Dividend Policy

Over the years, the Company has consistently followed a policy of paying high dividends, keeping in mind the cashgenerating capacities, the expected capital needs of the business and strategic considerations. For 2009-10, the board has recommended a dividend of 1,500 percent higher than 1,000 percent declared in previous year and has maintained a payout ratio of 31.3 percent vis-a-vis 36.5 percent in the previous year. Further, board has also declared 4,000 percent interim dividend on the occasion of 25th year.

Table Working Capital Management & Liquidity Ratios Table 2:1: Key Indicators Of Profitability
2009-10 Inventory Period Operating Cycle Cash Cycle Current Ratio Acid Test Ratio 10.6 13.3 -17.0 0.45 0.26 2008-09 11.0 16.9 -13.1 0.51 0.30

Working Capital management

Hero Honda has always sought to efficiently use the various components of working capital cycle. The Company has been able to effectively control the receivable and inventories enabling it to continue to operate on negative working capital.

Notes On Working Capital
The average of inventory, receivables and payables has been taken for calculations of inventory period, operating and cash cycle.

RISKS AND OUTLOOK
Global uncertainty: While India's growth path remains clear and secure, there could some ripples on liquidity in India. The debt-related troubles within the Eurozone could slow down the pace of global economic recovery. Commodity prices: Even though the surge in commodity prices has lessened in recent months, the medium to longterm trend remains volatile. Monsoons: Even though the country as a whole may receive normal rainfall, wide variances between regions could impact agricultural production during the kharif season. Inflation: Inflation is spreading to non-food categories such as manufacturing and fuels. A rising rupee and strong