CHAPTER I INTRODUCTION 1.

.1 PROFILE OF THE COMPANY (BHEL) Bharath Heavy Electricals Limited is the largest engineering and manufacturing enterprise of its king in India. It is also one of the leading international companies in the field of power equipment measures. The first plant of BHEL was set up at Bhopal in 1956, which signaled the beginning of the Heavy Electrical Industry in India. 1.2 Wide spread centers In the early sixties, three more major plants were set up at Haridwar, Hyderabad and Trichy. The company has fourteen manufacturing units, four power sector regional centers, eight service centers and eighteen regional offices, besides project sites, spread all over India and abroad. A strategic business unit for ceramics was formed at Bangalore. 1.3 Unique specialties BHEL has a well recognized track record of performance making profits continuously since 1971-72 and paying dividends since 1976-77. BHEL manufactures over 180 products under thirty major groups. The quality and reliability of its products is due to the emphasis on design, engineering and manufacturing to international standards best acquiring and adopting some of the best technologies from leading companies in the world together with technologies developed in its own R&D centers.

1.4 Certifications BHEL has acquired certifications from both ISO 9000 & ISO 14000 standards for its operations and has also adopted the concepts of total quality management. BHEL has adopted occupational health and safety standards as per OHSAS 18001. The major units of BHEL have already acquired the ISO 14001 certification. The companys inherit potential coupled with its strong performance over the years has resulted in it being chosen as one of the Navratna status. 1.5 Business sectors of BHEL BHELs operations are organized around three business sectors namely Power, Industry and International Operations. Industry operation includes Transmission,

Transportation, Telecommunication and Renewable Energy. 1.6 POWER SECTOR 1.6.1 Generation Power generation sector comprises thermal, gas, hydro and nuclear power plant business. Though BHEL supplied sets account logs nil till 1969MV or 65% of the total installed capacity of 95377 MV 70, it rises to 62,051

in the country.

BHEL has the capability of turning power projects from concept to commissioning. With its technology, it has the ability to produce thermal sets with super critical parameters unto 1000 MV unit rating and gas turbine- generator sets of upto 240 MV units rating.

1.6.2 Achievements a) To make the most part of the high-ash content coal used in India, BHIL supplies circulating fluidized bed combustion boilers to both thermal and combined cycle power plants. b) The company manufactures 235 MV nuclear turbine-generator sets and obtains a production of 500 MV in these sets. c) Custom made hydro sets of Francis, Pelton and Kaplan types for different headdischarge combinations are also engineered and manufactured by BHEL. d) Until now, the company had placed orders for more than 700 utility sets of thermal, hydro, gas and nuclear plants. This is based on contemporary technology comparable to the best in the world. It is also internally competitive.

1.7 INDUSTRIAL SECTOR 1.7.1 Industry BHEL is a major contributor of equipment and system to industries. Its major contributions are cement, sugar, fertilizer, refineries, petrochemicals, steel, paper etc. The range of systems and equipment supplied includes captive power plants, DG power plants, high-speed industrial drive turbines, electrical machines, pumps, valves etc. 1.7.2 Transportation Most of the trains operated by the Indian railways, including the metro in Calcutta, are equipped with BHELs traction electrics and traction control equipment. The company

also supplies electric locomotives to Indian railways and diesel shunting locomotives to various industries. The company have supplied 5000/4600 DC locomotives to Indian railways. Battery powered road vehicles are also manufactured by the company. 1.8 Telecommunication BHEL also give importance to telecommunication sector by way of small, medium and large switching systems. 1.8.1 Renewable energy Technologies used by BHEL for discovering non-conventional and renewable sources of energy include, wind electric generators, solar-power based water pumps, lighting and beating systems. 1.8.2 International operations BHEL has been established in over 50 counties of the world. Its knowledge is known from the United States in the West to the New Zealand in the far East. BHEL in these countries covers turnkey power projects of thermal, hydro and gas based type besides a wide variety of products like Switchgear, transformers and heat exchangers. BHEL has contributed over 1100 MV of boiler capacity to Malaysia. Besides this, they have also achieved successes in Oman, Saudi Arabia, Libya, Greece, Egypt, SriLanka etc. Their development in overseas has also provided BHEL, the experience of working with world renewed consulting organizations and inspection agencies. The demanding requirements of both domestic and international markets have been dealt successfully by BHEL. In terms of difficult works as well as technological, quality

and other requirements like financing package, extended warrantees have proven its capabilities. The company has also been successful in meeting varying needs of the industry like captive power plants, utility power generation or for the oil sector requirements. BHEL possesses large amount of flexibility to interface and change international companies for large projects. The company also exhibits adaptability by manufacturing and supplying intermediate products, like steam generator pressure parts. BHEL can be compared with the original equipment manufactures by its success in the area of rehabilitation and life extension of power projects. 1.9 BHEL product range throughout India The BHEL ranges are 1. Thermal Power Plants 2. Gas based Power Plants 3. Hydro Power Plants 4. Heat exchanges and Pressure Vessels 5. Oil field Equipment 6. Boilers 7. Boilers Auxiliaries 8. Pumps 9. Power station Control Equipment 10. Switch Gear 11. Bus Ducts 12. Equipment for Nuclear Power Plants 13. Steam less Steel Tubes vision

14. Compressors

A world class-engineering enterprise committed to enhancing stakeholder value. Employees, customers and suppliers are given adequate knowledge about environment. BHEL will also assist and co-operate with the concerned Government Agencies and Regulatory Bodies engaged in environmental activities, which offer the companies capabilities in this field. 1.10 BHELS Vision BHELS vision is to become a world class innovation and competitive and profitable engineering enterprise providing total business solutions.

1.11 Mission It is an Indian multinational engineering enterprise providing total business solutions through quality products, systems and services in the fields of energy, industry, transportation infrastructure and other potential areas.

1.12 Values: 1. Zeal to excel and zest for change. 2. Integrity and fairness in all matters. 3. Respect for dignity and potential individuals. 4. Strict adherence to commitments. 5. Ensure speed of response. 6. Foster learning, creativity and team work. 7. Loyalty and pride of the company.

1.13 Opportunities and threats 1.13.1 World Investments made in the electricity sector have been lowered in recent years by foreign electricity venture as foreign direct investment in the developing world. This is one of the parts of the sluggish state of the global economy and because of unsatisfactory financial performance of many acquisitions in the electric power sector.

These changes in the environment have led to a cautious approach by developers and its harder to get off the new projects from the ground. Some countries have modified their plans because of the change in restructuring electricity market and reforms. The total worldwide order of booking has been lowered leading to aggressive marketing by major global power plant equipment manufacturing players, who have been undergoing a phase of consolidation. Though there has been a decrease in overall orders in the recent times, many developing nations are planning to expand their electricity infrastructure for the forthcoming years. Number of promising market for new power equipment are found in South- East Asian countries, Middle-East and Gulf cooperation council( GCC) countries. Moreover, BHEL has the global opportunity for servicing of generating machinery as well as distributing generation in the developing countries

1.13.2 Positioning for the future BHEL has finalized a new corporate plan with the title strategic plan 2007 and steps are taken to start the iniatives. The company has also revised the vision, mission and values statements, which are suitably adjusted and with remodification to reflect its current aspuations. In corporate line the company aims to accelerate the growth with suitable strategies and focus area the core strengths of the and company are 1) To strengthen and extend the core business of power generation power, power transmission, transportation and industrial systems and products. 2) Areas like water management pollution control and waste management, port handling systems, simulators [power and process], energy conservation systems, LNG terminals are newly entered 3) To enter into continuous revenue stream business like power generation and transmission and distribution. 1.14 BHEL, TRICHY UNIT BHEL, Trichy unit was established in 1963 and is situated in Trichy- Tanjore highway road around 20km from Trichy Central Bus Stand. 12,000 employees are working in this organization on permanent basis and around 4000 employees are working on contract basis. It has an area of 2, 50,000 sq. meters and consists of a major unit namely. 1. High Pressure Boiler Plant (HPBP) 2. Seamless Steel Tube Plant (SSTP) 3. Combined Cycle Demonstration Plant (CCDP)

Boiler Auxiliaries plant of Ranipet and piping centre of Madras (Chennai) and Goinwal come under the control of Trichy Unit. 1.15 Product profile of BHEL, Trichy o Steam Generators for Power Generation and o Industrial Applications o Heat Recovery Steam Generators o Industrial Boilers o Atmosphere and Circulating Fluidized bed o Combustion Boilers o Nuclear Steam Generators and Reactors o Pressure Vessels o Hear Exchange o Seamless Steel Tubes o Studded tubes o Serrated fin. Tubes o Piping systems o Columns o Valves o Boiler Auxiliaries o Wind Electric Generators 1.16 Finance Department Of BHEL, Trichy The following are the important operations of finance department of BHEL, Trichy.

 Sales Accounting Purchase Approvals Budgets Legal Excise, Sales Tax, Income Tax & Customs Costing Pay Roll Internal Audit Foreign Trade- Imports, Exports System Cash and Bank

CHAPTER II REVIEW OF LITERATURE 2.1 WORKING CAPITAL MANAGEMENT Working capital management is concerned with the decisions which are related with the current assets and the current liabilities. It means, it concerned with day-to-day management activities. The key factor, which is used to differentiate long term financial management and short- term financial management, is the timing of cash. Long- term financial decisions by buying capital equipment or issuing debentures, involve cash which flows over an extended period of time. But a short time financial decision mainly involves the cash flow within a year, or with in the operating cycle of the firm.

2.2 CONCEPTS OF WORKING CAPITAL The two concepts of working capital are 1. Gross working capital

It refers to the investment made by the company in current assets. Current assets are the assets which can be converted into cash with an accounting year or operating cycle. It also includes cash, short-term securities, debtors, bills receivable and stock.

2. Net working capital The difference between current assets and current is called the net working capital. Current liabilities are the one which is claimed from the outsiders and are expected to be returned within an accounting year. It includes creditors, bills payable, and out siding expenses. Net working capital may be positive or negative. A net working capital becomes positive only when the current assets exceed current liabilities. A negative net working capital occurs when current liabilities exceed current assets. 2.3 TWO DANGEROUS POINTS OF CURRENT ASSETS 2.3.1 Danger of inadequate working capital 1. Inadequate working capital will lead to a condition, in which one cannot pay its short-term liabilities in time. So there arises a situation where there is a loss of reputation and tight credit terms. 2. The organizations requirements cannot be fulfilled in bulk; hence it cannot take the advantage of cash discounts. 3. Difficulties will arise in meeting the day-to-day expenses. This will lead to inefficiency and increase in costs with the minimum profits.

4. Lack of working capital will lead to less favorable marketing conditions and less profitable projects. 5. Due to scarcity of working capital, fixed assets are not properly utilized. Thus this results in the fall of investments return.

2.3.2 Danger of Excessive Working Capital 1. Excessive working capital will lead to low investments in fixed assets. Hence there will be no profits for the business and there can be no proper rote of return on its investments. 2. The low rate of return on investment will lead to the fall in the value of shares. 3. Excessive working capital will lead to unnecessary purchasing and excessive amount of inventories. As a result, there are chances of theft and loses. 4. Excessive debtors and defective credit policy are the indication of excessive working capital. There may be delay in collection and increased incidence of bad debts. 5. Excessive working capital will make the management complacent. This will lead to overall inefficiency in the organization. 2.4 NEED FOR WORKING CAPITAL MANAGEMENT Beyond the limit, both the current assets i.e., inadequate working capital and excessive working capital are dangerous. Beyond the limitations of both the level, the common goal of the organization cannot be achieved. Working capital Management provides effective and efficient decision to allocate the current assets.

2.5 TYPES OF WORKING CAPITAL The two types of working capital are, 1. Permanent working capital. 2. Temporary working capital.

2.5.1 Permanent Working Capital As the operating cycle is a continuous process, the need for current assets is felt constantly. The Magnitude of the current assets need not to be the same. It may increase or decrease over the time. However, there is a minimum level of current assets which are continuously required by the firm to continue its business operations. This minimum level of the current assets is known as permanent or fixed working capital. However the permanent working capital line needs not to be horizontal.

2.5.2 Temporary working capital On the other hand, when there is a slack period in the market, the investment made on the inventories and account receivable will be low. The change of the extra working capital used to support the production and sales, is known as fluctuating or variable or temporary working capitals. When the company has a peak period of sales, it will have large amount of inventories, when compared to their normal sales. This makes the costumers to invest money for credit sales. 2.6 RATIO ANALYSIS

Ratio analysis, simply defined, refers to the analysis and interpretation of financial statements through ratios. Now a day it is used by all the business and industrial concerns in their financial analysis.

2.7 RATIO The term ratio simply means one number expressed in terms of another. It describes in mathematical terms the quantitative relationship that exists between two numbers. 2.8 TYPES OF RATIOS 1. CURRENT RATIO It is relationship between firms current assets and current liability. Current assets Current ratio = _______________________________ Current liability 2. QUICK RATIO It is relationship between liquid assets and current liabilities. Liquid assets Quick ratio = _________________________ Current liabilities 3. CASH RATIO It is relationship between cash and current liabilities. Cash Cash ratio = _______________________

Current liabilities

4. DEBTORS TURNOVER RATIO It indicates the number time debtors turned over each year. Generally the higher value of debtors turnover shows high efficiency to manage the credit management. Total sales Debtors turnover ratio = ______________________________ Debtors 5. DEBT COLLECTION PERIOD It indicates the speed with which debts are collected. Days/months in a year Debt collection period = _______________________________ Debtors turnover ratio

6. CREDITORS TURNOVER RATIO The ratio shows on an average the number of times creditors turned over during the year. Credit purchase Creditors turnover ratio = ________________________

Average creditors

7. DEBT PAYMENT PERIOD Creditors turnover ratio indicates the number of days taken by the firm, to pay the debtors to creditors. Days/months in a year Debt payment period = _______________________________ Creditors turnover ratio 8. INVENTORY TURNOVER RATIO It indicates the inventories turning into receivables through sales. Sales Inventory turnover ratio =__________________________ Inventory 9. INVENTORY HOLDING PERIOD It indicates duration of holding inventories in stores. Days/months in a year Inventory holding ratio = ______________________________ Inventory turnover ratio 10. WORKING CAPITAL TURNOVER RATIO This ratio explains the relationship between sales and working capital.

Net sales Working capital turnover ratio = ______________________________ Net working capital

CASH TURNOVER RATIO It is the relationship between sales and cash. Cash turnover ratio = Sales ___________________ Cash balance 2.9 ARTICLES To make ones project effective, it is better to go through the projects done by others earlier. This gives a complete idea about ones project. It also helps to correct the mistakes done in the earlier projects. Summing up, it improves ones project. So with this idea, let us see some of the projects done by others earlier.

Mr. J. Maria peter Ignatius., MBA., of Bharathidasan University did a project with the title Working Capital Management in Bharath Heavy Electricals Limited, Tiruchirrappalli. He did this project in the month of June 2004, using the data from 1998 to 2003. The objectives of his study were To analyse the requirement of funds for the routine activities of business.

 To study on the source of fund generated and their methods of utilization. To know the amount of funds allotted in the current assets and to forecast the working capital trend. To study cash receivables position of the organization.

His findings were In all the years the value of the quick ratio is higher than the ideal value; it indicates firms ability to pay the immediate obligations Cash ratio clearly indicates firms debt borrowing power from financial institutions and other sources. The firms debt collection period have more than 150 days. Firm increased the debt collection period year by year. It shows firms liberal debt collection policy. Working capital turnover ratio was decreased in year by year. It clearly shows firm reduced to use net working capital for sales

Mr. G. Dhanabal., MBA., of Bharathidasaan University did a project with the title Working Capital Management in Trichy Steel Rolling Mills Limited, Tirchirappalli. He did the project in the month of June 2004, using the data from 1998 to 2003. His objectives were To study the financial position of the firm To estimate the future of working capital requirement of the unit

 To bring out the level of inventory and to analyse the receivables, payables and cash management of the company His findings were Firm ability have been was increasing every year in order to meet the short term liabilities. More sales has been done on credit basis Bank balance is sufficient to tackle unexpected problem. Current ratio satisfactory level is 2:1. It is significantly achieved by the company.

Miss. Mohanapriya, M.B.A, in her research on Working capital management of Tanjore co-operative milk supply society Ltd. Which is the partial fulfillment of the requirements for the award of her degree submitted to Bharathidasan University, in the year November 2003. Outlined the following objectives and findings. Her Objectives were: Know the project of Co-operative milk supply society. Analysis the short term liquidity position of the study unit during the period 96-97 to 2000-01. Analysis and evaluate working capital management. Her Findings were: The size of current assets has increased during the study period. During the study period the working capital turnover ratio were 210.51;

 194.60; 45.44 and 11.86 times respectively the higher ratios in the 2 year 1997-98 and 98-99 indicates sufficient amount of working capital and effective utilizations of working capital. The cash turnover ratio is to be increasing times.

Miss. Abiramisundhari, in her research on Working capital management of TSRM Limited Trichy. Which is the partial fulfillment of the requirements for the award of her M.Com degree submitted to Bharathidasan University, in the year November 2003. Outlined the following objectives and findings.

Her Objectives were: To study the importance of W/c management for a concern. To assess the proportion of the components of W/c of TSRM Ltd, Trichy. To suggest measures to increases the efficiency of W/c management of TSRM Ltd, Trichy. Her Findings were: The company has been taken for sufficient care for the maintenance of adequate accounting period. The proportion of net W/c to total assets showed on increasing trend through out the five years. The over all performance of receivables management showed a satisfactory position throughout the past 5 years.

Mr. Kamaraj, M, Phil, in his research on Working capital management of Dalmia Cement Limited Trichy. Which is the partial fulfillment of the requirements for the award of her degree submitted to Bharathidasan University, in the year November 2003. Outlined the following objectives and findings.

His Objectives were: To know the Financial Performance of Dalmia Cement. To examine the practice follow into Management of cash. To know the techniques of Inventory Management in D.C.B.C.

His Findings were: Raw Material Consumption over the study period in terms of quantity and value has showed an incise trend. Operating ratio is considered to be yardstick of operating efficiently of the concern. The concern has show dormant and fast moving inventories during the 5 years a study period. Performance of the co should be judged on the basis of return on equity capital. It is satisfactory positive

CHAPTER III 3.1 OBJECTIVES

1. Evaluate the working capital of the company during the period of study. 2. Analysis of working capital with various tools. 3. Analysis of various components of working capital. 4. To study the adequacy of working capital and suggest improvement to overcome deficiency if any.

CHAPTER IV 4.1 RESEARCH METHODOLOGY

It is purely and simply the framework or a plans for the study that guides the collection and analysis of data. Research is the scientific way to solve the problem and its increasingly used to improve market potential. This involves exploring the possible methods, one by one, and arriving at the best solution, considering the resources at the disposal of research. 4.2 PRIMARY DATA The primary data is collected by observation by the researcher of the functioning of the unit. 4.3 SECONDARY DATA

It is derived from the annual reports, magazines, web sites and the internal auditing books of BHEL. 4.4 TOOLS OF ANALYSIS The researcher used tools to analysis the financial performance of the firm. They are 1. Ratio analysis 2. Trend analysis 4.5 SCOPE OF THE STUDY The main scope of the study is to evaluate, analyze and understand the current assets management and to know the influence of the components of working capital on sales in the year 2001 2002 to 2005 2006. 4.6 PERIOD OF THE STUDY The study analysis, the financial performance of Bharath Heavy Electrical Ltd covers the financial years from 2001 2006 consequently.

CHAPTER V DATA ANALYSIS AND INTERPRETATION TABLE 5.1 STATEMENT SHOWING CURRENT RATIO Rs in lakhs
YEAR CURRENT ASSETS CURRENT LIABILITIES CURRENT RATIO 2001-2002 805139.02 471346.54 1.71 2002-2003 834839.66 475605.95 1.76 2003-2004 1042469.93 633685.33 1.65 2004-2005 1334297.99 844589.43 1.58 2005 -2006 1633077.90 1032002.23 1.58

SOURCE: SECONDARY DATA

INTERPRETATION
Current ratio during the year 2001-2002 was 1.71 and its slightly increased in 1.76 at 2002-2003 and its decreased 20032004 at 1.65 and its same value in 20042005 and 2005 2006. There is no significant.

CHART 5.1 CURRENT RATIO

1.8 1.75 PERCENTAGE 1.7 1.65 1.6 1.55 1.5 1.45 200102 200203 200304 YEARS 200405 200506 current ratio

TABLE 5.2 STATEMENT SHOWING QUICK RATIO Rs in lakhs

YEAR 2001-2002 2002-2003 2003-2004 2004-2005 2005 -2006

LIQUID ASSETS LIQUID LIABILITIES LIQUID RATIO

605716.15 471346.54

634734.05 475605.95

832081.57 633685.33

1042687.26 844589.43

1258640.84 1032002.23

1.29

1.33

1.31

1.23

1.22

SOURCE: SECONDARY DATA INTERPRETATION The quick ratio in the year 2001-2002 was 1.29 and it gets increased 0.04% at 2002 and 2003 (1.33) and in 2003-2004 get decreased 0.02% (1.31) and 2004-2005 get decreased 0.08% (1.23) and it again decreases 2005-2006 at 0.01%(1.22).

CHART 5.2 LIQUID RATIO

1.34 1.32 1.3 1.28 1.26 1.24 1.22 1.2 1.18 1.16 2001-02 2002-03 2003-04 2004-05 2005-06 YEARS

PERCENTAGE

liquid ratio

STATEMENT SHOWING CASH RATIO TABLE 5.3 Rs in lakhs

YEAR 2001-2002 2002-2003 2003-2004 2004-2005 2005 -2006

CASH CURRENT LIABILITIES CASH RATIO

47658.92 471346.54

132091.11 475605.95

265963.89 633685.33

317786.21 844589.43

413397.54 1032002.23

0.10

0.20

0.42

0.38

0.40

SOURCE: SECONDARY DATA INTERPRETATION The Cash ratio of BHEL in the 2001-2006 was fluctuation in 2005-2006 it was 0.40 times and in 2001-2002 it was 0.10 times and 2003-2004 it was reduced to 0.42.

CHART 5.3 CASH RATIO

0.45 0.4 0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 2001-02 2002-03 2003-04 2004-05 2005-06 YEARS

PERCENTAGE

Cash ratio

TABLE 5.4 STATEMENT SHOWING DEBTORS TURNOVER RATIO

Rs in lakhs
YEAR TOTAL SALES DEBTORS DEBTOR TURNOVER RATIO SOURCE: SECONDARY DATA INTERPRETATION Debtors constitute an important constitute of current assets and therefore the quality of debtors to a great extent determines firms liquidity .The higher the ratio, the better it is, since it would indicate that debts are being collected promptly. In the year 2004-2005 the debt is 1.56 comparing to the previous year came down. 1.48 1.70 1.75 1.56 1.87 2001-2002 682311.04 458407.08 2002-2003 693030.43 407578.21 2003-2004 801903.20 460848.04 2004-2005 952713.54 597214.22 2005 -2006 1337403.27 716806.49

CHART- 5.4 DEBTOR TURNOVER RATIO

2 1.8 1.6 1.4 PERCENTAGE 1.2 1 0.8 0.6 0.4 0.2 0 200102 200203 200304 YEARS 200405 200506

DTR

DEBT COLLECTION PERIOD TABLE 5.5 Rs in lakhs

YEAR 2001-2002 2002-2003 2003-2004 2004-2005 2005 -2006

DAYS DEBT TURNOVER RATIO DEBT COLLECTION PERIOD

365 1.48

365 1.70

365 1.75

365 1.56

365 1.87

247

215

210

234

195

SOURCE: SECONDARY DATA INTERPRETATION The debt collection period of BHEL in the 2001-2002 was 247 days and in 20052006 it was 195 days.

CHART 5.5 DEBT COLLECTION PERIOD

250 200 PERCENTAGE 150 100 50 0 2001- 2002- 2003- 2004- 200502 03 04 05 06 YEARS DTCP

TABLE 5.6 CREDITORS TURNOVER RATIO Rs in lakhs

YEAR CREIDT 2001-2002 330676.82 2002-2003 316037.84 2003-2004 363465.65 2004-2005 509767.76 2005 -2006 709940.33

PURCHASE CREDITORS CREDITORS TURNOVER RATIO SOURCE: SECONDARY DATA INTERPRETATION The Creditors turnover ratio of BHEL was fluctuating during the year 2001 2006. It was upward in (2001 2002) was 0.82 times and it was downward in 2003 2004 is 0.70 times. 0.82 0.80 0.70 0.72 0.81 404107.97 393240.68 517389.20 708633.44 875960.92

CHART -5.6 CREDITORS TURNOVER RATIO

0.82 0.8 0.78 0.76 0.74 PERCENTAGE 0.72 0.7 0.68 0.66 0.64 2001- 2002- 2003- 2004- 200502 03 04 05 06 YEARS

CTR

TABLE 5.7 DEBT PAYMENT PERIOD Rs in lakhs

YEAR 2001-2002 2002-2003 2003-2004 2004-2005 2005 -2006

DAYS CREDITORS TURNOVER RATIO DEBT PAYMENT PERIOD

365 0.82

365 0.80

365 0.70

365 0.72

365 0.81

445

456

522

507

451

SOURCE: SECONDARY DATA INTERPRETATION The debt collection period of BHEL in the 2001-2002 was 245 days and in 20052006 it was 451 days.

CHART 5.7 DEBT PAYMENT PERIOD

600 500 400 PERCENTAGE 300 200 100 0 2001- 2002- 2003- 2004- 200502 03 04 05 06 YEARS DPP

TABLE 5.8

CASH TURNOVER RATIO Rs in lakhs

YEAR SALES CASH 2001-2002 682311.04 47658.92 2002-2003 693030.43 132091.11 2003-2004 801903.20 265963.89 2004-2005 952713.54 317786.21 2005 -2006 1337403.27 413397.54

CASH TURNOVER RATIO

14.32

5.25

3.02

3.00

3.24

SOURCE: SECONDARY DATA INTERPRETATION The cash turnover ratio in the year 2001-2006 was downward in the year in the 2001-2002 it was decreased 3.24.

CASH TURNOVER RATIO

16 14 12 10 8 6 4 2 0

PERCENTAGE

C.T.R

2001-02 2002-03 2003-04 2004-05 2005-06 YEARS

TABLE 5.9 INVENTORY TURNOVER RATIO Rs in lakhs

YEAR SALES INVENTORY 2001-2002 682311.04 199422.87 2002-2003 693030.43 200105.61 2003-2004 801903.20 210388.36 2004-2005 952713.54 291610.73 2005 -2006 1337403.27 374437.06

INVENTORY TURNOVER RATIO

3.42

3.46

3.81

3.26

3.57

SOURCE: SECONDARY DATA INTERPRETATION Inventory turnover of BHEL for 2001 2006 was fluctuation. in 2001-2002 the inventory turnover ratio was high up to 3.81 and it was low in 2004-2005 at 3.27.

CHART 5.9 INVENTORY TURNOVER RATIO

3.9 3.8 3.7 3.6 3.5 PERCENTAGE 3.4 3.3 3.2 3.1 3 2.9 2001- 2002- 2003- 2004- 200502 03 04 05 06 YEARS

ITR

TABLE 5.10 INVENTORY HOLDING PERIOD Rs in lakhs

YEAR DAYS INVENTORY TURNOVER RATIO INVENTORY TURNOVER PERIOD SOURCE: SECONDARY DATA INTERPRETATION Inventory turnover period of BHEL for 2001 2006 was 107 days in 2003.it was 106 days and 2003-2004 it get reduced 96 days and it got raised in 2004-2005 to 112 days In 2005 -2006it got downwards to 102 days. 107 106 96 112 102 3.42 3.46 3.81 3.26 3.57 2001-2002 365 2002-2003 365 2003-2004 365 2004-2005 365 2005 -2006 365

CHART 5.10 INVENTORY TURNOVER PERIOD

115 110 105 PERCENTAGE 100 95 90 85 2001- 2002- 2003- 2004- 200502 03 04 05 06 YEARS IHP

TABLE-5.11 WORKING CAPITAL TURNOVER RATIO Rs in lakhs

YEAR SALES NET WORKING CAPITAL WORKING CAPITAL TURNOVER RATIO SOURCE: SECONDARY DATA INTERPRETATION Working capital turnover ratio for the year 2005-2006 was 2.23 times. It is higher when comparing the past four years. The working capital management has to improve by more concentration on collection strategies. 2.04 2.00 2.00 2.00 2.23 2001-2002 682311.04 333792.48 2002-2003 693030.43 359233.71 2003-2004 801903.20 408784.60 2004-2005 952713.54 489708.56 2005 -2006 1337403.27 601075.67

CHART-5.11 WORKING CAPITAL TURNOVER RATIO

2.25 2.2 2.15 2.1 PERCENTAGE 2.05 2 1.95 1.9 1.85

WCTR

2001- 2002- 2003- 2004- 200502 03 04 05 06 YEARS

TABLE 5.12 WORKING CAPITAL FOR TREND ANALYSIS Rs in lakhs

YEAR CURRENT ASSETS CURRENT LIABILITIES WORKING CAPITAL

2001-2002 805139.02 471346.54 333792.48

2002-2003 834839.66 475605.95 359233.71

2003-2004 1042469.93 633685.33 408784.6

2004-2005 1334297.99 844589.43 489708.56

2005 -2006 1633077.90 1032002.23 601075.67

SOURCE: SECONDARY DATA

INTERPRETATION
In this current asset is increasing during the period of study. Current liability is also increased during the period of study. And working capital is also increased.

CHART 5.12 WORKING CAPITAL FOR TREND ANALYSIS

1800000 1600000 1400000 1200000 1000000 VALUES 800000 600000 400000 200000 0

CA WC

CL

2001- 2002- 2003- 2004- 200502 03 04 05 06 YEARS

TABLE 5.13 ANALYSIS OF VARIOUS COMPONENTS IN WORKING CAPITAL CURRENT ASSETS

Rs in lakhs Particulars inventories Sundry debtors C& B balance Other assets Loans and advances Total 01-02 02-03 24.77 23.97 56.94 5.92 .0006 12.38 100 48.82 15.82 0.012 11.37 100 03-04 20.20 44.21 25.51 0.13 9.97 100 04-05 21.85 44.75 23.82 0.35 9.22 100 05-06 22.93 43.90 25.31 0.52 7.35 100

SOURCE: SECONDARY DATA

INTERPRETATION
In this period inventories, sundry debtors, other current assets and loan and advances was decreased during the period of the study. Cash and bank balance was only increased during the period of the study.

CHART 5.13 ANALYSIS OF VARIOUS COMPONENTS IN WORKING CAPITAL

60 50 40 PERCENTAGE 30 20 10 0 2001- 200202 03 2003- 200404 05 YEARS 200506 INVENTORIE S SD CASH & BANK OTHER CA LOAN & ADV

TABLE 5.13 CURRENT LIABILITIES Rs in lakhs

YEAR 2001-2002 2002-2003 2003-2004 2004-2005 2005 -2006

CURRENT LIABILITIES PROVISIONS TOTAL

86.32 13.68 100

83.04 16.95 100

82.01 17.98 100

84.30 15.69 100

85.34 14.65 100

SOURCE: SECONDARY DATA

INTERPRETATION
In this liabilities was downward in the period of study in this provision was upward in the period of study.

CHART 5.13 CURRENT LIABILITIES

90 80 70 60 50 PERCENTAGE 40 30 20 10 0

LIABILITIES PROVISION

2001- 2002- 2003- 2004- 200502 03 04 05 06 YEARS

CHAPTER VI FINDINGS OF STUDY

1. The working capital as per trend analysis, current assets was in the year 2001-2002 was Rs.805139.02 and the in the year 2005-2006 was Rs.1633077.90.so the current assets was increased during the period of study. 2. The working capital as per trend analysis, current liabilities was in the year 20012002 was Rs.47l346.54 and the in the year 2005-2006 was Rs.1032002.90.so the current liabilities was increased during the period of study. 3. The working capital as per trend analysis, working capital was in the year2001-2002 was 333792.48 and the in the year 2005-2006 was 601075.67.so the working capital was increased during the period. 4. In this analysis of various components in working, in current asset, in inventory sundry debtors in loan and advances and other current assets are downward trend. Then cash and bank balance only upward trend. 5. In current liabilities, liabilities downward trend and provision are upward trend during the period of study. 6. Analysis of each component in working capital sundry creditors is upward manner during the period of study. 7. Working capital turnover ratio was downward year by year. 8. Inventory turnover ratio was 3.57 in 2005-2006. It is upward while comparing from 2001-2002. 9. The current ratios for all the subsequent years are good. All of them are above standard norm. So the short term solvency position of the company is good. 10. The debtor turnover ratio in the year 2001-2002 was 1.48 and get increased in the year 2005-2006 was 1.87. 11. The quick ratio for all the subsequent year is good. It is all of them are standard norm. From the above table the quick ratio found satisfactory. 12. The Cash balances of the organization found fluctuating over the years. The proportion of cash in current asset was increasing in 2001-2006. 13. The average collection period is high in 2001-2002 that is 107 days and 2005-2006 is 102 days in this reduce collection period.

CHAPTER - VII SUGGESTION AND RECOMMEDATIONS

1. Apart from present technique of age wise analysis, reason wise analysis to be done periodically and suitable actions to be taken by the organization. 2. While collecting dues from customer collecting focus on customer irrespective of production unit, division and products to be followed. 3. Automatic storage and retrieval system (ASRS) presently implementing in components stores of BHEL, trichy may also be introduce in others stores or units. 4. Periodic review on non moving and slow moving items of inventory must be done by the organization. 5. All suppliers are to be educated on the requirement of various documents so that delay in processing of bills and payment may be reduced/avoided by the organization. 6. Debt collection policy is also very liberal. To avoid bad debts and to increase effective sales. 7. Through the current assets a level is satisfactory. They excess of the fund can be invested in other productive applications.

CHAPTER VIII

CONCLUSION
The overall working capital management of BHEL is effective and satisfactory. However, effective steps may be taken to reduce sundry creditors and inventory by using latest tools and techniques. the most care has been taken to analyze the working capital position of the BHEL, Apart from that growth and financial soundness of the studying unit have also been made.

CHAPTER IX LIMITATION
Only secondary data collected from BHEL trichy is used for the study, hence the accuracy of the findings and conclusion of the statement will depend upon the accuracy of the given data. Only five years financial statement of BHEL are used for this schedule. The limitations of the tools and techniques used in the study will also reflect in the outcome of the study.

CHAPTER - X SCOPE FOR FURTHER STUDY The present study concentrates on the working capital position with reference to BHEL. In addition to that study contains the analysis of financial soundness and growth of the firm in the term of liquidity solvency and trend analysis.

BIBLIOGRAPHY BOOKS M.Y.Khan and p. k. Jain, financial management, third edition,Tata McGraw Hill Publishing Company Limited, ,NEW Delhi, 2001. P.V. Kuldarni, and B.G. Sathyaprasad, financial management, Ninth edition, Himalaya publishing House, NEW Delhi, 2001. S. N. Maheshwari, principles of management accounting, Thirteenth edition, Sultan chand & sons New Delhi,2002. Dr. S. N. Maheshwari, financial management, sixth edition, Sultan chand & Sons New Delhi,2000. I. M. Pandey, Financial management,eighth edition, Vikas publishing House pvt.Ltd., New Delhi, 2003. Prasanna Chandra, Financial management,fourth edition,Tata McGraw- Hill publishing Company Limited,New Delhi,1999.

Annual reaports of BHEL (2001-2006) Internal records of the company WEBSITE: www. Bhel.org www. abb. in www .ge. co www.siemens.org