A STUDY ON MAMAGEMENT OF WORKING CAPITAL With reference to Bharat ea!" P#ate$ %&e$$e#$ %&e$$e#$ Li'ite( )BP&* A +ro,ect +ro,ect re+ort in the area of -Finance. $/0'itte( to BERHAMPUR (e3 ree of UNIVERSITY f/#fi##'ent of the re1/ire'ent$ for the a2ar( of (e3ree BAECLOUR OF BUSINESS ADMINISTRATION4 B" REYYA ISWAR ISWAR REDDY5 REDD Y5 Re3 no67 89:;:<=>8>
Under the esteemed guidance of
Mr4 Mr4 $4?4+a(h" $4?4+a( h" Asst. Professor College of Business Administration, Berhampur
PRESIDENCY COLLEGE’S COLLEGE OF USINESS !D"INIS#R!#ION ER$!"PUR%ORISS!
ACKNOWL EDGEMENTS
I would like to forward my sincere thanks and gratitude to Mr4 $4?4+a(h" $4?4+a( h" for availing me the opportunity to do this project work. work.
Mr4 $4?4+a(h" $4?4+a(h " , faculty My deep gratitude also goes to Mr4 member, who has patiently guided me to the successful completion of this project work.
I would like to express my sincere gratitude to Shri B.V. ao5 ao5 Manager !"#I$I$%&, ' department, B'(V, for his valuable support and guidance during the entire course of the project work.
I would also like extend my gratitude to my parents and friends without whose help and advice this project would not have been possible.
REYYA ISWAR REDDY
CONTENTS CAPTER78
INTRODUCTION OB@ECTI&ES OF STUDY NEED FOR TE STUDY DESIGN OF TE STUDY SCOPE OF TE STUDY METODOLOGY LIMITATIONS CAPTER7=
INDUSTRY PROFILE COMPANY PROFILE CAPTER7
TEORITICAL FRAMEWORK OF TE STUDY CAPTER7
ANALYSIS ANALYSIS % INTERPRETA INTER PRETATION TION OF TE STUDY ST UDY CAPTER79
SUMMARY FINDINGS SUGGESTIONS
BIBILIOGRAPY
ANNEURE
CAPTER78
INTRODUCTION OB@ECTI&ES OF TE STUDY NEED FOR TE STUDY DESIGN OF TE STUDY SCOPE OF TE STUDY METODOLOGY LIMITATIONS
INTRODUCTION TO TE TOPIC
FINANCIAL MANAGEMENT
Financia# 'ana3e'ent i$ 'ana3eria# acti!it" 2hich i$ concerne( 2ith the +#annin3 an( contro##in3 of fir'$ financia# re$o/rce$4 It 2a$ a 0ranch of econo'ic$ ti## 8:> an( a$ a $e+arate (i$ci+#ine it 2a$ of recent ori3in4 Sti## it ha$ no /ni1/e 0o(" of ?no2#e(3e of it$ o2n an( (ra2$ hea!i#" fro' econo'ic$ for it$ theoretica# conce+t$ e!en to(a"4 Theor" of financia# 'ana3e'ent +ro!i(e$ conce+t/a# an( ana#"tica# in$i3ht$ to 'a?e (eci$ion$ re#atin3 to the financia# a$+ect$ of or3aniation $?i##f/##"4
Definition$ of financia# 'ana3e'ent
-Financia# 'ana3e'ent i$ concerne( 2ith the efficient /$e of re$o/rce na'e#"5 ca+ita# f/n($.4 EHRA SOLOMAN
an i'+ortant
-Financia# 'ana3e'ent i$ concerne( 2ith the 'ana3eria# (eci$ion$ that re$/#t in the ac1/i$ition an( financin3 of #on37ter' an( $hort7ter' cre(it$ for the fir'.4 PILLIPPATUS4 -Financia# 'ana3e'ent i$ that 0/$ine$$ acti!it" 2hich i$ concerne( 2ith the ac1/i$ition an( con$er!ation of ca+ita# f/n($ in 'eetin3 financia# nee($ an( o!era## o0,ecti!e$ of a 0/$ine$$ enter+ri$e.4 WEELER The$e (efinition$ 2e can /n(er$tan( the f/nction$ of the financia# 'ana3e'ent4 Tho$e are +roc/re'ent of f/n($ an( effecti!e /ti#iation an( +art of the$e f/nction$ /$e (ifferent techni1/e$4
OB@ECTI&ES OF FINANCIAL MANAGEMENT
/ite o0!io/$#"5 the o0,ecti!e of the fir' $ho/#( 0e the 'aJi'iation of it$ !a#/e of the $hareho#(er$4 The +rice of $hare$ in the 'ar?et in(icate$ the !a#/e of the fir'4 Factor$ #i?e in!e$t'ent5 financin3 an( (i!i(en( eJerci$e an inf#/ence on the 'ar?et +rice of the $hare$4 The 'ain o0,ecti!e$ of financia# 'ana3e'ent can 0e $ai( a$6
PROFIT MAIMIHATION
The o0,ecti!e of e!er" or3aniation i$ +rofit 'aJi'iation4 Profit MaJi'iation 'ean$ 'aJi'iin3 the r/+ee inco'e of fir'$4 Profit i$ con$i(ere( a$ the 'o$t a++ro+riate 'ea$/re of a fir'$ +erfor'ance4
WEALT MAIMIHATION
It i$ a #on3 7 ter' o0,ecti!e4 Wea#th 'aJi'iation i$ nothin3 0/t increa$in3 the 2ea#th of the $hareho#(er$ 0" 2a" of contri0/tin3 to the net 2orth of the $hareho#(er$4 For attainin3 the$e a0o!e $ai( o0,ecti!e$ financia# 'ana3er 'a?e$ cr/cia# (eci$ion$ re#atin3 to in!e$t'ent in (ifferent +ro,ect$5 (i!i(en( (eci$ion$ 5 (e0t e1/it" 'iJ (eci$ion$5 $o/rce of finance5 ana#"$i$ of ratio$ an( 2or?in3 ca+ita# 'ana3e'ent4
INTRODUCTION ABOUT BP& LTD
BP& 2a$ e$ta0#i$he( in the "ear 8:;; at &i$a?ha+atna'5 An(hra Pra(e$h a$ a P/0#ic Sector Un(erta?in3 /n(er the De+art'ent of ea!" in(/$tr" )DI* to 'an/fact/re an( $/++#" c/$to' 0/i#t +roce$$ +#ant e1/i+'ent$ for Core Sector In(/$trie$ #i?e Ferti#ier$5 Oi# Refinerie$5 Petroche'ica#$5 Stee# P#ant$5 N/c#ear5 S+ace5 Defence an( Po2er Sector$ 2ith the technica# co##a0oration of SKODA EJ+ort5 Cecho$#o!a?ia4 The Co'+an" i$ #ocate( on N79 near to Air+ort5 Rai#2a" Station an( Sea Port in &i$a?ha+atna'5 An(hra Pra(e$h4 The Co'+an" i$ $+rea( o!er a tota# area of ; Acre$4 BP& i$ a +re'ier Or3aniation $+ecia#iin3 in (e$i3n5 fa0rication5 $/++#" an( erection of eat EJchan3er$5 Co#/'n$5 Stora3e S+here$5 Reactor$ an( Stri++er$5 M/#ti#a"er &e$$e#$ Reactor Re3enerator Pac?a3e5 Air Se+aration P#ant$5 P/r3e Ga$ Reco!er" Unit$5 OJ"3en P#ant$5 Nitro3en P#ant$5 "(ro3en P#ant$5 S/#+h/r Reco!er" Unit$5 Cr/(e Sta0i#iation Unit$5 Mo/n(e( Stora3e S"$te'$5 Co'+act eat EJchan3er$5 On Boar( OJ"3en 3eneratin3 $"$te' etc45 to Oi# Refinerie$5 Ferti#ier P#ant$5 Stee# P#ant$5 Defiance $ector etc45 an( ha$ 0een contri0/tin3 to the Nation 0/i#(in3 (/rin3 the +a$t fo/r (eca(e$4 The Co'+an" ha$ 3oo( +otentia# to cater to the 3ro2in3 nee($ en!i$a3e( in Po2er5 Oi# an( Ga$5 N/c#ear5 Defiance an( other $trate3ic $ector$ in f/t/re4 A#$o5 BP& i$ hi3h#" re+/te( for the /a#it" an( re#ia0i#it" of it$ +ro(/ct$ an( +o$$e$$e$ $e!era# Nationa# % Internationa# /a#it" accre(itation$ 0e$i(e$ ISO :>>86=>>> certification4 BP& $tarte( +ro(/ction in the "ear 8:87= 2ith a t/rno!er of ,/$t R$484:9 Cr$ an( cro$$e( R$4>> Cr$ in the "ear 8::;7:4 The Co'+an" contri0/te( 'ore than R$4 ;9> Cr$ to the nationa# eJche1/er (/rin3 the +a$t => "ear$4 BP& i$ the #ar3e$t fa0ricator of +roce$$ e1/i+'ent in In(ia for the +etro#e/'5 ferti#ier5 che'ica# an( a##ie( in(/$trie$4 It i$ a $/0$i(iar" of a navaratna Centra# P/0#ic Sector Enter+ri$e Bharat ea!" E#ectrica# Li'ite( an( i$ 'ana3e( 0" an a/tono'o/$ $e+arate 0oar( of (irector$4 Sit/ate( in the cit" of (e$tin" of &i$a?ha+atna' on the 2e$tern $ee coa$t of the Deccan +#atea/5 BP& i$ acce$$i0#e 0" roa(5 rai#5 $ea an( i$ 2e## connecte( to a## 'etro+o#itan citie$ 0" air4 BP& ha$ 0een $e#ecte( for the $t/("4 The to+ic $e#ecte( i$ -A $t/(" on Wor?in3 Ca+ita# Mana3e'ent. 2ith reference to BP&4
NEED FOR TE STUDY
BP& BP& ha$ e'er3 e'er3e( e( a$ one one of the the #ea( #ea(in in3 3 hea! hea!" " en3in en3inee eeri rin3 n3 In(/ In(/$tr $trie ie$$ after after it$ it$ inco incor+ r+ora oratio tion5 n5 in the the "ear "ear 8:;; 8:;; to 'an/f 'an/fac act/ t/re re c/$t c/$to' o' B/ B/i# i#tt ca+ita ca+ita## e1/i e1/i+' +'en entt re1/ re1/ir ire( e( 0" the the +roc +roce$ e$$$ in(/ in(/$tr $trie$ ie$ #i?e #i?e ferti ferti#i #ier er$5 $5 Petr Petro o che'i che'ica# ca# % che'i che'ica ca## in(/$trie$4 After After it$ co''i$$ co''i$$ion ionin3 in3 % co''enc co''ence'e e'ent nt of +ro(/c +ro(/ction tion55 the Co'+an" Co'+an" ha$ 0een 0een contin/o/$#" /+(atin3 it$ techno#o3ie$5 0" enterin3 into Co##a0oration$ 2ith reno2ne( co'+anie$ #i?e M<$ BSL5 Dea#$ 7 France5 CG7Nether#an($5 ahn % C#a"7USA etc4 Ma''oth En3ineerin3 ca+a0i#itie$ % eJce##ent (e$i3nin3 net2or? % Man/fact/rin3 faci#itie$5 hi3h (e3ree of c/$to'er confi(ence5 2ith $o/n( 2or? C/#t/re$ are $o'e of the !ita# factor$ in!o#!e( in achie!in3 contin/o/$ 3ro2th of BP&4 BP&4 o2e!er in the ear#" =>>>$5 the financia# +erfor'ance of the in(/$tr" 2ent /n(er 3reat $train5 (/e to a co'0ination of a(!er$e factor$5 2hich 3ot 0/nche( "ear 0" "ear4 Sinc Sincee =>>8 =>>8 $tee $tee+ + ri$e ri$e in eJor eJor0i 0ita tant nt inte intere re$t $t co$t co$t$5 $5 incr increa ea$e $e( ( inf# inf#at atio ion5 n5 3#o0 3#o0a# a# co'+etition5 Go!ern'ent +o#ic" etc f/rther a33ra!ate( the $it/ation4 o2e!er o2e!er55 fro' fro' the "ear =>>5 the co'+an" co'+an" $tarte( $ho2in3 $ho2in3 +o$iti!e +o$iti!e $i3n$ in the o+eration$ an( $tare( earnin3 +rofit$4 The 'ain rea$on for thi$ (e!e#o+'ent i$ the (eci$ion of the Go!ern'ent Go! ern'ent to (e#in? the co'+an" co' +an" fro' BYNL5 A##aha0a( A##aha0a( an( 'a?e it +art of ea!" E#ectrica# E1/i+'ent Con3#o'erate BEL4 The "ear =>> can 0e $ai( a$ RE-BIRTH a$ RE-BIRTH "ear "ear for BP&4 BEL5 fro' the (ate of ta?in3 o!er BP& in =>>5 $tarte( to #oo? after ?e" area$ #i?e /ti#iation of +#ant ca+acit" to the f/##e$t eJtent5 attention on financia# (i$ci+#ine5 R re#ate( +ro0#e'$5 Ca+eJ etc4 Fro' the "ear =>> the co'+an" re7$tarte( it$ 0/$ine$$ 2ith ne2 #oo?5 #oo?5 $trate3i $trate3ie$5 e$5 (i!er$i (i!er$ifica fication tion an( once a3ain a3ain $tarte( $tarte( 3ainin3 3ainin3 c/$to'e c/$to'err confi(ence5 there0" earnin3 +o$iti!e financia# fi3/re$ an( on the 2a" of re3ainin3 +a$t 3#or"4 The i'+ortance of the $t/("5 Wor?in3 Ca+ita# Mana3e'ent in BP&5 &i$a?ha+atna' +re$/++o$e$ that one !er" i'+ortant rea$on$ for 2hich P/0#ic $ector Enter+ri$e$ in In(ia ha!e $/ffere( financia# $train$ in the #ate >$ an( in :>$ or earne( #o2 Le!e# of +rofit 'a" re#ate to the 'i$con$tr/in3 of the financia# a$+ect$4 a( the$e Enter+ri$e$ 'ana3e( 'ana3e( the o!era## o!era## financ financee o+eratio o+eration$ n$ in an efficie efficient nt 'anner 'anner55 the" the" 2o/#( 2o/#( ha!e 3enerate( re$o/rce$ for it$ 3ro2th a$ 2e## a$ econo'ic 3ro2th4
OB@ECTI&ES OF TE STUDY
Thi$ $t/(" of BP& ha$ 0een /n(erta?en to e!a#/ate the financia# efficienc" of the or3aniation 0" e$ta0#i$hin3 the fo##o2in3 o0,ecti!e$4 To ?no2 a0o/t the !ario/$ !ar io/$ $o/rce$ of finance$5 2or?in3 ca+ita# to BP&4 BP&4 To ,/(3e the financia# +o$ition5 i4e4 the $hort7ter' #i1/i(it" +o$ition an( the #on37ter' $o#!enc" of BP&4 BP&4 To 'ea$/re the o+erationa# efficienc" of BP&4 To (eter'ine the +rofita0i#it" tren($ of BP&4 To a$$e$$ the o!era## financia# +o$ition of the co'+an" thro/3h !ario/$ e$ta0#i$he( techni1/e$4
RATIO ANALYSIS6
Ratio ana#"$i$ i$ a techni1/e of ana#"$i$ an( inter+retation of financia# State'ent$4 It i$ the +roce$$ +roce$$ of e$ta0#i e$ta0#i$hi $hin3 n3 an( inter+ inter+re retin tin3 3 ratio$ ratio$ for he#+in he#+in3 3 in 'a?in3 'a?in3 certain certain (eci$ion$4 (eci$ion$4 o2e!er ratio ana#"$i$ i$ not an en( for it$e#f4 It i$ a on#" a 'ean$ of 0etter /n(er$tan(in3 of financia# $tren3th$ an( 2ea?ne$$ of a fir'4
SCOPE OF TE STUDY6 The $co+e of the $t/(" i$ connecte( to one of the ?e" area$ of finance i4e4 Ana#"$i$ % Inter+retation of Financia# State'ent$4 The $t/(" a++rai$e$ the co'+an" co'+an"$ $ 'eetin3 'eetin3 the re1/ir re1/ire'e e'ent$ nt$ for the +roce +roce$$ $$ in(/$t in(/$trie$ rie$ in the core core $ector $/ch a$ ferti#ier5 oi# refinerie$5 che'ica#$ etc4
METODOLOGY6 The ana# The ana#"$i "$i$$ of the the +ro, +ro,ec ectt 2a$ 0a$e( 0a$e( on the the a!ai#a a!ai#a0# 0#ee infor infor'at 'atio ion4 n4 An" infor'ation a0o/t the to+ic i$ ca##e( the (ata4 The (ata 2a$ 3athere( fro' !ario/$ $o/rce$ i4e45 Pri'ar" an( Secon(ar" $o/rce$4
T"+e T"+e of Data6
Pri'ar" Data Secon(ar" Data
Pri'ar" Data6 An" infor'ation that i$ co##ecte( afre$h an( for the fir$t ti'e i$ ca##e( Pri'ar" (ata (ata 4The 4The +ri'ar" +ri'ar" (ata (ata ha++en ha++en to 0e ori3ina ori3ina## in characte characterr4 The The Infor'a Infor'ation tion i$ 3athere( 3athere( fro' concern concerne( e( e'+#o"ee$ e'+#o"ee$44 The e'+#o"e e'+#o"ee$ e$ an( 'ana3er of the financia# (e+art'ent ha!e +ro!i(e( the infor'ation nee(e( for the $t/("4
Secon(ar" Data6 Infor'ation 2hich ha$ a#rea(" 0een co##ecte( 0" $o'e0o(" e#$e or $o'e other a3enc" 2ith (efinite +/r+o$e an( 2hich ha$ a#rea(" 0een +roce$$e( i$ ca##e( $econ(ar" (ata4 The $econ(ar" (ata for the $t/(" ha!e 0een 3athere( fro' the 0a#ance $heet$5 +rofit an( #o$$ acco/nt$ ann/a# re+ort$ an( other 0oo?$ an( 'an/a#$ of the BP& LTD4 LTD4
LIMITATIONS OF TE STUDY 6
E!er" $t/(" i$ con(/cte( /n(er certain #i'itation$4 The $t/(" re#ate$ on#" to financia# (ata an( other area$ are not ta?en into con$i(eration4 The $t/(" i$ carrie( o/t on#" for a +erio( of = 'onth4 'onth4 It 2a$ not +o$$i0#e to 3et cent +ercent +ercent correct correct infor'a infor'ation tion44 Th Thee re$ear re$earch ch 2a$ 'a(e 'a(e accor(i accor(in3 n3 to the infor'a infor'ation tion a!ai#a0#e fro' re#ate( (e+art'ent$ an( thro/3h ann/a# re+ort$ +/0#i$he(4 The $ent $t/(" co!er$ on#" for a +erio( of fi!e "ear$4 So the ana#"$i$ 2i## 0e 'a(e on thi$ 0a$i$4 =>>;7=>> =>>7=>> =>>7=>>: =>>:7=>8> =>8>7=>88
CAPTER7=
INDUSTRY PROFILE COMPANY PROFILE INDUSTRY PROFILE BP& i$ a $/0$i(iar" of BEL )Bharat ea!" E#ectrica#$ Lt(*5 na!aratna Centra# P/0#ic Sector Enter+ri$e an( ea!" E#ectrica# E1/i+'ent Con3#o'erate4
MARKET PROFILE67
In a((ition to BP& #e3ac" +ro(/ct$ $/ch a$ +roce$$ +#ant$5 co'0/$tion $"$te'$5 0oi#er$5 cr"o3enic e1/i+'ent$ for refinerie$5 ferti#ier +#ant$5 $tee# +ant$ etc5 2ith the ta?eo!er of the co'+an" 0" BEL5 the co'+an" (i!er$ifie( into 'an/fact/rin3 e1/i+'ent$ re1/ire( for +o2er 3eneration +#ant$ in an( a0roa(4
CUSTOMER PROFILE67
BP&S c#iente#e inc#/(e$7 P/0#ic5 Pri!ate5 Co7o+erati!e Sector or3aniation$ in a#'o$t a## the core $ector of econo'" $/ch a$ a## the ferti#ier +#ant$5 +etro#e/' refinerie$ an( $tee# +#ant$ in In(ia an( a0roa(4 No25 2ith the (i!er$ification a## 'a,or +o2er +#ant$ in In(ia4 Other 'a,or c/$to'er$ are fro' +a+er5 che'ica#$5 (efence5 $+ace $ector$4
COMPETITOR PROFILE
In the area of +roce$$ +#ant6 @ohn
L%T5 GR En335 L#o"($ $tee#5 ISGEC5 Tho'$on5 Go(re, etc
In the area of cr"o3enic$6 Lin(a5 +ro(/ct$5 Ko0e5 itachi5
ICCP5 INO5 Shan3hai$ oJ"3en5 L%T5 &@U5 E$$ar5 LINDE5 Air OPM5 PraJair
In the area of co'0/$tion $"$te'6 ABL
ISGEC5 Ba0coc? Ther'aJ5 I3nif#/i( 0oi#er$5 L%T KTI5 Ther'aJ etc
COMPANY PROFILE
EAD OFFICE67 &i$a?ha+atna'5 An(hra Pra(e$h4 BRANC OFFICE6 7 M/'0ai5 Chennai5 Ne2 De#hi Bharat ea!" P#ate$ an( &e$$e#$ Lt(5 it i$ a +/0#ic Li'ite( Co'+an"4 It i$ a ,o0 or(er< $ho+ +ro(/ction in(/$tr"4 Accor(in3 to c/$to'er $+ecification$ an( re1/ire'ent$ it +ro(/ce$ !ario/$ +ro(/ct$4 Fore $eein3 the co/ntr"$ nee( for fa0ricatin3 e1/i+'ent of an eJc#/$i!e Factor" 2ith the 'ain o0,ect of re(/cin3 (e+en(ence on forei3n $/++#ier$ an( 0eco'e $e#f $/fficient o/r$e#!e$4 Th/$ the 0irth of BP& in the "ear 8:;; to 'eet the (e'an($ of +roce$$ e1/i+'ent for core in(/$tr" #i?e Ferti#ier$5 +etroche'ica#$5 +etro#e/' an( other che'ica# in(/$trie$ initia##"4 BP& /$in3 (ifferent t"+e$ of 'ateria#$ 'an/fact/re( an( $/++#ie( $e!era# 0/i#t e1/i+'ent$ $/ch a$ +re$$/re !e$$e#$5 heat eJchan3er$5 co#/'n$5 interna# tra"$ etc4 After eJec/tin3 $o'e i'+ortant or(er$5 BP& LTD 3aine( f/## confi(ence of c/$to'er$ 2hich c#eare( the 2a" to enter the #ine of cr"o3enic fie#(5 +/#+ coo?in3 +#ant5 e!a+oration +#ant an( in(/$tria# 0oi#er$ on a tota# t/rn?e" 0a$i$ 2hich of #ater "ear$ he#+e( in a/3'entin3 t/rno!er of the co'+an" an( increa$in3 +rofita0i#it"4
INTRODUCTION ABOUT BP& LTD6
In the #i0era#ie( econo'" of In(ia an( in the era of 3#o0a#iation a co'+an" '/$t rethin? it$ 0/$ine$$ 'i$$ion an( a## f/nctiona# $trate3ie$4 In the$e (a"$ co'+anie$ fin( the'$e#!e$ co'+etin3 in a race 2here the roa( $i3n$ an( r/#e$ ?ee+ (a"$ 2hen it 2a$ -0/$ine$$ a$ /$/a#. co'+anie$ co/#( $/ccee( on#" 0" ha!in3 inno!ati!e i(ea$ co'0ine( 2ith 0" effecti!e financia# 'ana3e'ent4 Therefore5 it i$ not $/r+ri$in3 that to(a"$ 2innin3 co'+anie$ are tho$e 2hich fore$ee the f/t/re an( 'ana3e the finance effecti!e#"4 One can 'ana3e finance effecti!e#" 0" 'ana3in3 2or?in3 ca+ita#5 ca+ita# $tr/ct/re an( ta?in3 (eci$ion on ca+ita# 0/(3etin34
U#ti'ate#"5 finance i$ at it$ 0e$t a0o/t !a#/e a((in35 (e!e#o+in3 ne2 +ro(/ct$ an( rai$in3 the 2or#($ $tan(ar($ of #i!in34 The hea!" en3ineerin3 in(/$tr" i$ a 'a,or $tren3th of an" econo'"4 The$e hea!" en3ineerin3 in(/$trie$ 2hich +ro(/ce ca+ita# 3oo($ are the 'o$t 'o(ern of the entire in(/$tria# 3ro/+4 In In(ia the$e hea!" en3ineerin3 in(/$trie$ occ/+" a cr/cia# ro#e in it$ econo'ic (e!e#o+'ent in !ie2 of the h/3e in!e$t'ent a$ 2e## a$ the critica# i'+ortance to nation4 The$e in(/$trie$ are 'o$t#" confine( to the +/0#ic $ector on#"4 BP& Lt(4 i$ the #ar3e$t fa0ricator of +roce$$ e1/i+'ent in In(ia for the +etro#e/'5 che'ica# an( a##ie( in(/$trie$4 It i$ f/##" o2ne( 0" the 3o!ern'ent of In(ia an( i$ 'ana3e( 0" an a/tono'o/$ 0oar( of (irector$4 Sit/ate( in the Cit" of (e$tin" of &i$a?ha+atna' on the 2e$tern $ee coa$t of the Deccan P#atea/5 BP& i$ acce$$i0#e 0" roa(5 rai#5 $ea an( i$ 2e## connecte( to a## 'etro+o#itan citie$ 0" air4 BP&5 &i$a?ha+atna' i$ a +/0#ic $ector /n(erta?in3 BP& ha$ 0een $e#ecte( for the $t/("4 The to+ic $e#ecte( i$ -A $t/(" on Wor?in3 Ca+ita# Mana3e'ent.4 Bharat ea!" +#ate$ % &e$$e#$ Lt(45 $tarte( off in 8:;; a$ f/##" o2ne( Go!ern'ent Co'+an" for De$i3n5 Man/fact/re % S/++#" of ca+ita# e1/i+'ent re1/ire( for +roce$$ in(/$trie$ in the core $ector $/ch a$ ferti#ier$5 oi# refinerie$ % +etroche'ica#$ etc4 Sri D4 San,ee!a""a #ai( the fo/n(ation $tone5 the then Mini$ter of In(/$tr" on th @an 8:; in &i$a?ha+atna'4 It co'e$ /n(er the +/r!ie2 of the De+art'ent of ea!" In(/$tr"5 Mini$tr" of In(/$tr"4 With the technica# co##a0oration of SKODA EJ+ort Co'+an" of Cecho$#o!a?ia in the "ear 8:;5 it 3ot eJ+erti$e an( 3/i(ance for e$ta0#i$hin3 the +ro,ect an( for the De$i3n % 'an/fact/re of !ario/$ +roce$$ e1/i+'ent$4 BP& 0eca'e a f/##" o2ne( $/0$i(iar" of Bharat ea!" E#ectrica#$ Lt(4 Licen$e( in$ta##e( ca+acit" i$ ==8>MT4 The initia# ca+ita# o/t#a" i$ R$4849 crore$4 The +ro(/ct 'iJ inc#/(e( heat eJchan3er$5 co#/'n$5 an( +re$$/re !e$$e#$5 Stora3e !e$$e#$5 +i+in3 etc4 D/rin3 the "ear of it co''ercia# +ro(/ction i4e4 8:878:= the t/rno!er 2a$ ,/$t R$ 9 #a?h$4 In 8::;7: it ha$ recor(e( on t/rno!er of R$ =::: #a?h$ i4e4 a## ti'e hi3h4 La$t Fi!e "ear +erfor'ance i$ +ro(/ce( here /n(er4
PYSICAL OUTPUT S#
Year
Licen$e( Ca+
In$ta##e( Ca+acit"
Achie!e(
T
8
=>>87>=
==8> MT
==8> MT
8: MT
=
=
=>>=7>
==8> MT
==8> MT
> MT
8
=>>7>
==8> MT
==8> MT
=8> MT
;>
=>>7>9
==8> MT
==8> MT
;>8> MT
8>:
9
=>>97>;
==8> MT
==8> MT
= MT
8==
;
=>>;7>
==8> MT
==8> MT
>8 MT
8>
=>>7>
==8> MT
==8> MT
88 MT
8>
=>>7>:
==8> MT
==8> MT
9; MT
:
=>>:78>
==8> MT
==8> MT
98>> MT
8>
==8> MT
8==: MT
8
=>8>788
8>
==8> MT
R$ #a?h$
=>8>788 De$cri+tion
=>>:78>
=>>7>:
=>>7>
=>>;7>
=>>97>;
8=;>4 I
GTO )Net of EJci$e D/t"*
;4:>
=84=
884;
89;4:
8>:=4
9994=
8:4>
9;4;;
;>84;
;4>
7:4=
748:
7>:4=
==489
784=
78>8:4>
7:9=4
7=>4;
=;94
78:48:
>4>>
=>>4=
>4>>
>4>>
79>4::
:;:=4:
7;:4
784:>
8>4>
948
>4>>
>4>>
9;4 II
&a#/e A((e( ) I7 II* 94>8
III
Gro$$ Mar3in)PBDIT* =4>:
I&
Gro$$ Profit)PBIT* 4
&
EJtra Or(inar" Inco'e 4=
&I
Profit 0efore TaJ )PBT* >48;
&II
Inco'e TaJ
>4>> 7994> 8;4>9
49; &III
Profit after TaJ )PAT*
79:4;:
:;949=
79;>49
7;:4
784:>
ISTORY OF BP&
Licen$e( to $tart con$tr/ction of +#ant at &i$a?ha+atna' in 8:;;5 BP& confronte( 'an" o0$tac#e$ $/ch a$ 2ater +ro0#e'$5 fre1/ent +o2er c/t$ 0oth at initia# $ta3e a$ 2e## a$ at the ti'e 2hen con$tr/ction 2a$ 3oin3 on4 In $+ite of a## tho$e o0$tac#e$ the ci!i# an( $tr/ct/ra# 2or? 2a$ co'+#ete( to a 'a,or eJtent 0" the en( of 8 $t March8:;4The #icen$e( an( in$ta##e( ca+acit" i$ ==8> MT4 The initia# ca+ita# o/t#a" 0ein3 R$4849 crore$4 Later after Co'+#etion of in$ta##ation 2or? BP& ha( recei!e( or(er$ for the 8 $t ti'e fro' M 2here $o'e +ro(/ction faci#itie$ ha( a#rea(" 0een e$ta0#i$he( 0" in$ta##ation of fa0ricatin3 'achiner" #i?e 0en(in3 ro##$5 2e#(in3 e1/i+'ent etc4 D/rin3 the fir$t "ear +ro(/ction5 the co'+an" ha$ inc/rre( a #o$$ of R$ =4 #a?h$ 'ain#" (/e to inci(ence of fiJe( eJ+en(it/re a++ortion7a0#e to Pro(/ction #i?e e$ta0#i$h'ent (e+reciation etc4 The $a'e #o$$ +o$ition 2a$ contin/e( ti## 8: 7 8::4 The contin/o/$ #o$$e$ +/t BP& far fro' +rofiteerin3 co'+anie$4
In 8::7> BP& ha$ 2itne$$e( $e!era# $i3nificant e!ent$ 0oth on financia# a$ 2e## a$ +ro(/ction front$4 BP& for the fir$t ti'e in it$ "ear$ of co''ercia# +ro(/ction attaine( a 0rea?7e!en #e!e# 2ith a 'ar3ina# +rofit of R$ 4>: #a?h$ a$ a3ain$t a net #o$$ of R$ 8=: #a?h$ +ro,ecte( at the 0e3innin3 of the "ear4 D/rin3 8:>78 the co'+an" for the $econ( con$ec/ti!e "ear5 earne( a net Profit )after taJ* R$ 4=8 #a?h$ fro' it$ o+eration$4 Thi$ "ear BP& Lt( o+eration$ inc#/(e( 'an/fact/rin3 of !er" critica# an( $o+hi$ticate( e1/i+'ent to core in(/$trie$4 A3ain in 8:87= the co'+an" o+eration$ re$/#te( in a net +rofit of R$ ;>48: #a?h$ a$ a3ain$t a 0/(3ete( #o$$ of R$ =><7 #a?h$4 Ma,or +en(in3 intere$t on #oan fro' GOI 2a$ c#eare( in thi$ "ear4 D/rin3 8:=7 BP& reache( 8>> tar3et +ro(/ction an( re$/#te( in a net +rofit of R$8>48 #a?h$ a$ a3ain$t the 0/(3ete( #o$$ of R$ :9 #a?h$4 With +re$ti3io/$ 2or? or(er$ fro' &i$a?ha+atna' $tee# +#ant for $/++#" of air an( 3a$ $e+aration +#ant$ BP& cro$$e( a tar3et +ro(/ction an( it$ o+eration$ re$/#te( in a net +rofit of R$ 99 #a?h$4 A3ain in 8:7 BP&$ +ro,ect$ 2ere $/cce$$f/##" fa0ricate( an( it$ +rofit$ too? an /+2ar( tren( an( it$ o+eration$ re$/#te( in PAT of R$ =:> #a?h$4 It 2a$ eJ+ecte( to e'er3e an increa$in3 tren( in the +rofit$ of BP& for the "ear 8:7:4 o2e!er5 (/e to chan3e$ in the econo'" 2ith entr" of 3#o0a# +#a"er$ in 8::>$5 increa$e( +ri!ate $ector co'+etition5 intro(/ction of LSTK conce+t 0" c/$to'er$ an( Go!ern'ent$ +o#ic" to2ar($ PSU i4e4 i'+#e'entation of &RS an( +ro+o$a#$ for (i$in!e$t'ent5 the Co'+an" ha$ $/ffere( h/3e #o$$e$ in =>>=7> an( =>>7>4 B" !irt/e of thi$5 entire net 2orth of the co'+an" 3ot ero(e(4 Thi$ re$/#te( for reference of the co'+an" to BIFR in A/3/$t =>>4 &ario/$ re!i!a# +ro+o$a#$ trie( after =>> for reha0i#itation of the co'+an" thro/3h o/tri3ht $a#e5 'er3in3 2ith other PSU$5 $tan( a#one re!i!a# etc4 o2e!er5 (/e to chan3e in Go!ern'ent +o#ic" after =>>9 an( con$i(erin3 the +otentia# of BP&5 GOI ha$ fina##" 'a(e the co'+an" a$ $/0$i(iar" of BEL5 a Navaratna PSU4
AN O&ER&IEW OF TOP MANAGEMENT6
Fro' Ma" =>> the co'+an" 0eca'e $/0$i(iar" of BEL4 At Cor+orate #e!e# the co'+an"$ affair$ are 'ana3e( 0" the Boar( con$i$t of f/## ti'e Mana3in3 Director an( CMD5 BEL a$ the chair'an of the 0oar(4 In a((ition5 8 EJ officio Director fro' DI )a('ini$trati!e 'ini$tr"* % = f/nctiona# Director$ a#$o con$tit/te the Boar(4
Techno#o3" % Mar?et I$$/e$6
The +re$ent +#ant % 'achiner" % infra$tr/ct/re /ti#iin3 0" the co'+an" i$ of > "ear$ o#( an( ha!e 0een f/##" (e+reciate(4 At +re$ent the interna# #ea( ti'e i$ hi3h 2hen co'+are to co'+etitor$4 Si'i#ar#" in the area$ of en3ineerin3 the #ea( ti'e re1/ire( for (e$i3n an( (ra2in3$ i$ to 0e re(/ce( 2hich re1/ire$ i'+#e'entation of $o+hi$ticate( +roce$$ (e$i3n $oft2are4
A$ +er reha0i#itation $che'e a++ro!e( 0" GOI5 BEL 2i## in!e$t R$ =8 crore$ for 'o(erniation of the +#ant in the "ear$ =>8878= to =>8784
Pro(/ct Di!er$ification
The co'+an" ha$ /n(erta?en $e!era# EPC contract$ on EPC
Re!i!a# an( T/rnaro/n( of the co'+an"6
On 09.05.2008, the company was orma!!y ta"en over #y BHE$, a navaratna %&', as per the rev(va! scheme sanct(one) #y *OI.
The $a#ient feat/re$ of re!i!a# $che'e are a$ 0e#o24
)A$ +er the Go!t4 of In(ia5 Mini$tr" of ea!" In(/$trie$ % P/0#ic Enter+ri$e$5 De+art'ent of ea!" In(/$tr"5 #etter F4No4 8 )88* < =>> PE )I&* Date( >4>94=>>*
). GOI 2i## 2ai!e an( 2rite off #oan an( intere$t a'o/ntin3 to R$4894;8 Cr$4 *. GOI to +ro!i(e 3/arantee a'o/ntin3 to R$4=9> Cr$ to ena0#e BP& to rai$e 0on($ fro' the (o'e$tic 'ar?et $/0,ect to the con(ition$ a$ inti'ate( !i(e thi$ office #etter of e!en no4 (ate( =:4>4=>> +. The entire +ai( /+ ca+ita# of BP& to the t/ne of R$4 4: Cr$ 2o/#( 0e tran$ferre( to BEL at a notiona# !a#/e of Re4 8<74
. BEL 2i## ta?e o!er 0oth the a$$et$ an( #ia0i#itie$ )inc#/(in3 contin3ent #ia0i#itie$* of BP& a$ a 3oin3 concern4 -. The ta?eo!er 2i## entai# the fo##o2in3 conce$$ion$ fro' the
. Go!ern'ent of An(hra Pra(e$h6 a* Tran$fer of tit#e of #an( 'ea$/rin3 ;4 acre$ in +o$$e$$ion of BP& a$ 3ift a#on3 2ith 2ai!er of re3i$tration an( $ta'+ (/t"4 0* Wai!er of Sa#e$ TaJ arrear$ a'o/ntin3 to R$4=48; Cr$ c* Wai!er of NALA TaJ of R$4 #a?h an( (* Wai!er of (/e$ to2ar($ Water TaJ5 Pro+ert" TaJ5 an( &acant Lan( TaJ of R$44:; Cr$4
/. The con$orti/' of Ban?er$ ha$ a3ree( for One7Ti'e7Sett#e'ent BEL 'a" ta?e ti'e#" a(!anta3e of the offer4 0. BEL 2i## inf/$e at #ea$t R$4 Cr$ a$ a((itiona# E1/it" Ca+ita# an( a(e1/ate f/n($ for /+73ra(ation of 'an/fact/rin3 faci#itie$5 Ca+eJ an( Wor?in3 Ca+ita#4 :4 BEL 2i## ta?e o!er BP& 2ith a## it$ e'+#o"ee$4 8>4 DI 2i## a$$i$t BEL in $ett#in3 the (i$+/te( (e'an($ re#atin3 to eJci$e5 c/$to'$5 inco'e7taJ etc45 on a ca$e to ca$e 0a$i$4 884 BEL 2i## ta?e7o!er BP& a$ it$ $/0$i(iar" an( ta?e a## +o$$i0#e $te+$ for it$ re!i!a#4 The 'atter re3ar(in3 recon$tit/tion of the Boar( of Director$ i$ /n(er con$i(eration of the co'+etent a/thorit"4
The Sanctione( Reha0i#itation7c/'7Ta?e7o!er Sche'e
The Re!i!a# Sche'e en!i$a3e$ ta?e7o!er of Bharat ea!" P#ate an( &e$$e#$ Li'ite( )BP&*5 a Go!ern'ent of In(ia Enter+ri$e an( S/0$i(iar" of Bharat Yantra Ni3a' Li'ite( )/n(er The Mini$tr" of ea!" In(/$trie$ an( P/0#ic Enter+ri$e$* 0" Bharat ea!" E#ectrica#$ Li'ite( )BEL*5 a Go!ern'ent of In(ia Enter+ri$e )a#$o /n(er the Mini$tr" of ea!" In(/$trie$ an( P/0#ic Enter+ri$e$* a$ it$ $/0$i(iar"4 A$ +er the $che'e5 the entire /n(erta?in3 of BP& $ha## 0e tran$ferre( to BEL a$ it$ $/0$i(iar"4 The entire +ai(7/+ ca+ita# of R$ 4: Cr$ 2o/#( 0e tran$ferre( to BEL at a no'ina# !a#/e of Re 8<7 4 BEL 2i## ta?e7o!er 0oth a$$et$ an( #ia0i#itie$ )inc#/(in3 contin3ent #ia0i#itie$* of BP& a$ a 3oin3 concern4 BEL 2i## ta?e7o!er BP& 2ith a## it$ e'+#o"ee$4 BEL 2i## inf/$e at #ea$t R$ Cr$ a$ a((itiona# E1/it" Ca+ita# an( a(e1/ate f/n($ for /+73ra(ation of 'an/fact/rin3 faci#itie$5 CAPE an( 2or?in3 ca+ita#4 A0o!e cite( -Sanctione( Reha0i#itationo!er7Sche'e. ha$ 0een fo/n( acce+ta0#e to a## the e'+#o"ee$ an( $ec/re( cre(itor$4 A0o!e $che'e 2a$ a++ro!e( 0" BIFR in Octo0er =>8>4
S"ner3" of B/$ine$$ 0et2een BEL an( BP&6
In a((ition to i'+ro!e'ent in +re$ent 0/$ine$$ of BP&5 the ta?e7o!er 0" BEL 2i## ha!e the fo##o2in3 a(!anta3e$6
•
Mana3eria# an( 'ar?etin3 $/++ort fro' BEL4 Di!er$ification into i3h Pre$$/re Po2er Boi#er$4 Techno#o3ica# S/++ort for ne2 +ro(/ct$4 Financia# S/++ort for /+ 3ra(ation of 'an/fact/rin3 faci#itie$5 Ca+eJ an( Wor?in3 Ca+ita# Re1/ire'ent$4 En$/re( f#o2 of ne2 or(er$4 S"ner3" 0et2een the t2o or3aniation$ in !ie2 of $i'i#arit" of +ro(/ct$
Factor$ for re!i!a# of BP& thro/3h ta?eo!er 0" BEL6
• • • •
• •
BEL on it$ +art ha$ 2or?e( o/t the !ia0i#it" of the BP& ta?eo!er5 ta?in3 into con$i(eration the +oint$6 BEL to enhance the ca+a0i#itie$ % ca+acitie$ of BP& to 0/i#( /+on it$ $tren3th$ in the eJi$tin3 0/$ine$$ of $/++#"in3 +roce$$ e1/i+'ent to $ector$ #i?e Oi#5 Petroche'ica#$5 Ferti#ier$ etc4 In a((ition5 BEL +#an$ to enhance BP&$ ca+a0i#itie$ % ca+acitie$ in the area of in(/$tria# 0oi#er$5 heat eJchan3er$5 con(en$er$ etc4In ca+ita# in!e$t'ent of R$4 =9 Cr$ i$ en!i$a3e( for the /+73ra(ation of re1/ire( faci#itie$4 EJ+ecte( 3ro2th in the 'ar?et for BP&$ +ro(/ct$ 5 e$+ecia##" in +roce$$ e1/i+'ent an( cr"o3enic$4 A$ +er In(/$tr" ana#"$i$5 or(er$ 2orth R$4 8>> Cr$ +er ann/' are eJ+ecte( in the neJt fi!e "ear$ fro' oi# Refinerie$ an( Petroche'ica# +ro,ect$ to f#o2 to the en3ineerin3 % fa0rication in(/$tr"4 With a 'ar?et $hare of BP& of 89 8 in the +a$t in thi$ $e3'ent5 BP& can 0eco'e 'ore confi(ent in a((re$$in3 thi$ 'ar?et o!erco'in3 it$ financia# con$traint$ 0" +artici+atin3 in $o'e of the ten(er$ 2ith BEL $/++ort4 A$ $/ch5 BP&$ financia# 2ea?ne$$ 2o/#( 0e 'iti3ate( once it$ re$tr/ct/rin3 i$ co'+#ete( an( BEL ta?e$ o!er it$ f/nctionin34 The Ca+ti!e Po2er Pro,ect$ )CPP* an( In(/$tria# 0oi#er$ 'ar?et $e3'ent i$ eJ+ecte( to 3ro2 fro' aro/n( R$4 8>> Cr$ in =>>7> to an e$ti'ate( #e!e# of R$4 =>> Cr$ in neJt fi!e "ear$ 0a$e( on +ro,ecte( 8= in(/$tria# 3ro2th in the co'in3 "ear$4
BP& can tar3et a $hare of =9 > of thi$ 'ar?et5 +ro!i(e( 'ar?et eJ+ectation$ on (e#i!er" an( +rice are f/#fi##e(4 C/rrent#"5 the Trich" /nit of BEL i$ con$traine( in tar3etin3 the in(/$tria# 0oi#er$ 'ar?et (/e to hea!" #oa( of 0oi#er or(er$ fro' the /ti#it" $e3'ent4 In thi$ re3ar(5 BP& can 0e (e!e#o+e( a$ a (e(icate( center for in(/$tria# 0oi#er$ 0" BEL4 The $a#e$ t/rno!er fro' thi$ $e3'ent ha$ 0een +ro,ecte( to reach to #e!e# of R$5 >> Cr$ 0" the fifth "ear after f/nctiona# ta?e o!er 0" BEL5 0a$e( on factor$ #i?e increa$e( !o#/'e5 0etter financia# ca+a0i#itie$ #ea(in3 to #o2er 2or?in3 ca+ita# 0orro2in3 co$t$ etc4
BP&6 AN O&ER&IEW4
INTRODUCTION
Incor+oration of the Co'+an"
6
Pri'ar" O0,ecti!e
6
Technica# Co##a0oration +ro!i(e( 0" Co''ence'ent of Con$tr/ction Co'+#etion of Con$tr/ction Co''ence'ent of Pro(/ction Initia# Pro,ect Co$t Initia# Pro(/ct MiJ Pre$$/re !e$$e#$5 Techno#o3ica# Str/ct/re$5 Pi+in3 etc4 In$ta##e( Ca+acit" T/rno!er for the "ear =>>:78> RESOURCES PRODUCTION FACILTIES Factor" Area Tota# Co!ere( Area Co!ere( area of Pro(/ction Sho+$ Po2er Re1/ire'ent No4 of Anci##ar" Unit$
6 6 6 6 6 6
SKODA5 Cecho$#o!a?ia4 8:; 8:8 8:8 R$4 849 core$ eat EJchan3er$5 co#/'n$5
6 6
=5 =8> M4T4 R$4 8> corer$
6 6 6 6 6
8:;; "o manufacture custom built 1apital 23uipment for the process of Industries such as 4ertili5ers, (etrochemicals, (etroleum
8: Acre$ :>5>>> $14 Meter$ 9;5>>> $14 Meter$ 5>>> KW fro' APSEB Aro/n( a Doen
IMPORTANT MACINERY
The 'aJi'/' crane #iftin3 ca+acit" i$ 8=> tone$5 0/t #oa($ /+ to =9> tone$ can 0e #ifte( 2ith i'+ro!i$ation4 MaJi'/' Ro##in3 ca+acit" i$ ;>'' in co#( con(ition an( 8>'' in hot con(ition4 BP& ha$ the #ar3e$t heat treat'ent f/rnace in In(ia5 the $ie 0ein3 Meter$ 2i(th5 949 'eter$ hei3ht an( ;49 'eter$ #on34 One 'ore f/rnace of =>> Ton ca+acit" an( 89'tr$4 Bo3ie #en3th ha$ 0een a((e(4 Other critica# e1/i+'ent a!ai#a0#e 2ith BP& are Dee+ Dra2in3 "(ra/#ic Pre$$ of 8;>>T ca+acit" Sin3#e S+in(#e CNC Dee+ ho#e Dri##in3 Machine 2ith G/n Dri##in3 attach'ent an( =No$4 CNC (ri##in3 'achine$ 2hich can e'+#o" con!entiona# (ri##$4 Another CNC Dee+ ho#e (ri##in3 'achine ha$ 0een in$ta##e( recent#" 0" MT4 A n/'0er of We#(in3 Rotator$ of ca+acit" /+ to =9> Tone$4 We#(in3 e1/i+'ent $/ch a$ 'an/a# Arc5 S/0 'er3e( Arc5 TIG5 MIG5 P#a$'a inc#/(in3 the #ate$t hi3h +ro(/cti!e 2e#(in3 e1/i+'ent $/ch t/ne hea( $/0'er3e( arc 2e#(in35 an( Bi7 catho(e TIG 2e#(in3 4T/0e finin3 Machine4A n/'0er of !ertica# an( horionta# 0orin3 'achine$ 2ith a 'aJi'/' ca+acit" of 9 'eter$ (ia an( =>>'' $+in(#e (ia re$+ecti!e#"4 Different t"+e$ of Non7(e$tr/ction Te$tin3 E1/i+'ent4 We## e1/i++e( Ph"$ica# an( Che'ica# La0oratorie$4 Metro#o3" $ection etc4 CL S/+er7Mini Co'+/ter5 T2o Mini co'+/ter$ 9; CAD Machine$ an( 88 Per$ona# co'+/ter$4
MANPOWER )A$ on 8 $t Mar5 =>88*
•
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Wor?'en < Staff S/+er!i$or$ EJec/ti!e$ Tota#
EMPLOYEE WELFARE AMENITIES
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To2n$hi+ Area 7 898 Acre$ No4 of /arter$ 7 88:= => 0e( o$+ita# Protecte( Water S/++#" Un(er3ro/n( (raina3e $"$te' En3#i$h 'e(i/' $choo# 2ith CBSE S"##a0/$ Te#/3/ 'e(i/' $choo# 2ith AP State S"##a0/$ S+ecia# $choo# for 'enta##" han(ica++e( chi#(ren4 &ocationa# trainin3 centre for 'enta##" han(ica++e( Co''/nit" center for c/#t/ra# acti!itie$ % $+ort$ o+en air theatre faci#itie$ Ka#"ana Man(a+a'4
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6 6 6 6 88>:
B" a0$or0in3 ?no27ho2 fro' !ario/$ 2or#( reno2ne( co##a0orator$5 BP& /+3ra(e( it$ $tat/$ fro' a 'ere fa0ricator of +roce$$ e1/i+'ent to that of an en3ineerin3 co'+an" of internationa# re+/te4
PRO@ECTS OF NATIONAL IMPORTANCE EECUTED
CUSTOMER
PRO@ECT
84
IOCL5 Pani+at
"(ro crac?er reactor$7No$
=4
IOCL5 Pani+at
Reactor5 Re3enerator % Office Cha'0er
4
IOCL5 Pani+at
Refor'er % WR Pac?a3e
4
IOCL5 M/'0ai
89> MT Ca+acit" LPC 0/##et$
94
IOCL5 Chennai
S+here
;4
Ar3on Reco!er" /nit
4
BOKARD STEEL PLANT5 Bo?aro NRL5 N/'a#i3arh
4
PCL5 &i$a?ha+atna'
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PCL5 &REP II &i$a?ha+atna' PCL5 &i$a?ha+atna'
884
PCL5 &i$a?ha+atna'
Re!a'+in3 of 9>TP oi# % 3a$ fire( 0oi#er
8=4
PCL5 M/'0ai
9> TP Boi#er
84
BPCL5 M/'0ai
Nitro3en P#ant
84
"/n(ai ea!" In(/$trie$5 Ne2 De#hi S+ace a++#ication centre5 Ah'a(a0a( TECNIMONT ICB LTD4 M/'0ai OSWAL CEMI FERTILIHER LTD7Para (ee+
Cr"o Nitro3en +#ant
894 8;4 84
Air Fin coo#er$
9>9' Dia ther'a# !ac//$ $"$te' Nitro3en +#ant Wa$te eat LP 0oi#er$
A$ a +art of tota# 1/a#it" 'ana3e'ent +ro3ra'5 BP& ha$ ac1/ire( ISO :>>8 certification (/rin3 the "ear 8::7:5 +artic/#ar#" to 0oo$t /+ it$ eJ+ort$ an( to 0e co'+etiti!e in the internationa# 'ar?et4
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Re7certification of ISO :>>8 ha$ 0een o0taine( in Se+te'0er5 8::;4 In reco3nition of hi3h $tan(ar($ of o/r 1/a#it"5 confe(eration of In(ian in(/$tr" )CII*5 So/thern Re3ion5 AP +re$ente( the /a#it" A2ar(4
RESEARC % DE&ELOPMENT
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Re$earch % De!e#o+'ent (e+art'ent 2a$ e$ta0#i$he( in 8:9 an( i$ 2e## e1/i++e( 2ith hi3h tech e1/i+'ent to cater to A++#ie$ Re$earch an( Pro(/ct De!e#o+'ent4 R%D ha$ (e!e#o+e( 8; Pro,ect$ $o far4 So'e of the +ro(/ct$ co''ercia#ie( inc#/(e6 • • • • • • •
Titani/' Ano(e$ Titani/' Air Bott#e$ Cr"o3enic &at$ In(i!i(/a# /ic? Freein3 Unit S/+er In$/#ate( Pi+in34 S/+er In$/#ate( Cr"o3enic Stora3e tan?$ D4M4 Water P#ant$
A +re$ti3io/$ or(er for De!e#o+'ent of eat EJchan3er$ for Li3ht Co'0at Aircraft )LCA* Pha$e7II ha$ 0een recei!e( fro' Aerona/tica# De!e#o+'ent A3enc"5 Ban3a#ore4
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So'e of the A2ar($ recei!e( for eJce##ence in R%D inc#/(e6 CIS A2ar( for R%D achie!e'ent in 8::=7:4
ANCILLARISATION
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BP& ha$ (e!e#o+e( $o'e anci##ar" in(/$trie$ in it$ !icinit" to cater to it$ re1/ire'ent$4 A+art fro' offerin3 $/fficient 2or? #oa( to the$e in(/$tria# /nit$5 BP& ha$ 0een a$$i3nin3 2or? to a n/'0er of $'a## $ector in(/$trie$4 BP& +ro!i(e$ 'ateria#5 tran$+ortation an( in$+ection $er!ice$ to the Anci##arie$ to he#+ the' ri$e to it$ 1/a#it" re1/ire'ent$4
PRESENT STRENGTS
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Financia#5 Mana3eria#5 Technica# 0ac?7/+ an( $/++ort of Na!aratna PSU5 BEL EJce##ent De$i3n % En3ineerin3 ca+a0i#itie$4 State of the Art Man/fact/rin3 faci#itie$4 Acco'+#i$he( i'a3e a$ a $/++#ier of /a#it" Pro(/ct$ in the (o'e$tic an( internationa# 'ar?et$4 i3h (e3ree of c/$to'er confi(ence4 Techno#o3ica# tie7/+ arran3e'ent$4 We## traine( an( 1/a#ifie( 2or? force an( En3ineer$4
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So/n( 2or? c/#t/re % har'onio/$ In(/$tria# Re#ation$4 EJten$i!e co'+/teriation4 Ca+a0i#it" to $/++#" Pro,ect$ % S"$te'$ on t/rn?e" 0a$i$4 Pro,ect Mana3e'ent S?i##$4
PLANS % STRATEGIES
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To 3ro2 a$ an En3ineerin35 Proc/re'ent an( Con$tr/ction Co'+an"4 To en#ar3e EJ+ort B/$ine$$4 To re$ort to eJten$i!e co'+/teriation an( A/to'ation for re(/ction of c"c#e ti'e5 i'+ro!e'ent of 1/a#it" an( re(/cin3 co$t$4 To for3e $trate3ic 0/$ine$$ a##iance$ 2ith Internationa# Co'+anie$ to (eri!e techno#o3ica# an( 'ar?etin3 a(!anta3e$4 To $tri!e for contin/o/$ /+(atin3 of techno#o3ie$ to 0e on +ar 2ith Internationa# Co'+anie$4 To foc/$ on /'an Re$o/rce$ De!e#o+'ent4 To chan3e the 2or? c/#t/re to 0e co'+ati0#e 2ith 'ar?et (e'an($4
CONSTRAINTS
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Non co'+/teriation < No ERP i3h a!era3e a3e of e'+#o"ee$ < no eJec/ti!e recr/it'ent $ince 8:: Wor?in3 ca+ita# con$traint$ Re+#ace'ent+(atin3 of 'achiner"
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CAPTER 7 TEORITICAL FRAMEWORK OF TE STUDY WORKING CAPITAL MANAGEMENT INTRODUCTION E!er" 0/$ine$$ nee($ f/n($ for t2o +/r+o$e$ for it$ e$ta0#i$h'ent an( to carr" o/t it$ (a" to (a" o+eration$4 Wor?in3 ca+ita# refer$ to that +art of the fir'$ ca+ita#5 2hich i$ re1/ire( for financin3 $hort ter' or c/rrent a$$et$ $/ch a$ ca$h5 'ar?eta0#e $ec/ritie$5 (e0tor$ an( in!entorie$4 Wor?in3 ca+ita# i$ the a'o/nt of f/n($ to co!er the co$t of o+eratin3 the enter+ri$e4 The 3oa# of 2or?in3 ca+ita# 'ana3e'ent i$ to 'ana3e the c/rrent a$$et$ an( c/rrent #ia0i#itie$ of the fir' in $/ch a 2a" that a $ati$factor" #e!e# of 2or?in3 ca+ita# i$ 'aintaine(4 Wor?in3 ca+ita# i$ the (ifference 0et2een the inf#o2 an( o/tf#o2 of f/n($4 Wor?in3 ca+ita# i$ a#$o ?no2n a$ re!o#!in3 or circ/#atin3 or $hort ter' ca+ita#4 MEANING AND DEFINITION OF WORKING CAPITAL
DEFINITION Accor(in3 to Ra#+h Kenne(" an( Ste2ar( Mc M/##er -a $t/(" of 2or?in3 ca+ita# i$ of 'a,or i'+ortance to interna# an( eJterna# ana#"$i$ 0eca/$e of it$ c#o$e re#ation$hi+ 2ith the c/rrent (a" to (a" o+eration$ of 0/$ine$$.4
MEANING6
Wor?in3 ca+ita# refer$ to the f/n($ in!e$te( in c/rrent a$$et$ i4e4 in!e$t'ent in $toc?$5 $/n(r" (e0tor$5 ca$h an( other c/rrent a$$et$4 C/rrent a$$et$ are e$$entia# to /$e fiJe( a$$et$ +rofita0#" 4 For eJa'+#e a 'achine cannot 0e /$e( 2itho/t ra2 'ateria#4 Th/$ it i$ o0!io/$ that certain a'o/nt of f/n($ i$ a#2a"$ tie( /+ in ra2 'ateria#$5 2or? in +ro3re$$ an( fini$he( 3oo($4 o2e!er5 the 0/$ine$$ a#$o en,o"$ cre(it faci#itie$ fro' it$ $/++#ier$ 2ho 'a" $/++#" ra2 'ateria#$ on cre(it an( the fir' 'a" not +a" a## the eJ+en$e$ i''e(iate#"4 Therefore5 certain a'o/nt of f/n($ i$ a/to'atica##" a!ai#a0#e to finance the c/rrent a$$et$ re1/ire'ent$4 o2e!er the re1/ire'ent$ for c/rrent a$$et$ are /$/a##" 3reater than the a'o/nt of f/n($ +a"a0#e thro/3h c/rrent #ia0i#itie$ 4 In other 2or($5 c/rrent a$$et$ are to 0e ?e+t at a hi3her #e!e# than the c/rrent #ia0i#itie$4
CONCEPTS OF WORKING CAPITAL There are t2o conce+t$ of 2or?in3 ca+ita# )a* Gro$$ 2or?in3 ca+ita# )0* Net 2or?in3 ca+ita#
Gro$$ 2or?in3 ca+ita#
Gro$$ 2or?in3 ca+ita# refer$ to the fir'$ in!e$t'ent in c/rrent a$$et$4 C/rrent a$$et$ are the a$$et$5 2hich can 0e con!erte( into ca$h 2ith in an acco/ntin3 "ear an( inc#/(e ca$h5 $hort7ter' $ec/ritie$5 (e0tor$ )acco/nt$ recei!a0#e$ or 0oo? (e0t$*5 0i##$ recei!a0#e$ an( $toc? )in!entor"*4
Net 2or?in3 ca+ita#
Net 2or?in3 ca+ita# refer$ to the (ifference 0et2een c/rrent a$$et$ An( c/rrent #ia0i#itie$4 C/rrent #ia0i#itie$ are tho$e c#ai'$ of o/t$i(er$ 2hich are eJ+ecte( to 'at/re for +a"'ent 2ith in an acco/ntin3 "ear an( inc#/(e cre(itor$ )acco/nt$ +a"a0#e*5 0i##$ +a"a0#e an( o/t$tan(in3 eJ+en$e$4 Net 2or?in3 ca+ita# can 0e +o$iti!e or ne3ati!e4 A +o$iti!e 2or?in3 ca+ita# 2i## ari$e 2hen c/rrent a$$et$ eJcee( c/rrent
#ia0i#itie$4 A ne3ati!e 2or?in3 ca+ita# 2i## occ/r 2hen c/rrent #ia0i#itie$ are in eJce$$ of c/rrent a$$et$4 Li$t of c/rrent a$$et$ an( c/rrent #ia0i#itie$ CURRENT ASSETS
CURRENT LIABILITIES
o
Ca$h in han( Ca$h at 0an? Bi##$ recei!a0#e$ S/n(r" De0tor$ Stoc? Pre+ai( eJ+en$e$ Accr/e( inco'e Short ter' in!e$t'ent$
CLASSIFICATION OF WORKING CAPITAL
o o o o o o o
Bi##$ +a"a0#e S/n(r" cre(itor$ Accr/e( eJ+en$e$ Short ter' #oan$ Di!i(en( +a"a0#e Ban? o!er(raft Pro!i$ion for taJe$
Wor?in3 ca+ita# 'a" 0e c#a$$ifie( in t2o 2a"$4 On the 0a$i$ of conce+t Gro$$ Wor?in3 Ca+ita# Net Wor?in3 Ca+ita#
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On the 0a$i$ of ti'e Per'anent or FiJe( Wor?in3 Ca+ita# Re3/#ar Wor?in3 Ca+ita# Re$er!e Wor?in3 Ca+ita# Te'+orar" or &aria0#e Wor?in3 Ca+ita# Sea$ona# Wor?in3 Ca+ita# S+ecia# Wor?in3 Ca+ita#
SOURCES OF WORKING CAPITAL There are t2o $o/rce$ of 2or?in3 ca+ita#4
Per'anent or FiJe(
The fiJe( +ro+ortion of 2or?in3 ca+ita# $ho/#( 0e 3enera##" finance( fro' the fiJe( ca+ita# $o/rce$ #i?e o o o
Share$ De0ent/re$ P/0#ic (e+o$it$
o
Retainin3 +rofit$ Loan$ fro' financia# in$tit/tion$
=4 Te'+orar" or &aria0#e
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Te'+orar" 2or?in3 ca+ita# re1/ire'ent of a concern 'a" 0e 'et fro' the $hort ter' $o/rce$ of ca+ita# #i?e o o o o o o
Co''ercia# 0an?er$ In(i3eno/$ 0an?er$ Tra(e cre(itor$ Accr/e( eJ+en$e$ Co''ercia# +a+er$ Acco/nt$ recei!a0#e$
Wor?in3 ca+ita# i$ !er" e$$entia# to 'aintain the $'ooth r/nnin3 of 0/$ine$$4 No 0/$ine$$ can r/n $/cce$$f/##" 2itho/t an a(e1/ate a'o/nt of 2or?in3 ca+ita#4 o2e!er it '/$t a#$o 0e note( that 2or?in3 ca+ita# i$ a 'ean$ to r/n the 0/$ine$$ $'ooth#" an( +rofita0#" an( not an en( in it$e#f4 Th/$ conce+t of 2or?in3 ca+ita# can 0e con(/cte( thro/3h a n/'0er of (e!ice$ $/ch a$
o
Ratio ana#"$i$ F/n($ f#o2 ana#"$i$ B/(3et
RATIO ANALYSIS
o o
A ratio i$ a $i'+#e arith'etic eJ+re$$ion of the re#ation$hi+ of one n/'0er to another4 The techni1/e of ratio ana#"$i$ can 0e e'+#o"e( for 'ea$/rin3 $hort ter' #i1/i(it" or 2or?in3 ca+ita# +o$ition of a fir'4 Se!era# ratio$ #i?e c/rrent ratio 5 1/ic? ratio 5 in!entor" t/rno!er ratio 5 recei!a0#e t/rno!er ratio 5 +a"a0#e$ t/rno!er ratio 5 2or?in3 ca+ita# t/rno!er ratio5 ca$h +o$ition ratio etc4
=4FUNDS FLOW ANALYSIS
F/n($ f#o2 ana#"$i$ i$ a technica# (e!ice (e$i3nate( to $t/(" the $o/rce$ fro' 2hich a((itiona# f/n($ are (eri!e( an( the /$e to 2hich the$e $o/rce$ are +/t4 It i$ an effecti!e 'ana3e'ent too# to $t/(" chan3e$ in the financia# +o$ition )2or?in3 ca+ita#* of a 0/$ine$$ enter+ri$e 0et2een 0e3innin3 an( en(in3 financia# $tate'ent$ (ate$4 The f/n($ f#o2 ana#"$i$ con$i$t$ of6 )a* Pre+arin3 $che(/#e of chan3e$ in 2or?in3 ca+ita# )0* State'ent of $o/rce$ an( a++#ication of f/n($4
4 WORKING CAPITAL BUDGET
Wor?in3 ca+ita# 0/(3et5 a$ a +art of tota# 0/(3etin3 +roce$$ of a 0/$ine$$5 i$ +re+are( e$ti'atin3 f/t/re #on3 ter' an( $hort ter' 2or?in3 ca+ita# nee($ an( the $o/rce$ to finance the'5 an( then co'+arin3 the 0/(3ete( fi3/re$ 2ith the act/a# +erfor'ance for ca#c/#atin3 !ariance$5 if an"5 $o that correcti!e action$ 'a" 0e ta?en in the f/t/re4 It$ 'ain o0,ecti!e i$ to en$/re a!ai#a0i#it" of f/n($ a$ an( 2hen nee(e( 5 an( to en$/re effecti!e /ti#iation of the$e re$o/rce$ 4 The $/cce$$f/# i'+#e'entation of 2or?in3 ca+ita# 0/(3et in!o#!e$ +re+arin3 $e+arate 0/(3et$ for !ario/$ e#e'ent$ of 2or?in3 ca+ita#5 $/ch a$5 ca$h5 in!entorie$ an( recei!a0#e$4
OB@ECTI&ES OR NEED OF WORKING CAPITAL
The nee( for 2or?in3 ca+ita# cannot 0e o!er e'+ha$ie(4 E!er" 0/$ine$$ nee($ $o'e a'o/nt of 2or?in3 ca+ita#4 The nee( for 2or?in3 ca+ita# ari$e$ (/e to the ti'e 3a+ 0et2een +ro(/ction an( rea#iation of ca$h fro' $a#e$4
It re1/ire$
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For the +/rcha$e of 'ateria#$5 co'+onent$ an( $+are$4 To +a" 2a3e$ an( $a#arie$4
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To inc/r (a"7 to7 (a" eJ+en$e$ an( o!erhea($ $/ch a$ f/e#5 +o2er an( office eJ+en$e$ etc4
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To 'eet the $e##in3 co$t$ a$ +ac?in35 a(!erti$in3 etc4 To +ro!i(e cre(it faci#itie$ to the c/$to'er$4
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To 'aintain the in!entorie$ of ra2 'ateria#$5 2or? in +ro3re$$5 $tore$ an( $+are$5 an( fini$he( $toc?4
IMPORTANCE OF WORKING CAPITAL
Wor?in3 ca+ita# i$ ,/$t #i?e the heart of the 0/$ine$$4 If it 0eco'e$ 2ea? the 0/$ine$$ can har(#" +ro$+er an( $/r!i!e4 It i$ an in(eJ of $o#!enc" of a concern4 It$ +ro+er circ/#ation +ro!i(e$ to the 0/$ine$$ the ri3ht a'o/nt of ca$h to 'aintain in 0/$ine$$4 Witho/t a(e1/ate a'o/nt of 2or?in3 ca+ita#5 +ro(/ction interr/+tion 'a" ta?e +#ace an( re$/#t$ in re(/ction of +rofit4 @/$t a$ circ/#ation of 0#oo( i$ !er" nece$$ar" in h/'an 0o(" to 'aintain #ife5 $'ooth f#o2 or circ/#ation of 2or?in3 ca+ita# i$ nece$$ar" for the hea#th of the enter+ri$e4 The +ri'e o0,ect of 'ana3e'ent i$ to 'a?e +rofit4 Whether or not thi$ i$ acco'+#i$he( in 'o$t 0/$ine$$ (e+en($ #ar3e#" in the 'anner in 2hich the 2or?in3 ca+ita# i$ a('ini$tere(4
KEY AREAS OF WORKING CAPITAL
Genera##" in the 2or?in3 ca+ita# 'ana3e'ent there are three i'+ortant area$4 Tho$e are • • •
Ca$h 'ana3e'ent Recei!a0#e$ 'ana3e'ent In!entor" 'ana3e'ent
AD&ANTAGES OF ADEUATE WORKING CAPITAL
Wor?in3 ca+ita# i$ the #ife 0#oo( of the 0/$ine$$4 @/$t a$ circ/#ation of 0#oo( i$ e$$entia# in the h/'an 0o(" for 'aintainin3 #ife5 2or?in3 ca+ita# i$ !er" e$$entia# to 'aintain the 0/$ine$$4 The 'ain a(!anta3e$ of 'aintainin3 a(e1/ate a'o/nt of 2or?in3 ca+ita# are a$ fo##o2$6 Goo( $o#!enc" +o$ition in the 0/$ine$$ Goo(2i##5 it i$ ea$" to 3et #oan$ Ca$h (i$co/nt$ Re3/#ar $/++#" of ra2 'ateria#$ Re3/#ar +a"'ent of $a#arie$5 2a3e$ an( other (a" to (a" Co''it'ent$ EJ+#oitation of fa!ora0#e 'ar?et con(ition$ A0i#it" to face cri$i$ /ic? an( re3/#ar ret/rn on in!e$t'ent i3h 'ora#e E!er" 0/$ine$$ concern $ho/#( ha!e a(e1/ate 2or?in3 ca+ita# to r/n it$ 0/$ine$$ o+eration$4 It $ho/#( not ha!e either re(/n(ant< eJce$$ or $horta3e of 2or?in3 ca+ita#4
DISAD&ANTAGES OF ECESSI&E WORKING CAPITAL
EJce$$i!e 2or?in3 ca+ita# 'ean$ i(#e f/n($ 2hich earn no +rofit for the 0/$ine$$ an( hence the 0/$ine$$ cannot earn a +ro+er rate of ret/rn on it$ in!e$t'ent4 Where there i$ a re(/n(ant 2or?in3 ca+ita#5 it 'a" #ea( to /nnece$$ar" +/rcha$in3 an( acc/'/#ation of in!entorie$ ca/$in3 'ore chance$ of theft5 2a$ta3e an( #o$$e$4 EJce$$i!e 2or?in3 ca+ita# i'+#ie$ eJce$$i!e (e0tor$ an( (efecti!e cre(it +o#ic" 2hich 'a" ca/$e hi3her inci(ence of 0a( (e0t$4 It 'a" re$/#t in o!era## inefficienc" in the or3aniation4 When there i$ eJce$$i!e 2or?in3 ca+ita#5 re#ation$ 2ith 0an?$ an( other financia# in$tit/tion$ 'a" not 0e 'aintaine(4 D/e to #o2 rate of ret/rn on in!e$t'ent$ the !a#/e of $hare$ 'a" a#$o fa##4 The re(/n(ant 2or?in3 ca+ita# 3i!e$ ri$e to $+ec/#ati!e tran$action$4
DISAD&ANTAGES OF INADEUATE WORKING CAPITAL
A concern5 2hich ha$ ina(e1/ate 2or?in3 ca+ita#5 cannot +a" it$ $hort ti'e #ia0i#itie$ in ti'e4 Th/$ it 2i## #oo$e it$ re+/tation an( $ha## not 0e a0#e to 3et 3oo( cre(it faci#itie$4 it cannot 0/" it$ re1/ire'ent$ in 0/#? an( cannot a!ai# of (i$co/nt etc4 It 0eco'e$ (iffic/#t for the fir' to eJ+#oit fa!ora0#e 'ar?et con(ition$ an( /n(erta?e +ro,ect$ (/e to #ac? of 2or?in3 ca+ita#4 The fir' cannot +a" (a" to (a" eJ+en$e$ of it$ o+eration$ an( it create$ inefficiencie$5 increa$e co$t$ an( re(/ce$ the +rofit$ of the 0/$ine$$4 It 0eco'e$ i'+o$$i0#e to /ti#ie efficient#" the fiJe( a$$et$ (/e to non 7a!ai#a0i#it" of #i1/i( f/n($4 The rate of ret/rn on in!e$t'ent$ a#$o fa##$ 2ith the $horta3e of 2or?in3 ca+ita#4
FACTORS DETERMINING TE WORKING CAPITAL REUIRMENTS
A fir' $ho/#( +#an it$ o+eration$ in $/ch a 2a" that it $ho/#( ha!e neither too '/ch nor too #itt#e 2or?in3 ca+ita# 4 The 2or?in3 ca+ita# re1/ire'ent$ are (eter'ine( 0" a 2i(e !ariet" of factor$4
Nat/re an( $ie of 0/$ine$$
Wor?in3 ca+ita# re1/ire'ent$ of a fir' are 0a$ica##" inf#/ence( 0" the nat/re of it$ 0/$ine$$4 Tra(in3 an( financia# fir'$ ha!e a !er" $'a## in!e$t'ent in fiJe( a$$et$5 0/t re1/ire a #ar3e $/' of 'one" to 0e in!e$te( in 2or?in3 ca+ita#4 Wherea$ +/0#ic /ti#itie$ ha!e a !er" #i'ite( nee( for 2or?in3 ca+ita# an( ha!e to in!e$t a0/n(ant#" in fiJe( a$$et$4 Their 2or?in3 ca+ita# re1/ire'ent$ are no'ina# 0eca/$e the" 'a" ha!e ca$h $a#e$ on#" an( $/++#" $er!ice$ 0/t not +ro(/ct$4 Wor?in3 ca+ita# nee($ of 'o$t 'an/fact/rin3 concern$ fa## 0et2een too eJtre'e re1/ire'ent$ of tra(in3 fir'$ an( +/0#ic /ti#itie$4 S/ch concern$ ha!e to 'a?e a(e1/ate in!e$t'ent$ in c/rrent a$$et$ (e+en(in3 /+on the tota# a$$et$ $tr/ct/re an( other !aria0#e$4 The $ie of the 0/$ine$$ that i$ 'ea$/re( in ter'$ of $ca#e of o+eration$ a#$o ha$ an i'+act on the 2or?in3 ca+ita# nee($4 A$ BP&$ $ca#e of o+eration$ i$ #ar3e5 the fir' nee($ 'ore 2or?in3 ca+ita# then $'a## fir' (oe$4
Man/fact/rin3 c"c#e
The 'an/fact/rin3 c"c#e co'+ri$e$ of the +/rcha$e an( /$e of ra2 'ateria# in the +ro(/ction of fini$he( 3oo($4 A$ the fir'$ 'an/fact/rin3 c"c#e i$ #en3th" the 2or?in3 ca+ita# re1/ire'ent of the fir' i$ #ar3e4 Sa#e$ 3ro2th
The 2or?in3 ca+ita# nee($ of fir' increa$e a$ it$ $a#e$ 3ro24 C/rrent a$$et$ 2i## ha!e to 0e e'+#o"e( 0efore 3ro2th ta?e$ +#ace4 A 3ro2in3 fir' nee($ to in!e$t f/n($ in fiJe( a$$et$ in or(er to $/$tain it$ 3ro2in3 +ro(/ction an( $a#e$ 4 Thi$ in t/rn increa$e in!e$t'ent in c/rrent a$$et$ to $/++ort en#ar3e( $ca#e of o+eration$5 a 3ro2in3 fir' nee($ f/n($ contin/o/$#"4
De'an( con(ition$
The 0/$ine$$ !ariation$ $/ch a$ $ea$ona# an( c"c#ica# f#/ct/ation$ in the (e'an( for +ro(/ct$ an( $er!ice$ affect the 2or?in3 ca+ita# re1/ire'ent$4 When there i$ an /+2ar( $2in3 in the econo'"5 $a#e$ 2i## increa$e4 Corre$+on(in3#"5 the fir'$ in!e$t'ent in in!entorie$ an( 0oo? (e0t$ 2i## a#$o increa$e4 D/rin3 0oo'5 a((itiona# in!e$t'ent$ in fiJe( a$$et$ 'a" 0e 'a(e 0" $o'e fir'$ to increa$e their +ro(/cti!e ca+acit"4 The$e act a$ f/rther a((ition$ to 2or?in3 ca+ita#4
=4 Pro(/ction +o#ic"
To re(/ce 2or?in3 ca+ita# +ro0#e'$ ari$in3 (/e to chan3e$ in (e'an( for the fir'$ +ro(/ct$5 a $tea(" +ro(/ction +o#ic" 'a" 0e 'aintaine(4 If the fir'$ +ro(/cti!e ca+acitie$ can 0e /ti#ie( for 'an/fact/rin3 !arie( +ro(/ct$5 it can ha!e the a(!anta3e of (i!er$ifie( acti!itie$ an( $o#!e it$ 2or?in3 ca+ita# +ro0#e'$4
Price #e!e# chan3e$
Genera##"5 ri$in3 +rice #e!e#$ 2i## re1/ire a fir' to 'aintain hi3her a'o/nt of 2or?in3 ca+ita#4 o2e!er co'+anie$ 2hich can i''e(iate#" re!i$e their +ro(/ct +rice$ 2ith ri$in3 +rice #e!e#$ 2i## not face a $e!ere 2or?in3 ca+ita# +ro0#e'4 O+eratin3 efficienc" an( +erfor'ance
The o+eratin3 efficienc" of the fir' re#ate$ to the o+ti'/' /ti#iation of re$o/rce$ at 'ini'/' co$t$4 The /$e of 2or?in3 ca+ita# i$ i'+ro!e( an( the +ace of ca$h c"c#e i$ acce#erate( 2ith o+eratin3 efficienc"4 Better /ti#iation of re$o/rce$ i'+ro!e$ +rofita0i#it" an( th/$ he#+$ in (ecrea$in3 the +re$$/re on 2or?in3 ca+ita#4 A hi3h net +rofit 'ar3in contri0/te$ to2ar($ the 2or?in3 ca+ita# +oo#4 In fact5 the net +rofit i$ a $o/rce of 2or?in3 ca+ita# to the eJtent it ha$ 0een earne( in ca$h4 A fir' can enhance it$ 2or?in3 ca+ita# f/n($ 0" $a!in3 taJe$ thro/3h a++ro+riate taJ +#annin34
Fir'$ cre(it +o#ic"
The cre(it +o#ic" of the fir' affect$ 2or?in3 ca+ita# 0" inf#/encin3 the #e!e# of 0oo? (e0t$4 The cre(it ter'$ to 0e 3rante( to c/$to'er$ 'a" (e+en( /+on nor'$ of the in(/$tr" to 2hich the fir' 0e#on3$4 The fir' $ho/#( 0e (i$cretionar" in 3eneratin3 cre(it ter'$ to it$ c/$to'er4 De+en(in3 /+on the in(i!i(/a# ca$e (ifferent ter'$ 'a" 0e 3i!en to (ifferent c/$to'er$4 A #i0era# cre(it +o#ic" 2itho/t ratin3 the cre(it 2orthine$$ of c/$to'er$ 2i## 0e (etri'enta# to the fir' an( 2i## create a +ro0#e' for co##ectin3 f/n($ #ater on4 S#ac? co##ection +roce(/re$ re$/#t in increa$e of 0oo? (e0t$4 The fir' $ho/#( fo##o2 a rationa#ie( cre(it +o#ic" 0a$e( on the cre(it $tan(in3 of c/$to'er$ an( other re#e!ant factor$4
OPERATING CYCLE
O+eratin3 c"c#e i$ the ti'e (/ration re1/ire( to con!ert $a#e$5 after the con!er$ion of reco/r$e$ into in!entorie$ into ca$h4 The o+eratin3 c"c#e of a 'an/fact/rin3 co'+an" in!o#!e$ three +ha$e$ Ac1/i$ition of re$o/rce$ $/ch a$ ra2 'ateria#5 #a0or5 +o2er an( f/e#5 Man/fact/rin3 of the +ro(/ct 2hich inc#/(e$ con!er$ion of ra2 'ateria# # into 2or? in +ro3re$$ an( WIP into fini$he( 3oo($5 Sa#e of the +ro(/ct either for ca$h or on cre(it4 Cre(it $a#e$ create acco/nt$ recei!a0#e$ for co##ection4
If the o+eratin3 c"c#e #en3th i$ hi3h5 2e nee( to in!e$t #ar3e a'o/nt a$ 2or?in3 ca+ita# an( !ice7 !er$a4
So'eti'e$ 0a$in3 on the co'+etition 2e nee( to in!e$t h/3e a'o/nt in (e0tor$ a$ a cre(it $a#e$4 F#/ct/ation$ in the +rice$ a#$o nee( increa$e or (ecrea$e in the a'o/nt of 2or?in3 ca+ita#4 So'e $ea$ona# factor$ a#$o inf#/ence the nee( of 2or?in3 ca+ita#4 O+eratin3 c"c#e in!o#!e$ the fo##o2in3 $e1/ence of e!ent$ o o o o o
Con!er$ion of ca$h into ra2 'ateria#$ an( #a0or4 Con!er$ion of ra2 'ateria# an( #a0or into 2or? in +ro3re$$4 Con!er$ion of 2or? in +ro3re$$ into fini$he( 3oo($4 Con!er$ion of fini$he( 3oo($ into (e0tor$ thro/3h cre(it $a#e$4 Con!er$ion of (e0tor$ an( 0i##$ recei!a0#e$ into ca$h4
1ash
8ebtors
aw Materials 4inished %oods
6ork7in7progress
WORKING CAPITAL CYCLE OF A MANUFACTURING FIRM
•
U$e$ of o+eratin3 c"c#e
The o+eratin3 c"c#e i$ he#+f/# to the co'+an" in t2o 2a"$ 7 It he#+$ in foreca$tin3 2or?in3 ca+ita# re1/ire'ent$4 Contro# of 2or?in3 ca+ita# can 0e (one efficient#" 0" the /$e of o+eratin3 c"c#e4
Deter'ination of the #en3th of o+eratin3 c"c#e6
The #en3th of the o+eratin3 c"c#e of a 'an/fact/rin3 fir' i$ the $/' of6 4 In!entor" con!er$ion +erio(4 • Boo? (e0t$ con!er$ion +erio(4 •
GROSS OPERATING CYCLE )GOC*6
The fir'$ 3ro$$ o+eratin3 c"c#e )GOC* can 0e (eter'ine( a$ in!entor" con!er$ion +erio( )ICP* +#/$ (e0tor$ con!er$ion +erio( )DCP*4 Th/$5 GOC i$ 3i!en a$ fo##o2$6 Gro$$ o+eratin3 c"c#e In!entor" con!er$ion +erio( De0tor$ con!er$ion +erio(
IN&ENTORY CON&ERSION PERIOD
The in!entor" con!er$ion i$ the $/' of ra2 'ateria# con!er$ion +erio( )RMCP* 5 2or?7in7+ro3re$$ con!er$ion +erio( )WIPCP* an( fini$he( 3oo($ con!er$ion +erio( )FGCP* ICP RMCP WIPCP FGCP
RAW MATERIAL CON&ERSION PERIOD )RMCP*
The ra2 'ateria# con!er$ion +erio( )RMCP* i$ the a!era3e ti'e +erio( ta?en to con!ert 'ateria# into 2or?7in7+ro3re$$4 It (e+en($ on6 Ra2 'ateria# con$/'+tion +er (a" Ra2 'ateria# in!entor" The ra2 'ateria# con!er$ion +erio( i$ o0taine( 2hen ra2 'ateria# in!entor" i$ (i!i(e( 0" ra2 'ateria# con$/'+tion +er (a"4 Ra2 'ateria# in!entor" Ra2 'ateria# con!er$ion +erio( QRa2 'ateria# con$/'+tion<;>
WORK7IN7PROGRESS CON&ERSION PERIOD )WIPCP*
Wor?7in7+ro3re$$ con!er$ion +erio( )WIPCP* i$ the a!era3e ti'e ta?en to co'+#ete the $e'i7fini$he( or 2or?7in7+ro3re$$4 It i$ 3i!en 0" the fo##o2in3 for'/#a6 Wor?7in7+roce$$ in!entor" Wor?7in7+roce$$ con!er$ion +erio( QCo$t of +ro(/ction<;>
FINISED GOODS CON&ERSION PERIOD )FGCP*
Fini$he( 3oo($ con!er$ion +erio( )FGCP* i$ the a!era3e ti'e ta?en to $e## the fini$he( 3oo($4 FGCP i$ 3i!en 0" the fo##o2in3 for'/#a Fini$he( 3oo($ in!entor" Fini$he( 3oo($ con!er$ion +erio( QCo$t of 3oo($ $o#(<;>
DEBTORS )RECEI&ABLES* CON&ERSION PREIOD )DCP*
De0tor$ con!er$ion +erio( )DCP* i$ the a!era3e ti'e ta?en to con!ert (e0tor$ into ca$h4 DCP re+re$ent$ the a!era3e co##ection +erio(4 It i$ ca#c/#ate( a$ fo##o2$6 De0tor$ con!er$ion +erio( )DCP*
De0tor$ Cre(it $a#e$<;>
CREDITORS )PAYABLES* DEFERRAL PERIOD )CDP*
Cre(itor$ )Pa"a0#e$* Deferra# Perio( )CDP* i$ the a!era3e ti'e ta?en 0" the fir' in +a"in3 it$ $/++#ier$ )cre(itor$*4 CDP i$ 3i!en a$ fo##o2$
Cre(itor$ Cre(itor$ Deferra# Perio( )CDP*
Cre(it +/rcha$e$<;>
CAS CON&ERSION OR NET OPERATING CYCLE6 Net O+eratin3 C"c#e )NOC* i$ the (ifference 0et2een 3ro$$ o+eratin3 c"c#e an( +a"a0#e$ (eferra# +erio(4 Net O+eratin3 C"c#e )NOC* Gro$$ o+eratin3 c"c#e Cre(itor$ (eferra# +erio(4
KEY AREAS OF WORKING CAPITAL
Genera##" in the 2or?in3 ca+ita# 'ana3e'ent there are three i'+ortant area$ 2hich are !er" i'+ortant 4Tho$e are Ca$h 'ana3e'ent Recei!a0#e$ 'ana3e'ent In!entor" 'ana3e'ent
MANAGEMENT OF CAS Ca$h 'ana3e'ent i$ one of the ?e" area$ of 2or?in3 ca+ita# 'ana3e'ent4 The ter' ca$h refer$ to ca$h ca$h 'ana3e'ent i$ /$e( in t2o $en$e$4 $en$e$4 In a narro2 $en$e it i$ /$e( 0roa(#" to co!er c/rrenc" an( 3enera##" acce+te( e1/i!a#ent ca$h $/ch a$ che1/e$5 (raft$ an( (e'an( (e+o$it$ in 0an?$4 The 0roa(er !ie2 of ca$h a#$o inc#/(e$ near near ca$h a$$et$ $/ch a$ 'ar?eta0#e $ec/ritie$ an( ti'e (e+o$it$ in 0an?$ 4The 'ain characteri$tic of the$e i$ that the" can 0e rea(i#" con!erte( into ca$h 4 The The three +ri'ar" 'oti!e$ for 'ain ca$h 0a#ance are a$ fo##o2$6
Tran$action 'oti!e$
Thi$ refer$ to the ho#(in3 of ca$h to 'eet ro/tine ca$h re1/ire'ent$ to finance the tran$action$ 2hich a fir' carrie$ on 5 in the or(inar" co/r$e of 0/$ine$$4
Preca/tionar" 'oti!e$
Thi$ 'oti!e of ho#(in3 ca$h i'+#ie$ the nee( to ho#( ca$h to 'eet /n+re(icta0#e /n+re(icta0#e o0#i3ation$4
S+ec/#ation 'oti!e
S+ec/#ation 'oti!e refer$ to the (e$ire of a fir' to ta?e a(!anta3e of o++ort/nitie$ 2hich +re$ent the'$e#!e$ at /neJ+ecte( 'o'ent$ an( 2hich are t"+ica##" o/t$i(e the nor'a# co/r$e of 0/$ine$$4
Ca$h c"c#e6
The ca$h c"c#e refer$ to the +roce$$ 0" 2hich ca$h i$ /$e( to +/rcha$e 'ateria# fro' 2hich 3oo($ are +/rcha$e( an( then $o#( to c/$to'er$ to +a" 0i##$ #ater4 The fir' recei!e$ ca$h fro' c/$to'er$ an( the c"c#e re+eat$ it$e#f4
Ca$h 0/(3et6
It i$ a (e!ice to he#+ a fir' to +#an an( contro# the /$e of ca$h4 It i$ a $tate'ent $ho2in3 the e$ti'ate( ca$h inf#o2 an( ca$h o/tf#o2 o!er the fir'$ +#annin3 horion4
CAS MANAGEMENT SYSTEM IN BP&
Co'+an" ha$ ca$h cre(it arran3e'ent$ 2ith 0an?$4 Co##ection$ fro' $a#e$ are centra#ie(4 Pa"'ent to in(i3eno/$ $/++#ier$ i$ thro/3h ca$h $ection4 MIS for 'onitorin3 ca$h 2ith (etai#$4
RECEI&ABLES MANAGEMENT6
When a fir' 'a?e$ an or(inar" $a#e of 3oo($ an( $er!ice$ an( (oe$ not recei!e +a"'ent5 the fir' 3rant$ tra(e cre(it an( create$ acco/nt$ recei!a0#e$5 2hich 2o/#( 0e co##ecte( in f/t/re4 The 'ana3e'ent of the$e i$ ?no2n a$ recei!a0#e$ 'ana3e'ent4 The 'ana3e'ent of recei!a0#e$ in!o#!e$ cr/cia# (eci$ion in three ?e" area$6 cre(it +o#icie$5 cre(it ter'$ an( co##ection +o#icie$4
Cre(it +o#ic"6
The cre(it +o#ic" of a fir' +ro!i(e$ a fra'e 2or? to (eter'ine 2hether or not to eJten( cre(it to c/$to'er4 o2 '/ch cre(it to eJten( Cre(it $tan(ar($ are criteria to (eci(e the t"+e of c/$to'er to 2ho' the 3oo($ co/#( 0e $o#( on cre(it4 If a fir' ha$ 'ore $#o2 +a"in3 c/$to'er$ it$ in!e$t'ent in acco/nt$ recei!a0#e$ 2i## increa$e4 The fir' 2i## a#$o 0e eJ+o$e( to hi3her ri$? of (efa/#t4 The choice of o+ti'/' cre(it $tan(ar($ in!o#!e$ a tra(eoff 0et2een incre'enta# ret/rn an( incre'enta# co$t4
Ana#"$i$ of c/$to'er$6
Cre(it $tan(ar($ inf#/ence the 1/a#it" of the fir'$ c/$to'er$4 The t2o a$+ect$ of the 1/a#it" of c/$to'er$ 7 The ti'e ta?en 0" c/$to'er to re+a" cre(it o0#i3ation$ an( The (efa/#t rate
CREDIT TERMS6
Cre(it ter'$ $+ecif" the (/ration of cre(it an( tern$ of +a"'ent 0" c/$to'er$4 In!e$t'ent in acco/nt$ recei!a0#e$ 2i## 0e hi3h if c/$to'er$ are a##o2e( eJten(e( ti'e +erio( for 'a?in3 +a"'ent$4
Cre(it +erio(6
Cre(it +erio( i$ the #en3th of the ti'e for 2hich cre(it i$ eJten(e( to c/$to'er$4 A fir' #en3then$ cre(it +erio( to increa$e it$ o+eratin3 +rofit thro/3h eJ+an(e( $a#e$4
Ca$h Di$co/nt6
Ca$h (i$co/nt i$ a re(/ction in +a"'ent offere( to c/$to'er to in(/ce the' to re+a" cre(it a'o/nt 2ithin a $+ecifie( +erio( of ti'e 2hich 2i## 0e #e$$ than the nor'a# cre(it +erio(4
COLLECTION EFFORTS6
Thi$ (eter'ine$ act/a# co##ection +erio(4 The #o2er the co##ection +erio(5 the #o2er i$ the in!e$t'ent in acco/nt$ recei!a0#e$ an( !ice !er$a4 Pro'+t co##ection i$ nee(e( for fa$t t/rno!er of 2or?in3 ca+ita#4 Kee+in3 co##ection co$t$ an( 0a( (e0t$ 2ithin #i'it$ an( 'aintainin3 co##ection efficienc" a#$o inf#/ence the 2or?in3 ca+ita# nee($ of the fir'4
IN&ENTORY MANAGEMENT6
In!entor" i$ one of the 'a,or c/rrent a$$et$4 The ter' in!entor" refer$ to the $toc?+i#e of the +ro(/ct a fir' i$ offerin3 for $a#e an( co'+onent$ that 'a?e /+ the +ro(/ct4 The a$$et$ 2hich fir'$ $tore$ a$ in!entor" in antici+ation of nee( are ra2 'ateria#$5 2or? in +ro3re$$ an( fini$he( 3oo($4
The 'ain o0,ecti!e of in!entor" 'ana3e'ent i$6 84 To 'ini'ie the fir'$ in!e$t'ent in in!entor" =4 To 'eet a (e'an( for the +ro(/ct 0" efficient#" or3aniin3 the fir'$ +ro(/ction an( $a#e$ o+eration$4 4 The 'a,or o0,ecti!e of in!entor" 'ana3e'ent i$ to 'ini'ie co$t4 The co$t a$$ociate( 2ith in!entor" 'ana3e'ent fa##$ into t2o 0a$ic cate3orie$4 Or(erin3 < ac1/i$ition < $et7/+ co$t Carr"in3 co$t Man" $o+hi$ticate( 'athe'atica# techni1/e$ are a!ai#a0#e to han(#e in!entor" 'ana3e'ent +ro0#e'$4 The 'a,or +ro0#e' area$ that co'+ri$e the heart of in!entor" contro#$ are4 C#a$$ification +ro0#e' to (eter'ine the t"+e of contro# re1/ire(4
The or(er 1/antit" +ro0#e' Safet" $toc?$
ABC Ana#"$i$
Thi$ techni1/e i$ 0a$e( on the a$$/'+tion that a fir' Sho/#( not eJerci$e the $a'e (e3ree of contro# for a## ite'$ of in!entor"4 It $ho/#( rather ?ee+ a 'ore ri3oro/$ contro# on ite'$ that are 7 Mo$t re1/ire(5 an( < or $#o2e$t t/rnin3 Ite'$ that are #e$$ eJ+en$i!e $ho/#( 0e 3i!en #e$$ contro# effort$4 On the 0a$i$ of co$t in!o#!e( in!entor" ite'$ are cate3orie( into three c#a$$e$4 A 3ro/+ ite'$ in!o#!e #ar3e$t in!e$t'ent an( in!entor" contro# $ho/#( 0e 'o$t ri3oro/$ an( inten$i!e4 B 3ro/+ $tan($ 'i(2a"4 C 3ro/+ con$i$t$ of ite'$ of in!entor"5 2hich in!o#!e re#ati!e#" $'a## in!e$t'ent a#tho/3h the n/'0er of ite'$ i$ fair#" #ar3e4 The$e ite'$ (e$er!e 'ini'/' attention4 The co'+an" ha$ +re+are( #i$t$ of ite'$ of in!entor" i(entif"in3 the $a'e a$ cate3or" A5 B % C ite'$5 0/t on#" for the +/r+o$e of +h"$ica# !erification4
ECONOMIC ORDER UANTITY
It i$ the o+ti'/' #e!e# of in!entor"5 2hich i$ a#$o (efine( a$ that #e!e# of in!entor" or(er that 'ini'ie$ tota# co$t$ a$$ociate( 2ith in!entor" 'ana3e'ent4 The t2o co$t$ a$$ociate( 2ith in!entor" i$ or(erin3 an( carr"in3 co$t$4 The (eter'ination of a++ro+riate 1/antit" to 0e +/rcha$e( in each #ot to re+#eni$h $toc? a$ a $o#/tion5 2hich a$$/re$ 7 S'ooth +ro(/ction or $a#e$ o+eration$ Lo2er or(erin3 or $et/+ co$t$ B/t it in!o#!e$ hi3her carr"in3 co$t$4 On the other han( $'a## or(er$ 2o/#( re(/ce the carr"in3 co$t$ 0/t the or(erin3 co$t 2o/#( increa$e5 a$ there i$ a #i?e#ihoo( of interr/+tion of o+eration$ (/e to $toc? o/t$4 The co'+an" /$/a##" +roc/re$ in!entor" in eJce$$ of re1/ire'ent 2hich #ea($ to eJtra carr"in3 co$t$ an( (e'/rra3e chan3e$ (/e to non c#earance of i'+orte( 'ateria#$ in ti'e fro' +ort$4
SAFETY STOCKS
Safet" $toc? i$ (efine( a$ the 'ini'/' in!entor" to $er!e a$ a $afet" 'ar3in or 0/ffer to 'eet an antici+ate( increa$e in /$a3e re$/#tin3 fro' an /n/$/a##" hi3h (e'an( an( or an /ncontro##a0#e #ate recei+t of inco'in3 in!entor"4 It in!o#!e$ t2o t"+e$ of co$t$4 Stoc? o/t co$t a$$ociate( 2ith $horta3e of in!entor"4 Carr"in3 co$t$ a$$ociate( 2ith 'aintenance of in!entor"4 The co'+an" ?ee+$ a $afet" $toc? of on#" e#ectro(e$5 #oo$e too#$ an( $+are +art$4 The co'+an" ho#($ a $toc? of $iJ 'onth$ con$/'+tion4 Nor'$ for ho#(in3 each cate3or" of in!entor" fiJe( 0" 0/rea/ of +/0#ic enter+ri$e in 8:; 2ere fo##o2e( 0" the co'+an" ti## the co'+an" fiJe( it$ nor'$ in Fe04 8::9 8 ::9 for 0etter in!entor" contro# an( increa$in3 o!era## efficienc"4
CAPTER7 ANALYSIS % INTERPRETATION OF TE STUDY
D/rin3 '" $t/(" 2ith BP& Li'ite(5 I ha!e 3one thro/3h the acco/ntin3 $tate'ent$ of #a$t fi!e "ear$4 Brief (etai#$ of the $a'e are 3i!en 0e#o2 0efore co''encin3 into the ana#"$i$ an( inter+retation4
ANALYSIS COMPARISION COMMON SIHE PR PROFIT % LOSS ACCOUNT De$cri+tion
=>8>788
=>>:78>
=>>7>
=>>;7>
8;:49 78>94 :9>4:= 8=;>4
8>84= 78>9=48 >>4= ;4:>
:49 9:4 :948 =84=
8>=:4:; ;;>4= 89;4>> 884;
8>;4>; 78;4: :;4; 89;4:
Direct EJ+en(it/re Ra2 Materia# % S/07Cont4 Erection EJ+en(it/re Po2er % F/e# Tota# II &a#/e A((e( ) I7 II*
;=9=48 =>:4 =4 ;>4: 9;4
8>=4:; 9>4;= =;:4: 98=4 9994=
;:4: 8;;4: =94>; ;=;4= 8:4>
8>=9=49> =>4=9 =84= 8=994>= 9;4;;
;=48 ==>4= =9=4> =48 ;>84;
In(irect EJ+en(it/re E'+#o"ee Re'/neration Man/fact/rin3 EJ+en$e$ Other EJ+en(it/re Pro!i$ion$ Le$$6 Other Re!en/e$ Tota# I&
;;84=> 84: ;8=4:= =;4>9 +++.28 94;
:4 =>4; ;>4>: 849 529.2 4>
;==>4; 49 94>; =>49 +.08 8>8=49:
>=4 8:4; :94> 9>>;4> ++2.5 ;>4:
>::48 9>4>9 ;949 99=48; 2.0 :;:49
GROSS MARGIN )PBDIT*
94>8
7:4=
748:
7>:4=
==489
DEPRECIATION
8>:4:=
8=94>
4=:
8;48
84
GROSS PROFIT )PBIT*
=4>:
78>8:4>
7:9=4
7=>4;
=;94
8>48
>4>> 7=;4>:
>4>> 88>4;
>4>> 8>:;4
:>4;= 8848
=9;4
;>=4:
;>=4:
>4>>
>4>> >4>> >4 >4>>
7;94;
984
::4;9
8>=4:9
79>4::
788949
7994>
4
>4>>
=>>4=
>4>>
7;:4 >4>> >4>>
4=
79>4::
:;:=4:
7994>
7;:4
>48;
8>4>
948
8;4>9
>4>>
49;
79:4;:
:;949=
79;>49
7;:4
Inco'e T/rno!er Accretion< Decretion )FG
Intere$t Go!t Other$ DRE Prior +erio( A(,/$t'ent$ PROFIT )* < LOSS )7* Intere$t < Other$ Wai!e( EJtra Or(inar" ite'$ Net Profit < Lo$$ 0efore TaJ )PBT* Inco'e TaJ Net Profit < Lo$$ after TaJ )PAT*
>4>>
=>>7>:
BALANCE SEET De$cri+tion So/rce$ of F/n($ Share o#(er$ F/n($ Re$er!e$ % S/r+#/$ Sec/re( Loan$ Un7Sec/re( Loan$ Tota# FiJe( A$$et$ )inc# Ca+ita# WIP* Acc/'/#ate( De+reciation Net FiJe( A$$et$ In!e$t'ent$ In!entor" De0tor$ Ca$h Loan$ C/rrent A$$et$ Le$$6 C/rrent Lia0i#itie$ % Pro! S/n(r" Cre(itor$ De+o$it$ A(!ance fro' C/$to'er$ Other Lia0i#itie$ C/rrent Lia0i#itie$ Pro!i$ion$ C/rrent Lia0i#itie$ % Pro! Wor?in3 Ca+ita# )CA7CL* Mi$c4 EJ+4 the eJtent not 2rt off Acc/'/#ate( Lo$$ Tota#
=>8>788
=>>:78>
=>>7>:
=>>7>
=>>;7>
:4 =4>8 >4>> =;>4> =:>48:
:4 =4>8 8488 =;:4; >;=49
:4 =4>8 >4>> =:4; ===84
:4 =4>8 =8894= >48 ;=>4=8
:4 =4>8 =84:= >=948> ;9:848
894 8=49 >4:>
>;49; ;>=4;9 ;>4:8
:::4 ;49 9==49
:48= ;;=499 849
:==4>= ;;4>: 894:
848
848
848
848
848
9=94>: :99:4;= =>4:: 8>>4> =;4
9;:4>; :=>4:8 89;4> =84>: ==;;48>
94= ;;=4 >4;: >>;4 =>=94>
4:> :984; 9949 88>:48 =;>84>
99>4>8 849 8;94=; ;9:;4 8:9;4;
=948 ;489 9;;4> :8>4; 8=:94=8 =8=4= =8>>4: =;>4=9
84> >94: 8;4;8 :;4= 8:=49= =8>:499 8::>=4> =;94>
8884:> =48 9=4= 888>:49 8=;4> 8;:4: 8::;4>: =84:
88:4=: =4; ::48 8=4 8=48; 8>;4:> =>8:4>; 9=94>8
88884: ;=>4= =9>>49= ;>>4> 88>4>8 =849 88>9499 984>:
>4>>
>4>>
>4>>
=9;4
8;;4
=;94 =:>48:
==94=: >;=49
=;94;> ===84
9:849
9=;4; ;9:848
;=>4=8
R$ La?h$ RAW MATERIAL PURCASES Detai#$
84>488
84>48>
Ra2 Materia# OB A((6 P/rcha$e$ Tota# Le$$6 I$$/e$ < Con$/'e(
=;4>9 ;=84898 :>;4=> 98=48
==4:: 984; 9:=4; 8>;4;8
=98:4;> ;=4>8 8;84;8 ;4;
:48= 8>84: 889=4;8 88;4>8
=;:48 9:49 8>::4=: ;;;>48;
;994>;
=;4>;
==4:
=98:4;>
:48
84>488
84>48>
84>4>:
84>4>
84>4>
49;
79:4;:
:;949=
79;>4
7;:4
8>:4:=
8=94>
4>
8=4;
849
7;4> 7;4:9
4; 8:4;8 7 =4>9
7::4:= >=48
7=:4: 4==
:84 ::84:
>4;
7=:;4:
84:>
Stoc? a$ on c#o$in3 (ate CAS FLOW STATEMENT Detai#$ Ca$h F#o2 fro' O+eratin3 acti!itie$ Net Profit for the "ear A(,/$t'ent$ for 6 De+reciation char3e for the "ear A(,/$t'ent$ for 6 Increa$e < Decrea$e in in!entor" Decrea$e in Loan$ % a(!ance$ Increa$e < Decrea$e in De0tor$ Increa$e in Deffere( Re!en/e EJ+en(it/re Increa$e < Decrea$e in Lia0i#itie$ Increa$e < Decrea$e in Pro!i$ion$ Net ca$h f#o2 fro' O+eratin3 acti!itie$ P/rcha$e of FiJe( A$$et$ Increa$e < Decrea$e in in!e$t'ent$ Ca$h f#o2 fro' in!e$tin3 acti!itie$ Increa$e in Sec/re( Loan$ Increa$e in Un$ec/re( Loan$ GOI Loan Wai!er Ca$h f#o2 fro' financin3 acti!itie$ Net incr4 in ca$h an( ca$h e1/i!a#ent$ Ca$h an( ca$h e1/i!a#ent$ OB Ca$h an( ca$h e1/i!a#ent$ CB
7=48 >4>> 9>=4;: ;>=4
84>4>:
84>4>
84>4>
=9;4 7:94; 789498
;>=4: 7:4 8994
;894: 7;=>49: 8:4
=:4=8
>4>> 7:48 ;>48; 7 =>949:
8>94
7884>8
7;4
7:4:8
7;48
7==48
7994>:
7>4=:
>4>>
>4>>
>4>>
>4>>
>4>>
7:4:8
7;48
7==48
7994>:
7>4=:
78488 7:4=
==4 =84
7=8894= 78:8:49> ==>4
>4 ==>4>
8>49; 9;949
78>=49
=84>
789=48
==48
;=48
74>9 89;4> =>4::
88=49 >4;: 89;4>
784 9949 >4;:
7:4;: 8;94=; 9949
;=49: ;4; 8;94=;
IMPORTANT RATIOS < OTER INFORMATION
8 = 9 ; : 8> 88 8= 8 8 89 8; 8 8 8: => =8 == = = =9 =;
De$cri+tion Direct eJ+ a$ a of GTO )net of ED* &a#/e a((e( a$ a of GTO )net of ED* PBDIT a$ a of T/rno!er PAT a$ a of T/rno!er Intere$t Co!era3e Ratio Gro$$ Profit Ratio Net Profit Ratio Co$t Goo($ $o#( Net Sa#e$ < Ca+ita# E'+#o"e( In!entor" < T/rno!er )(a"$* C/rrent Ratio Li1/i(it" Ratio S/+er /ic? Ratio De0t 7E1/it" Ratio Pro+rietar" Ratio FiJe( A$$et$ Ratio No of E1/it" Share$ V 8>>> Ca+ita# A((ition$ A!era3e In!entor" A!era3e De0tor$ A!era3e Cre(itor$ A!era3e Wor?in3 Ca+ita# A!era3e Ra2 Materia# A!era3e Wor?7in7+ro3re$$ A!era3e Fini$he( Goo($ Ca+ita# E'+#o"e(
=>8>788
=>>:78>
=>>7>:
=>>7>
=>>;7>
94
9:4>
;4>>
4=9
9;4;
;48 =49 ;48 =49= ;48 ;4: 8=:49 48= 8> 84=: 84>> >4 4> 4; >4>= : :4:8 :84> :>4= >849; =;:4; 94=8 8;>4 >4 >8489
>4: 749; 74= 4 >4: 7:4:8 :;:4: =4;: 8;> 84= 84>= >4: 4>8 4 >4>= : ;48 :94 :84 =:49 89498 8>:4=> =8>84>= 88=4; ==94:
=4>> 78>4: 8848 74:8 =4>> 88;4:8 8=4> :4; =8 8488 >4= >4; 4>9 ;4 >4>= : ==48 9>:4; >>=489 894;> >49> =:4; =8=>4= =>4>8 49;
=;49 7==48 784>: 74 =;49 7=4;: =894> =4: : 84= 8489 >4; 8:48 =498 >4>= : 9948> ;:4:; 4>> 88=94; 84>9 ;=;49= 8==4: :84 849
4 894> 78:4= >49> 4 7==48= 8>=;488 849: := 84: 84 >4 849> =4; >4>= : >4=: 9>>49 =84 889:4;= ;>:4; ;9=4 8=9:4 ;=4 :4>=
READY RECONER S# 8 = 9 ; : 8> 88 8= 8 8 89 8; 8 8 8: => =8 == = = =9 =; = = =: > 8 =
Partic/#ar$ T/rno!er Gro$$ T/rno!er )Net of ED* &a#/e a((e( Gro$$ Mar3in )PBDIT* De+reciation PBIT )a* Intere$t on Go!t4 #oan$ )0* Intere$t on Other #oan$ Profit 0efore TaJ Profit after taJ Gro$$ B#oc? Net B#oc? inc# Ca+ WIP C/rrent A$$et$ C/rrent Lia0i#itie$ Pro!i$ion$ Wor?in3 Ca+ita# L3 ter' #oan$ Intere$t accr/e( Sh ter' #oan$ Intere$t accr/e( Share Ca+ita# Re$er!e$ % S/r+#/$ Ca+ita# e'+#o"e( )Net B# WC* Acc/'/#ate( Lo$$e$ Net Worth N/'0er of e'+#o"ee$ &a#/e a((e( +er e'+#o"ee Sa#arie$5 Wa3e$ % Benefit$ &a#/e a((e( +er R/+ee of 2a3e$ Contri0/tion to EJche1/er EJ+ort$ Net Profit to Net Worth Sa#arie$ % Wa3e$ to t/rno!er Mat#4 Ua$a3e to GTO )Net of ED* S/n (e0tor$ to T/rno!er ) (a"$*
=>8>788 8;:49 8=;>4 9;949 94>8 8>:4:= =4>: >4>> 8>48 8>=4:9 49; 894 >4:> =;4 8=:94=8 =8=4= =;>4=9 :48 =9894= :4 =4>8 >8489 =;94 7==:94: 88>: 948> ;;84=> 84=8 84; > 4= 4>
=>>:78> 8>84 ;4: >4== 7:4= 8=94 78>8:4> >4>> 7=;4>: 79>4:: 79:4;: >;49; ;>4:8 ==;;48 8:=49 =8>:499 =;94> 8:=;49= =9894= :4 =4>8 ==94: ==94 7=949 8=9> =4:: ;4; >4; =8;49= > 74;> 84
=>>7>: :49 ;4> 8:48 788;4 4=: 78==884= >4>> 88>4; :;:=4: :;949= :::4 9==49 =>=94> 8=;4> 8;:4: =84: 8;:=4 ==849 :4 =4>8 49; =;94;> 7==::48 8> 84 ;==>4; >4= 8=48= >4>> 84:> 48
:4; =99
9489 =;
94: =>
=>>7> 8>=:4:; 8;4:; :=94: 794= 8;48 7:84:9 >4>> 8>:;4 7994: 79;>4 :;4> 849 =;>84> 8=48 8>;4:> 9=94>> >48 =8894=9 :4 =4>8 849 9:84 79;49; 89: =4;: >=4= 848: =;84= >4>> 7:4= 84= ;=4=> 8:
=>>;7> 8>;4>; 8>:4= 8;;4;8 =;=498 84 =84 :>4;= 8848 7;48: 7;:4 :=>4: 894: =>=48; 8:8:49 =849 984>: >=948> =84:= :4 =4>8 :4>= 9=;4; 79=;84;: 898= 94> >::48 =4; ==4: >4>> 7;49: 848 4; 89
Wor?in3 ca+ita# $tate'ent for a +erio( of fi!e "ear$ fro' the "ear )=>>;7> to
=>8>788* )R$4 In #a?h$* =>8>788
=>>:78>
=>>7>:
=>>7>
=>>;7>
9=94>:
9;:4>9
94=
4:>
99>4>8
S/n(r" (e0tor$
:99:4;=
:=>4:8
;;=4
:984;
849
Ca$h % 0an? 0a#4
=>4::
89;4>
>4;:
9949
8;949
Loan$ % a(!ance$
8>>4>
=84>:
>>;4
88>:48
;9:;4
TOTAL )A*
=;4
==;;48>
=>=94>
=;>84>
8:9;4;
=948
84>
8884:>
88:4=:
De+o$it$
;489
>94:
=48
=4;
;=>4=
A(!ance fro' c/$to'er$
9;;4>
8;4;8
9=4=
::48
=9>>49=
Other #ia0i#itie$
:8>4;
:;4=
888>:49
8=4
;>>4>
C/rrent #ia0i#itie$
8=:94=8
8:=49=
8=;4>
8=48;
88>4>8
Pro!i$ion$
=8=4=
=8>:499
8;:4:
8>;4:>
=849
C/rrent #ia0i#itie$ % Pro!i$ion$
=8>>4:
8::>=4>
8::;4>:
=>8:4>;
88>9499
TOTAL )B*
=8>>4:
8::>=4>
8::;4>:
=>8:4>;
88>9499
Net 2or?in3 ca+ita# )A7B*
=;>4=9
=;94>
=84:
9=94>8
984>:
)A* C/rrent a$$et$ In!entorie$
)B* C/rrent #ia0i#itie$ S/n(r" cre(itor$
88884:
Inter+retation6
D/rin3 the 9 "ear +erio(5 the 2or?in3 ca+ita# +o$ition of BP&L i$ (ec#inin34 D/rin3 =>>;7> to =>8>788 on#" the 2or?in3 ca+ita# $ho2$ an Do2n 2ar( tren(4 Fro' the a0o!e ta0#e 2e can o0$er!e that the net 2or?in3 ca+ita# i4e45 c/rrent a$$et$ an( c/rrent #ia0i#itie$ i$ !er" #o2 in the "ear =>>7>: i4e45 =84: 2hen co'+are( to =>>7> an( a3ain it 2a$ increa$e( 0" =;94> in the "ear =>>:78> an( (ecrea$e( in the "ear =>8>7 884 Thi$ $ho2$ that the fir' i$ not in a +o$ition to 'aintain it$ c/rrent a$$et$ an( c/rrent #ia0i#itie$4 Beca/$e of thi$ rea$on the net 2or?in3 ca+ita# i$ f#/ct/atin34
State'ent $ho2in3 chan3e$ in 2or?in3 ca+ita# of BP& Lt( fro' =>>:78> to =>8>788 )R$4 In #a?h$*
Partic/#ar$
=>>:78>
=>8>788
Increa$e
)A*C/rrent a$$et$ In!entor"
9;:4>9
9=94>:
;4>
S/n(r" (e0tor$
:=>4:8
:99:4;=
=48
Ca$h % 0an? 0a#4
89;4>
=>4::
Loan$ % a(!ance$
=84>:
8>>4>
;4:9
TOTAL )A*
==;;48>
=;4
88=94;;
84>
=948
4:
De+o$itor$
>94:
;489
94;
A(!ance fro' c/$to'er$
8;4;8
9;;4>
89884;
Other$ #ia0i#itie$
:;4=
:8>4;
Pro!i$ion$
=8>:499
=8=4=
8::>=4>
=8>>4:
=;94>
=;>4=9
)B* C/rrent #ia0i#itie$
Decrea$e
4>9
4>9
S/n(r" cre(itor$
TOTAL )B*
Net 2or?in3 ca+ita#)A7B* Decrea$e in 2or?in3 ca+ita# TOTAL
=4> ;>=4 8>;;49
=884;
84
84
=;94>
=;94>
9:48
9:48
Inter+retation6
Fro' the a0o!e ta0#e 2e can o0$er!e that In 0et2een =>>:78> an( =>8>788 the net 2or?in3 ca+ita# +o$ition $ho2$ a Do2n 2ar( tren( i4e45 84 0eca/$e there i$ a 'ore +ro+ortionate (ecrea$e in c/rrent a$$et$ +o$ition )in!entor"5 (e0tor$ an( #oan$ a(!ance$* o!er the +ro+ortionate increa$e in c/rrent #ia0i#itie$ +o$ition )#ia0i#itie$ an( +ro!i$ion$ * 2hich /#ti'ate#" re$/#te( in (ecrea$e in 2or?in3 ca+ita# +o$ition 'ana3e'ent at BP&L (/rin3 the a0o!e 'entione( +erio(4 D/rin3 thi$ +erio( the c/rrent a$$et$ +o$ition i$ not $ati$factor"4
State'ent $ho2in3 chan3e$ in 2or?in3 ca+ita# of BP& Lt( fro' =>>7>: to =>>:78> )R$4 In #a?h$*
Partic/#ar$
=>>7>:
=>>:78>
Increa$e
)A* C/rrent a$$et$
94=
9;:4>9
S/n(r" (e0tor$
;;=4
:=>4:8
=94>
Ca$h % 0an? 0a#4
>4;:
89;4>
88=49
Loan$ an( a(!ance$
>>;4
=84>:
=>=94>
==;;48>
8884:>
84>
De+o$itor$
=48
>94:
;4
A(!ance fro' c/$to'er$
9=4=
8;4;8
948
Other Lia0i#itie$
888>:49
:;4=
8>4;
Pro!i$ion$
8;:4:
=8>:499
8::;4>:
8::>=4>
8;;4>
Net 2or?in3 ca+ita# )A7B*
=84:
=;94>
=4>9
Increa$e in 2or?in3 Ca+ita#
=4>9
=;94>
=88949
Decrea$e 4
In!entor"
TOTAL)A* )B* C/rrent #ia0i#itie$
:4; :84
89=48 884:>
S/n(r" cre(itor$
TOTAL )B*
TOTAL
=;94>
;>48; 8=4>;
=88949
Inter+retation67
Fro' the a0o!e ta0#e 2e can o0$er!e that In 0et2een =>>7>:an(=>>:78> the net 2or?in3 ca+ita# +o$ition $ho2$ a /+2ar( tren( i4e45 =4>9 0eca/$e there i$ 'ore increa$e in the c/rrent #ia0i#itie$ +o$ition )#ia0i#itie$ an( intere$t accr/e( on #oan$* 2hich re(/ce$ the 2or?in3 ca+ita# e!en 2hen there i$ an increa$e in c/rrent a$$et$ #i?e in!entor" an( $/n(r" (e0tor$4
State'ent $ho2in3 chan3e$ in 2or?in3 ca+ita# +o$ition of BP& Lt( fro' =>>7> to =>>7>: )R$4 In #a?h$*
Partic/#ar$
=>>7>
=>>7>:
Increa$e
)A* C/rrent a$$et$ In!entor"
4:>
94=
::4:=
S/n(r" (e0tor$
:984;
;;=4
>4;
Ca$h % 0an? 0a#4
9949
>4;:
84
Loan$ an( a(!ance$
88>:48
>>;4
>=48
=;>84>
=>=94>
)B* C/rrent #ia0i#itie$ S/n(r" cre(itor$
88:4=:
8884:>
;=4;8
De+o$itor$
=4;
=48
8849
A(!ance fro' c/$to'er$
::48
9=4=
Other Lia0i#itie$
8=4
888>:49
Pro!i$ion$
8>;4:>
8;:4:
89498
=>8:4>;
8::;4>:
89498
9=94>8
=84:
TOTAL )A*
TOTAL )B* Net 2or?in3 ca+ita# )A7B* Decrea$e in 2or?in3 Ca+ita#
TOTAL
::4:=
Decrea$e
;=994:=
:94
949 99>4>
99>4>
9=94>8
9=94>8
=48
=48
Inter+retation 67 Fro' the a0o!e ta0#e 2e can o0$er!e that In 0et2een =>>7> an( =>>7>: the net 2or?in3 ca+ita# +o$ition $ho2$ a Do2n 2ar( tren( i4e45 99>4> 0eca/$e there i$ a 'ore +ro+ortionate (ecrea$e in c/rrent a$$et$ +o$ition )in!entor" an( ca$h 0a#ance$* o!er the +ro+ortionate increa$e in c/rrent #ia0i#itie$ +o$ition )0on($ re+a"a0#e an( intere$t accr/e( on #oan$* 2hich /#ti'ate#" re$/#te( in (ecrea$e in 2or?in3 ca+ita# +o$ition +o$in3 a ne3ati!e $i3n of 2or?in3 ca+ita# 'ana3e'ent at BP&L (/rin3 the a0o!e 'entione( +erio(4
State'ent $ho2in3 chan3e$ in 2or?in3 ca+ita# of BP& Lt( fro' =>>;7> to =>>7> )R$4 In #a?h$*
Partic/#ar$
=>>;7>
=>>7>
Increa$e
)A* C/rrent a$$et$ In!entor"
99>4>8
4:>
=:4:
S/n(r" (e0tor$
849
:984;
=:;4:
Ca$h % 0an? 0a#4
8;94=;
9949
Loan$ an( a(!ance$
;9:;4
88>:48
=4
8:9;4;
=;>84>
848=
)B* C/rrent #ia0i#itie$ S/n(r" cre(itor$
88884:
88:4=:
=4=
De+o$itor$
;=>4=
=4;
8>4:;
A(!ance fro' c/$to'er$
=9>>49=
::48
Other Lia0i#itie$
;>>4>
8=4
=4>
Pro!i$ion$
=849
8>;4:>
8994;
88>9499
=>8:4>;
984>:
9=94>8
TOTAL )A*
TOTAL )B* Net 2or?in3 ca+ita# )A7B* Decrea$e in 2or?in3 Ca+ita# TOTAL
Decrea$e
:4;:
:4;:
;:4:
;:4:
8::4= =;=;4>
=;=;4> 984>:
984>:
=4
=4
Inter+retation67
Fro' the a0o!e ta0#e 2e can o0$er!e that In 0et2een =>>;7> to =>>7>5 the 2or?in3 ca+ita# +o$ition $ho2$ an (o2n2ar( tren( i4e45 =;=;4> o!er it$ +re!io/$ "ear 0eca/$e there i$ a +ro+ortionate increa$e in $/n(r" (e0tor$ an( ca$h o!er the +ro+ortionate (ecrea$e in c/rrent #ia0i#itie$ #i?e #ia0i#itie$ an( 0on($ re+a"a0#e 2hich /#ti'ate#" re$/#te( in net increa$e in 2or?in3 ca+ita# +o$ition +o$in3 a +o$iti!e $i3n of 2or?in3 ca+ita# 'ana3e'ent at BP&L (/rin3 the a0o!e 'entione( +erio(4
RATIO ANALYSIS
A ratio i$ a $i'+#e arith'etica# eJ+re$$ion of the re#ation$hi+ of one n/'0er to another4 It 'a" 0e (efine( a$ the in(icate( co7efficient of t2o 'athe'atica# eJ+re$$ion$4 The techni1/e of ratio ana#"$i$ can 0e e'+#o"e( for en$/rin3 $hort ter' #i1/i(it" or 2or?in3 ca+ita# +o$ition of a fir'4 The fo##o2in3 ratio$ 'a" 0e ca#c/#ate( for thi$ +/r+o$e4 C/rrent ratio Aci( te$t ratio A0$o#/te #i1/i( ratio or ca$h +o$ition ratio In!entor" t/rno!er ratio Recei!a0#e$ < De0tor$ t/rno!er ratio Pa"a0#e < Cre(itor$ t/rno!er ratio Wor?in3 ca+ita# t/rno!er ratio C/rrent #ia0i#itie$ to 2or?in3 ca+ita#
CURRENT RATIO
C/rrent ratio 'a" 0e (efine( a$ the re#ation$hi+ 0et2een c/rrent a$$et$ an( c/rrent #ia0i#itie$4 Thi$ ratio i$ a#$o ?no2n a$ 2or?in3 ca+ita# ratio5 i$ a 'ea$/re of 3enera# #i1/i(it" an( i$ 'o$t 2i(e#" /$e( to 'a?e the ana#"$i$ of a $hort7ter' financia# +o$ition or #i1/i(it" of a fir'4
CURRENT RATIO
CURRENT ASSETS XXXXXXXXX CURRENT LIABILITIES
C/rrent a$$et$ In!entor" De0tor$ Ca$h % 0an?$ 0a#ance$ Other C/rrent A$$et$ Loan$ % a(!ance$4 C/rrent #ia0i#itie$ c/rrent #ia0i#itie$ +ro!i$ion$
Ca#c/#ation of c/rrent ratio of BP&L fro' =>>;7> to =>8>788 )R$4 In #a?h$* YEAR
C/rrent a$$et$
C/rrent
#ia0i#itie$
C/rrent ratio
=>8>788
=;4
=8>>4:
848=
=>>:78>
==;;48>
8::>=4>
848
=>>7>:
=>=94>
8::;4>:
84>8
=>>7>
=;>84>
=>8:4>;
84=
=>>;7>
8:9;4;
88>9499
84
Inter+retation6 7
A c/rrent ratio of =68 i$ con$i(ere( a$ i(ea#4 The c/rrent ratio of B44P4&4 in =>>;7> i$ 84 an( it i$ (ecrea$e( to 84= in=>>7 =>>5 4an( it i$ (ecrea$e( to 84>8 in =>>7>: an( a3ain it i$ increa$e( to 848 in =>>:78>5 an( a3ain it i$ (ecrea$e( to 848= in =>8>7884 The c/rrent ratio of the fir' i$ for 0e#o2 the $tan(ar(5 the #i1/i(it" +o$ition of fir' i$ not a## $ati$factor"4
UICK RATIO
/ic? ratio i$ a#$o ?no2n a$ Li1/i( Ratio or Aci( Te$t Ratio4 The ter' #i1/i(it" refor'$ to the a0i#it" of a fir' to +a" it$ $hort7ter' o0#i3ation a$ an( 2hen the" 0eco'e (/e4 /ic? ratio 'a" 0e (efine( a$ the re#ation$hi+ 0et2een /ic? < Li1/i( a$$et$ an( C/rrent < Li1/i( #ia0i#itie$4 An a$$et i$ $ai( to 0e #i1/i( if it can 0e con!erte( into ca$h 2ithin a $hort +erio( 2itho/t #o$$ of !a#/e4
UICK ASSETS UICK RATIO XXXXXXXXXXX CURRENT LIABILITIES
UICK ASSETS CURRENT ASSETS )IN&ENTORIES PREPAID EPENSES*
Ca#c/#ation of 1/ic? ratio of BP&L fro' =>>;7> to =>8>788 )R$4 In #a?h$*
Year
/ic? A$$et$
C/rrent Lia0i#itie$
Ratio
=>8>788
8>4;9
8=:94=8
84>>
=>>:78>
8>:4>9
8:=49=
84>=
=>>7>:
8:8>4=9
8=;4>
>4=
=>>7>
=88;;48
8=48;
8489
=>>;7>
89=>;4;
88>4>8
84
Inter+retation6 7
A /ic? ratio of 868 i$ con$i(ere( a$ i(ea#4 The /ic? ratio i$ 84 in =>>;7> an( it i$ 3ra(/a##" (ecrea$e( in =>>7>5 =>>7>:4an( a3ain increa$e( in =>>:78> i4e45 84>=5 an( a3ain (ecrea$e( to 84>> in =>8>7884 The /ic? ratio of the fir' i$ 0e#o2 the $tan(ar($4 The $hort ter' #i1/i(it" +o$ition of the fir' i$ not $ati$factor"4
IN&ENTORY TURNO&ER RATIO
E!er" fir' ha$ to 'aintain a certain #e!e# of in!entor"5 $o a$ to 'eet the re1/ire'ent$ of the 0/$ine$$4 B/t the #e!e# of in!entor" $ho/#( neither 0e too hi3h nor too #o24 In!entor" t/rno!er ratio i$ a#$o ?no2n a$ $toc? !e#ocit"4 It 2o/#( in(icate 2hether in!entor" ha$ 0een efficient#" /$e( or not4
IN&ENTORY TURNO&ER RATIO
In!entor" XXXXXXX ;9 T/rn o!er
Ca#c/#ation of in!entor" t/rno!er ratio of BP&L fro' =>>;7> to =>8>788
YEAR
T/rno!er
A!era3e in!entor" )in #a?h$*
In!entor" t/rno!er ratio
No of (a"$
=>8>788
8;:49
:84>
>49
8>
=>>:78>
8>84=
:94
>4
8;>
=>>7>:
:49
9>:4;
>4;>
=8
=>>7>
8>=:4:;
;:4:;
>4=;
:
=>>;7>
8>;4>;
9>>49
>4=
:=
Inter+retation6 7
In!entor" t/rno!er ratio i$ recor(e( hi3he$t in the "ear =>>7>: i4e45 >4;> an( #o2e$t in the "ear =>>7> i4e45>4=; The ratio in(icate$ the i'+ro+er 'ana3e'ent of in!entor" 2hich #ea($ to the /nnece$$ar" 0#oc?in3 of 2or?in3 ca+ita# 2hich i$ not 3oo( for an" or3aniation5 for 2hich intere$t i$ to 0e +ai(4
DEBTORS TURNO&ER RATIO
De0tor$ t/rno!er ratio in(icate$ the !e#ocit" of (e0t co##ection of fir'4 In $i'+#e it in(icate$ the n/'0er of ti'e$ a!era3e (e0tor$ are t/rne( o!er (/rin3 a "ear4 Genera##" the hi3her the !a#/e of (e0tor$ t/rno!er the 'ore efficient i$ the 'ana3e'ent of (e0tor$ < $a#e$ or 'ore #i1/i( the (e0tor$4 Si'i#ar#" #o2 (e0tor$ t/rno!er i'+#ie$ efficient 'ana3e'ent of (e0tor$ < $a#e$ an( #e$$ #i1/i( (e0tor$4
DEBTORS TURNO&ER RATIO
DEBTORS XXXXXXX ;9 TURNO&ER
Ca#c/#ation of (e0tor$ t/rno!er ratio of BP&L fro' =>>;7> 7 =>8>788
YEAR
TURNO&ER
De0tor$
De0tor$ t/rno!er Ratio
No of (a"$
=>8>788
8;:49
:99:4;=
>4;:
=99
=>>:78>
8>84=
:=>4:8
>4:
=;
=>>7>:
:49
;;=4
>4;
=>
=>>7>
8>=:4:;
:984;
>49=
8:
=>>;7>
8>;4>;
84>8
>4:
89
Inter+retation6 7
De0tor$ t/rno!er ratio i$ recor(e( hi3he$t in the "ear =>>:78> i4e45>4: an( #o2e$t in the "ear =>>;7>i4e45>4:4
CREDITORS TURNO&ER RATIO
In the co/r$e of 0/$ine$$ o+eration a fir' ha$ to 'a?e cre(it +/rcha$e$ an( in the $hort ter' #ia0i#itie$4 The ratio in(icate$ the !e#ocit" 2ith 2hich the cre(itor$ are t/rno!er in re#ation to +/rcha$e$4 Genera##" hi3her the cre(itor$ !e#ocit" 0etter it i$ or other2i$e #o2er the cre(itor$ !e#ocit" #e$$ fa!ora0#e are re$/#t$4
CREDITORS CREDITORS TURNO&ER RATIO XXXXXXXX PURCASES Ca#c/#ation of cre(itor$ t/rno!er ratio of BP&L fro' =>>;7>to =>8>788 In La?h$
No of (a"$ YEAR
CREDITORS
PURCASES
Cre(itor$ t/rno!er Ratio
=>8>788
=948
;994>;
>4
=>>:78>
84>
=;4>;
848=
=>>7>:
8884:>
==44:
>4
=>>7>
88:4:>
=98:4;>
>49
=>>;7>
88884:
:48
>4=:
= >: == 8;9 8>
Inter+retation6 7
The ratio 2a$ recor(e( hi3he$t in =>>7> an( #o2e$t in =>>97>; 2hich i$ a0o!e the #i'it4 The ratio in(icate$ the co'+an"$ cre(i0i#it" an( tr/$t 2ith cre(itor$ 2hich are !er" $ati$factor"4
WORKING CAPITAL TURNO&ER RATIO
The 2or?in3 ca+ita# t/rno!er ratio in(icate$ the !e#ocit" of the /ti#iation of net 2or?in3 ca+ita#4 The ratio in(icate$ the n/'0er of ti'e$ the 2or?in3 ca+ita# i$ t/rne( o!er in the co/r$e of a "ear4 The ratio 'ea$/re$ the efficienc" 2ith 2hich the 2or?in3 ca+ita# i$ 0ein3 /$e( 0" the fir'4
WORKING CAPITAL TURNO&ER RATIO
T/rno!er XXXXXXXXXXX WORKING CAPITAL
Ca#c/#ation of 2or?in3 ca+ita# t/rno!er ratio of BP&L fro' =>>7>9 to =>>7>: in #a?h$
YEAR
T/rno!er
=>8>788
8;:49
=>>:78>
8>84=
=>>7>: =>>7> =>>;7>
:49 8>=:4:; 8>;4>;
W4C4
Ratio
=;>4=9
94=
=;94>
4
=84:
=;4=
9=94>>
4>
984>:
=48
Inter+retation6 7
A hi3her W4C4 t/rno!er ratio in(icate$ the efficient 'ana3e'ent of 2or?in3 ca+ita#4 The W4C4T4R4 i$ 4= in =>>7=>>9 It in(icate$ efficient 'ana3e'ent of 2or?in3 ca+ita#4 In =>>97>; it 2a$ (ecrea$e( to 4> Later it 2a$ (ecrea$e( /+ to =>>7>:4 In =>>7>: it i$ =4 It 'ean$ the 'ana3e'ent fai#$ to +ro+er /$e of 2or?in3 ca+ita#4
Tren($
in 2or?in3 ca+ita# 'ana3e'ent fro' =>>;7> to =>8>788
Year
C/rrent a$$et$ )A*
C/rrent #ia0i#itie$ )B*
Net2or?in3 ca+ita#
Percenta3e of chan3e
=>>;7>
=>=48;
8:8:49
984>:
;=4;:
=>>7>
=;>84>
8=48
9=94>>
8498
=>>7>:
=>=94>
8=;4>
=84:
8>4
=>>:78>
==;;48>
8:=49=
=;94>
=4:
=>8>788
=;4
8=:94=8
=;>4=9
=:4=>
Inter+retation6 Fro' the a0o!e ta0#e 2e can o0$er!e that the net 2or?in3 ca+ita# i$ !er" hi3h in the "ear =>>;7=>> i4e984>: an( it i$ !er" #o2 in the "ear =>>7=>>: i4e=84:4thi$ $ho2$ that the fir' i$ not in a +o$ition to 'aintain it$ c/rrent a$$et$ an( c/rrent #ia0i#itie$4
BP&6
Tren($ in c/rrent a$$et$
Year
C/rrent a$$et$
Percenta3e of chan3e
=>>;7>
=>=48;
7
=>>7>
=;>84>
4:
=>>7>:
=>=94>
=48
=>>:78>
==;;48>
)8>4;=*
=>8>788
=;4
)48>*
Inter+retation6
the a0o!e ta0#e 2e can o0$er!e that the +ercenta3e of chan3e in c/rrent a$$et$ $ho2 a ne3ati!e tren($ in the "ear =>>:7=>8> %=>8>788 i4e4 8>4;=4%48> thi$ $ho2 that that the fir' i$ not in a +o$ition to 'aintain it$ c/rrent a$$et$4
BP&6
Tren($ in c/rrent #ia0i#itie$
Year
C/rrent #ia0i#itie$
Percenta3e of chan3e
=>>;7>
8:8:49
7
=>>7>
8=48
94>:
=>>7>:
8=;4>
>49=
=>>:78>
8:=49=
=4
=>8>788
8=:94=8
)=4*
Inter+retation6 Fro' the a0o!e ta0#e 2e can o0$er!e that the +ercenta3e of chan3e in c/rrent #ia0i#itie$ $ho2 a ne3ati!e tren( in the "ear =>8>7=>88 i4e4 =44 The hi3he$t +ercenta3e of chan3e in the "ear =>>7> i4e45 94>: 4The #o2e$t +ercenta3e of chan3e in the "ear =>>7>: i4e54>49=4
BP&6
Brea? /+ of c/rrent a$$et$
Partic/#ar$
=>>;7>
=>>7>
=>>7>:
=>>:78>
=>8>788
In!entor"
99>4>8
4:>
94=
9;:4>;
9=94>:
S/n(r" (e0tor$
849
:984;
;;=4
:=>4:8
:99:4;=
Ca$h 0an?
8;94=;
9949
>4;:
89;4>
=>4::
Loan$
;9:;4
88>:48
>>;4
=84>:
8>>4>
Inter+retation6
BP&6
Tren($ in $toc?
Year
In!entor"
Percenta3e of chan3e
=>>;7>
99>4>8
7
=>>7>
4:>
);48*
=>>7>:
94=
):4*
=>>:78>
9;:4>;
84>
=>8>788
9=94>:
)84>*
Inter+retation6 Fro' the a0o!e ta0#e 2e can o0$er!e that the +ercenta3e of chan3e in In!entor" $ho2 a +o$iti!e tren( in the "ear =>>:7=>8> i4e4 84>4An( re'ainin3 a## the "ear$ $ho2in3 a ne3ati!e ter'$4 Thi$ $ho2 that the fir' i$ not in a +o$ition to 'aintain $/fficient In!entor"4 The fir' ha$ to ta?e 'ea$/re$ to 'aintain in!entor"
BP&6 Year
Tren($ in $/n(r" (e0tor$ $/n(r" (e0tor$
Percenta3e of chan3e
=>>;7>
849
7
=>>7>
:984;
)=948=*
=>>7>:
;;=4
4;
=>>:78>
:=>4:8
)>4;;*
=>8>788
:99:4;=
)=4:*
Inter+retation6 Fro' the a0o!e ta0#e 2e can o0$er!e that the +ercenta3e of chan3e in $/n(r" (e0tor$ in $ho2 a +o$iti!e tren( in the "ear =>>7=>>: i4e4 4;4 It i$ hi3he$t +ercenta3e of chan3e5 an( re'ainin3 a## the "ear$ $ho2in3 a ne3ati!e ter'4 Thi$ $ho2$ that the fir' i$ not in a +o$ition to 'aintain $/fficient $/n(r" (e0tor$4
BP&6 Year
Tren($ in ca$h % 0an? ca$h % 0an?
Percenta3e of chan3e
=>>;7>
8;94=;
7
=>>7>
9949
89>4==
=>>7>:
>4;:
=4
=>>:78>
89;4>
)84=*
=>8>788
=>4::
88;4:=
Inter+retation6 Fro' the a0o!e ta0#e 2e can o0$er!e that the +ercenta3e of chan3e in ca$h % 0an? in $ho2 ne3ati!e ter' in the "ear =>>:7=>8> i4e4 84 4The hi3he$t +ercenta3e of chan3e in the "ear =>>7> i4e45 89>4
BP&6
Tren($ in #oan$
Year
#oan$
Percenta3e of chan3e
=>>;7>
;9:;4
7
=>>7>
88>:48
)>4=*
=>>7>:
>>;4
4
=>>:78>
=84>:
884>>
=>8>788
8>>4>
)8>4:*
Inter+retation6 Fro' the a0o!e ta0#e 2e can o0$er!e that the +ercenta3e of chan3e in Loan$ in $ho2 ne3ati!e tren($ in the "ear =>>7=>> % =>8>788 i4e4 >4= % 8>4:4 The hi3he$t +ercenta3e of chan3e in the "ear =>>7>: i4e45 44
BP&6
Brea? /+ of c/rrent #ia0i#itie$
Partic/#ar$
=>>;7>
=>>7>
=>>7>:
=>>:78>
=>8>788
S/n(r" cre(itor$
88884:
88:4=:
8884:>
84>
=948
De+o$it$
;=>4=
=4;
=48
>94:
;489
A(!ance fro' c/$to'er$
=9>>49=
::48
9=4=
8;4;8
9;;4>
Other$ #ia0i#itie$
;>>4>
8=4
888>:49
:;4=
:8>4;
Pro!i$ion$
=849
8>;4:>
8;:4:
=8>:499
=8=4=
Inter+retation6
BP&6
Tren($ in $/n(r" cre(itor$
Year
$/n(r" cre(itor$
Percenta3e of chan3e
=>>;7>
88884:
7
=>>7>
88:4=:
)=4:*
=>>7>:
8884:>
)48=*
=>>:78>
84>
)4>:*
=>8>788
=948
884:
Inter+retation6
Fro' the a0o!e ta0#e 2e can o0$er!e that the +ercenta3e of chan3e in $/n(r" cre(itor$ in $ho2 ne3ati!e ter'$ in the "ear$ =>>7=>> 5=>>7>: % =>>:78> i4e45=4: 5 48= %4>: The hi3he$t +ercenta3e of chan3e in the "ear =>8>788 i4e45 884:4
BP&6
Tren($ in De+o$it$
Year
De+o$it$
Percenta3e of chan3e
=>>;7>
;=>4=
7
=>>7>
=4;
)84*
=>>7>:
=48
)84:*
=>>:78>
>94:
49;
=>8>788
;489
);4;:*
Inter+retation6 Fro' the a0o!e ana#"$i$ 2e can o0$er!e that the fir' i$ not 'aintain $/fficient a(!ance fro' c/$to'er$ 2h" 0eca/$e it i$ $ho2in3 ne3ati!e ter'$ fro' =>>7> % =>8>7884the hi3he$t +ercenta3e of chan3e in the "ear =>>7>: i4e458>4;4
BP&6
Tren($ in A(!ance fro' c/$to'er$
Year
A(!ance fro' c/$to'er$
Percenta3e of chan3e
=>>;7>
=9>>49=
7
=>>7>
::48
)4*
=>>7>:
9=4=
8>4;
=>>:78>
8;4;8
4;8
=>8>788
9;;4>
)=;4;=*
Inter+retation6 Fro' the a0o!e ana#"$i$ 2e can o0$er!e that the fir' i$ not 'aintain $/fficient a(!ance fro' c/$to'er$ 2h" 0eca/$e it i$ $ho2in3 ne3ati!e ter'$ fro' =>>7> % =>8>7884the hi3he$t +ercenta3e of chan3e in the "ear =>>7>: i4e458>4;4
BP&6
Tren($ in Other #ia0i#itie$
Year
Other #ia0i#itie$
Percenta3e of chan3e
=>>;7>
;>>4>
7
=>>7>
8=4
)49*
=>>7>:
888>:49
)94*
=>>:78>
:;4=
894=9
=>8>788
:8>4;
48
Inter+retation6 Fro' the a0o!e ana#"$i$ 2e can o0$er!e that the fir' i$ not 'aintain $/fficient other #ia0i#itie$ 2h" 0eca/$e it i$ $ho2in3 ne3ati!e ter'$ fro' =>>7> % =>>7>: i4e4549 % 94 the fir' ha$ to ta?en 'ea$/re$ to 'aintain other #ia0i#itie$4
BP&6
Tren($ in +ro!i$ion$6
Year
+ro!i$ion$
Percenta3e of chan3e
=>>;7>
=849
7
=>>7>
8>;4:>
)4:*
=>>7>:
8;:4:
:49
=>>:78>
=8>:499
)=848*
=>8>788
=8=4=
)==4==*
Inter+retation6
Fro' the a0o!e ana#"$i$ 2e can o0$er!e that the +ercenta3e of chan3e in Pro!i$ion i$ $ho2 ne3ati!e tren($ in the "ear =>>7=>>5 =>>:78> %=>8>788 i4e4 4:5 =848 % ==4==4 Thi$ $ho2$ that that the fir' i$ not in a +o$ition to 'aintain it$ +ro!i$ion$4 ANALYSIS
The co'+an" co/#( achie!e o+eratin3 +rofit$ in =>8>788 after a 3a+ of three "ear$4 The rea$on for thi$ i$ contro# of co$t of +ro(/ction4 The or(er 0oo? +o$ition of the co'+an" i$ on i'+ro!e'ent tren(4 Beca/$e of re3/#ar or(er 0oo?in35 the co'+an" i$ a0#e to 3et initia# a(!ance$ fro' c/$to'er$ an( there0" 0" 'ana3in3 it$ 2or?in3 ca+ita# nee( to $o'e eJtent4 A$ recei!a0#e$ fro' the c/$to'er$ a#$o i'+ro!in3 con$i(era0#e5 'ain#" (/e to !i3oro/$ fo##o2 /+5 +#anne( co##ection $che(/#e5 the co'+an" i$ $o'e2hat co'fort in 'eetin3 it$ 2or?in3 ca+ita# nee($ e!en tho/3h there i$ re3/#ar ca$h cre(it a3ree'ent 2ith an" 0an?4 The co'+an" i$ re3/#ar in c#earin3 $a#arie$ of the e'+#o"ee$ an( c#ear $tat/tor" (/e$ in ti'e4 With the ca$h f#o2$ 3enerate( fro' o#( (e0tor$ an( a#$o f/n( $/++ort fro' it$ ho#(in3 co'+an"5 the co'+an" ha$ c#eare( 'a,orit" of #on3 +en(in3 (/e$ an( there0" i'+ro!e( it$ 2or?in3 ca+ita# ratio in the "ear$ =>>:78> an( =>8>7884 In the +a$t t2o "ear$ the c/rrent ratio +o$ition i$ co'forta0#e 2hen co'+are( to +re!io/$ "ear$4 o2e!er5 there are f#/ct/ation$ in the c/rrent ratio4 A hi3h in!entor" t/rno!er ratio in(icate$ 3oo( #i1/i(it" +o$ition4 Proc/re'ent of in!entor" in eJce$$ of re1/ire'ent in $o'e ca$e$ an( non7a!ai#a0i#it" in re$+ect of other 'ateria#$ re$/#tin3 $to++a3e of +ro(/ction4 There i$ a contin/o/$ increa$e in the (e0tor t/rno!er ratio (/rin3 the +a$t fi!e "ear$5 2hich i$ (/e to the (ecrea$e in (e0tor$ co##ection +erio( )the ti'e #a3 0et2een cre(it $a#e$ an( ca$h co##ection*4 The cre(itor$ t/rno!er ratio i$ increa$in3 o!er the +a$t fi!e "ear$ 2hich i$ (/e to increa$e in the cre(itor$ co##ection +erio( 2hich $ho2$ the co'+an" i$ (e#a"in3 the +a"'ent$ to cre(itor$4 Thi$ i$ ha++enin3 a$ +er the ne2 +roce(/re co'+an" i$ fo##o2in3 in c#earin3 it$ cre(itor$4 BP&L rai$e$ 0i##$ at +erio(ic inter!a#$ for the 2or? (one at the $ite (e+en(in3 on the 'i#e $tone$ i(entifie(4 o2e!er the co'+an" reco3nie$ inco'e /$in3 the +ercenta3e co'+#etion 'etho( for the 2or? (one at $ite$5 2hich re$/#t$ in acc/'/#ation of accr/e( inco'e4
CAPTER79
FINIDINGS % SUGGESTIONS6
FINDINGS
Po$t =>>>5 'o$t of the centra# +/0#ic $ector enter+ri$e$ in In(ia are (oin3 2e##4 The rea$on i$5 the PSU$ ha!e ha( intro$+ection a0o/t their (ec#inin3 +erfor'ance (/rin3 #ate >$ an( entire :>$ an( $tarte( a++#"in3 !ario/$ techni1/e$ for i'+ro!e'ent5 there0" to co'+ete 2ith the +ri!ate $ector an( 3#o0a# entre+rene/r$ an( $tan( the'$e#!e$ in the nationa# a$ 2e## a$ internationa# 'ar?et$4 Go!ern'ent +o#ic" to2ar($ PSU$ a#$o enco/ra3e( the PSU$ to i'+ro!i$e the'$e#!e$4 A$ a +art of reha0i#itation +ro3ra''e5 GOI ha$ 2ritten off #oan$ an( 2ai!e( intere$t !a#/in3 R$ 89 corer$4 Go!ern'ent of AP 2ai!e( !ario/$ $tate an( #oca# taJe$ to the t/ne of R$ chore$5 0e$i(e$ re3i$terin3 the #an( +o$$e$$e( 0" the co'+an" a$ a 3ift (ee(4 Si'i#ar#"5 BP& a#$o 2ith the he#+ of Go!ern'ent +o#ic" co/+#e( 2ith chan3e in the 'ana3e'ent $tarte( $ho2in3 +o$iti!e re$/#t$4 The "ear =>> can 0e $ai( a$ T/rnaro/n( "ear or Re0irth "ear for BP&4 After ta?e7o!er of BP& 0" BEL5 the co'+an" i$ en,o"in3 3oo( 'onetar" $/++ort fro' it$ ho#(in3 co'+an"4 With the $/++ort of the f/n($ +/'+e( 0" ho#(in3 co'+an"5 BP& c#eare( the o/t$tan(in3 #oan$ of con$orti/' 0an?$5 #i1/i(ate( 'o$t of the $tat/tor" an( other #ia0i#itie$ an( en,o"in3 2or?in3 ca+ita# re1/ire'ent$4 It$ ho#(in3 co'+an" ha$ a#rea(" c#eare( the Ca+eJ +ro3ra' an( in the co'in3 t2o to three "ear$5 an a'o/nt of R$ => core$ 2o/#( 0e in!e$te( to2ar($ Ca+eJ4
84 The c/rrent ratio of B44P4&4 in =>> i$ 848 an( it i$ (ecrea$e( to >4; in =>>; an( it i$ (ecrea$e( to >49: in =>>7>4 =4 The /ic? ratio i$ >4 (/rin3 =>> (ecrea$e( in =>>5 >9 an( >; an( $too( at >4: on 84>4=>>; an( it i$ (ecrea$e( to >49 in =>>7>4
4 The ratio of the fir' i$ >4>= in =>> an( it increa$e( to >4> in =>>7> an( a3ain (ecrea$e( in =>>7>9 an( to 4>= in =>>97>;4 4 The (e0t of the co'+an" i$ !er" hi3h an( the Net 2orth of the Co'+an" ha$ 0eco'e ne3ati!e an( ha$ increa$e( to R$4 )7* :4=>crore$ a$ on 84>4=>>;4 The cre(itor$ of the co'+an" are in a hi3h ri$?" +o$ition4 In =>>7> a#$o the co'+an" ha$ in a hi3h ri$?" +o$ition4
94 A #o2er $o#!enc" ratio i$ an in(icator of the fir' 2hich i$ in 3oo( +o$ition4 The $o#!enc" ratio of the fir' i$ 849= in =>>=7> an( it increa$e( to =4 in =>>97>;4 The $o#!enc" +o$ition of the fir' i$ not $ati$factor"4
i3her o+eratin3 +rofit ratio i$ an in(icator of 3oo( financia# +erfor'ance of the co'+an"4 The o+eratin3 +rofit i$ +o$iti!e in =>8>788 hence o+eratin3 +rofit ratio of the fir' i$ 3oo(4 The hi3her the ret/rn on net 2orth ratio the 0etter i$ the financia# +erfor'ance of the fir' fro' the +er$+ecti!e of the $hareho#(er$4 The net 2orth ratio of the fir' i$ ne3ati!e (/rin3 the a0o!e +erio(4 It in(icate$ the 0a( financia# +erfor'ance of the fir'4 An In!entor" t/rno!er ratio of i$ con$i(ere( i(ea#4 The in!entor" t/rno!er ratio $ho2$ (ecrea$e in recent "ear$ in B44P4&4 Then the fir' i$ inefficient in!entor" 'ana3e'ent A hi3her W4C4 t/rno!er ratio in(icate$ the efficient 'ana3e'ent of 2or?in3 ca+ita#4 The W4C4T4R4 i$ =49 in =>>=7> 2hich i$ !er" #o2 an( a$ the Wor?in3 Ca+ita# 0eca'e ne3ati!e the ratio$ co/#( not 0e ca#c/#ate( fro' =>>7>4 It in(icate$ inefficient 'ana3e'ent of 2or?in3 ca+ita#4 The ratio in(icate$ the $ta0i#it" of efficient /ti#iation of o2ner$ an( #on3 ter' cre(itor$ f/n($4 The ratio (/rin3 the "ear =>>=7> i$ 4=4 o2e!er a$ the Ca+ita# e'+#o"e( ha$ 0eco'e ne3ati!e5 the ratio$ co/#( not 0e ca#c/#ate(4 It in(icate$ inefficient /ti#iation of f/n($4
SUGGESTIONS The 'ar?etin3 (e+art'ent can 0e f/rther $tren3thene( for or(er 0oo? of 'ore #e3ac" +ro(/ct$4
I'+#e'entation of SAP < ERP i$ i''e(iate re1/ire'ent in BP&4 Thi$ area '/$t 0e concentrate( e$+ecia##" ?ee+in3 in !ie2 of hi3h tar3et$ $et 0" the co'+an" in the co'in3 "ear$ an( a#$o ?ee+in3 in !ie2 of +ro+o$e( ca+eJ +ro3ra''e4 Intere$t free a(!ance$ $ho/#( 0e co##ecte( fro' the c/$to'er$4 With thi$ the #i1/i(it" +o$ition i'+ro!e$4
Yo/n3 an( ener3etic 2or?force in(/ction i$ nee( of the ho/r for BP& a$ it$ a!era3e e'+#o"ee a3e i$ a0o!e >4
ABC ana#"$i$ i$ to 0e fo##o2e( for effecti!e 'ana3e'ent of in!entor"4 Thi$ i$ re1/ire( 0eca/$e the ra2 'ateria# +ortion i$ aro/n( ;> for e!er" R$ 8>> $+ent 0" the co'+an"4
In or(er to increa$e it$ +ro(/ction an( +rofita0i#it"5 BP& ha$ to $ec/re 'ore eJ+ort or(er$4 The co'+an" ha$ to i(entif" ne2 eJ+ort 'ar?et$4 Effort i$ to 0e 'a(e to earn 'ore ret/rn on ca+ita# e'+#o"e(4
There '/$t 0e 0etter coor(ination a'on3 +/rcha$e5 +ro(/ction5 'ar?etin3 an( financia# (i!i$ion$4 Thi$ 2i## he#+ in achie!in3 3reater efficienc" in in!entor" 'ana3e'ent4
BP& ha$ to chec? the 'an +o2er a$ +er the re1/ire'ent an( eJi$te( at +re$ent4
The co$t contro# 'echani$' of the fir' $ho/#( 0e i'+ro!e( $o that 2a$tef/# eJ+en(it/re can 0e a!oi(e( an( area$ of co$t$ re(/ction can 0e i(entifie(4