ACCOUNTING FOR MANAGERS

2. PREPARED BY:
Shivam Girdhar 16BSP2359
Srishti Kaushal 16BSP2572
Varun Khosla 16BSP2803
Tanya Gupta 16BSP2706
Sanjana Sardana 16BSP2226

3. ANALYSIS OF FINANCIAL HEALTH OF A
LOSS MAKING COMPANY i.e. BSNL

4. 1. The main objective of preparing this report is to analyse the financial health of the company i.e. Bharat Sanchar
Nagar Limited (BSNL) which was incurring huge losses from past many years due to the government who are
not issuing license to BSNL for mobile telecom and also the second reason is the huge operational cost.
2. Analyse the profit and loss statement that how they have maintained their balances and taxes and after that also
how their depreciation has been charged on their assets.
3. Also to find out what were the main reasons and what are the major services that BSNL provides to its customers
and the key area where BSNL has to improve with the news articles that are been shown in past years for this
telecom company.

5. Bharat Sanchar Nigam Limited (abbreviated BSNL) is an
Indian state self owned telecommunication company
headquartered in New Delhi
It is the largest provider of fixed
telephony and broadband services with more than 60% market
share
However, in recent years the company's revenues and market
share have plummeted into heavy losses due to intense
competition in the Indian telecommunications sector.
It has footprints throughout India except for Mumbai and new
Delhi which are managed by Mahanagar Telecom Nigam
(MTNL).

6. BSNL mobiles is major provider of GSM cellular mobile services under
the brand name Cellone. BSNL provides complete telecom services
solution to enterprise customers including MPLS, P2P and Internet leased
lines.
It provides fixedline services and landline using CDMA technology and its extensive
optical fiber network. BSNL provides Internet access services through dial-up
connection as prepaid, NetOne as postpaid and Dataone as BSNL Broadband
BSNL announced the discontinuation of its telegram services from 15 July 2013, after
160 years in service. It was opened to the public in February 1855; it was upgraded to
a web-based messaging system in 2010, through 182 telegraph offices across India

7. Rural Landline networks on an average of spending
Rs.708/line per month with a return of Rs.78/month.
Withdrawal of subsidies after being pushed into social obligation.
BSNL was forced to purchase useless broadband wireless spectrum on
pan India for 18Cr. which they have to pay to the government.
The main reason for company running into losses is its very huge
operational costs. Particularly here the salary component of its employees
is almost 10 times higher than that of any private operators in the field.

8. The financial analysis of any company can only be made with the help of Technical Analysis which
uses the Financial Analysis Tools.
These tools can take the form of:
1) Graphics
2) Common Size Analysis

9. Financial Year Revenue (in crores)
2012 -8851 Loss
2013 -7884 Loss
2014 -7085 Loss
2015 -8234 Loss
A) GRAPHICS
Graphically, with the help of data and a line graph the losses of BSNL are as follows –
Line Graph For the last 5 years of Bharat Sanchar Nagar Limited (BSNL) :
-8851
-7884
-7085
-8234
-10000
-9000
-8000
-7000
-6000
-5000
-4000
-3000
-2000
-1000
0
2012 2013 2014 2015
Line Graph For the last 4 years of
Bharat Sanchar Nagar Limited (BSNL)

10. As at As at
31st March 2015 31st March 2014
EQUITY AND LIABILITIES
Shareholder’s funds
Share capital 1,250,000 1,250,000
Reserves and surplus 3,506,443 4,470,295
Deferred government grant 28,497 33,037
4,784,940 5,753,332
Non-current liabilities
Long-term borrowings 5,619 72,000
Other long-term liabilities 344,477 330,074
Long-term provisions 28,438 85,532
Current liabilities
378,534 487,606
Short-term borrowings 632,871 373,853
Trade payables 828,914 870,657
Other current liabilities 734,591 682,363
Short term provisions 63,980 67,459
Total
2,260,356 1,994,332
7,423,830 8,235,270
ASSETS
Non-current assets
Fixed assets
– Tangible assets 3,522,316 4,144,428
– Intangible assets 863,184 917,677
– Capital work-in-progress 327,914 386,917
– Intangible assets under development - 923
4,713,414 5,449,945
Non-current investments 20,000 20,000
Deferred tax assets (net) 84,706 23,773
Long-term loans and advances 843,152 532,684
5,661,272 6,026,402
Current assets
Inventories 369,688 354,728
Trade receivables 232,660 276,258
Cash and bank balances 122,477 93,195
Short-term loans and advances 69,135 76,344
Other current assets 911,286 1,321,806
Intra/inter circle remittances
1,705,246 2,122,331
57,312 86,537
Total 7,423,830 8,235,270
BHARAT SANCHAR NIGAM LIMITED - Balance sheet

11. The changes in percentage from financial year 2014-15 are as follows –
Liabilities:
1) Reserves and Surplus showed a negative percentage change of 21.56%
2) Under the long term borrowings, the secured loans increased from NIL in the year 2014 to Rs.5169 Lakhs in the year 2015.
This also had an impact on the debt-equity ratio of the firm thereby causing it to decrease
3) The short term borrowings experienced an increase in the percentage change by 69.2%. This implies that the working
capital requirements and the daily operating expenses of BSNL reported an increase
Assets:
Both the percentage change in the Current Assets as well as fixed assets as compared to financial year 2013-14 was negative.
1) The current assets fell by a negative percentage of 6%
2) The fixed assets also fell negatively by 19.6%
B) COMMON SIZE ANALYSIS

12. Accounting Ratios and Implications -
1. Debt Equity Ratio = Debt/Equity = 0.55
An ideal debt-equity ratio of any company is 2:1. However, BSNL reported a DE ratio of 0.55:1 which is lesser than the
ideal ratio. The company is raising funds through equity which will lead to lose their control for decision making.
2. Current Ratio = Current Assets/Current Liabilities = 0.75.
Any current ratio which is under 1 indicates that the company’s liabilities are greater than its assets and suggests that the
company in question would be unable to pay off its obligations if they came due at that point
3. EPS (Earnings per share) = Net income by total no of shares of company = (16.47)
The values of EPS below zero mean that the shareholder are losing money
5. Solvency Ratio = Net Income + Depreciation/ Short Term Liabilities + Long Term Liabilities = 22%. Solvency Ratio is also a
key metric used to measure an enterprise’s ability to meet its debt and other obligations. The solvency ratio indicates whether a
company’s cash flow is sufficient to meet its short term and long term liabilities. The lower a company’s solvency ratio, the
greater is the probability that it will default on its debt obligations.
RATIO ANALYSIS

13. There is decrease in the cash flow from the operating activities
from Rs.104582 to Rs.60023 which indicates that there is a
decrease in operating activity due to slow down of business
Cash Flow Analysis
There is no major change in cash flow of investing activities
There is increase in short term borrowing from Rs.117739 To
RS 259018 because the company doesn’t have sufficient funds
for the working capital

14. BSNL net loss widens to Rs.8234 crore in FY15 due to asset depreciation.
If you look at the table carefully, you will realize that at EBIDTA level, which is very important parameter in judging company performance, especially telecom companies,
BSNL still made a loss of 731 crores. But when Public Relations of BSNL announced the news, they added other income, which has nothing much to do with core operations
(Interest on bank deposits, liquidity damages etc.) to EBIDTA. So adding other income of 1403 crore, they announced operating profit of 672 crores.
In a nutshell they have not turned around. BSNL is still bleeding. And due to loss making landline operations, they will keep on making losses.
All amounts are in Rs. Cr.
Still Bsnl is a loss making company only.
Only BSNL got Operating Profit Rs 672 crore and Net Loss Rs 8234 crore for the year 2014-15.
Also Net loss increased from Rs 7019.76 crore in 2013-14 to Rs 8234.90 crore in 2014-15

15. BSNL: A story of turnaround
BSNL will have to get back into making profits and not just operational profits to be strong PSU.
Prime Minister Narendra Modi had singled out BSNL for special mention about the turnaround in their fortune in
his Independence Day broadcast. BSNL expects to earn a revenue of Rs 30,000 crores in 2015-16, and made an
operating profit of Rs 670 crores in 2014-15. It showed an operating profit of Rs 672 crores in FY 2014-15 from
an operating loss of Rs 691 crores in FY 2013-14.
Interestingly the Telecom Watchdog says that the BSNL’s operating profit was due to an advance of Rs 720
crores in 2003 from the department of telecommunications being waived off in 2014-15. It also alleges that the
telecom minister’s actions have not benefited BSNL and has given a private telecom company an advantage. If
this is true then it needs to be looked into.
Why is BSNLnot making a profit like othertelecom companies?
It was happened by the Govt. policy. At first, mobile phone license was not given to BSNL, until private
companies looted the public by charging huge amount for O/G & I/C calls. Next, after entering in mobile sector,
BSNL was not permitted to purchase sufficient equipments to compete private co's. Then, Rs. 18000 Cr. was
taken away from BSNL to the Govt. as License fee. As a social obligation, BSNL is suffering with Rs. 14000Cr.
loss yearly, for landline sector where rural areas and private co's are not willing to go. BSNL gains Rs 7000 Cr.
from mobile sector. Thus, net loss is Rs.7000 Cr. yearly.

16. We also notice that in last four year how their revenues (losses)
are fluctuating as depicted in the line graph as well.
After preparing this report we have analysed the financial health of the company
i.e. Bharat Sanchar Nagar Limited (BSNL) which was incurring huge losses from
past many years due to the government who are not issuing license to BSNL for
mobile telecom and also the second reason is the huge operational cost.
And with this we came to know that how liabilities and assets in the balance sheet
changes over the period of time.
At the end there are some news articles that are showing that how this company
i.e. BSNL incurring losses and what were he consequences over then company.