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OPTCL
OPTCL
INTRODUCTION
Background of Study
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Every organization, working capital plays a vital role, as the company needs capital for its expenditure.
Many companies fail due to poor working capital management. Companies often fail every year due to
poor working capital management practices. Entrepreneurs often dont account for short term
confusions to cash flow and are forced to shutdown their operations.
In easy term, working capital is a surplus of current assets over the current liabilities. Quality working
capital management disclose higher returns of current assets than the current liabilities to maintain a
stable liquidity position of a company. Otherwise, working capital is a need of funds to meet the day to
day working expenses. So a systematic way of managing of working capital is highly required to
ensure a proper stability of the financial position of an organization.
OPTCL is one of the largest power transmission organizations in the country, which plays the role of
transmission of electricity in the entire state of Odisha. Seeing the quality opportunity to study financial
system and practices of OPTCL, it is relatively important to take up summer internship on WORKING
CAPITAL MANAGEMENT IN OPTCL. During the project work, it is being analyzed the working
capital position of this organization. Decisions relating to working capital and short term financing are
mentioned to as working capital management. These involve managing the relationship between a
organizations short-term assets and its short-term liabilities. The goal of Working capital management
is to ensure that the firm is able to continue its operations and that it has ample money flow to satisfy
both maturing short-term debt and upcoming operational expenses.
Working capital management assign to maintain the level of working capital to optimum level, because
if a concern has inadequate opportunities and if the working capital is more than required then the
concern will lose money in the form of interest on the blocked funds. Therefore working capital
management plays a very important role in the profitability of a company. And also due to heavy
competitions among different organizations it is now compulsory to look after working capital.
Relevance of Study
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OPTCLs total assets are covered by current assets. Current assets form around 30% -40% of the total
assets. This could be less profitable on the assumption that current assets generates lesser returns as
compared to fixed assets.
In this competitive world it become mandatory to keep large current assets in form of inventories so as
to ensure smooth production an excellent management of these inventories has to be maintained to
strike a balance between all the inventories required for the production.
To manage all these inventories and determine the investments in each inventories, the system call for a
proper management of current assets which is really a tough job as the amount of inventories required
are large in numbers.
Here comes the need of working capital management or managing the investment s in current assets.
Thus companies like OPTCL it is not easy at all to implement a good working capital management as it
demands on individual attention on its different components.
The study of working capital management is very helpful for the organization to know its liquidity
position. The study is relevant to the organization to know the day to day expenditure. This study is
relevant to give an idea to utilize the current assets.
This study is also relevant to the student as they can use it as a reference. This report will help in
conducting further research in future. Others researcher can use this project as secondary data.
Company Profile
ODISHA POWER TRANSMISSION CORPORATION LIMITED,(OPTCL)
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Notified as the State Transmission Utility (STU) by the State Government and discharges the State
Load Dispatch Function.
The registered office of OPTCL is situated at Bhubaneswar, the capital of the state of Odisha. Its
projects and field units are spread all over Odisha. OPTCL became fully functional on 9th June 2005
consequent upon issue of Odisha Electricity Reform (Transfer of Transmission and Related Activities)
Scheme, 2005 under the provision of Electricity Act, 2003 and the Odisha Reform Act, 1995 by the
State Government for transfer and vesting of transmission related activities of GRIDCO with OPTCL.
The company has been designated as the State Transmission Utility in terms of section 39 of the
Electricity Act, 2003. Presently the company is carrying on intra state transmission and wheeling of
electricity under a license issued by the Odisha Electricity Regulatory Commission. The company is
also discharging the functions of State Load Despatch Centre. The company owns Extra High Voltage
Transmission system and operates about 9550.93 ckt kms of transmission lines at 400 kV, 220 kV, 132
kV levels and 81 nos. of substations with transformation capacity of MVA. The day-to-day affairs of
the company are managed by the Managing Director assisted by whole-time Functional Directors as
per the advice of the Board of Directors constituted. They are in turn assisted by a team of dedicated
and experienced professionals in the various fields.
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VISION
OPTCL is one of the best transmission utility in the country in terms of uninterrupted power
supply, lowering the loss, contributing to states industrial growth.
Developing the transmission system in the backdrop of formation of strong National Power
Grid as a flagship, endeavour to steer the development of power system on planned path leading
to cost effective fulfillment of the objective of Electricity to all at affordable price.
MISSION
Transmission system is planned and operated so as to ensure that the transmission system is built,
operated and maintained to provide efficient, economical and coordinated system of Transmission and
meet the overall performance Standards.
To upgrade the transmission system network so as to handle power to the tune of 3000 MW for
100% availability of power to each family.
To give training to practicing engineers and work force so as to professionalism them with
progressive technology and capable commercial organization of the country so as to build up
the most techno-commercially viable model of the country.
Objective of OPTCL
To finally conduct transmission lines and sub-station in the state for expulsion of power from the state
setup stations feed power to state distribution companies, circle of power to other states, manage the
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existing lines and sub-stations for power transmission and to launch power system improvement by
renovation, advancement and modernization of the transmission network.
OPTCL being a State Transmission Utility Public Authority has set the following objectives.
Clearing all functions of outlining and analysis relating to Intra State, Inter State transmission
with Central Transmission Utility, State Government, Generating companies, Regional Power
Board, Authority, Licensees or other person notified by State Government in this behalf.
Safeguard development of efferent and cost-effective system of intra state and interstate
transmission lines for steady flow of electricity from generating stations to the load centre.
Arrange unbiased open access to its transmission system for use by any licensee or generating
company or any consumer as and when such open access is provided by the state commission
on payment of transmission charges/surcharge as may be specified by the state commission.
Administer and control over the intra-state transmission system, efferent operation and
maintenance of transmission lines and sub-stations and move State Load Despatch Center to
ensure optimum scheduling and dispatch of electricity and to ensure integrated operation of
power systems in the state.
Modernize power at the earliest possible time through deployment of emergency restoration
system in the event of any Natural Disasters like super cyclone, flood etc.
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In order to implement the reform, in the first phase, two corporate entities namely Grid Corporation of
Odisha Limited (GRIDCO) and Odisha Hydro Power Corporation Limited (OHPC) were established in
April 1995, GRIDCO was incorporated under the Companies Act, 1956. In April 1995 to own and
operate the transmission and distribution system in the state. Similarly OHPC was incorporated to own
and operate all the hydro generating stations in the state.
The state government enacted the Odisha Electricity Reform Act, 1995 which came into force with
effect from 1.4.1996. In exercise of power under section 23 and 24 of the Odisha Electricity Reform
Act, 1995, the State Government notified the Odisha Electricity Reform (Transfer of Undertakings,
Assets, Liabilities, Proceedings and Personnel) Scheme Rules 1996. As per the scheme, the
transmission, distribution activities and of the OSEB along with the related assets, liabilities, personnel
and proceedings were vested on GRIDCO. Simultaneously the hydro generation activities of OSEB
along with related assets, liabilities, personnel proceedings were vested in OHPC.
In order to privatize the distribution functions of electricity in the State, four distribution companies
namely Central Electricity Supply Company of Odisha Limited (CESCO), North Eastern Electricity
Supply Company of Odisha Limited (NESCO), Southern Electricity Supply Company of Odisha
Limited (SOUTHCO) and Western Electricity Supply Company Odisha Limited (WESCO) were
incorporated under the companies act, 1956 as separated corporate entities. During November 1998 the
state government issued the Odisha Electricity Reform(Transfer of Assets, Liabilities, Proceedings
and personnel of GRIDCO to distribution companies) Rules 1998 wherein the electricity distribution
and retail supply activities along with the related assets, liabilities, personnel and proceedings were
transferred from GRIDCO to the four Distribution Companies. Through a process of international
competitive bidding (ICB), the four distribution companies were privatized during 1999.
After separation of distribution business, GRIDCO left with electricity transmission and bulk
supply/trading activities. GRIDCO was also declared as the state transmission utility and was
discharged the functions of State Load Despatch Centre (SLDC).
The Government of India enacted the Electricity Act, 2003 which came into effect from 10th June,
2003. Under the provision of the said Act, trading in electricity has been recognized as a distinct
licensed activity, which can only be undertaken by a licensee to be granted by the appropriate
commission. The act specifically prohibits the STU and transmission company in the state from
engaging in the business of trading. GRIDCO being a State Transmission Utility was not permitted to
engage itself in the trading in electricity and was required to segregate its activities in a manner within
the period allowed under the Act that, the entity which will undertake transmission STU and SLDC
function will not undertake the activities of trading and bulk supply of electricity.
Keeping in view the statutory requirement of the Electricity Act for separation of trading and
transmission functions into two separate entities, the State Government incorporated Odisha Power
Transmission Corporation Limited(OPTCL) to take over the transmission, STU/SLDC functions of
GRIDCO.
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In exercise of the power conferred under section 39,131,133 and 134 of the Electricity Act, 2003, read
with section 23 and 24 of the Odisha Electricity Reform Act, 1995, the State Government issued the
notification Odisha Electricity Reform(Transfer of Transmission and Related Activities) Schemes
2005 on 9.6.2005. The Scheme was made effective from 1.4.2005. By virtue of the transfer scheme,
2005, OPTCL now undertaking the functions of transmission of electricity in the state of Odisha and
has been declared as the State Transmission Utility. GRIDCO is also discharging the functions of
SLDC.
Reform Achievements
1) First Transfer between OHPC and GRIDCO effected on 1st April, 1996
2) OER Act, 1995 created Odisha Electricity Regulatory Commission, a Regulatory body which
became functional on 1.8.1996
3) Unbundling of Transmission and Distribution via Second Transfer Scheme effective from November
26,1998.
4) 9 tariff orders after public hearing have been passed by OERC
(FY98, FY99, FY00, FY01, FY02, FY03, FY04, FY05, FY06)
5) BSES took over management and operational control of 3 Distribution Companies (WESCO,
SOUTHCO and NESCO) from April 1, 1999.
6) Privatization of Distribution completed with AES taking over the fourth distribution company,
CESCO from September 1, 1999
7) CESCO remained under the management of an administrator (CEO) appointed by OHRC with of
effect of 27.8.2001.
8) A new public limited company under the name Odisha Power Transmission Corporation Limited
was incorporated on 29.03.2004 to carry on the business of transmission, STU and SLDC functions of
GRIDCO.
9) OPTCL became functional on 1.04.2005. GRIDCO continue to carry on its bulk supply and trading
functions.
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LIQUIDITY RATIO
Liquidity refers to ability of a concern to meet its current obligation as and when these become due.
The short-term obligation are met by realizing amount from current, floating or circulating asset. The
current asset either be liquid or near liquidity. These should be convertible into cash for paying
obligation of short-term nature. To measure the liquidity of a firm, following ratios can be calculated.
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A) CURRENT RATIO: Current assets include cash and those assets which can be converted into
cash within a year, such marketable securities, debtors and inventories. All obligations within a year are
include in current liabilities. Current liabilities include creditors, bills payable accrued expenses, short
term bank loan income tax liabilities and long term debt maturing in the current year. Current ratio
indicates the availability of current assets in rupees for every rupee of current liability.
B) QUICK RATIO OR ACID TEST: Quick ratio establish the relationship between quick or
liquid assets and liabilities. As asset is liquid if it can be converting into cash immediately or
reasonably soon without a loss of value. Cash is the most liquid asset other assets which is relatively
liquid and include in quick assets are debtors and bills receivable and marketable securities. Inventories
are considered as less liquid. Inventory normally required some time for realizing into cash. Their value
also has tendency to fluctuate. The quick ratio is found out by dividing quick assets by current
liabilities.
C) ABSOLUTE LIQUID ASSET: Even though debtors and bills receivables are considered as
more liquid then inventories, it cannot be converted into cash immediately on time. Therefore while
calculation of absolute liquid ratio only the absolute liquid assets as like cash in hand cash in bank,
short term marketable securities are taken into consideration to measure the ability of the firm in
meeting short term financial obligation. It calculates by absolute assets dividing by current liabilities.
EFFICIENCY RATIO
Funds are invested in various assets in business to make sales and earn profits. The efficiency with
which assets are managed directly affects the volume of sale. Activity ratios measure the efficiency and
effectiveness which the firm manages its resources or assets. These ratios are also called turnover
ratios.
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a) Tables
CHAPTER 2
REVIEW OF THE LITERATURE
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Pass C.L., Pike R.H (1984), examined that in last 40 years major theoretical development have
occurred in the area financial decision making and long-term investment. Related technique and new
concepts are been implemented in industrial practices. In contrast less attention has been given in
respect to short-term finances, basically on working capital management. Less importance has been
given by the firm regarding working capital management, but effective working capital management
plays a crucial role in enhancing the profitability and growth of the firm. However, experience shows
that inadequate planning and control of working capital is one of the major causes of failure of
business.
Herzfeld B (1990), his studies say that Cash is King indeed money managers who share the
responsibility of running this countrys businesses. As bank demanding more from prospective
borrowers, great importance is given to those accountable for so-called working capital management.
Working capital management is all about managing the current and short-term assets and short-term
liabilities. The function of the firm is to make sure they have enough assets to continue its business.
Appuhami, Ranjita B (2008), studied impact on firms capital expenditure on their working capital
management. The author used the data collected from listed companies in the Thailand Stock
Exchange. The study used Schulman and Coxs (1985) Net Liquidity Balance and Working Capital
Requirement as a proxy for working capital measurement and developed multiple regression models.
The empirical research found that firms capital expenditure has a significant impact on working capital
management. The study also found that the firms operating cash flow, which was recognized as
practical variable, has a significant relationship with working capital management.
Hardcastle J (2009), stated that working capital, sometimes called gross working capital, simply refers
to the firms total current assets (the short-term ones), cash, marketable securities, accounts receivable
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and inventory. Long-term financial analysis primarily concerns strategic planning, working capital
management deals with day-to-day operations. By making sure that production lines do not stop due to
lack of raw materials, that customers pay on time and that enough cash is on hand to make payments
when they are due. Obviously without good working capital management, no firm can be efficient and
profitable.
Thachappilly G (2009) Working capital management manages flow of funds, (2009) describes that
working capital is the cash needed to carry on operations during the cash conversion cycle, i.e. the days
from paying for raw materials to collecting cash from customers. Raw materials and operating supplies
must be bought and stored to ensure uninterrupted production. Wages, salaries, utility charges and other
incidentals must be paid for converting the materials into finished products. Customers must be
allowed a credit period that is standard in the business. Only at the end of this cycle does cash flow in
again.
Beneda, Nancy; Zhang, Yilei (2008), he found out the impact of working capital management on the
operating performance and growth of new public companies. The study also sheds light on the
relationship of working capital with debt level, firm risk and industry. Using a sample of initial public
offerings (IPOs), the study finds a significant positive association between higher levels of accounts
receivable and operating performance. The study futher finds that maintaining control (i.e. lower
amounts) over levels of cash and securities, fixed assets and accounts.
Dubey R (2008), studied the working capital in a firm generally arises out of four basic factors like
sales volume, technological changes, seasonal, cyclical changes and policies of the firm. The strengths
of the firm is dependent on the working capital as discussed earlier but this working capital is itself
dependent on the level of sales volume of the firm. The firm requires current assets which can be
converted readily into cash say within a year such as receivables, inventories and liquid cash. If the
level of sales is stable and towards growth the level of cash, receivables and liquid cash. If the level of
sales is stable and towards growth the level of cash, receivables and stock will also be on the high.
McClure B (2007), describes that cash is the lifeline of a company. If this lifeline deteriorates, so does
the companys ability to fund operations, reinvest and meet capital requirements and payments.
Understanding a companys cash flow health is essential to making investment decisions. A good way
to judge a companys cash flow prospects is to look at its working capital management (WCM). Cash
is king when fund raising is harder than ever. Letting it slip away is an oversight that investors should
not forgive. Analyzing a companys working capital can provide excellent insight into how well a
company handles its cash, and whether it is likely to have any on hand to fund growth and contribute to
shareholder value.
Grass D (2006), stated that Cash is the lifeblood of business is an often repeated maximum amongst
financial managers. Working capital management refers to the management of current or short-term
assets and short-term liabilities. Components of short-term assets include inventories, loans and
advances, debtors, investments and cash and bank balances. Short-term liabilities include creditors,
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trade advances, borrowing and provisions. The major emphasis is, however, on short-term, since shortterm liabilities arise in the context of short-term assets. It is important that companies minimize risk by
prudent working capital management.
Maynard E. Refuse (1996), argued that attempts to improve working capital by delaying payment to
creditors is counter-productive to individuals and to the economy as a whole. Claims that altering
debtor and creditor levels for individual tiers within a value system will rarely produce any net benefit.
Proposes that stock reduction generates system-wide financial improvement and other important
benefits. Urges those organization seeking concentrated working capital reduction strategies to focus on
stock management strategies based on lean supply-chain techniques.
Thomas M. Kruegar (2005), studied distinct levels of WCM measures for different industries, which
tend to be stable over time. Many factors help to explain this discovery. The improving economy
during the period of the study may have resulted in improved turnover in some industries, while
slowing turnover may have been a signal of trouble ahead. Our results should be interpreted cautiously.
Our study takes places over a short time frame during a generally improving market. In addition, the
survey suffers from survivorship bias- only the top firms within each industry are ranked each year and
the composition of those firms within the industry can change annually.
Eljelly (2002), it is examined the relationship between profitability and liquidity, as measured by
current ratio and cash gap(cash conversion ratio) on a sample of 929 joint stock companies in Saudi
Arabia. Using correlation and regression analysis, Eljelly[9] found significant negative relationship
between the firms profitability and its liquidity level, as measured by current ratios and long cash
conversion cycles. At the industry level, however, he found that the cash conversion cycle or the cash is
of more importance as a measure of liquidity than current ratio that affects profitability. The firm size
variable was also found to have significant effect on profitability at the industry level.
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CHAPTER 3
RESEARCH METHODS
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To appraise the utilization of current asset and current liabilities and find out short-comings if any.
To suggest measures for effective management of working capital.
Project based on
Annual report of OPTCL- 2006-07
Annual report of OPTCL-20007-08
Annual report of OPTCL-2008-09
Annual report of OPTCL-2009-10
Annual report of OPTCL-2010-11
CHAPTER 4
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The result and finding is in five different sections. The first sections explain about the components of
working capital, variables of working capital. The second section explains about the liquidity trend of
the organization. The third section explains about the working capital trend. The fourth section explains
the usages of current assets and current liabilities. The last section explains the measure to effective
management of working capital in the organization.
The first section explains about the various components of working capital and variables of working
capital.
Table 1.1
2006-07
2007-08
2008-2009
2009-2010
2010-2011
Cash
64,82,76,812
49,08,81,183
90,70,19,750
72,71,06,129
57,94,33,229
Debtors
79,81,96,201
75,10,64,690
1,05,50,97,47
3
80,85,19,278
1,05,56,31,69
8
96,90,56,460
1,55,87,35,700
Inventories
1,05,24,79,98
2
76,68,65,262
Sundry
Creditors
Provision
61,03,22,496
66,51,67,980
68,95,26,597
72,40,51,456
85,55,52,857
83,08,65,819
1,30,45,17,74
4
4,81,70,02,60
3
5,69,56,67,47
5
5,62,99,60,268
1,14,42,69,951
a) Cash in bank in the year 2006-07 was Rs64,82,76,812 . It is decreased to Rs49,08,81,183 in the year
2007-08. In year 2006-07 it increased to Rs90,70,019,750 . And then it suddenly decreases to
Rs72,71,06,129 again decreases to Rs57,43,31,119 in the year 2008-09.
b) Debtors increases which was not good sign for the organization. In 2006-07 debtors were
Rs79,81,96,201 and it increased to Rs1,05,24,79,982 in the year 2007-08 a total increases in
Rs25,42,83,781. In year 2006-07 it was increased Rs1,05,50,97,473. And in 2007-08 it again increased
in Rs1,05,56,31,698 and in 2008-09 in reached 1,55,87,35,700.
c) As per the above findings inventories were increased. The inventories were Rs79,81,96,201 in 200607.In 2007-08 it increased to Rs76,68,65,262, with an increase of Rs1,58,00572, with the percentage
growth of 2.10%. In 2006-07 it increased to Rs80,85,19,278 with the increase in 7.7%. In 2007-08 it
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2006-07
2007-08
2008-09
2009-10
2010-11
ROTA(Return on
total assets)
OPM(Operating
Profit margin)
GEAR(Gearing Ratio
i.e. financial
debt/total assets)
CR(Current Ratio)
0.15
0.16
0.22
0.10
0.13
61.55%
56.40%
27.78%
34.65%
35.82%
0.64:1
0.55:1
0.43:1
0.33:1
0.34:1
1.28:1
0.94:1
0.86:1
0.62:1
0.68:1
0.58:1
0.46:1
0.27:1
0.22:1
0.24:1
0.13
0.12
0.21
0.16
0.20
0.11
0.13
0.24
0.26
0.28
0.23
0.25
0.13
0.19
0.16
0.25
0.34
0.17
0.21
0.23
QAR(Quick assets
ratio)
CA/TA(Current
Assets to Total
Assets)
CL/TA(Current
Liabilities to Total
assets)
SK/CA(Stocks to
Current assets)
TD/CA(Trade
Debtors to Current
Assets)
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CA_TURN
(Current Assets
Turnover is
sales/current assets)
1.10
1.29
1.08
0.60
0.61
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Current Ratio
2006-07
1.28:1
2007-08
0.94:1
2008-09
0.86:1
2009-10
0.62:1
2010-2011
0.68:1
Quick Ratio
0.58:1
0.46:1
0.27:1
0.22:1
0.24:1
Absolute
Liquid Ratio
Stocks to
Current Assets
Trade Debtors
to Current
Assets
Current Assets
to Total Assets
Current
Liabilities to
Total Assets
0.25:1
0.15:1
0.12:1
0.08:1
0.09:1
0.23
0.25
0.13
0.19
0.20
0.25
0.34
0.17
0.21
0.23
0.13
0.12
0.21
0.16
0.23
0.11
0.13
0.24
0.26
0.28
77 days
CCC(Cash
Conversion
Cycle)
70 days
43 days
115 days
118 days
125 days
85 days
57 days
126 days
128 days
63 days
61 days
37 days
86 days
89 days
Inventory
Days
Debtors
Turnover
Days
Creditors
Turnover
Days
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a) In 2006-07 the current ratio was 1.28:1 which is below the standard of 2:1. In 2007-08, it was found
that the current ratio of OPTCL was 0.94:1 and it was decreased from the total current assets from
previous year and an increased in current liability this year. In 2008-09, it was found that the current
ratio of OPTCL is 0.86:1. In 2009-10 the current ratio was 0.62:1 and in 2010-11 the current ratio was
0.68:1.
b) Quick ratio in 2006-07 it was 0.58:1 and 0.46:1, 0.27:1, 0.22:1 and 0.24:1 in 2007-08,
2009-10 and 2010-11.
2008-09,
c) In the year 2006-07 the absolute liquid ratio was found to be 0.25:1. In the year 2007-08 the absolute
liquid ratio of OPTCL was found to be 0.15:1. The absolute liquid ratio of the organization for the year
2008-09 was found 0.12:1 and in the year 2009-10 was 0.008:1 and for the financial year of 2010-11
was 0.09:1.
d) Stock to current assets is 0.23, 0.25, 0.13, 0.19 and 0.20 in the respective years.
e) Trade debtors to current asset ratio come 0.25, 0.34, 0.17, 0.21 and 0.23 in the respective years.
f) Current asset to total asset ratio come 0.13, 0.12, 0.21 and 0.16 in the year 2006-07, 2007-08, 200809, 2009-10 and 2010-11.
g) Current liabilities to total asset came 0.11 in 2006-07 and in 2007-08 it came 0.13, in 2008-09 it
came 0.24, in 2009-10 it came 0.26 and in 2010-11 in came 0.28.
h) Cash conversion ratio for inventory came 77days, 70days, 43days and 115days.
Cash conversion for debtors came 125 days in 2006-07, it reduced to 85 and 57 days in 2007-08,
2008-09 respectively. But in 2009-10 it increased to 126 days then in 2010-11 it increased to 128 days.
Cash conversion ratio came 63 days, 61 days, 37 days and 86 days respectively.
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YEARS
CURRENT ASSETS
(IN RUPEES)
CURRENT
LIABILITY
(IN RUPEES)
RATIO
2006-07
3,21,50,26,429
2,50,80,12,516
1.28:1
2007-08
3,10,61,19,303
3,35,96,86,508
0.94:1
2008-09
6,30,63,13,319
7,29,34,88,649
0.86:1
2009-10
5,07,93,75,378
8,21,36,64,274
0.62:1
2010-11
4,43,85,38,139
8,42,34,81,867
0.53:1
A) 2006-07 it was found that the current ratio was 1.28:1 which is below the standard of 2:1. It is due
to a decrease of total current assets from the previous year to current year. Still it is manageable and
also the condition was under the control.
B) In the year 2007-08, it was found that the current ratio of OPTCL was 0.94:1. It was below the
standard of 2:1 and it is decrease in total current assets from previous year and an increase in current
liability this year. The cash and bank balance is found to decrease this year in comparison to that of
previous year where as the current liabilities and provisions both have increased this year.
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C) In the year 2008-09, it was found that the current ratio of OPTCL was 0.86:1. It is a not good
indication according to the rule of thumb because the firm has more current assets than current
liabilities. The firm may be able to meet its short term obligations in time.
D) 2009-10 and 2010-11, it was found that the current ratio of OPTCL was 0.62:1 and 0.53:1. It was
not a good indication according to rule of thumb because the firm has more current assets than current
liabilities. The firm was not able to meet its short term obligation in time.
E) As increase in administrative overhead expenses, super annuity benefits and payment of past loan
etc are the major factor for increasing of current liabilities.
F) Situation can be controlled so more emphasis can be given on these areas to reduce current liabilities
and to increase current assets so that the actual standard of 2:1 can be achieved.
In addition to, company should make clear cut strategic planning to sell electricity to major industries
at industrial rate to achieve higher revenue.
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Years
Liquid Assets
Current liability
Ratio
2006-07
1,44,64,73,013
2,50,80,,12,516
0.58:1
2007-08
1,54,33,61,165
3,35,96,86,508
0.46:1
2008-09
1,96,21,17,223
7,29,34,88,649
0.27:1
2009-10
1,78,27,37,827
8,21,36,64,274
0.22:1
2010-11
2,138,168,819
8,423,481,867
0.25:1
A) The quick ratio or the Acid Test Ratio of OPTCL for the financial year 2006-07 was found to be
0.58:1. So it was manageable situation.
B) In the year 2007-08 it was found that the Quick Ratio of OPTCL was 0.46:1 which was below the
normal standard. It was due to a little bit increase in current liabilities in comparison to that of previous
year. Still it was also in a manageable position and by giving a small effort the normal standard of 1:1
can be achieved.
C) In the year 2008-09 it is found that the QUICK ratio of OPTCL is 0.27:1, which is just normal
standard. It is due to a little bit increase in current liabilities.
D) In the year 2009-10 it is found that the Quick ratio was 0.22:1 which is below standard.
Management should have an eye on to that.
E) In the year 2010-11 the situation is also no good. The quick ratio is 0.25:1, which is below standard
of 1:1.
Page
27
Current Liabilities
Ratio
2006-07
64,82,76,812
2,50,80,12,516
0.25:1
2007-08
49,08,81,183
3,35,96,86,508
0.15:1
2008-09
90,70,19,750
7,29,34,88,649
0.12:1
2009-10
72,71,19,750
8,21,36,64,274
0.08:1
2010-11
57,94,33,119
8,32,34,81,867
0.06:1
By going through the table of Absolute liquid Ratio, balance sheet of OPTCL the following results can
be drawn.
A) In the year 2006-07 the Absolute Liquid Ratio was found to be 0.25:1. Through it is below the
normal standard still it is manageable condition.
B) In the year 2007-08 the Absolute Liquid Ratio of OPTCL was found to be 0.15:1 which was below
from the previous year. It is due to a decrease in cash and bank balances and also a slightly in current
liabilities.
C) The Absolute Liquid Ratio of the firm for the financial year 2008-09 is found to be 0.12:1 which is
below the normal standard. This is due less cash and bank balances of the organization in comparison
to the current liabilities.
D) In the year 2009-10 and 2010-11, the absolute liquid ratio found to be 0.08:1 and 0.06:1
respectively. This is due to less cash and bank balances of the organization to the current liabilities.
Page
28
2008-2009
Amount in (Rs)
-71,37,17,644
2007-2008
Amount in (Rs)
-18,30,29,883
2006-2007
Amount in (Rs)
-3,64,99,383
13,09,96,775
1,18,36,39,044
6,33,87,383
11,15,56,818
42,43,77,484
54,16,01,198
97,24,54,617
1,10,65,54,318
1,23,90,63,901
1,08,22,03,592
1,09,74,37,879
1,09,90,58,990
30,26,423
30,26,423
30,26,423
-1,04,00,87,510
-47,574
-209
4,28,44,898
-4,5513,310
-6,90,09,008
-5,03,60,383
47,481
27,846
46,318
46,305
11,59,214
15,22,603
29,50,312
28,65,292
1,11,96,801
8,12,05,348
4,47,68,652
11,63,525
92,89,278
-23,96,915
-21,13,256
1,70,66,92,319
176372705
1,05,74,70,893
1,88,59,83,078
2,25,46,20,994
64,38,311
-16,20,59,785
-4,46,04,328
-2,98,62,664
Sundry Debtors
1,17,79,20,033
-4,53,02,877
-37,81,016
-26,35,73,059
27,27,22,589
-59,43,581
-1,43,98,325
-2,44,71,317
50,31,04,002
Page
29
6,57,07,207
1,20,34,71,087
-2,72,53,85,618
24,60,67,167
Current liabilities
69,90,20,397
4,93,59,037
42,88,03,928
42,01,27,401
Provisions
2,40,57,12,716
1,91,87,52,382
3,52,31,00,656
47,36,52,134
2,95,82,76,263
1,16,37,35,296
82,19,39,662
4,01,57,47,156
3,04,97,18,374
3,07,65,60,656
-93,41,57,641
-91,68,37,432
-1,03,91,08,694
4,55,13,310
6,90,09,008
5,03,60,383
1,73,07,27,631
-88,86,44,331
-84,78,28,424
-98,87,48,311
1,08,80,34,380
-1,06,41,24,474
-1,05,96,33,683
-1,02,66,95,328
2,03,48,78,848
32,39,10,165
-6,95,82,948
-36,86,01,393
2,48,89,47,563
-2,61,68,02,137
-88,70,89,752
-83,19,11,252
71,94,45,000
5,00,00,000
23,05,55,000
82,26,58,195
-3,30,70,16,446
-1,78,57,51,383
-2,24,52,07,973
14,76,73,010
-17,99,13,621
41,61,38,567
-15,73,95,628
NET CAPITAL
CHANGES (B)
CASH GENERATED
FROM THE
OPERATIONS (A)+
(B)
1,77,35,72,529
4,28,44,898
CASH FLOW FROM
INVESTING
ACTIVITIES:
Capital
Expenditure(CAPEX)
Interest received
revenue
CASH GERNRATED
FROM INVESTING
ACTIVITIES (C)
Page
30
72,71,06,129
90,70,19,750
49,08,81,183
64,82,76,812
57,94,33,119
72,71,06,129
90,70,19,750
49,08,81,184
Page
31
2006-07
(rupees)
75,10,64,690
Sundry Debtors
79,81,96,201
64,82,76,812
38,94,06,739
Total
3,21,50,26,429
Less: CURRENT
LIABILITIES
(CL)
Sundry Creditor
61,03,22,496
Deposits and
retention from
supplies/contractors
Interest accrued but
Not due on loans
Liabilities for
wealth tax
Electricity duty
payable
Liabilities for fringe
benefit tax
2007-08
(rupees)
2008-09
(rupees)
2009-10
(rupees)
2010-11
(rupees)
76,68,65,26
2
1,05,24,79,
982
49,08,81,18
3
65,25,53,30
4
14,33,39,57
2
3,10,61,19
,303
80,85,19,27
8
1,05,50,97,
473
90,70,19,75
0
66,69,51,62
9
2,86,87,25,
189
6,30,63,13
,319
96,90,56,460
1,14,42,69,9
51
1,55,87,35,7
00
57,94,33,11
9
75,13,33,06
9
40,47,66,30
0
4,43,85,38,
139
66,51,67,98
0
13,71,54,49
7
68,95,26,59
7
14,91,29,26
9
72,40,51,456
6,27,33,789
2,05,82,149
1,30,49,185
51,73,055
79,27,784
37,299
47,240
47,253
28,781
48,416
2,12,903
49,092
1,82,269
1,56,113
1,63,387
23,41,534
44,54,790
68,51,705
68,51,705
68,51,705
62,80,81,987
12,50,63,350
Page
32
1,05,56,31,6
98
72,71,06,129
74,48,94,758
1,58,26,86,3
33
5,07,93,75,
378
12,89,91,075
85,55,52,85
7
15,76,14,45
4
Other Liabilities
87,64,35,326
Current liabilities
Provisions
1,67,71,46,
697
83,08,65,819
Total Current
Liabilities
Working Capital
(CA-CL)
2,50,80,12,
516
70,70,13,91
3
1,22,77,13,
016
2,05,51,68
,764
1,30,45,17,
744
3,35,96,86
,508
25,35,67,2
05
1,61,76,99,
768
2,47,64,86
,046
4,81,70,02,
603
7,29,34,88
,649
98,71,75,3
20
1,65,27,44,6
14
2,51,79,96,
799
5,69,56,67,4
75
8,21,36,64,
274
3,13,42,88,
896
1,76,53,62,9
96
2,79,3521,
599
5,62,99,60,2
68
8,42,34,81,
867
3,98,49,43,
728
In 2006-07, working capital was Rs70,70,13,913 because current asset was more than current
liabilities. In 2007-2008 it became negative due to the fact that current liabilities exceeds than current
assets. In 2008-2009 it became Rs-98,71,75,330 due to excessive of provisions. In that year current
liabilities exceeds current assets. In 2009-2010, working capital again became negative. In 2010-2011
working capital again became negative.
2006-07
70,70,13,913
2007-08
-25,35,67,205
2008-09
-98,71,75,330
2009-10
-3,13,42,88,896
2010-11
-3,98,49,43,728
Working
Capital
100
-35.86
-139.62
-443.31
-563.63
Page
33
Indices
It is observed that in 2006-07, working capital indices was very high due to current assets exceeded
current liabilities. In 2007-08 indices was also high because current asset were more than current
liabilities. In 2008-09 the company was able to manage their working capital efficiently. But in 2009-10
and 2010-11 it became negative.
YEAR
2006
2007
2008
2009
2010
Cost of sales
3,55,34,94,401
3,99,75,58,798
6,78,92,95,427
3,05,16,27,568
4,05,19,14,742
Ratio
5.03 times
-15.7times
-6.88times
-0.97times
-1.02times
A) In the year 2006-2007, there was an increase in working capital turnover ratio to 5.03.
B) However, in the year 2007-2008, it was -15.7 which indicates there was a decrease in net current
assets due to increase in current liabilities.
C) In the year 2008-2009, it was -6.88 which was better than previous year.
D) But in 2009-2010, working capital turnover was -0.97, which indicates there was decrease in net
current assets due to increase in current liabilities.
E) In 2010-2011, working capital turnover was -1.02.
Page
34
(2007-2008)
(Rs)
(Rs)
(2006-
Increase in
working capital
Decrease in
working capital
(Rs)
(Rs)
Current assets
Stores and spares
75,10,64,690
76,68,65,262
1,58,00,572
Sundry Debtors
79,81,96,201
1,05,24,79,98
2
25,42,83,781
64,82,76,812
49,08,81,183
15,73,95,629
62,80,81,987
65,25,53,304
2,44,71,317
38,94,06,739
14,33,39,572
24,60,67,167
Total
3,21,50,26,42
9
3,10,61,19,30
3
Current liabilities
1,67,71,46,69
7
2,05,51,68,76
4
37,80,22,067
Provisions
83,08,65,819
1,30,45,17,74
4
47,36,51,925
Total
2,50,80,12,51
3,35,96,86,50
Current liabilities
Page
35
Working capital
70,70,13,913
-25,35,67,205
(CA-CL)
Net decrease in working
capital
-96,05,81,118
-25,35,67,205
96,05,81,118
-25,35,67,205
1,25,51,36,788
1,25,51,36,788
A) The total current asset of the year 2007-08 is decreased to Rs 3,10,61,19,303 from previous years
figure of Rs 3,21,50,26,429.
B) The total value of stores and spares is increased from the previous year figure and the value of
sundry debtors is also increased from the previous year figure.
C) The cash and bank balances of the organization have a decrease of Rs 15,73,95,629 from previous
year figure. Similarly the figure for loans and advances is also decreased to Rs 14,33,39,572 from the
previous year figure of Rs 38,94,06,739.
D) The other current assets like prepaid expenses and sundry receivables have also increased from the
previous year figure.
E) The total current liabilities of the year 2007-08 was increased to Rs 3,35,96,86,508 from a previous
years figure of Rs 2,50,80,12,516.
F) That, the increase for current liabilities is due to increase in the figure of sundry creditors, deposits
and retention from supplier/contractors, liabilities for wealth tax, liabilities for fringe benefits tax and
other liabilities from the previous years figure.
G) Due to increase in the value of stores and spares, sundry debtors and other current assets, there is a
sign of increase in working capital. However, due to a decrease in the figure of cash, bank balances,
loan and advances etc, there is a clear sign of decrease in the working capital.
H) Due to increase in current liabilities and provisions for pension and gratuity and retrospective
revision of pay, there is a sign of decrease in working capital.
I) As per the analysis, it is observed that, the ratio of increased of working capital is drastically reduced
than the previous years and the decrease sign of working capital is Rs 96,05,81,118 (2007-08), which
Page
36
has impacted the steady increased of current working capital and negative affected the profitability of
the organization.
J) It is found that the current assets figure is decrease from the previous years figure and the current
liabilities figure is increased from the previous year. As a result of which, there is a net decrease
(negative figure) in working capital this financial year (2007-08).
K) That, some more emphasis can be given on current assets to increase its figure and to decrease
current liabilities figure as a result of which the figure for working capital can be increased.
Current asset
Stores and spares
Sundry debtors
Cash and bank
balances
Other current
assets
Loan and
advances
Total
Current liabilities
Current liabilities
Provision
Total
(2008-
(2009-2010)
(Rs)
(2008-2009)
(Rs)
Increase in
working capital
(Rs)
Decrease in
working capital
(Rs)
80,85,19,278
1,05,50,97,473
90,70,19,750
96,90,56,460
1,05,56,31,698
72,71,06,129
16,05,37,182
5,34,225
17,99,13,621
66,69,51,629
74,48,94,758
7,79,43,129
2,86,87,25,189
1,58,26,86,333
1,28,60,38,856
6,30,63,13,319
5,07,93,75,378
2,47,64,86,046
4,81,70,02,603
7,29,34,88,649
2,51,79,96,799
5,69,56,67,475
8,21,36,64,274
4,15,10,753
87,86,64,872
Page
37
Working
Capital(Current
asset-current
liabilities)
-98,71,75,330
Net decrease in
working capital
-2,14,71,13,566
-3,13,42,88,896
-3,13,42,88,896
2,14,71,13,566
-3,13,42,88,896
2,38,61,28,102
2,38,61,28,102
A) The total current asset of the year 2008-09 decreased to Rs 5,07,93,75,378 from a previous year
figure of Rs 6,30,63,13,619
B) The total value of stores and spare is increased from the previous years figure and the value of
sundry debtors is also increased from the previous year figure.
C) The cash and bank balances of the organization have a decrease of Rs 17,99,13,621 from the
previous years figure. Similarly the figure for loans and advances is also decreased to Rs
1,58,26,86,333 from the previous year figure of Rs 2,86,87,25,189.
D) The other current asset like prepaid expenses and sundry receivables had also increased from the
previous year figure of Rs 7,29,34,88,649.
F) The increase for current liabilities is due to increase in the figure of sundry creditors, deposits and
retention from supplier/contractors, liabilities for wealth tax, liabilities for fringe benefit tax and other
liabilities from the previous year figure.
G) Due to increase in the value of stores and spares, sundry debtors and other current assets, there is
sign of increase in working capital. However, due to a decrease in the figure of cash, bank balances,
loan and advances etc, there is a clear sign of decrease in the working capital.
H) Due to increase in current liabilities and provision for pension and gratuity of pay, there is a sign of
decrease in working capital
I) As per the analysis, it was observed that, the ratio of increase of working capital is drastically
reduced than previous year and the decrease sign of working capital is Rs -2,14,71,13,566 (2009-10),
which has impacted the steady increase of current working capital and negatively affected the
profitability of the organization
J) It is found that the current assets figure is decreased from the previous year figure and the current
liabilities figure is increased from the previous year. As a result of which there is a net decrease
(negative figure) in working capital this financial year (2001-12)
Page
38
K) More emphasis can be given on current assets to increase its figure and to decrease current
liabilities figure as a result of which the figure for working capital can be increased.
CURRENT ASSETS
Total assets are basically classified in two parts as fixed assets and current assets. Fixed assets are in the
nature of long term or life time for the organization. Current assets convert in the cash in the period of
one year. It means that current assets are liquid assets or assets which can convert in to cash within a
year.
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
75,10,64,690
76,68,65,262
80,85,19,278
96,90,56,460
79,81,96,201
64,82,76,812
1,05,24,79,98
2
49,08,81,183
1,05,50,97,47
3
90,70,19,750
1,05,56,31,69
8
72,71,06,129
1,14,42,69,95
1
1,55,87,35,70
0
57,94,33,119
62,80,81,987
65,25,53,304
66,69,51,629
74,48,94,758
75,13,33,069
Page
39
current
assets
Loan and
advances
Total of
CA
CA Indices
38,94,06,739
14,33,39,572
3,21,50,26,42
9
100
3,10,61,19,30
3
99.61
2,86,87,25,18
9
6,30,63,13,31
9
196.15
1,58,26,86,33
3
5,07,93,75,37
8
157.99
40,47,66,300
4,43,85,38,13
9
138.11
From the above table the current assets indices show growth in the year 2006-07. In 2007-08 it decline
marginally and in 2008-09 it again increase and in 2009-10 it decline and it further decline in 2010-11
Year
2006
2007
2008
2009
2010
SALES
3,55,34,94,401
3,99,75,58,789
6,78,92,95,427
3,05,16,27,568
4,05,19,14,743
CURRENT ASSETS
3,21,50,26,429
3,10,61,19,303
6,30,63,13,319
5,07,93,75,378
4438538139
RATIO
1.10
1.29
1.08
0.60
0.91
In the year 2006-07, the current asset turnover was 1.10 which became 1.29 and 1.08 in
the year 2007-08 and 2008-09 respectively. But in the year 2009-10 and 2010-11, the
current asset turnover was 0.60 and 0.91 respectively due to sale was less than the
current assets.
Page
40
(No. in %)
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.
Current Assets
(CA)
Stores and spares
Sundry debtors
Cash and bank
balances
Other current
assets
Loan and
advances
Total of CA
2006
2007
2008
2009
23.37
24.82
20.16
24.69
33.89
15.80
12.82
16.73
14.38
19.08
20.78
14.31
19.54
21.01
10.58
14.67
12.11
4.61
45.49
31.16
100
100
100
100
CURRENT LIABILITIES
2006(rupees)
2007(rupees)
2008(rupees)
2009(rupees)
2010(rupees)
Creditors
61,03,22,496
66,51,67,980
68,95,26,597
72,40,51,456
85,55,52,857
12,50,63,350
13,71,54,497
14,91,29,269
12,89,91,075
15,76,14,454
6,27,33,789
2,05,82,149
1,30,49,185
51,73,055
79,27,784
37,299
47,240
47,253
28,781
48,416
2,12,903
49,240
1,82,269
1,56,113
1,63,387
23,41,534
44,54,790
68,51,705
68,51,705
68,51,705
Page
41
Other liabilities
87,64,35,326
1,22,77,13,016
1,61,76,99,768
1,65,27,44,614
1,76,53,62,996
Total
Provision
Total
Current liabilities indices
1,67,71,46,697
83,08,65,819
2,50,80,12,516
100
2,05,51,68,764
1,30,45,17,744
3,35,96,86,508
133.96
2,47,64,86,046
4,81,70,02,603
7,29,34,88,649
290.81
2,51,79,96,799
5,69,56,67,475
8,21,36,64,274
327.50
2,79,35,21,599
5,62,99,60,268
8,42,34,81,867
335.85
Year
Net Sales
Average Debtors
Ratio
2006
2007
2008
2009
2010
3,55,34,94,401
3,99,75,58,798
6,78,92,95,427
3,05,16,27,568
4,05,19,14,743
1,21,68,45,410
92,53,38,091.5
1,05,37,88,728
1,05,53,64,568
1,55,87,35,700
2.92
4.32
6.44
2.89
2.61
Average
collection period
(365/DTR)days
125
85
57
126
132
Debtors Turn Over Ratio- By going through per calculation table and diagrams of Debtor Turn
Over Ratio, profit and loss accounts and balance sheet of OPTCL the following results can be drawn.
Page
42
A) In the year 2006-07 the debtor turnover ratio was 2.92 times and the average collection period is
found to be 125 days. This year, there is a higher value of debtor turn over and a shorter average
collection period in comparison to that of previous year. This is a good indication
B) In the year 2007-08 the debtor turn over ratio is 4.32 times and the average collection period is 85
days. This year, the value of debtors turnover is higher than the previous year due to decrease in
average debtors and an increase in net sales and the average collection period is also shorter than the
previous years figure.
C) In the year 2008-09 the debtor turn over ratio is 6.44 times and the average collection period is 57
days. This year, the value of debtor turnover is higher than the previous year due to decrease in average
debtors.
D) In the year 2009-10 the debtor turnover is 2.89 times and the average collection period is found to
be 126 days. This year, there is higher value of debtor turn over.
E) In the year 2010-11 the debtor turnover is 2.61 times and the average collection period is found to be
132 days.
F) OPTCL used to collect pending dues directly from consumers for which, substantial delay in getting
payment. However, the present average period of collection is decreased due to involvement of
NESCO, SOUTHCO, CESCO, WESCO etc. for collection of revenue on behalf of OPTCL and the
same has been made through banks. The shorter the average collection period, the better the quality of
debtors, since a short collection period implies the prompt payments by debtors. So this is a good
indication for the organization.
C) An innovative approach, combining operational and financial skills and an all encompassing view of
the companys operations will help in identifying and implementing strategies that generate short-term
cash. This can be achieved by having the right set of executives who are responsible for setting targets
and performance levels. They could be then held accountable for delivering, encouraged to be
enterprising and to act as change agents.
D) Working capital management is an important yardstick to measure a company operational and
financial efficiency. This aspect must form part of the strategic and operational thinking. Efforts should
constantly be made to improve the working capital position. This will yield greater efficiencies and
improve customer satisfaction.
E) Cash should be managed properly.
F) Efforts should be made to reduce the current liabilities and to increase the current asset.
G) Placing the responsibility for collecting the debt upon the centre that made the sale.
D) Absolute liquid test ratio is below 1:2, which are worries for OPTCL. The reason is that liquid assets
fall very short than current liabilities. The current liabilities again exceed the absolute liquid assets.
There is not significant increase in absolute current assets like cash and bank balances from 2007-08 to
2010-11. But there is a rapid increase in case of current liabilities like sundry creditors, deposits and
retention from suppliers, liabilities for fringe benefit tax and provision.
E) Debtors of the company were high; they were increasing year to year, so more funds were blocked
in debtors. As the company is selling electricity to the sundry debtors and the cash is not immediately
received so some amount of cash is blocked in that matter.
F) The current assets trend increased from 2007-08, but in 2011 it decline. The current assets like stores
and spare increased in 2007-08 to 2008-09 but in 2009-10 it declined and then it is increased in 201011. Sundry debtors increased from 2009 -10 to 2008-09 but it declined in 2009-10 but again it is
increased in 2010-11.
G) The current liabilities trend increasing at a speed which is worried thing for company. Current
liabilities like sundry creditors, deposits and retention from supplier, interest accrued but not due on
loans, liabilities for wealth tax, electricity duty payable, liabilities for fringe benefit tax increased from
2007-08 to 2010-11.
H) Debtors turnover ratio improved from 2009 to 2011 and so the number of collection period
decreases. But in 2012 debtors turnover ratio decreases and collection period increases. In 2009-10 it
was 126 days. Then it is reduced to 85 and 57 days in 2007-08 and 2008-09 respectively. But in 200910 it again increased to 125 days.
J) Current asset ratio decrease throughout the year. It was 1.10 in 2006-07 then it increased to 1.29 then
a fall down occurred as it was 1.08 in 2008-09 and 0.60 in 2009-10.
K) Working capital turnover ratio was positive in 2006-07; it became negative in 2007-08, 2008-09,
2009-10 and 2010-11. It was 5.03 times in 2006-07 then is sloped downward and it was -15.7, -6.88,
-0.97, -1.02 in 2007-08, 2008-09, 2009-10 and 2010-11 respectively.
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CHAPTER 5
CONCLUSIONS AND RECOMMENDATIOND
Conclusion
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On the basis of analysis on working capital management in OPTCL, the following conclusion arrived.
A) The company has gross profit for the past four years (2007-08, 2008-09, 2009-10 and 2010-11) in
negative and the current liabilities are increasing, in comparison to current assets position. Hence, it is
an alarming sign for the smooth working capital management.
B) OPTCL didnt manage the liquidity position of the company. The liquidity position was in a good
condition and in 2006-07, it was also satisfactory. But, in the year 2007-08, 2008-09, 2009-10 and
2010-11 the situation of liquidity position was alarming due to increase to total current liabilities and
decrease in total current assets which led to the decrease in the net working capital of the company.
C) During the year 2006-07, 2007-08, 2008-09, 2009-2010 and 2010-11 the companys liquid assets
were not satisfactory.
D) The average collection period of the company during the year 2006-07 is 125 days, it is reduced to
85 days in 2007-08 and again it reduced to 57 days in 2008-09, but the average collection period again
increases to 126 days in 2009-10 and 132 days in 2010-11.
E) There is also satisfactory net cash flow from the operating, investing and financing activities of the
organization.
F) Through the net working capital of the company is decreased, still the company is in a better
manageable position and the companys present status of maintaining current assets and current
liabilities and satisfactory.
G) They are unable to manage their cash, funds and debts.
By adapting better management practices, the company may attain a sound financial position in future
and able to manage its working capital efficiently.
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Recommendations
OPTCL is the soul of Odishas power transmission and is playing a pivotal role in making surplus
power consumption state through efficiently administering the system of transmission. For
improvement of organizations profitability, much emphasis is needed to improve the better working
capital management by decreasing the current liabilities through reducing of unplanned over head
expenses. In such process, current assets position will be improved through collection of revenue from
power transmission as well as recovery of past dues from consumers, Govt. and other agencies etc. The
company should give more attention on increasing its collection of revenue from wheeling of power
and should give more emphasis to curtail unplanned expenses to decreases the loss. Further, the
management should focus on shortening its average collection period by changing its credit terms and
conditions.
By taking the above remedial measures, the organization can be an EVA+ company with due emphasis
on proper way of managing the working capital.
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References
Textbooks
1. Maheswari Dr s.n Financial Management, Ninth edition, 2006 sultan chand & sons,
New Delhi.
2. Pandey I.M., Financial Management, Vikas Publishing House Pvt. Ltd. 8th edition 1999.
3. Prasanna Chandra, Financial Management, Fourth edition 1999, Tata Mc.graw hill publishing
company Ltd, New Delhi.
4. Gupta, sashi., Financial Management, 4th edition, 2007, Kalyani publisher, New Delhi
5. Kothari C.R. Research Methodology, Wishva Prakashan, New Delhi, 2001
Articles
An overview of working capital management and corporate financing.
Working Capital Management.
Working Capital Management Manages Flow of Funds (2009)
Working Capital Management-an effective tool for organizational success(2008)
Bibliography
www.optcl.com
www.investopedia.com
www.moneycontrol.com
www.wikipedia.com
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Annexures
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