The document analyzes the working capital turnover ratios of BHEL and Crompton Greaves from 2002-2003 to 2011-2012. It finds that BHEL had an average working capital turnover ratio of 2.01 over this period, ranging from 1.61 to 2.59 annually. Crompton Greaves had a higher average ratio of 6.44, ranging from 5.24 to 8.69. The document compares the ratios between the two companies and uses a t-test to determine if there is a significant difference between their working capital efficiency.

1. International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online),
Volume 6, Issue 3, March (2015), pp. 01-07 © IAEME
1
SIGNIFICANCE OF WORKING CAPITAL TURNOVER
RATIO: A CASE STUDY OF BHEL AND CROMPTON
GREAVES
Vineet Singh
Assistant Professor, Dept. of Commerce,
Guru Ghasidas Vishwavidyalaya, Bilaspur, Chhattisgarh.
ABSTRACT
The present study is an attempt to analyze the working capital turnover ratio of Bharat Heavy
Electricals Limited (BHEL). Working Capital Turnover Ratio indicates the efficiency of working
capital in making sales. In order to provide a better insight into the study a comparison is made
between working capital turnover ratio of BHEL and Crompton Greaves (C.G). In addition, t-test is
applied in order to find out that whether there is a significant difference between working capital
turnover ratio of BHEL and C.G or not.
Key words: BHEL, Crompton Greaves, Working Capital Turnover Ratio.
INTRODUCTION
Working Capital Turnover Ratio indicates the relationship between the cost of goods sold
during the year and net working capital during the year. This ratio reveals how efficiently working
capital has been utilised in making sales. A high working capital turnover ratio shows efficient use of
working capital and quick turnover of current assets like stock and debtors.
BHEL is one of the very few companies in the world, which manufactures all major power
generating equipment under one roof such as Turbines and Generator Sets, Boilers, Transformers,
Switchgear and Control Gear, Electrical Furnace etc. BHEL is India largest engineering and
manufacturing enterprise in the energy-related infrastructure sector which was established more than
40 years ago and has been earning profits continuously since 1971-72. BHEL manufactures over 180
products under 30 major product groups and caters to core sectors of the Indian Economy.
Crompton Greaves is India's largest private sector enterprise in the field of heavy electrical
industry and is engaged in designing, manufacturing and marketing technologically sophisticated
electrical products and services, which are mainly concerned with power generation, transmission
and distribution. C.G was established in 1937 in India, and since then the company has retained its
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2. International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online),
Volume 6, Issue 3, March (2015), pp. 01-07 © IAEME
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leadership position in the application and management of electrical energy. Crompton Greaves has
three important strategic business areas which includes Power systems, Industrial systems and
Consumer products. Crompton Greaves is engaged in designing, manufacturing and marketing
technologically sophisticated electrical products and services, which includes power generation,
transmission and distribution, in addition executing turn-key projects to make it available ready-to-
use condition.
OBJECTIVE OF STUDY
(i) To estimate the working capital turnover ratio of BHEL during 2002-2003 to 2011-2012.
(ii) To estimate the working capital turnover ratio of C.G during 2002-2003 to 2011-2012.
(iii) To compare the working capital turnover ratio of BHEL and C.G during 2002-2003 to 2011-
2012.
(iv) To test whether there is a significant difference between working capital turnover ratio of
BHEL and C.G with the help of t test during 2002-2003 to 2011-2012.
RESEARCH METHODOLOGY
The study is primarily based on secondary data. The relevant information in this regard has
been collected from various sources like annual reports of BHEL and Crompton Greaves for the
research year 2002-2003 to 2011-2012 and websites. In addition reference books have been referred
from libraries, materials from journal articles, textbooks, working papers are also put into
consideration. Thus, various sources have been used to collect the relevant data. The analysis is
mainly carried out through various statistical measures like percentage, average, t test etc.
Analysis and Interpretation:
To make an analysis, working capital turnover ratio of BHEL and C.G has been calculated by
following tables and graphical representation, followed by a comparative study.
Table 1: Working Capital Turnover Ratio (BHEL)
Year
Cost of Goods
Sold (BHEL)
Net Working
Capital (BHEL)
Working Capital
Turnover Ratio (BHEL)
2002-2003 6073.30 3592.34 1.69
2003-2004 6945.03 4087.85 1.70
2004-2005 7864.14 4897.09 1.61
2005-2006 10751.03 6010.76 1.79
2006-2007 13458.53 6642.86 2.03
2007-2008 14838.64 7883.88 1.88
2008-2009 21332.33 8568.17 2.49
2009-2010 26237.44 10493.09 2.50
2010-2011 32506.13 12551.37 2.59
2011-2012 36874.86 19992.01 1.84
Average 17688.14 8471.94 2.01

3. International Journal of Management (IJM), ISSN 0976
Volume 6, Issue 3, March (2015), pp.
Fig. 1: Working Capital Turnover Ratio (BHEL)
Table 1 exhibits working capital turnover ratio of BHEL
during the study period of 2002-2003 to 2011
BHEL amounted to Rs. 6073.30
which has resulted in working capita
at Rs. 6945.03 crores and net working capital amounted to Rs.
working capital turnover ratio of
stood at 1.61:1. In the same year t
net working capital amounted to Rs.
amounted to Rs. 10751.03 crores and net working capi
resulted in working capital turnover ratio of
turnover ratio stood at 2.03:1. Further in the year 2007
amounted to Rs. 14839.64 crores and net working capital amounted to Rs.
resulted in working capital turnover ratio of
21332.33 crores and net working capital amounted to Rs.
working capital turnover ratio of
stood at 2.50:1. The cost of goods sold of BHEL amounted to Rs.
capital amounted to Rs. 10493.09
goods sold amounted to Rs. 32506.13
crores which has resulted in working capital turnover ratio of
working capital turnover ratio of BHEL stood at
also been shown with the help of Figure 1.
0
0.5
1
1.5
2
2.5
3
Working Capital Turnover Ratio (BHEL)
International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976
(2015), pp. 01-07 © IAEME
3
Working Capital Turnover Ratio (BHEL)
orking capital turnover ratio of BHEL which stood at an average of 2.01:1
2003 to 2011-2012. In the year 2002-2003 the cost of goods sold in
6073.30 crores and net working capital amounted to Rs.
which has resulted in working capital turnover ratio of 1.69:1. In 2003-2004 cost of goods sold stood
crores and net working capital amounted to Rs. 4087.85 crores which has resulted in
working capital turnover ratio of 1.70:1. In 2004-2005 the working capital turnover ratio o
In the same year the cost of goods sold of BHEL amounted to Rs.
net working capital amounted to Rs. 4897.09 crores. In the year 2005-2006 the cost of goods sold
crores and net working capital amounted to Rs. 6010.76
resulted in working capital turnover ratio of 1.79:1. In the year 2006-2007 the working capital
:1. Further in the year 2007-2008 the cost of goods sold in BHEL
crores and net working capital amounted to Rs. 7883.88
resulted in working capital turnover ratio of 1.88:1. In 2008-2009 cost of goods sold stood at Rs.
crores and net working capital amounted to Rs. 8568.17 crores
working capital turnover ratio of 2.49:1. In 2009-2010 the working capital turnover ratio of BHEL
The cost of goods sold of BHEL amounted to Rs. 26237.44 crores and net working
10493.09 crores in the year 2009-2010. In the year 2010
32506.13 crores and net working capital amounted to Rs.
which has resulted in working capital turnover ratio of 2.59:1. In the year 2011
apital turnover ratio of BHEL stood at 1.84:1. Working capital turnover ratio of BHEL has
also been shown with the help of Figure 1.
Working Capital Turnover Ratio (BHEL)
Working Capital Turnover Ratio (BHEL)
6502(Print), ISSN 0976 - 6510(Online),
stood at an average of 2.01:1
2003 the cost of goods sold in
crores and net working capital amounted to Rs. 3592.34 crores
2004 cost of goods sold stood
crores which has resulted in
2005 the working capital turnover ratio of BHEL
he cost of goods sold of BHEL amounted to Rs. 7864.14 crores and
2006 the cost of goods sold
6010.76 crores which has
2007 the working capital
2008 the cost of goods sold in BHEL
7883.88 crores which has
2009 cost of goods sold stood at Rs.
which has resulted in
2010 the working capital turnover ratio of BHEL
crores and net working
2010. In the year 2010-2011 the cost of
crores and net working capital amounted to Rs. 12551.37
:1. In the year 2011-2012 the
Working capital turnover ratio of BHEL has
Working Capital Turnover Ratio (BHEL)

4. International Journal of Management (IJM), ISSN 0976
Volume 6, Issue 3, March (2015), pp.
Table 2:
Fig. 2: Working Capital Turnover Ratio (C.G)
Table 2 reveals working capital turnover ratio of C.G
during the study period of 2002-2003 to 2011
C.G amounted to Rs. 1485.39 crores and net working capital amounted to Rs.
has resulted in working capital turnover ratio of
of C.G. stood at 6.44:1. In 2004-
the year 2005-2006 the cost of goods sold amounted to Rs.
amounted to Rs. 331.32 crores which has resulted in working capital turnover ratio of
year 2006-2007 the working capital turnover ratio stood at
sold amounted to Rs. 3030.25 crores and net working capital amounted to Rs.
in the year 2007-2008 the cost of goods sold in C.G amounted to Rs.
capital amounted to Rs. 360.93 crores which has resulted in working capital turnover r
In 2008-2009 cost of goods sold stood at Rs.
570.30 crores which has resulted in working capital turnover ratio of
0
1
2
3
4
5
6
7
8
9
10
Working Capital Turnover Ratio (C.G)
Year
Cost of Goods Sold
(C.G)
2002-2003 1485.39
2003-2004 1583.32
2004-2005 1824.62
2005-2006 2299.42
2006-2007 3030.25
2007-2008 3363.00
2008-2009 3967.84
2009-2010 4393.73
2010-2011 5003.77
2011-2012 5781.02
Average 3273.24
International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976
(2015), pp. 01-07 © IAEME
4
Table 2: Working Capital Turnover Ratio (C.G)
Working Capital Turnover Ratio (C.G)
orking capital turnover ratio of C.G which stood at an average of 6.83:1
2003 to 2011-2012. In the year 2002-2003 the cost of goods sold in
crores and net working capital amounted to Rs.
turnover ratio of 5.26:1. In 2003-2004 working capital turnover ratio
-2005 the working capital turnover ratio of C.G stood at
2006 the cost of goods sold amounted to Rs. 2299.42 crores and net working capital
crores which has resulted in working capital turnover ratio of
2007 the working capital turnover ratio stood at 7.33:1. In the same year
crores and net working capital amounted to Rs.
2008 the cost of goods sold in C.G amounted to Rs. 3363.00
crores which has resulted in working capital turnover r
2009 cost of goods sold stood at Rs. 3967.84 crores and net working capital amounted to Rs.
which has resulted in working capital turnover ratio of 6.96
Working Capital Turnover Ratio (C.G)
Working Capital Turnover Ratio (C.G)
Cost of Goods Sold Net Working Capital
(C.G)
Working Capital
Turnover Ratio (C.G)
282.52 5.26
246.01 6.44
303.60 6.01
331.32 6.94
413.42 7.33
360.93 9.32
570.30 6.96
620.02 7.09
686.37 7.29
1014.19 5.70
482.87 6.
6502(Print), ISSN 0976 - 6510(Online),
stood at an average of 6.83:1
2003 the cost of goods sold in
crores and net working capital amounted to Rs. 282.52 crores which
2004 working capital turnover ratio
2005 the working capital turnover ratio of C.G stood at 6.01:1. In
and net working capital
crores which has resulted in working capital turnover ratio of 6.94:1. In the
:1. In the same year the cost of goods
crores and net working capital amounted to Rs. 413.42 crores. Further
crores and net working
crores which has resulted in working capital turnover ratio of 9.32:1.
crores and net working capital amounted to Rs.
6.96:1. In 2009-2010 the
Working Capital Turnover Ratio (C.G)
Working Capital
Turnover Ratio (C.G)
5.26
6.44
6.01
6.94
7.33
9.32
6.96
7.09
7.29
5.70
6.83

5. International Journal of Management (IJM), ISSN 0976
Volume 6, Issue 3, March (2015), pp.
working capital turnover ratio of C.G stood a
amounted to Rs. 4393.73 crores and net working capital amounted to Rs.
2010-2011 the cost of goods sold amounted to Rs.
to Rs. 686.37 crores which has resulted in working capital turnover ratio of
2012 the working capital turnover ratio of C.G stood at
C.G. has also been shown with the help of Figure 2.
Table 3: Working Capital Turnover Ratio (BHEL and C.G)
Year
Working Capital Turnover Ratio
(BHEL)
2002-2003 1.69
2003-2004 1.70
2004-2005 1.61
2005-2006 1.79
2006-2007 2.03
2007-2008 1.88
2008-2009 2.49
2009-2010 2.50
2010-2011 2.59
2011-2012 1.84
Average 2.01
Fig. 3: Working Capital Turnover Ratio (BHEL and C.G)
Table 3 reveals working capital turnover ratio of BHEL and C.G
2.01:1 and 6.83:1 respectively during the study period of 2002
2003 the working capital turnover ratio of BHEL stood at
turnover ratio of Crompton Greaves stood a
turnover ratio of BHEL and Crompton Greaves stood at
working capital turnover ratio of
0
2
4
6
8
10
Working Capital Turnover Ratio
Working Capital Turnover Ratio (BHEL)
International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976
(2015), pp. 01-07 © IAEME
5
working capital turnover ratio of C.G stood at 7.09:1. In the same year the cost of goods sold of C.G
crores and net working capital amounted to Rs. 620.02
2011 the cost of goods sold amounted to Rs. 5003.77 crores and net working capital amounted
which has resulted in working capital turnover ratio of 7.29
2012 the working capital turnover ratio of C.G stood at 5.70:1. Working capital turnover ratio of
C.G. has also been shown with the help of Figure 2.
Working Capital Turnover Ratio (BHEL and C.G)
Working Capital Turnover Ratio
(BHEL)
Working Capital Turnover
Ratio (C.G)
1.69 5.26
1.70 6.44
1.61 6.01
1.79 6.94
2.03 7.33
1.88 9.32
2.49 6.96
2.50 7.09
2.59 7.29
1.84 5.70
2.01 6.83
Working Capital Turnover Ratio (BHEL and C.G)
orking capital turnover ratio of BHEL and C.G which
2.01:1 and 6.83:1 respectively during the study period of 2002-2003 to 2011-2012. In the year 2002
2003 the working capital turnover ratio of BHEL stood at 1.69:1where as the working capital
turnover ratio of Crompton Greaves stood at 5.26:1. In the year 2003-2004 the working capital
turnover ratio of BHEL and Crompton Greaves stood at 1.70:1 and 6.44:1 respectively. BHEL has a
working capital turnover ratio of 1.61:1 where as Crompton Greaves has a working capital turnover
Working Capital Turnover Ratio
(BHEL and C.G)
Working Capital Turnover Ratio (BHEL) Working Capital Turnover Ratio (C.G)
6502(Print), ISSN 0976 - 6510(Online),
he cost of goods sold of C.G
620.02 crores. In the year
crores and net working capital amounted
7.29:1. In the year 2011-
Working capital turnover ratio of
Working Capital Turnover Ratio (BHEL and C.G)
Working Capital Turnover
Ratio (C.G)
Working Capital Turnover Ratio (BHEL and C.G)
which stood at an average of
2012. In the year 2002-
:1where as the working capital
2004 the working capital
:1 respectively. BHEL has a
:1 where as Crompton Greaves has a working capital turnover
Working Capital Turnover Ratio
Working Capital Turnover Ratio (C.G)

6. International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online),
Volume 6, Issue 3, March (2015), pp. 01-07 © IAEME
6
ratio of 6.01:1 in 2004-2005. In the year 2005-2006 the working capital turnover ratio of BHEL
stood at 1.79:1 where as the working capital turnover ratio of Crompton Greaves stood at 6.94:1. In
the year 2006-2007 BHEL has a working capital turnover ratio of 2.03:1 where as Crompton
Greaves has working capital turnover ratio of 7.33:1. Further in the year 2007-2008 the working
capital turnover ratio of BHEL and Crompton Greaves stood at 1.88:1 and 9.32:1 respectively.
BHEL has a working capital turnover ratio of 2.49:1 where as Crompton Greaves has a working
capital turnover ratio of 6.96:1 in 2008-2009. In the year 2009-2010 the working capital turnover
ratio of BHEL stood at 2.50:1 where as the working capital turnover ratio of Crompton Greaves
stood at 7.09:1. In the year 2010-2011 BHEL has working capital turnover ratio of 2.59:1 where as
Crompton Greaves has a working capital turnover ratio of 7.29:1. In the year 2011-2012 the working
capital turnover ratio of BHEL and Crompton Greaves stood at 1.84:1 and 5.70:1 respectively.
Working capital turnover ratio of BHEL and C.G has also been shown with the help of Figure 3.
HYPOTHESIS TESTING ON WORKING CAPITAL TURNOVER RATIO (BHEL and C.G)
To test whether there is a significant difference between working capital turnover ratio of
BHEL and C.G the following hypothesis is framed and tested through t-test at 95 % confidence
level:
H0 There is no significant difference between working capital turnover ratio of BHEL and C.G
H1 There is a significant difference between working capital turnover ratio of BHEL and C.G
t-Test: Two-Sample Assuming Unequal Variances
PARAMETERS
WORKING CAPITAL TURNOVER
RATIO BHEL
WORKING CAPITAL
TURNOVER RATIO C.G
Mean 2.011686579 6.832530143
Variance 0.140211593 1.257813604
Observations 10 10
Hypothesized Mean Difference 0
df 11
t Stat -12.89334309
P(T<=t) one-tail 2.77125E-08
t Critical one-tail 1.795884814
P(T<=t) two-tail 5.5425E-08
t Critical two-tail 2.200985159
Since the calculated value of t two tail at .05 level of significance is more than the table value
of t, null hypothesis is rejected and alternative hypothesis is accepted that there is a significant
difference between working capital turnover ratio of BHEL and C.G.
CONCLUSION
On the basis of above analysis it can be concluded that BHEL is maintaining working capital
turnover ratio at an average of 2.01:1 where as C.G is maintaining working capital turnover ratio at
an average of 6.83:1 during the study period of 2002-2003 to 2011-2012. Working Capital Turnover
Ratio indicates the relationship between the cost of goods sold during the year and net working
capital during the year. This ratio reveals how efficiently working capital has been utilised in making
sales. A high working capital turnover ratio shows efficient use of working capital and quick
turnover of current assets like stock and debtors. The above analysis reveals that C.G is able to
maintain a higher working capital turnover ratio during the study period than BHEL, which means

7. International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online),
Volume 6, Issue 3, March (2015), pp. 01-07 © IAEME
7
that C.G is able to use its working capital more efficiently than C.G. In addition the above analysis
also reveals that there is a significant difference between working capital turnover ratio of BHEL and
Crompton Greaves.
REFERENCES
1. Annual Reports of Bharat Heavy Electricals Limited (BHEL) 2002-03 to 2011-12
2. Annual Reports of Crompton Greaves (C.G) 2002-03 to 2011-12
3. http://www.bhel.com/home.php
4. http://www.cgglobal.com/
5. James, C. Van Horne, ‘Financial Management and Policy’, Prentice-Hall of India Pvt. Ltd,
New Delhi, 2008
6. Khan, M. Y. and Jain, P. K., ‘Financial Management: Text and Problems’, Tata McGraw-Hill
Publication Company Limited, New Delhi, 2010.
7. Agarwal, N. K., ‘Management of Working Capital’, Sterling Publication Pvt. Ltd., New
Delhi, 1993.
8. Financial Management (Shashi K. Gupta, R. K. Sharma)
9. Arunkumar O. N and T. Radharamanan, “Working Capital Management and Profitability: An
Empirical Analysis of Indian Manufacturing Firms” International Journal of Management
(IJM), Volume 4, Issue 1, 2013, pp. 121 - 129, ISSN Print: 0976-6502, ISSN Online: 0976-
6510.
10. Dr. A. Selvarani and M. Chandra, “Examining The Impact on Industry Background and
Gender on Job Satisfaction, Organizational Commitment and Turnover Intent” International
Journal of Management (IJM), Volume 6, Issue 1, 2015, pp. 191 - 199, ISSN Print: 0976-
6502, ISSN Online: 0976-6510.