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INTRODUCTION
Cash is the important current asset for the operations of the business. Cash is the basic
input needed to keep the business running on a continuous basis; it is also the ultimate
output expected to be realized by selling the service or product manufactured by the firm.
The firm should keep sufficient cash, neither more nor less. Cash shortage will disrupt the
firm’s manufacturing operations while excessive cash will simply remain idle, without
contributing anything towards the firm’s profitability. Thus, a major function of the
financial manager is to maintain a sound cash position. Cash is the money which a firm
can disburse immediately without any restriction. The term cash includes coins, currency
and cheques held by the firm, and balances in its bank accounts. Sometimes near-cash
items, such as marketable securities or bank time’s deposits, are also included in cash. The
basic characteristic of near-cash assets is that they can readily be converted into cash.
Generally, when a firm has excess cash, it invests it in marketable securities.
Cash management is a broad term that refers to the collection, concentration, and
disbursement of cash. The goal is to manage the cash balances of an enterprise in such a
way as to maximize the availability of cash not invested in fixed assets or inventories and
to do so in such a way as to avoid the risk of insolvency. Factors monitored as a part of
cash management include a company's level of liquidity, its management of cash
balances, and its short-term investment strategies. In some ways, managing cash flow is
the most important job of business managers. If at any time a company fails to pay an
obligation when it is due because of the lack of cash, the company is insolvent. Insolvency
is the primary reason firms go bankrupt. Obviously, the prospect of such a dire
consequence should compel companies to manage their cash with care. Moreover,
efficient cash management means more than just preventing bankruptcy. It improves the
profitability and reduces the risk to which the firm is exposed. Cash management is
particularly important for new and growing businesses. Cash flow can be a problem even
when a small business has numerous clients, offers a product superior to that offered by
its competitors, and enjoys a sterling reputation in its industry. Companies suffering from
cash flow problems have no margin of safety in case of unanticipated expenses. They also
may experience trouble in finding the funds for innovation or expansion. It is, somewhat
ironically, easier to borrow money when you have money. Finally, poor cash flow makes
it difficult to hire and retain good employees. It is only natural that major business
expenses are incurred in the production of goods or the provision of services.
In most cases, a business incurs such expenses before the corresponding payment is
received from customers. In addition, employee salaries and other expenses drain
considerable funds from most businesses. These factors make effective cash management
an essential part of any business's financial planning. Cash is the lifeblood of a business.
Managing it efficiently is essential for success. When cash is received in exchange for
products or services rendered, many small business owners, intent on growing their
company and tamping down debt, spend most or all of these funds. But while such
priorities are laudable, they should leave room for businesses to absorb lean financial
times down the line. The key to successful cash management, therefore, lies in tabulating
realistic projections, monitoring collections and disbursements, establishing effective
billing and collection measures, and adhering to budgetary restrictions.
KEY TAKEAWAYS
Cash management is the process of managing cash inflows and outflows.
There are many cash management considerations and solutions available in the
financial marketplace for both individuals and businesses.
For businesses, the cash flow statement is a central component of cash flow
management.
COMPANY PROFILE
COMPANY PROFILE
INFORMATION
Industry : Automotive
Products : Motorcycles,
Commuter Vehicles & Scooters,
Recreational Vehicles, Boats, Marine
Engines, Snowmobiles,
Small Tractors, Personal Watercraft,
Electrically Power Assisted Bicycles,
Automobile Engines
The company's products includes motorcycles, scooters, motorized bicycles, boats, sail
boats, personal water craft, swimming pools, utility boats, fishing boats, outboard motors,
4-wheel ATVs, recreational off-road vehicles, go-kart engines, golf carts, multi-purpose
engines, electrical generators, water pumps, snowmobiles, small snow
throwers, automobile engines, surface mounters, intelligent machinery, industrial-
use unmanned helicopters, electrical power units for wheelchairs and helmets. The
company is also involved in the import and sales of various types of products,
development of tourist businesses and management of leisure, recreational facilities and
related services. Yamaha’s motorcycle sales are the second largest in the world outboard
motor and Yamaha is the world leader in water vehicle sales.
HISTORY
Beginnings: 1955
The motorcycle division of Yamaha was founded in 1955, and was headed by Genichi
Kawakami. Yamaha's initial product was a 125 cc (7.6 cu in) two-cycle, single cylinder
motorcycle, the YA-1, which was a copy of the German DKW RT 125. The YA-1 was a
competitive success at racing from the beginning, winning not only the 125cc class in the
Mt. Fuji Ascent, but also sweeping the podium with first, second and third place in the All
Japan Autobike Endurance Road Race that same year. Early success in racing set the tone
for Yamaha, as competition in many varieties of motorcycle racing has been a key
endeavor of the company throughout its history, often fueled by a strong rivalry
with Honda and other Japanese manufacturers.
Yamaha began competing internationally in 1956 when they entered the Catalina Grand
Prix, again with the YA-1, at which they placed sixth. The YA-1 was followed by the YA-
2 of 1957, another 125cc two stroke, but with significantly improved frame and
suspension. The YD-1 of 1957 was a 250cc two-stroke twin cylinder motorcycle,
resembling the YA-2, but with a larger and more powerful motor. A performance version
of this bike, the YDS-1 housed the 250cc two-stroke twin in a double downtube cradle
frame and offered the first five-speed transmission in a Japanese motorcycle. This period
also saw Yamaha offer its first outboard marine engine.
These included racing and performance street riding, touring, motocross racing, endure
and recreational off-road riding, and cruising. Yamaha branched out from the relatively
small number of UJMs (Universal Japanese Motorcycle) at the start of the decade to a
much larger set of offerings in several clearly defined markets at the end of the decade.
The XV750 of 1981 featured an air-cooled V-twin four stroke engine and cruiser styling,
and was one of the first Japanese cruiser style motorcycles. By the end of the 1980s
Yamaha had offered dozens of cruiser styled bikes in a variety of displacements and
engine configurations. The RZV500 was one of the first "repli-racers", a near copy of
Kenny Roberts competition GP bike, it featured a liquid-cooled two-stroke motor of
500cc displacement in a V4 configuration, along with a perimeter frame and full fairing.
A more popular and practical high-performance model for the street was introduced in
1985, the FZ750.
Bike: Yamaha MT 15
Price: 1.49 lakh
Strengths:
Excellent branding, advertising and global distribution.
One of the major brand in motorsport like MotoGP, World superbike etc.
Yamaha produces scooters from 50 to 500 cc, and a range of motorcycles from 50
to 1,900 cc, including cruiser, sport touring, sport, dual-sport, and off-road.
Extremely high Size and reach of company.
Weaknesses:
Bikes like R15, R1 are quite expensive.
Opportunities:
Two-wheeler segment is one of the most growing industries.
Threats:
Strong competition from Indian as well as international brands.
Mission:
Kando is a Japanese word used by Yamaha to describe their corporate mission. Kando in
translation describes the sensation of profound excitement and gratification derived from
experiencing supreme quality and performance. Some reasonable English synonyms are
"emotionally touching" or "emotionally moving". Stated by the president of Yamaha,
Takuya Nakata, Yamaha looks to maintain dominance above its competition through
creativity and innovation.
Approach to Quality:
Yamaha Motor is working daily to improve quality and to provide customers with peace
of mind and confidence as well as a sense of excitement. The Basic Policies for Quality
form the standard against which these activities are judged. As Yamaha Motor’s president
has declared, these are Group wide policies under which “To constantly provide peace of
mind, confidence and a sense of excitement to customers, we strive to achieve the best
quality possible, by creating suitable standards of safety and reliability to realize high-
quality products and services effectively, taking a customer-oriented approach that
emphasizes a deep sense of emotion in accordance with the spirit of the Yamaha Brand
Charter.”Under these policies, we formulated the YQ2021 Companywide medium-term
quality policy covering the years 2019-2021, which sets three specific goals for our
business activities: quality that provides exceptional excitement; quality that challenges;
and quality that is trusted.In addition, the Yamaha Group's Quality Assurance Standards
conforming to ISO9001 form the basis for continuous improvement to quality
management systems.
In this chapter, the review of various books, research studies have been made to make
clear about the concept of cash management as well as to recall the theories and previous
studies made by various researchers.
The basic concept of cash management has been searched in to this section of literature
review. Text books that have been prescribed under academic studies are the primary
sources on the basic concept of cash management.
Cash is lifeblood of the business, which is the most important component of the working
capital. It is the most liquid assets, have vital important to daily operations of the firm.
Cash is the common denominator to which all current assets can be reduced because the
other major liquid, that is receivable and inventory get eventually converted into cash
(Khan and Jain, 1999). This underlines the significance of cash management cash
provides liquidity, but it doesn't pay interest; it is just one of the raw materials that you
need to do business. It is expensive keeping your capital tied up in large inventories of
raw materials when it could be earning interest (Brealey & Myers, 1999:884).
The term cash with reference to cash management is used in two senses. In a narrow
sense it is used broadly to cover cash (currency) and generally accepted equivalents of
cash such as cheques, drafts and demand deposits in bank. The broader view of cash also
includes near cash assets, such as marketable securities and time deposits in the banks.
The main characteristic of these is that they can be readily sold and converted into cash.
They also provide a short-term investment outlet for excess cash and are also useful for
meeting planned outflow of funds. We employ the term cash management in the broader
sense. Irrespective of the form in which it is held a distinguished feature of cash, as an
assets is that it has no earning power ….(Khan & Jain, 1986, p. 663-664).
So simply starting, management of near cash assets, i.e. marketable securities, time
deposits in bank, is called cash management. Broadly speaking, receivables and
inventory is also termed as management of cash because receivables and inventory are
also supposed to readily converting into cash.
According to modern approach financial management can be broken down into major
decisions as function of finance, which is: (a) Investment decision, (b) Financing
decision and (c) Dividend policy decision. Cash management function comes under
investment decision. Investment decision refers to two major decisions.
(1) Selection of long term assets, which will yield a return over a return over a period
oftime in future, i.e. more than a year, and
(2) Selection of short term assets or current assets which can generally be converted
into cash with a year.
The latter decision function is also termed as working capital management, which is
concerned with the management of current assets. The tow basic components of working
capital management are:
Cash management deals with the second component of working capital management, the
management of cash or near cash assets such as marketable securities and time deposits
in banks, receivables and inventory.
Cash is the common denominator to which all other current assets can be converted into
readily or in near future, and thus it is the most liquid current asset. Cash when held as an
asset has no earning capacity. Nevertheless business firm have to hold cash for three
different motives, they are:
(a) Transaction motive, (b) Precautionary motive, and (c) Speculative motive
Keynes has identified. However M.Y. Khan and P.K. Jain have also taken into
consideration.
(a) Transaction motive refers to the need for cash to meet payments related to
ordinary course of business transactions payments of purchases, labour takes and
dividends. In day to day business transactions a firm necessarily requires cash to meet
payments of its purchases wages operating expenses. Financial charges like interests,
taxes dividends etc. like wise in the course of daily business transactions. Cash are
generated from sale of goods or services, returns on outside investments etc. This
receiving of cash is called cash inflows and the payments of cash are termed as cash
outflow. In practice, cash inflow and outflow seldom coincides, and thus of cash inflow
and outflow seldom coincides, and thus of cash outflow. Such requirement of cash to
meet scheduled payments in course of daily business transaction is known as transaction.
(b) Precautionary motive for holding cash is the need for cash to maintain a cushion
to meet unexpected contingencies, such as the situation of natural calamities like earth
quake, floods, strikes, etc. Sharp increase in raw material cost dramatic showdown in
collection of accounts receivables, unexpected cancellation of order for goods owing to
dissatisfaction of customers etc.
(c) Speculative motive refers to the holding of cash by the firms to take advantage of
opportunities when the firm would face unexpected situations and which are typically out
of course of business. Precautionary motive is defensive in nature; to put it differently,
the purpose for holding cash under precautionary motives lies in fulfilling cash
requirements should any unexpected opportunities such as to purchase raw materials at a
reduced price on instant payment, buying securities when interest rates are speculated to
decline, etc.
(d) Compensation motive refers to the holding of cash balance to compensate banks
for providing certain services and loans to the firm such as clearance of cheque, supply of
credit information, transfer of funds, etc. For the services provided by the bank as stated
above, the clients are required to maintain a minimum balance of cash at bank, which can
not be utilized by the clients. Since the proportion of this cash balance cannot be utilized
in firm for the transaction purposes the bank they can use the money to earn some return.
Such balances held by banks for the services they provide to their clients are called
compensating balance likewise under some sort of loan agreements between a bank and
its customers. Compensating balance is required as a condition precedent to the grant of
loan, when the supply of credit is restricted and interest rates are rising.
Out of the four motives for holding cash, the most important ones are transaction motive
and the compensation motive. This is because precautionary balances can be met by sort
terms borrowings and business firms normally do not speculate and thus doesn't require
speculative balances.
Business with regular gross income in the form of cash payments for goods or services
need relatively small cash working balances. If the bus company with its sign 'pay as you
enter' cannot meet demand for cash, the trouble is not with the working capital but with
the whole business. To the extern that either regulating of income or cash term is taking
the supply of cash funds should be increased; forecasting is the calculation of all
reasonable probabilities about the business future.
Area of cash management includes basically cash planning and forecasting strategic of
cash management techniques, optimum cash balance and investing the excess cash on
marketable securities.
Cash planning is a technique to plan and control the use of cash. It protects the financial
condition of the firm by developing a projected cash statement (Pandey, 1999). Cash
budget is a summary statement of the firm's expected cash inflows and out flows over a
projected time period. It gives information on the timing and magnitude of expected cash
flow and cash balance over the projected period. This information helps the financial
manager to determine the future cash needs firm, plan for the financing of these needs
and exercise control over the cash and liquidity of the firm. (Van Horne, 1996)
Cash budget serves two purposes. The first is the budget alerts the financial manager to
future cash needs, second the cash flood forecasts provide a standard or budget, against
which subsequent performance can be judged (Brealey and Myers, 1999). Thus, cash
budget is arrived as through a projection of future cash receipt and cash disbursements of
the firm over various intervals of time there the cash budget refers the short term cash
forecasts. So, one of the significant role of the short term forecast is to pinpoint when the
money will be needed and when it can be repaid. Another use of cash forecasts is to help
in managing the investment of surplus cash in marketable securities. There are two most
commonly used methods of short term cash forecasting and control.
In this method involves forecasting for each terms of receipts and payments. The prime
aim of receipt and disbursements forecasts is to summarize these flows during a
predetermined period (Pandey, 1999).
It is sometimes called the source and uses approach. Mainly, it has three sections: source
of cash, uses of cash and the adjusted cash balance. This procedure will help in adjusting
estimated earning on an accrual basis to a cash basis. It also help in anticipating the
working capital movements.
The broad cash management strategies are essentially related to the cash turnover process
that is the cycle refers to the process by which cash is used to purchase materials from
which are produced goods, which are then sold to customers who later pay the bills. The
33
A B C D E
A firm has no control over the time involved between stages A and B. The lag between D
and E is determined by the production process and inventory policy. The time between
stages E and F is determined by credit terms and the payments policy of customers.
The higher the cash turnover, the less is the cash a firm requires. A firm should, therefore
try to maximize the turnover. But it must maintain a minimum amount of operating cash
balance so that it does not run out of cash. The minimum level of operating cash is
determiner by dividing the total operating annual outlays by the cash turnover rate. Cash
management strategies are intended to minimize the operating cash balance requirement.
(Khan & Jain 1999)
2.2.3 Cash Management Techniques/Processes
The efficiency of cash management techniques means speedy cash collection and
delaying payment on account payable.
In managing cash efficiently, the cash inflow process can be accelerated through
systematic planning and refined techniques. Some techniques of speedy cash collection
practiced by various business firms are given below.
A transfer mechanism is a system for moving funds between accounts at different banks.
Wire Transfer: It is the faster way to move cash between banks, eliminating transit
float. Wire transfer are typically initiated on a standing other basis company head
quarters will make a written authorization to a local depository bank to transfer funds to
the firm's concentration bank when the amount exceeds some target level.
Effective controls of disbursements can also result more availability of cash. The
objective in disbursements is to slow them down as much as possible. The combination
of fast collection and slow disbursements will in maximum availability of funds.
One way of maximizing cash availability is 'playing the float' for disbursement, float is
the difference between the total money amount of cheques drawn on a bank account and
the balance shows on the banks book. It is possible of course for a company to have a
negative balance on its books. A positive bank balance, because cheques outstanding
they are drawn. If the size of float can be estimated accurately, bank balances can be
reduced and the funds invested to earn positive return. For using float company should
pay from distant bank or scientific cheque cashing analysis.
In this system all the payments should be made by the head office from a centralized
disbursement account. Such as arrangement would enable a firm to delay payments and
conserve cash for several reasons. First, it involves increase transit time. Second, since
the firm has a centralized bank account a relatively smaller total cash balance will be
needed. Third, schedules can be tightly controlled and disbursement made exactly on the
right day.
(c) Avoidance of Early Payments:
(d) Accruals:
Accruals are defined as current by not yet paid for such as remuneration to employees,
payment of taxes, payment of rent, who render service in advance and receive payments
later. The longer the period after which payment is made the greater is the amount of free
financing consequently and the smaller is the amount of cash balance required.
Now a day, computer is widely used for transfusing the funds that regulating changes
have been emitted greater competition among financial Institutions. Another aspect of
changing environment is the increased satisfaction in computer application to cash
management and in electronic fund transfer. With such system a customer's cheque is
scanned electronically and verified by computer.
The increased use of electronic system is moving the economy towards electronic data
interchange (EDI). EDI's efforts in float management: it will be possible to forecast the
timing of cash flows with greater accuracy. Traditional practices in areas such as credit
terms based on paper/ mail/ manual procuring are likely to be subject to change (Weston
and Copland, 1992). Most money movement today is in the form of electronic funds
transfers (EFTS) a practically all financial records are stored in computer memories and
not on paper.
In cash management model, it is assumed that the firm on average is growing and is a net
user of cash. Marketable securities represent a buffer stocks between episodes of external
financing, which is drawn as required periodically. Ordering cost is represented by the
clerical and transactions cost of making transfers between the investment portfolio and
the cash account. The holding cost is the interest foregone on cash balance held.
Assuming that expenditure occurs evenly over time and that cash replenishments come in
jump sums at periodic intervals, the optimal size of the cash transfer is formulated as
follows:
2bT
C i
Where,
They refer to the process by which cash is used to purchase material from which are
produced goods, which are then sold to customers who later pay bills. Thus opportunities
to improve cash cycle help in best management of cash. The cash cycle involves several
steps along the way as found flow from the firm accounts as shown as below.
P Q R S T U V W X
39
Time (days)
Figure: 7 Cash Cycle
Advance and research based journals of finance are hardly found in Nepal. Very limited
numbers of journals of finance cannot cover its full dimensions. Though, in this section
articles from various national and international journals are reviewed and the attempt is
concentrated to build the sound conceptual framework of subject matter, which may
helps for the study.
W.J Baumol, at his article "the transaction demand for cash: An inventory theoretic
Approach" on quarterly journal of economic (Vol, LXV, Nov, 1952) identifies cash
maintenance as analogues to inventory maintenance and demonstrates that the model of
economic order quantities that is applicable to inventory management is perfectly
applicable in cash management tool. He has presented model in view of minimizing the
opportunity cost of holding cash and maximizing the return on the available funds, the
cash balance should be maintained at a minimum level and the funds not required from
immediate use be invested in the marketable securities.
Similarly, M.H. Miller and Orr. D, in their article " a Model of the Demand for money in
firms" on quarterly journal of economic, (Vol, LXV, Aug, 1996) have developed a model
known as Miller-Orr model, that takes into account the realistic pattern of cash flows and
prescribed when and how much to transfer from cash to investment account and
viceversa.
Ram M. Saksena at his article, "Towards more efficient cash management" on quarterly
journal of management quality ( Vol.No. 5, 1974) identified that the term cash
management has a meaning according to the purpose for which it is used and persons
with varying branches of knowledge implies various meaning of cash. Economics
considered cash, as the means to satisfy human want, the lawyer the view that cash is the
legal tender money issued by a determinate authority. However, our concern of the
meaning of cash is an asset constituting the most liquid item among all the assets. But to
obtain cash involves cost because corporation has to rise through issue to share or by
borrowing with interest. In through generation money market procurement is liability and
wasted opportunity unless it is not put to its optimal use.
Birman and McAdams (1962) in their article "Management Decision for Cash and
Marketable Securities" on graduate school of business have applied the Economic Order
Quantity model like Baumol, Bailey (1962) considered cash balance held by the firm to
be a productive asset similar to any other asset. He stated that ".......cash balance held by
business firms is obviously a productive resource similar to any other. Presumably, this is
because....... they reduce the other resources required for a given level of production, by
facilitating payments". Meltzer (1963) adjudged wealth as an explanatory variable of
cash balance determination and sales as the measure of wealth. He hypothesized that the
amount of money held by firms is the function of the market rate of interest and wealth.
He concluded that "the results suggest strongly that the cross-section demand for money
by firms is a function of sales, to a first approximation linear in the logarithms and unit
elastic." Frazer (1964) examined the percentage of cash to liquid assets as a function of
total assets of firms, and presented evidence on the question of economics of scales. He
concluded that cash varies less than proportionately with the assets of firms.
According to Whalen (1965) in his article "A cross Section Study of Business Demand
for Cash" on journal of finance, (September, 1965) has found the speculative demand for
money may be considered as a function of wealth. Assets and sales are the explanatory
variables to determine the cash balance of the firm. Since Whalen attempted to
incorporate assets as well as transactions into the demand function, the analysis presented
by him in order to determine the cash holding of the firm differed from Meltzer's model.
He hypothesized that the cash holding of the firm is not only for transaction purpose but
also as an investment. Miller-Orr (1966) assumed that a firm's cash flows could be
analyzed by a stochastic process. He followed Baumol's model, without question and
deduced that the firm's pattern of payment and receipts is fixed and that the cost of
nonpayment is infinite. He added that the firm or the individual is presumed to hold that
amount of money which minimizes the interest cost. He further advised holding money
rather than bonds, since there is transaction cost associated with the conversion of bonds
into money. This reduces the cost of transaction and maximizes profits by an equivalent
amount.
Sprenkle (1967) in their article "Large Economics Units, Banks and the Transactions
Demand for Money" on quarterly journal of economic, (Vol, LXXX, Aug, 1966: 436442)
have assumed that money had all the attributes of ordinary inventoried goods. Vogel and
Maddala (1967) assumed that the demand for cash, government securities and liquid
assets is a function of wealth determination. According to them the firm is assumed to
allocate its financial holdings among assets so as to equalizer the marginal rates of return,
adjusted for risk involved. This result differ from Meltzer only in that Meltzer estimated
on the demand equation for the industry for each year, whereas, Vogel and Maddal
employed the dummy variables and estimated pooled regression with yearly data. They
had also included assets as explanatory variables in the demand for money equation and
determined the economics of scale. Nadiri (1969) suggested that the estimates of
elasticity of demand for money with respect to scale or production are unequivocally
equal to unity.
Taking cognizance of the fact that the optimization the operating decision subject to
various financial constraints is possible, Charnes, Cooper and Miller ( 1959) had applied
Liner Programming Model for the first time to finance their article " Application of
Linear Programming to Financial Budgeting and cost of Funds". Moreover, their model
determines the opportunity cost of long term funds. The major quantitative conclusions
that are obtained from the above liner – programming model is considered as major input
for capital investment analysis. Therefore, their model is too general to be applied to the
short – run cash management problem.
Ijiri, Y Levy, F.K and R.C Lyon (1963) in their article " A linear programming Model for
Budgeting Model for Budgeting and financial planning" on journal of accounting
research (vol, 1 no 2 autum 1963) have had extended the first linear programming model
established by charnels, cooper and Miller, with the marketable securities transaction, but
in a very general form and is limited to single period.
We can find numerous studies conducted for the partial fulfillment of master's degree.
One of these was presented by Mr. Bijaya Pradhan in 1997, entitled “A study of cash
management of salt trading corporation limited”. The thesis was based on the secondary
data of the company for the part six years and it analyzed the major aspects of cash
management such as analysis of liquidity position, cash management system and account
receivable through various financial ratio analysis. The major findings of this study have
been presented as follows:
a) Management has taken liberal credit policy to sales of goods. Hence the cash and
bank balance of the study period is minimum of account receivable.
b) Salt Trading Corporation limited (STCL) could not make the best use of available
cash balance prudently.
e) Optimum cash balance not maintained. The cash & bank balance with respect to
current assets has been in fluctuating trend. Similar is the cash with respect to the
total assets.
In the like manner, a somehow related thesis to cash management was present by Mr.
Krishna Narayan Shrestha in the year 2000, entitled 'A study on inventory management
in Royal Drugs company limited'. The analysis were carried on the basis of inventory
management formulate such as economic order quantity and Re-order level. Mr. K.N.
Shrestha computed inventory values theoretically and compared it with actual quantity of
inventory in the firm in relation with other factors such as time, working days, and so, on.
The deviations from theory suggested the condition of actual inventory management
practice of the firm. In spite of the approach to analysis being different from the general
tools of analysis only a portion of cash management i.e. only the inventory management
aspect has been analyzed the analysis being based only on three types of raw materials
purchased.
Thus it was identified that there are still a lot to explore in cash management function of
the financial literature. It was clear from review of literature that a dissertation on cash
management is one of the uncommon undertakings and this bears originality of its kind.
However, before commencing this undertaking, there were several alternatives to begin
an undertaking of the thesis.
Alternatives such as case study, comparative analysis, study of more than two
enterprises, etc were some of these like wise, the other variations of alternatives are the
types by legal status of enterprises existing in the country; for instance private enterprise,
public enterprise, partnership enterprise, government enterprise, or the other combination
could be the type of goods or services these enterprise are producing for instance
pharmaceutical industry cigarette factory, financial institutions, paper and paper products
industry, and so on. These complications got simplified after the following literature
review.
a) RDL doesn't have any definite policy reading how much of cash balance to hold
each fiscal year.
b) RDL has not been forecasting cash balance taking in to consideration on the sales
volume.
d) Cross analysis related that RDL fails to collect receivables from its sundry debtors
timely.
e) RDL has not been precisely meeting its current liabilities indicate that for some
FYS such cash and bank balance held is excessively high whereas for some other
FYS such cash and bank balance is extremely low.
Liquidity position:
Overall the liquidity position of the firm has been found moderately dissatisfactory.
Cash flow statement:
Overall clearly cash inflow and out flow in R.D.L is not in properly managed. Surplus
cash has not been properly employed to earn returns by investing in short term
investment opportunities.
The thesis submitted by Mr. Gopal Jung Raymajhi. on the topic “Cash Management
System of Lumbini Bank Limited” (2008) points out that Cash management in the
banking sector of Nepal is primarily based on the traditional practices, which lack in a
scientific approach. A more serious aspect of cash management has been the absence of
any formalized system of cash planning and cash budgeting in menu of the banking
sector, although the executives of some banks do practice forecasting of cash
requirements on a formal basis.
c) To find out the current weakness in cash management system of this Bank.
There are also very limited studies conducted on accounts cash management in the
context of Nepal. These few studies conducted earlier have now become old and not
given the real picture of recent practices. Many studies and developed theories after
completing those early studies in Nepal.
Thus there is need to carry out a study to asses' recent development in cash management
and it should be find out whether their findings are matching Nepalese practices. In
conclusion, the main short coming of previous dissertations that laid foundation to this
research is:
a) Lack of proper cash budget and cash flow statement analysis in most of the
dissertations.
RESEARCH METHODOLGY
Research Design
Research is a systematic process of collecting and analyzing information (data) in order to
increase our understanding of the phenomenon about which we are concerned or
interested. A Research Design is the framework or plan for a study which is used as a
guide in collecting and analyzing the data collected. It is the blue print that is followed in
completing the study. The basic objective of research cannot be attained without a proper
research design. It specifies the methods and procedures for acquiring the information
needed to conduct the research effectively. It is the overall operational pattern of the
project that stipulates what information needs to be collected, from which sources and by
what methods.
Primary Sources
These include the Balance sheet and Profit and loss Account method.
Secondary Sources
These include books, the internet, company brochures, the company website, competitor’s
websites etc. newspaper articles etc.
1. Research Design:
Determine whether your study will be exploratory, descriptive, causal, or a
combination of these approaches.
Define the scope of your study, including the time frame and geographical
area.
2. Research Objectives:
Clearly state the objectives of your study. What do you want to achieve
through your research on cash management?
3. Data Collection:
Identify the sources of data for your study. These may include financial
reports, company records, interviews, surveys, and industry publications.
4. Sampling:
If applicable, define your target population and select a sample from it.
Explain the sampling method you will use (e.g., random sampling,
stratified sampling) and the rationale behind your choice.
Describe the tools and instruments you will use to collect data. For
example, if you are conducting interviews, specify the interview questions.
Explain how data will be collected, including the frequency and timing of
data collection.
Provide details on how you will ensure data quality and reliability.
7. Data Analysis:
Define the analytical techniques you will use to analyze the collected data.
Common methods for cash management studies may include financial ratio
analysis, regression analysis, or qualitative content analysis of interviews
or case studies.
If using software for analysis (e.g., Excel, statistical software), mention it.
8. Ethical Considerations:
9. Data Presentation:
Explain how you will present your findings, including the use of tables,
charts, graphs, and narrative descriptions.
11. Limitations:
Identify any limitations of your study, such as data constraints, sample size
limitations, or potential biases.
12. References:
List all the sources, literature, and references you used to inform your
research.
13. Appendices:
Remember to tailor your research methodology to the specific objectives and context of
your cash management study. Additionally, ensure that your methodology is rigorous and
aligns with best practices in research.
Forecast future cash flows to ensure that the organization can meet its
financial obligations.
4. Liquidity Management:
5. Cost Reduction:
6. Risk Management:
The specific objectives of a cash management study will depend on the organization's
goals, challenges, and the broader economic and industry context. The research should
aim to provide insights and recommendations that help the organization make informed
decisions to improve its cash management practices.
The scope of a study on cash management can vary depending on the specific objectives
and focus of the research. Here are some key aspects and areas that you can consider
when defining the scope of your cash management study:
1. Organizational Context:
2. Industry or Sector:
Specify whether your study will concentrate on a particular industry or
sector (e.g., retail, manufacturing, healthcare, finance) and explore how
cash management practices differ within that sector.
3. Geographical Scope:
4. Time Frame:
Clearly state the research objectives and questions that your study aims to
address. For example:
What are the key principles and best practices in cash management?
Specify which aspects of cash management you will investigate. This may
include:
Payment processing
Debt management
By defining the scope of your cash management study in a clear and concise manner, you
can ensure that your research objectives are achievable and that your study contributes
meaningfully to the understanding of cash management practices in your chosen context.
3. Timeframe:
The choice of the study period can impact the relevance and
generalizability of your findings. A short study period may not capture
long-term cash management trends and challenges.
4. External Factors:
6. Subjective Measures:
It's essential to acknowledge these limitations in your research and discuss how they may
have affected the validity and reliability of your findings. Additionally, suggesting
avenues for future research that can address these limitations can enhance the overall
value of your study
CHAPTER – 5
Formula
Current Assets
Current Ratio =
Current Liabilities
Current Ratio
33%
Interpretation:-
This graph is shows to current financial position of Yamaha Motors Showroom on the
basis of current ratio. In 2015 the current ratio is 32 % and 2016 the current ratio is 33%
will be increase with the value of 1 % on previous year. In 2017 the current ratio is 35%
will be increase with the value of 2 % on previous year.
2. QUICK RATIO
Formula:-
Quick Assets
Quick ratio =
Quick Liabilities
25%
2017
39%
2016
2015
36%
Interpretation:-
This graph is related to quick ratio of Yamaha Motors Showroom. In 2015 the quick ratio
is 25 % and 2016 the quick ratio is 36 % will be increase with the value of 11 % on
previous year. In 2017 the quick ratio 39 % will be increase with the value of 3 % on
previous year.
3. DEBT-EQUITY RATIO
Formula:-
Long term loan
Debt-equity ratio =
Shareholders fund
Debt-Equity Ratio
31%
37% 2017
2016
2015
32%
Interpretation:-
This graph shows debt-equity ratio of Yamaha Motors Showroom. In 2015 the debt-equity
ratio is 31 % and 2016 the debt-equity ratio is 32 % will be increase with the value of 1 %
on previous year. In 2017 the debt-equity ratio 37 % will be increase with the value of 5
% on previous year.
Formula:-
Table No. 4
Particulars Years
2017 2016 2015
Long Term Debt
Net Assets
Total Ratio
14%
2017
2016
45%
2015
40%
Interpretation:-
This graph shows debt to capital employed ratio of Yamaha Motors Showroom. In 2015
the debt to capital employed ratio is 45 % and 2016 the debt to capital employed ratio is
40 % will be decrease with the value of 5 % on previous year. In 2017 the debt to capital
employed ratio 15 % will be decrease with the value of 25 % on previous year.
5. PROPRIETARY RATIO
Formula:-
Shareholders’ funds
Proprietary ratio =
Capital employed (net assets)
Proprietary Ratio
13%
2017
2016
47% 2015
39%
Interpretation:-
This graph shows proprietary ratio of Yamaha Motors Showroom. In 2015 the proprietary
ratio is 47 % and 2016 the proprietary ratio is 40% will be decrease with the value of 7 %
on previous year. In 2017 the proprietary ratio 13 % will be decrease with the value of
27% on previous year.
6. TOTAL ASSETS TO DEBT RATIO:-
Formula:-
Total assets
Total assets to debt ratio =
Long term debts
29%
36% 2017
2016
2015
35%
Interpretation:-
This graph shows total asset to debt ratio of Yamaha Motors Showroom. In 2015 the total
asset to debt ratio is 36 % and 2016 the total asset to debt ratio is 35% will be decrease
with the value of 1 % on previous year. In 2017 the total asset to debt ratio 29 % will be
decrease with the value of 6 % on previous year.
Formula:-
28%
2017
2016
2015
53%
19%
Interpretation:-
This graph shows inventory turnover ratio of Yamaha Motors Showroom. In 2015 the
inventory turnover ratio is 53 % and2016 the inventory turnover ratio is 19% will be
decrease with the value of 34 % on previous year. In 2017 the inventory turnover ratio 28
% will be increase with the value of 9% on previous year.
8. TRADE RECEIVABLES TURNOVER RATIO
Formula:-
Net credit revenue from operations
Trade receivable turnover ratio =
Average trade receivable
27%
2017
2016
2015
54%
19% Interpretation:-
This graph shows trade
receivable turnover
ratio of Yamaha Motors Showroom. In 2015 the trade receivable turnover ratio is 27 %
and 2016 the trade receivable turnover ratio is 19% will be decrease with the value of 28
% on previous year. In 2017 the trade receivable turnover ratio is 54 % will be increase
with the value of 31 % on previous year.
9. GROSS PROFIT RATIO
Formula:-
Gross profit
Gross Profit Ratio = X 100
Net revenue of operations
33%
Interpretation:-
This graph shows gross profit ratio of Yamaha Motors Showroom. In 2015 the gross
profit ratio is 32 % and 2016 the gross profit ratio is 34% will be increase with the value
of 1 % on previous year. In 2017 the gross profit ratio 34 % will be the same value of the
previous year.
10. NET PROFIT RATIO
Formula:-
Net Profit
Net Profit Ratio = X 100
Revenue from operations
22%
2017
41% 2016
2015
37%
Interpretation:-
This graph shows net profit ratio of Yamaha Motors Showroom. In 2015 the net profit
ratio is 41 % and 2016 the net profit ratio is 37% will be decrease with the value of 7 %
on previous year. In 2017 the net profit ratio 22 % will be decrease with the value of 15%
on previous year.
CHAPTER – 6
Certainly, here's a sample conclusion and suggestions for a study of cash management at
Yamaha Motors:
Conclusion:
2. Cash Flow Forecasting: Yamaha Motors employs robust cash flow forecasting
models that take into account various factors affecting its cash flows, including
seasonal fluctuations and market dynamics. This proactive approach enhances its
ability to make informed financial decisions.
4. Risk Management: Yamaha Motors has integrated risk management into its cash
management strategy, particularly concerning currency exchange risk and interest
rate risk. This proactive approach mitigates potential financial vulnerabilities.
5. Technology Adoption: The company has embraced technology solutions for cash
management, such as online banking platforms and cash management software,
streamlining its operations and enhancing efficiency.
6. Continuous Improvement: Yamaha Motors continuously evaluates and refines
its cash management practices to adapt to changing market conditions and
regulatory requirements, highlighting its commitment to financial sustainability.
Suggestions:
Based on our findings, we offer the following suggestions to further enhance Yamaha
Motors' cash management practices:
Assets
Fiscal year is January-December. All values JPY.
ITEM
2018 2019 2020 2021 2022
ITEM
Cash Only
138.16B 122.72B 267.18B274.94B 296.82B
Cash Only
Short-Term Investments
- - - - -
Short-Term Investments
Other Receivable
- - - - 216.99B
Other Receivable
Inventories
329.17B 356.75B 312.32B405.36B 525.85B
Inventories
Finished Goods
208.44B 224.01B 169.83B211.92B 285.43B
Finished Goods
Work in Progress
58.68B 64.32B 74.94B 92.07B 115.76B
Work in Progress
Raw Materials
62.05B 68.42B 67.56B101.37B 124.66B
Raw Materials
Buildings
103.57B 111.2B 106.98B114.48B 129.33B
Buildings
Accumulated Depreciation
625.89B 670.64B 671.76B711.86B 766.88B
Accumulated Depreciation
Intangible Assets
8.52B 8.64B 11.24B 28.42B 39.64B
Intangible Assets
Net Goodwill
- - - - -
Net Goodwill
Other Assets
9.58B 21.31B 29.32B 37.49B 38.02B
Other Assets
Total Assets
1.42T 1.53T 1.64T 1.83T 2.18T
Total Assets
Accounts Payable
140B 134.99B 143.95B 165.18B 177.73B
Accounts Payable
Dividends Payable
- - - - -
Dividends Payable
Accrued Payroll
14.11B 14.52B 14.69B 15.33B 18.8B
Accrued Payroll
Long-Term Debt
77.42B 185.62B 362.04B 324.19B 284.99B
Long-Term Debt
Non-Convertible Debt
69.44B 178.98B 354.42B 316.19B 271.58B
Non-Convertible Debt
Convertible Debt
- - - - -
Convertible Debt
Deferred Taxes
(20.31B) (14.6B) (11.24B) (15.47B)(29.34B)
Deferred Taxes
Other Liabilities
4.44B 24.44B 24.54B 27.37B 26.45B
Other Liabilities
Deferred Income
- - - - -
Deferred Income
Total Liabilities
724.09B 780.98B 891.75B 932.24B 1.13T
Total Liabilities
Non-Equity Reserves
- - - - -
Non-Equity Reserves
Retained Earnings
572.71B 607B 644.35B 761.48B 894.05B
Retained Earnings
Cumulative Translation
Adjustment/Unrealized For. Exch. Gain
(118.28B)(119.45B)(141.13B)(103.47B)(55.72B)
Cumulative Translation
Adjustment/Unrealized For. Exch. Gain
Revaluation Reserves
10.41B 10.43B 10.43B 10.43B 10.43B
Revaluation Reserves
ITEM
2018 2019 2020 2021 2022
ITEM
Treasury Stock
(727M) (733M) (734M) (11.72B)(31.73B)
Treasury Stock
Total Equity
695.74B 751.83B 749.16B 900.67B 1.05T
Total Equity
ITEM
2018 2019 2020 2021 2022
ITEM
Sales/Revenue
1.67T 1.66T 1.47T 1.81T 2.25T
Sales/Revenue
Sales Growth
- -0.50% -11.62% 23.19% 24.05%
Sales Growth
Cost of Goods Sold (COGS) incl. D&A 1.22T 1.22T 1.1T 1.31T 1.61T
ITEM
2018 2019 2020 2021 2022
ITEM
Cost of Goods Sold (COGS) incl. D&A
COGS Growth
- 0.37% -10.06% 18.75% 23.67%
COGS Growth
COGS excluding D&A
1.17T 1.17T 1.05T 1.25T 1.55T
COGS excluding D&A
Depreciation & Amortization Expense
46.41B 49.69B 48.24B 51.13B 59.82B
Depreciation & Amortization Expense
Depreciation
- - - - -
Depreciation
Amortization of Intangibles
- - - - -
Amortization of Intangibles
Gross Income
455.17B 442.33B 371.81B 506.84B 633.75B
Gross Income
Gross Income Growth
- -2.82% -15.94% 36.32% 25.04%
Gross Income Growth
Gross Profit Margin
- - - - 28.19%
Gross Profit Margin
SG&A Expense
304.37B 319.69B 284.32B 318.66B 399.47B
SG&A Expense
SGA Growth
- 5.03% -11.06% 12.08% 25.36%
SGA Growth
Research & Development
102.77B 102.02B 94B 95.29B 105.22B
Research & Development
Other SG&A
201.6B 217.67B 190.33B 223.38B 294.25B
Other SG&A
Other Operating Expense
10.02B 7.28B 5.82B 5.84B 9.41B
Other Operating Expense
Unusual Expense
183M 327M 3.01B 2.95B (432M)
Unusual Expense
EBIT after Unusual Expense
(183M) 115.04B 78.67B 179.39B 225.3B
EBIT after Unusual Expense
Non Operating Income/Expense (6.94B) 2.84B 5.16B 15.48B 14.61B
ITEM
2018 2019 2020 2021 2022
ITEM
Non Operating Income/Expense
Non-Operating Interest Income
4.24B 3.66B 3.92B 3.39B 4.77B
Non-Operating Interest Income
Equity in Affiliates (Pretax)
2.35B 2.47B 864M 4.09B 5.3B
Equity in Affiliates (Pretax)
Interest Expense
3.36B 3.38B 3.63B 2.65B 4.17B
Interest Expense
Interest Expense Growth
- 0.51% 7.22% -26.90% 57.51%
Interest Expense Growth
Gross Interest Expense
3.36B 3.38B 3.63B 2.65B 4.17B
Gross Interest Expense
Interest Capitalized
- - - - -
Interest Capitalized
Pretax Income
136.88B 120.63B 84.99B 199.7B 245.8B
Pretax Income
Pretax Income Growth
- -11.88% -29.54% 134.97% 23.08%
Pretax Income Growth
Pretax Margin
- - - - 10.93%
Pretax Margin
Income Tax
32.38B 36.57B 29.22B 35.57B 56.22B
Income Tax
Income Tax - Current Domestic
37.03B 34.49B 27.76B 38.74B 61.67B
Income Tax - Current Domestic
Income Tax - Current Foreign
- - - - -
Income Tax - Current Foreign
Income Tax - Deferred Domestic
(4.64B) 2.09B 1.46B (3.16B) (5.45B)
Income Tax - Deferred Domestic
Income Tax - Deferred Foreign
- - - - -
Income Tax - Deferred Foreign
Income Tax Credits
- - - - -
Income Tax Credits
Equity in Affiliates - - - - -
ITEM
2018 2019 2020 2021 2022
ITEM
Equity in Affiliates
Other After Tax Income (Expense)
- - - - -
Other After Tax Income (Expense)
Consolidated Net Income
104.5B 84.05B 55.77B 164.13B 189.58B
Consolidated Net Income
Minority Interest Expense
11.13B 8.32B 2.7B 8.55B 15.14B
Minority Interest Expense
Net Income
93.37B 75.74B 53.07B 155.58B 174.44B
Net Income
Net Income Growth
- -18.88% -29.93% 193.15% 12.12%
Net Income Growth
Net Margin Growth
- - - - 7.76%
Net Margin Growth
Extraordinaries & Discontinued Operations
- - - - -
Extraordinaries & Discontinued Operations
Extra Items & Gain/Loss Sale Of Assets
- - - - -
Extra Items & Gain/Loss Sale Of Assets
Cumulative Effect - Accounting Chg
- - - - -
Cumulative Effect - Accounting Chg
Discontinued Operations
- - - - -
Discontinued Operations
Net Income After Extraordinaries
93.37B 75.74B 53.07B 155.58B 174.44B
Net Income After Extraordinaries
Preferred Dividends
- - - - -
Preferred Dividends
Net Income Available to Common
93.37B 75.74B 53.07B 155.58B 174.44B
Net Income Available to Common
EPS (Basic)
267.35 216.82 151.89 445.67 511.47
EPS (Basic)
EPS (Basic) Growth
- -18.90% -29.95% 193.41% 14.77%
EPS (Basic) Growth
Basic Shares Outstanding 349.23M 349.3M 349.4M 349.09M 341.05M
ITEM
2018 2019 2020 2021 2022
ITEM
Basic Shares Outstanding
EPS (Diluted)
267.35 216.82 151.89 445.67 511.26
EPS (Diluted)
EPS (Diluted) Growth
- -18.90% -29.95% 193.41% 14.72%
EPS (Diluted) Growth
Diluted Shares Outstanding
349.23M 349.3M 349.4M 349.09M 341.2M
Diluted Shares Outstanding
EBITDA
187.19B 165.05B 129.91B 233.47B 284.69B
EBITDA
EBITDA Growth
- -11.83% -21.29% 79.71% 21.94%
EBITDA Growth
EBITDA Margin
- - - - 12.66%
EBITDA Margin
BIBLIOGRAPHY
https://chat.openai.com/
https://www.scribd.com
https://www.moneycontrol.com/