RATIO ANALYSIS OF BEL

Project Report Submitted in partial fulfillment of the requirements for Master of Business Administration (MBA)

By Kamal jeet Togra Roll No: 1173651 Batch of 2011-13

GIAN JYOTI INSTITUTE OF MANAGEMENT & TECHNOLOGY PHASE-I, MOHALI July 2012

ACKNOWLEDGMENT

Behind every achievement lies an unfathomable sea of gratitude to those who actuated it, without whom it would ever have come into existence. To them I say the words of gratitude imprinted not just in report but also deep in my heart. I express my deep sense of indebtedness to my institute GJIMT, MOHALI and MR. A. K. MITTAL for giving me unique opportunity of pursuing this management research project. Words elude me in expressing my profound gratitude to MR. KAPIL GUPTA for their painstaking and close suggestions and thought provoking discussions throughout project which went a long way in guiding my efforts in the right direction.

Student Name . Signature Date ..

CERTIFICATE OF ORIGINALITY

I Kamal jeet togra , Roll No. 1173651 of batch 2011-2013, am a full time bonafide student of first year of Master of Business Administration (MBA) Programme of Gian Jyoti Institute of Management & Technology, Mohali.

I hereby certify that I have undergone summer training at Bharat Electronics Limited (BEL) from 7.05.2012 to 6.07.2012 and the project report titled Ratio Analysis of BEL submitted in partial fulfillment of the requirements of the MBA programme is an original work of mine under the guidance of the industry mentor MR. Kapil Gupta and faculty mentor MR. A. K. Mittal , and is not based on or reproduced from any existing work of any other person. Further, the project report is not based on or reproduced from any earlier work undertaken at any other time or for any other purpose, and has not been submitted anywhere else at any time.

(Student's Signature) Student Name: Kamal jeet Togra Date:

(Faculty Signature ) Faculty Name: MR. A. K. Mittal Date:

EXECUTIVE SUMMARY

Bharat Electronics Limited (BEL) is a Government of India undertaking set up under the Ministry of Defence. BEL was established in 1954 in Bangalore, primarily to meet strategic defence electronics needs of the country. With nine manufacturing units located in Bangalore, Ghaziabad, Panchkula, Kotdwara, Pune, Taloja, Hyderabad, Chennai & Machilipatnam, Bharat Electronics commands a strong presence in practically every vital area of professional electronics in the country. This report is the result of my 8 weeks of summer training at BHARAT ELECTRONICS LIMITED. Is an integral part Of MBA course and efficient utilization of material, time and resources are very much important for successful completion of any task. Above to this, coordination is must, which determines the degree of success. In order to be competent, all the students are required to take a real time project work. This exposure to project work will help them to know that how academic knowledge is applied in actual business situation. Keeping all this in view, the project given to me was to RATIO ANALYSIS OF BEL The all rounded encouraging support by many persons towards this report has created in me confidence regarding the approval of the subject matter. Actually this report is a result of an assignment, to improve myself and gain confidence. In this, I have done my best to make it a genuine study. But as well as all know a maxim TO ERR IS HUMAN. Therefore there is a chance for some mistakes. Also a critical appraisal by anyone will be heartily welcomed.

LIST OF CONTENTS

Chapter 1. 1.1 1.2. 1.3. 1.4. 1.5. 1.5.1. 1.5.2. 1.6. 1.7. 1.8. 1.9. 1.10. 1.11. 1.12. 1.13. 1.14. 1.15.

Introduction Profile Historical Background Various Units Performance Highlights Customer Profile Equipment Components Products Manufactured BEL at a Glance Corporate Vision Corporate Mission Corporate Values Corporate Objectives Quality Policy Quality Objectives Top Management Team Board of Directors

01 01 02 06 08 09 09 11 12 16 17 17 18 18 19 20 21 22

1.16. 1.17. 1.18. 1.19. 1.20. Chapter 2. 2 2.1. 2.2. 2.3. 2.4. 2.5. 2.6. 2.7. 2.8. Chapter 3. 3.1 3.2. 3.3. 3.4. 3.5.

Organizational Structure Stakeholders Joint Ventures Subsidiaries CSR Activities Business Process Departments of Finance & Accounts Payroll Section Cash Section Sales Section Purchase Section Miscellaneous Section Foreign Payments Budget Budgetary Control Research Methodology Sources of Secondary Data Need for the Study Objectives Limitations Ratio Analysis

23 26 28 30 32 40 40 41 46 47 49 50 51 54 56 57 57 58 59 60 61

Chapter 4. Chapter 5. 5.1. 5.2. 5.3. 5.4. 5.5.

Data Analysis Findings, Summary & Conclusion Findings of the study Summary Conclusion Bibliography Appendices

82 118 118 120 120 121 122

LIST OF ILLUSTRATIONS

4.1. 4.1.1. 4.1.2. 4.1.3. 4.2. 4.2.1. 4.3. 4.3.1. 4.3.2. 4.3.3. 4.3.4. 4.4. 4.4.1. 4.4.2. 4.4.3. 4.4.4. 4.4.5. 4.4.6.

Liquidity Ratios Current Ratio Quick Ratio Absolute Liquidity Ratio Leverage Ratios Proprietory Ratio Activity Ratios Working Capital Turnover Ratio Fixed Assets Turnover Ratio Capital Turnover Ratio Current Assets to Fixed Assets Ratio Profitability Ratios Net Profit Ratio Operating Ratio Net Operating Profit Ratio Return on Total assets Ratio Reserves & Surplus to Capital Ratio Earnings Per Share

82 82 85 87 89 89 92 92 94 96 98 100 100 102 104 106 108 110

4.4.7. 4.4.8. 4.4.9.

Price Earnings Ratio Return on Shareholders Investment Return on Investment

112 114 116

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BHARAT ELECTRONICS LIMITED (BEL)

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CHAPTER 1

INTRODUCTION

BHARAT ELECTRONICS LIMITED PROFILE Set up in Bangalore in 1954, BEL has grown India foremost defence electronics company, a NAVRATAN PSU under the Ministry of Defense. BEL is a Multi-product , Multi-technology, Multi-unit conglomerate boasting of over 350 products in the areas of Military communications, Radars, Naval systems, Telecom and Broadcast, Electronics welfare, Tank Electronics, Professional Electronics components and Solar photo vatic systems. BEL also provides twin key system solution. BELs customers include the ARMY, NAVY, AIRFORCE, PARAMILITARY, COAST GUARD, POLICE, DOORDARSHAN, ALL INDIA RADIO, DEPARMENTS OF TELECOMUNICATIN, and CONSUMERS OF PROFESSIONAL ELECTRONICS COMPONENT. It was conferred NAVRATNA status in JUNE 2007, recognizing BELs consistent financial performance and inherent strengths in research and development, manufacturing and quality. BEL maintains technological leadership with its-in-house R&D and in association with DRDO labs. The company spent 5.26 % of its turnover in R&D in 2009. BEL has strategies in place to scale up its performance to the international level with advanced focus on business development, Marketing and product system development with acquisition of requisite technologies.

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HISTORICAL BACKGROUND

After Independence India had many responsibilities from basic necessity to telecomm & defence equipment so after adoption of its constitution in 1950, the government was seized with the plans to lay the foundation of a strong, self-

sufficient Modern India. On the industrial announced in the year 1952. It was recognized that in certain core sectors infrastructure facilities require huge investments, which cannot be met by private sector and as such, the idea of Public Sector Enterprise (PSE) was mooted. Under this a Professional Electronics company in India incorporated that was front, industrial policy resolution (IPR) was BHARAT ELECTRONICS LIMITED.

BEL was established in 1954 as a Public Sector Enterprise under the administrative control of Ministry of Defence as the fountain head to manufacture and supply electronics components and equipment. BEL, with a noteworthy history of pioneering achievements, has met the requirements of state-of art professional electronic equipment for Defence, broadcasting, Civil Defence and telecommunications as well as the component requirement of entertainment and medical X-ray industry. Over the years, BEL has grown to a multi- product, multi-unit and technology driven company with track record of a profit earning PSU.

BEL was born to meet the growing needs of Indian Defence services for electronic systems. Employing the best engineering talent available in the country, BEL has progressed manufacturing state-of-the-art products in the field of Defence Electronics like Communications including encryption, Radars and strategic components.

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Over the years, BEL has diversified to meet the needs of civilian customers as well and has provided products and network solutions on turnkey basis to customers in India and abroad.

With the Research & Development efforts, its engineers have fructified it into a world-class organization. The company has a unique position in India of having dealt with all the generations of electronic component and equipment. Having started with a HF receiver in collaboration with T-CSF of France, the companys equipment designs have had a long voyage through the hybrid, solid-state discrete component to the state-of-art integrated circuit technology. In the component arena also, the

company established its own electron valve manufacturing facility. It moved on to semiconductors with the manufacture of germanium and silicon devices and then to manufacture of Integrated circuits. To keep in pace with the component and equipment technology, its manufacturing and product assurance facilities have also undergone sea change. The design groups have CADDs facility, the manufacturing has CNC machines and a Mass Manufacture Facility, and QC checks are performed with multi-dimensional profile measurement machines. Automatic testing machines, environmental labs to check extreme weather and other operational conditions are there. All these facilities have been established to meet the stringent requirements of MIL grade systems.

Product mix of the company are spread over the entire electromagnetic (EM) spectrum ranging from tiny audio frequency semiconductor to huge radar systems and X-ray tubes on the upper edge of the spectrum. Its manufacturing units have special focus towards the product ranges like Defence Communications, Radars, Optical & Onto-electronics, Telecommunications, Sound and Vision broadcasting, Electronic components, etc.

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Besides manufacturing and supply of a wide variety of products, BEL offers a variety of services like Telecom and Radar Systems Consultancy, Contract Manufacturing, Calibration of test& measuring instruments, etc. At the moment, the company is installing MSSR radar at important airports under the modernization of airports plan of National Airport Authority (NAA).

BEL has nurtured and built a strong in-house R&D base by absorbing technologies from more than 50 leading companies worldwide and DRDO labs for a wide range of products. A team of more than 800 engineers is working in R&D. Each unit has its own R&D Division to bring out new products to the production lines. Central Research Laboratory (CRL) at Bangalore and Ghaziabad works as independent agency to undertake contemporary design work on state-of-art and futuristic technologies. About 70% of BELs products are of in-house design.

BEL was amongst the first Indian companies to manufacture computer parts and peripherals under arrangement with International Computers India Limited (ICIL)

In 1970s. BEL assembled a limited number of 1901 systems under the arrangement with ICIL. However, following Governments decision to restrict the computer manufacture to ECIL, BEL could not progress in its computer manufacturing plans. As many of its equipment were microprocessor based, the company continued to develop computers based application, both hardware and software. Most of its software requirements are in real time. EMCCA, software intensive naval ships control and command system is probably one of the first project of its nature in India and Asia. BEL has won a number of national and international awards for Import Substitution, Productivity, Quality, Safety etc.

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Today, BEL has set up impressive infrastructure spread in 9 location with 29production division and manufacturing facilities in their ISO-9001/9002 certified production units around the country. They are Bangalore, Ghaziabad, Pune, Taloja (Maharashtra), Hyderabad, Panchkula (Haryana), Chennai,

Machilipathnam (A.P.) and Kotdwara (U.P.)

BEL has won a number of national and international awards for Import Substitution, Productivity, Quality, Safety Standardization etc. BEL was ranked no.1 in the field of Electronics and 46th overall among the top 1000 private and public sector undertakings in India by the Business Standard in its special supplement "The BS 1000 (1997-98)". This organization also stands on number 7th position in the best 100 public and private companies according to the "electronic for u" in 2002. BEL was listed 3rd among the Mini Ratnas (category II) by the Government of India, 49 th among Asia's top 100 Electronic Companies by the Electronic Business Asia and within the top 100 worldwide Defence Companies by the Defence News, USA.

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VARIOUS UNITS

Its corporate office is at Bangalore. Bangalore complex is the BELs first and largest unit and it accounts for two-thirds of both the companys turnover and manpower. This units product range covers over 300 Defence and Civilian products. Ghaziabad is the second largest unit of BEL and it specializes in radars, communication equipments & microwave-components.

In total BEL has got 9 units. These are distributed in all over the India as:

BANGALORE (Corporate Office) GHAZIABAD PANCHKULA MACHILIPATNAM PUNE HYDERABAD CHENNAI KOTDWARA TALOJA

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Figure 1: Network of BEL across Country UNITS BANGALORE GHAZIABAD PUNE MACHLIPATNAM PANCKULA CHENNAI KOTDWARA HYDRABAD NAVI MUMBAI ESTD. (YEAR) 1954 1974 1979 1983 1985 1985 1986 1986 1986 No. of Employee 5927 2596 411 500 625 410 720 490 500

Table 1: Manufacturing Units with the number of employees.

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The year 2000 saw the Bangalore Unit, which had grown very large, being reorganized into Strategic Business Units (SBUs). There are seven SBUs in Bangalore Unit. The same year, BEL shares were listed in the National Stock Exchange.

In 2002, BEL became the first defence PSU to get operational Mini Ratna Category I status. In June 2007, BEL was conferred the prestigious Navratna status based on its consistent performance.

During 2008-09, BEL recorded a turnover of Rs.4624 crores.

Performance Highlights

Bharat Electronics Limited (BEL), a Navratna defence PSU, has recorded a turnover of Rs.5,235 crores (provisional) for the fiscal year 2009-10, registering a growth of 13.2 per cent over the turnover of Rs.4,624.09 crores during 2008-09. The estimated Profit Before Tax was Rs. 1,086 crores (provisional), as against last years figure of Rs. 1,096.84 crores. BEL achieved exports of US $23.65 million, which is an increase of 33 per cent over last years figure of US $17.77 million. The turnover per employee during 2009-10 has shown a considerable growth to Rs. 45.3 lakhs from last years Rs. 38.6 lakhs. The value added per employee has increased to Rs. 19 lakhs from last years value of Rs. 18 lakhs. The order book as on today is estimated to be around Rs. 11,350 crores.

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CUSTOMER PROFILE

Equipment

Defence Army Tactical and Strategic Communication Equipment and Systems, Secrecy Equipment, Digital Switches,

Battlefield Surveillance Radars, Air Defence and Fire Control Radars, Opto-Electronic Instruments, Tank Fire Control Systems, Stabilizer Systems, Stimulators and Trainers. Navy Navigational, Surveillance, Fire Control Radars, IFF, SONAR Systems, Torpedo Decoys, Display Systems, EW Systems, Simulators, Communication Equipment and Systems. Air Force Surveillance and Tracking Radars, Communication Equipment and Systems, IFF and EW Systems. Non-Defence Para-Military Space Department Communication Equipment and Systems. Precision Tracking Radars, Ground Electronics, Flight and On-Board Sub-systems. All India Radio Doordarshan (TV Network) MW, SW & FM Transmitters. Low, Medium and High Power Transmitters, Studio Equipment, OB Vans, Cameras, Antennae, Mobile and Transportable Satellite Uplinks. TV Studios on Turnkey Basis for Educational

NCERT

20

Programs. Department of Telecommunications Transmission Equipment (Microwave and UHF) and PCM Multiplex, Rural and Main Automatic Solar

Exchanges,

Flyaway

Satellite

Terminals,

Panels for Rural Exchanges. Videsh Sanchar Nigam and other Corporate Bodies Civil Aviation Airport Surveillance Radars, Secondary Surveillance Radars. Meteorological Department Power Sector Oil Industry Forest Departments, Irrigation & Electricity Boards Medical & Health Care Railways Communication Equipment for Metros, Microwave Radio Relays, And Digital Microwave Radio Relays. Clinical and Surgical Microscope with Zoom. Cyclone Warning and Multipurpose Meteorological Radars. Satellite Communication Equipment. Communication Systems, Radars. Communication Systems. MCPC VSATs, SCPC VSATs, Flyaway Earth

Stations. Hub Stations, Up/Down Convertors, LNA Modems

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Components

Defence

Transmitting Tubes, Microwave Tubes, Lasers, Batteries, Semiconductors-Discrete, Hybrid and Integrated Circuits.

Non-Defence All India Radio, Doordarshan (TV Network), Department Telecomm and Civil Industries Entertainment Industry B/W TV Tubes, Silicon Transistors, Integrated Circuits, Bipolar and CMOS, Piezo Electric Crystals, Ceramic Capacitors and SAW Filters. Integrated Circuits, Crystals. Vacuum Interrupters. Liquid Crystal Displays. of Transmitting Tubes, Microwave Tubes, and Vacuum Tubes.

Telephone Industry Switching Industry Instrumentation Industry Medical & Health Care

X-ray Tubes.

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Products Manufactured

Bharat Electronics Limited (BEL) designs, develops and manufactures state-of- theart products in the field of Radars, Defence Communications, Telecommunications, Sound and Vision Broadcasting, Opto-electronics, Solar systems, IT products and Electronic components. BEL has the expertise in engineering Radar, Telecom and Satcom networks, providing network solutions to meet customer needs. These systems are supplied and commissioned on turnkey basis.

With over four decades of manufacturing experience Bharat Electronics Limited has pioneered the professional electronics movement in India. With continuous upgradation of technology, commitment to quality and constant innovation, BEL has grown into a multi product, multi unit, multi technology company . Bharat Electronics manufactures and supplies Communication equipments for the Defence forces - covering ground, air and ship borne equipments and systems.

BEL manufactures a comprehensive range of Radars for defence as well as civilian applications. Radar systems offered from BEL are for applications like Surveillance, Fire Control, Tracking and Navigation. In the category of Land based Radars , BEL manufactures systems for 3D Surveillance, Secondary surveillance, fire control and battle field surveillance. For Naval applications Radars offered are in the Navigational, Fire control and Surveillance categories. In Civilian category BEL offers radars for Air Traffic Control. The frequency bands covered extend from C band upto Ka band. BEL also offers Networking of Radars.

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SONAR products from BEL cover the range of underwater applications for surface ships, submarines and Naval aviation. BEL also offers Naval systems in user defined configurations for different types and classes of ships, submarines and other platforms and applications.

Tank Fire Control System MK 1B AL 4421 is designed to reduce the engagement time leading to an increase in kill rate and to improve the first round hit probability. The system is capable of engaging static or moving targets with own tank stationary or static targets with own tank moving.

During the year 2001-02, BEL earned the distinction of becoming the first Defence PSU to acquire operational MINIRATNA CATEGORY-I status. This enhanced status will provide BEL certain operational autonomy in the areas of capital investment, establishment of Joint Ventures etc.

A number of initiatives were taken to diversify the business of BEL and secure orders. In September 2001, BEL won a tender of Rs 18 crore from Andhra Pradesh Government towards establishing a network (APNET) for state-wide broadcast and communication upto district/block level. The hub has been commissioned and the terminals are in various stages of completion. The Andhra Pradesh Government has now invited BEL to give a proposal for Phase II of the project to cover the whole State. The value of Phase II will be around Rs.40 crore.

BEL has also been awarded a Satellite Network tender by Andhra Pradesh Beverages Corporation Limited (APBCL). APBCL negotiated the price with BEL for using the common infrastructure of APNET at the Hub. The main application is for

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consolidating the sales transactions on-line by 31 remote centres with the APBCL headquarters on the BOOT model.

BEL has been selected through competitive tendering by the Ministry of Home Affairs to establish a countrywide network called POLNET on turnkey basis. The project includes 11 M Hub at Delhi, 40 high capacity VSAT terminals for the State Headquarters and major cities, 833 low capacity VSATs at District Headquarters and Block levels. The negotiations have been completed and the order valued at Rs 97 crore, is in the final stages of processing. POLNET will enable effective communication among Police Forces of various states, exchange of police data files and fingerprints and Video Broadcast & Conferencing.

BEL secured a large number of orders for the LED based Solar Traffic Signals in Bangalore, Hyderabad and New Delhi etc.

BEL and Indian Space Research Organisation have entered into an understanding for cooperative efforts to meet the growing demands of satellite manufacture in India. Satellite Electronics Payload (Transponders)- a major part of any satellite will be manufactured by BEL for integration with the satellites to be launched by ISRO. BEL has also commenced manufacture and supply of solar-based mini power plants, the first of which has been installed in a technology foundation in New Delhi.

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Figure 2: BEL Weapon Locating RADAR

Figure 3: Akash Missiles

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Bharat Electronics Limited at a Glance

Bharat Electronics Limited (BEL) is a Government of India undertaking set up under the Ministry of Defence. BEL was established in 1954 in Bangalore, primarily to meet strategic defence electronics needs of the country. With nine manufacturing units located in Bangalore, Ghaziabad, Panchkula, Kotdwara, Pune, Taloja, Hyderabad, Chennai & Machilipatnam, Bharat Electronics commands a strong presence in practically every vital area of professional electronics in the country. Bharat Electronics has been awarded the coveted ISO 9000 certification, the benchmark of international quality. BELs philosophy is epitomized on its motto QUALITY, TECHNOLOGY, INNOVATION With in-house R&D and state-of-art manufacturing facilities, BEL manufactures a wide range encompasses Semiconductor Devices, Professional Vacuum Tubes, Crystal Devices, and Solar Cells & Systems. Almost all components manufactured by Bharat Electronics conform to international specifications. The component part numbers are equivalent to application compatible with international part numbers.

The passionate pursuit of excellence at BEL is reflected in repulsion with its customers that can be described in its motto, mission and objectives :

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Corporate- Vision, Mission, Values and Quality Objectives of BEL.

VISION

We shall be a world class customer preferred enterprise in the defense communication system and services to be a world class enterprise in professional electronics.

MISSION

To be the market leader in defense electronics and in other chosen fields and products. We shall be a world class customers preferred and focused globally competitive best in Class Company in defense communication systems through quality, technology and innovation.

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VALUES

Customer centric Putting customers first. Working with temporary, honesty and integrity. Respect for individuals. Passion for excellence for testing team work. Striving to achieve high employee satisfaction. Endeavoring to fulfill social responsibility. Fostering team work. Encouraging flexibility and innovation. Proud to being a part of the organization.

OBJECTIVES

To become a customer-driven company supplying quality products at competitive prices at the expected time and providing excellent support. To create an organizational culture this encourages members of the organization to realize their full potential through continuous learning on the job and through once HRD initiatives.

In order to meet the nations strategic needs to strive for self reliance by indigenization of materials and components.

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To achieve growth in the operation commensurate with the growth of professional electronics industry in the country. To generate internal resources for financing the investments required for modernization, expansion and growth for ensuring a fail return to the investor. To progressively increase overseas sales of its products services. To create an organization culture this encourages members of the organization to realize their full potential through continuous learning on the job and through other HRD initiatives.

To generate internal resources for profitable growth. To attain technology leadership in defense electronics through in-house R&D, partnership with defense/research laboratories and academic institutions. To give thrust to exports. To create a facilitating environment for people to realize their full potential through continuous learning and team work. To give value for money to customers and to create wealth for shareholders. To constantly benchmark companys performance with best-in-class

internationally. To raise marketing abilities to global standards. To strive for self-reliance through indigenization.

Corporate Motto Quality, Technology and Innovation

Quality Policy

BEL is committed to consistently deliver enhanced value to our customers, through continual improvement of our products and processes.

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Quality Objectives

(a)

Effective and Efficient design and development process, considering the present and future needs of customers.

(b)

Enhanced customer satisfaction by on-time delivery of defect free products and effective life cycle support.

(c)

Continual up gradation and utilization of infrastructure and human resources.

(d) e)

Mutually beneficial alliances with suppliers. Continual improvement of processes through innovation, technology and knowledge management.

The management of BEL is convinced of the need for Quality Enhancement, on a continuous basis, in the company. Need was felt to impart Education / Training to all the officers on the various facets of quality management. Accordingly, an institute called Bharat Electronics Quality Institute (BEQI) was established in 1999.

Bharat Electronics Ltd., (BEL), a premier Professional Electronics Company of India, has established and nurtured a strong in-house R&D base over the years to emerge and remain as a market leader in the chosen areas of business in professional electronics. Each of the nine manufacturing units of BEL is having its own in-house R&D Division to develop new products in its field of operations.

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Top Management Team

Name

Title Chairman, Managing Director, Member Member Member of of

Age

Ashwani Kumar Datt

Procurement Appointments

Committee, Committee,

of58

Investment Committee and Member of R&D Committee Director of Finance, Wholetime Director, 58

M.G. Raghuveer

Member of Procurement Committee, Member of Investment Committee and Member of R&D Committee

Syed Kabeer Ahmad IRSME Director of Bangalore Complex, Whole Time Director, Member of Audit Committee and59 Member of Procurement Committee Chief Scientist of CRL Bangalore and General Manager of CRL Bangalore Chief Vigilance Officer --

H.S. Bhadoria

AjitT. Kalghatgi

--

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BOARD OF DIRECTORS - BHARAT ELECTRONICS LIMITED

Name Ashwani Kumar Datt M.G. Raghuveer H.S. Bhadoria H.N. Ramakrishna M.L. Shanmukh

Primary Company

Age

Bharat Electronics Limited

58

Bharat Electronics Limited

58

Bharat Electronics Limited

59

Bharat Electronics Limited

57

Bharat Electronics Limited

54

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Designing Organizational Structure:

Bharat Electronics Limited currently employs 11545 employees across India. The organization structure for BEL is given below:

The details of different Manufacturing Units and their tasks are given below:

1. BANGALORE
Director: Mr. H.S. Bhadoria General Manager (Military Comm): Mr. Amol Newaskar

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General Manager (Military Radars): Mr. P C Jain General Manager (Naval Systems): Mr. A A Mohanram, Mr. Vijayaraghavan M General Manager (Electronic W&A): Mr. S K Acharya General Manager (T&B Systems): Mr. S Ramachandran General Manager (Electronic): Mr. C Nageshwar Rao General Manager (Export): Mr. Girish Kumar Products and Focus Areas: Communication equipments HF/VHF Man pack, Mobile & static Trans-receiver/Transmitters

2. GHAZIABAD
General Manager (NCS): Mr. S K Sharma General Manager (Radar): Mr. S C Jain Products and Focus Areas: Antenna for primary & secondary radars

3. PUNE
General Manager: Mr. Amarendra D. Products and Focus Areas: Static 7 Rotating Anode x-ray cables, Magnesium Manganese Dioxide, Battery packs

4. MACHILIPATNAM
General Manager: Mr. Vijay Gundannavar Products and Focus Areas: Passive night vision devices- Goggles, Binoculars, Periscopes,

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5. KOTDWARA
General Manager: Mr. R Chandra Kumar Products and Focus Areas: ULSB, BEST, SMART, HART

6. PANCHKULA
General Manager: Mr. Suresh N. Products and Focus communication equipment Areas: VHF/UHF Ground to ground to air

7. NAVI MUMBAI
General Manager: Mr. M M Handa Products and Focus Areas: Hydraulics for T- 72 Tank stabilizers, Shelters for Electronic equipment.

8. CHENNAI
General Manager: Mr. Mehrotra D K Products and Focus Areas: Gun control & Drive System for Armored Fighting Vehicles

9. HYDERABAD
General Manager: Mr. G Raghavendra Rao Products and Focus Areas: Electronic warfare equipment.

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Stakeholders

Various Stakeholders for BEL are: Government: BEL is a PSU, under Ministry of Defense, Government of India established on 1954. BEL is 76 per cent owned by the Indian government. Financial sectors: 24 per cent owned by financial sectors through the Indian stock exchange. Managers and Workers: Bharat Electronics Limited currently employs 11545 employees across India. Customers

Indian Market
Bharat Electronics Limited is a major supplier of products and turnkey systems to the Indian Defence Services. Over the years, BEL has diversified into manufacturing many civilian products as well. Large turnkey telecommunication solutions are also being offered to civilian market.

Exports
Exports play a key role in BEL's strategic perspective. The ranges of products and services exported have been increasing over the years. A number of international companies are using the facilities at BEL for contract manufacturing. Various products and services are exported to countries like Indonesia, Brazil, Russia, Malaysia, Germany etc.

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Suppliers: various suppliers and distributors are linked directly or indirectly. They want to charge as much as possible to earn more revenues. Trade Unions Competitors: BEL enjoys near monopoly status in supplying high-tech defense products like radars, sonars, communication equipment, and electronic warfare equipment to the armed forces. Other division

manufacturing civilian products supplies communication equipment to the telecom industry, voting machines etc. Competition is very low in the defense sector, however the other segments do have some competition. Local Communities: Local Communities are concerned with the effect of the Unit to its society and environment. Environment: Ever since the first accreditation to ISO 14001 Environmental Management System was conferred in 2002, the enthusiasm to maintain a clean environment spread like wildfire. All the six SBUs of Bangalore Complex and the related Services Groups are now certified.

Though different SBUs and service groups have distinct focus in their manufacturing and business operations, their common goal of maintaining cleaner surroundings has united them in finding solutions to environmental issues.

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JOINT VENTURES

GE-BE PRIVATE LIMITED GE-BE Pvt Limited was set up in 1997 as a joint venture between Bharat Electronics Limited and General Electric Medical System. The facility based at Whitefield, Bangalore, India, manufactures X-ray tubes for RAD & F and CT systems, as well as components such as High Voltage Tanks and Detector modules for CT system. The products are exported worldwide and meet the safety and regulatory standards specified by FDA, CE, MHW, AERB and the facility has been accredited with ISO-9001; ISO-13485 and ISO-14001 certifications. GEBEL also markets the conventional X-ray tubes made at Pune Unit of BEL.

X Tubes

Ray

High Tanks

Voltage

CT Detector Modules

The turnover of GEBEL during 2004-2005 was over Rs. 450 Crores including an export of over Rs. 430 Crores.

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The company has been recognized for its outstanding export performance since 1998 by the Export Promotion Councils. The facility conforms to the high standards of Environment, Health & Safety and is recognized as a GE Global Star site. Apart from manufacturing, a dedicated engineering team is working on the development of new technologies & products to meet various customer needs

Mr SrikantSrinivasan ManagingDirectorGE-BEPrivateLimited

BEL-MultitoneLtd BEL and Multitone, UK, offers state- of- the- art Mobile Communication Products for the workplace. Multitone invented paging in 1956 when it developed the world's first system to serve the "life or death" environment of St.Thomas Hospital, London. With the strength of Bharat Electronics in the Radio Communications field and the technology of Multitone in the field of Radio Paging, the joint venture company is in a position to offer tailor made solutions to the Mobile Communication needs at workplaces in various market segments.

The joint venture offers one of the most comprehensive on-site product ranges - from small, easy to use pagers to practical, durable private Mobile Radios and the latest technology, digital cordless communication systems. Brief details of the products are:

Access 700 one-way speech paging system which supports 100 pagers. Access 1000/3000 Radio Paging system which supports 1500/5000 users. Computer Radio Integration units. Digital Cordless Communication System.

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Subsidiaries
BEL Optronic Devices Ltd. is a subsidiary company of BEL. It is established for conducting research, development and manufacture of Image associated Intensifier Tubes high voltage and Power

Supply Units for use in Military, security and Commercial systems. The company is located in Bhosari Industrial Area, Pune.

Gen II and Gen II plus, 18mm Image Intensifier

Tubes are high gain,compact, proximity focused devices

developed to produce high resolution intensified images with Automatic Brightness

Control. These devices are available in Inverting

(XX1440-I Series) and Non inverting (XX1450-I Series) image types.

The product conforms to MILI49052D

41

Gen II, 25mm Image Intensifier Tubes are high gain, Electro-statically focused device developed to produce high resolution

intensified images. This device is available in Inverting (XX1470-I Series) image type.

The product conforms to MIL-I- 49040E.

High voltage power supply units, PS-12 and for 18mm for also are

I.I.Tubes 25mm

PS-42 are

I.I.Tubes

manufactured.

These

SMD version high voltage, low current power supply units around comprising type, of wrap

hermetically

sealed DC-DC converter and can be powered by low current 2 to 3.6 V source alkaline batteries.

The products conform to

42

MIL-P-49146 (ER) and MILP-49090C (CR) respectively

ANVIS Power Supply Units:

ANVIS (Aviators Night Vision System) Power Supply Units, PS-52-I, are used in Gen II Plus / Super Gen / Gen III 18mm I.I. Tubes for Aviation Night Vision Sights e.g used by helicopter pilots for night surveillance. The ANVIS Power Supply Units employ high density electronics for compactness and light weight. The product conforms to MIL standards.

CSR activities:

Corporate social Responsibility

In tune with BELs cherished value of fulfilling social responsibilities, the Company is committed to contribute for the socio-economic development of its stakeholders and the business decisions of the Company will be in line with its corporate social obligations. BELs initiatives shall aim at earning the goodwill of the community and enhancing the image of the Company. Pursuing this objective, your Company has finalised a policy on Corporate Social Responsibility, under which areas like health care, education, rural development, environment protection, conservation of resources, will be addressed.

43

Enviornment Management Environmental Management in BEL -In Pursuit of Sustainable Development Bharat Electronics Limited, in line with this global concern, has set out several initiatives towards creating a cleaner environment and pays scrupulous attention to controlling pollution. Development of suitable methods and effective management processes, wherever they are susceptible to pollution, supported by a conscientious workforce, makes BEL an environmentally responsible industry. The records indicate total compliance.

Even the quick view one registers while entering the factory premises of Bharat Electronics, presents a green picture of the healthy environmental practices prevalent in the company. Lush-green lawns and gardens, interspersed with trees, surround the well-maintained buildings.

Environmental Management System:

Ever since the first accreditation to ISO 14001 Environmental Management System was conferred in 2002, the enthusiasm to maintain a clean environment spread like wildfire. All the six SBUs of Bangalore Complex and the related Services Groups are now certified.

Though different SBUs and service groups have distinct focus in their manufacturing and business operations, their common goal of maintaining cleaner surroundings has united them in finding solutions to environmental issues.

Clean Air:

Even the inconspicuous emission to air is checked through stacks and chimneys. Gases passing through these chimneys are treated and monitored within the limits
44

specified by the Karnataka State Pollution Control Board (KSPCB). To ensure compliance, the Quality Assurance Division, independent of the operating centres, monitors the quality of air samples once in 30 days. If variations are observed, prompt corrective actions put the system in order.

Effluent Treatment :

The domestic effluents are treated in two effluent treatment plants located in the factory premises. Each day around 1,500 Kilolitres of domestic waste water undergoes biological treatment, followed by clarification, filtration and chlorination. Domestic waste water is treated and recycled for gardening purposes and is not discharged outside, thereby eliminating pollution and saving water. We practice zero discharge.

Closed Conduit System:

By establishing a closed conduit pipeline system, at a cost of Rs.40 lakhs, for carrying primary-treated process effluents from Plating Shops and other Processing Centres to the Centralised Effluent Treatment Plant, BEL has avoided flow of such effluents in open drains, eliminating the related pollution and mixing with rain water.

Solid Waste Management:

A system exists for collection of waste and disposal of the same in an orderly manner after proper segregation. All metal scraps are segregated at the source itself. Hazardous wastes are handled separately and stored in the well-protected central hazardous waste store constructed exclusively for this purpose and disposed as per legal norms. A high level of awareness exists on handling and disposing such materials to take care of the environmental requirements and legislation.
45

Hazardous Waste Management System:

Management of hazardous waste is a key issue in environmental management. Bharat Electronics has established an impeccable system by constructing an exclusive, well-protected place for safe-keeping the hazardous waste with an enclosed area of 640 sq. meters. Intermediate stores exist in each division wherein identified Hazardous Wastes are quantified and stored. After these items are brought and stored in the central hazardous waste stores, Engineering Services Division disposes them as per the norms of Karnataka State Pollution Control Board. This avoids several kinds of pollution that would normally occur due to spillage, mixing with rain water or inadvertent mixing with other materials, etc. This system in practice effectively prevents pollution caused by hazardous wastes.

Cleaner technology:

The real solution to environmental pollution lies, not merely in mitigating its adverse impacts, but in preventing the generation of the pollutants proactively through application of cleaner technology in our processes. Our assiduous search for environmentally-friendly processes took us further in the prevention of pollution. The following initiatives present a brief account of our attempts towards cleaner processes and environment-friendly technology. Change of process was made by switching over from hazardous metal Sodium treatment to environment-friendly aqueous process for PTFE based Copper Clad Printed Circuit Boards Manufacturing. Copper is one of the important materials used in the manufacture of Printed Circuit Boards but the process waste generated shall be free from copper. Many process

46

changes were effected to reduce such copper related pollution through the following actions By introduction of auto-dosers and collection of the spent alkaline etchant in Carboys, by laying drain pipelines, reduction of Copper content in the effluent entering the primary treatment plant was effected. By introduction of Red-ox potential based auto dosing units in acid etching plants and laying of drain piping system from etchant chambers to collection chambers, reduction of Copper content in effluent was also achieved. The chemistry of Desmearing Process has been changed from HF to Permanganate Process, which eliminates complete Fluoride content.

Sludge

reduction

through

development

of

clean

technologies

An effective pollution control system targets reduction in hazardous waste generated. Several processes were studied in detail and modifications implemented with a view to minimising sludge generation, a hazardous waste.

In Components manufacturing Division, Calcium Chloride in place of lime, Sodium Hypochlorate in place of Bleaching powder and Sodium Meta Bi-sulphide in place of Ferrous Sulphate are employed to reduce the sludge generation.

In our primary treatment plants for process effluent, change of chemical from Lime to Caustic Lye (Liquid) reduced the Sludge Quantity to less than 25 %. In Zinc Plating process of Low Power Equipment Division, use of Cyanide compound was eliminated by switching over to Cyanide-free Zinc plating process, which has not only done away with cyanide effluent but also the sludge generated during its neutralization.

Design for Clean Environment

Our Research and Development Departments also look for environmentally friendly components. Certain electronic components have been introduced in some of our design to exclude the hazardous
47

effects

of

materials

such

as

Polybrominated compounds, Hexavalent Chromium, Mercury, Beryllium Oxide, PVC and Lead, during their disposal. Use of energy efficient devices, introduced in the equipment designs, results in resource conservation in addition to reducing the operating cost.

Natural Resources Management

The organization's prognosis of the looming dangers of indiscriminate use of natural resources led to several conservation measures. The concerted efforts put forth in saving energy, water and fuel are significant.

Water Conservation:

Conservation of water is an environmental imperative for any responsible industry. We look for every possible means to save water. Water conservation efforts, like any other material conservation strategy, involve three approaches - reduce, reuse and recycle. We focus on each of them.

Reduce usage:

The Company has concentrated on improving the process efficiency to reduce the water consumption. The leakage in various processes were identified and

prevented. Old equipment, where the efficiency in usage of water has come down, were reconditioned to improve the performance. Improved supervision and installation of sprinkler system resulted in better utilization of Horticulture water.

48

Reduce wastage:

Reduction in wastage of water is an important aspect. Leakage in pipelines, leakage caused by old valves and inadequate maintenance problems were solved. The measures taken in this direction include replacement of the leaking pipelines and replacement of old valves with new valves, which are also available with improved modern technology. The overhead tanks are provided with auto level controllers to avoid manual errors. Many a time taps in common facilities such as sinks and flushing system are kept open when the tank is empty and water gushes out when the tank gets filled. Replacement of such taps with push cock taps and auto flush for urinals have brought down such wastage.

Reuse of Water:
Reuse of water is to use the same water repeatedly in the process. The application is limited, as in most of the applications the water becomes unfit for use. However, an attempt has been made in the bus wash yards to reuse the water with minor treatment. An oil-water separation plant has been set up to reduce the pollution due to oil and to conserve water. This saves about 30 kiloliters of water everyday.

Recycle:
The effluent treatment plants treat both domestic and process effluents and recycle around 2500 Kilolitres per day to meet approximately 42% of the water requirement.

Rainwater Harvesting Reservoir:

The Rainwater Harvesting reservoir inaugurated on April 17, 2003, mainly recharges ground water and is expected to supply water for our own use in the future. Such a large-scale rainwater harvesting system with a storage capacity of 170 Million Litres built at a cost of Rs.57 Lakhs, is known to be the first of its kind by an industry in the country. This will help not only our company but our neighbourhood as well. We are moving towards creating greenery in every area, not covered by buildings or other utility. Not to constrain this progress by shortage of water, the organization has entered into an agreement with Bangalore Water Supply and Sewerage Board for

49

supply of treated water from their sewage treatment plant also, with an average supply of 1 million litres per day, thereby ensuring the use of potable water only for potable purposes and non-potable water for other purposes.

Energy Conservation

Total energy use:

The Company's persevering efforts to reduce the energy consumption brought down the consumption of electrical energy from 48 million units in 1988-89 to 34 million units in 2004-05 even though production has increased several times.

50

CHAPTER 2

BUSINESS PROCESS

DEPARTMENTS OF FINANCE & ACCOUNTS

PAYROLL CASH SALES PURCHASE MISCELLANEOUS BILLS FOREIGN & LOCAL PAYMENTS BUDGET & COMPIALATION

51

PAYROLL SECTION

It is very important section of finance and accounts department. In it basically salary is calculated. When salary is calculated the date is consider 23rd of last month to 22nd of current month. It will make an assumption that the person will be comes remaining day of this deducted on next month. When salary is calculated following items is add. BASIC SALARY DEARNES ALLOWANCE (current rate is 16.9% of B/S) H.R.D (Current rate is 20% of B/S) TRAVILLING ALLOWANCE TIFFIN ALLOWANCE AND ETC.

The payroll section deducted 12% of BASIC SALARY and D.A for every employee salary and equal amt. contribute by the employer or company for employee provident fund. TDS also deducted by the payroll section. For deducting TDS they can forecast on quarterly basis income and deducting TDS.

Payroll section calculate employee extra time on the basis of hour.

UP TO 48 HOUR IN A WEEK SINGLE RATE PER HOUR. MORE THAN 48 HOUR DOUBLE RATE PER HOUR IN A WEEK.

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In order to understand the meaning of expression SALARY. One has to keep in mind the following norms:

1. RELATIONSHIP BETWEEN PAYER AND PAYEE:

The distinction

between two types of relationship is vital because income annexed by an employee from this employer is chargeable under INCOME FROM OTHER SOURCES.

2. SALARIES AND WAGES: Both are the compensation for work done or services rendered, though ordinarily salary is paid in connection with services of non-manual type of work, while wages are paid in connection with manual services.

3. SALARY FROM MORE THAN ONE SOURCES: If an individual receives salary from more than one employer during the same year, salary from each source is taxable under the head SALARY.

4. SALARY INCOME MUST BE REAL: Amount taxable under the head SALARY is a real salary and non fictitious salary. There should an intention to pay and receive salary. 5. SALARY PAID TAX-FREE: If salary is paid tax-free by the employees, the employee has to include in his taxable income not only the salary receive but also the amount of tax paid by the employer. Salary under section 17(1)
53

a. Wages b. Any pension c. Any gratuity d. Any fees, commission, profits or in addition to any salary or wages. e. Any advance of salary f. Any payment received in respect of any period of leave not availed by him. g. The contribution made by the central government in the previous year.

INCOME FROM SALARIES Computation Steps: BASIC SALARY ADD D.A (Dearness Allowances) H.R.A (House Rent Allowance) Education Allowances Reimbursement Of Expenses By Employees

DETERMINE TAXABLE AMOUNT OF DIFFERENT ALLOWANCES House Rent Allowance Foreign Allowance Fixed Medical Allowances

DETERMINE TAXABLE VALUE OF DIFFERENT PREQUISITES Rent Free House Gas, Electricity and Water Supply Free Education etc.

GROSS SALARY SUB Entertainment Allowance

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Professional Tax Standard Deduction

TAXABLE SALARY LESS Deduction Under Section 80C Deduction Under Section 80L

TAX AND SURCHARGE ADD Education Cess (2% of Tax) Secondary And Higher Education Cess

SLAB VALUES
India Income tax slabs 2012-2013 for General tax payers Income tax slab (in Rs.) 0 to 2,00,000 2,00,001 to 5,00,000 5,00,001 to 10,00,000 Above 10,00,000 Tax No tax 10% 20% 30%

55

India Income tax slabs 2012-2013 for Female tax payers Income tax slab (in Rs.) 0 to 2,00,000 2,00,001 to 5,00,000 5,00,001 to 10,00,000 Above 10,00,000 Tax No tax 10% 20% 30%

India Income tax slabs 2012-2013 for Senior citizens (Aged 60 years but less than 80 years) Income tax slab (in Rs.) 0 to 2,50,000 2,50,001 to 5,00,000 5,00,001 to 10,00,000 Above 10,00,000 Tax No tax 10% 20% 30%

India Income tax slabs 2012-2013 for very senior citizens (Aged 80 and above) Income tax slab (in Rs.) 0 to 5,00,000 5,00,001 to 10,00,000 Above 10,00,000 Tax No tax 20% 30%

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CASH SECTION

It is another important section in which payment is made. This section the payment is made to PAYMENT MADE TO SUPLIER PAYMENT MADE TO EMPLOYEE PAYMENT MADE ON MISCELLANEOUS EXPENCE PAYMENT MADE TO CONTRACTOR ON THE BASIS OF BILL PREPARE BY ANY SECTION OF F&A AND SO ON.

In this section payment made in the different way

REAL TLME GROSS SETELMENT (RTGS) The payment is made for the amount more than one lakh to the party thru RTGS. Cheque is sent to bank (S.B.I) and S.B.I sends the same RBI (RESERVE BANK OF INDIA) and RBI credit it to the vendors account.

ELECTRONIC CLEARING SYSTEM (ECS)

Another important area is BANK RECONCILIATION

57

SALES SECTION

Another important section of F&A in it sales is done threw in systematic manner. There are followings steps

STEP 1. Firstly tender is drawn by the defence org. and non defence org.

STEP 2. The quotation is filling up by the BEL.

STEP 3. Than on the basis of the contract the order is place and when order will be rec. than contract can be made.

STEP 4. Than contract review meeting is calling in which in discussion made about contract term condition if there will is need to change could be done. Before starting the production the product sample made by BEL. And given it to for testing if product will be clear from test than finally production will be start.

58

STEP 5. Than sales order is made and outbound delivery is done and invoice can be made and tax can be charged and excise duty charge if applicable. In the BEL excise duty is exempted.

STEP 6. Payment is rec. in following manner 15% payment is rec. as an initial advance. 35% payment is rec. for purchasing the material. Another 35% payment is rec. when storage is done and completion it to finish product. 10% payment is made when equipment is to store of the party. Remaining 5% payment made when lot of supply is accepted.

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PURCHASE SECTION

The important section of F&A. In which all payment related to purchase is prepare. There will be following step that should be following. STEP 1. Purchase order is given STEP 2. Now goods are rec. STEP 3. Now goods are inspected. STEP 4. Now goods are accepted with invoice. STEP 5. Now G/R pricing is made. STEP 6. Now payment is given.

Some time payment made in advance to supplier. Than payment is adjust with next delivery.

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MISCELLANEOUS SECTION

One of the important sections of F&A is miscellaneous. In which all the payment related to miscellaneous expense is done in this section.

The following payment that consider in the section. 1. Payment made on annual maintains contract like maintains of computer and related device. 2. Payment related to bill of canteen. 3. Payment on electricity payment. 4. Payment made on telephone bill. 5. Payment like suggestion given by employee. 6. Payment made on delivery charges like trunks that is supply charges like loading and unloading chares and so on.

The payment related to above expenses is according to term and condition that is made by BEL with this part when payment is made all terms & conditions is followed.

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FOREIGN PAYMENTS

EXPORT: Export can be defined as when the raw materials are sold to foreign countries. IMPORT: When the goods and raw materials are purchase from foreign country to our country.

Foreign Payments Foreign payments deals with the payments involved while making transactions with the foreign countries. Following are a term which is to be followed while making the foreign payment. T.T (Telegraph Transfer) L.C (Letter Of Credit) S.D (Sight Draft)

TELEGRAPH TRANSFER (T.T) The first thing to be kept in mind is the PO (Purchase Order). In purchase order include various terms of payments i.e. Terms of order Delivery date Quantity Amount

Even the time of payment has to be mentioning with the suppliers name written on it and the address respectively.
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When the goods are received t e material store department passes the entry and make a G/R (Goods Receipts) Material A/C To G/L A/C Or (GR) A/C Now GR is sent to the FINANCE DEPT for the payment purpose. STEPS INVOLVED STEP 1:- Making of Payments Liability is created and the entry is made in the following way GR A/C To vendor A/C STEP 2:- To make the advice slip is prepared on BRS (Bank Reconciliation Statement) and it is sent to the (SBI Chandigarh) Due to the difference in currencies of various countries on our behalf (SBI Chd) makes the payment and debit our account with that much of amount. Vendors A/C To Bank State Bank of India after receiving the advice slip and documents, they make payment to suppliers on our behalf. (With reference to the currency) After the above process we (BEL) have to pay to SBI chd and it also charge commission from Bharat Electronics Ltd. DOCUMENTS ATTACHED FOR PAYMENT Invoice Bill Of Entry
63

Dr.

Dr.

Dr.

A-I Form Bank Details

SBI Chandigarh sent a debit advice after debiting over account and after making a payment. Then the above payments are entered in SAP. ME 23N F-48 FB 50

ME 23N Display Purchase order F-48 Advance Payment FB 50 Bank Commission Charges

LETTER OF CREDIT (L.C) Here the bank directly receives documents from the suppliers bank. The payment is made our (BEL) behalf after receiving the documents. There is no direct involvement of our company and the suppliers. All the payments are done through our (BEL) bank and the bank of suppliers. When the payments are done. We (BEL) make payment to our bank i.e. SBI Chandigarh.

SIGHT DRAFT (S.D) Here the same procedure follows same as which is applied in telegraph transfer and letter of credit but the difference here is that the rejections of goods are possible to the buyers in sight draft. If the goods are not satisfactory it can be directly rejected.

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BUDGET

A budget is prepared to have effective utilization of funds and for the realization of objectives as efficiently as possible. It related to planned events i.e. the policy and program to be followed in a future period under planned conditions. The process of budget starts where forecast ends and converts it into a budget. Budget is made in respect of those spheres which are related to business or industry.

ESSENTIALS OF A BUDGET It is a plan expressed in monetary terms but it can also contain physical units. It is related to a definite future period. It usually shows the planned income to be generated and expenditure to be incurred. It also shows capital to be employed during the period. It is prepared for the purpose of implementing the policy formulated by the management and the objective to be achieved during the period.

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BUDGET REVENUE BUDGET Short term payments Day to day expenditure Are included CAPITAL BUDGET Long term payments All assets are included

Budget can also be recorded in SAP SAP SYSTEMATIC APPLIACTION PRODUCT REVENUE BUDGET Internal order is used CAPITAL BUDGET Work breakdown structure is used

The entries to be made in SAP can be done by the following ways: KO 01 - creation of revenue KO 22 check the revenue KO 02 release KO 03 to display IMA II tore lease IM 32 budget IM 52 budget CJ 32 for releasing

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BUDGETARY CONTROL

Budgetary control is applied to a system of management and accounting control by within all operations and output are forecasted as far ahead as possible and actual results when known are compared with budget estimated. To enable management to conduct business in most efficient manner. To get the effective utilization of resources and realization of objectives. Budgetary control laid emphasis on the staff organization. It ensures effective utilization of men, material, machines and money. It helps in promoting a feeling of cost consciousness and in restricting expenditure to the minimum.

CHIEF EXECUTIVE BUDGET OFFICER SALES MANAGER Sales budget including advertising, selling and distribution cost PRODUCTION MANAGER Production and plan utilization budget PURCHASING MANAGER Material budget PERSONNEL MANAGER Labor budget ACCOUNTANT Cost budget master budget.

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CHAPTER 3

METHODOLOGY

The information is collected through secondary sources during the project. That information was utilized for calculating performance evaluation and based on that, interpretations were made.

Sources of secondary data:

1. Most of the calculations are made on the financial statements of the company provided statements. 2. Referring standard texts and referred books collected some of the information regarding theoretical aspects. 3. Method- to assess the performance of he company method of observation of the work in finance department in followed.

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NEED FOR THE STUDY

1. The study has great significance and provides benefits to various parties whom directly or indirectly interact with the company. 2. It is beneficial to management of the company by providing crystal clear picture regarding important aspects like liquidity, leverage, activity and profitability. 3. The study is also beneficial to employees and offers motivation by showing how actively they are contributing for companys growth. 4. The investors who are interested in investing in the companys shares will also get benefited by going through the study and can easily take a decision whether to invest or not to invest in the companys shares.

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OBJECTIVES

The major objectives of the resent study are to know about financial strengths and weakness of Bharat electronics limited through FINANCIAL RATIO ANALYSIS.

The main objectives of resent study aimed as:

To evaluate the performance of the company by using ratios as a yardstick to measure the efficiency of the company. To understand the liquidity, profitability and efficiency positions of the company during the study period. To evaluate and analyze various facts of the financial performance of the company. To make comparisons between the ratios during different periods.

OBJECTIVES 1. To study the present financial system at BEL. 2. To determine the Profitability, Liquidity Ratios. 3. To analyze the capital structure of the company with the help of Leverage ratio. 4. To offer appropriate suggestions for the better performance of the organization.

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LIMITATIONS

1. The study provides an insight into the financial, personnel, marketing and other aspects of BEL. Every study will be bound with certain limitations. 2. The below mentioned are the constraints under which the study is carried out. 3. One of the factors of the study was lack of availability of ample information. Most of the information has been kept confidential and as such as not assed as art of policy of company. Time is an important limitation. The whole study was conducted in a period of 60 days, which is not sufficient to carry out proper interpretation and analysis.

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Ratio Analysis

FINANCIAL ANALYSIS Financial analysis is the process of identifying the financial strengths and weaknesses of the firm and establishing relationship between the items of the balance sheet and profit & loss account. Financial ratio analysis is the calculation and comparison of ratios, which are derived from the information in a companys financial statements. The level and historical trends of these ratios can be used to make inferences about a companys financial condition, its operations and attractiveness as an investment. The information in the statements is used by Trade creditors, to identify the firms ability to meet their claims i.e. liquidity position of the company. Investors, to know about the present and future profitability of the company and its financial structure. Management, in every aspect of the financial analysis. It is the responsibility of the management to maintain sound financial condition in the company.

RATIO ANALYSIS The term Ratio refers to the numerical and quantitative relationship between two items or variables. This relationship can be exposed as Percentages Fractions Proportion of numbers

72

Ratio analysis is defined as the systematic use of the ratio to interpret the financial statements. So that the strengths and weaknesses of a firm, as well as its historical performance and current financial condition can be determined. Ratio reflects a quantitative relationship helps to form a quantitative judgment.

STEPS IN RATIO ANALYSIS The first task of the financial analysis is to select the information relevant to the decision under consideration from the statements and calculates appropriate ratios. To compare the calculated ratios with the ratios of the same firm relating to the pas6t or with the industry ratios. It facilitates in assessing success or failure of the firm. Third step is to interpretation, drawing of inferences and report writing conclusions are drawn after comparison in the shape of report or recommended courses of action.

BASIS OR STANDARDS OF COMPARISON Ratios are relative figures reflecting the relation between variables. They enable analyst to draw conclusions regarding financial operations. They use of ratios as a tool of financial analysis involves the comparison with related facts. This is the basis of ratio analysis. The basis of ratio analysis is of four types. Past ratios, calculated from past financial statements of the firm. Competitors ratio, of the some most progressive and successful competitor firm at the same point of time. Industry ratio, the industry ratios to which the firm belongs to Projected ratios, ratios of the future developed from the projected or pro forma financial statements.

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NATURE OF RATIO ANALYSIS Ratio analysis is a technique of analysis and interpretation of financial statements. It is the process of establishing and interpreting various ratios for helping in making certain decisions. It is only a means of understanding of financial strengths and weaknesses of a firm. There are a number of ratios which can be calculated from the information given in the financial statements, but the analyst has to select the appropriate data and calculate only a few appropriate ratios. The following are the four steps involved in the ratio analysis. Selection of relevant data from the financial statements depending upon the objective of the analysis. Calculation of appropriate ratios from the above data. Comparison of the calculated ratios with the ratios of the same firm in the past, or the ratios developed from projected financial statements or the ratios of some other firms or the comparison with ratios of the industry to which the firm belongs.

INTERPRETATION OF THE RATIOS The interpretation of ratios is an important factor. The inherent limitations of ratio analysis should be kept in mind while interpreting them. The impact of factors such as price level changes, change in accounting policies, window dressing etc., should also be kept in mind when attempting to interpret ratios. The interpretation of ratios can be made in the following ways. Single absolute ratio Group of ratios Historical comparison Projected ratios Inter-firm comparison

74

GUIDELINES OR PRECAUTIONS FOR USE OF RATIOS The calculation of ratios may not be a difficult task but their use is not easy. Following guidelines or factors may be kept in mind while interpreting various ratios are Accuracy of financial statements Objective or purpose of analysis Selection of ratios Use of standards Caliber of the analysis

IMPORTANCE OF RATIO ANALYSIS Aid to measure general efficiency Aid to measure financial solvency Aid in forecasting and planning Facilitate decision making Aid in corrective action Aid in intra-firm comparison Act as a good communication Evaluation of efficiency Effective tool

LIMITATIONS OF RATIO ANALYSIS Differences in definitions Limitations of accounting records Lack of proper standards
75

No allowances for price level changes Changes in accounting procedures Quantitative factors are ignored Limited use of single ratio Background is over looked Limited use Personal bias

CLASSIFICATIONS OF RATIOS The use of ratio analysis is not confined to financial manager only. There are different parties interested in the ratio analysis for knowing the financial position of a firm for different purposes. Various accounting ratios can be classified as follows: 1. Traditional Classification 2. Functional Classification 3. Significance ratios

1. Traditional Classification It includes the following. Balance sheet (or) position statement ratio: They deal with the relationship between two balance sheet items, e.g. the ratio of current assets to current liabilities etc., both the items must, however, pertain to the same balance sheet. Profit & loss account (or) revenue statement ratios: These ratios deal with the relationship between two profit & loss account items, e.g. the ratio of gross profit to sales etc., Composite (or) inter statement ratios: These ratios exhibit the relation between a profit & loss account or income statement item and a balance sheet items, e.g. stock turnover ratio, or the ratio of total assets to sales.
76

2. Functional Classification These include liquidity ratios, long term solvency and leverage ratios, activity ratios and profitability ratios.

3. Significance ratios Some ratios are important than others and the firm may classify them as primary and secondary ratios. The primary ratio is one, which is of the prime importance to a concern. The other ratios that support the primary ratio are called secondary ratios.

IN THE VIEW OF FUNCTIONAL CLASSIFICATION THE RATIOS ARE 1. Liquidity ratio 2. Leverage ratio 3. Activity ratio 4. Profitability ratio

1. LIQUIDITY RATIOS Liquidity refers to the ability of a concern to meet its current obligations as & when there becomes due. The short term obligations of a firm can be met only when there are sufficient liquid assets. The short term obligations are met by realizing amounts from current, floating (or) circulating assets The current assets should either be calculated liquid (or) near liquidity. They should be convertible into cash for paying obligations of short term nature. The sufficiency (or) insufficiency of current assets should be assessed by comparing them with short-term current liabilities. If current assets can pay off current liabilities, then liquidity position will be satisfactory. To measure the liquidity of a firm the following ratios can be calculated Current ratio Quick (or) Acid-test (or) Liquid ratio
77

Absolute liquid ratio (or) Cash position ratio

(a) CURRENT RATIO: Current ratio may be defined as the relationship between current assets and current liabilities. This ratio also known as Working capital ratio is a measure of general liquidity and is most widely used to make the analysis of a shortterm financial position (or) liquidity of a firm.

Current assets Current ratio = Current liabilities

Components of current ratio CURRENT ASSETS Cash in hand Cash at bank Bills receivable Inventories Work-in-progress Marketable securities Short-term investments Sundry debtors Prepaid expenses CURRENT LIABILITIES Out standing or accrued expenses Bank over draft Bills payable Short-term advances Sundry creditors Dividend payable Income-tax payable

78

(b) QUICK RATIO Quick ratio is a test of liquidity than the current ratio. The term liquidity refers to the ability of a firm to pay its short-term obligations as & when they become due. Quick ratio may be defined as the relationship between quick or liquid assets and current liabilities. An asset is said to be liquid if it is converted into cash with in a short period without loss of value.

Quick or liquid assets Quick ratio = Current liabilities

Components of quick or liquid ratio QUICK ASSETS Cash in hand Cash at bank Bills receivable Sundry debtors Marketable securities Temporary investments CURRENT LIABILITIES Out standing or accrued expenses Bank over draft Bills payable Short-term advances Sundry creditors Dividend payable Income tax payable

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(c) ABSOLUTE LIQUID RATIO Although receivable, debtors and bills receivable are generally more liquid than inventories, yet there may be doubts regarding their realization into cash immediately or in time. Hence, absolute liquid ratio should also be calculated together with current ratio and quick ratio so as to exclude even receivables from the current assets and find out the absolute liquid assets.

Absolute liquid assets Absolute liquid ratio = Current liabilities

Absolute liquid assets include cash in hand etc. The acceptable forms for this ratio is 50% (or) 0.5:1 (or) 1:2 i.e., Rs.1 worth absolute liquid assets are considered to pay Rs.2 worth current liabilities in time as all the creditors are nor accepted to demand cash at the same time and then cash may also be realized from debtors and inventories.

Components of Absolute Liquid Ratio ABSOLUTE LIQUID ASSETS Cash in hand Cash at bank Interest on Fixed Deposit CURRENT LIABILITIES Out standing or accrued expenses Bank over draft Bills payable Short-term advances Sundry creditors Dividend payable Income tax payable

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2. LEVERAGE RATIOS

The leverage or solvency ratio refers to the ability of a concern to meet its long term obligations. Accordingly, long term solvency ratios indicate firms ability to meet the fixed interest and costs and repayment schedules associated with its long term borrowings. The following ratio serves the purpose of determining the solvency of the concern. (a) PROPRIETORY RATIO A variant to the debt-equity ratio is the proprietory ratio which is also known as equity ratio. This ratio establishes relationship between share holders funds to total assets of the firm. Proprietory ratio

Shareholders funds Proprietory ratio = Total assets

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SHARE HOLDERS FUND Share Capital Reserves & Surplus

TOTAL ASSETS Fixed Assets Current Assets Cash in hand & at bank Bills receivable Inventories Marketable securities Short-term investments Sundry debtors Prepaid Expenses

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3. ACTIVITY RATIOS
Funds are invested in various assets in business to make sales and earn profits. The efficiency with which assets are managed directly effect the volume of sales. Activity ratios measure the efficiency (or) effectiveness with which a firm manages its resources (or) assets. These ratios are also called Turn over ratios because they indicate the speed with which assets are converted or turned over into sales. Working capital turnover ratio Fixed assets turnover ratio Capital turnover ratio Current assets to fixed assets ratio

(a) WORKING CAPITAL TURNOVER RATIO Working capital of a concern is directly related to sales.

Working capital = Current assets - Current liabilities It indicates the velocity of the utilization of net working capital. This indicates the no. of times the working capital is turned over in the course of a year. A higher ratio indicates efficient utilization of working capital and a lower ratio indicates inefficient utilization. Working capital turnover ratio=cost of goods sold/working capital. Components of Working Capital CURRENT ASSETS Cash in hand Cash at bank Bills receivable CURRENT LIABILITIES Out standing or accrued expenses Bank over draft Bills payable

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Inventories Work-in-progress Marketable securities Short-term investments Sundry debtors Prepaid expenses

Short-term advances Sundry creditors Dividend payable Income-tax payable

(b) FIXED ASSETS TURNOVER RATIO It is also known as sales to fixed assets ratio. This ratio measures the efficiency and profit earning capacity of the firm. Higher the ratio, greater is the intensive utilization of fixed assets. Lower ratio means under-utilization of fixed assets. Cost of Sales Fixed assets turnover ratio = Net fixed assets

Cost of Sales = Income from Services

Net Fixed Assets = Fixed Assets - Depreciation

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(c) CAPITAL TURNOVER RATIOS Sometimes the efficiency and effectiveness of the operations are judged by comparing the cost of sales or sales with amount of capital invested in the business and not with assets held in the business, though in both cases the same result is expected. Capital invested in the business may be classified as long-term and short-term capital or as fixed capital and working capital or Owned Capital and Loaned Capital. All Capital Turnovers are calculated to study the uses of various types of capital.

Cost of goods sold Capital turnover ratio = Capital employed

Cost of Goods Sold = Income from Services

Capital Employed = Capital + Reserves & Surplus

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(d) CURRENT ASSETS TO FIXED ASSETS RATIO This ratio differs from industry to industry. The increase in the ratio means that trading is slack or mechanization has been used. A decline in the ratio means that debtors and stocks are increased too much or fixed assets are more intensively used. If current assets increase with the corresponding increase in profit, it will show that the business is expanding.

Current Assets Current Assets to Fixed Assets Ratio = Fixed Assets

Component of Current Assets to Fixed Assets Ratio CURRENT ASSETS Cash in hand Cash at bank Bills receivable Inventories Work-in-progress Marketable securities Short-term investments Sundry debtors Prepaid expenses Machinery Buildings Plant Vehicles FIXED ASSETS

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4. PROFITABILITY RATIOS The primary objectives of business undertaking are to earn profits. Because profit is the engine, that drives the business enterprise. Net profit ratio Return on total assets Reserves and surplus to capital ratio Earnings per share Operating profit ratio Price earning ratio Return on investments

(a) NET PROFIT RATIO Net profit ratio establishes a relationship between net profit (after tax) and sales and indicates the efficiency of the management in manufacturing, selling administrative and other activities of the firm.

Net profit after tax Net profit ratio= Net sales

Net Profit after Tax = Net Profit () Depreciation () Interest () Income Tax

Net Sales = Income from Services

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It also indicates the firms capacity to face adverse economic conditions such as price competitors, low demand etc. Obviously higher the ratio, the better is the profitability.

(b) RETURN ON TOTAL ASSETS Profitability can be measured in terms of relationship between net profit and assets. This ratio is also known as profit-to-assets ratio. It measures the profitability of investments. The overall profitability can be known.

Net profit Return on assets = Total assets

Net Profit = Earnings before Interest and Tax

Total Assets = Fixed Assets + Current Assets

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(c) RESERVES AND SURPLUS TO CAPITAL RATIO It reveals the policy pursued by the company with regard to growth shares. A very high ratio indicates a conservative dividend policy and increased ploughing back to profit. Higher the ratio better will be the position.

Reserves& surplus Reserves & surplus to capital = Capital

(d) EARNINGS PER SHARE Earnings per share is a small verification of return of equity and is calculated by dividing the net profits earned by the company and those profits after taxes and preference dividend by total no. of equity shares.

Net profit after tax Earnings per share = Number of Equity shares

The Earnings per share is a good measure of profitability when compared with EPS of similar other components (or) companies, it gives a view of the comparative earnings of a firm. (e) OPERATING PROFIT RATIO Operating ratio establishes the relationship between cost of goods sold and other operating expenses on the one hand and the sales on the other.

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Operating cost Operation ratio = Net sales

However 75 to 85% may be considered to be a good ratio in case of a manufacturing under taking. Operating profit ratio is calculated by dividing operating profit by sales.

Operating profit = Net sales - Operating cost

Operating profit Operating profit ratio = Sales

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(f) PRICE - EARNING RATIO Price earning ratio is the ratio between market price per equity share and earnings per share. The ratio is calculated to make an estimate of appreciation in the value of a share of a company and is widely used by investors to decide whether (or) not to buy shares in a particular company. Generally, higher the price-earning ratio, the better it is. If the price earning ratio falls, the management should look into the causes that have resulted into the fall of the ratio.

Market Price per Share Price Earning Ratio = Earnings per Share

Capital + Reserves & Surplus Market Price per Share = Number of Equity Shares

Earnings before Interest and Tax Earnings per Share = Number of Equity Shares

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(g) RETURN ON INVESTMENTS Return on share holders investment, popularly known as Return on investments (or) return on share holders or proprietors funds is the relationship between net profit (after interest and tax) and the proprietors funds.

Net profit (after interest and tax) Return on shareholders investment = Shareholders funds

The ratio is generally calculated as percentages by multiplying the above with 100.

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CHAPTER 4

DATA ANALYSIS

LIQUIDITY RATIO

1. CURRENT RATIO (Amount in Rs.) (Rs. in Thousands) Current Ratio

Year

Current Assets

Current Liabilities

Ratio

2007 2008 2009 2010 2011

50214959 58607781 73380510 81954722 118833689

28291605 32915813 42602265 44310249 75974247

1.77 1.78 1.72 1.85 1.56

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Interpretation

As a rule, the current ratio with 2:1 (or) more is considered as satisfactory position of the firm. Current assets should be more than current liabilities so that despite fall in their prices , current liabilities could be paid easily. If current ratio is 2:1 , it means that the current liabilities would be paid even if there is 50% fall in the prices of current assets. The greater this ratio, better will be the short term solvency of the firm and more safe will be the interests of the short-term creditors. The ratio should neither be too high or neither be too low. High ratio is an indicator of weak investment policy of the firm and low ratio increases the risk in payment of short-term debts. High ratio also means that funds of the firm are lying surplus and unutilized. The huge increase in current liability due to increase in sundry creditors in the year 2011 resulted a decrease in the ratio as compared to the current ratio of 2010.

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GRAPHICAL REPRESENTATION

CURRENT RATIO 1.85 1.80 1.75 1.70 Ratio 1.65 1.60 1.55 1.50 1.45 1.40 2007 2008 2009 Years 2010 2011

RATIO

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2. QUICK RATIO
(Amount in Rs.) (Rs. in Thousands)

Quick Ratio

Year

Quick Assets

Current Liabilities

Ratio

2007 2008 2009 2010 2011

37751426 45092071 49201416 57467670 94226030

28291605 32915813 42602265 44310249 75974247

1.33 1.37 1.15 1.30 1.24

Interpretation

Quick assets are those assets which can be converted into cash with in a short period of time, say to six months. Liquid assets do not include stock and prepaid expenses stock is less liquid and its price fluctuates.

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With the help of this ratio, the capacity of the firm to pay its current liabilities immediately is measured. A liquid ratio 1:1 is considered a standard ratio. The higher this ratio, more will be the short term solvency of the business. This ratio is calculated to remove the shortcomings of the current ratio. This ratio is considered better than current ratio. Sometimes, the current ratio is high because of large proportion of stock but due to low liquidity ratio, the short-term financial position of business is weak. If liquid assets are less than current liabilities, the management should manage cash. Compare with 2010, the Quick ratio is decreased because the sundry creditors are increased.

GRAPHICAL REPRESENTATION

QUICK RATIO

1.40 1.35 1.30 1.25 Ratio 1.20 1.15 1.10 1.05 1.00 2007 2008 2009 Years 2010 2011
RATIO

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3. ABOSULTE LIQUIDITY RATIO

(Amount in Rs.) (Rs. in Thousands)

Absolute Cash Ratio

Year

Absolute Liquid Assets

Current Liabilities

Ratio

2007 2008 2009 2010 2011

20817283 24534939 26419452 35784050 65193564

28291605 32915813 42602265 44310249 75974247

0.74 0.75 0.62 0.81 0.86

Interpretation

The current assets which are ready in the form of cash are considered as absolute liquid assets. Here, the cash and bank balance and the interest on fixed assts are absolute liquid assets. Debtors are not included in them. Normally the ratio
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of 0.5:1 is considered the standard ratio. It means that for every rupee of liability there should be current assets of 50 paisa in cash. In the year 2011, the cash and bank balance is increased due to increase in the deposits. That causes a slight increase in the current years liquidity ratio.

GRAPHICAL REPRESENTATION

ABSOLUTE LIQUIDITY RATIO

1.00 0.80 0.60 Ratio 0.40 0.20 0.00 2007 2008 2009 Years 2010 2011
RATI O

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LEVERAGE RATIOS

1. PROPRIETARY RATIO
(Amount in Rs.) (Rs. in Thousands) Proprietary Ratio

Year

Share Holders Funds

Total Assets

Ratio

2007 2008 2009 2010 2011

25723123 32129463 37836815 43252559 49857065

56894135 68043006 83618831 91621729 129933606

0.45 0.47 0.45 0.47 0.38

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Interpretation

The proprietary ratio establishes the relationship between shareholders funds to total assets. It determines the long-term solvency of the firm. This ratio indicates the extent to which the assets of the company can be lost without affecting the interest of the company. This ratio shows that how much capital is introduced by the owner in business. Higher ratio means a sound position of business, because it shows that the organization is not run through outside funds which mean less interference and pressure of outsiders. The higher the ratio, The more profitable it is for the creditors and less management will have to depend on external funds. If the ratio is low, the creditors can be suspicious about the repayment of their debt on liquidation of company. The reserves and surplus is increased due to the increase in balance in profit and loss account, which is caused by the increase of income from services. The proprietary ratio decreased in the year 2011 as compared to the previous year because of huge increase in sundry debtors and cash & bank balances in 2011.

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GRAPHICAL REPRESENTATION

PROPRIETARY RATIO

0.60 0.40 Ratio 0.20 0.00 2007 2008 2009 Years 2010 2011

RA

102

ACTIVITY RATIOS

1. WORKING CAPITAL TURNOVER RATIO

(Amount in Rs.) (Rs. in Thousands)

Working Capital Turnover Ratio

Year

Net Sales

Working Capital

Ratio

2007 2008 2009 2010 2011

39526953 41025430 46240909 52197740 55296932

21923354 25691968 30778245 37644473 42859442

1.80 1.60 1.50 1.39 1.29

Interpretation

This ratio indicates how effectively working capital is being utilized by the concern. Higher the ratio, the lesser is the investment in working capital and the greater are the profits. A very high ratio is a sign of overtrading and a low ratio indicates undertrading, i.e. working capital is not effectively used.
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Income from services is greatly increased and the working capital is also increased greater due to the increase in from services because the huge increase in current assets. The income from services is raised and the current assets are also raised together resulted in the decrease of the ratio of 2011 compared with 2010.

GRAPHICAL REPRESENTATION

WORKING CAPITAL TURNOVER RATIO

2.00 1.50 Ratio 1.00 0.50 0.00 2007 2008 2009 Years 2010 2011
RATIO

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2. FIXED ASSETS TURNOVER RATIO

(Amount in Rs.) (Rs. in Thousands)

Fixed Assets Turnover Ratio

Year

Net Sales

Net Fixed Assets

Ratio

2007 2008 2009 2010 2011

39526953 41025430 46240909 52197740 55296932

4193417 4491967 5141789 5213913 5426970

9.43 9.13 8.99 10.01 10.19

Interpretation
This ratio is most useful for manufacturing concern since sales are produced not only by the use of working capital but also by the capital invested in fixed assets. This ratio indicates how effectively and profitably the fixed assets of a business are used.

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The higher is the ratio, the better is the performance. On the other hand a low ratio indicates that fixed assets are not being efficiently utilized.

Fixed assets are used in the business for producing the goods to be sold. This ratio shows the firms ability in generating sales from all financial resources committed to total assets. The ratio indicates the account of one rupee investment in fixed assets. The net sale is greatly increased in the current year that affected a slight increase in the ratio compared with the previous years ratio.

GRAPHICAL REPRSENTATION

FIXED ASSETS TURNOVER RATIO

10.50 10.00 Ratio 9.50 9.00 8.50 8.00 2007 2008 2009 Years 2010 2011
RATIO

106

3. CAPITAL TURNOVER RATIO

(Amount in Rs.) (Rs. in Thousands) Capital Turnover Ratio

Year

Net Sales

Capital Employed

Ratio

2007 2008 2009 2010 2011

39526953 41025430 46240909 52197740 55296932

25723123 32129463 37836815 43252559 49857065

1.54 1.28 1.22 1.21 1.11

Interpretation
This is another ratio to judge the efficiency and effectiveness of the company like profitability ratio. Higher ratio indicates effective management and proper utilization of capital employed. A low capital turnover ratio should be taken to mean that sufficient sales are not being made and profits are lower. The ratio has been continuously decreasing for five years which means that sufficient sales are not being made and profits are lower.

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GRAPHICAL REPRESENTATION

CAPITAL TURNOVER RATIO

2.00 1.50 Ratio 1.00 0.50 0.00 2007 2008 2009 Years 2010 2011

RATIO

108

4. CURRENT ASSETS TO FIXED ASSETS RATIO

(Amount in Rs.) (Rs. in Thousands) Current Assets To Fixed Assets Ratio

Year

Current Assets

Fixed Assets

Ratio

2007 2008 2009 2010 2011

50214959 58607781 73380510 81954722 118833689

4193417 4491967 5141789 5213913 5426970

11.97 13.05 14.27 15.72 21.90

Interpretation
A decrease in a ratio may mean that trading is slack or more mechanization has been put through. An increase in the ratio may reveal that inventories and debtors have unduly increased or fixed assets have been intensively used. An increase in the ratio, accompanied by increase in profits, indicates that business is expanding. Current assets are increased tremendously as compared to the fixed assets during five years, which results in the continuous increase in this ratio.

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GRAPHICAL REPRESENTATION

CURRENT ASSETS TO FIXED ASSETS RATIIO

25.00 20.00 Ratio 15.00 10.00 5.00 0.00 2007 2008 2009 Years 2010 2011
RATIO

110

PROFITABILITY RATIOS

GENERAL PROFITABILITY RATIOS

1. NET PROFIT RATIO

(Amount in Rs.) (Rs. in Thousands) Net Profit Ratio

Year

Net Profit After Tax

Net Sales

Ratio(%)

2007 2008 2009 2010 2011

7181614 8267399 7457597 7208710 8614685

39526953 41025430 46240909 52197740 55296932

18.17 20.15 16.13 13.81 15.58

Interpretation
The net profit ratio is the overall measure of the firms ability to turn each rupee of income from services in net profit. High net profit ratio will help the firm service in the fall of income from services, rise in cost of production or declining demand.

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Higher the ratio the more favourable for the business as it denotes sound management and efficiency. Lower ratio reveals decline in profits and mismanagement. The net profit is increased because the income from services is increased. The increment resulted a slight increase in 2011 ratio compared with the year 2010.

GRAPHICAL REPRESENTATION

NET PROFIT RATIO

25.00 20.00 Ratio 15.00 10.00 5.00 0.00 2007 2008 2009 Years 2010 2011
RATIO (%)

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2. OPERATING RATIO
(Amount in Rs.) (Rs. in Thousands)

Operating Ratio

Year

Operating Cost

Net Sales

Ratio(%)

2007 2008 2009 2010 2011

28986663 29304234 35174704 41740028 43881966

39526953 41025430 46240909 52197740 55296932

73.33 71.43 76.07 79.97 79.36

Interpretation
The operating ratio is used to measure the relationship between the operation costs and the net sales. Lower the ratio, the better it is. A high ratio is unfavourable since it will leave a small amount of operation income to meet interest, dividend etc. The operating profit ratio is decreased compared with the last year. The earnings are increased due to the increase in the income from services. So, the ratio is decreased slightly compared with the previous year.
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GRAPHICAL REPRESENTATION

OPERATING RATIO

80.00 78.00 76.00 74.00 Ratio 72.00 70.00 68.00 66.00 2007 2008 2009 Years 2010 2011 Series1

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3. NET OPERATING PROFIT RATIO

(Amount in Rs.) (Rs. in Thousands) Net Operating Profit Ratio

Year

EBIT

Net Sales

Ratio(%)

2007 2008 2009 2010 2011

10540290 11721196 11066205 10457712 11414966

39526953 41025430 46240909 52197740 55296932

26.67 28.57 23.93 20.03 20.64

Interpretation
The operating profit ratio is used to measure the relationship between operating profit and sales of a firm. This ratio indicates the portion remaining out of every rupee worth of sales after all operation costs and expenses have been met. Higher the ratio the better it is. The operating profit ratio is increased compared with the last year. The earnings are increased due to the increase in the income from services. So, the ratio is increased slightly compared with the previous year.
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GRAPHICAL REPRESENTATION

NET OPERATING PROFIT RATIO

30.00 25.00 20.00 Ratio 15.00 10.00 5.00 0.00 2007 2008 2009 Years 2010 2011

RATIO

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4. RETURN ON TOTAL ASSETS RATIO

(Amount in Rs.) (Rs. in Thousands) Return on Total Assets Ratio

Year

Net Profit After Tax

Total Assets

Ratio(%)

2007 2008 2009 2010 2011

7181614 8267399 7457597 7208710 8614685

56894135 68043006 83618831 91621729 129933606

12.62 12.15 8.92 7.87 6.63

Interpretation
An overall measure of profitability is Return on Total Assets. This ratio is calculated to measure the profit after tax against the amount invested in total assets to ascertain whether assets are being utilized properly or not. The higher the ratio, the better it is for the concern. This ratio reveals the profitability of total assets, hence it throws light on how efficiently the assets are utilized by the management. Net profit after tax increased in less proportion as compared to the increase in total assets during every year, which results in the continuously decrease

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in this ratio during five years, it means that the total assets are not being properly utilized by the company.

GRAPHICAL REPRESENTATION

RETURN ON TOTAT ASSETS

14.00 12.00 10.00 Ratio 8.00 6.00 4.00 2.00 0.00 1 2 3 Years 4 5
RATIO (%)

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5. RESERVES & SURPLUS TO CAPITAL RATIO

(Amount in Rs.) (Rs. in Thousands)

Reserves & Surplus To Capital Ratio

Year

Reserves & Surplus

Capital

Ratio

2007 2008 2009 2010 2011

24923123 31329463 37036815 42452559 49057065

800000 800000 800000 800000 800000

31.15 39.16 46.30 53.07 61.32

Interpretation
The ratio is used to reveal the policy pursued by the company a very high ratio indicates a conservative dividend policy and vice-versa. Higher the ratio better will be the position. The reserves & surplus is increased with every year from 2007 but the capital is remaining constant from the year 2007. So the increase in the reserves & surplus caused a greater increase in the current years ratio compared with the older.

119

GRAPHICAL REPRESENTATION

RESERVES AND SURPLUS TO CAPITAL RATIO

70.00 60.00 50.00 Ratio 40.00 30.00 20.00 10.00 0.00 2007 2008 2009 Years 2010 2011
RATIO

120

OVERALL PROFITABILITY RATIOS

6. EARNINGS PER SHARE

Earnings Per Share

Year

Net Profit After Tax

No of Equity Shares

Ratio

2007 2008 2009 2010 2011

7181614000 8267399000 7457597000 7208710000 8614685000

80000000 80000000 80000000 80000000 80000000

89.77 103.34 93.22 90.11 107.68

Interpretation
Earnings per share ratio are used to find out the return that the shareholders earn from their shares. After charging depreciation and after payment of tax, the remaining amount will be distributed by all the shareholders. Higher the earnings per share, better is the performance and prospects of the company. The increasing trend of E.P.S. increases the possibility of more
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dividend and bonus shares which finally has a favourable effect on the market value of shares. This ratio assists in evaluating the prevailing market price of shares in the light of earning capacity of the firm. Net profit after tax is increased due to the huge increase in the income from services. That is the amount which is available to the shareholders to take. The share capital is constant from the year 2007. Due to the huge increase in net profit the earnings per share is greatly increased in 2011.

GRAPHICAL REPRESENTATION
EARNING PER SHARE

110.00 105.00 100.00 Ratio 95.00 90.00 85.00 80.00 2007 2008 2009 Years 2010 2011
RATIO

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7. PRICE EARNINGS (P/E) RATIO

(Amount in Rs.)

Price Earning (P/E) Ratio

Year

Market Price Per Share

Earnings Per Share

Ratio

2007 2008 2009 2010 2011

321.54 401.62 472.96 540.66 623.21

89.77 103.34 93.22 90.11 107.68

3.58 3.89 5.07 6.00 5.79

Interpretation
The ratio is calculated to make an estimate of application in the value of share of a company. At any time, the P/E ratio is an indicator of how highly the market rates or values a business. The ratio is helpful in predicting the market price of equity share at some future date and in determining whether the share of a particular firm is undervalued/overvalued. If high risk is found in a share, it reduces its market price and hence automatically reduces its P/E ratio. This ratio helps the shareholders to decide whether shares should be purchased or not in a company.
123

The market price per share is increased due to the increase in reserves & surplus. The earnings per share are also increases greatly compared with the last year because of increase in the net profit. So, the ratio is decreased compared with the previous year.

GRAPHICAL REPRESENTATION

PRICE-EARNING RATIO
7.00 6.00 5.00 Ratio 4.00 3.00
RATIO

2.00 1.00 0.00 2007 2008 2009 Years 2010 2011

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8. RETURN ON SHAREHOLDERS INVESTMENT

(Amount in Rs.) (Rs. in Thousands)

Return on Shareholders Investment

Year

Net Profit After Tax

Share Holders Fund

Ratio(%)

2007 2008 2009 2010 2011

7181614 8267399 7457597 7208710 8614685

25723123 32129463 37836815 43252559 49857065

27.92 25.73 19.71 16.67 17.28

Interpretation
This is the ratio between net profits and shareholders funds. The ratio is generally calculated as percentage multiplying with 100. The net profit is increased due to the increase in the income from services ant the shareholders funds are increased because of reserve & surplus. So, the ratio is increased in the current year.

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GRAPHICAL REPRESENTATION

RETURN ON SHAREHOLDERS INVESTMENT

30.00 25.00 20.00 Ratio 15.00

RATIO

10.00 5.00 0.00 2007 2008 2009 Years 2010 2011

126

9. RETURN ON INVESTMENT
(Amount in Rs.) (Rs. in Thousands)

Return on Investment

Net Profit Before Interest Year & Tax Capital Employed Ratio(%)

2007 2008 2009 2010 2011

10540290 11721196 11066205 10457712 11414966

25723123 32129463 37836815 43252559 49857065

40.98 36.48 29.25 24.18 22.90

INTERPRETATION

It is most important to measure the overall profitability. Higher the ratio, the better it is. This ratio is an indicator of the earnings capacity on the capital employed in the business. The objective of computing this ratio is to determine how efficiently the long term funds supplied by the creditors and shareholders have been used.

127

This ratio measures profitability of total capital employed in the business. This ratio helps in determining as to what extent the management has been successful in increasing the income of the shareholders through the use of borrowed capital. This ratio is continuously decreases from the year 2007 because of the increase in capital employed in more proportion as compared to net profits. Net profit decreased in the year 2009 and 2010 which results a decrease in this ratio.

GRAPHICAL REPRESENTATION

RETURN ON INVESTMENT

45.00 40.00 35.00 30.00 Ratio 25.00 20.00 15.00 10.00 5.00 0.00 2007 2008 2009 Years 2010 2011
RATIO

128

Chapter 5

FINDINGS, SUMMARY & CONCLUSION

FINDINGS OF THE STUDY

1. The current ratio has shown in a fluctuating trend as 1.77, 1.78, 1.72, 1.85, and 1.56 during 2007 of which indicates a continuous increase in both current assets and current liabilities. 2. The quick ratio is also in a fluctuating trend throughout the period 2007 11 resulting as 1.33, 1.37, 1.15, 1.30 and 1.24. The companys present liquidity position is satisfactory. 3. The absolute liquid ratio has been decreased from 0.74 to 0.86, from 2007 11. 4. The proprietary ratio has shown a fluctuating trend. The proprietary ratio is decreased as compared with the last year. So, the long term solvency of the firm is decreased. 5. The working capital decreased from 1.80 to 1.29 in the year 2007 - 11. 6. The fixed assets turnover ratio is in increasing trend from the year 2009 11 (9.43, 9.13, 8.99, 10.01 and 10.19). It indicates that the company is efficiently utilizing the fixed assets. 7. The capital turnover ratio is decreased form 2007 11 (1.54, 1.28, 1.22, 1.21 and 1.11).
129

8. The current assets to fixed assets ratio is increasing gradually from 2007 11 as 11.97, 13.05, 14.27, 15.72 and 21.90. It shows that the current assets are increased than fixed assets. 9. The net profit ratio is in fluctuation manner. It increased in the current year compared with the previous year from 13.81 to 15.58. 10. The net profit is increased in the current year. But the return on total assets ratio is decreased from 7.87 to 6.63. 11. The Reserves and Surplus to Capital ratio is increased from 2007-11 (31.15, 39.16, 40.30, 53.07 and 61.32). The capital is constant, but the reserves and surplus is increased in every year. 12. Net profit after tax is increased due to the huge increase in the income from services. That is the amount which is available to the shareholders to take. The share capital is constant from the year 2007. Due to the huge increase in net profit the earnings per share is greatly increased in 2011. 13. The operating profit ratio is in fluctuating manner as (26.67, 28.57, 23.93, 20.03 and 20.64) from 2007 11 respectively. 14. Price Earnings ratio is reduced when compared with the last year. It is reduced from 6.00 to 5.79, because the earnings per share are increased. 15. The return on shareholders investment is increased from 16.67 to 17.28 compared with the previous year. Both the profit and shareholders funds increase cause an increase in the ratio.

130

SUMMARY

1) After the analysis of Financial Statements, the company status is better, because the Net working capital of the company is greatly increases with every year. 2) The company profits are increases in the current year as compared to previous year profits which is good for a company. 3) The company is utilising the fixed assets, which majorly help to the growth of the organisation. The company should maintain that perfectly. 4) The company fixed deposits are raised from the inception, it gives the other income i.e., Interest on fixed deposits.

CONCLUSION

The companys overall position is at a good position. Particularly the current years position is well due to raise in the profit level from the last year position. It is better for the organization to diversify the funds to different sectors in the present market scenario.

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BIBLIOGRAPHY

REFFERED BOOKS . . . INTERNET SITE MANAGEMENT ACCOUNTING SHARMA & GUPTA MANAGEMENT ACCOUNTANCY - PILLAI & BAGAVATI FINANCIAL MANAGEMENT - I. M. PANDEY

www.ercap.org www.wikipedia.com www.scribd.com www.nwda.gov.in

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APPENDICES

133