Professional Documents
Culture Documents
INTRODUCTION
1.1 PROFILE OF THE COMPANY (BHEL)
enterprise of its king in India. It is also one of the leading international companies in the
The first plant of BHEL was set up at Bhopal in 1956, which signaled the beginning
In the early sixties, three more major plants were set up at Haridwar, Hyderabad and
Trichy. The company has fourteen manufacturing units, four power sector regional centers,
eight service centers and eighteen regional offices, besides project sites, spread all over
India and abroad. A strategic business unit for ceramics was formed at Bangalore.
continuously since 1971-72 and paying dividends since 1976-77. BHEL manufactures over
The quality and reliability of its products is due to the emphasis on design,
engineering and manufacturing to international standards best acquiring and adopting some
of the best technologies from leading companies in the world together with technologies
BHEL has acquired certifications from both ISO 9000 & ISO 14000 standards for
its operations and has also adopted the concepts of total quality management. BHEL has
adopted occupational health and safety standards as per OHSAS 18001. The major units of
The company’s inherit potential coupled with its strong performance over the years
BHEL’s operations are organized around three business sectors namely Power,
1.6.1 Generation
Power generation sector comprises thermal, gas, hydro and nuclear power plant
business. Though BHEL supplied sets account logs nil till 1969- 70, it rises to 62,051
BHEL has the capability of turning power projects from concept to commissioning.
With its technology, it has the ability to produce thermal sets with super critical parameters
unto 1000 MV unit rating and gas turbine- generator sets of upto 240 MV units rating.
1.6.2 Achievements
a) To make the most part of the high-ash content coal used in India, BHIL supplies
circulating fluidized bed combustion boilers to both thermal and combined cycle power
plants.
c) Custom made hydro sets of Francis, Pelton and Kaplan types for different head-
d) Until now, the company had placed orders for more than 700 utility sets of
thermal, hydro, gas and nuclear plants. This is based on contemporary technology
1.7.1 Industry
contributions are cement, sugar, fertilizer, refineries, petrochemicals, steel, paper etc.
The range of systems and equipment supplied includes captive power plants, DG
power plants, high-speed industrial drive turbines, electrical machines, pumps, valves etc.
1.7.2 Transportation
Most of the trains operated by the Indian railways, including the metro in Calcutta,
are equipped with BHEL’s traction electrics and traction control equipment. The company
also supplies electric locomotives to Indian railways and diesel shunting locomotives to
various industries.
1.8 Telecommunication
sources of energy include, wind electric generators, solar-power based water pumps,
BHEL has been established in over 50 counties of the world. Its knowledge is
known 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 gas
based type besides a wide variety of products like Switchgear, transformers and heat
exchangers.
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, SriLanka
etc.
Their development in overseas has also provided BHEL, the experience of working
The demanding requirements of both domestic and international markets have been
capabilities.
The company has also been successful in meeting varying needs of the industry like
captive power plants, utility power generation or for the oil sector requirements.
companies for large projects. The company also exhibits adaptability by manufacturing and
BHEL can be compared with the original equipment manufactures by its success in
6. Boilers
7. Boilers Auxiliaries
8. Pumps
Employees, customers and suppliers are given adequate knowledge about environment.
BHEL will also assist and co-operate with the concerned Government Agencies and
1.11 Mission
solutions through quality products, systems and services in the fields of energy, industry,
1.12 Values:
1.13.1 World
Investments made in the electricity sector have been lowered in recent years by
foreign electricity venture as foreign direct investment in the developing world. This is one
of the parts of the sluggish state of the global economy and because of unsatisfactory
These changes in the environment have led to a cautious approach by developers and it’s
harder to get off the new projects from the ground. Some countries have modified their
The total worldwide order of booking has been lowered leading to aggressive
marketing by major global power plant equipment manufacturing players, who have been
Though there has been a decrease in overall orders in the recent times, many
developing nations are planning to expand their electricity infrastructure for the
forthcoming years.
Number of promising market for new power equipment are found in South- East
Moreover, BHEL has the global opportunity for servicing of generating machinery
BHEL has finalized a new corporate plan with the title “strategic plan 2007” and
steps are taken to start the iniatives. The company has also revised the vision, mission and
values statements, which are suitably adjusted and with remodification to reflect it’s current
aspuations.
In corporate line the company aims to accelerate the growth with suitable strategies
and focus area the core strengths of the and company are
1) To strengthen and extend the core business of power generation power, power
2) Areas like water management pollution control and waste management, port
handling systems, simulators [power and process], energy conservation systems, LNG
3) To enter into continuous revenue stream business like power generation and
BHEL, Trichy unit was established in 1963 and is situated in Trichy- Tanjore
highway road around 20km from Trichy Central Bus Stand. 12,000 employees are working
in this organization on permanent basis and around 4000 employees are working on
contract basis. It has an area of 2, 50,000 sq. meters and consists of a major unit namely.
o Industrial Applications
o Industrial Boilers
o Combustion Boilers
o Pressure Vessels
o Hear Exchange
o Studded tubes
o Piping systems
o Columns
o Valves
o Boiler Auxiliaries
The following are the important operations of finance department of BHEL, Trichy.
Sales Accounting
Purchase Approvals
Budgets
Costing
Pay Roll
Internal Audit
System
REVIEW OF LITERATURE
Working capital management is concerned with the decisions which are related with
the current assets and the current liabilities. It means, it concerned with day-to-day
management activities.
The key factor, which is used to differentiate long term financial management and
But a short time financial decision mainly involves the cash flow within a year, or
the assets which can be converted into cash with an accounting year or operating cycle. It
also includes cash, short-term securities, debtors, bills receivable and stock.
The difference between current assets and current is called the net working capital.
Current liabilities are the one which is claimed from the outsiders and are expected to be
returned within an accounting year. It includes creditors, bills payable, and out siding
expenses.
Net working capital may be positive or negative. A net working capital becomes
positive only when the current assets exceed current liabilities. A negative net working
1. Inadequate working capital will lead to a condition, in which one cannot pay its
short-term liabilities in time. So there arises a situation where there is a loss of reputation
3. Difficulties will arise in meeting the day-to-day expenses. This will lead to
profitable projects.
5. Due to scarcity of working capital, fixed assets are not properly utilized. Thus
1. Excessive working capital will lead to low investments in fixed assets. Hence
there will be no profits for the business and there can be no proper rote of return on its
investments.
2. The low rate of return on investment will lead to the fall in the value of shares.
4. Excessive debtors and defective credit policy are the indication of excessive
working capital. There may be delay in collection and increased incidence of bad debts.
5. Excessive working capital will make the management complacent. This will lead
Beyond the limit, both the current assets i.e., inadequate working capital and
excessive working capital are dangerous. Beyond the limitations of both the level, the
As the operating cycle is a continuous process, the need for current assets is felt
constantly. The Magnitude of the current assets need not to be the same. It may increase or
required by the firm to continue its business operations. This minimum level of the current
assets is known as permanent or fixed working capital. However the permanent working
On the other hand, when there is a slack period in the market, the investment made
The change of the extra working capital used to support the production and sales, is
When the company has a peak period of sales, it will have large amount of
inventories, when compared to their normal sales. This makes the costumers to invest
statements through ratios. Now a day it is used by all the business and industrial concerns
2.7 RATIO
The term ratio simply means one number expressed in terms of another. It describes
in mathematical terms the quantitative relationship that exists between two numbers.
1. CURRENT RATIO
Current assets
Current liability
2. QUICK RATIO
Liquid assets
Current liabilities
3. CASH RATIO
Cash
It indicates the number time debtors turned over each year. Generally the
higher value of debtor’s turnover shows high efficiency to manage the credit
management.
Total sales
Debtors
Days/months in a year
The ratio shows on an average the number of times creditors turned over
Credit purchase
Creditor’s turnover ratio indicates the number of days taken by the firm, to
Days/months in a year
Sales
Inventory
Days/months in a year
This ratio explains the relationship between sales and working capital.
Net sales
___________________
Cash balance
2.9 ARTICLES
others earlier. This gives a complete idea about one’s project. It also helps to correct the
mistakes done in the earlier projects. Summing up, it improves one’s project.
So with this idea, let us see some of the projects done by others earlier.
with the title “Working Capital Management in Bharath Heavy Electricals Limited,
Tiruchirrappalli”. He did this project in the month of June 2004, using the data from 1998
to 2003.
To know the amount of funds allotted in the current assets and to forecast the
In all the years the value of the quick ratio is higher than the ideal value; it indicates
Cash ratio clearly indicates firm’s debt borrowing power from financial institutions
The firm’s debt collection period have more than 150 days. Firm increased the debt
collection period year by year. It shows firm’s liberal debt collection policy.
Working capital turnover ratio was decreased in year by year. It clearly shows firm
Mr. G. Dhanabal., MBA., of Bharathidasaan University did a project with the title
He did the project in the month of June 2004, using the data from 1998 to 2003.
Firm ability have been was increasing every year in order to meet the short
term liabilities.
company.
Tanjore co-operative milk supply society Ltd.” Which is the partial fulfillment of the
requirements for the award of her degree submitted to Bharathidasan University, in the year
Analysis the short term liquidity position of the study unit during the period 96-97
to 2000-01.
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 1997-98
and 98-99 indicates sufficient amount of working capital and effective utilizations
of working capital.
TSRM Limited Trichy”. Which is the partial fulfillment of the requirements for the award
of her M.Com degree submitted to Bharathidasan University, in the year November – 2003.
Ltd, Trichy.
The company has been taken for sufficient care for the maintenance of adequate
accounting period.
The proportion of net W/c to total assets showed on increasing trend through
Cement Limited Trichy”. Which is the partial fulfillment of the requirements for the award
Raw Material Consumption over the study period in terms of quantity and value has
The concern has show dormant and fast moving inventories during the 5 years a
study period.
is satisfactory positive
CHAPTER –III
3.1 OBJECTIVES
1. Evaluate the working capital of the company during the period of study.
deficiency if any.
CHAPTER –IV
It is purely and simply the framework or a plans for the study that guides the
collection and analysis of data. Research is the scientific way to solve the problem and it’s
increasingly used to improve market potential. This involves exploring the possible
methods, one by one, and arriving at the best solution, considering the resources at the
disposal of research.
CHAPTER – V
DATA ANALYSIS AND INTERPRETATION
TABLE – 5.1
INTERPRETATION
Current ratio during the year 2001-2002 was 1.71 and its slightly increased in 1.76
at 2002-2003 and its decreased 2003–2004 at 1.65 and its same value in 2004–2005 and
2005 – 2006. There is no significant.
CHART – 5.1
CURRENT RATIO
1.8
1.75
PERCENTAGE
1.7
current ratio
1.65
1.6
1.55
1.5
1.45
2001- 2002- 2003- 2004- 2005-
02 03 04 05 06
YEARS
TABLE – 5.2
STATEMENT SHOWING QUICK RATIO
Rs in lakhs
YEAR 2001-2002 2002-2003 2003-2004 2004-2005 2005 -2006
LIQUID 605716.15 634734.05 832081.57 1042687.26 1258640.84
ASSETS
LIQUID 471346.54 475605.95 633685.33 844589.43 1032002.23
LIABILITIES
INTERPRETATION
The quick ratio in the year 2001-2002 was 1.29 and it gets increased 0.04% at 2002
and 2003 (1.33) and in 2003-2004 get decreased 0.02% (1.31) and 2004-2005 get decreased
0.08% (1.23) and it again decreases 2005-2006 at 0.01%(1.22).
CHART – 5.2
LIQUID RATIO
1.34
1.32
PERCENTAGE 1.3
1.28 liquid ratio
1.26
1.24
1.22
1.2
1.18
1.16
2001-02 2002-03 2003-04 2004-05 2005-06
YEARS
INTERPRETATION
The Cash ratio of BHEL in the 2001-2006 was fluctuation in 2005-2006 it was 0.40
times and in 2001-2002 it was 0.10 times and 2003-2004 it was reduced to 0.42.
CHART – 5.3
CASH RATIO
0.45
0.4
0.35
PERCENTAGE
0.3 Cash ratio
0.25
0.2
0.15
0.1
0.05
0
2001-02 2002-03 2003-04 2004-05 2005-06
YEARS
TABLE – 5.4
INTERPRETATION
Debtors constitute an important constitute of current assets and therefore the quality
of debtors to a great extent determines firm’s liquidity .The higher the ratio, the better it is,
since it would indicate that debts are being collected promptly. In the year 2004-2005 the
debt is 1.56 comparing to the previous year came down.
CHART- 5.4
DEBTOR TURNOVER RATIO
2
1.8
1.6
1.4
PERCENTAGE 1.2
1
DTR
0.8
0.6
0.4
0.2
0
2001- 2002- 2003- 2004- 2005-
02 03 04 05 06
YEARS
INTERPRETATION
The debt collection period of BHEL in the 2001-2002 was 247 days and in 2005-
2006 it was 195 days.
CHART – 5.5
DEBT COLLECTION PERIOD
250
200
150
PERCENTAGE DTCP
100
50
0
2001- 2002- 2003- 2004- 2005-
02 03 04 05 06
YEARS
TABLE – 5.6
CREDITORS TURNOVER RATIO
Rs in lakhs
YEAR 2001-2002 2002-2003 2003-2004 2004-2005 2005 -2006
CREIDT 330676.82 316037.84 363465.65 509767.76 709940.33
PURCHASE
CREDITORS 404107.97 393240.68 517389.20 708633.44 875960.92
CREDITORS
TURNOVER 0.82 0.80 0.70 0.72 0.81
RATIO
INTERPRETATION
The 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 – 2004 is 0.70
times.
CHART -5.6
CREDITORS TURNOVER RATIO
0.82
0.8
0.78
0.76
0.74
PERCENTAGE CTR
0.72
0.7
0.68
0.66
0.64
2001- 2002- 2003- 2004- 2005-
02 03 04 05 06
YEARS
TABLE –5.7
DEBT PAYMENT PERIOD
Rs in lakhs
YEAR 2001-2002 2002-2003 2003-2004 2004-2005 2005 -2006
DAYS 365 365 365 365 365
CREDITORS
TURNOVER 0.82 0.80 0.70 0.72 0.81
RATIO
DEBT
PAYMENT 445 456 522 507 451
PERIOD
INTERPRETATION
The debt collection period of BHEL in the 2001-2002 was 245 days and in 2005-
2006 it was 451 days.
CHART – 5.7
DEBT PAYMENT PERIOD
600
500
400
PERCENTAGE 300 DPP
200
100
0
2001- 2002- 2003- 2004- 2005-
02 03 04 05 06
YEARS
TABLE –5.8
CASH TURNOVER RATIO
Rs in lakhs
YEAR 2001-2002 2002-2003 2003-2004 2004-2005 2005 -2006
SALES 682311.04 693030.43 801903.20 952713.54 1337403.27
CASH 47658.92 132091.11 265963.89 317786.21 413397.54
INTERPRETATION
The cash turnover ratio in the year 2001-2006 was downward in the year in the
2001-2002 it was decreased 3.24.
CASH TURNOVER RATIO
16
14
12
10
PERCENTAGE 8
6
4 C.T.R
2
0
2001-02 2002-03 2003-04 2004-05 2005-06
YEARS
TABLE – 5.9
INVENTORY TURNOVER RATIO
Rs in lakhs
YEAR 2001-2002 2002-2003 2003-2004 2004-2005 2005 -2006
SALES 682311.04 693030.43 801903.20 952713.54 1337403.27
INVENTORY 199422.87 200105.61 210388.36 291610.73 374437.06
INTERPRETATION
Inventory turnover of BHEL for 2001 – 2006 was fluctuation. in 2001-2002
the inventory turnover ratio was high up to 3.81 and it was low in 2004-2005 at 3.27.
CHART –5.9
3.9
3.8
3.7
3.6
3.5
PERCENTAGE 3.4 ITR
3.3
3.2
3.1
3
2.9
2001- 2002- 2003- 2004- 2005-
02 03 04 05 06
YEARS
TABLE – 5.10
INVENTORY HOLDING PERIOD
Rs in lakhs
YEAR 2001-2002 2002-2003 2003-2004 2004-2005 2005 -2006
DAYS 365 365 365 365 365
INVENTORY
TURNOVER 3.42 3.46 3.81 3.26 3.57
RATIO
INVENTORY
TURNOVER 107 106 96 112 102
PERIOD
INTERPRETATION
Inventory turnover period of BHEL for 2001 – 2006 was 107 days in 2003.it was
106 days and 2003-2004 it get reduced 96 days and it got raised in 2004-2005 to 112 days
In 2005 -2006it got downwards to 102 days.
CHART – 5.10
INVENTORY TURNOVER PERIOD
115
110
105
PERCENTAGE 100 IHP
95
90
85
2001- 2002- 2003- 2004- 2005-
02 03 04 05 06
YEARS
TABLE-5.11
WORKING CAPITAL TURNOVER RATIO
Rs in lakhs
YEAR 2001-2002 2002-2003 2003-2004 2004-2005 2005 -2006
SALES 682311.04 693030.43 801903.20 952713.54 1337403.27
NET 333792.48 359233.71 408784.60 489708.56 601075.67
WORKING
CAPITAL
WORKING 2.04 2.00 2.00 2.00 2.23
CAPITAL
TURNOVER
RATIO
INTERPRETATION
Working capital turnover ratio for the year 2005-2006 was 2.23 times. It is higher
when comparing the past four years. The working capital management has to improve by
more concentration on collection strategies.
CHART-5.11
WORKING CAPITAL TURNOVER RATIO
2.25
2.2
2.15
2.1
PERCENTAGE 2.05 WCTR
2
1.95
1.9
1.85
2001- 2002- 2003- 2004- 2005-
02 03 04 05 06
YEARS
TABLE –5.12
WORKING CAPITAL FOR TREND ANALYSIS
Rs in lakhs
YEAR 2001-2002 2002-2003 2003-2004 2004-2005 2005 -2006
CURRENT 805139.02 834839.66 1042469.93 1334297.99 1633077.90
ASSETS
CURRENT 471346.54 475605.95 633685.33 844589.43 1032002.23
LIABILITIES
WORKING 333792.48 359233.71 408784.6 489708.56 601075.67
CAPITAL
INTERPRETATION
In this current asset is increasing during the period of study. Current liability is also
increased during the period of study. And working capital is also increased.
CHART – 5.12
WORKING CAPITAL FOR TREND ANALYSIS
1800000
1600000
1400000
1200000
1000000 CA CL
VALUES
800000 WC
600000
400000
200000
0
2001- 2002- 2003- 2004- 2005-
02 03 04 05 06
YEARS
TABLE –5.13
ANALYSIS OF VARIOUS COMPONENTS IN WORKING CAPITAL
CURRENT ASSETS
Rs in lakhs
Particulars 01-02 02-03 03-04 04-05 05-06
inventories 24.77 23.97 20.20 21.85 22.93
Sundry debtors
56.94 48.82 44.21 44.75 43.90
C& B balance
Other assets 5.92 15.82 25.51 23.82 25.31
Loans and advances .0006 0.012 0.13 0.35 0.52
12.38 11.37 9.97 9.22 7.35
Total 100 100 100 100 100
INTERPRETATION
In this period inventories, sundry debtors, other current assets and loan and
advances was decreased during the period of the study. Cash and bank balance was only
increased during the period of the study.
CHART – 5.13
ANALYSIS OF VARIOUS COMPONENTS IN WORKING CAPITAL
60
50
40
PERCENTAGE 30 INVENTORIE
S
20 SD
10 CASH &
0 BANK
2001- 2002- 2003- 2004- 2005- OTHER CA
02 03 04 05 06
LOAN & ADV
YEARS
TABLE –5.13
CURRENT LIABILITIES
Rs in lakhs
YEAR 2001-2002 2002-2003 2003-2004 2004-2005 2005 -2006
CURRENT 86.32 83.04 82.01 84.30 85.34
LIABILITIES
PROVISIONS 13.68 16.95 17.98 15.69 14.65
TOTAL 100 100 100 100 100
INTERPRETATION
In this liabilities was downward in the period of study in this provision was upward
in the period of study.
CHART – 5.13
CURRENT LIABILITIES
90
80
70
60
50
PERCENTAGE LIABILITIES
40 PROVISION
30
20
10
0
2001- 2002- 2003- 2004- 2005-
02 03 04 05 06
YEARS
CHAPTER – VI
FINDINGS OF STUDY
1. The working capital as per trend analysis, current assets was in the year 2001-2002
was Rs.805139.02 and the in the year 2005-2006 was Rs.1633077.90.so the current
assets was increased during the period of study.
2. The working capital as per trend analysis, current liabilities was in the year 2001-
2002 was Rs.47l346.54 and the in the year 2005-2006 was Rs.1032002.90.so the
current liabilities was increased during the period of study.
3. The working capital as per trend analysis, working capital was in the year2001-2002
was 333792.48 and the in the year 2005-2006 was 601075.67.so the working capital
was increased during the period.
4. In this analysis of various components in working, in current asset, in inventory
sundry 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 upward trend
during the period of study.
6. Analysis of each component in working capital sundry creditors is upward manner
during 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 comparing from
2001-2002.
9. The current ratios for all the subsequent years are good. All of them are above
standard 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 increased in the
year 2005-2006 was 1.87.
11. The quick ratio for all the subsequent year is good. It is all of them are standard
norm. From the above table the quick ratio found satisfactory.
12. The Cash balances of the organization found fluctuating over the years. The
proportion of cash in current asset was increasing in 2001-2006.
13. The average collection period is high in 2001-2002 that is 107 days and 2005-2006
is 102 days in this reduce collection period.
CHAPTER - VII
SUGGESTION AND RECOMMEDATIONS
1. Apart from present technique of age wise analysis, reason wise analysis to be done
periodically and suitable actions to be taken by the organization.
2. While collecting dues from customer collecting focus on customer irrespective of
production unit, division and products to be followed.
3. Automatic storage and retrieval system (ASRS) presently implementing in
components stores of BHEL, trichy may also be introduce in others stores or units.
4. Periodic review on non moving and slow moving items of inventory must be done
by the organization.
5. All suppliers are to be educated on the requirement of various documents so that
delay in processing of bills and payment may be reduced/avoided by the
organization.
6. Debt collection policy is also very liberal. To avoid bad debts and to increase
effective sales.
7. Through the current assets a level is satisfactory. They excess of the fund can be
invested in other productive applications.
CHAPTER – VIII
CONCLUSION
The overall working capital management of BHEL is effective and satisfactory. However,
effective steps may be taken to reduce sundry creditors and inventory by using latest tools
and techniques. the most care has been taken to analyze the working capital position of the
BHEL, Apart from that growth and financial soundness of the studying unit have also been
made.
CHAPTER –IX
LIMITATION
Only secondary data collected from BHEL trichy is used for the study, hence the
accuracy of the findings and conclusion of the statement will depend upon the accuracy
of 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 reflect in the
outcome of the study.
CHAPTER - X
SCOPE FOR FURTHER STUDY
The present study concentrates on the working capital position with reference to BHEL. In
addition to that study contains the analysis of financial soundness and growth of the firm in
the term of liquidity solvency and trend analysis.
BIBLIOGRAPHY
BOOKS