debtor management.

Main elements or dimensions of Debtors management

For effective debtor management, following elements should be analyzed

1. Credit policy

Credit policy effects debtor management because it guides management about how to control debtors and how to make balance between liberal and strict credit. If company does not restrict to sell the products on credit after a given limit of sale. This liberated credit policy will increase the amount of sale and profitability. But risk will also increase with increasing of sale. If we sell the good to those debtors whose capability to pay is not good, then it is possible that some amount will become bad debts. Company can increase the time limit for paying by such debtors. On the other hand, if company’s credit policy is strict, then it will increase liquidity and security, but decrease the profitability. So, finance manager should make credit policy at optimum level where profitability and liquidity will be equal. We can show it graphically.

Sub part of credit policy

(a) Length of Credit period

Length of credit period is also an element that affects decisions of finance manager relating to manage debtors. It is the time which allows to debtor to pay his debt for purchasing goods on credit from vendor. Finance manager can increase the length of credit period according to reputation of customers.

(b) Cash discount

1 Cash discount is technique to get money fastly from debtors. It is cost of investment in credit sale.

2. Credit policy analysis

It means decision relating to analysis of credit policy. Evaluation and analysis of credit policy is based on following factors.

a) Collection of debtor’s information

For analysis the financial position of debtors, we have to collect the information relating to debtors. This information can be obtained from customer’s financial statements of previous years, bank reports, and information given by credit rating agencies. These information will be useful for deciding where debtors will our debt or not. It will also be useful for knowing capability to pay the debt. b) Credit Decisions

After collection and analysis the debtor’s information, manager has to decide whether company should facilitate to sell goods on credit or not. If company sells the goods on credit to particular debtor, then at what level it will be sold after seeing his position. For this manager can fix the standard for providing goods on credit. If a particular debtor is below than given standard, then he should not accept his proposal of buying goods on credit.

3. Formulation Collection Policy

For getting fund fastly from debtor, the following steps will be taken under formulation of collection policy.

a) Send reminding letter for paying debt

b) Take the help of debt collection agency for getting bad debt.

c) To do legal action against bad debtors.

d) To request personally to debtor to pay his dues on mobile or email.

2 e) Finance manager should monitor collection position through average collection period from past sundry

Debtor and their turnover ratio.

f) To make ageing schedule. Sample of ageing schedule is given below. Accounts receivable is an accounting transaction which deals with the billing of customer who owes money to a person, company or organization for goods and services that has been provided to the customers. In most business entities this is typically done by generating an invoice and mailing or electronically delivering it to the customer, who in turn must pay it within an established timeframe called credit or payment terms.

An example of a common payment term is Net 30, meaning payment is due in the amount of the invoice 30 days from the date of invoice. Other common payment terms include Net 45 and Net 60 but could in reality be for any time period agreed upon by the vendor and the customer.

On a company's balance sheet, accounts receivable is the amount that customers owe to that company. Sometimes called trade receivables, they are classified as current assets assuming that they are due within one year. To record a journal entry for a sale on account, one must debit a receivable and credit a revenue account. When the customer pays off their accounts, one debits cash and credits the receivable in the journal entry. The ending balance on the trial balance sheet for accounts receivable is always debit.

Accounts receivable departments use the sales ledger. Other types of accounting transactions include accounts payable, payroll, and trial balance.

A debt management plan is a formal agreement between a debtor and creditor(s). Debt Management Plans help reduce outstanding, unsecured debts at a reduced level over a fixed period of time to help regain control of finances.

Debt Management Plans are individually tailored based on what can be realistically afforded on a monthly basis. To achieve an accurate figure, an income and expenditure test will establish what monies are coming into the household and what is being paid out. Income and expenditure includes everything, such as rent/mortgage, secured loans, utility bills, and essential living expenses (food & TV license etc). Once the income and expenditure is

3 completed, the leftover amount is your disposable income which is divided amongst creditors through a Debt Management company. Working capital (abbreviated WC) is a financial metric which represents operating liquidity available to a business, organization or other entity, including governmental entity. Along with fixed assets such as plant and equipment, working capital is considered a part of operating capital. Net working capital is calculated as current assets minus current liabilities. It is a derivation of working capital, that is commonly used in valuation techniques such as DCFs (Discounted cash flows). If current assets are less than current liabilities, an entity has a working capital deficiency, also called a working capital deficit.

A company can be endowed with assets and profitability but short of liquidity if its assets cannot readily be converted into cash. Positive working capital is required to ensure that a firm is able to continue its operations and that it has sufficient funds to satisfy both maturing short-term debt and upcoming operational expenses. The management of working capital involves managing inventories, accounts receivable and payable, and cash.Company can sell the goods on credit or cash. Cash sale is inflow of cash and it is controlled under cash flow analysis. But credit sale creates sundry debtors. Company has to receive money from them. If company starts to sell on return of cash, then it decreases the level of company’s sale and profitability. On the other side, if company promotes credit sale, it can increase the risk of bad debts. So, it is required to control and to manage debtors.

Meaning of Debtor management

Main elements or dimensions of Debtors management

For effective debtor management, following elements should be analyzed

Credit policy

Credit policy effects debtor management because it guides management about how to control debtors and how to make balance between liberal and strict credit. If company does not

4 restrict to sell the products on credit after a given limit of sale. This liberated credit policy will increase the amount of sale and profitability. But risk will also increase with increasing of sale. If we sell the good to those debtors whose capability to pay is not good, then it is possible that some amount will become bad debts. Company can increase the time limit for paying by such debtors. On the other hand, if company’s credit policy is strict, then it will increase liquidity and security, but decrease the profitability. So, finance manager should make credit policy at optimum level where profitability and liquidity will be equal. We can show it graphically.

BOOK KEEPING FOR ACCOUNTS RECEIVABLE

Companies have two methods available to them for measuring the net value of account receivables, which is computed by subtracting the balance of an allowance account from the accounts receivable account.

The first method is the allowance method, which establishes a liability account, allowance for doubtful accounts, or bad debt provision, that has the effect of reducing the balance for accounts receivable. The amount of the bad debt provision can be computed in two ways - either by reviewing each individual debt and deciding whether it is doubtful (a specific provision) or by providing for a fixed percentage, say 2%, of total debtors (a general provision). The change in the bad debt provision from year to year is posted to the bad debt expense account in the income statement.

The second method, known as the direct write-off method, is simpler than the allowance method in that it allows for one simple entry to reduce accounts receivable to its net realizable value. The entry would consist of debiting a bad debt expense account and crediting the respective account receivable in the sales ledger.

Receivable management – The term receivable management is defined as “debt owed to the firm by customer arising from the sale of goods/ services in the ordinary course of business.” The receivable represents an important component of the current assets of the firm. Receivables may be known as accounts receivables, trade creditors or customer receivable. When a firm its products / services and does not receive cash for it immediately, the firm has said to be granted trade credit to the customers. Trade credit

5 thus creates receivable / book debts, which the firm is expected to collect in near future. Accounts receivable are thus amounts due from customers, which bear no interest in essence, a company is providing no cost financing to the customer to encourage the purchase of the company’s product/services. The extension of credit can be justified only if the increase in the sales and related cash collections (discounted for the time until collection) exceeds the amount otherwise cash generated under a “cash only” policy. These customer from whom receivable or book debt are to be collected in the future are called as “trade debtors” or simply as “debtor” and represents the firm’s claim on assets. Trade debtors are expected to be converted into cash within a short period and are included in the current assets. Since receivables often accounts for the significance portion of total assets, it requires careful attention and adequate management. It is skill demanding field because the customer has to be bestowed with trust along with a continuous vigilance. COSTS:

The major categories of cost associated with extension of credit and receivable are:

 Collection cost

 Capital cost

 Delinquency cost

 Default cost

COLLECTION COST:

These costs are administrative cost incurred in collecting the receivable from the customers. This category includes: 1. Additional expenses on the creation and maintenance of a credit department with staff, accounting, records, stationary, postage and other related items.

2. Expenses involved in acquiring credit information either through outside specialist agencies or by the staff of the firm itself.

CAPITAL COST:

6 Accounts receivables, being an investment in current assets, have to be financed involving a cost. There is a time lag between the sale of goods to, and the payment by, the customers. Meanwhile the firm has to pay employees and suppliers of raw material i.e. the firm should arrange for additional funds to meet its own obligations. Thus, the cost on the use of additional capital to support credit sales is therefore apart of the cost of extending credit.

DELINQUENCY COST: This cost arises out of the failure of the customer to meet their obligations when payment on credit sales becomes due after the expiry of the period of credit. Such cost includes:  Blocking up of funds for an extended period.

 Cost associated with steps that have to be initiated to collect the overdue, such as reminders and other collection efforts, legal charges, where necessary , and so on.

DEFAULT COST In addition of the above cost the firm may not be able to recover the overdue because of inability of the customers. Such debts are treated as bad debts and have to be written off, as they cannot be realized. Though a concern may be able to reduce bad debts through efficient collection mechanism, one cannot altogether rule out the possibility of this cost. BENEFITS: Apart from the cost, another factor that has a bearing on accounts receivable is the benefit emanating from credit sales. The benefits are:

“The increased sale and thereby profits”

However, the benefits would depend upon the credit policy adopted by the firm, i.e., a conservative or liberal credit policy. The impact of liberal credit policy is likely to have two forms:- i. Sales expansion

ii. Sales retention

In sales expansion a firm may grant credit either to increase sales or to attract new customer. This motive is growth oriented; on the other hand the sales retention the firm may grant credit

7 to protect its current sales against emerging competition. No matter whatever is the motive, the result the result of increased sales is the increase the profit of the firm.

8 SOME BASIC DEFINITION When the buying and selling process steps forward and the customer is not able to pay the total amount, the amount which they are not able to pay at the same time of buying the amount is known as DEBT. In the balance sheet of companies those customers are DEBTORS. In their balance sheet company is a CREDITOR. On the basis of market performance and credit rating company decides the time period of payback of the amount. This time period is known as CREDIT PERIOD. The total amount called as debt is called as OUTSATNDING. When this total outstanding is not paid within the credit period the amount remained to be collected is called as OVERDUE.

The total overdue is divided in different parts such as overdue within 3months, from 3-6 months, 6-12 months, 1 to 2 yrs, 2-3 yrs, above 3yrs, and above 5 yrs.

When the customer is not able to pay back the due after five years then this amount is known as BAD DEBTS.

HIL has kept some amount for this type of time of contingencies. This amount use for decreasing the effect of bad debts is called as PROVISION.

CURRENT ASSETS are those assets which can be converted into cash within the period of 12 months starting from the company’s financial year.

CURRENT LIABILITIES are those liabilities which are repaid within 12 months starting from company’s financial year.

9 RESEARCH METHODOLOGY

TYPE OF RESEARCH

The study is descriptive in nature in the sense that it focuses basically on analyzing the debtor’s management at HIL.

 RATIOS ARE USED TO THIS PROJECT WORK:

 TURNOVER RATIOS

 CURRENT RATIO

 QUICK RATIOS

DATA COLLECTIONS:

 PRIMARY DATA

 SECONDARY

10 OBJECTIVE OF THE STUDY

 The process of debtor’s management in HIL how the outstanding debtors are accounted & what steps and actions are taken and should be taken to recover these dues on time.  Comparison of HIL with other key players with respect to the debtors.  Position of debtors in different industries.

Hence the firm is required to allow the credit sale in order to expand its sales volume. The increase in sales is also essential to increase profitability.

 The sales of goods have become an essential part of the modern competitive economic system.  In fact credit sales and receivables are treated as a marketing tool to aid the sale of goods.  “To promote sales and profit until that point is reached where the return on investment in further funding of receivable is less than the cost of funds raised to finance that additional credit(i.e. cost of capital)”

11 NEED FOR THE STUDY

Trade credit is an important marketing tool. A policy of trade credit is followed nearly in all capital intensive industries either for sales expansion and /or sales retention. Under any circumstances investment in receivable is growth oriented.

 MARKET FACTOR: Market factors like price, forces accompany to grant credit. For example, HIL whose price is comparatively higher is forced to grant credit in order to maintain sale.

 COMPETITION: In view of stiff competition from both domestic and international players, the company is left with no option then to grant credit. Competition is another vital factor, which affects the credit policy of a firm, and HIL is not an exception.

 CUSTOMER’S REQUIREMENT: As the market has changed to the buyer’s market, the customers have become kings. If the customer expects credit and is worthy of it, he gets it.

 MARKETING TOOL: T o push up sales of slow moving products and encourage bulk purchase of fast moving products, credit plays an effective role in this context.

 RESESSIONARY ECONOMIC CONDITIONS: Liquidity crunch forces the company to grant credit.

12 SCOPE OF THE STUDY

The scope of this study is limited to the study of Debtors Management at HIL. The scope encompassed with the debtors section of the company which is a part of finance and accounting department.

Sources of data Collection

• Primary data are collected by interviewing customers and employees of HIL • Secondary data are collected by using internet, magazines and text books. 2.5 Sampling

The study was done by using the age wise analysis of debtors.

13 LIMITATION OF THE STUDY

1) The time horizon is very short, so in depth analysis could be done only of few schemes.

2) The project is dependent on the relevance of the secondary data (e.g. Annual reports of various companies) collected from the internet which might not be correct.

3) The study has been done on only a handful of data so it cannot be generalized to the entire industry.

14 LITERATURE REVIEW

Company can sell the goods on credit or cash. Cash sale is inflow of cash and it is controlled under cash flow analysis. But credit sale creates sundry debtors. Company has to receive money from them. If company starts to sell on return of cash, then it decreases the level of company’s sale and profitability. On the other side, if company promotes credit sale, it can increase the risk of bad debts. So, it is required to control and to manage debtors.

Meaning of Debtor management

To minimize the loss due to not receiving money from debtors is the main aim of debtor management.

Main elements or dimensions of Debtors management

For effective debtor management, following elements should be analyzed

1. Credit policy

15 possible that some amount will become bad debts. Company can increase the time limit for paying by such debtors. On the other hand, if company’s credit policy is strict, then it will increase liquidity and security, but decrease the profitability. So, finance manager should make credit policy at optimum level where profitability and liquidity will be equal. We can show it graphically.

Accounts receivable are a legally enforceable claim for payment to a business by its customer/ clients for goods supplied and/or services rendered in execution of the customer’s order. These are generally in the form of invoices raised by the business and delivered to the customer for payment within an agreed time frame. Accounts receivable are shown in the balance sheet as asset. It is one of a series of accounting transactions dealing with the billing of a customer for goods and services that the customer has ordered. These may be distinguished from notes receivable, which are debts created through formal legal instruments called promissory notes.

Contents [hide]

1 Overview

2 Payment terms

3 Accounts Receivable Age Analysis

4 Bookkeeping

5 Special uses

6 Related accounting topics

7 See also

8 Notes and references

Overview

16 Accounts receivable represents money owed by entities to the firm on the sale of products or services on credit. In most business entities, accounts receivable is typically executed by generating an invoice and either mailing or electronically delivering it to the customer, who, in turn, must pay it within an established timeframe, called credit terms[2] or payment terms.

The accounts receivable department uses the sales ledger, because a sales ledger normally records:[3]

The sales a business has made.

The amount of money received for goods or services.

The amount of money owed at the end of each month varies (debtors).

The accounts receivable team is in charge of receiving funds on behalf of a company and applying it towards their current pending balances.

Collections and cashiering teams are part of the accounts receivable department. While the collections department seeks the debtor, the cashiering team applies the monies received.

Payment terms

An example of a common payment term is Net 30 days, which means that payment is due at the end of 30 days from the date of invoice. The debtor is free to pay before the due date; businesses can offer a discount for early payment. Other common payment terms include Net 45, Net 60 and 30 days end of month. The creditor may be able to charge late fees or interest if the amount is not paid by the due date.

Booking a receivable is accomplished by a simple accounting transaction; however, the process of maintaining and collecting payments on the accounts receivable subsidiary account balances can be a full-time proposition. Depending on the industry in practice, accounts receivable payments can be received up to 10 – 15 days after the due date has been reached. These types of payment practices are sometimes developed by industry standards, corporate policy, or because of the financial condition of the client.

Since not all customer debts will be collected, businesses typically estimate the amount of and then record an allowance for doubtful accounts[4] which appears on the balance sheet as

17 a contra account that offsets total accounts receivable. When accounts receivable are not paid, some companies turn them over to third party collection agencies or collection attorneys who will attempt to recover the debt via negotiating payment plans, settlement offers or pursuing other legal action.

Outstanding advances are part of accounts receivable if a company gets an order from its customers with payment terms agreed upon in advance. Since billing is done to claim the advances several times, this area of collectible is not reflected in accounts receivables. Ideally, since advance payment occurs within a mutually agreed-upon term, it is the responsibility of the accounts department to periodically take out the statement showing advance collectible and should be provided to sales & marketing for collection of advances. The payment of accounts receivable can be protected either by a letter of credit or by Trade Credit Insurance

Accounts Receivable Age Analysis

An Accounts Receivable Age Analysis, also known as the Debtors Book is divided in categories for current, 30 days, 60 days, 90 days or longer. The analysis or report is commonly known as an Aged Trial Balance. Customers are typically listed in alphabetic order or by the amount outstanding, or according to the company chart of accounts. Zero balances are not usually shown.

Bookkeeping[edit]

On a company's balance sheet, accounts receivable are the money owed to that company by entities outside of the company. Account receivables are classified as current assets assuming that they are due within one calendar year or fiscal year. To record a journal entry for a sale on account, one must debit a receivable and credit a revenue account. When the customer pays off their accounts, one debits cash and credits the receivable in the journal entry. The ending balance on the trial balance sheet for accounts receivable is usually a debit.

Business organizations which have become too large to perform such tasks by hand (or small ones that could but prefer not to do them by hand) will generally use accounting software on a computer to perform this task.

18 Companies have two methods available to them for measuring the net value of accounts receivable, which is generally computed by subtracting the balance of an allowance account from the accounts receivable account.

The first method is the allowance method, which establishes a contra-asset account, allowance for doubtful accounts, or bad debt provision, that has the effect of reducing the balance for accounts receivable. The amount of the bad debt provision can be computed in two ways, either (1) by reviewing each individual debt and deciding whether it is doubtful (a specific provision); or (2) by providing for a fixed percentage (e.g. 2%) of total debtors (a general provision). The change in the bad debt provision from year to year is posted to the bad debt expense account in the income statement.

The second method is the direct write-off method. It is simpler than the allowance method in that it allows for one simple entry to reduce accounts receivable to its net realizable value. The entry would consist of debiting a bad debt expense account and crediting the respective accounts receivable in the sales ledger.

The two methods are not mutually exclusive, and some businesses will have a provision for doubtful debts, writing off specific debts that they know to be bad (for example, if the debtor has gone into liquidation.)

Special uses[edit]

Companies can use their accounts receivable as collateral when obtaining a loan (asset-based lending). They may also sell them through factoring or on an exchange. Pools or portfolios of accounts receivable can be sold in capital markets through securitization.

For tax reporting purposes, a general provision for bad debts is not an allowable deduction from profit[5] - a business can only get relief for specific debtors that have gone bad. However, for financial reporting purposes, companies may choose to have a general provision against bad debts consistent with their past experience of customer payments, in order to avoid over-stating debtors in the balance sheet.

19 Sub part of credit policy

(a) Length of Credit period

(b) Cash discount

Cash discount is technique to get money fastly from debtors. It is cost of investment in credit sale.

2. Credit policy analysis

It means decision relating to analysis of credit policy. Evaluation and analysis of credit policy is based on following factors.

a) Collection of debtor’s information

20 For analysis the financial position of debtors, we have to collect the information relating to debtors. This information can be obtained from customer’s financial statements of previous years, bank reports, and information given by credit rating agencies. These information will be useful for deciding where debtors will our debt or not. It will also be useful for knowing capability to pay the debt.

b) Credit Decisions

3. Formulation Collection Policy

For getting fund fastly from debtor, the following steps will be taken under formulation of collection policy.

a) Send reminding letter for paying debt

b) Take the help of debt collection agency for getting bad debt.

c) To do legal action against bad debtors.

d) To request personally to debtor to pay his dues on mobile or email.

21 e) Finance manager should monitor collection position through average collection period from past sundry debtor and their turnover ratio.

f) To make ageing schedule. Sample of Ageing schedule is given belowManaging the debtors for HIL is an important and chief function of the sales accounts division of finance and accounts. All the transactions of commercial nature are dealt with by this department in a detailed outline frame of working. The debtors arise each month out of the sales made on credit and suitable feeding of the required figures has to be made once in a month. This function is very much a difficult task owing to the various subsidiaries and associate companies being controlled by TISCO itself.

The activities of each of the companies are diverse in operations and require different policy formulations and strategies for complying with the existing market requirements. But they are controlled in a centralized manner so that they give an actual overview of the standing of the company. The profitability of each of the above is equally important to arrive at a consensus for finding out the actual earnings and future prospects. As such each of the company under subsidiary and associate is incorporated under distinct centres as Profit Centre.

To flatten the organizational structure and developed authority and responsibility for the quicker responsiveness to changing market conditions and greater initiative in dealing with different target markets, HIL has brought in the concept of profit centre. For all practical purpose, each profit centre functions as a separate company within the hold of HIL. From the debtors management point of view also each profit centre has the responsibility of appraising and dealing with its customers. However the overall control is centralized and is in the hands of the finance department. The main function which lies at the hands of HIL, Jamshedpur is to report such standings of the actual debtors as on a particular date to the MD in the form of a monthly report. The figures thus arrived at give an overview of which profit centres contribute the most to the debtor’s standing and the specific reasons for the same.

22 Being a steel manufacturing concern, HIL is mainly concerned with the actual debtors arising for the following profit centres:

 STEEL

 WIRE DIVISIONS

 FERRO ALLOYS AND MINERALS DIVISION

 TUBES DIVISION

 BEARINGS

Each of the above profit centers have debtors of their own which are handled and managed in a centralized manner. For an example, tubes division is one of the most important division which has the maximum contribution to the total sales taking together all the profit centers at a point of time. It has various parties of its own as debtors such as ESSAR STEEL LIMITED, BLUE STAR LIMITED, HYDERABAD INDUSTRIES LIMITED, MECHATRONICS and many debtors. A database relating to the different parties is maintained in a pre specified format which helps in understanding the actual standing of the debtor from the point of view of the actual sale being made to the party on credit till date. This format helps in maintaining the records in a form which helps in judging the actual ageing of the debtors and the amount being recovered from the total debt. By ageing we mean to give an actual definition to the debtors in terms of how old has the debt been to him and thereby categorizing him for the purpose. A same prescribed format is used by all the profit centers for managing their respective debtors.

EXPLANATION

Through this preparation we get to know the actual total debtors figures and the major parties that have contributed to the increase and decrease in the debtors as when compared with the previous financial period. It mainly emphasizes upon the total debtors figures and the overdue debtors and their major contributors in the form of party names and figures. It also gives all list of indications for the debtors whose standing are for periods beyond six months. This reporting is crucial for the reason that it gives the management the indicative areas for focus,

23 the reasons for a rise in debtors and suitable control for future standing which is profitable to the company as a whole.

This chapter provides related literature on debtor management and business performance of an organization .It covered what scholars have written about them from selected published journals, on internet and text books.

METHODS OF DEBTOR MANAGEMENT: Debtors occupy an important position in the structure of current assets of a firm. They are the outcome of rapid growth of trade credit granted by the firms to their customers. Trade credit is the most prominent force of modern business. It is considered as a Marketing tool acting as a bridge for the movement of goods through production and distribution stages to customers. It is generally believed that credit policy stimulates sales as it helps in retaining existing customers and winning clients from rivals. Trade debtors represent amounts owed to the firm as a result of credit sale of goods or services in the ordinary course of business. The key function of credit management is to optimize the sales at the minimum possible cost of credit.

RATIONALE OF CREDIT According to Kakuru Julius (2001), firms use credit as a marketing weapon for expanding business in a declining industry. In a growing competitive market, credit is used to increase a firms markets share of minimize erosion of the firm’s market share by maintaining the firms share and maintaining the firm market share. Further more, it helps to retain old customers and create new ones by wining them away from competitors. To him, credit extension is a desirable option on which companies can do business in a better way hence gaining competitive advantage. Kakuru Julius goes further to define credit policy as a set of polices of action designed to manage costs associated with credit, while maximizing the benefits from it. A firm may follow a limited or a stringent credit policy.

24 TYPE OF CREDIT POLICY Kakuru Julius (2001), identifies 2 types of credit policies; Lenient and Stringent Credit Policies. To him, a lenient credit policy tends to give credit to customer on very liberal terms and standards. He further notes that a stringent credit policy is highly selective and gives credit to only those customers whose credit worthiness has been ascertained and who are financially strong.

Costs associated with extending credit Boggess W.P (1967), noted that carrying costs are those costs of capital measured as the company’s internal required rate of return on funds committed in receivables where as normal credit costs are those costs for supporting the credit function, for example legal collections. Rosse and Waster field (1988), distinguished two costs; the carrying costs and opportunity costs. To them, carrying costs are those associated with credit extension and investment in receivables. They include the required rate of return from bad debts and the costs associated with credit analysis, monitoring and collection efforts. They further argued that opportunity costs are costs related to loss of sales and as a result of refusing to grant credit. According to Van Horne (1989), a firm should evaluate its credit policy in terms of returns and costs. The costs involved include; the selling costs, administration costs, collection costs and bad debt losses. Van Horn however identifies these costs as involving in the implementation of credit sales. He further emphasizes that a firm can realize sales because of credit sales, which leads to larger profits. Kakuru Julius (2001) noted that though extending credit is beneficial, it involves costs which are inevitable in some cases, and these costs include; collection costs, bad debt losses, administrative costs and opportunity costs. To him, collection costs are incurred at the time of collection of receivables. These could be in form of sending reminding letters, meeting telephone charges and making reminders through the press in some cases.

25 NATURE OF CREDIT MANAGEMENT POLICIES Credit management policies are comprehensive set procedures and guidelines that must be followed by banks in lending practices to achieve their goals (Agu, 1998). The term credit policy is used to refer to the combination of three decision variables i.e. credit standards, credit terms and collection efforts on which the financial manager has influence. Credit standards are criteria to decide the types of customers to whom goods could be sold on credit. If a firm has more slow- paying customers, its investment in accounts receivable will increase. The firm will also be exposed to higher risk of default.

According to Pandey (2001), in order to analyze customers and set standards, two aspects are considered; the average collection paid and the default rate. To him, average collection paid refers to the period in which debts remain outstanding, and default rate is the ratio of uncollected receivables to the total receivables.

Pandey (2001) identifies 5C’s of credit as a measurement in setting standards. The 5 C’s include; character, capacity, condition, capital, and collateral.

Character According to Pandey (1995) the credit manager attempts to ascertain the applicant’s willingness to pay and settle his or her obligation. Much consideration is accorded to the moral factor. As much as possible, the financial manger should ascertain whether the customer will make honest efforts to meet the credit obligations of the firm. In making analyses about the customer’s character, the firm should consider some of the aspect from the clients. These aspects include; bank references, marital status, attachment to government agencies, level of education contact operational stability and historical background.

According to Pandey (2001), Capacity is the ability of a customer to pay credit advanced to him or her. In analysis his or her capacity, the manager should look at financial statements, previous experience with the firm, bank and trade references, amount and purpose of credit.

26 Kakuru, (2001) also considers that factors like profit margin, cash flows, acid taste ratio of business, and the duration one has been in the business should be looked while analyzing capacity.

Condition According to Kakuru (2001), this includes the assessment of prevailing economic and other factors like social – political which may affect the customer’s ability to pay. In addition, where customers incur substantially larger transport costs, one could be disruptive in extending credit to such. This is because this high cost reduces their profits which may affect their payments. All these views are shared by Pandy (2001).

According to Pandey (1995), one should evaluate the customer’s financial position by analyzing ratios and trends in cash and working capital positions. The attributes to consider are how much the owner of the business has put in the business as this determines the stake of the person in the business. Pandey (2001) contends that, in some situations, the applicant may be required to offer securities before credit is advanced. The security should be safe and easily marketable. Credit terms According to Pandey (1995), credit terms are stipulations under which a firm grants credit to its customers. To him, immediately after the credit manager has verified the credit applicant using set credit standards, decisions to extend credit is made . The firm should try as much as possible to make terms more attractive to act as an incentive to clients without incurring unnecessary high levels of bad debts. Therefore, the terms used should conform to the average industrial terms and they include credit period and cash discount.

27 Collection procedures Balstansky (1993) noted that collection procedures are efforts applied in order to accelerate collections from slow paying customers and to reduce bad debt losses. Collection procedures could be defined for each credit customer. This should be done in an organized manner that will accelerate cash receipts without endangering the relationship with the debtor. Kakuru (2001), gives a step by step procedure that is essential in collecting dues from slow paying customers and these include; reminders, final write-off, insuring debtors, and factoring of debtors.

2.1.5 Designing credit policy Kakuru Julius (2001), contends that, the only a way a firm can control its sales is through altering its credit policy. He says that credit policy is based on three controllable variables which are credit standards credit terms, and collection procedure. Credit Investigations and Analysis Van Horne (1989), emphasizes that, credit analysis considers the character of the company, its management and the financial strength of the firm in order to avoid imbalances. To him, credit analysis can be done by using techniques like credit scoring where characteristic of an applicant are quantitatively rated and credit decisions made on the basis of the total score. Characteristics like the marital status, level of education occupational stability can be rated. Credit Limit According to Kakuru Julius (2001), credit limit is the maximum of credit the firm can extend to customers at any point of time. He suggests that the analyst should carefully sensitize the amount of contemplated sales and the customer’s financial strength and that if a problem arises, it may make it inevitable to review the credit limit. Credit standards setting in practice According to Kakuru Julius (2001), in order to analyze customers and set standards, two aspects are considered; the average collection paid and the default rate. To him, average collection paid refers to the period in which debts remain outstanding, and default rate is the ratio of uncollected receivables to the total receivables.

28 Credit terms According to Pandy (1995) credit terms are stipulations under which a firm grants credit to its customers. To him, immediately after the credit manager has verified the credit applicant using set credit standards, decisions to extend credit is made. The firm should try as much as possible to make terms more attractive to act as an incentive to clients without incurring unnecessary high levels of bad debts. Therefore, the terms used should conform to the average industrial terms and the include credit period and cash discount. Collection procedures Balstansky (1993) noted that collection procedures are efforts applied in order to accelerate collections from slow paying customers and to reduce bad debt losses. Collection procedures could be defined for each credit customer. This should be done in an organized manner that will accelerate cash receipts without endangering the relationship with the debtor. Kakuru, (2001), gives a step by step procedure that is essential in collecting dues from slow paying customers and these include; reminders, final write-off, insuring debtors, and factoring of debtors.

2.2 Definition of business performance Stoner (1997) describes business performance as the ability to operate efficiently, profitably, survives, grow and lead to opportunities and threats.

Stoner (1997) singled out the production process efficiently as the key factor governing business performance. There is also emphasis upon innovation for profitability, assets management and overall entrepreneurship for achieving lasting performance. Considering the definitions therefore, business performance can be defined as in terms of profitability, liquidity, and growth and expansion prospects for the business.

According to Dean, (1994), Organizations; the term ‘organizational performance’ is used comfortably in three time- senses - the past, present, and the future. In other

29 words, performance can refer to something completed, or something happening now, or activities that prepares for new needs.

Managing the debtors for Tata steel is an important and chief function of the sales accounts division of finance and accounts. All the transactions of commercial nature are dealt with by this department in a detailed outline frame of working. The debtors arise each month out of the sales made on credit and suitable feeding of the required figures has to be made once in a month. This function is very much a difficult task owing to the various subsidiaries and associate companies being controlled by TISCO itself.

To flatten the organizational structure and developed authority and responsibility for the quicker responsiveness to changing market conditions and greater initiative in dealing with different target markets, Tata steel has brought in the concept of profit centre. For all practical purpose, each profit centre functions as a separate company within the hold of Tata steel. From the debtors management point of view also each profit centre has the responsibility of appraising and dealing with its customers. However the overall control is centralized and is in the hands of the finance department. The main function which lies at the hands of Tata steel, Jamshedpur is to report such standings of the actual debtors as on a particular date to the MD in the form of a monthly report. The figures thus arrived at give an overview of which profit centres contribute the most to the debtor’s standing and the specific reasons for the same.

30 Being a steel manufacturing concern, Tata steel is mainly concerned with the actual debtors arising for the following profit centres:

 STEEL

 WIRE DIVISIONS

 FERRO ALLOYS AND MINERALS DIVISION

 TUBES DIVISION

 BEARINGS

Each of the above profit centers have debtors of their own which are handled and managed in a centralized manner. For an example, tubes division is one of the most important division which has the maximum contribution to the total sales taking together all the profit centers at a point of time. It has various parties of its own as debtors such as ESSAR STEEL LIMITED, BLUE STAR LIMITED, TATA CHEMICALS LIMITED, MECHATRONICS and many debtors. A database relating to the different parties is maintained in a pre specified format which helps in understanding the actual standing of the debtor from the point of view of the actual sale being made to the party on credit till date. This format helps in maintaining the records in a form which helps in judging the actual ageing of the debtors and the amount being recovered from the total debt. By ageing we mean to give an actual definition to the debtors in terms of how old has the debt been to him and thereby categorizing him for the purpose. A same prescribed format is used by all the profit centers for managing their respective debtors.

31 EXPLANATION Through this preparation we get to know the actual total debtors figures and the major parties that have contributed to the increase and decrease in the debtors as when compared with the previous financial period. It mainly emphasizes upon the total debtors figures and the overdue debtors and their major contributors in the form of party names and figures. It also gives all list of indications for the debtors whose standing are for periods beyond six months. This reporting is crucial for the reason that it gives the management the indicative areas for focus, the reasons for a rise in debtors and suitable control for future standing which is profitable to the company as a whole.

Profitability, for example, is often regarded as the ultimate performance indicator, but it is not the actual performance. The actual performance occurred some time back - first with decisions and then the actions that followed the decisions. Profit is therefore an indicator of previous performance. In this sense, performance is the outcome or ‘end’.

If you are also interested in current behaviors that are associated with good or high performance, then you must identify and assess them as they occur. These behaviors start with the strategic planning process and continue into implementation, monitoring, and assessment. In this sense, performance is the ‘activity’ or ‘means’. are also interested in predictors of performance - conditions and behaviors that have been shown over time to lead to better performance. In this sense, performance is a package of behaviors around strategic planning and programming.

According to Ghobadian, (1994), There are numerous, major methods and movements to regularly increase the performance of organizations. Each includes regular recurring activities to establish organizational goals, monitor progress toward the goals, and make adjustments to achieve those goals more effectively and efficiently. Typically, these become integrated into the overall recurring management systems in the organization (as opposed to being used primarily in one-time projects for change.

2.3 Measures of Performance. 32 When determining performance of a business, the following have to be considered according to (Balunywa, 1998) Increased market share. This is where the company expands on its activities by occupying a large position of the existing markets. This can be in terms of sales and the range of products in the market hence a sign of good performance. Return on gross investment. This is in terms of profits obtained from investment you made. Therefore, high rates of profitability show a sign of good performance Total waste reduction. When a company performs well, waste reduction is minimized because every activity is done in the right time and right place thus not wasting firm’s resources (Bakunda, 2001). “For world class companies, the ultimate goal is zero costs. All costs are unnecessary unless proven otherwise.” Meeting standards. Usually when a company meets standards set in a particular field, it will indicate a good performance level. Others include cost reduction, improved facilities, and good reputation. Despite important advances made in determining what qualifies to be a good indicator of business performance, much more needs to be done to develop a satisfactory understanding of the subject because no measure works in isolation of the other, all factors must be combined and exploited efficiently to achieve performance targets.

2.4 Other factors affecting business performance Competition Competition comes in existence from situations where two or more business organizations produce identical products, share the same market. Many Economists believe that competition is a fact, which must be considered if the business is to prosper (Porter, 1992). In order to match increasing competition, most companies will produce products that can be bought at relatively low prices. However, this may compromise quality in that customers may purchase infrequently hence affecting performance (Drucker, 1989).

Customers influence David and Houston (2000) argues that the most important factor that impact on any organizations operations function is to manage value adding activities inside the business in

33 such away that customer requirements are meet in full. For each element of product or service that is of concern to the customer, organizations will have an internal response that facilitates the satisfaction of the customer preferences thus, performance. The most successful businesses are those that can most effectively configure their operations to meet customer requirements. Planning Dune (1995) stresses the importance of financial planning in the business to prosper effectively. A retailer or any business owner invests money in merchandise for profitable resale to others but this will be impossible of the choice of merchandise if made without effective planning, and the result is always low profits or loss. Marketing function Kotler, (1995) cited marketing function as one of the major weapons to be used for the better results of business operations. All business organizations have to continuously encourage through potential customers to buy their products and they must achieve this as efficiently as possible through implanting marketing function.

Adock (1995) advises business organizations with no formal marketing function, in order to succeed to use specialists or managers who initially understand market requirements.

Biimble (1990) advises business operators or owners to acknowledge that, a business, which carries out advertising as part of marketing function, increases its market share, which indicates good performance. Economic changes In situations where high currency is charged, business is forced to increase prices for sustainability of business hence affecting their performance. This can be because of importation in periods for example, when the currency rate is very high. Other economic changes as inflation also causes prices to increase eventually cost of production increases as a result demand reduces hence affecting performance Brown, (1990).

Generally, it can be seen that the theoretical models have only served as a rough guides and have not specifically analyzed the imposition of a tax on business performance. Even Brown (1990) who tried to analyze economic changes never pointed out how taxation affects business performance that the present study wants to investigate

34 According to Mbaguta, (2002) lack of capital is another impediment to businesses in their early stages. Results of the study indicated a significant proportion of the respondents, 64(48%) raised this as a major problem. First, these businesses were started with limited capital. Secondly, micro businesses lack collaterals such as cars or land titles that can be deposited to get loans from the traditional commercial banks. On the other hand, the loans provided by microfinance institutions are small, with a short repayment period and high interest rates.

Snyder (2000) points poor record keeping as also a cause for startup business failure. In most cases, this is not only due to the low priority attached by new and fresh entrepreneurs, but also a lack of the basic business management and skills. Most business people, therefore, end up losing track of their daily transactions and cannot account for their expenses and their profits at the end of the month.

High rental charges have impeded the success of many businesses as some charges are pegged to the United States dollar, which in most cases appreciates against the Hyederabad shilling Bagazonzya (2003). One businessperson mentioned that their rent is US$200 for a space of 12 feet by 10 feet. Expansion of towns has led to increased demand for business premises, which means that some small businesses have been pushed away from the busy areas of the town to the periphery. This has increased costs and resulted in poor sales and negative cash flow, thus minimizing the chances for most businesses to succeed.

Arden, (2003) points’ lack of effective management during their early stages is also a major cause of business failure for small businesses. Owners tend to manage these businesses themselves as a measure of reducing operational costs. This study uncovered the example of businessperson who locks the shop for a full day whenever he goes shopping in Kampala. He does this once every week, a total of four days a month. One result of this is loss of customer loyalty.

35 Relationship between debtor management and organizational performance

For businesses to succeed it is essential to have a good debtor management In addition, businesses should aim at fixing prices that will enable them to earn sufficient profits for survival and growth. Further, every businessperson needs effective and efficient management skills to go into business and new, effective, and efficient management skills to stay there.

Namajja (2003) recommends debtor management systems. She asserts that small to medium sized businesses should have system or process for managing debtors. It is even more important during uncertain financial times that you manage your debtors effectively, and there are several different methods for doing this.

According to Balunywa (1996); medium sized businesses should have budget profit and loss analysis to really know what you spend (or intend to spend) in each area of your business over 12 months?

Conclusion In orgarnisations,although there are other ways of driving the business to success like competitive aggressiveness, visionary, leadership, trained staff and costumer focus, debtor management provides a reflector of past and a drive to achieve better performance for effective measurement.

36 INDUSTRY PROFILE India is the eighth largest producer of crude steel in the world, accounting for 3.37% of the global steel production in 2005. India’s finished carbon steel production grew to reach an estimated 42.63mmt in 2005-06; primary producers alone contributed about 38% whereas secondary producers contributed the rest. With reference in changes in economy Indian steel industry is poised for massive expansion. Dramatic consumption growth over the last few years has stimulated enormous expansion plans, facilitated by a relatively unexploited iron ore raw material base. India is now being hailed as the new China, where crude steel production soared from less than 100m tonnes in 1995 to over 400m tonnes in 2006.This report focuses on detailed study about the Indian Steel Industry. Steel became an integral part of development. It discusses basic steel manufacturing processes like Blast Furnace and, Electric arc Furnace, industry value chain with a special reference to major raw material trends and price trends of steel products. Demand –supply dynamics has been discussed along with key growth drivers and Export-Import scenario. It also talks about Issues & challenges of the steel industry, mergers and acquisitions, government policies and regulations. Top 10 Leading Players in steel Industry have been profiled namely Steel Authority of India (SAIL), HIL, ESSAR Steel and JSW Steel in this report and analyzed on the basis of financial and operational performance and compares their Competitive Positioning along with future outlook in the light of increasing trend in investments in the domestic industry .Steel Industry in India is on an upswing because of the strong global and domestic demand. India's rapid economic growth and soaring demand by sectors like infrastructure, real estate and automobiles, at home and abroad, has put Indian steel industry on the global map. According to the latest report by International Iron and Steel Institute (IISI), India is the seventh largest steel producer in the world. With reference to development which revised Indian infrastructure, the origin of the modern Indian steel industry can be traced back to 1953 when a contract for the construction of an integrated steelworks in Rourkela, Orissa was signed between the Indian government and the German companies Fried Krupp und Demag AG. The initial plan was an annual capacity of 500,000 tonnes, but this was subsequently raised to 1 million tonnes. The capacity of Rourkela Steel Plant (RSP), which belongs to the SAIL (Steel Authority of India Ltd.) group, is presently about 2 million tonnes. At a very early stage the former USSR and a British consortium also showed an interest in establishing a modern steel industry in India. This resulted in the Soviet-aided building of a steel mill with a capacity of 1 million tonnes in Bhilai and the British-backed construction in Durgapur of a foundry which also has a million

37 tone capacity. The Indian steel industry is organized in three categories i.e., main producers, other major producers and the secondary producers. The main producers and other major producers have integrated steel making facility with plant capacities over 0.5 mT and utilize iron ore and coal/gas for production of steel. The main producers are HIL, SAIL, and RINL, while the other major producers are ESSAR, ISPAT and JVSL. The secondary sector is dispersed and consists of: (1) Backward linkage from about 120 sponge iron producers that use iron ore and non-coking coal, providing feedstock for steel producers; (2) Approximately 650 mini blast furnaces, electric arc furnaces, induction furnaces and energy optimizing furnaces that use iron ore, sponge iron and melting scrap to produce steel; and (3) Forward linkage with about 1,200 re-rollers that roll out semis into finished steel products for consumer use. Structural Weaknesses of Indian Steel Industry Although India has modernized its steelmaking considerably, however, nearly 6% of its crude steel is still produced using the outdated open-hearth process. Labour productivity in India is still very low. According to an estimate crude steel output at the biggest Indian steelmaker is roughly 144 tonnes per worker per year, whereas in Western Europe the figure is around 600 tonnes. India is deficient in raw materials required by the steel industry. Iron ore deposits are finite and there are problems in mining sufficient amounts of it. India's hard coal deposits are of low quality. Insufficient freight capacity and transport infrastructure impediments too hamper the growth of Indian steel industry. Strengths of Indian Steel Industry • Low labour wage rates • Abundance of quality manpower • Mature production base • Positive stimuli from construction industry • Booming automobile industry Outlook The outlook for Indian steel industry is very bright. India's lower wages and favourable energy prices will continue to promise substantial cost advantages compared to production facilities in (Western) Europe or the US. It is also expected that steel industry will undergo a process of consolidation since industry players are engaged in an unfettered rush for scale. This is evident from the recent acquisition of Corus by Tata. The deployment of steel.

38 Asbestos is a group of minerals with long, thin fibrous crystals. The word "asbestos" is derived from a Greek adjective meaning inextinguishable. The Greeks termed asbestos the "miracle mineral" because of its soft and pliant properties, as well as its ability to withstand heat. Asbestos became increasingly popular among manufacturers and builders in the late 19th century due to its resistance to heat, electricity and chemical damage, its sound absorption and tensile strength. When asbestos is used for its resistance to fire or heat, the fibers are often mixed with cement or woven into fabric or mats. Asbestos was used in some products for its heat resistance, and in the past was used on electric oven and hotplate wiring for its electrical insulation at elevated temperature, and in buildings for its flame-retardant and insulating properties, tensile strength, flexibility, and resistance to chemicals.

The main product ASBESTOS CEMENT SHEET is primarily a cement based product were about 10-15% asbestos fiber is needed to reinforce the cement is weather proof, even through it absorbs moisture, the water will not pass through the product. Asbestos cement is used for corrugated sheets, slates, flat sheet for animal pens, cladding molded fitting, water system rain water gutters, down pipes, under ground pipes and sewer pipes, skills, chalkboards. Most of the asbestos consumed globally is chrysolite. Russia, Kazakhstan is major producers of asbestos. The studies across the globe had not found any increased risk of carrier to the workers even at the levels of fiber/cubic centimeter, whereas the Indian chrysolite cement industry works well bellow 0.5 fiber/cubic centimeter.

3.1.1 Historic usage Asbestos was named by the ancient Greeks who also recognized certain hazards of the material. The Greek geographer Strabo and the Roman naturalist Pliny the Elder noted that the material damaged lungs of slaves who wove it into cloth. Charlemagne, the first Holy Roman Emperor, is said to have had a tablecloth made of asbestos.

Wealthy Persians, who bought asbestos imported over the Hindu Kush, amazed guests by cleaning the cloth by simply exposing it to fire. According to Biruni in his book of Gems, any cloths made of asbestos were called shastakeh. Some of the

39 Persians believed the fiber was fur from an animal named samandar that lived in fire and died when exposed to water.

Some archeologists believe that ancients made shrouds of asbestos, wherein they burned the bodies of their kings, in order to preserve only their ashes, and prevent their being mixed with those of wood or other combustible materials commonly used in funeral pyres. Others assert that the ancients used asbestos to make perpetual wicks for sepulchral or other lamps. In more recent centuries, asbestos was indeed used for this purpose. Although asbestos causes skin to itch upon contact, ancient literature indicates that it was prescribed for diseases of the skin, and particularly for the itch. It is possible that they used the term asbestos for alumen plumosum, because the two terms have often been confused throughout history.

Asbestos became more widespread during the industrial revolution; in the 1860s it was used as insulation in the U.S. and Canada. Development of the first commercial asbestos mine began in 1879 in the Appalachian foothills of Quebec. By the mid 20th century uses included fire retardant coatings, concrete, bricks, pipes and fireplace cement, heat, fire, and acid resistant gaskets, pipe insulation, ceiling insulation, fireproof drywall, flooring, roofing, lawn furniture, and drywall joint compound.

Approximately 100,000 people in the United States have died, or will die, from asbestos exposure related to ship building. In the Hampton Roads area, a shipbuilding center, mesothelioma occurrence is seven times the national rate. Thousands of metric tons of asbestos were used in World War II ships to wrap the pipes, line the boilers, and cover engine and turbine parts. There were approximately 4.3 million shipyard workers in the United States during WWII; for every thousand workers about fourteen died of mesothelioma and an unknown number died from asbestosis.

Asbestos fibers were once used in automobile brake pads and shoes. Since the mid- 1990s, a majority of brake pads, new or replacement, have been manufactured instead with linings made of ceramic, carbon, metallic and Aramid fiber (Twaron or Kevlar—the same material used in bullet-proof vests). Kent, the

40 first filtered cigarette on the market, used crocidolite asbestos in its "Micronite" filter from 1952 to 1956.

The first documented death related to asbestos was in 1906. In the early 1900s researchers began to notice a large number of early deaths and lung problems in asbestos mining towns. The first diagnosis of asbestosis was made in England in 1924.By the 1930s, England regulated ventilation and made asbestosis an excusable work related disease, about ten years sooner than the U.S. The term Mesothelioma was not used in medical literature until 1931, and was not associated with asbestos until sometime in the 1940s.

The United States government and asbestos industry have been criticized for not acting quickly enough to inform the public of dangers, and to reduce public exposure. In the late 1970s court documents proved that asbestos industry officials knew of asbestos dangers and tried to conceal them.

In Japan, particularly after World War II, asbestos was used in the manufacture of ammonium sulphate for purposes of rice production, sprayed upon the ceilings, iron skeletons, and walls of railroad cars and buildings (during the 1960s), and used for energy efficiency reasons as well. Production of asbestos in Japan peaked in 1974 and went through ups and downs until about 1990, when production began to drop severely.

41 COMMERCIALLY AVAILABLE ROOFING MATERIALS

The weather proofing material is the topmost or outermost layer, exposed to the weather. Many different kinds of materials have been used as weather proofing material:

• Thatch is roofing made of plant stalks in overlapping layers.

• Wheat Straw, widely used in England, France and other parts of Europe. • Sea grass, used in coastal areas where there are estuaries such as Scotland. Has a longer life than straw. Claimed to have a life in excess of 60 years. • Shingles, called shakes in North America. Shingles is the generic term for a roofing material that is in many overlapping sections, regardless of the nature of the material. The word is also used specifically to denote shingles made of wood. • Red cedar . Life expectancy, up to 30 years. However, young growth red cedar has a short life expectancy. High cost. Should be allowed to breathe. • Hardwood. Very durable roofing found in Colonial Australian architecture, its use now limited to restorations. • Slate. High cost with a life expectancy of up to 200 years. Slate cleaves into thin sheets, making it much lighter than concrete tiles, though heavier than sheet steel and other light roof coverings. • Stone slab. Heavy stone slabs (not to be confused with slate) 1"-2" thick were formerly used as roofing tiles in some regions in England. Stone slabs require a very heavyweight roof structure, but their weight makes them storm proof. An obsolete roofing material. • Ceramic tile. High cost, life of more then 100 years. • Imbrex and tegula, style dating back to ancient Greece and Rome. • Metal shakes or shingles. Long life. High cost, suitable for roofs of 3/12 pitch or greater. Because of the flexibility of metal, they can be manufactured to lock together, giving durability and reducing assembly time. • Mechanically seamed metal. Long life. High cost, suitable for roofs of low pitch such as 0.5/12 to 3/12 pitch. • Concrete, usually reinforced with fibres of some sort. Concrete tiles require a stronger roof structure than slate, as some owners have found to their cost.

42 • Asphalt shingle, made of bitumen embedded in an organic or fiberglass mat, usually covered with colored, man-made ceramic grit. Cheaper than slate or tiles. Various life span expectancies. • Asbestos shingles. Very long lifespan, fireproof and low cost but now rarely used because of health concerns. • Membrane. Membrane roofing is in large sheets, generally fused in some way at the joints to form a continuous surface. • Thermosetting plastic (e.g. EPDM rubber). Synthetic rubber sheets adhered together with contact adhesive or tape. Primary application is big box store with large open areas and little vertical protrusions. • Thermoplastic (e.g. PVC, TPO, CSPE). Plastic sheets welded together with hot air creating one continuous sheet membrane. Can be rewelded with the exception of CSPE. Lends itself well to both big box and small roof application because of its hot air weld ability. • Modified bitumen - heat welded, asphalt adhered or installed with adhesive. Asphalt is mixed with polymers such as APP or SBS, then applied to fiberglass and/or polyester mat, seams sealed by locally melting the asphalt with heat, hot mopping of asphalt, or adhesive. Lends itself well to all applications. • Built-Up Roof - Multiple plies of asphalt saturated organic felt or coated fiberglass felts. Plies of felt are adhered with hot asphalt, coal tar pitch or adhesive. • Sprayed-in-Place Polyurethane Foam (SPUF) - Foam sprayed in-place on the roof, and then coated with a wide variety of coatings, or in some instances, covered with gravel. • Polyester. • PTFE (synthetic Fluor polymer) embedded in fibre glass. • Metal roofing. Generally a relatively inexpensive building material, unless copper is used. • Galvanized steel frequently manufactured with wavy corrugations to resist lateral flexing and fitted with exposed fasteners. Widely used for low cost and durability. Sheds are normally roofed with this material. Known as Gal iron, it was the most extensively used roofing material of 20th century Australia, now replaced in

43 popularity by steel roofing coated with an alloy of zinc and aluminum, claimed to have up to four times the life of galvanized steel. • Standing-seam metal with concealed fasteners. • Mechanically seamed metal with concealed fasteners contains sealant in seams for use on very low sloped roofs. • Flat-seam metal with soldered seams. • Glass Clear windows have been used since the invention of glass to cover small openings in a building. They provided humans with the ability to both let light into rooms while at the same time keeping inclement weather outside. Glass is generally made from mixtures of sand and silicates, and is very brittle. Modern glass "curtain walls" can be used to cover the entire facade of a building. Glass can also be used to span over a wide roof structure in a "space frame". • Ceramics, these are such things as tiles, fixtures, etc. Ceramics are mostly used as fixtures or coverings in buildings. Ceramic floors, walls, counter-tops, even ceilings. Many countries use ceramic roofing tiles to cover many buildings. Ceramics used to be just a specialized form of clay-pottery firing in kilns, but it has evolved into more technical areas. • Foam More recently synthetic polystyrene or polyurethane foam has been used on a limited scale. It is light weight, easily shaped and an excellent insulator. It is usually used as part of a structural insulated panel where the foam is sandwiched between wood or cement.

44 COMPANY PROFILE

The year 1946 saw the birth of India. It was also the year HYDERABAD INDUSTRIES LIMITED was founded. Over the decades, it has blazed a pioneering path in the fibre cement industry and has grown into a formidable player. The corporate office of HIL is situated at Hyderabad. The HIL R & D centers situated at Hyderabad and Faridabad support all its manufacturing units to achieve excellency in its manufacturing activities. The Manufacturing facilities are at Hyderabad, Faridabad & Daruhera (Haryana), Chennai (TN), Jasidih (Jharkhand), Wada (Maharashtra), Vijayawada, Timmappur (AP),sutariya (UP), Balasore(Orissa) and Thrissur (kerala).

The company has four regional offices & over 46 sales depots all over India, all with the purpose of providing convenient services to customers. HYDERABAD INDUSTRIES LIMITED is a flagship Company of the C.K.Birla group of Companies, incorporated on 17th June 1946. HIL has blazed a pioneering path in the building products industry. HIL has led the cement industry for well over five decades. Today HIL is a multi product, multi locational organization with a formidable network of branches, depots, stockiest and personnel spread all over India.

HIL being backed by the organizational and technical expertise of the Birlas, also has a Board of directors comprising experienced personnel from Business, Finance and Industry. The Board is chaired by Mr.C.K.Birla. HIL’s product range include Fibre Cement roofing sheets in the name of CHARMINAR and MALABAR, Autoclaved Aerated Concrete Blocks and Panels called AEROCON, Calcium Silicate insulation product called HYSIL, Jointing material for Gaskets and Plant and machinery for these products.

The HYDERABAD INDUSTRIES LIMITED, Thrissur is situated 10 km away from the Thrissur town. The exact place where the company is situated is Athani, which is an industrial area. This company was incorporated in the year 1985 and commenced production in 1986 in the name as MALABAR BUILDING PRODUCTS, which was a joint venture by HIL and KSIDC (Kerala State

45 Industries Development Corporation. Later in the year 2005 April the company was merged with the HIL completely from the KSIDC. And in the same year the company changed its name to HYDRABAD INDUSTRIES LIMITED.

About 200 employees are working in HIL, Thrissur as a whole. In that 110 employees are working in plant, 72 are office staffs and 18 are bargaining staffs. The plant is working for 24 hours and there are three shifts per day. The whole plant is completely automated. The HIL Thrissur plant is producing only the AC roofing sheets in the name of CHARMINAR.

Charminar AC Roofing Sheets have been the No.1 roofing sheets of choice for more than 50 years now, providing roofing to millions of low cost houses and to industries, commercial businesses and for several public utilities. Charminar sheets are widely known for their superior quality and durability. The raw materials used in the production process are Fibre, fly ash, rag pulp and cement. Among these raw materials Fibre is importing from Brazil and Canada and cement is mainly bought from ACC cements. The Company mainly sells their products through dealers who are selected by the company. The finished products are mainly sold in the south India, especially in Tamil Nadu.

The company has a visionary management and motivated team of dynamic workers sharing common vision and working in the union. The company is moving ahead with to innovate and provide excellent production. HIL is providing to have an operational efficiency compactable with global standards. As a socially organization, it has contributed significantly towards eco-friendliness and various social causes.

The company has involved in conducting a lot of community welfare programme. In this year the company conducted a welfare programme named ‘SOUHRUTHAM 2008’.

46 Mission and Vision of Hyderabad Industries Limited

To maintain leadership in Fibre cement products industry and develop complementary products and services to strengthen the core business of building products.

• Fulfilment of market needs with cost effective solutions for enduring and enhanced customer satisfaction. • Striving for excellence in all the area of company’s operation.

• Innovative solutions to create world class products and services fostering collective wisdom and commitment of employees to create corporate and group culture and values which they are proud to be part of.

• Maintain equitable balance between development and environmental needs of the society.

3.1.2 Quality Policy

Provide products and services that adequately and consistently meet specified and identified needs of customers by

. Continues upgrade of product value and by . Building customer responsive environment

In making and deliverance of the products and services

3.1.3 Research & Development.

Research and Development Center of Hyderabad Industries Limited is fully equipped with latest state-of-art technology, equipment and test facilities including Pilot Plants situated in ultra modern spacious building covering an area of about 11000 sft of main Building and about 16000 sft area of Pilot Plant. HIL, R & D center is recognized by Department of Science and Technology Government of India.

47 HIL have been conferred with the DSIR National Award for R & D efforts in industry for the year 2000 in the area of new materials for "AEROCON INSTA PANEL"

Dedicated team of scientists and engineers are constantly working for product upgradation, optimum utilization of raw materials, development of substitute materials, new products and new product applications, saving substantial amount of foreign exchange for the country.The R & D Division has contributed in the following specific areas:

• Identification and development of environment friendly building products with emerging market needs. • Emphasis on process optimization, cost reduction and development of value added products. • Effective utilization of energy, water and waste material. • Absorption of imported technical know-how. • Development of new products i.e., Aerocon Insta - Panels, Access Flooring system, pressed sheets, fire protection boards, Light weight AAC Blocks, non-asbestos jointing material for automobile industry etc.

Quality Policy

Provide products and services that adequately and consistently meet specified and identified needs of customers by

. Continues upgrade of product value and by . Building customer responsive environment

. In making and deliverance of the products and services

Philosophy

HYDERABAD INDUSTRIES LIMITED is committed to good Corporate Governance. The Company has been following good principles of business over the years by following all the laws and regulations of the land with an emphasis on accountability, trusteeship, and integrity. It is our responsibility to ensure that the

48 organization is managed in a manner that protects and furthers the interests of our stakeholders.

DEPARTMENT PROFILE

The organization has mainly 5 departments. They are

1. HUMAN RESOURCE DEPARTMENT 2. FINANCE DEPARTMENT 3. PURCHASE DEPARTMENT 4. MARKETING DEPARTMENT. 5. PRODUCTION DEPARTMENT 3.3.1 ORGANIZATION CHART OF HUMAN RESOURCE DEPARTMENT

General Manager

Manager Industrial Relations Jr. Manager Establishment Sr. Officer HR

Security

Time Office Assistants

The managing human resource in the organization is an important task. Human resource department is doing the management of human resource in the organization. Hyderabad Industries Limited follows a system in HR department

49 that each authority coming under the General Manager (works) has to report directly to General Manager (Works) in the hierarchy. This will helps to speed up the communication flow in the organization.

3.3.2 ORGANISATION CHART OF FINANCE DEPARTMENT

Deputy Manager Accounts

Assistant manager

Sr. Accounts Officer

Assistants

Sound financial decisions have been one of the critical practices in the success of Hyderabad Industries Limited, Thrissur proper planning and long vision of the financial managers help the company to undergo to smooth sail. All monetary transactions of the company are handled and brought to account by the finance department.

3.3.3 ORGANISATION CHART OF PURCAHSE DEPARTMENT

Sr. Purchase Manager

Assistant Manager Purchase

Purchase Officer

50 Assistants

The purchase manager is the only person who is the having the prime authority to make orders for the purchase of raw materials. After referring the stock report of raw materials and finished goods, the purchase manager purchase the raw- materials in order to ensure the continuous flow of production.

3.3.4 ORGANISATION CHART OF PRODUCTION DEPARTMENT

Production Manager

Deputy Manager Deputy Manager Production Maintenance

Jr. Manager Jr. Manager Production Production

Shift in charge

The production manager and his team are responsible for realizing the visions of the company within constraints of technical possibility. This involves coordinating the operations of various production activities and maintains a good flow of work without any blockage.

51 3.3.5 ORGANISATION CHART OF MARKETING DEPARTMEN

Marketing Manager

Sales Manager

Regional Sales Manager

Area Sales Manager

Sales Officer

3.4. Product Profile

3.4.1 Charminar Aerocon panels.

Charminar Aerocon Panel is a unique factory developed product that fulfills the following Green Building concept. • Raw material contains up to 40% Fly Ash (recycled power plant waste). • Excellent Thermal and Sound Insulation. • A good fire rating up to 2 hrs. -Depending upon thickness. • Factory cured panel -Dry construction at site. • Completely re-locatable. • Proven suitable for seismic and cyclone prone zones

Other Benefits:

52 • Fast track construction -Tongue and groove joining system allows faster construction. • Light weight -allows easy handling and erection. • Excellent water & termite resistance. • Can be given any surface finish

Applications:

Charminar Roofing Sheets are an ideal building material for roofing and side- cladding in: • Industrial/ Power Plant Cladding • Control Room • Prefabricated site offices • Prefabricated Houses, Canteens and Rest Rooms • Partitions • Police Stations • School Buildings • Telephone Exchanges • ATM Cubicles

3.4.2 Charminar AC roofing Sheets. Charminar AC Roofing Sheets have been the No.1 roofing sheets of choice for more than 50 years now. Providing roofing to millions of low cost houses and to industries, commercial businesses and for several public utilities. Charminar sheets are widely known for their superior quality and durability. Special Features • Strong & durable • Weather-proof • Less noise during rains • Non-corrosive Charminar Concreted Roofing Sheets are made from Fibre, Portland cement and Binder. Fibre in these sheets acts as reinforcement like steel in RCC. These are

53 owing to their quality, strength & durability. These are manufactured to exceed the requirements of strength specified in the relevant Indian standards. Standards

• IS: 459-1992 Specification for Corrugated and Semi-Corrugated Asbestos Cement Sheets. • IS: 3007 - 1999 Code of practice for laying of Asbestos Cement Sheets, Part-I, Corrugated Sheets. • IS: 1626 (Part3) 1994 - Roofing fittings.

Applications

Charminar Roofing Sheets are an ideal building material for roofing and side- cladding in: • Industrial buildings of all types • Food Storage Godowns • Warehouses & Cold Storages • Poultry farms, dairy farms and other agricultural sheds • Garages, Verandahs and Outhouses • Houses • School buildings • Public Utility Sheds • Cooling Towers • Cinema Halls • Stadiums • Railway & Bus Stations

54 55 DATA ANALYSIS

HIL VS. SAIL OPERATING MARGIN: OPERATING MARGIN (%)

FY 2011- YEARS FY 2007-08 FY2008-09 FY 2009-10 FY 2010-11 12 HIL 32.47 41.1 38.88 39.61 41.94 SAIL 20.71 36.53 23.24 28.09 28.19

ANALYSIS:

From the above graph, it is clear that HIL has been always in a better position in terms of operating margin profit (%) when compared to SAIL. From 32.47% in 2007-08 to 41.94% in 2009-10 HIL has proved itself. Whereas SAIL‘s operating margin profit% has been just 20.71% in year 2007-08 to 42.19% in 2008-09.

56 TREND OF CURRENT RATIO IN LAST FIVE YEARS

CURRENT RATIO

YEARS FY 2007-08 FY2008-09 FY 2009-10 FY 2010-11 FY 2011-12 HIL 0.68 0.71 0.72 1.77 3.92 SAIL 0.91 1.18 1.23 1.59 1.73

ANALYSIS:

An ideal current ratio is 1:1. When compared to SAIL, current ratio of HIL is not a desirable one. In the year 2007-08 the ratio is very high which is not desirable since it means there was less efficient use of funds which was lowering down the profitability of the concern. In case of SAIL the ratio is almost coming closer to the ideal ratio.

57 QUICK RATIO

QUICK RATIO FY 2007- FY2008- FY 2009- FY 2010- FY 2011- YEARS 08 09 10 11 12 HIL 0.39 0.33 0.29 1.37 3.52 SAIL 0.57 0.76 0.72 1.01 1.23

ANALYSIS:

Quick ratio shows short-term solvency of a business in a true manner. It is also called acid- test ratio and liquid ratio. It is calculated in order to know how quickly current liabilities can be paid with the help of quick assets. Quick assets mean those assets, which are quickly convertible into cash. While comparing HIL with SAIL it can be clearly seen that HIL is in a better position. SAIL’s ratio as on 2007-08 was 0.57 which increased to 1.23 in 2008-09. When compared to HIL it is clear that the increase in the ratio is more than that of SAIL.

58 DEBTORS TURNOVER RATIO

DEBTORS TURNOVER RATIO

FY 2010- FY 2011- YEARS FY 2007-08 FY2008-09 FY 2009-10 11 12 HIL 12.47 15.73 16.52 17.32 12.74 SAIL 13.64 16.64 15.12 16.77 15.52

ANALYSIS:

Debtors turnover ratio indicates the relation between net credit sales and average accounts receivables of the year. This ratio is also known as Debtors’ Velocity. This ratio indicates the efficiency of the concern to collect the amount due from debtors. It determines the efficiency with which the trade debtors are managed. Higher the ratio, better it is as it proves that the debts are being collected very quickly. HIL and SAIL both has an increasing trend in debtor’s turnover ratio when compared to last five years.

59 TREND AVERAGE COLLECTION PERIOD IN LASTFIVE YEARS

AVERAGE COLLECTION PERIOD

FY 2007- FY 2009- FY 2010- YEARS 08 FY2008-09 10 11 FY 2011-12

HIL 29.24 23.19 22.089 21.06 28.64

SAIL 26.75 21.93 24.12 21.75 23.51

ANALYSIS:

This ratio indicates how quickly and efficiently the debts are collected. The shorter the period the better it is and longer the period more the chances of bad debts. Although no standard period is prescribed anywhere, it depends on the nature of the industry. In case of HIL & SAIL, the average collection period has decreased when compared to 2007-08 to 2008-09, but SAIL has less chance of bad debt since its average collection is 23.51 days as& when compared to HIL’s average collection period of 28.64 days.

60 HILvs. ARCELOR MITTAL (MITTAL STEEL)

TREND OF CURRENT RATIO IN LAST FIVE YEARS

CURRENT RATIO

YEARS FY 2007-08 FY2008-09 FY 2009-10 FY 2010-11 FY 2011-12 HIL 0.68 0.71 0.72 1.77 3.92 MITTAL STEEL 1.54 2.02 1.6 1.41 1.44

Analysis:

Current ratio shows the short-term financial position of the business. The current ratio of ARCELOR MITTAL is better when compared to HIL. The ideal current ratio is 1:1.this signifies the ability of the company to pay off its current liabilities. More the ratio indicates idleness of working capital.

61 DEBTORS TURNOVER RATIO

Debtors Turnover Ratio

YEARS FY 2007-08 FY2008-09 FY 2009-10 FY 2010-11 FY 2011-12 HIL 12.47 15.73 16.52 17.32 12.74 MITTAL STEEL 13.53 11.71 10.04 10.99 14.64

Analysis: Debtors turnover ratio indicates the relation between net credit sales and average accounts receivables of the year. This ratio is also known as Debtors’ Velocity. This ratio indicates the efficiency of the concern to collect the amount due from debtors. It determines the efficiency with which the trade debtors are managed. Higher the ratio, better it is as it proves that the debts are being collected very quickly. HIL and ARCELOR MITTAL both have an increasing trend in debtors turnover ratio when compared to last five years. But MITTAL has a better turnover ratio than HIL.

62 AVERAGE COLLECTION PERIOD

Average Collection Period

YEARS FY 2007-08 FY2008-09 FY 2009-10 FY 2010-11 FY 2011-12 HIL 29.24 23.19 22.089 21.06 28.64 MITTAL STEEL 26.97 31.14 36.34 33.21 24.91

Analysis:

63 HIL vs. JINDAL STEEL & POWER LTD

OPERATING MARGIN PROFIT

OPERATING MARGIN PROFIT (%) FY 2007- FY2008- FY 2009- FY 2010- FY 2011- YEARS 08 09 10 11 12 HIL 32.47 41.1 38.88 39.61 41.94 JINDAL STEEL AND POWER LTD 37.42 40.65 40.26 40.01 42.76

Analysis:

The trend shows there is an almost stagnant range for JSP. From 37.42% in the year 2007- 08,it increased to 42.76% in 2008-09. In case of HIL there was a steep increase in 2009-10 but then the operating margin profit decreased for two consecutive years and finally in the year 2008-09 it reached to 41.94%.from 32.47% in year 2007-08,it increased more than 9% till 2008-09.

64 TREND OF SALES IN LAST FIVE YEARS

SALES FY 2007-08 FY2008-09 FY 2009-10 FY 2010-11 FY 2011-12 HIL 12372.53 17414.52 22272.14 27437.29 134089.02 JSPL 1550.24 2775.32 3273.93 4338.54 6822.42

ANALYSIS: The trend of sales of HIL AND JINDAL STEEL AND POWER LTD. has been increasing year after year, but when both are compared, the increase in sales of HIL is more than JINDAL. From Rs.12372.53 crores in year 2008-09, HIL ‘sales has reached Rs.134089.02 crores in 2009-10.whereas in case of JINDAL STEEL AND POWER LTD. the sales wasRs.1550.24 crores in 2008-09 which increased only to Rs.6822.42 crores.

65 TREND OF CURRENT RATIO

FY 2007- FY2008- FY 2009- FY 2010- FY 2011- CURRENT RATIO 08 09 10 11 12 HIL 0.68 0.71 0.72 1.77 3.92 JINDAL STEEL AND POWER LTD 1.21 1.35 1.26 1.13 1.56

Analysis: This ratio is also called working capital ratio. This ratio explains the relationship between current assets and current liabilities of a business, where current assets are those assets which are either in the form of cash or easily convertible into cash within a year. Similarly, liabilities, which are to be paid within an accounting year, are called current liabilities. Current ratio shows the short-term financial position of the business. This ratio measures the ability of the business to pay its current liabilities.

66 DEBTORS TURNOVER RATIO

DEBTORS TURNOVER FY 2007- FY2008- FY 2009- FY 2010- FY 2011- RATIO 08 09 10 11 12 HIL 12.47 15.73 16.52 17.32 12.74 JINDAL STEEL AND POWER LTD 8.19 14.33 13.77 13.87 19.96

Analysis:

Debtors turnover ratio indicates the relation between net credit sales and average accounts receivables of the year. This ratio is also known as Debtors’ Velocity. This ratio indicates the efficiency of the concern to collect the amount due from debtors. It determines the efficiency with which the trade debtors are managed. Higher the ratio, better it is as it proves that the debts are being collected very quickly. HIL and JSPL both have an increasing trend in debtors turnover ratio when compared to last five years. But JSPL has shown a better performance in last five years.

67 AVERAGE COLLECTION PERIOD

Average Collection Period FY 2007- FY FY 2010- FY 2011- YEARS 08 FY2008-09 2009-10 11 12 HIL 29.24 23.19 22.089 21.06 28.64 JSPL 44.55 25.46 26.49 26.3 18.28

ANALYSIS: This ratio indicates how quickly and efficiently the debts are collected. The shorter the period the better it is and longer the period more the chances of bad debts. Although no standard period is prescribed anywhere, it depends on the nature of the industry. In case of HIL & JSPL, the average collection period has decreased when compared to 2007-08 to 2008-09.but Jindal has decreased more than half of the average period from 2007-08, which was 44.55days to 18.28 days in 2008-09. Whereas in case of HIL, the average collection period was 29.24 days in2007-08 which reduced to 28.64 days only in 2008-09.

68 SUGGESTIONS

1. Though SAP is implemented in the company, it is not fully implemented in town division, because of which lot of manual work is done. If SAP is implemented then this problem would be solved.

2. The state government & other government departments are another problem area in town division. The company must send frequent reminders, ex-once in 15 days that they have to pay their dues. The company must negotiate with the government about their repayment of dues.

3. The company is facing problem in collecting the medical bills from corporate customers. The company must make the list of defaulter in medical bills, which must be kept with the concern authority. The person in charge must see that the defaulter must not be entertained, even though it is an emergency case, until he pays his old dues.

4. The selection of customer must be done carefully, by properly checking the company’s background, its repayment capacity etc. The company should rate the parties by seeing its past performances. These ratings must be updated every year.

5. Channel financing is a way through which problems of dues can be controlled to a great extent but it should be taken care that the company won’t be liable for any default made by the middle person.

6. Now a day, it has become a normal practice of appointing a third party for collection of dues which should be taken into account as it removes the burden of collection for the company. Proper agreement between the third party and the company should be formulated in which all the terms and conditions must be mentioned. It should be without recourse and a third party should be legally appointed, thus not hampering the goodwill of the company and also taking care of the collection process.

69 SUMMARY OF FINDINGS

1. Most of the customers belong to the category of manufacturers i.e. they are using secondary and by-products of HIL as a raw material.

2. Majority of customers prefer to purchase secondary and by-products from Bokaro steel Plant because of local market and quality but they find price is higher compared to the quality.

3. Majority of the customers are satisfied with the quality of the secondary and by- products of HIL and that is a big advantage for HIL.

4. Of the four major types of products produced by HIL in Secondary and by- products division, most of the customers are purchasing secondary steel and by- products from HIL.

5. Most of the customers deal with Bokaro steel plant and HIL for purchase of secondary and by-products.

6. Low price, better service and high quality are the major concerns that the customers looks into for preferring a particular steel plant for secondary and by- products.

7. Majority of customers responded that other steel plants are providing secondary and by-products at a lower rate.

70 CONCLUSION

 Nevertheless, since industries do provide credit, they do so as optimally as possible. The word used is 'optimal' before and let me confirm that it doesn't necessarily mean the best possible, but the best possible under the circumstances.  A key strategy in lowering bad debt is reducing the time to recover the invoiced amounts.Together with stock days; debtor and creditor days are a crucial link between the company's income statement, its balance sheet and its cash-flow.  While in the income statement a company can book sales and profits to its heart's content, if it is slower than before at collecting its bills and suppliers demand faster payment, then cash receipts will not reflect the trend in profits. It is this divergence between profits and cash that is often the biggest and best signal that a company might be in trouble.  As with some other ratios, the absolute level of debtor and creditor days is less important than the trend over time and how the company compares with its competitors, particular the leader in the industry.  If a company's performance in this area is inferior to its competitors (that is, it collects its overdue invoices slower and is forced to pay its own debts faster) it is a sign of weakness. Deterioration in credit control over time is a worrying trend in any business. It merits closer monitoring by investors than it sometimes gets.

71 BIBLIOGRAPHY

Websites www.hil.com www.economywatch.com www.businesslink.gov.uk www.studyfinance.com www.financialexpress.com www.worldsteel.org/?action=programs&id=64 www.indianindustry.com http://steel.nic.in/ http://en.wikipedia.org/wiki/steel www.newssteel.com

Magazines HIL, 2007, VOLUME-2 HIL, MAY-2011 ECONOMIC TIMES, EXIM NEWSLETTER

ANNUAL REPORT OF HIL

Books Financial management – KHAN & JAIN Working capital management – HRISHIKES BHATTACHARYA