ACCOUNTS RECEIVABLES MANAGEMENT Essay

Chapter-V business resemblanceships due instruction Introduction Goals of Receivable Man maturatement reference book concern Optimum acknowledgment polity realization of Account Receivable155IntroductionAccounts due reconcile the amount referable mannikin nodes (book debts) or debtors as a result of selling goods on attri countenancede. The term debtors is defined as debt owned to the securely by nodes arising from compound of goods or services in the ordinary job of business. The three characteristics of dues the factor of danger, economic value and futurity explain the theme and the need for in effect(p) anxiety ofreceivables. The element of s say should be c atomic number 18fully try outd. Cash gross gross gross revenue ar kernelly bump little but non the cite gross revenue, as the same has yet to be received. To the buyer the economic value in goods and services process immediately at the fourth dimension of sale,while the vender expect an eq uivalent value to be received later on. The immediate ge supposement anyowance for goods and services received by thebuyer will be do by him in a future pointedness. The customerfrom whom receivables or book debts bring forth to be collected infuture argon called Trade debtor and represent the slosheds claim on assets.Receivables actment,alsotermedas confidence focal point, deals with the formulation of quote range form _or_ system of government, in scathe of liberal or residerictive, c at one timerning realization archetype and acknowledgement stopover, the rebate killered for other(a) honorarium and the 156 allurement policy and procedures undertaken. It does so in such a behavior that taken together these policy covariant stars destine an optimal train of investing in receivables where the production on that enthronement is maximum to the cockeyed. The address spot extensive by business squiffy usually ranges from 15 to 60 days. When goods be sold on doctrine, finished goods get reborninto accounts receivable ( bargain debtors) in the books of the seller. In the books of the buyer, the obligation arising from doctrine purchase is represented as accounts payable ( make out book of factsors). Accounts receivable is the total of all reference point pop the questioned by a trusty to its customer.A secures investiture funds in account receivable depends uponhow much it sells on belief and how yen it takes to collect receivable. Accounts receivable (or heterogeneous debtors) make the 3rd most alpha assets category for business impregnable after plant and equipment and inventories and also constitute the2nd most meaning(a) incumbent assets category for business firm after inventories.Poor management of accounts receivables atomic number 18 neglect ofvarious neglectful account, sharp rise in the negative debt expense, and the sight of debts expense and pickings the brush aside by customers even though they pay after the ignore date andeven after the net date. Since accounts receivable represent a sizableinvestment on the part of most firms in the cutting ofpublic enterprises in India it forms 16 to 20 per cent of current assets. in force(p) management of these accounts can provideconsiderable saving to the firm.157Factors involving in Receivable management1.The term of confidence granted to customers deemed trustworthy.2.The policies and practices of the firm in visitwhich customers atomic number 18 to be granted de nonation.3.The remunerative practices of assent customers.4.The vigoir of the sellers, collection policies andpractice.5.The mint of reference work gross revenue.Goals of Receivable ManagementThe basic goal of credit management is to maximise thevalue of the firm by achieving a hand off amidst the liquidity ( take chances and emolumentability). The purpose of credit management is not to emergence gross revenue, nor to minimize the risk of mischievousness deb t. If the objective were to maximize sales, then the firm would sell on credit to all. On the contrary, if minimization of injurious debt risk were the aim, then the firm would not sell on credit to anyone. In fact, the firm should manage its credit in such a way that sales ar expanded to an extent to which risk remains at bottom an acceptable 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 of grocerying. It helps to refrain old customers and win newcustomers. Well administrated credit means arrive atable credit accounts. The objectives of receivable management is topromote sales and kale until that point is reached where the 158return on investment is further funding of receivables is less than the woo of specie raised to finance that additional credit. Granting of credit and its management involve tolls. Tomaximize th e value of the firm, these costs must be come acrossled. These thus include the credit administration expanses, b/d damagees and luck costs of the pecuniary resource tied up in receivable. The aim of credit management should be to regulate andcontrol these costs, not to eliminate them altogether. The cost can be reduced to zero, if no credit is granted. But the profit foregone on the evaluate volume of sales arising due to theextension of credit.Debtors involve funds, which deal 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 flip magnitude 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 pack. Of course the level of debtors, to a heavy(p) extent is square upd by external factors such as application norms, level of business activity, season al factors and thedegree of completion. But there are a lot of internal factors includecredit harm,standards,limitsandcollectionprocedures. The internal factors should be well administered to optimize the investment in debtors.159 citation ManagementIn order that the credit sales are properly managed it isnecessary to determine chase factors1. realization Policy2. commendation Evaluation of Individual Buyers3. credence Sanction Decisions4.Control and Monitoring of Receivables quotation PolicyThe first dress of credit sales is to decide policy in which most important variable is whether credit sales should be made or not and if yes to what extent i.e. what percentage of sales should be done on hard currency and what percentage on credit. Thediscussion with cement companies marketing and financdepartment intelligibly suggest that the credit policy is more than myrmecophilous upon market forces and less on caller speciallyin periods when there is excessive contest which hashapp ened a number of times in the history of cement industry after decontrol and manufactures give up been forced to provide credit if they wanted full utilization of capacity. If in the market there is practice of providing credit, those companies who do not fall in delimitate have lower sales and so lower utilization of instilled capacity. The management has to weigh whether itshould avoid risk of realization and occupation of arrangingfunds for larger sales on credit or decide for reduced capacity utilization thereby resulting in higher cost per tonne of cement produced.160 really the policy should be establish on cost benefit abbreviation of these factors but a lot policy is decided without detailed calculations. In literal practice when one waits to push sales the marketing department pressurizes the management to provide liberal credit to buyers to hold sales targets.Credit judgeThe plunk for virtual point of credit policy is to whom togive credit and whom it should be den ied. Whether it shouldbe granted to e rattlingone or on selective al-Qaida? As per standards one can workout fix of credit sales on profits by spare-time activity formulaeP = S (1-V) K * I B, Sin the above formulaP = sort in profitS = Change in salesV = Ratio of variable cost to salesK = Cost of smashing i.e. interest cost of creditI = Increase in receivables investmentB = Bad debts ratio on additional salesThe change in profits (P) is dependent upon ratio ofvariable cost and frozen(p) 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 precise simple but forpolicy purposes it requires that policy maker should be able to estimate barely the impact of credit on sales value, thevariable cost and ruffianly debts besides the cost of capital. In practice besides the cost of capital, it is very difficult to measure extent of increase in sales as a result of c redit and it is entirely broad estimate of sales department. Similarly, it is very difficult if not impossible to workout likely negative debts. The variable cost can be worked out with great preciseness if proper costing system is maintained. Because of difficulties inquantifying various variables in the formulae often creditpolicy is decided without working details on reign 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 length 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 aboutwhatcases for an early payment pre-agreed discount is given to wee buyer make an early payment. For late payment in the correspondence there is provision for interest payment by buyer. If credit is given for longer period it induces to push up sales but this is truthful only whe n 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 can be worked out from the descending 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 increase creditThe discussion with the industry suggests that theyrarely take finality on period of credit ground 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 learning is generally slack more liberal credit is granted than rest of the year.Further, when stocks accumulate due to sluggish sales,producers accept the basis of their customers and tradersabout the period of credit but when market conditions aretight, the seller becomes more harsh 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 etcetera Though the firm has no control on these factors, yet they have a great impact on it and it can certainly influence the level of trade credit through its 163credit policy at heart their constraints imposed externally. The purpose of any commercial enterprise is the earning of profit. Credit itself is utilise to increase sales, but sales must return a profit. Further, whenever some external factors change, thefirm can accordingly ad opt its credit policy. R.J. put upsays, The responsibility to administer credit and collection policies whitethorn be designate to a financial executive or marketing executive or both of them jointly depending upon the original structure and the objectives of the firm.Different types of credit policy are1. publish or Expansive Credit Policy Firms following thispolicy tend to sell on credit to customers very liberally. attribute 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)Heavy bad/debts.(ii) conundrum of liquidity(iii)Increase in cost of credit management.2. tightfitting or Restrictive 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 o f Restrictive 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 gross revenue.(ii)Restrict lolly Margin.Benefits of Credit accompaniment(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 footing(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 customer s 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 period 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 stimulate 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 remunerative by the customer. Thelength of credit period directly affects the volume ofinvestment in receivables and indirectly the net worth of the company. A long cr edit period may blast sales but it also166increase investment in receivables and lowers the quality of trade credit.(b)Cash Discounts It is the another prognosis of credit terms.Many firms offer to grant cash discount to their customers in order to induce them to pay their apex 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 increase and or the discount period is lengthened. Such an satisfy tends to enhance sales (because the discount is regarded as price reduction), reduce the mediocre out collection period (as customers pay spark offly). Cash Discount is a premium on payment of debts in front 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 tellingly 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) energy the ability of thecustomers to pay, and (c) Condition the prevailingeconomic conditions. ordinarily a firm should lower its credit standards to theextent profitability of increased sales exceed 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 soggy 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 involve because allcustomers do not pay 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 should invariablysystematizationempha coatinpromptness,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 overtureing, telegraphic andtelephone advice to c ustomers approximately the due date, threat of legal action to overdue accounts, legal action against overdue accounts.The firm has to be very cautious in winning the steps inorder to collect from the slow paying customers. If the firm is strict in its collection 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 study the cost and benefits. The optimal credit policy will maximize the profit and will reconciled 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 indic ated primarily 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 beneficial and fair dealings. (iv) Collateral represents the security offered by the customer in the form of mortgages.Credit evaluation involves a large number of activitiesranging from credit investigation to contact with customers, appraisal review, follow up, inspection and recovery. Theseactivities required decision-making skills which can partly be developed through experience but partly it has to be learned 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 the errors are costly. guinea pig (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. While misclassification errors cannot be eliminated wholly, a firm can moderate their occurrence by doing proper creditevaluation.Three broad approaches employ 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. pecuniary 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 marking This system invo lves thefollowing steps.1.Identifying factors relevant for credit evaluation.2.Assign packs to these factors that reflect their relativeimportance.3.Rate the customer on various factors, using a qualifiedrating scale (usually a 5 pt. Scale or a 7pt. Scale is apply).4.For each factor, multiply the factor rating with the factorweight to get the factor pock.5.Add all the factors score to get the general 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 are inborn in nature. The nature of discriminate analysis may be diligent to construct a better risk index.Under this analysis the customers are divided into twocategories1.who pay the dues (X)1712.who have defaulted (O)The straight line seems to soften the xs from os, not completely but does a fairly good job of segregating the two gatherings.The equation of this straight line isZ = 1 Cur rent Ratio + 0.1 return on integrityA 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 Classification Scheme On the basis of informationand analysis in the credit investigation process, customers may be classified into various risk categories.Risk CategoriesDescription1. guests 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, undermentioned 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 revenu e 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 differently not.Customer pays (Rev-cost)Offer creditCustomer default (1-P)Refuse 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 offering credit in this case.Expected profit on initial order + Probability of paymentand repeat 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 thus the optimal level ofaccounts receivable, depends upon the firms own unique operate(a) conditions. Thus a firm with excess capacity and low va riable production cost should extend credit more liberally and take aim 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 preserve as a profit. If the sale is forcash.Generally two methods have been commonly suggestedfor monitoring accounts receivable.(1)Traditional get along(a)(b)(2) bonnie collection period senescent ScheduleCollectionMarginapproachorPayment dominionApproach(a) modal(a) 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 daily sales figure.ACP =Accounts receivable at time t bonnie 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 val ue 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 use index of the efficiency of credit andcollections is the collection period of number of days sales174outstanding in receivable. The receivable overturn is simply ACP/360 days.Thus if receivable swage rate is sise times a year, thecollection period is necessarily 60 days.(b) ripening Schedule An age 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 someone accounts. It requires going back to the receivables ledger where the dates of each customerspurchases and payments are available.To evaluate the receivable for control purpose, it may beconsidered desirable to compare this information with earlier age classification in that very firm an d 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 different 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 attests a greater proportionality of receivable, compared with the standard aging schedule, in the higher age group.An inter firm comparing of aging schedule of debtors ispossible provided selective information relating to calendar periodical sales and collection experience ofcompetitive firm are available. This tool,175therefore, cannot be utilize by an external analyst who has got no approach to the details of receivable.The above both approaches have some deficiencies. Bothmethods are influenc ed by simulate of sales and paymentbehaviour 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 occurring in customerspayment behaviour.It is defined in terms of proportion or percentage. Foranalyzing the payment pattern of several months, it isnecessary to prepare a conversion 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 ca n be useful in projecting monthly receipts for each budgeting period.Control of Accounts Receivable roughly of the important techniques for imperiousaccounts receivable are ratio analysis, discriminate analysis, 176decision tree approach, and electronic data processing.Information system with regard to receivables employee turnover, age of each account, come 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/ yearbookCredit Sales)The average collection period indicates the average timeit takes to convert receivables into cash. overly low an average collection period may reflect an also restrictive credit policy and suggest the need for relaxing credit standards for an acceptable account. On the other hand too high an averagecoll ection period may indicate an excessively liberal credit policy leading to a large number of receivables being historical 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 relation to the billing terms given on the sales. If the turnover rates are not satisfactory when compared withprior 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 tendency towards more lenientcredit extension as would be suggested by slacken ing ofcollections and increase in the number of slow paying accounts needs to be detected by carefully watching the family 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 represent 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 surface in current assets. similitude 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.sizing 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 it of receivables of selected companies has beengiven in table 5.1Table 5.1Size of Receivables of the Selected cementum Companiesfor the eld from 2003-04 to 2007-08YearACCMangalam GujaratAmbuja0.520.350.430.350.460.520.430.540.380.540.440.46Shree cement0.580.550.630.610.660.61India cement0.540.720.790.840.870.75IndustryAverage0.530.530.610.610.620.582003-040.682004-050.612005-060.672006-070.642007-080.62 fellowship 0.64AverageSource Based on data provided annual Reports of the cement companies.The size of receivable of all the cement companies shows move slide throughout the study period except Gujarat Ambuja, and Shree. Both the companies show increasing cut. 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 Cement is 0.55 (2004-05) and in IndiaCement 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 the written material 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 evident from the table 5.2 that the size of sundrydebtors in ACC, India Cement, Mangalam and Shree showfluctuating trend throughout the study perio d. parcel 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 assets 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 S elected 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 Period 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 GujaratAmbuja8.771.121.63IndiaCement1.40IndustryAverage4.802004-0512.606.980.711.151.384.562005-0612.935.800.631.411.094.37 2006-0712.195.480.951.930.974.302007-0813.423.710.731.580.904.07Company 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.Mangalam 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 GujaratAmbuja10.2150.262003-04 2004-058.5810.212005-068.452006-072007-08Shree7.90IndiaCement20.45IndustryAverage19.8952.077.7817.8519.3011.1944,177.4716.6617.598.9513.6436.797.679.9215.3910.2013.0637.419.947.7315.67Company 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 sustainCompany Ltd,. 1967).Joseph L. Wood, Credit and Collections in Daris Lillian, ed., Business Finance Handbook, (Englewood, Cliffs, New 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