ACCOUNTS RECEIVABLES MANAGEMENT Essay

Chapter-VAccounts everyplacedue focal point Introduction Goals of Receivable Management credence Management Optimum credence polity commendation of Account Receivable155IntroductionAccounts receivable represent the amount due form nodes (book debts) or debtors as a result of make outing goods on extension. The term debtors is defined as debt owned to the dissolute by clients arising from sale of goods or services in the ordinary course of vexation. The three characteristics of receivables the element of take a chance, sparingal value and futurity explain the basis and the need for efficient anxiety ofreceivables. The element of insecurity should be c be well(p)y crumpled. change gross sales be tot solelyy riskless just non the realization sales, as the same has yet to be received. To the buyer the economic value in goods and services process directly at the time of sale,while the seller expect an equivalent value to be received subsequently on. The cash pay ment for goods and services received by thebuyer bequeath be make by him in a future detail. The clientfrom whom receivables or book debts have to be collected infuture argon called Trade debtor and represent the tautens claim on assets.Receivables direction,to a faulttermedas realization concern, deals with the prescripttion of faith polity, in name of liberal or restrictive, concerning creed criterionised and realization effect, the discount offered for early payment and the 156 appealingness insurance insurance policy and procedures last-placehertaken. It does so in such a way that taken to suckher these policy variable stars fall an optimal take of investment in receivables where the remember on that investment is maximum to the level. The realisation uttermostextended by business devoted normally ranges from 15 to 60 days. When goods argon sold on denotation, finished goods bring down convertedinto accounts receivable (trade debtors) in the books of the seller. In the books of the buyer, the obligation arising from quotation purchase is represented as accounts payable (tradecreditors). Accounts receivable is the total of all credit extended by a firm to its customer.A firms investment in account receivable depends uponhow much it sells on credit and how long it takes to collect receivable. Accounts receivable (or motley debtors) bring in the 3rd to the highest degree important assets category for business firm after plant and equipment and inventories and also speak to the2nd most important underway assets category for business firm after inventories.Poor management of accounts receivables be neglect ofvarious due account, sharp rise in the dreadful debt write down, and the accretion of debts expense and taking the discount by customers compensate though they pay after the discount accompaniment andeven after the net date. Since accounts receivable represent a sizableinvestment on the part of most firms in the case of public enterprises in India it forms 16 to 20 per cent of current assets. Efficient management of these accounts can provideconsiderable saving to the firm.157Factors involving in Receivable management1.The terms of credit apt(p) to customers deemedcreditworthy.2.The policies and practices of the firm in determiningwhich customers atomic number 18 to be granted credit.3.The paying practices of credit customers.4.The vigoir of the sellers, collection policies andpractice.5.The majority of credit sales.Goals of Receivable ManagementThe basic address of credit management is to maximize thevalue of the firm by achieving a trade off between the liquidity (risk and profitability). The intent of credit management is not to maximize sales, nor to minimize the risk of detrimental debt. If the objective lens were to maximizesales, therefore the firm would sell on credit to all. On the contrary, if minimization of bad debt risk were the aim, then the firm would not sell on credit to a ny iodin. In fact, the firm should manage its credit in such a way that sales are puff uped to an extent to which risk remainswithin an accep tabularise limit.Thus to achieve the goal ofmaximizing the value, the firm should manage its trade credit. The efficient and effective credit management does helpto expand sales and can prove to be an effective tool ofmarting. It helps to retain old customers and win newcustomers. salutary administrated credit means profitable credit accounts. The objectives of receivable management is topromote sales and pay until that drumhead is r all(prenominal)ed where the 158 go past on investment is further funding of receivables is less than the speak to of funds raised to finance that additional credit. Granting of credit and its management involve costs. Tomaximize the value of the firm, these costs must be controlled. These consequently include the credit administration expanses, b/dlosses and opportunity costs of the funds bind up in recei vable. The aim of credit management should be to regu upstart andcontrol these costs, not to appropriate them altogether. The cost can be reduced to zero, if no credit is granted. But the profit foregone on the expected quite a little of sales arising due to theextension of credit.Debtors involve funds, which have an opportunity cost.Therefore, the investment in receivables or debtors should be optimized. Extending liberal credit pushes sales and thusresults in higher profitability but the increasing investment in debtors results in increasing cost. Thus a trade off should be sought between cost and benefits to bring investment indebtors at an optimum level. Of course the level of debtors, to a great extent is influenced by external factors such as exertion norms, level of business activity, seasonal factors and thedegree of completion. But there are a lot of internal factors includecreditterms,standards,limitsandcollectionprocedures. The internal factors should be well administe red to optimize the investment in debtors.159 reference ManagementIn station that the credit sales are properly managed it isnecessary to determine following factors1.Credit insurance policy2.Credit Evaluation of Individual Buyers3.Credit Sanction Decisions4.Control and Monitoring of ReceivablesCredit PolicyThe early stage of credit sales is to decide policy in which most important variable is whether credit sales should be make or not and if yes to what extent i.e. what percentage of sales should be through on cash and what percentage on credit. The countersign with cement companies merchandising and financdepartment clearly purpose that the credit policy is to a great extentdependent upon grocery forces and less on company speciallyin periods when there is excessive competition which hashappened a number of times in the history of cement industry after decontrol and manufactures have been forced to provide credit if they wanted full utilization of content. If in the marke t there is practice of providing credit, those companies who do not fall in line have frown sales and so lower utilization of instilled capacity. The management has to weigh whether itshould avoid risk of realization and line of work of arrangingfunds for larger sales on credit or decide for reduced capacity utilization thereby resulting in higher cost per tonne of cement produced.160Actually the policy should be based on cost benefit psychoanalysis of these factors but often policy is firm without detailed calculations. In actual practice when one waits to push sales the marketing department pressurizes the management to provide liberal credit to buyers to realize sales targets.Credit RatingThe second virtual put of credit policy is to whom togive credit and whom it should be denied. Whether it shouldbe presumptuousness to everyone or on selective basis? As per standards one can workoutimpact of credit sales on net profit by following formulaeP = S (1-V) K * I B, Sin the su pra formulaP = diverseness in profitS = Change in salesV = balance of variable cost to salesK = speak to of capital i.e. interest cost of creditI = Increase in receivables investmentB = Bad debts ratio on additional salesThe transform in meshwork (P) is dependent upon ratio ofvariable cost and fixed cost and change in sales. The figure is worked out by deducting variable cost from sales i.e. salesminus variable cost is change in profits.The above formula appears to be very simple but forpolicy purposes it requires that policy maker should be able to estimate precisely the impact of credit on sales value, thevariable cost and bad debts besides the cost of capital. In practice besides the cost of capital, it is very backbreaking to measure extent of increase in sales as a result of credit and it is buy food broad estimate of sales department. Similarly, it is very difficult if not impossible to workout likely bad debts. The variable cost can be worked out with great precision if proper costing g all overnance is maintained. Because of difficulties inquantifying various variables in the formulae often creditpolicy is decided without working details on prevailing market conditions and the need of the company to push sales at a point of time. It has been by various companies that no details are worked.Credit PeriodThe credit period is the time aloofness for which selleragrees to provide credit to the buyers. It varies according to the practice of trade and varies between 15 to 60 days. In somecases for an early payment pre-agreed discount is given toinduce buyer make an early payment. For late payment in theagreement there is provision for interest payment by buyer. If credit is given for longstanding period it induces to push up sales but this is true only when one provides longer period credit than competitors. The customer-distributor, dealer, consumers isattracted to a firm who provides longer period credit. Theimpact of credit on profits and sales c an be worked out from the following formulaP= S (1-V)*K*1-b, SThe various components are as under 162 P= Change in profit S= Change in sales 1= Change in investments receivablesV= ratio of variable cost to salesK= Cost of giving creditb= bad debits ratio to change magnitude creditThe discussion with the industry suggests that theyrarely take termination on period of credit based on formula. It is market conditions and practices in the trade, which decides the period of credit and hardly any calculations of cost are done. In practice it is marketing department whose advice plays animportant and deciding role. In the period when sales have to be pushed up more credit is provided and there is no uniform policy overtime. During rainy season (July-Sep.) when demand is generally retard more liberal credit is granted than rest of the year.Further, when stocks accumulate due to sluggish sales,producers accept the terms of their customers and tradersabout the period of credit but when ma rket conditions aretight, the seller becomes more strict in providing credit.Optimum Credit PolicyCredit policy refers to those decision variables thatinfluence the amount of trade credit i.e. the investment inreceivables. The firms investment in receivable are affected by general economic conditions, industry norms, pace oftechnological change, competition etc. Though the firm has no control on these factors, yet they have a great impact on it and it can for certain influence the level of trade credit through its 163credit policy within their constraints imposed externally. The purpose of any commercial enterprise is the earning of profit. Credit itself is utilized to increase sales, but sales must return a profit. Further, whenever some external factors change, thefirm can accordingly adopt its credit policy. R.J. Chambers judges, The duty to administer credit and collection policies may be assigned to a financial executive director or marketing executive or both of them joint ly depending upon the original structure and the objectives of the firm.Different types of credit policy are1.Loose or Expansive Credit Policy Firms following thispolicy tend to sell on credit to customers very munificently. Credits are granted even to those whose credit worthiness is notproved, not known and are doubtful.Advantages of Loose or Expansive Credit Policy(i)Increase in Sales (higher sales),(ii)Increase in profit (higher profit),Disadvantages of Loose or Expansive Credit Policy(i) grievous bad/debts.(ii)Problem of liquidity(iii)Increase in cost of credit management.2.Tight or constraining Credit Policy Firms following thispolicy are very selective in extending credit. They sell on credit, only to those customers who had proved credit worthiness.Advantages of Tight of cropive Credit Policy(i)Minimize cost.(ii)Minimize chances of bad debts.164(iii)Higher sales in long run.(iv)Higher profit in long run.(v)Do not pose the serious problem of liquidity.Disadvantages of Tight or Restrictive Credit Policy(i)Restrict Sales.(ii)Restrict Profit Margin.Benefits of Credit Extension(i)Increases the sales of the firm.(ii)Makes the credit policy liberal.(iii)Increase the profits of the firm(iv)The market value of the firms share would rise.Cost of Credit Extension(i)Bad debt losses(ii)Production and selling cost.(iii)administrative expenses.(iv)Cash discounts and opportunity cost.Cost Benefit Trade off Profitability165Aspects of Credit Policy(i)Credit terms(a)Credit Period(b)Cash Discounts(ii)Credit Standard(iii)Collection policy or collection efforts.(i)Credit terms The stipulations under which thefirm sells on credit to its customers are called credit terms. (a)Credit Period The time duration for which credit isextended to the customers is referred to as credit period. It is the length of time for customers under which they are allowed to pay for their purchases. It is generally varies between 15-60 days. When a firm does not extend any credit the credit per iod would obviously be zero. It is generally stated in terms of a net date, for example, if firm allows 30 days of credit with nodiscount to induce early payments credit then its credit terms are stated at net 30. Usually the credit period of the firm is governed by industry norms, but firms can extend credit forlonger duration to find sales. If the firms bad debts build up, it may tighten up its credit policy as against the industry norms.According to Martin H. Seidhen, Credit period is the duration of time for which trade credit is extended. During this period the overdue amount must be paid by the customer. Thelength of credit period directly affects the volume ofinvestment in receivables and indirectly the net worth of the company. A long credit period may blast sales but it also166increase investment in receivables and lowers the quality of trade credit.(b)Cash Discounts It is the another aspect of credit terms.Many firms offer to grant cash discount to their customers in pa rade to induce them to pay their bill early. The cash discount terms indicate the rate of discount and the period for which discount has been offered. If a customer does not avail this offer, he is expected to make the payment by the net date. In the words of Martin H. Seiden Cash Discount preventsdebtors from using trade credit as a source of WorkingCapital.Liberalizing the cash discount policy may mean that thediscount percentage is increased and or the discount period is lengthened. Such an effect tends to enhance sales (because the discount is regarded as equipment casualty reduction), reduce the comely collection period (as customers pay promptly). Cash Discount is a premium on payment of debts before due date and not acompensation for the so called prompt payment.(iii)Credit Standard The credit standard followed by thefirm has an impact of sales and receivables. The salesand receivables level are likely to be high, if the creditstandard of the firm are relatively low. In contrast, ifthe firm has relatively low credit standard, the salesand receivables level are expected to be relativelyhigh. The firms credit standard are influenced by threeC of credit. (a) Character the willingness of thecustomers to pay, (b) Capacity the ability of thecustomers to pay, and (c) Condition the prevailingeconomic conditions.Normally a firm should lower its credit standards to theextent profitability of increased sales outmatch the associated costs. The cost arising due to credit standard realization are administrative cost of supervising additional accounts andservicing increased volume of receivables, bad debt losses,production and selling cost and cost resulting from the slower average collection period.The extent to which credit standard can be liberalizedshould depend upon the matching between the profits arisingdue to increased sales and cost to be incurred on the increased sales.(iii) Collection policy- This policy is call for because allcustomers do not pa y the firms bill in time. There are certain customers who are slow payers and some are non-payers.Therefore the collection policy should aim at acceleratingcollections from slow payers and non-payers and reducing bad debt losses. According to R.K. Mishra, A collection policy shouldalwayssystematization expressinpromptness,collectionefforts.Itregularitywillandhaveapsychological effect upon the customers, in that, it will make them realize the attitude of the seller towards the obligations granted.The collection programme of the firm aimed at timelycollection of receivables, any consist of many things likemonitoring the state of receivable, despatch of letter tocustomers whose due date is approaching, telegraphic andtelephone advice to customers around the due date, threat of legal action to overdue accounts, legal action against overdue accounts.The firm has to be very cautious in taking the timbres inorder to collect from the slow paying customers. If the firm is strict in its coll ection policy with the permanent customers, who are temporarily slow payers due to their economicconditions, they will get offended and may shift to competitors and the firm may loose its permanent business. In following an optimal collection policy the firm should equivalence the cost and benefits. The optimal credit policy will maximize the profit and will consistent with the objective of maximizing the value of the firm.Credit EvaluationBefore granting credit to a prospective customers thefinancial executive must judge, how creditworthy is thecustomer. In judging the creditworthiness of a customer, often financial executive keep in mind as basic criteria the four (i) Capital refers to the financial resources of a company as indicated in general by the financial statement of the firm. (ii) Capacity refers to the ability of the customers to pay on time. (iii) Character refers to the reputation of the customer for honest and fair dealings. (iv) Collateral represents the securit y offered by the customer in the form of mortgages.Credit military rank involves a large number of activitiesranging from credit investigation to contact with customers, appraisal review, follow up, inspection and recovery. Theseactivities demand decision-making skills which can partly be real through experience but partly it has to be lettered externally. This is particularly true in area of pre-creditappraisal and post-credit follow up.It is an important element of credit management. It helpsin establishing credit terms. In assessing credit risk, two types of error occur (i) A good customer is misclassified as a poor credit risk. (ii) A bad customer is misclassified as a good credit risk. both(prenominal) the errors are costly. Type (i) leads to loss of profit on sales to good customer who are denied credit. Type (ii)leads in bad debt losses on credit sales made to risky customer. plot of ground mis miscellany errors cannot be eliminated wholly, a firm can mitigate their occ urrence by doing proper creditevaluation. troika broad approaches used for credit evaluation areA.Traditional Credit Analysis This approach to creditanalysis calls for assuming a prospective customer in terms of 5 of credit (i) Character, (ii) Capacity, (iii) Capital, (iv) Collateral, and (v) Conditions.To get the information on the 5 firm may rely on thefollowing.1. financial statements2.Bank referencesone hundred seventy3.4.Credit agencies5.Experience of the firm6.B.Trade referencesPrices and yields on securitiesSequential Credit Analysis This method is moreefficient method than above method. In this analysis,investigation is carried further if the benefits of such analysis outweighs its cost.C.Numerical Credit Scoring This system involves thefollowing steps.1.Identifying factors relevant for credit evaluation.2.Assign weights to these factors that beam their relativeimportance.3.Rate the customer on various factors, using a suitablerating scale (usually a 5 pt. cuticle or a 7pt. Scale is used).4.For each factor, multiply the factor rating with the factorweight to get the factor score.5.Add all the factors score to get the overall customerrating index.6.Based on the rating index, classify the rating index.D. Discriminant Analysis The credit index described above is somewhat ad hoc in nature and is based on weight which aresubjective in nature. The nature of split analysis may be employed to construct a better risk index.Under this analysis the customers are divided into twocategories1.who pay the dues (X)1712.who have neglected (O)The straight line seems to separate the xs from os, not completely but does a fairly good job of segregating the two groups.The equating of this straight line isZ = 1 on-line(prenominal) Ratio + 0.1 return on equityA customer with a Z score less than 3 is deemed creditworthy and a customer with a Z score less than 3 is considered not credit worthy i.e. the higher the Z score the stronger the credit rating.(V)Risk Classific ation Scheme On the basis of informationand analysis in the credit investigation process, customers may be classified into various risk categories.Risk CategoriesDescription1. Customers with no risk of default2. Customer with negligible risk of default( 2%)3. Customer with less risk of default(2% to 5%)4. Customer with some risk of default(5% to 10%)5. Customer with significant risk of default( 10%)Credit Granting Decision After assessing the creditworthiness of a customer, next step is to take credit granting decision.There are two possibilities(i)No repetition of order.Profit = P (Rev-Cost) (1-P) Cost172Where P is the probability that the customer pays hisdues, (1-P) is the probability that the customer defaults,Rev is revenue for sale and cost is the cost of goods sold.The expected profit for the refuse credit is O. Obviously,if the expected profit of the course of action offer credit is positive, it is desirable to extend credit otherwise not.Customer pays (Rev-cost)Offer cre ditCustomer default (1-P) protest credit(ii)Repeat Order In this case, this would only be acceptedonly if the customer does not default on the first order. Under this, once the customer pays for the first order, the probability that he would default on the second order is less than theprobability of his defaulting on the first order. The expected profit of whirl credit in this case.Expected profit on initial order + Probability of paymentand resound order x expected profit on repeat order.P1 (Rev1 Cost1)-(1-P1) Cost1 + P1 x P2(Rev2-Cost2)-(1P2) Cost2 The optimal credit policy, and hence the optimal level ofaccounts receivable, depends upon the firms own uniqueoperating conditions. Thus a firm with excess capacity and low variable production cost should extend credit more liberally and carry a higher level of accounts receivable than a firmoperating a full capacity on a slim profit margin. When a sale is made, the following events occur173(1)Inventories are reduced by the cost of goods sold.(2)Accounts receivable are increased by the sales price, and(3)The differences is playscripted as a profit. If the sale is forcash.Generally two methods have been commonly suggestedfor monitoring accounts receivable.(1)Traditional Approach(a)(b)(2) average out collection periodAging ScheduleCollectionMarginapproachorPayment formApproach(a) mediocre Collection Period (AC) It is also called DaySales Outstanding (DSOI) at a given time t may define as the ratio of receivable outstanding at that time to average day by day sales figure.ACP =Accounts receivable at time t medium daily salesAccording to this method accounts receivable aredeemed to be in control if the ACP is equal to or less than a certain norm. If the value of ACP exceed the specified norm, collections are considered to be slow.If the company had made cash sales as well as creditsales, we would have concentrated on credit sales only, andcalculate average daily credit sales.The widely used index of the efficien cy of credit andcollections is the collection period of number of days sales174outstanding in receivable. The receivable turnover is scarce ACP/360 days.Thus if receivable turnover is six times a year, thecollection period is necessarily 60 days.(b)Aging Schedule An maturation schedule breaks down afirms receivable by age of account. The purpose of classifying receivables by age group is to gain a closer control over the quality of individual accounts. It requires going back to the receivables ledger where the dates of each customerspurchases and payments are available.To guess the receivable for control purpose, it may beconsidered desirable to compare this information with earlier age classification in that very firm and also to compare this information with the experience of other firms of same nature. Financial executives get such schedule prepared at periodicintervals for control purpose.So we can say Aging Schedule classifies outstandingaccounts receivable at a given point of time into diverse age brackers. The actual aging schedule of the firm is comparedwith some standard aging schedule to determine whetheraccounts receivable are in control. A problem is indicated if the actual aging schedule shows a greater proportion of receivable, compared with the standard aging schedule, in the higher age group.An inter firm comparison of aging schedule of debtors ispossible provided data relating to monthly sales and collection experience ofcompetitive firm are available. This tool,175therefore, cannot be used by an external analyst who has got no approach to the details of receivable.The above both approaches have some deficiencies. Bothmethods are influenced by pattern of sales and payment behavior of customer. The aging schedule is distorted whenthe payment relating to sales in any month is unusual, eventhough payment relating to sales in other months are normal. II.Payment Pattern Approach This pattern is developed tomeasure any changes that might be oc curring in customerspayment behaviour.It is defined in terms of proportion or percentage. Foranalyzing the payment pattern of several months, it isnecessary to prepare a transmutation matrix which shows thecredit sales in each month and the pattern of collectionassociated with it.The payment pattern approach is not dependent on saleslevel. It focuses on the key issue, the payment behaviour. It enables one to analyze month by month pattern as against the combined sales and payment patterns.From the collection pattern, one can judge whether thecollection is improving, stable, or deteriorating. A secondary analysis is that it provides a historical record of collection percentage that can be useful in projecting monthly receipts for each budgeting period.Control of Accounts ReceivableSome of the important techniques for controllingaccounts receivable are ratio analysis, discriminate analysis, 176decision tree approach, and electronic data processing.Information system with regard to re ceivables turnover, age of each account,progress of collection surface of bad debt losses, and number of delinquent accounts is also used as one of thecontrol measures.Ratio analysis is widely used in the control of accountsreceivable. Some of the important ratios used for this purpose are discussed below(1)Average collection Period (Receivables x 365/AnnualCredit Sales)The average collection period indicates the average timeit takes to convert receivables into cash. Too low an average collection period may reflect an likewise restrictive credit policy and suggest the need for relaxing credit standards for an acceptable account. On the other hand too high an averagecollection period may indicate an excessively liberal credit policy leading to a large number of receivables being past due and some being not collectable.(2)ReceivablesTurnoverSales/Receivables)(AnnualCreditThis ratio also indicates the slowness of receivables. Boththe average collection period ratio and receivables ratio must be analyzed in intercourse to the billing terms given on the sales. If the turnover rates are not satisfactory when compared with forward experience, average industry turnover and turnoverratios of comparable companies in the same industry, ananalysis should be made to determine whether there is any177laxity in the credit policy or whether the problem is incollection policy.(3)Receivables to Sales (Receivables/Annual Credit Sales x100)Receivables can be expected to fluctuate in direct relationto the volume of sales, provided that sales terms and collection practices do not change. The magnetic inclination towards more lenientcredit extension as would be suggested by slackening ofcollections and increase in the number of slow paying accounts needs to be detected by carefully watching the kinship of receivables to sales. When credit sales figures for a period are not available, total sales figures may be used. The receivables figures in the calculation ordinarily repres ent year-endreceivables. In the case of firms with seasonal sales, year-end receivables figures may be deceptive. Therefore, an average of the monthly closing balances figures may be more reliable.(4)Receivables as percentage of Current(Receivables/Total Current Assets Investment)AssetsThe ratio explains the amount of receivables per rupee ofcurrent asset investment and its size in current assets.Comparison of the ratio over a period offers an index of afirms changing policies with regard to the level of receivables in theworking capital.Some other ratios are1. size of it of receivable = receivable/total current assets2.Size of debtors = debtors/total current assets1783.Size of loans and advances = loans and advances/totalcurrent assetsThe size of receivables of selected companies has beengiven in table 5.1 panel 5.1Size of Receivables of the Selected cement Companiesfor the years from 2003-04 to 2007-08YearACCMangalam GujaratAmbuja0.520.350.430.350.460.520.430.540.380.540.440.46Sh reecementum0.580.550.630.610.660.61Indiacementum0.540.720.790.840.870.75IndustryAverage0.530.530.610.610.620.582003-040.682004-050.612005-060.672006-070.642007-080.62Company 0.64Average line Based on data provided annual Reports of the cement companies.The size of receivable of all the cement companies showsfluctuating trend passim the take period draw out Gujarat Ambuja, and Shree. Both the companies show increasing trend. The minimum size of receivable in ACC is 0.61 (2004-05),Mangalam is 0.38 (2007-08), Gujarat Amubja is 0.35 (2003-04and 2004-05), Shree cementum is 0.55 (2004-05) and in Indiacementum is 0.54 (2003-04). The maximum size of receivable inACC is 0.66 (2003-04), Mangalam is 0.52 (2003-04), GujaratAmbuja is 0.54 (2007-08), and Shree cement is 0.66 (2007-08) and in India cement is 0.87 (2007-08). The study of thecomposition of receivables is a very important tool to evaluatethe management of receivables. It assists to show the point where receivables are concentrated most.The size of sundry debtors in cement manufacturing companies in India has been computed and presented in thetable 5.2.Table 5.2Size of Sundry Debtors of the Selected cement Companiesfor the years from 2003-04 to 2007-08ShreeCement0.22IndiaCement0.11Industry0.21Mangalam GujaratAmbuja0.340.052004-050.290.320.050.330.080.222005-060.320.340.070.320.110.232006-070.280.310.080.270.140.222007-080.270.210.090.260.120.19Company 0.280.300.070.280.110.21YearACC2003-040.19AverageSource Based on data based on Annual Report of Cement CompanyIt is perspicuous from the table 5.2 that the size of sundrydebtors in ACC, India Cement, Mangalam and Shree showfluctuating trend throughout the study period. Percentage to current assets was highest to 0.32 in ACC in 2005-06 andhighest 0.33 in Shree in 2004-05. Gujarat Ambuja showsincreasing trend throughout the study period. The percentage of sundry debtors to current assets where reduced shows that in those years the speed of increase in current as sets was much more than that of the sundry debtors. The size of receivable of all the cement companies shows fluctuating trend throughoutthe study period except Gujarat Amubja.The minimum size ofreceivable in ACC is 0.21 (2003-04), Mangalam is 0.21 (2007-08), Gujarat Ambuja is 0.05 (2003-04 and 2004-05), Shree cement is 0.22 (2003-04) and in India Cement is 0.08 (2004-05). Themaximum size of receivable in ACC is 0.32 (2005-06),Mangalam is 0.34 (2003-04 and 2005-06), Gujarat Ambuja is 0.09 (2007-08), and Shree Cement is 0.33 (2004-05) and in IndiaCement is 0.14 (2006-07).The average collection period of selected cementcompanies has been given in table 5.3Table 5.3Average Collection Period in Selected Cement Companiesfor the years from 2003-04 to 2007-08(in days)YearACCMangalamGujarat AmbujaShree1999-003436746IndiaCement182000-014336747202001-024333849222002-0341271048372003-042628103747Company393284529AverageSource Based on data provided in AppendixThe minimum Average Collection Peri od in ACC is 34(2003-04), Mangalam is 27 (2006-07), Gujarat Ambuja is 7 (200304 and 2004-05), Shree Cement is 37 (2007-08) and in India Cement is 18 (2003-04). The maximum Average CollectionPeriod in ACC is 43 (2004-05 and 2005-06), Mangalam is 36(2003-04 and 2004-05), Gujarat Ambuja is 10 (2006-07) and2007-08), and Shree Cement is 49 (2005-06) and in India Cement is 47 (2007-08).181The Creditor turnover of selected cement companies hasbeen given in the table 5.4.Table 5.4Creditor turnover of Selected Cement Companiesor the years from 2003-04 to 2007-08Shree11.10Mangalam GujaratAmbuja8.771.121.63IndiaCement1.40IndustryAverage4.802004-0512.606.980.711.151.384.562005-0612.935.800.631.411.094.372006-0712.195.480.951.930.974.302007-0813.423.710.731.580.904.07Company 12.456.150.831.541.154.42YearACC2003-04AverageSource Based on data based on Annual Report of the cement companiesIt is evident from the table 5.4 that Creditor turnover inACC and Gujarat Ambuja and Shree fluctuating trend.Ma ngalam and India Cement show decreasing trend all overthe study period. The minimum Creditor turnover in ACC is1.10 (2003-04), Mangalam is 3.71 (2007-08), Gujarat Ambuja is 0.62 (2005-06), Shree Cement is 1.15 (2004-05) and in IndiaCement is 0.90 (2007-08). The maximum Creditor turnover inACC is 13.42 (2007-08), Mangalam is 8.77 (2003-04), GujaratAmbuja is 1.12 (2003-04), and Shree Cement is 1.93 (2006-07) and in India Cement is 1.40 (2003-04).Thedebtorsturnoverincementmanufacturingcompanies in India has been computed and presented in thetable 5.5.182Table 5.5Size of Receivable of Selected Cement Companiesfor the years from 2003-04 to 2007-08YearACC10.65Mangalam GujaratAmbuja10.2150.262003-042004-058.5810.212005-068.452006-072007-08Shree7.90IndiaCement20.45IndustryAverage19.8952.077.7817.8519.3011.1944,177.4716.6617.598.9513.6436.797.679.9215.3910.2013.0637.419.947.7315.67Company 9.3711.6644.148.1514.5217.57AverageSource Based on data based on Annual Report of the Cement CompaniesIt is evident from the table 5.5 that the debtors turnoverin ACC is fluctuating maintains approximately a fixed level. Mangalam and Gujarat Ambuja show fluctuating trendthroughout the study period. Debtors turnover was highest to 13.64 in Mangalam and 9.94 in Shree in 2006-07 and 2007-08respectively. India Cement shows decreasing trend throughout the study period. The minimum debtors turnover in ACC is 8.45 (2005-06), Mangalam is 10.21 (2003-04 and 2004-05),Gujarat Ambuja is 36,79 (2002-03), Shree Cement is 7.47 (200506) and in India Cement is 7.73 (2007-08).The maximumdebtors turnover in ACC is 10.65 (2003-04), Mangalam is 13.64 (2006-07), Gujarat Ambuja is 52.07 (2004-05), and Shree Cement is 9.94 (2007-08) and in India Cement is 20-45 (2003-04).183Select ReferencesO.M. Introduction to Financial Management (Homewood illnois Richard D. Irwin, 1978).Lawerence D. Schal and Charles W. Haley, FinancialManagement, 3rd Edition. New York, McGraw Hill, 1973).S.E Bolten, managerial Finance, ( Boston Houghton Mitten Co., 1976).R.J. Chambers, Financial Management, (Sydney GTE Law BookCompany Ltd,. 1967).Joseph L. Wood, Credit and Collections in Daris Lillian, ed., Business Finance Handbook, (Englewood, Cliffs, New island of Jersey Prentice Hall, 1962.Martin H. Seiden, The Quality of Trade Credit (New York National Bureau of Economic Research, 1964.Theodore N. Backman, Credit and Collection Management andTheory (New York McGraw Hill Book Company, 1962).184