2. PROJECT FINANCE is the financing of long term industrial
projects based upon a complex financial structure divided in two
parts like debt funding & equity funding to meet total Project Cost
Management of trade credit is commonly known as Management
of Receivables.
When goods and services are sold under an agreement permitting
the customer to pay for them at a later date, the amount due from
the customer is recorded as accounts Receivables.
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3. To understand the concept of Project financing, it’s
various components, methods and nature of
project financing.
To analyse the various components of project
financing, which is specifically used in borrowing
the finance for the small-scale industry and large
scale industry. If focuses on the requirement and
the procedures applied by the banks for assessing
and sanction the loan.
To study the credit policy and procedure of
receivable management.
To study impact of receivable in financial liquidity.
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4. The financing of long-term infrastructure,
industrial projects and public services based
upon a non-recourse or limited recourse
financial structure where project debt and
equity used to finance the project are paid back
from the cash flows generated by the project.
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5. Finalization of Order
Loan Application Preparation Stage
Appraisal as carried out by Bank/Financial Institutions
Communication of sanction of financial assistance/
Sanction Letter
Acceptance of Financial Assistance by the Borrower
Post Sanction Formalities
Creation of stipulated securities like Equitable
Mortgage.
Execution of Loan Agreement
Loan Disbursement
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6. Additional cost to get loan viz. application & loan
procedure fees of the banks, stamp duty & legal
expenses involved
Details on existing facilities availed like Term
Loan, Cash Credit, Overdraft, Letter of credit, etc from
existing banks and security offered for these facilities.
Amount of loan.
Name of preferred banks.
Own contribution (margin money) and source of
margin money
Additional security available & offered for the
proposed loan
Rate of interest offered by various Banks .
Supporting documents required by the Banks.
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7. Statement mentioning purpose of investment
Type, capacity of technical inters.
Revenue generation with a current and budgeted figures
Details of government approvals
Technical specifications about the project.
Location details of the project
Type of land & plant & machinery and other infrastructure.
Details of Operation & Maintenance
Information on Cost Benefit Analysis
Report of techno economic viability study
Market scenario of the industry
Cost of the project
Means of Finance
Revenue Mechanism
Financial Projections including, IRR, Debt Equity Ratio, etc.
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8. Rate of interest
Security for the loan
Personal Guarantee
Corporate guarantee
Pledge
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9. What are receivables?
• Receivables are sales made on credit basis.
Why do we need receivables?
• To increase total sales
• To increase profits
• To meet increasing Competition
Understanding Receivables
• As a part of the operating cycle
• Time lag between sales and receivables creates
need for working capital
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10. ADMINISTRATIVE COST:
Administrative costs In form of salaries to clerks who
maintain records of debtors, expenses on investigating the
creditworthiness of debtors, etc.
CAPITAL COST:
Cost incurred in terms of interest (if financed from outside)
or opportunity cost (if internal recourses they could have
been put to some other use)
COLLECTION COST
Cost incurred for collection of amounts at the appropriate
time from the customers.
DEFAULTING COST:
Amounts which have to written off as bad debts.
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11. Credit policy encompasses the policy of a
company in respect of credit standards adopted,
the period over which credit is extended to
customers, any incentive in the form of cash
discount offered, as also the period over which
discount can be utilized by the customers and the
collection effort made by the company.
Various variables are:
Credit standards
Credit period
Cash discount
Collection program
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12. Monitoring
Receivable
↓ CHEQUE
Sending Letters
↓ Allowed
Telegraphic Advice REAL TIME
GROSS
Instrument
to customer NEFT
TRANSFER
↓ SETTLEMENT for Payment
Threat of Legal
action (overdue)
↓ DEMAND
Legal Action DRAFT
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13. Current Ratio = Current assets
Current liabilities
2.5
2
1.5
1
Current Ratio
0.5
0
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14. Quick ratio = Current Assets- (Inventories+ Prepaid expenses)
Current Liabilities
2
1.8
1.6
1.4
1.2
1
0.8
0.6 Quick Ratio
0.4
0.2
0
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15. Inventory Turnover Ratio = Sales
Average Inventory
44
43
42
41
40 Inventory
39 Turnover Ratio
38
37
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16. INVENTORY TURNOVER PERIOD=No. of Days in year /
Inventory turnover ratio
9.2
9
8.8
8.6
8.4
8.2
Invetory
8
Turnover Period
7.8
7.6
7.4
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17. Debtors turnover ratio = Total Sales
Debtors
Debtors Turnover Ratio
4.7
4.6
4.5
4.4
4.3
4.2
4.1 Debtors
4 Turnover
3.9 Ratio
3.8
3.7
3.6
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18. Debtors collection period = No. of days in theyear
Debtors Turnover
95
90
85
80 Debtors
75 Turnover Period
70
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19. Asset turnover ratio= Sales
Net Asset
Assets Turnover Ratio
4
3.5
3
2.5
2
1.5 Assets Turnover
1 Ratio
0.5
0
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20. The debtor’s collection period is not so good.
The quick ratio of Wipro Limited is showing a
fluctuating trend but it is good & above standard
ratio 1:1.
The current ratio of Wipro Limited is not
satisfactory but it is above the standard ratio i.e.
2:1 in 2012-11 but it below in 2011-10 & 2009-08.
Inventory turnover period has decreased from 9
days to 8 days in 2011 & 2012, because of lack
control of inventory.
Debtors collection period has come down from 90
to 79 & 78days due to efficient credit Management
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21. The company should go for Factoring services for
all the credit line customers. This will improve the
cash flow of the company and reduces the risk.
The company should remind the customer
periodically before the due date by sending
reminder letters / personal visit by marketing
executives.
The marketing department is to be advised for
increasing the cash sales by offering
quantity discounts.
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22. Project Financing and Receivables Management are interrelated
and interdependent concepts.
Receivables management plays an important role in maintaining
customers relationship. A good credit policy maintains good
relationship with customer.
Project financing is emerging as the preferred alternative to
conventional methods of self-financing of infrastructure and other
large-scale projects worldwide.
Throughout my project I have analyzed company’s financial
position and I have also interpreted the data. In spite of some
limitation we try to analyze and interpreted the facts and figures
with accuracy.
Based on the analysis and interpretation I tried to give my
findings and suggestions for the company as per my best
knowledge.
Finally project really helps us in knowing the practical things of
the corporate world. Really I enjoyed this project work in its real
spirit.
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