A

SUMMER INTERNSHIP REPORT

ON

“FINANCIAL ANALYSIS”
OF
METRO WIRELESS ENGINEERING (INDIA) PVT. LTD.

Submitted By:

Radhika P. Dasani
 ACKNOWLEDGEMENT

It gives me immense pleasure to present this project report on “Financial Analysis of

Metro Telworks” carried out at Metro Wireless Engineering India Pvt. Ltd. in partial
fulfillment of post-graduate course M.B.A.
No work can be carried out without the help and guidance of various persons. I am happy
to take this opportunity to express my gratitude to those who have been helpful to me in
completing this project report.
At the outset I would like to thank Mr. Amarjeet Suryavanshi, Head of Human Resource Dept.
for allowing me to work with organization and Mr. Naveen Bohra, Head of Finance Dept. for his
valuable advice and guidance during our project completion, also Mr. Vishrant Shah for timely help
concerning various aspects of project. I also thank to all staff members of account department for helping
me to complete the summer internship program.

Lastly I would like to thank my parents, friends and well wishers who encouraged me to
do this research work and all those who contributed directly or indirectly in completing this
project to whom I am obligated to.

Radhika P. Dasani

M.B.A. II
 Certificate

It is hereby certified that the work incorporated in the thesis submitted entitled “Topic” submitted by
(Student’s name) comprises the result of independent and original investigation carried out me. The
material which obtained (and used) from other sources has been duly acknowledged in the thesis.

Date:

Place: Signature of the student

It is certified that the work mentioned above is carried out under my guidance.

Date:

Place: Signature of the faculty guide

 TOPIC

(1) Introduction to plant

(2) Introduction to Portland Cement
(3) Classification of Portland Cement
(4) Required Raw Material & Process
(5) Raw Mill Section
(6) Kiln Section
(7) Coal Mill Section
(8) Equipment Required
(9) Cement Mill
(10) Problem & Precautions
(11) Conclusion
(12) Reference
 CONTENTS

Sr. No. Title Page No.

1 INTRODUCTION TO PLANT 6
1.1 Information 7
Managing Directors
1.2
  1.3 History 8
  1.4 Development 11
1.5 ISI Specification of Cement 23
2 INTRODUCTION TO PORTLAND CEMENT 24

3 CLASSIFICATION OF PORTLAND CEMENT

4 REQUIREMENT OF RAW MATERIAL & DESCRIOTION 26
5  RAW MILL SEECTION 29
Mining section 32
5.1 
6 KILN SECTION 32
7  COAL MILL SECTION 33
8  EQUIPMENT REQUIRED
9  CEMENT MILL 35
  9.1 Testing of cement 41
9.2 Setting of cement 45
9.3  Uses 47
 10 PROBLEM & PRECAUTION 65
11 CONCLUSIONS 68
12 REFERENCES 74

1. INTRODUCTION
1.1 Information
 On 25th August, 1996 the man who found the industrial empire &
numerous education & cultural institution of Mehta group was “Shri Nanji
Kalidas Mehta” born at Gorana, Porbandar. Thus Mehta group lost there
entrepreneur & India on industrialist.
SCL is situated at Ranavav, the coastal village on the shore of
Arabian Sea in Porbandar district. It is about 16 Kms from Porbandar city
linked by road. And also linked by the railway. The need of coal is
completed by the rail terminal facilities in Porbandar city & also completed
transportation of raw material.

1.2 General Information

Name Of the Organisation : Saurashtra Cement Ltd.
Location : Saurashtra Cement Ltd.
 Near Railway Station, Ranavav-360560
Chairman : Mr. M. N. Mehta
Year of Establish : 1956
Registered Office : Saurashtra Cement Ltd.
Near Railway Station, Ranavav-360560
Corporate Office : Agrima Business Centre
3rd floor, M. K. Mehta
Internation House,
178, Back Bay Reclamation,
Mumbai-400 020
Marketing Office : 3027305 Sakar, 3rd Floor,
Opp: Gandhigram railway station,
Ahmedabad
Brand Name : Hathi Cement
Products : Ordinary Portland Cement (OPC)
43 – Grade cement
53 – Grade cement
Pozzolana Portland Cement(PPC)
Sulphate Resistant Cement(SRC)
No. of Employees : 675 Employees

1.3 Managing Directors

1) Mr. M. N. Mehta (Chairman)
2) Mr. D. N. Mehta
3) Mr. Jay Mehta (Executive Chairman)
4) Mr. M. N. Rao
5) Mr. Hemand D. Mehta
6) Mr. S.V.S.Raghwan
7) Mr. Stephan Potter
8) Mr. S. Ramjee
9) Mrs. Savita Pittie
10) Mr. M. K. Chanduka
11) Mr. M. S. Gilotra
12) Shri Rajkumar Poddar
13) Mr. A. M. Fadia
1.4 History

The word history refers to the past position of the company when it was
established Saurashtra Cement Ltd. A flagship company of the Mehta Group was
incorporated on June 11th ,1956. By late Shri Nanji Kalidas Mehta.

They installed in 1959 cement plant of TDP adopting then they started the latest
technology of commercial production in 1960.

The cement plant was situated at Ranavav, a distance of 16 km from city

Porbandar. It has 4 marketing branches : Baroda, Ahmedabad, Surat & Rajkot. SCL is
one of the leading players in the cement industry manufacturing ordinary and Portland
cement. Hathi Cement is the brand leader in Gujarat & has established itself over decades
as a “Choice of every generation for its strength & durability.

Saurashtra Cement Ltd. Has also a license to product chemicals but in 1993 Co.
cancelled its license for chemical industries because of high demand of cement.
1.5 Development

The Company is literally engaged in the site selection of various projects like Airtel, Tata, Idea,
Vodafone, Alcatel, etc. The Company is taking the orders from various companies mentioned above for
finding the sites for the towers, so that the proper network is provided to the customers.

For this many technical persons and other related persons are engaged in the same work of
finding the sites. For that people have to travel more and more on behalf of the company. So the
employees raise the reimbursement statement (they spend on behalf of the Company).

The major objective of the study is the financial analysis of Metro Wireless Engineering India
Pvt. Ltd. & to suggest measures to overcome the shortfalls if any. This report examines the analysis of the
statement like Balance sheet and Profit/Loss account of past two years to know the performance of the
Company.

The data is collected from the Company’s annual report and from other executives of the
Company.

With the help of theoretical knowledge on the part of ratios and cash flow, all the relevant ratios
of the Company for past two years have been founded. With the help of regression analysis projected
performance of the Company for the year 2010-11 have been forecasted. After thorough study and
discussion with the Company’s professionals, comments were taken so that interpretation of these ratios
become easy and accurate.

2. INTRODUCTION OF PROJECT

Meaning of Financial Analysis is to classify the data in simple form given in financial statements
and to compare with each other to find out the strong points and weakness of the business and to take
decisions for future. Financial statement analysis is important to boards, managers, payers, lenders, and
others who make judgments about the financial health of organizations. For instance, if all items relating
to current assets are placed in one group while all items relating to current liabilities are placed in another
group, the comparison between the two groups will provide useful information. Actually the figures given
in financial statements do not speak anything themselves. The analysis of these figures helps the
interested reader by giving tongue to these mute heaps of figures.

 In the words of Finney and Miller:

 “Financial analysis consists in separating facts according to some definite plan, arranging them
in groups according to certain circumstances and then presenting them in a convenient and easily read
and understandable form.”

 In the words of John N. Myres:

“Financial statement analysis is largely a study of relationships among the various financial
factors in a business, as disclosed by a single set of statements and a study of the trends of these factors
as shown in a series of statements.”

One widely accepted method of assessing financial statements is ratio analysis, which uses data
from the balance sheet and income statement to produce values that have easily interpreted financial
meaning. Most organizations routinely evaluate their financial condition by calculating various ratios and
comparing the values to those for previous periods, looking for differences that could indicate a
meaningful change in financial condition. Many organizations also compare their own ratio values to
those for similar organizations, looking for differences that could indicate weaknesses or opportunities for
improvement.

3. LITERATURE REVIEW AND STUDY OF INDUSTRY

3.1 TELECOM INFRASTRUCTURE SCENARIO

India is among the fastest growing mobile markets in the world: India, the second largest mobile
market in the world, is also among the fastest growing mobile markets globally. The number of cell phone
subscribers is continuing to grow at a rapid pace across the world’s two most populous countries, with
China and India now claiming 796 million and 617.5 million mobile phone users, respectively, through
May 2010.

India, a relatively late entrant into mobile services, has benefited from a significant decline in
mobile network costs during the last three to four years. As compared with a capital cost of US$50-
90/subscriber to provide mobile service, it costs as much as US$200-350/subscriber to provide fixed-line
services. This and the added benefit of mobility have led to stagnation in the total fixed line subscriber
base, which along with the significant growth in the mobile base has translated into India having one of
the highest ratios globally of mobile subscribers to total telecom subscribers.
3.1.1 Infrastructure Sharing

There are multiple possible options of sharing amongst telecom service providers.
However this sharing also depends on telecom regulatory and legislation.

 Passive Infrastructure sharing is nothing but sharing non-electronic infrastructure at cell site. Passive
Infrastructure is becoming popular in telecom industry world wide.
 Active sharing is nothing but sharing electronic infrastructure.
 Spectrum-sharing concept is based on a lease model and is often termed ‘spectrum trading’. An
operator can lease a part of its spectrum to another operator on commercial terms.
 Base station sharing is prospective while each operator: maintains control over logical Node B so that
it will be able to operate the frequencies assigned to the carrier, fully independent from the partner
operator and retains control over active base station equipment such as the

TRXs that control reception/transmission over radio channels. Radio network controller and core network
are not shared here.

 Site sharing includes antennas and mast; this may also hold Base transceiver station (BTS), Node B in
UMTS context and common equipments such as Antenna system, masts, cables, filters and shelter.
 Sharing a mast is called mast sharing.
 Antenna sharing shares an antenna and all related connections (coupler, feeder cable), in addition to
passive radio site elements.
 RNC (Radio Network Controller) sharing represents maintaining logical control over the RNC of
each operator independently.
 MSC and Routers sharing or backbone sharing includes sharing switches (MSC) and routers (SGSN)
on the operator's fixed network.
 Geographical Splitting
 Frequency Sharing

3.1.2 Functioning of a Tower Infrastructure Company: A tower infrastructure

company provides passive infrastructure on a sharing basis to telecom operators.

The role of a tower infrastructure company may be summarized as follows:

 Site planning, keeping in view the network rollout plans of prospective customers.
 Site acquisition, including entering into long-term agreements with land owners.
 Obtaining of necessary regulatory approvals.
 Erection and commissioning of tower and allied equipment.
 Provision of support services such as back-up power, air-conditioning and security.
 Provision of turnkey solutions to telecom companies such as sourcing of equipment, testing
and maintenance.

3.1.2.1 Types of Towers: - Telecom towers are broadly classified on the basis of their
placement as Ground-based and Roof-top.

1. Ground-Based Tower: Erected on the ground, ground-based towers (GBTs) are taller
(typically 200 to 400 feet) and are mostly used in rural and semi-urban areas because of the
easy availability of real-estate space there. GBTs involve a capital expenditure in the range of
Rs. 2.4 to 2.8 million, depending on the height of the tower.

2. Roof-Top Tower (RTT): Roof-top towers (RTTs), which are generally placed on the roofs
of high-rise buildings, are shorter (than GBTs) and more common in urban and highly
populated areas, where there is paucity of real-estate space. Typically, these involve a capital
expenditure of Rs. 1.5 to 2 million.

It is the height of a telecom tower that determines the number of antennas that can be
accommodated, which in turn determines the capacity of the towers, apart from factors such as location
and geographical conditions (wind speeds, type of terrain, etc.). Hence, typically, while GBTs can
accommodate up to six tenants, RTTs can accommodate two to three tenants.
3.1.2.2 Master Service Agreements: A tower infrastructure company normally enters into
separate Master Service Agreements (MSAs) with its occupants/tenants. MSAs are signed between tower
infrastructure companies and telecom operators (tenants), and clearly spell out the overall tower
requirements of the tenants, the pricing terms, and other binding terms and conditions between the two
parties.

3.2 ABOUT METRO TELWORKS

The Wireless telecommunications industry has undergone explosive growth and has become
global in its scope and ambitions. Spectrum has become severely congested. Good network design is no
longer a "nicety", but rather a necessity. Competitiveness in Telecommunications Industry is looking for
simpler, cost effective and innovative strategies. Wireless services and Products are essential
requirements.

Metro Telworks was primarily engaged in the Telecom installations and operations support for
fixed and Wireless operators. In 2002, it was inspired to diversify into RF services & in building solutions
to Wireless providers. Now beyond these services, it has expanded to cover Turnkey solutions, RF
Planning and Optimization, Network Performance Services, Switch Planning, IP Planning and Project
management. It undertakes task based projects requiring delivery of tangible results in the form of either
cell site production or network quality improvement and has consistently met or exceeded Key
Performance Indicators (KPI).

 THEIR MISSION:
"To provide Cost efficient Services for emerging Telecom Networks, carrying innovative products
to enable our customers to achieve excellence in their performance"

The Wireless industry still needs creative problem solvers, grounded in experience but aspiring to
develop new solutions, well versed in all of the essential details of infrastructure equipment from
manufactures the world over. They have ability to build team in minimum lead-time. Their presence in
different regions enables us to access quicker and skilled resources

Their philosophy goes beyond meeting client requirements. The Company believes “We meet
your needs by putting ourselves in your shoes and thinking of unforeseen situations that you may come
across.”
 WIRELESS SERVICES

 Network Planning

Operator facing challenges are extensive and unavoidable. New technology, Coverage, Capacity,
and Maximizing the Value of Existing Network Resources, are challenging requirements. Network
Planning is crucial services for designing any network.

Today's Network Planning requires great strategies and forward planning. In Network planning it
is also important to make provision for future innovative technology. We offer services for GSM, GPRS,
EDGE, CDMA, WCDMA, and Wi-Fi.

Metro Telworks helps customer not only in Network design but also in expanding rapidly and
cost effectively.

As a part of Network Planning we offer following services

 Study of spectrum requirements

 Network Design and Dimensioning
 Access Network Planning
 Transmission and Synchronization plan
 Switching Network Topology
 Techno-commercial Bid preparations

 RF Planning & Design

Radio network planning comprises of radio network dimensioning, planning of the coverage,

capacity, frequency allocation and interference analysis. Moreover it includes detailed planning, which
concentrate on parameter planning with necessary field measurement.
1. RF Cell Planning

 Initial dimensioning of the radio network

 CW Propagation model tuning
 Candidate identification & nominal planning
 Technical site surveys

2. Capacity Planning

 Coverage and capacity planning and analysis

 Addition of new cell sites
 Upgrade of existing cell sites
 Signaling/SDCCH dimensioning
 Additional spectrum use
 Traffic Management

3. Frequency Planning

 Static frequency allocation

 Frequency hopping (RF hopping or Base band hopping)
 Frequency and neighbors planning
 Hierarchical Cell structure

 RF Optimization

High quality of service in mobile networks is the prerequisite for the commercial success.
Continuous optimization is a process, which focuses on checking the network quality continuously and
takes actions when needed. It is a more constant way of maintaining good quality in the network,
especially when the mobile networks are changing rapidly and more and more customers are being
served.

 Parameter Configuration Check (OMC Audit)

 Traffic and throughput analysis
  Parameter planning and optimization
 Dropped call analysis
 Handover success analysis
 Drive test analysis
 Interference analysis
 Field measurements and acceptance testing
 Frequency & Strategy Planning
 Top N Site Targeting

 Network Support Services

Quality of Service is a measure of how the customer feels the service provided by the network. 
QoS is an external measure often supported through drive test programs. This measure provides the
customer perspective of Network Quality.

Network performance is a measure of how effectively and efficiently the network is functioning. 
Network performance is an internal measure mainly derived from Network Management data.   This
measure provides an Engineering perspective of network quality.

 Provide Subscriber perception of service

 Benchmark figures against competitors
 QoS reports for Senior Management
 Analysis and evaluation of network upgrades
 Acceptance testing of new networks / new regional rollouts
 Independent benchmarking of vendor equipment
 Continuous/repetitive monitoring to highlight slow degradation of Network Quality
 Provision of Engineering data for further analysis
 Benchmarking
 Network Audits

 Transmission Planning Services

 Transmission network planning covers definition of the whole network topology, technology
selections, equipment configurations, synchronization and management plans. Essential areas of expertise
are also site candidate identification and selection, technical site surveys and line-of-sight checks.

 Initial dimensioning of the transmission network

 Transmission media selections: microwave (PDH), SDH, optic, copper, leased line, Satellite
 Existing network evaluation/expansion
 Technical site surveys
 Line-of-sight surveys
 Capacity and topology planning
 Synchronization planning
 Network management planning
 Routing with timeslot allocation
 MW link level planning and interference analysis
 BSC/RAN area boundaries definition

 In-building Solutions

We offer In-building solutions with GSM/GPRS and Wireless LAN (Wi-Fi) technologies.

One of the fastest changes in mobile network rollouts is occurring inside the buildings. Picocells
are the ideal solution for providing coverage, capacity to indoor traffic hot spots and other priority
installations, such as:- Airports , Railway stations, Hotels Shopping centers, and Large corporate clients.

It has been estimated that 70-90% of all mobile calls are made inside the buildings. It has also
been noticed that it is becoming too expensive to increase the indoor location probability by outdoor sites
(>90%). So the easiest way to provide good in-building coverage is to use picocells inside the building.
That provides good coverage and capacity inside the building and at the same time releases capacity to
outdoor cells. These solutions are mostly based on Distributed Antenna Systems (DAS), Fiber Optic
Distribution Antenna Systems (FODS) or picoBTSs.

We are equipped to undertake

  Planning of RF distribution network
 Installation Planning and supervision
 Post installation walk test
 Recommendation on BSS Parameters

Subways and long highway tunnels represent a very challenging environment for implementing
reliable seamless cellular coverage. However, there are several different solution possibilities for
underground systems:

 BTS is used in underground systems where high capacity is needed and/or where the
underground section is very long.
 Fiber-Optic Distribution for very long tunnels is good for distributing the signal using the optical
repeaters. BTS is usually used in these solutions.
 RF repeater solution is feasible for those tunnels in which no high capacity is needed and where
the underground section is not very long.

 Switch Planning/ IP Planning

Switching network planning covers dimensioning of the circuit switched network elements and
related interconnections to backbone and fixed (PSTN) networks, taking into account the existing
network platform.

We provide services for

 Switch dimensioning
 Interconnection with other elements
 BSC Connection
  Network long-run evolution path planning
 Routing plans

CORE/IP network planning includes dimensioning of the core network elements and related
interconnections to other packet core networks, taking into account the existing network platform, the
network development path, and technical and geographical constraints.

We can advise on

 IP core network architectural design and dimensioning

 Core network migration path from 2G to 3G
 Throughput analysis and routing plans

 Project Management

Effective project management begins with a complete understanding of the Wireless

communications industry

Project management is a methodology used to manage the effort of people, equipment and
material to achieve a specific set of goals and objectives.  Project management methodology is becoming
one of the most popular management techniques used in the world today. We excell in it.

 Manpower Management

Metro Telworks provides placement and deployment of manpower services. We have a databank
of qualified professional engineers. Our Human Resource team excels in recruitment and training, which
results in retention of skills engineers. Our presence in various countries has unable us to provide
personnel with different cultures, background and varied experience.

We can provide qualified manpower of

 Network Planner
 Network optimization engineer
 Transmission Planner
 Drive tester
 In-Building planner and supervisor
 Project Manager
 Switch Planner
 Software developer

 Ongoing Projects

 SWAP and RF Optimization for Reliance Bihar (GSM) through Alcatel-Lucent.

 RF Optimization for Reliance (CDMA) MP circle through Alcatel - Lucent.
 Network Planning (RF & TX Planning & Optimization) for 1000 sites for Airtel Orrisa.
 Siemens to Nokia SWAP in UP East for Idea for 1300 sites.
 Siemens to Nokia SWAP in UP West for Idea for 1700 sites.
 RF & TNP planning and optimization of 500 sites for IDEA Gujarat.
 Turnkey Project of Planning and Optimization for Airtel (Bharti) thru Nokia for 1400 Sites in
Bihar/Jharkhand.
 Network Planning (RF & TX Planning & Optimization) on Man month Deployment for
Vodafone Bihar.
 Network Planning (RF & TX Planning & Optimization) on Man month Deployment for
Vodafone North East.
  Turnkey Project of Planning and Optimization for Airtel (Bharti) thru Nokia for 2190 Sites in
Madhya Pradesh/Chhattisgarh.
 RF & TNP planning and optimization for IDEA MPCG for 1500 sites and Benchmarking for
major 3 cities in MPCG.
 IBS planning and implementation for Bharti Gujarat through Nokia.
 IBS planning and implementation for Bharti MPCG through Nokia.

 Completed Projects

 Network Planning (RF & TX Planning & Optimization) for 2090 sites within 2 years. Including
37IBS sites for Airtel in MP/Chhattisgarh.
 Nominal Planning, RF & TX surveys for 310 sites within 2 months for Airtel Bihar.
 Network Planning (RF & TX Planning & Optimization) for 20 sites within a year for Vodafone in
Andaman & Nikobar.
 Nominal Planning, RF & TX surveys for 100 sites within a month for Airtel Orrisa.
 Network Benchmarking using SwissQual 7.5 for Airtel for 14 major cities in India, including 4
GSM and a CDMA operator.

 Overseas Projects

 Network benchmarking for Nokia for 10 countries in APAC & China.

 IBS Turnkey Project of Planning and Optimization for Digital & Globe Telecom-Philippines.
 Optimization Project for Metro Manila for Digital.
 Site Development for Digital.

 List of Customers

1. Vendors
 Nokia Siemens Network
 Alcatel-Lucant
 Huawai
2. Operators
 Airtel
 Vodafone
 Idea
 Reliance Infocom
 BSNL
 Aircel
3.3 METRO WIRELESS PRESENCE – INDIA TELECOM TOWERS IN
RURAL AREAS

2014

201 178 115 82 26

53 20
40 15
38 3
407 230
245 196139 1075
292
312
654

715 856
733 850
780 780

MP Orissa Jharkhand Maharashtra Rajasthan

Chhattisgarh Uttar Pradesh Himachal Pradesh Andhra Gujarat
West Bangal Karnataka Uttaranchal Assam Bihar
Arunachal J&K Meghalaya Tamil Nadu Nagaland
Manipur Mizoram Haryana Punjab Tripura
Sikkim Goa
 ZEPHYR PEACOCK INVESTS RS. 22.5CR IN METRO TELWORKS

Metro Telworks, an outsourcing service provider in the telecom space, is the SME-focused fund’s
fifth investment.

Zephyr Peacock Fund II, an SME-focused venture capital firm, has invested about Rs. 22.5 crore
($4.5 million) for a 20% stake in Metro Wireless Engineering India Pvt Ltd, or Metro Telworks, a
telecom services company, according to sources close to the transaction. This deal values the
Ahmedabad-based company at around Rs 100 crore. The company will use the proceeds to expand its
services to the Middle-East and Africa.

Kartik C. Parija, Managing Director, Zephyr Peacock India, confirmed the transaction to
VCCircle but he declined to divulge any details such as valuation of the firm and Zephyr’s stake in Metro
Telworks, following the deal. Parija, who led the deal, will also sit on the board of the company, it is
learnt.

Mumbai-based investment bank Blend Financial Services acted as sole advisor to the deal.
Zephyr’s investment in Metro Telworks is a play on the ancillary services to the telecom industry. Metro
Tel provides a variety of services such as network planning, radio & transmission planning and project
management to telecom network companies. It counts Alcatel-Lucent, Reliance and Airtel as some of its
clients. When operators like Airtel and Vodafone expand, they need to lay down new networks which will
be done by players like Alcatel-Lucent, Nokia Siemens and Ericsson who in turn outsource the
installation and network planning to companies like Metro Tel.

Explaining the rationale behind the investment, Parija says, “This is a classical play on telecom
outsourcing.” Going forward, the differentiating factor for telecom operators would be their quality of
service unlike pricing which is the deciding factor currently. Metro Telworks currently employs about
500 engineers and has offices in 10 cities in the country and also has operations in the Philippines,
Singapore and Indonesia. The company will also benefit significantly from the 3G roll out, he added. The
Indian telecom market is one of the largest and fastest growing in the world with about 550 million
subscribers currently, adding 170 million subs in the last one year alone.

4. OBJECTIVES OR PURPOSE OF FINANCIAL ANALYSIS

 The purpose of financial analysis depends on the needs of the person who is analyzing these
statements.

These varying needs may be:-

1. To know the Earning Capacity or Profitability.

2. To know the Solvency.
3. To know the Financial Strength.
4. To know the capability of payment of interest and dividend.
5. To know the trend of the business.
6. To know the efficiency of management.
7. To provide useful information's to the Management.
5. RESEARCH METHODOLOGY

Research methodology is a way to systematically solve the research problem. It may be

understood as a science of studying now research is done systematically. In that various steps,
those are generally adopted by a researcher in studying his problem along with the logic behind
them.
It is important for research to know not only the research method but also know
methodology. The procedures by which researchers go about their work of describing, explaining
and predicting phenomenon are called methodology. Methods comprise the procedures used for
generating, collecting and evaluating data. All this means that it is necessary for the researcher to
design his methodology for his problem as the same may differ from problem to problem. Data
collection is important step in any project and success of any project will be largely depend upon
now much accurate you will be able to collect and how much time, money and effort will be
required to collect that necessary data, this is also important step. Data collection plays an
important role in research work. Without proper data available for analysis you cannot do the
research work accurately.
5.1 OBJECTIVES OF THE STUDY

Study of the working capital management is important because unless the working capital is
managed effectively, monitored efficiently planed properly and reviewed periodically at regular intervals
to remove bottlenecks if any the company can not earn profits and increase its turnover. With this primary
objective of the study, the following further objectives are framed for a depth analysis.

1. To study the working capital management of Metro Wireless Engineering Pvt. Ltd.
2. To study the optimum level of current assets and current liabilities of the company.
3. To study the liquidity position through various working capital related ratios.
4. To study the working capital components such as receivables accounts, cash management,
inventory position.

5. To study the way and means of working capital finance of the Metro Wireless Engineering

Pvt. Ltd.

6. To estimate the working capital requirement of Metro Wireless Engineering Pvt. Ltd.

7. To study the operating and cash cycle of the company.

6. DATA ANALYSIS AND INTERPRETATION

The Analysis of Financial Statement plays a vital role in helping the financial manager and top
management of company to plan and control their financial, structural operations. An efficient analysis
would therefore highlight the pitfalls in management in terms of financial matters such as income,
expenditure, profitability, working capital requirements etc. This gives an excellent idea about
controllable and uncontrollable variables. A sound financial decision gives higher profitability and
performance. It is nothing but a fine tuning of control system financial structure.

6.1 WORKING CAPITAL MANAGEMENT

6.1.1 INTRODUCTION

Working capital management is concerned with the problems arise in attempting to manage the
current assets, the current liabilities and the inter relationship that exist between them. The term current
assets refers to those assets which in ordinary course of business can be, or, will be, turned in to cash
within one year without undergoing a diminution in value and without disrupting the operation of the
firm. The major current assets are cash, marketable securities, account receivable and inventory. Current
liabilities ware those liabilities which intended at there inception to be paid in ordinary course of business,
within a year, out of the current assets or earnings of the concern. The basic current liabilities are account
payable, bill payable, bank over-draft, and outstanding expenses.

The goal of working capital management is to manage the firm s current assets and current
liabilities in such way that the satisfactory level of working capital is mentioned. The current should be
large enough to cover its current liabilities in order to ensure a reasonable margin of the safety.

 Definition:-

1. According to Guttmann & Dougall-

“Excess of current assets over current liabilities.”

2. According to Park & Gladson-

“The excess of current assets of a business (i.e. cash, accounts receivables, inventories) over
current items owned to employees and others (such as salaries & wages payable, accounts
payable, taxes owned to government).”

6.1.2 NEED OF WORKING CAPITAL MANAGEMENT

The need for working capital gross or current assets cannot be over emphasized. As already
observed, the objective of financial decision making is to maximize the shareholders wealth. To achieve
this, it is necessary to generate sufficient profits can be earned will naturally depend upon the magnitude
of the sales among other things but sales can not convert into cash. There is a need for working capital in
the form of current assets to deal with the problem arising out of lack of immediate realization of cash
against goods sold. Therefore sufficient working capital is necessary to sustain sales activity. Technically
this is refers to operating or cash cycle. If the company has certain amount of cash, it will be required for
purchasing the raw material may be available on credit basis. Then the company has to spend some
amount for labor and factory overhead to convert the raw material in work in progress, and ultimately
finished goods. These finished goods convert in to sales on credit basis in the form of sundry debtors.
Sundry debtors are converting into cash after expiry of credit period. Thus some amount of cash is
blocked in raw materials, WIP, finished goods, and sundry debtors and day to day cash requirements.
However some part of current assets may be financed by the current liabilities also. The amount required
to be invested in this current assets is always higher than the funds available from current liabilities. This
is the precise reason why the needs for working capital arise.

6.1.3 CONCEPT OF WORKING CAPITAL

There are two concepts of working capital:

1.     Gross working capital

2.     Net working capital

1. Gross Working capital refers to the firms’ investment in current assets. Current assets are the assets
which can be converted into cash within an accounting year and include cash, short-term securities,
debtors, bills receivable and stock.

2. Net Working Capital refers to the difference between current assets and current liabilities. Current
liabilities are those claims of outsiders which are expected to mature for payment within an
accounting year and include creditors, bills payable and outstanding expenses.

NET WORKING CAPITAL = CURRENT ASSETS – CURRENT LIABILITIES

Net working capital can be positive or negative. When the current assets exceeds the current
liabilities are more than the current assets. Current liabilities are those liabilities, which are intended to be
paid in the ordinary course of business within a short period of normally one accounting year out of the
current assts or the income business.

6.1.4 TYPES OF WORKING CAPITAL

The operating cycle creates the need for current assets (working capital). However the need does
not come to an end after the cycle is completed to explain this continuing need of current assets a
destination should be drawn between permanent and temporary working capital.

1. Permanent working capital

The need for current assets arises, as already observed, because of the cash cycle. To carry on
business certain minimum level of working capital is necessary on continues and uninterrupted basis. For
all practical purpose, this requirement will have to be met permanent as with other fixed assets. This
requirement refers to as permanent or fixed working capital.
2. Temporary working capital

Any amount over and above the permanent level of working capital is temporary,
fluctuating or variable, working capital. This portion of the required working capital is needed to
meet fluctuation in demand consequent upon changes in production and sales as result of
seasonal changes permanent level is fairly castanet; while temporary working capital is
fluctuating in the case of an expanding firm the permanent working capital line may not be
horizontal. This may be because of changes in demand for permanent current assets might be
increasing to support a rising level of activity.
6.1.5 COMPOSITION OF CURRENT ASSETS

Analysis of current assets components enable one to examine in which components the
working capital fund has locked. A large tie up of funds in inventories affects the profitability of
the business or the major portion of current assets is made up cash alone, the profitability will be
decreased because cash is non earning assets.

Particulars 2007-08 2008-09 2009-10

Inventories 1,08,51,382 3,14,58,962 8,75,00,000

Sundry Debtors 6,39,13,530 7,77,35,443 12,24,46,133

Cash and Bank balance 8,24,794 19,35,036 28,70,505

Loans and Advances 84,87,910 1,90,59,274 2,62,03,203

Total of C.A. 8,40,77,616 13,01,88,715 23,90,19,841

6.1.6 COMPOSITION OF CURRENT LIABILITIES

Current liabilities mean the liabilities which have to pay in current year. It includes sundry
creditor s means supplier whose payment is due but not paid yet, thus creditors called as current
liabilities. Current liabilities also include short term loan and provision as tax provision. Current liabilities
also includes bank overdraft. For some current assets like bank overdrafts and short term loan, company
has to pay interest thus the management of current liabilities has importance.

Particulars 2007-08 2008-09 2009-10

Current liabilities 3,63,13,087 4,13,24,156 8,87,09,852

Provisions 1,19,66,785 1,52,97,267 1,64,30,954

Total of C.L. 4,82,79,872 5,66,21,423 10,51,40,806

6.1.7 WORKING CAPITAL SIZE

Particulars 2007-08 2008-09 2009-10

Current Assets 7,55,89,706 13,01,88,715 23,90,19,841

Current Liabilities 3,63,13,087 5,66,21,423 10,51,40,806

Net Working Capital

(C.A-C.L) 3,92,76,619 7,35,67,292 13,38,79,035

6.1.8 WORKING CAPITAL INDICES

Year 2007-08 2008-09 2009-10

N.W.C 3,92,76,619 7,35,67,292 13,38,79,035

W.C Indices 100 187.31 340.86

W.C.Indices

400

300

200

100

0
2007-08 2008-09 2009-10
 INTERPRETATION
It was observed that in the year 2008-09 current assets increased by around 72% and current
liabilities increased only by 56% which affect as working capital increased by 87%. In the year 2009-10
net working capital increased to Rs. 13,38,79,035 from Rs. 7,35,67,292, the increase in working capital is
close to 82%. While current assets increased by 84% and current liabilities by 86%.

6.1.9 DETERMINANTS OF WORKING CAPITAL

The amount of working capital is depends upon following factors:

1. Nature of business

Some businesses are such, due to their very nature, that their requirement of fixed capital is more
rather than working capital. These businesses sell services and not the commodities and that too on cash
basis. As such, no founds are blocked in piling inventories and also no funds are blocked in receivables.
E.g. public utility services like railways, infrastructure oriented project etc. there requirement of working
capital is less. On the other hand, there are some businesses like trading activity, where requirement of
fixed capital is less but more money is blocked in inventories and debtors.

2. Length of production cycle

In some business like machine tools industry, the time gap between the acquisition of raw
material till the end of final production of finished products itself is quit high. As such amount may be
blocked either in raw material or work in progress or finished goods or even in debtors. Naturally there
need of working capital is high.

3. Size and growth of business

In very small company the working capital requirement is quit high due to high overhead, higher
buying and selling cost etc. as such medium size business positively has edge over the small companies.
But if the business start growing after certain limit, the working capital requirements may adversely affect
by the increasing size.

4. Business/ Trade cycle

If the company is the operating in the time of boom, the working capital requirement may be
more as the company may like to buy more raw material, may increase the production and sales to take
the benefit of favorable market, due to increase in the sales, there may more and more amount of funds
blocked in stock and debtors etc. similarly in the case of depressions also, working capital may be high as
the sales terms of value and quantity may be reducing, there may be unnecessary piling up of stack
without getting sold, the receivable may not be recovered in time etc.

5. Terms of purchase and sales

Some time due to competition or custom, it may be necessary for the company to extend more
and more credit to customers, as result which more and more amount is locked up in debtors or bills
receivables which increase the working capital requirement. On the other hand, in the case of purchase, if
the credit is offered by suppliers of goods and services, a part of working capital requirement may be
financed by them, but it is necessary to purchase on cash basis, the working capital requirement will be
higher.

6. Profitability

The profitability of the business may be vary in each and every individual case, which is in turn
its depend on numerous factors, but high profitability will positively reduce the strain on working capital
requirement of the company, because the profits to the extend that they earned in cash may be used to
meet the working capital requirement of the company.

7. Operating efficiency

If the business is carried on more efficiently, it can operate in profits which may reduce the strain
on working capital; it may ensure proper utilization of existing resources by eliminating the waste and
improved coordination etc.

6.1.10 COMPONENTS OF WORKING CAPITAL

1. CASH MANAGEMENT

Cash is the important current asset for the operation of the business. Cash is the basic input
needed to keep the business running in the continuous basis, it is also the ultimate output expected to be
realized by selling or product manufactured by the firm.

The firm should keep sufficient cash neither more nor less. Cash shortage will disrupt the firm’s
manufacturing operations while excessive cash will simply remain ideal without contributing anything
towards the firm’s profitability. Thus a major function of the financial manager is to maintain a sound
cash position.
Cash is the money, which a firm can disburse immediately without any restriction. The term cash includes
coins, currency and cheques held by the firm and balances in its bank account. Sometimes near cash items
such as marketing securities or bank term deposits are also included in cash. Generally when a firm has
excess cash, it invests it is marketable securities. This kind of investment contributes some profit to the
firm.

Need to hold cash

 The firm’s need to hold cash may be attributed to the following three motives:-

1. Transaction Motive: The transaction motive requires a firm to hold cash to conduct its business in
the ordinary course. The firm needs cash primarily to make payments for purchases, wages and
salaries, other operating expenses, taxes, dividends, etc.

2. The Precautionary Motive: A firm is required to keep cash for meeting various contingencies.
Though cash inflows and outflows are anticipated but there may be variations in these estimates. For
example a debtor who pays after 7 days may inform of his inability to pay, on the other hand a
supplier who used to give credit for 15 days may not have the stock to supply or he may not be in
opposition to give credit at present.

3. Speculative Motive: The speculative motive relates to the holding of cash for investing in profit
making opportunities as and when they arise. The opportunities to make profit changes. The firm will
hold cash, when it is expected that interest rates will rise and security price will fall.

 Advantages of Cash Management

1. Cash does not enter in to the profit and loss account of an enterprise, hence cash is neither profit nor
losses but without cash, profit remains meaningless for an enterprise owner.
2. A sufficient of cash can keep an unsuccessful firm going despite losses
3. An efficient cash management through a relevant and timely cash budget may enable a firm to obtain
optimum working capital and ease the strains of cash shortage, fascinating temporary investment of
cash and providing funds normal growth.
4. Cash management involves balance sheet changes and other cash flow that do not appear in the profit
and loss account such as capital expenditure.

 The four facts of management for which strategies should be evolved are

 Cash Planning:
Cash inflow and outflow should be planned to project cash surplus of deficit for each
period of the planning period. Cash budget should be prepared for this purpose.

 Managing the Cash Flows:

The flow of cash should be properly managed. They cash inflows should be accelerated
while, as far as possible, decelerating the cash outflows.

 Optimum Cash Level:

 The Company should decide about the appropriate level of cash balances. The cost of
excess cash and danger of cash deficiency should be matched to determine the optimum
level of cash balances.

 Investing Surplus Cash:

The surplus cash balances should be properly invested to earn profits. The company
should decide about the division of such cash balance between bank deposits, marketable
securities and inter corporate lending.

 Cash cycle
One of the distinguishing features of the fund employed as working capital is that constantly
changes its form to drive business wheel. It is also known as circulating capital which means current
assets of the company, which are changed in ordinary course of business from one form to another, as for
example, from cash to inventories, inventories to receivables and receivables to cash.

Cash Cycle

Collection
Information and
Borrow or Invest
Control

Payments

METRO WIRELESS ENGINEERING (INDIA) PVT. LTD.

 CASH FLOW STATEMENT

(Amount in Lakhs)

FOR THE FOR THE FOR THE

YEAR YEAR YEAR
PARTICULARS
ENDING ON ENDING ON ENDING ON
31/03/2008 31/03/2009 31/03/2010

A. Cash flow from operating activities

Profit/(loss) before tax & extraordinary items 559.79 1,023.03 362.65

Add/(deduct) adjustment for :      

Depreciation 49.23 89.60 140.17

Interest paid 21.41 18.53 31.22

Preliminary expense. w/off 0.21 0.21 0.00

Interest & dividend income -0.82 -3.61 -9.95

Profit on sale of investments 0.00 -0.10 -0.99

Foreign exchange loss/(gain) net -2.86 -1.46 -0.25

Roc filling charges 1.11 3.54 0.49

Loss on sale of fixed assets 0.00 1.34 1.66

Operating profit before change in working

628.07 1,131.07 525.01
capital

Changes in debtors & advances -378.34 -252.89 -469.98

Changes in payables 310.27 98.54 485.19

Change in inventory -73.79 -206.08 -560.41

Tax paid -268.58 -375.10 -174.27

Extraordinary items      

       

Net cash flow from operating activities ( A ) 217.64 395.56 -194.46

Dividend paid -17.29 -26.08 -13.50

Corporate dividend tax -2.94 -4.43 -3.82

Interest paid -21.41 -18.53 -31.22

Foreign exchange loss/(gain) net 2.86 1.46 0.25

Roc filling charges paid -1.11 -3.54 -0.49

     

Net cash flow from financial activities ( C ) 169.59 -123.59 1,484.94

     

Net cash flow from (A+B+C) 7.96 11.10 19.35

Opening Cash & Cash Equivalent 0.29 8.25 19.35

Closing Cash & Cash Equivalent 8.25 19.35 28.71

2. RECIEVABLE MANAGEMENT

 Introduction:
The success or failure of a business depends primarily on the demand for its products – as a rule,
the higher its sales, the larger its profit and the higher its stock price. Sales in turn depends on a number of
factors, some exogenous but other under the firms control. The major controllable determinants of
demand are sales, prices, product quality, advertising, and the firm’s credit policy.

Trade credit is considered as an essential marketing tool, acting as a bridge for the movement of
goods through production and distribution stages to customers. A firm grants a trade credit to protect its
sale from the competitors and to attract the potential customers to buy its products at favorable terms.
When the company sells its products or services and does not receive cash immediately, the firm is said to
have granted trade credit to customers.

While the firms would like to sell on cash, the presence of competition and the force of custom
persuade to sell on credit. Firms grant credit to facilitate sales.

The credit period extended by a firm usually ranges from 2 to 3 months. When goods are sold
on credit, finished goods get converted into accounts receivable (trade debtors).

Trade creditors thus create receivables or book debts, which the firm is expected to collect in the near
future. For decade’s trade credit has been a major source of finance in working capital next to bank credit
and the need for trade credit has remained more in modern time due to highly competitive nature of
market.

The book debts or receivable arising out of has three characteristics:

 It involves and elements of risk which should be carefully analyzed.

 It is based on economic value. To the buyer the economic value in goods or
services passed immediately at the time of sale, while the seller expects an

equivalent value to be received later on.

 It implies futurity. He will make the cash payment for goods or services received
by the buyer.

 Credit policy has four variables:

1. Credit period:
The length of time buyers are given to pay for their purchases

2. Discounts:
The discount percentage in sales given for early payment.

3. Credit standard:
Financial strength of acceptable credit customers

4. Collection p o l i c y :
The toughness or laxity in attempting to collect on slow paying accounts.

 Goal of credit policy:

 Firm use credit as a marketing tool for expanding sales. The firm will have to evaluate its credit
policy in terms of both return and cost of additional sales. Additional sales should add to the firm’s
operational profit.

There are three types of cost involved:

 Production and selling cost

 Administration cost
 Bad debts losses

Thus the evaluation of a change in a firm’s credit policy involves analysis of:

 Opportunity cost of lost contribution.

 Credit administration costs and bad debt losses.

DEBTORS TURNOVER RATIO

Debtors turnover ratio or accounts receivable turnover ratio indicates the velocity of debt
collection of a firm. In simple words it indicates the number of times average debtors
(receivable) are turned over during a year. Debtors turnover ratio or debtors turnover ratio
indicates the number of times the debtors are turned over a year. The higher the value of debtors

turnover the more efficient is the management of debtors or more liquid the debtors are.
Similarly, low debtors turnover ratio implies inefficient management of debtors or less liquid
debtors.

Debtors Turnover Ratio = Net Sales

Debtors

 CALCULATION
 Year 2007-08 2008-09 2009-10

Debtors Turnover Ratio 2.81 4.22 2.85

Debtors Turnover

0
2007-08 2008-09 2009-10

 INTERPRETATION

The ratio in the year 2008-09 is higher than compared to previous year. The higher the
value of debtor’s turnover the more efficient is the management of debtors or more liquid the
debtors are. While it decreases in the year 2009-10. This indicates that low debtor’s turnover
ratio implies inefficient management of debtors or less liquid debtors.

AVERAGE COLLECTION OF RECIEVABLE

The average collection period of receivable is quick and effective method of comparing the
liquidity of percentage receivable with that of the past and for the inter firm comparison. It also offers a
basic for projecting the receivable balance in the future.

Average Collection Period = Days in Financial Year

 Debtors Turnover

 CALCULATION
(Rs. in Lakhs)

Year 2007-08 2008-09 2009-10

Net sales 1796.57 3278.28 3492.51

Sundry Debtors 639.13 777.35 1224.46

ACP in days 128 85 126

Change in Sales - 82.47% 6.53%

Change in ACP - -33.59% 48.24%

 ANALYSIS
From the above data of sales we can say that sales gradually increases from the 2007-08 to 2009-
10. But the debtors in the year 2009-10 have increased more than 95% from the year 2007-08. At first in
the year 2008-09 the no. of debtors increased in small proportion as compared to net sales. So the
collection period in the year decreased. In the year 2009-10 the debtors has increased up to 60% from the
previous year. But sales does not increased to such extent, which indicates that ACP increases. A longer
collection period implies too liberal and inefficient credit collection performance.

6.2 RATIO ANALYSIS

6.2.1 INTRODUCTION
 Ratio analysis is the powerful tool of financial statements analysis. A ratio is defined as the
indicated quotient of two mathematical expressions and as the relationship between two or more things.
The absolute figures reported in the financial statement do not provide meaningful understanding of the
performance and financial position of the firm. Ratio helps to summaries large quantities of financial data
and to make qualitative judgment of the firm s financial performance.

6.2.2 ROLE OF RATIO ANALYSIS

Ratio analysis helps to appraise the firms in the term of there profitability and efficiency of
performance, either individually or in relation to other firms in same industry. Ratio analysis is one of the
best possible techniques available to management to impart the basic functions like planning and control.
As future is closely related to the immediately past, ratio calculated on the basis historical financial data
may be of good assistance to predict the future. E.g. On the basis of inventory turnover ratio or debtor s
turnover ratio in the past, the level of inventory and debtors can be easily ascertained for any given
amount of sales. Similarly, the ratio analysis may be able to locate the point out the various arias which
need the management attention in order to improve the situation. E.g. Current ratio which shows a
constant decline trend may be indicate the need for further introduction of long term finance in order to
increase the liquidity position. As the ratio analysis is concerned with all the aspect of the firm s financial
analysis liquidity, solvency, activity, profitability and overall performance, it enables the interested
persons to know the financial and operational characteristics of an organization and take suitable
decisions.

6.2.3 LIMITATIONS OF RATIO ANALYSIS

1. The basic limitation of ratio analysis is that it may be difficult to find a basis for making the

comparison.

2. Normally, the ratios are calculated on the basis of historical financial statements. An

organization for the purpose of decision making may need the hint regarding the future

happiness rather than those in the past. The external analyst has to depend upon the past which

may not necessary to reflect financial position and performance in future.

3. The technique of ratio analysis may prove inadequate in some situations if there is differs in

opinion regarding the interpretation of certain ratio.

4. As the ratio calculates on the basis of financial statements, the basic limitation which is

applicable to the financial statement is equally applicable In case of technique of ratio analysis

also i.e. only facts which can be expressed in financial terms are considered by the ratio

analysis.

5. The technique of ratio analysis has certain limitations of use in the sense that it only highlights

the strong or problem arias, it dose not provide any solution to rectify the problem arias.
 CALCULATION OF RATIOS

1.   CURRENT RATIO

Current Ratio, also known as working capital ratio is a measure of general liquidity and its most
widely used to make the analysis of short-term financial position or liquidity of a firm. It is defined as the
relation between current assets and current liabilities. Thus,

Current Ratio = Current Assets 

Current Liabilities

The two components of this ratio are:

1)     Current Assets

2)     Current Liabilities

Current assets include cash, marketable securities, bill receivables, sundry debtors, inventories
and work-in-progresses. Current liabilities include outstanding expenses, bill payable, dividend payable
etc.

A relatively high current ratio is an indication that the firm is liquid and has the ability to pay its
current obligations in time. On the hand a low current ratio represents that the liquidity position of the
firm is not good and the firm shall not be able to pay its current liabilities in time.

 CALCULATION
 Year 2008-09 2009-10 2010-11

Current Ratio 2.3 2.24 2.18

Current Ratio

2.3
2.28
2.26
2.24
2.22
2.2
2.18
2.16
2.14
2.12
2008-09 2009-10 2010-11

 INTERPRETATION
A ratio equal or near to the rule of thumb of 2:1 i.e. current assets double the current liabilities is
considered to be satisfactory. As the above ratios are greater than 2, the Company is able to meet its
current obligations. In other way the Company has greater margin of safety for its creditors.

2. QUICK RATIO

Quick ratio is a more rigorous test of liquidity than current ratio. Quick ratio may be defined as
the relationship between quick/liquid assets and current or liquid liabilities. An asset is said to be liquid if
it can be converted into cash with a short period without loss of value. It measures the firms’ capacity to
pay off current obligations immediately.

Quick ratio = Quick Assets

Current Liabilities

Where Quick Assets are:

1. Marketable Securities
2. Cash in hand and Cash at bank.
3. Debtors.

A high ratio is an indication that the firm is liquid and has the ability to meet its current liabilities
in time and on the other hand a low quick ratio represents that the firms’ liquidity position is not good.

It is generally thought that if quick assets are equal to the current liabilities then the concern may
be able to meet its short-term obligations. However, a firm having high quick ratio may not have a
satisfactory liquidity position if it has slow paying debtors. On the other hand, a firm having a low
liquidity position if it has fast moving inventories.

 CALCULATION

Year 2008-09 2009-10 2010-11

Quick Ratio 1.74 1.42 1.44

Quick Ratio

1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
2008-09 2009-10 2010-11

 INTERPRETATION
 Quick ratio indicates that the company has sufficient liquid balance for the payment of current
liabilities. The liquid ratio of 1:1 is suppose to be standard or ideal but here ratio is more than 1:1 over the
period of time, it indicates that the firm maintains the over liquid assets than actual requirement of such
assets.

3. NET WORKING CAPITAL RATIO

The difference between current assets and current liabilities excluding short term bank
borrowings is called net working capital or net current assets.NWC is sometimes used as a measure of
firm’s liquidity. It is considered that, between two firms, the one having the larger NWC has the greater
ability to meet its current obligations. This is not necessarily so; the measure of liquidity is a relationship,
rather than the difference between current assets and current liabilities. NWC, however, measures the
firm’s potential reservoir of funds. It can be related to net assets or capital employed.

Net working capital ratio = Net Working Capital

Net Assets

 CALCULATION

Year 2008-09 2009-10 2010-11

NWC Ratio 0.39 0.32 0.37

 NWC Ratio

0.4
0.35
0.3
0.25
0.2
0.15
0.1
0.05
0
2008-09 2009-10 2010-11

 INTERPRETATION
From the above calculation we can say that for the year 2009-10 the Company is using
its 32% of total assets as a current assets and for the year 2010-11 the company is using 37% of total
assets as a current assets.

4. CASH RATIO

Since cash is the most liquid asset, a financial analyst may examine cash ratio and its equivalent
to current liabilities. Trade investment or marketable securities are equivalent of cash; therefore, they may
be included in computation of cash ratio.

Cash Ratio = Cash + Cash Equivalents

Current Liabilities
 CALCULATION

Year 2008-09 2009-10 2010-11

Cash Ratio 0.03 0.03 0.02

Cash Ratio

0.03

0.025

0.02

0.015

0.01

0.005

0
2008-09 2009-10 2010-11

 INTERPRETATION
Cash ratio measures the immediate amount of cash available to satisfy short-term
liabilities. A cash ratio of 0.5:1 or higher is preferred. Cash ratio is the most conservative look at
a company's liquidity since it is taking in the consideration only the cash and cash equivalents.
The above ratios shows decreasing trends because the Company holds small amount of cash
with it to satisfy the immediate financial needs and rest of the amount is invested by the
Company in highly liquidated securities.

5. INVENTORY TURNOVER RATIO

 Inventory turnover ratio measures the speed with which the stock is converted into sales. Usually
a high inventory ratio indicates an efficient management of inventory because more frequently the stocks
are sold; the lesser amount of money is required to finance the inventory. Where as low inventory
turnover ratio indicates the inefficient management of inventory. A low inventory turnover implies over
investment in inventories, dull business, poor quality of goods, stock accumulations and slow moving
goods and low profits as compared to total investment.

Inventory Turnover Ratio = Total Sales

Work in Progress

 CALCULATION

Year 2008-09 2009-10 2010-11

Inventory T/O Ratio 20.78 7.97 7.68

Inventory T/O Ratio

25

20

15

10

0
2008-09 2009-10 2010-11

 INTERPRETATION
 It was observed that Inventory turnover ratio indicates maximum sales achieved with the
minimum investment in the inventory. As such, the general rule high inventory turnover is desirable but
high inventory turnover ratio may not necessary indicates the profitable situation. The billing period is
increased so the ratio decreases in the years 2009-10 and 2010-11 from the previous year.

6. FIXED ASSETS TURNOVER RATIO

Fixed assets turnover ratio is also known as sales to fixed assets ratio. This ratio measures
the efficiency and profit earning capacity of the concern. Higher the ratio, greater is the intensive
utilization of fixed assets. Lower ratio means under-utilization of fixed assets. The ratio is
calculated by using following formula:

Fixed Asset Turnover Ratio = Total Sales

Fixed Assets

 CALCULATION

Year 2008-09 2009-10 2010-11

Fixed Assets T/O Ratio 6.25 4.0 3.42

 Fixed Assets T/O Ratio

7
6
5
4
3
2
1
0
2008-09 2009-10 2010-11

 INTERPRETATION
The ratio shows substantial reduction from the year 2008-09 to 2010-11 because the Company
has purchased more fixed assets in the year 2009-10.

7. TOTAL ASSETS TURNOVER RATIO

The total asset turnover represents the amount of revenue generated by a company as a
result of its assets on hand.  This equation is a basic formula for measuring how efficiently a
company is operating. The sales represent all the revenue generated by the company and is
disclosed on a company's income statement. The higher the ratio of sales to net total assets, the
better.

Total Asset Turnover Ratio = Total Sales

Total Assets

 CALCULATION

Year 2008-09 2009-10 2010-11

 Total Assets Ratio 1.75 0.85 0.89

Total Assets Ratio

1.5

0.5

0
2008-09 2009-10 2010-11

 INTERPRETATION

The lower the total asset turnover ratio, as compared to historical data for the firm and
industry data, the more sluggish the firm's sales. This may indicate a problem with one or more
of the asset categories composing total assets - inventory, receivables, or fixed assets. The ratio
decreases in the year 2009-10 and 2010-11 from the previous year because the revenue
generation from the newly purchased assets is less.

8. RETURNS ON ASSETS RATIO

Return on Assets is a measure of a company’s profitability expressed as a percentage of its total

assets, not to be confused with return on capital employed—a nebulous phrase demanding a definition of
capital—or return on equity. Return on Assets, also called return on investment, measures how effectively
a company has generated profits with its available assets. The higher the Return on Assets, the better.

Return on Assets Ratio = Net Income

Average Total Assets

 CALCULATION

Year 2008-09 2009-10 2010-11

ROA Ratio 0.7 0.12 0.08

ROA Ratio

0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
2008-09 2009-10 2010-11

 INTERPRETATION

The return on assets ratio measures how efficiently profits are being generated from the
assets employed. The ratio here decreases as compared to previous year. This indicates
inefficient use of business assets and the earnings are low for the amount of assets.

9. RETURN ON EQUITY RATIO

 Preference share holders get a fixed rate of dividend irrespective of the quantum of
profits of the company). The rate of dividends varies with the availability of profits in case of
ordinary shares only.

Thus ordinary shareholders are more interested in the profitability of a company and the
performance of a company should be judged on the basis of return on equity capital of the
company. Return on equity capital which is the relationship between profits of a company and its
equity. This ratio is more meaningful to the equity shareholders who are interested to know
profits earned by the company and those profits which can be made available to pay dividends to
them. Interpretation of the ratio is similar to the interpretation of return on shareholder's
investments and higher the ratio better is.

Return on Equity Ratio = Net Income

Average Owners’ Equity

 CALCULATION

Year 2008-09 2009-10 2010-11

ROE Ratio 0.18 0.08 0.06

ROE Ratio

0.2

0.15

0.1

0.05

0
2008-09 2009-10 2010-11
 INTERPRETATION

The ROE ratio decreases from the year 2008-09 to 2010-11.Decreased ratio shows poor
utilization of equity funds and also poor use of debt funds.

10. PROFIT MARGIN RATIO

This ratio measures the profits after taxes on the year's sales. The higher this ratio, the
better prepared the business is to handle downtrends brought on by adverse conditions. This ratio
is calculated using the following formula:

Profit Margin Ratio = Net Income

Total Sales

 CALCULATION

Year 2008-09 2009-10 2010-11

Profit Margin Ratio 0.2 0.07 0.05

Profit Margin Ratio

0.2

0.15

0.1

0.05

0
2008-09 2009-10 2010-11
 INTERPRETATION

Above ratio shows decreasing trend because the expenses like fuel cost and salary cost are
increased due to inflation. The other reason is in the year 2009-10 most of the man month
projects were converted into Turnkey projects. As the man month projects are highly profitable
compared to turnkey projects, the profit margin ratio decreases.

11. EARNING PER SHARE RATIO

Earnings per share ratio (EPS Ratio) is a small variation of return on equity capital ratio
and is calculated by dividing the net profit after taxes and preference dividend by the total
number of equity shares. The earnings per share is a good measure of profitability and when
compared with EPS of similar companies, it gives a view of the comparative earnings or earnings
power of the firm. EPS ratio calculated for a number of years indicates whether or not the
earning power of the company has increased.

Earning Per Share Ratio = Net Income

No. Of shares

 CALCULATION

Year 2008-09 2009-10 2010-11

EPS Ratio 28.65 9 7.23

 EPS Ratio

30

25

20

15

10

0
2008-09 2009-10 2010-11

 INTERPRETATION

EPS ratio calculated for a number of years indicates the earning power of the company
has decreased.

12. INTEREST COVERAGE RATIO

A ratio used to determine how easily a company can pay interest on outstanding debt.
The interest coverage ratio is calculated by dividing a company's earnings before interest and
taxes (EBIT) of one period by the company's interest expenses of the same period. The lower the
ratio, the more the company is burdened by debt expense. When a company's interest coverage
ratio is 1.5 or lower, its ability to meet interest expenses may be questionable. An interest
coverage ratio below 1 indicates the company is not generating sufficient revenues to satisfy
interest expenses.

Interest Coverage Ratio = EBIT

Interest Expense

 CALCULATION

Year 2008-09 2009-10 2010-11

 Interest Coverage Ratio 56.21 12.62 7.57

Interest Coverage Ratio

60

50

40

30

20

10

0
2008-09 2009-10 2010-11

 INTERPRETATION
A higher interest coverage ratio is desirable, but too high a ratio is not good for the Company.
Here the Company’s ratio in the year 2008-09 is too high which indicates that this Company was very
conservative in using debt. But the ratio in the year 2010-11 is low as compared to year 2009-10 which
indicates excessive use of debt or inefficient operations. So the Company should make efforts to improve
the operating efficiency or to retire debtors have a comfortable coverage ratio.

13. DEBT EQUITY RATIO

Debt-to-Equity ratio indicates the relationship between the external equities or outsiders
funds and the internal equities or shareholders funds. It is also known as external internal equity
ratio. It is determined to ascertain soundness of the long term financial policies of the company.
A ratio of 1:1 is usually considered to be satisfactory ratio although there cannot be rule of
thumb or standard norm for all types of businesses. Theoretically if the owner’s interests are
greater than that of creditors, the financial position is highly solvent. In analysis of the long-term
financial position it enjoys the same importance as the current ratio in the analysis of the short-
term financial position.

Debt Equity Ratio = Total Liabilities

Owner’s Equity

 CALCULATION

Year 2008-09 2009-10 2010-11

Debt/Equity Ratio 0.12 0.02 0.16

D/E Ratio

0.16
0.14
0.12
0.1
0.08
0.06
0.04
0.02
0
2008-09 2009-10 2010-11

 INTERPRETATION
A ratio of 1:1 is usually considered to be satisfactory ratio. The debt equity ratio indicates how
much of the company is financed by debt. In our Case the ratio is lower than 1 in each year. A low debt to
equity ratio indicates that a company is carrying a low level of debt. Generally, ratios of higher than 1
indicate more risk in financing assets.

14. PAYOUT RATIO

We can calculate a dividend payout ratio by dividing the dividend a company pays per share by
the company's earnings per share. The normal range is 25% to 50% of earnings, though the average is
higher in some sectors of the economy than in others. A higher ratio indicates that a company pays more
in dividends and thus reinvests less of its earnings into the company. Whether or not this is desirable
depends on the rate of growth; investors tend to prefer a higher payout ratio in a slow-growing company
and a lower one in a fast-growing company.

Payout Ratio = Dividend Paid

Net Income

 CALCULATION

Year 2008-09 2009-10 2010-11

Payout Ratio 0.03 0 0

 Payout Ratio

0.03

0.025

0.02

0.015

0.01

0.005

0
2008-09 2009-10 2010-11

 INTERPRETATION

Small fast-growing companies are likely to invest much of their earnings in the business
for expansion and growth. These companies are likely to have a low payout ratio or none at all.
A low payout ratio can also demonstrate that a company’s dividend is small compared to its
earnings, indicating that the dividend is likely to be secure and reliable.
6.3 SUMMARY OF RATIO CALCULATION

RATIOS 2008-09 2009-10 2010-11

Current ratio 2.3 2.24 2.18

Quick ratio 1.74 1.42 1.44

Nwc ratio 0.39 0.32 0.37

Cash ratio 0.03 0.03 0.02

Inventory turnover ratio 20.78 7.97 7.68

Fixed assets turnover

ratio 6.25 4 3.42

Total assets ratio 1.75 0.85 0.89

Roa ratio 0.7 0.12 0.08

Roe ratio 0.18 0.8 0.6

Profit margin ratio 0.2 0.07 0.05

Eps ratio 28.65 9 7.23

Interest coverage ratio 56.21 12.62 7.57

Debt/equity ratio 1.6 1.36 1.46

Payout ratio 0.03 0 0

7. SWOT ANALYSIS OF METRO TELWORKS

STRENGTHS:

 The Company holds 2nd position in telecom infrastructure industry next to GTL.
 State-of-the-art technology combined with back and forward integration.
 Human assets like good quality intellectual capital, and a pool of talented and
qualified engineers.

 Zephyr Peacock, an SME focused venture capital Firm, invested about Rs. 22.5
Crore in Metro Telworks which indicates that the Company has sound financial

resources.

 Provides global telecom infrastructure services in countries like India,

Philippines, Indonesia, Singapore, South Africa, Saudi Arabia, Vietnam &

Bangladesh.

WEAKNESS:

 The Company has large number of debtors, so it has poor liquidity which affects
the investment opportunities in near future.

 The requirement of working capital is high, so the company needs to borrow more
short term funds having high interest rate. This will have adverse effect on profitability.
OPPORTUNITIES:

 Upcoming 3G technology will be implemented in October, 2010 which helps the

Company to expand its business.

 Contracting more overseas partners to further its global expansion.

 Unexplored rural market.

THREATS:

 Fierce competition from major players in the industry like ADA Cellworks/GTL,
Mobile Com, NR Switch & Radio Services & Integrated Wire Solutions Inc

 Increase cost of fuel & vehicles.

 The current expansion can raise the debt levels and make it more vulnerable in the
downturns.
8. CONCLUSIONS

Working capital management is important aspect of financial management. The study of working
capital management of Metro Wireless Engineering India Pvt. ltd. has revealed that the current ratio
decreases as compared to previous year, so the liquidity position of the company showed a decreasing
trend. The study has been conducted on working capital ratio analysis and working capital components
which helped the company to manage its working capital efficiency and affectively.

1. Working capital of the company was increasing and showing positive working capital per

year. It shows good liquidity position.

2. Positive working capital indicates that company has the ability of payments of short terms

liabilities.

3. Working capital increased because of increment in the current assets is more than increase in

the current liabilities.

4. Company s current assets were always more than requirement it affect on profitability of the

company.

5. Current assets are more than current liabilities indicate that company used long term funds
 for short term requirement, where long term funds are most costly then short term funds.

6. Current assets components shows sundry debtors were the major part in current assets it

shows the inefficient receivables management.

9. RECOMMEMDATIONS

Recommendation can be use by the firm for the betterment increased of the firm after study and
analysis of project report on study and analysis of working capital. I would like to recommend.

1. Company should raise funds through short term sources for short term requirement of

funds, which comparatively economical as compare to long term funds.

2. Company should take control on debtor s collection period which is

major part of current assets.

3. Company has to take control on cash balance because cash is non

earning assets and increasing cost of funds.

4. Decision for Purchase or Lease of Cars

The Company bears huge cost behind hiring the taxis. For example, Company has hired taxis
from almost 21 vendors in the Bihar Circle from the different parts of the State. The rates are different
depending on the vendor hired by the Branch head of the company. The Company is having
approximately 35 Crores of turnover p.a. And the expense related to the taxi bills is approximately 9 to 10
Crores of Rupees. It’s a serious matter that the technicians are hiring cars without negotiating and
bargaining. They just pay according to the rates decided by the vendor. Although the company uses as
many as 25 to 30 cars every month in the Bihar Circle according to our analysis. Sometimes due to heavy
demand of the sites, the employees of the company hire the cars for the whole month to be traveled.

So the expense of the taxi goes very high due to lack of poor negotiation and communication
skills. They even don’t care to bargain as the per km rate is very high. The costs of per km lies between
6.75 /- per/km to 12.5 /- per/km. The difference is due to the rates quoted by different vendors. Also the
difference is due to rates of extra kms and extra hours used by the company. Also if employees are out of
station the accommodation charges of employees as well as driver is barred by the company. If the
company hires the Taxi for whole month, basically the contract is of 3000 kms per/month which is 100
kms daily. If taxi is used let us say 2700 kms in the whole month. Than also the company is bound to pay
the whole charges of 3000 kms. So like wise there are many limitations in the same analysis.

 CALCULATION
RENTING CAR FROM OUTSIDE

PARTICULARS   CARS

     

Per
Direct Cost 10 Cars
Car

Rent Cost 27,000 270,000

Driver Night Hold

1,500 15,000
Charges

DT Charges 3,000 30,000

Extra Km @ 7.00 per km 10,500 105,000

Extra Hrs @ Rs 50 per hr 7,500 75,000

Administration 1,500 15,000

Total 51,000 510,000

If They Buy Cars On EMI Basis

 PARTICULARS AMOUNT IN RS.

Cars 10      

Per
Direct Cost   Per month Per Year
Car
MONTHLY
Driver Cost (16 Drivers) BENEFITS     YEARLY SAVING
 
SAVING
Salary Cost 6,500 6,500 104,000 1,248,000

DA Cost 2,500 2,500 40,000 480,000

Saving Cost per car per month 6,783
         
(Cost of renting Car - Cost of purchasing Car)
Fuel Cost        

Monthly Running        
67,826 813,912
If weCar
Assuming startAverage
with 10 @12/lt
cars        

Fuel consumption in liters assuming average running

375      
4500km
After 5 year car will be companies assets and it
16,667 200,000
will have
Fuel Cost scrap
@ 41/- lit value of at least Rs. 100,000 41 15,375 153,750 1,845,000

         

Maintenance Cost (Includes Repairing & Maintenance and

  2,500 25,000 300,000
Battery Replacement

Administration Cost     10,000 120,000

EMI Cost per month   9,511 95,110 1,141,320

Insurance Cost     14,314 171,768

         

Total Cost (10 Cars)     442,174 5,306,088

Total Cost (Per Car)     44,217 44,217

 ANALYSIS
 From the above calculation, we can recommend that if the Company starts purchasing cars
instead of hiring it from vendors, then the company will have yearly savings of around Rs. 81,396 per car
and after 5 years car will be company’s assets.

10. LIMITATIONS OF STUDY

Though financial statements are relevant and useful for a concern, still they do not present a final
picture a final picture of a concern. The utility of these statements is dependent upon a number of
factors. The analysis and interpretation of these statements must be done carefully otherwise
misleading conclusion may be drawn.

Financial statements suffer from the following limitations: -

1. Financial statements do not given a final picture of the concern. The data given in these
statements is only approximate. The actual value can only be determined when the business is
sold or liquidated.
2. Financial statements have been prepared for different accounting periods, generally one year,
during the life of a concern. The costs and incomes are apportioned to different periods with a
view to determine profits etc. The allocation of expenses and income depends upon the personal
judgment of the accountant. The existence of contingent assets and liabilities also make the
statements imprecise. So financial statement are at the most interim reports rather than the final
picture of the firm.

3. There are certain factors which have a bearing on the financial position and operating result of
the business but they do not become a part of these statements because they cannot be measured
in monetary terms. The basic limitation of the traditional financial statements comprising the
balance sheet, profit & loss A/c is that they do not give all the information regarding the financial
operation of the firm. Nevertheless, they provide some extremely useful information to the extent
the balance sheet mirrors the financial position on a particular data in lines of the structure of
assets, liabilities etc. and the profit & loss A/c shows the result of operation during a certain
period in terms revenue obtained and cost incurred during the year. Thus, the financial position
and operation of the firm.

4. Limited data:-

This project has completed with annual reports; it just constitutes one part of data collection i.e.
secondary. There were limitations for primary data collection because of confidentiality.

5. Limited period:-

This project is based on two year annual reports. Conclusions and recommendations are based on
such limited data. The trend of last two year and the projected data of 2010-11 may or may not reflect the
real working capital position of the company.
11. NOTES AND REFERENCES

 Reference Books:
1. I. M. Pandey - Financial Management - Vikas Publishing House Pvt. Ltd. - Ninth
Edition 2006
2. M.Y. Khan and P.K. Jain, Financial management Vikas Publishing House Ltd., New Delhi.

 Websites:
1. www.wikipedia.com
2. www.metrotelworks.com
3. www.scribd.com
 4. www.moneycontrol.com
5. www.2point6billion.com

12. ANNEXURES

ANNEXURE-1
 METRO WIRELESS ENGINEERING (INDIA) PVT. LTD.

PROVISIONAL BALANCE SHEET

(Amount in Lakhs)

AUDITED UNAUDITED PROJECTED

PARTICULARS 2008-09 2009-10 2010-11

SOURCES OF FUNDS      

Shareholder's Funds      

Paid up share capital 450.00 531.42 531.42

Reserves & Surplus 717.75 2,491.75 2,687.40

  1,167.75 3,023.17 3,218.82

Loan Funds

Secured Loans 124.64 45.38 528.38

Unsecured Loans 10.38 0.00 0.00

  135.03 45.38 528.38

Deferred tax liability (net) 3.52 3.52 3.52

Total 1,306.29 3,072.07 3,751.00

APPLICATION OF FUNDS

Fixed Assets

Gross Block 672.02 1,133.38 1,707.01

Less : Depreciation 148.93 283.36 483.35

Net Block 523.09 850.02 1,224.00

Capital Work In Progress 1.22 23.64 0.00

Investments 46.09 859.62 275.00

Current assets, loans
 
And advances

Work In Progress & Inventory 314.59 875.00 1,089.58

Cash and Bank Balance 19.35 28.71 28.59

Sundry Debtors 777.35 1,224.46 1,548.72

Loans & Advances 190.59 262.03 540

Total Current Assets 1,301.89 2,390.20 3,206.89

Less : Current Liabilities

     
& Provisions

Current Liabilities 413.24 887.10 756.83 

Provisions 152.97 164.31 198 

  566.21 1,051.41 955 

Net Current Assets 735.67 1,338.79 2,252.00 

       

Pre-operative expenditure
0.21 - - 
to the extent not written off

Total 1,306.29 3,072.07 3,751.00 

 ANNEXURE-2

METRO WIRELESS ENGINEERING (INDIA) PVT. LTD.

PROVISIONAL PROFIT AND LOSS ACCOUNT

(Amount in Lakhs)

AUDITED UNAUDITED PROJECTED

PARTICULARS
2008-09 2009-10 2010-11

Income      

Work done & consultancy services 3231.53 3427.32 4129.92

Other income 46.75 65.19 60.00

Increase / (decrease) in WIP/inventory 206.08 560.41 0.00

Total 3484.36 4052.92 4189.92

Expenses      

Field expenses 1300.37 1931.42 2124.56

Employee cost 857.12 1256.14 1507.37

Administrative expenses, Selling

195.72 331.31 231.92
& distribution expenses

Total 2353.2 3518.87 3863.85

Operating profit / (loss) 1131.16 534.05 540.65

Interest & financial expenses 18.53 31.22 45

Profit / (loss) before depreciation & taxes 1112.63 502.82 495.65

Depreciation 89.6 140.17 200

Profit / (loss) before taxation for the

1023.03 362.65 295.65
period
Provision for      

Deferred income tax (net) -9.19 - -

Fringe benefit tax 16 - -

Income tax 357 120 100

Income tax for earlier years 0.36 -0.95 -

Net profit / (loss) for the period 658.86 243.6 195.65

Appropriations      

Proposed final / interim dividend 22.5 - -

Corporate dividend distribution tax 3.82 - -

General reserve 500 - -

Balance carried to Balance Sheet 132.53 243.6 195.65

Total 658.86 243.6 195.65

Weighted average no. Of shares 43.54 53.14 53.14

Profit for calculation of EPS 658.86 243.6 195.65

Nominal value of equity shares (face value) 10 10 10

Basic / diluted earning per share in Rs. 15.13 4.58 3.68