Average Collection Period:-

The Debtors / Receivable Turnover ratio when calculated in terms of days is known as Average
Collection Period or Debtors Collection Period Ratio. The average collection period ratio represents
the average number of days for which a firm has to wait before its debtors are converted into cash.

Average Collection Period = Trade Debtors X 365 / Net Credit Sales

2010 = 1 day

2009 = 1 day

2008 = 1 day

Effect:-

This ratio measures the quality of debtors. A short collection period implies prompt payment by debtors.
It reduces the chances of bad debts. Similarly, a longer collection period implies too liberal and
inefficient credit collection performance. It is difficult to provide a standard collection period of debtors

(Note :- while calculating the average collection period Advances from Customers are also

deducted as a result of which the collection period comes to be 1(One) day for each year. )
Average Payment Period:-

It signifies the credit period enjoyed by the firm in paying creditors. Accounts payable include both
sundry creditors and bills payable. Same as debtors turnover ratio, creditors turnover ratio can be
calculated in two forms, creditors turnover ratio and average payment period.

Average Payment Period = Trade Creditor X 365/ Net Credit Purchase

2010 = 1 day

2009 = 1 day

2008 = 1 day

Effect:-

The average payment period ratio represents the number of days by the firm to pay its creditors. A high
creditor’s turnover ratio or a lower credit period ratio signifies that the creditors are being paid
promptly. This situation enhances the credit worthiness of the company. However a very favorable ratio
to this effect also shows that the business is not taking the full advantage of credit facilities allowed by
the creditors.

(Note :- while calculating the average Payment period Advances from Customers are also

deducted as a result of which the Payment period comes to be 1(One) day for each year. )
Overall Analysis of the Department:-

The Finance department of Taj, Chandigarh is divided into 4 separate departments namely Accounts,
Credit, Purchase and Stores. However Taj has commenced its business in Chandigarh from the year
2005 but then also due to the Efficient Finance Department present at the Taj Chandigarh the
performance the Branch is not less than any other Hotel of Taj Group following are some points to
prove all the statement mention above they are as follows :-

• The main issue at any Hotel is the managing the Cost and Inventory of the company however at
Taj both the Cost Controlling and management of Inventory is done efficiently by doing so the
profit margin of the Hotel can increase. Inventory are checked on weekly basis and for some on
daily basis the Physically present with the Store the no. of goods issued to different department
their consumption all this is taken into consideration and then physically mention is checks with
the records and any deviation will be chargeable by the department concern where the deviation
lies.

• The efficient Credit department is also there for recovering the fund blocked in the market and
collects the fund from the Debtors of the Hotel which results in increasing the Liquidity position
of the Business. The same can be seen in the Balance sheet the amount of Debtors is decreasing
day by day and cash is collected very soon from the Customers.

• The outsider parties like the Suppliers having the contracts of the Hotel were paid their
necessary amount of Bill as soon as possible this results in building the Brand of the Taj in the
market as well as the Suppliers will be curious enough to have the business with the Taj,
Chandigarh.

• Talking about the Working capital of the organization the Short term financial condition of the
Hotel is very strong however at first at looking at the Schedules of the Working Capital it is seen
that Current liabilities is much more than that of the Current Assets of the Hotel but the Picture
changes when we add the Cash at Bank and Cash in the Current Assets of the Organization.
• Proper recording of each and every document besides having the latest recording software
“ORION” and “FIDELIO” helps the Hotel to handle any dispute if any is informed to them.
However the entire working of the Department is functioning on “ORION”.

• In order to carry on the operation and no work of any Department should Stop is being ensured by
the Store department of Taj, Chandigarh they were using the Min-Max approach so that as soon
as the minimum level of any goods is reached the System gives the warning and the Goods were
demanded from the suppliers in order to prohibit the working of any Department concern. The
minimum level is determined by the Lead time of the Goods.

• The main working of the Purchase department is to purchase any Goods the Stores inform that
the minimum level has been reached and the necessary Requisition is passed taken into
consideration the Quantity required of any particular Goods.

• As the Hotel is the 24 X 7 working so as the Finance department of the Hotel. A Night Auditor
is appointed among the members of Accounts or Credit department who has the job of recording
all the transactions taken in the Hotel during the Night the amount of Billing is to be recorded in
the system called “FIDELIO” all the mode of payment( Cash, Credit Card, BTC or Room) are to
be mention and the same should be handed to the Credit Manager in the Morning who transfer
the FIDELIO data into ORION and a TALLY SHEET is prepare in order to check any deviation
in the data collected(FIDELIO) and mention in the system(ORION).
 ABSTRACT

This document discusses a project regarding the use of Working Capital analysis in determining
enterprise competitiveness. Working Capital analysis is thought to be more effective in determining
enterprise effectiveness and competitiveness in the market because it is a more dynamic examination of
actual return on assets and equity. Additionally, this unique use of Working Capital analysis is applied
to the concept of emerging markets and the proposal that Working Capital analysis is a better measure
of performance and competitiveness for firms that are competing in emerging markets not only this in
order to measure the shorter financial position of the Business the Working Capital Analysis is used.