CHAPTER IINTRODUCTION1.1 PROFILE OF THE COMPANY (BHEL)Bharath Heavy Electricals Limited is the largest engineering and manufacturingenterprise of its king in India. It is also one of the leading internationalcompanies in thefield of power equipment measures.The first plant of BHEL was set up at Bhopal in 1956, which signaled thebeginningof the Heavy Electrical Industry in India.1.2 Wide spread centersIn the early sixties, three more major plants were set up at Haridwar, HyderabadandTrichy. The company has fourteen manufacturing units, four power sector regionalcenters,eight service centers and eighteen regional offices, besides project sites,spread all overIndia and abroad. A strategic business unit for ceramics was formed atBangalore.1.3 Unique specialtiesBHEL has a well recognized track record of performance making profitscontinuously since 1971-72 and paying dividends since 1976-77. BHEL manufacturesover180 products under thirty major groups.The quality and reliability of its products is due to the emphasis on design,engineering and manufacturing to international standards best acquiring andadopting someof the best technologies from leading companies in the world together withtechnologiesdeveloped in its own R&D centers.
1.4 CertificationsBHEL has acquired certifications from both ISO 9000 & ISO 14000 standards forits operations and has also adopted the concepts of total quality management.BHEL hasadopted occupational health and safety standards as per OHSAS 18001. The majorunits ofBHEL have already acquired the ISO 14001 certification.The companys inherit potential coupled with its strong performance over theyearshas resulted in it being chosen as one of the Navratna status.1.5 Business sectors of BHELBHELs operations are organized around three business sectors namely Power,Industry and International Operations. Industry operation includes Transmission,Transportation, Telecommunication and Renewable Energy.1.6 POWER SECTOR1.6.1 GenerationPower generation sector comprises thermal, gas, hydro and nuclear power plantbusiness. Though BHEL supplied sets account logs nil till 1969-70, it rises to62,051MV or 65% of the total installed capacity of 95377 MV in the country.BHEL has the capability of turning power projects from concept to commissioning.With its technology, it has the ability to produce thermal sets with supercritical parametersunto 1000 MV unit rating and gas turbine- generator sets of upto 240 MV unitsrating.
1.6.2 Achievementsa) To make the most part of the high-ash content coal used in India, BHILsuppliescirculating fluidized bed combustion boilers to both thermal and combined cyclepowerplants.b) The company manufactures 235 MV nuclear turbine-generator sets and obtains aproduction of 500 MV in these sets.c) Custom made hydro sets of Francis, Pelton and Kaplan types for differenthead-discharge combinations are also engineered and manufactured by BHEL.d) Until now, the company had placed orders for more than 700 utility sets ofthermal, hydro, gas and nuclear plants. This is based on contemporary technologycomparable to the best in the world. It is also internally competitive.1.7 INDUSTRIAL SECTOR1.7.1 IndustryBHEL is a major contributor of equipment and system to industries. Its majorcontributions are cement, sugar, fertilizer, refineries, petrochemicals, steel,paper etc.The range of systems and equipment supplied includes captive power plants, DGpower plants, high-speed industrial drive turbines, electrical machines, pumps,valves etc.1.7.2 TransportationMost of the trains operated by the Indian railways, including the metro inCalcutta,are equipped with BHELs traction electrics and traction control equipment. Thecompany
also supplies electric locomotives to Indian railways and diesel shuntinglocomotives tovarious industries.The company have supplied 5000/4600 DC locomotives to Indian railways. Batterypowered road vehicles are also manufactured by the company.1.8 TelecommunicationBHEL also give importance to telecommunication sector by way of small, mediumand large switching systems.1.8.1 Renewable energyTechnologies used by BHEL for discovering non-conventional and renewablesources of energy include, wind electric generators, solar-power based waterpumps,lighting and beating systems.1.8.2 International operationsBHEL has been established in over 50 counties of the world. Its knowledge isknown from the United States in the West to the New Zealand in the far East.BHEL in these countries covers turnkey power projects of thermal, hydro and gasbased type besides a wide variety of products like Switchgear, transformers andheatexchangers.BHEL has contributed over 1100 MV of boiler capacity to Malaysia. Besides this,they have also achieved successes in Oman, Saudi Arabia, Libya, Greece, Egypt,SriLankaetc.Their development in overseas has also provided BHEL, the experience of workingwith world renewed consulting organizations and inspection agencies.The demanding requirements of both domestic and international markets have beendealt successfully by BHEL. In terms of difficult works as well astechnological, quality
and other requirements like financing package, extended warrantees have provenitscapabilities.The company has also been successful in meeting varying needs of the industrylikecaptive power plants, utility power generation or for the oil sectorrequirements.BHEL possesses large amount of flexibility to interface and change internationalcompanies for large projects. The company also exhibits adaptability bymanufacturing andsupplying intermediate products, like steam generator pressure parts.BHEL can be compared with the original equipment manufactures by its success inthe area of rehabilitation and life extension of power projects.1.9 BHEL product range throughout IndiaThe BHEL ranges are1. Thermal Power Plants2. Gas based Power Plants3. Hydro Power Plants4. Heat exchanges and Pressure Vessels5. Oil field Equipment6. Boilers7. Boilers Auxiliaries8. Pumps9. Power station Control Equipment10. Switch Gear11. Bus Ducts12. Equipment for Nuclear Power Plants13. Steam less Steel Tubes vision
14. CompressorsA world class-engineering enterprise committed to enhancing stakeholder value.Employees, customers and suppliers are given adequate knowledge aboutenvironment.BHEL will also assist and co-operate with the concerned Government Agencies andRegulatory Bodies engaged in environmental activities, which offer the companiescapabilities in this field.1.10 BHELS VisionBHELS vision is to become a world class innovation and competitive andprofitable engineering enterprise providing total business solutions.1.11 MissionIt is an Indian multinational engineering enterprise providing total businesssolutions through quality products, systems and services in the fields ofenergy, industry,transportation infrastructure and other potential areas.1.12 Values:1. Zeal to excel and zest for change.2. Integrity and fairness in all matters.3. Respect for dignity and potential individuals.4. Strict adherence to commitments.5. Ensure speed of response.6. Foster learning, creativity and team work.7. Loyalty and pride of the company.
1.13 Opportunities and threats1.13.1 WorldInvestments made in the electricity sector have been lowered in recent years byforeign electricity venture as foreign direct investment in the developingworld. This is oneof the parts of the sluggish state of the global economy and because ofunsatisfactoryfinancial performance of many acquisitions in the electric power sector.These changes in the environment have led to a cautious approach by developersand itsharder to get off the new projects from the ground. Some countries have modifiedtheirplans because of the change in restructuring electricity market and reforms.The total worldwide order of booking has been lowered leading to aggressivemarketing by major global power plant equipment manufacturing players, who havebeenundergoing a phase of consolidation.Though there has been a decrease in overall orders in the recent times, manydeveloping nations are planning to expand their electricity infrastructure fortheforthcoming years.Number of promising market for new power equipment are found in South-EastAsian countries, Middle-East and Gulf cooperation council( GCC) countries.Moreover, BHEL has the global opportunity for servicing of generating machineryas well as distributing generation in the developing countries
1.13.2 Positioning for the futureBHEL has finalized a new corporate plan with the title strategic plan 2007 andsteps are taken to start the iniatives. The company has also revised the vision,mission andvalues statements, which are suitably adjusted and with remodification toreflect its currentaspuations.In corporate line the company aims to accelerate the growth with suitablestrategiesand focus area the core strengths of the and company are1) To strengthen and extend the core business of power generation power, powertransmission, transportation and industrial systems and products.2) Areas like water management pollution control and waste management, porthandling systems, simulators [power and process], energy conservation systems,LNGterminals are newly entered3) To enter into continuous revenue stream business like power generation andtransmission and distribution.1.14 BHEL, TRICHY UNITBHEL, Trichy unit was established in 1963 and is situated in Trichy-Tanjorehighway road around 20km from Trichy Central Bus Stand. 12,000 employees areworkingin this organization on permanent basis and around 4000 employees are working oncontract basis. It has an area of 2, 50,000 sq. meters and consists of a majorunit namely.1. High Pressure Boiler Plant (HPBP)2. Seamless Steel Tube Plant (SSTP)3. Combined Cycle Demonstration Plant (CCDP)
Boiler Auxiliaries plant of Ranipet and piping centre of Madras (Chennai) andGoinwal come under the control of Trichy Unit.1.15 Product profile of BHEL, TrichyoSteam Generators for Power Generation andoIndustrial ApplicationsoHeat Recovery Steam GeneratorsoIndustrial BoilersoAtmosphere and Circulating Fluidized bedoCombustion BoilersoNuclear Steam Generators and ReactorsoPressure VesselsoHear ExchangeoSeamless Steel TubesoStudded tubesoSerrated fin. TubesoPiping systemsoColumnsoValvesoBoiler AuxiliariesoWind Electric Generators1.16 Finance Department Of BHEL, TrichyThe following are the important operations of finance department of BHEL,Trichy.
.Sales Accounting.Purchase Approvals.Budgets.Legal Excise, Sales Tax, Income Tax & Customs.Costing.Pay Roll.Internal Audit.Foreign Trade- Imports, Exports.System.Cash and Bank
CHAPTER IIREVIEW OF LITERATURE2.1 WORKING CAPITAL MANAGEMENTWorking capital management is concerned with the decisions which are relatedwiththe current assets and the current liabilities. It means, it concerned with day-to-daymanagement activities.The key factor, which is used to differentiate long term financial managementandshort- term financial management, is the timing of cash.Long-term financial decisions by buying capital equipment or issuing debentures,involve cash which flows over an extended period of time.But a short time financial decision mainly involves the cash flow within a year,orwith in the operating cycle of the firm.2.2 CONCEPTS OF WORKING CAPITALThe two concepts of working capital are1. Gross working capital
It refers to the investment made by the company in current assets. Currentassets arethe assets which can be converted into cash with an accounting year or operatingcycle. Italso includes cash, short-term securities, debtors, bills receivable and stock.2. Net working capitalThe difference between current assets and current is called the net workingcapital.Current liabilities are the one which is claimed from the outsiders and areexpected to bereturned within an accounting year. It includes creditors, bills payable, andout sidingexpenses.Net working capital may be positive or negative. A net working capital becomespositive only when the current assets exceed current liabilities. A negative networkingcapital occurs when current liabilities exceed current assets.2.3 TWO DANGEROUS POINTS OF CURRENT ASSETS2.3.1 Danger of inadequate working capital1. Inadequate working capital will lead to a condition, in which one cannot payitsshort-term liabilities in time. So there arises a situation where there is aloss of reputationand tight credit terms.2. The organizations requirements cannot be fulfilled in bulk; hence it cannottakethe advantage of cash discounts.3. Difficulties will arise in meeting the day-to-day expenses. This will lead toinefficiency and increase in costs with the minimum profits.
4. Lack of working capital will lead to less favorable marketing conditions andlessprofitable projects.5. Due to scarcity of working capital, fixed assets are not properly utilized.Thusthis results in the fall of investments return.2.3.2 Danger of Excessive Working Capital1. Excessive working capital will lead to low investments in fixed assets. Hencethere will be no profits for the business and there can be no proper rote ofreturn on itsinvestments.2. The low rate of return on investment will lead to the fall in the value ofshares.3. Excessive working capital will lead to unnecessary purchasing and excessiveamount of inventories. As a result, there are chances of theft and loses.4. Excessive debtors and defective credit policy are the indication of excessiveworking capital. There may be delay in collection and increased incidence of baddebts.5. Excessive working capital will make the management complacent. This will leadto overall inefficiency in the organization.2.4 NEED FOR WORKING CAPITAL MANAGEMENTBeyond the limit, both the current assets i.e., inadequate working capital andexcessive working capital are dangerous. Beyond the limitations of both thelevel, thecommon goal of the organization cannot be achieved.Working capital Management provides effective and efficient decision to allocatethe current assets.
2.5 TYPES OF WORKING CAPITALThe two types of working capital are,1. Permanent working capital.2. Temporary working capital.2.5.1 Permanent Working CapitalAs the operating cycle is a continuous process, the need for current assets isfeltconstantly. The Magnitude of the current assets need not to be the same. It mayincrease ordecrease over the time.However, there is a minimum level of current assets which are continuouslyrequired by the firm to continue its business operations. This minimum level ofthe currentassets is known as permanent or fixed working capital. However the permanentworkingcapital line needs not to be horizontal.2.5.2 Temporary working capitalOn the other hand, when there is a slack period in the market, the investmentmadeon the inventories and account receivable will be low.The change of the extra working capital used to support the production andsales, isknown as fluctuating or variable or temporary working capitals.When the company has a peak period of sales, it will have large amount ofinventories, when compared to their normal sales. This makes the costumers toinvestmoney for credit sales.2.6 RATIO ANALYSIS
Ratio analysis, simply defined, refers to the analysis and interpretation offinancialstatements through ratios. Now a day it is used by all the business andindustrial concernsin their financial analysis.2.7 RATIOThe term ratio simply means one number expressed in terms of another. Itdescribesin mathematical terms the quantitative relationship that exists between twonumbers.2.8 TYPES OF RATIOS1. CURRENT RATIOIt is relationship between firms current assets and current liability.Current assetsCurrent ratio = _______________________________Current liability2. QUICK RATIOIt is relationship between liquid assets and current liabilities.Liquid assetsQuick ratio = _________________________Current liabilities3. CASH RATIOIt is relationship between cash and current liabilities.CashCash ratio = _______________________
Current liabilities4. DEBTORS TURNOVER RATIOIt indicates the number time debtors turned over each year. Generally thehigher value of debtors turnover shows high efficiency to manage the creditmanagement.Total salesDebtors turnover ratio = ______________________________Debtors5. DEBT COLLECTION PERIODIt indicates the speed with which debts are collected.Days/months in a yearDebt collection period = _______________________________Debtors turnover ratio6. CREDITORS TURNOVER RATIOThe ratio shows on an average the number of times creditors turned overduring the year.Credit purchaseCreditors turnover ratio = ________________________
Average creditors7. DEBT PAYMENT PERIODCreditors turnover ratio indicates the number of days taken by the firm, topay the debtors to creditors.Days/months in a yearDebt payment period = _______________________________Creditors turnover ratio8. INVENTORY TURNOVER RATIOIt indicates the inventories turning into receivables through sales.SalesInventory turnover ratio =__________________________Inventory9. INVENTORY HOLDING PERIODIt indicates duration of holding inventories in stores.Days/months in a yearInventory holding ratio = ______________________________Inventory turnover ratio10. WORKING CAPITAL TURNOVER RATIOThis ratio explains the relationship between sales and working capital.
Net salesWorking capital turnover ratio = ______________________________Net working capitalCASH TURNOVER RATIOIt is the relationship between sales and cash.Cash turnover ratio = Sales___________________Cash balance2.9 ARTICLESTo make ones project effective, it is better to go through the projects done byothers earlier. This gives a complete idea about ones project. It also helps tocorrect themistakes done in the earlier projects. Summing up, it improves ones project.So with this idea, let us see some of the projects done by others earlier.Mr. J. Maria peter Ignatius., MBA., of Bharathidasan University did a projectwith the title Working Capital Management in Bharath Heavy Electricals Limited,Tiruchirrappalli. He did this project in the month of June 2004, using the datafrom 1998to 2003.The objectives of his study were.To analyse the requirement of funds for the routine activities of business.
.To study on the source of fund generated and their methods of utilization..To know the amount of funds allotted in the current assets and to forecast theworking capital trend..To study cash receivables position of the organization.His findings were.In all the years the value of the quick ratio is higher than the ideal value; itindicatesfirms ability to pay the immediate obligations.Cash ratio clearly indicates firms debt borrowing power from financialinstitutionsand other sources..The firms debt collection period have more than 150 days. Firm increased thedebtcollection period year by year. It shows firms liberal debt collection policy..Working capital turnover ratio was decreased in year by year. It clearly showsfirmreduced to use net working capital for salesMr. G. Dhanabal., MBA., of Bharathidasaan University did a project with thetitleWorking Capital Management in Trichy Steel Rolling Mills Limited,Tirchirappalli.He did the project in the month of June 2004, using the data from 1998 to 2003.His objectives were.To study the financial position of the firm.To estimate the future of working capital requirement of the unit
.To bring out the level of inventory and to analyse the receivables, payables andcash management of the companyHis findings were.Firm ability have been was increasing every year in order to meet the shortterm liabilities..More sales has been done on credit basis.Bank balance is sufficient to tackle unexpected problem..Current ratio satisfactory level is 2:1. It is significantly achieved by thecompany.Miss. Mohanapriya, M.B.A, in her research on Working capital management ofTanjore co-operative milk supply society Ltd. Which is the partial fulfillmentof therequirements for the award of her degree submitted to Bharathidasan University,in the yearNovember 2003. Outlined the following objectives and findings.Her Objectives were:.Know the project of Co-operative milk supply society..Analysis the short term liquidity position of the study unit during the period96-97to 2000-01..Analysis and evaluate working capital management.Her Findings were:.The size of current assets has increased during the study period..During the study period the working capital turnover ratio were 210.51;
.194.60; 45.44 and 11.86 times respectively the higher ratios in the 2 year 1997-98and 98-99 indicates sufficient amount of working capital and effectiveutilizationsof working capital..The cash turnover ratio is to be increasing times.Miss. Abiramisundhari, in her research on Working capital management ofTSRM Limited Trichy. Which is the partial fulfillment of the requirements forthe awardof her M.Com degree submitted to Bharathidasan University, in the year November 2003.Outlined the following objectives and findings.Her Objectives were:.To study the importance of W/c management for a concern..To assess the proportion of the components of W/c of TSRM Ltd, Trichy..To suggest measures to increases the efficiency of W/c management of TSRMLtd, Trichy.Her Findings were:.The company has been taken for sufficient care for the maintenance of adequateaccounting period..The proportion of net W/c to total assets showed on increasing trend throughout the five years..The over all performance of receivables management showed a satisfactoryposition throughout the past 5 years.
Mr. Kamaraj, M, Phil, in his research on Working capital management of DalmiaCement Limited Trichy. Which is the partial fulfillment of the requirements forthe awardof her degree submitted to Bharathidasan University, in the year November 2003.Outlined the following objectives and findings.His Objectives were:.To know the Financial Performance of Dalmia Cement..To examine the practice follow into Management of cash..To know the techniques of Inventory Management in D.C.B.C.His Findings were:.Raw Material Consumption over the study period in terms of quantity and valuehasshowed an incise trend..Operating ratio is considered to be yardstick of operating efficiently of theconcern..The concern has show dormant and fast moving inventories during the 5 years astudy period..Performance of the co should be judged on the basis of return on equity capital.Itis satisfactory positive
CHAPTER III3.1 OBJECTIVES1.Evaluate the working capital of the company during the period of study.2.Analysis of working capital with various tools.3.Analysis of various components of working capital.4.To study the adequacy of working capital and suggest improvement to overcomedeficiency if any.
CHAPTER IV4.1 RESEARCH METHODOLOGYIt is purely and simply the framework or a plans for the study that guides thecollection and analysis of data. Research is the scientific way to solve theproblem and itsincreasingly used to improve market potential. This involves exploring thepossiblemethods, one by one, and arriving at the best solution, considering theresources at thedisposal of research.4.2 PRIMARY DATAThe primary data is collected by observation by the researcher of thefunctioning ofthe unit.4.3 SECONDARY DATA
It is derived from the annual reports, magazines, web sites and the internalauditingbooks of BHEL.4.4 TOOLS OF ANALYSISThe researcher used tools to analysis the financial performance of the firm.They are1. Ratio analysis2. Trend analysis4.5 SCOPE OF THE STUDYThe main scope of the study is to evaluate, analyze and understand the currentassets management and to know the influence of the components of working capitalonsales in the year 2001 2002 to 2005 2006.4.6 PERIOD OF THE STUDYThe study analysis, the financial performance of Bharath Heavy Electrical Ltdcovers the financial years from 2001 2006 consequently.CHAPTER VDATA ANALYSIS AND INTERPRETATIONTABLE 5.1STATEMENT SHOWING CURRENT RATIORs in lakhs YEAR Mar 2006 Mar 2007 Mar 2008 Mar 2009 Mar 2010CURRENTASSETS12,396.4015,982.4019,222.2925,763.0330,789.29CURRENTLIABILITIES8,905.1411,957.3216,632.9723,415.1028,097.73CURRENTRATIO
SOURCE: SECONDARY DATAINTERPRETATIONCurrent ratio during the year 2001-2002 was 1.71 and its slightly increased in1.76at 2002-2003 and its decreased 20032004 at 1.65 and its same value in 20042005and2005 2006. There is no significant.CHART 5.1CURRENT RATIO
PERCENTAGE1.81.751.71.651.61.551.51.452001-2002-2003-2004-20050203 04 05 06YEARScurrent ratioTABLE 5.2STATEMENT SHOWING QUICK RATIORs in lakhs YEAR Mar 2006 Mar 2007 Mar 2008 Mar 2009 Mar 2010
LIQUIDASSETSLIQUIDLIABILITIESLIQUIDRATIOSOURCE: SECONDARY DATAINTERPRETATIONThe quick ratio in the year 2001-2002 was 1.29 and it gets increased 0.04% at2002and 2003 (1.33) and in 2003-2004 get decreased 0.02% (1.31) and 2004-2005 getdecreased0.08% (1.23) and it again decreases 2005-2006 at 0.01%(1.22).CHART 5.2LIQUID RATIO
220.127.116.11.221.241.261.281.31.321.34PERCENTAGEliquid ratio18.104.22.168.221.241.261.281.31.321.34PERCENTAGEliquid ratio2001-02 2002-03 2003-04 2004-05 2005-06YEARSSTATEMENT SHOWING CASH RATIOTABLE 5.3Rs in lakhsYEAR Mar 2006 Mar 2007 Mar 2008 Mar 2009 Mar 2010
CASH 1,483.972,068.911,511.021,950.51865.08CURRENTLIABILITIES 8,905.1411,957.3216,632.9723,415.1028,097.73CASH RATIOSOURCE: SECONDARY DATAINTERPRETATIONThe Cash ratio of BHEL in the 2001-2006 was fluctuation in 2005-2006 it was 0.40times and in 2001-2002 it was 0.10 times and 2003-2004 it was reduced to 0.42. CHART 5.3CASH RATIO
Rs in lakhs YEAR Mar 2006 Mar 2007 Mar 2008 Mar 2009 Mar 2010TOTALSALES14,739.4619,058.3321,775.6028,504.0534,613.43DEBTORS 7,168.069,695.8211,974.8715,975.5020,688.75DEBTORTURNOVERRATIOSOURCE: SECONDARY DATAINTERPRETATIONDebtors constitute an important constitute of current assets and therefore thequalityof debtors to a great extent determines firms liquidity .The higher the ratio,the better it is,since it would indicate that debts are being collected promptly. In the year2004-2005 thedebt is 1.56 comparing to the previous year came down. CHART- 5.4DEBTOR TURNOVER RATIO
PERCENTAGE22.214.171.124.126.96.36.199.20DTR2001-2002-2003-2004-20050203 04 05 06YEARSDEBT COLLECTION PERIODTABLE 5.5Rs in lakhs YEAR Mar 2006 Mar 2007 Mar 2008 Mar 2009 Mar 2010
DAYS 365 365 365 365 365DEBTTURNOVERRATIODEBTCOLLECTIONPERIODSOURCE: SECONDARY DATAINTERPRETATIONThe debt collection period of BHEL in the 2001-2002 was 247 days and in 20052006it was 195 days.CHART 5.5DEBT COLLECTION PERIOD
PERCENTAGEDTCP2502001501005002001-2002-2003-2004-20050203 04 05 06YEARSTABLE 5.6CREDITORS TURNOVER RATIORs in lakhs YEAR Mar 2006 Mar 2007 Mar 2008 Mar 2009 Mar 2010CREIDT
PURCHASECREDITORSCREDITORSTURNOVERRATIOSOURCE: SECONDARY DATAINTERPRETATIONThe Creditors turnover ratio of BHEL was fluctuating during the year 2001 2006.It was upward in (2001 2002) was 0.82 times and it was downward in 2003 2004is 0.70times.CHART -5.6CREDITORS TURNOVER RATIO
PERCENTAGE0.820.80.780.760.740.720.70.680.660.64CTR2001-2002-2003-2004-20050203 04 05 06YEARSTABLE 5.7DEBT PAYMENT PERIODRs in lakhs YEAR Mar 2006 Mar 2007 Mar 2008 Mar 2009 Mar 2010
DAYS 365 365 365 365 365CREDITORSTURNOVERRATIODEBTPAYMENTPERIODSOURCE: SECONDARY DATAINTERPRETATIONThe debt collection period of BHEL in the 2001-2002 was 245 days and in 20052006it was 451 days.
CASH TURNOVER RATIO Rs in lakhs YEAR Mar 2006 Mar 2007 Mar 2008 Mar 2009 Mar 2010SALES 14,739.4619,058.3321,775.6028,504.0534,613.43CASH1,483.972,068.911,511.021,950.51865.08CASHTURNOVERRATIOSOURCE: SECONDARY DATAINTERPRETATIONThe cash turnover ratio in the year 2001-2006 was downward in the year in the2001-2002 it was decreased 3.24.
TABLE 5.9INVENTORY TURNOVER RATIORs in lakhs YEAR Mar 2006 Mar 2007 Mar 2008 Mar 2009 Mar 2010SALES 14,739.4619,058.3321,775.6028,504.0534,613.43INVENTORY 3,744.374,217.675,736.407,837.029,235.46INVENTORYTURNOVERRATIOSOURCE: SECONDARY DATAINTERPRETATIONInventory turnover of BHEL for 2001 2006 was fluctuation. in 2001-2002the inventory turnover ratio was high up to 3.81 and it was low in 2004-2005 at3.27.
TABLE 5.10INVENTORY HOLDING PERIODRs in lakhs YEAR 2001-2002 2002-2003 2003-2004 2004-2005 2005 -2006DAYS 365 365 365 365 365INVENTORYTURNOVERRATIOINVENTORYTURNOVERPERIODSOURCE: SECONDARY DATAINTERPRETATIONInventory turnover period of BHEL for 2001 2006 was 107 days in 2003.it was106 days and 2003-2004 it get reduced 96 days and it got raised in 2004-2005 to112 daysIn 2005 -2006it got downwards to 102 days.
TABLE-5.11WORKING CAPITAL TURNOVER RATIORs in lakhs YEAR Mar 2006 Mar 2007 Mar 2008 Mar 2009 Mar 2010SALES 14,739.4619,058.3321,775.6028,504.0534,613.43NETWORKINGCAPITALWORKINGCAPITALTURNOVERRATIOSOURCE: SECONDARY DATAINTERPRETATIONWorking capital turnover ratio for the year 2005-2006 was 2.23 times. It ishigherwhen comparing the past four years. The working capital management has toimprove bymore concentration on collection strategies.
CHART-5.11WORKING CAPITAL TURNOVER RATIO188.8.131.52.1PERCENTAGE2.0521.951.91.8502 03 04 05 06YEARS2001-2002-2003-2004-2005-WCTRTABLE 5.12WORKING CAPITAL FOR TREND ANALYSIS Rs in lakhs
YEAR Mar 2006 Mar 2007 Mar 2008 Mar 2009 Mar 2010CURRENTASSETS12,396.4015,982.4019,222.2925,763.0330,789.29CURRENTLIABILITIES8,905.1411,957.3216,632.9723,415.1028,097.73WORKINGCAPITALSOURCE: SECONDARY DATAINTERPRETATIONIn this current asset is increasing during the period of study. Currentliability is alsoincreased during the period of study. And working capital is also increased.CHART 5.12WORKING CAPITAL FOR TREND ANALYSIS
VALUES180000016000001400000120000010000008000006000004000002000000CA CL2001-2002-2003-2004-20050203 04 05 06YEARSTABLE 5.13ANALYSIS OF VARIOUS COMPONENTS IN WORKING CAPITALCURRENT ASSETS
Rs in lakhsParticularsMar2006Mar2007Mar2008Mar2009Mar2010inventoriesSundry debtorsC& B balanceOther assetsLoans and advancesTotalSOURCE: SECONDARY DATAINTERPRETATIONIn this period inventories, sundry debtors, other current assets and loan andadvances was decreased during the period of the study. Cash and bank balance wasonlyincreased during the period of the study.CHART 5.13ANALYSIS OF VARIOUS COMPONENTS IN WORKING CAPITAL
0102030405060PERCENTAGE2001-022002-032003-042004-052005-06YEARSINVENTORIE0102030405060PERCENTAGE2001-022002-032003-042004-052005-06YEARSINVENTORIETABLE 5.13CURRENT LIABILITIESRs in lakhsYEAR Mar 2006 Mar 2007 Mar 2008 Mar 2009 Mar 2010
CURRENTLIABILITIESPROVISIONSTOTALSOURCE: SECONDARY DATAINTERPRETATIONIn this liabilities was downward in the period of study in this provision wasupwardin the period of study.CHART 5.13CURRENT LIABILITIES
PERCENTAGE9080706050403020100LIABILITIES2001-2002-20030203 04YEARS2004-20050506CHAPTER VIFINDINGS OF STUDY
1.The working capital as per trend analysis, current assets was in the year 2001-2002was Rs.805139.02 and the in the year 2005-2006 was Rs.1633077.90.so the currentassets was increased during the period of study.2.The working capital as per trend analysis, current liabilities was in the year20012002was Rs.47l346.54 and the in the year 2005-2006 was Rs.1032002.90.so thecurrent liabilities was increased during the period of study.3.The working capital as per trend analysis, working capital was in the year2001-2002was 333792.48 and the in the year 2005-2006 was 601075.67.so the working capitalwas increased during the period.4.In this analysis of various components in working, in current asset, ininventorysundry debtors in loan and advances and other current assets are downward trend.Then cash and bank balance only upward trend.5.In current liabilities, liabilities downward trend and provision are upwardtrendduring the period of study.6.Analysis of each component in working capital sundry creditors is upward mannerduring the period of study.7.Working capital turnover ratio was downward year by year.8.Inventory turnover ratio was 3.57 in 2005-2006. It is upward while comparingfrom2001-2002.9.The current ratios for all the subsequent years are good. All of them are abovestandard norm. So the short term solvency position of the company is good.10. The debtor turnover ratio in the year 2001-2002 was 1.48 and get increasedin theyear 2005-2006 was 1.87.11. The quick ratio for all the subsequent year is good. It is all of them arestandardnorm. From the above table the quick ratio found satisfactory.12. The Cash balances of the organization found fluctuating over the years. Theproportion of cash in current asset was increasing in 2001-2006.13. The average collection period is high in 2001-2002 that is 107 days and2005-2006is 102 days in this reduce collection period.
CHAPTER - VIISUGGESTION AND RECOMMEDATIONS1.Apart from present technique of age wise analysis, reason wise analysis to bedoneperiodically and suitable actions to be taken by the organization.2.While collecting dues from customer collecting focus on customer irrespective ofproduction unit, division and products to be followed.3.Automatic storage and retrieval system (ASRS) presently implementing incomponents stores of BHEL, trichy may also be introduce in others stores orunits.4.Periodic review on non moving and slow moving items of inventory must be doneby the organization.5.All suppliers are to be educated on the requirement of various documents so thatdelay in processing of bills and payment may be reduced/avoided by theorganization.6.Debt collection policy is also very liberal. To avoid bad debts and to increaseeffective sales.7.Through the current assets a level is satisfactory. They excess of the fund canbeinvested in other productive applications.CHAPTER VIII
CONCLUSIONThe overall working capital management of BHEL is effective and satisfactory.However,effective steps may be taken to reduce sundry creditors and inventory by usinglatest toolsand techniques. the most care has been taken to analyze the working capitalposition of theBHEL, Apart from that growth and financial soundness of the studying unit havealso beenmade.
CHAPTER IXLIMITATION Only secondary data collected from BHEL trichy is used for the study, hence theaccuracy of the findings and conclusion of the statement will depend upon theaccuracyof the given data. Only five years financial statement of BHEL are used for this schedule. The limitations of the tools and techniques used in the study will also reflectin theoutcome of the study.
CHAPTER - XSCOPE FOR FURTHER STUDYThe present study concentrates on the working capital position with reference toBHEL. Inaddition to that study contains the analysis of financial soundness and growthof the firm inthe term of liquidity solvency and trend analysis.
BIBLIOGRAPHYBOOKSM.Y.Khan and p. k. Jain, financial management, third edition,Tata McGraw HillPublishing Company Limited, ,NEW Delhi, 2001.P.V. Kuldarni, and B.G. Sathyaprasad, financial management, Ninth edition,Himalaya publishing House, NEW Delhi, 2001.S. N. Maheshwari, principles of management accounting, Thirteenth edition,Sultanchand & sons New Delhi,2002.Dr. S. N. Maheshwari, financial management, sixth edition, Sultan chand & SonsNew Delhi,2000.I. M. Pandey, Financial management,eighth edition, Vikas publishing Housepvt.Ltd., New Delhi, 2003.Prasanna Chandra, Financial management,fourth edition,Tata McGraw- Hillpublishing Company Limited,New Delhi,1999.·Annual reaports of BHEL (2001-2006) Internal records of the companyWEBSITE:www. Bhel.orgwww. abb. inwww .ge. cowww.siemens.org