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INTRODUCTION

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The aim of working capital management is to manage the firm‟s current assets and current liability in such a way that maintained a satisfactory level of working capital. This is so because if the firm cannot maintain a satisfactory level of working capital, it is likely to become insolvent and may even be forced into bankruptcy. The current assets should be large enough to cover its current liabilities in order to ensure a reasonable level of safety. The interaction between current Assets, current liabilities, and its use in best and possible way is the main theme of the theory of working capital management. I did my project training in Working Capital Management at National Thermal Power Corporation (NTPC) under the title of “Study the working capital and its different components.” I was asked to collect the information related to finance and accounting system of the organization, for that purpose, I meet the managers of NTPC who are doing job at executive level in the organization. I collected data from the financial statements of NTPC .

The secondary objective was to gather information about the different components of working capital. I started my survey from bills and stores section of NTPC in financial department itself. I went through all the eight sections of accounts department in NTPC. What is Working Capital and why working capital is required in the organization? Answer of the above question are as follow:Working capital management is concerned with the problems that arise in attempting to manage the current assets, the current liabilities, and the interrelationship that exist between them. Because they are highly liquid and need to manage it in a better way for its best utilization and

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meet all short-term finance and repayment of short-term debt. It manages the required funds to carry the required levels of current assets to enable the company to carry on its operations at the expected level without any disruption. There are two concepts of working capital: Gross and Net.  Gross working capital: - The term Gross working capital is refers to the total current assets of the company. In addition, the capital that includes all the detectable items likes expenses and others.  Net Working Capital:- The term Net working capital can be defined in two ways:(i) The most common definition of net working capital (NWC) is the difference between

current assets and current liabilities. (ii) Alternative definition of net working capital is that portion of current assets which is

financed with long-term funds. Since current liabilities represent sources of short-term funds, as longs as current assets exceed the current liabilities, the excess must be finance with long-term funds. This is more useful for the analysis of the trade-off between profitability and risk.

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COMPANY PROFILE:
About Nuclear Thermal Power Corporation:

NATIONAL THERMAL POWER PLANT

CORE VALUES:
       (BCOMIT) Business Ethics Customer Focus Organizational Pride Mutual Respect and trust Initiative and speed Total Quality

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POWERING INDIA‟S GROWTH” CORPORATE MISSION:  Make available reliable and quality power in increasingly large quantities at competitive prices and ensure timely realization of revenues.  Speedily plan and implement power projects. with contemporize technologies. breakthrough efficiency improvements. transmission. policy advocacy etc.  Develop a strong portfolio of profitable businesses in overseas markets including technical services.  Plan and speedily implement power project using state-of the art technologies. nuclear power. and new fuels. LNG.  Continuously attract and develop competent and committed human resources to match world standards.  Be an integrated utility by implementing strategic diversifications in areas such as power trading. and energy conservation. distribution. 4 . and non-conventional and eco-friendly fuels.NTPC VISION: “TO BE ONE OF THE WORLD‟S LARGEST AND BEST POWER UTILITIES. generation assets etc.  Adopt a broad based capacity portfolio including hydropower. coal mining. coal beneficiation etc.  Be a socially responsible corporate entity with thrust on environment protection.  Lead fundamental and applied research for adoption of state of the art technologies.  Lead developmental efforts in the Indian power sector including assisting stat utility reform. community development. ash utilization.

DADRI POWER PROJECT IN NUCLEAR THERMAL POWER CORPORATION NTPC DADRI POWER STATION: 4 X 210MW + 2 X 490MW COAL BASED POWER PLANTS and 817 MW Combined Cycle Gas Turbine Plant World / India / Uttar Pradesh / Dadri 5 .

which was until then largely in the hands of state electricity boards. Farakka.NATIONAL THERMAL POWER CORPORAION LTD: The year 1975 witnessed the birth of an organization that went on to achieve great feats in performance in a sector that was. Thus. then reeling under the oil crisis. NTPC was set up in the central sector to build. which was supporting the country in many development initiatives. NTPC was created not only to redraw the power map of India but also to excel in its performance and set benchmarks for others to follow. own. in four different regions of the country. severe supply shortage and operational practices that made the commercial viability of the sector unsustainable. It succeeded on both counts. the government of India. Singrauli. characterized largely by lack of investment. 6 . and operate large thermal power stations which unit size of 200 MW and 500 MW. economy back on track and the World Bank. Since then. The expectations were high and so were the risks. The first four projects namely. were already on the drawing board and were to be set up as pithead stations. There were challenges aplenty. Ramagundam. On November 7 1975. NTPC symbolized hope of the country suffering from crippling power black-outs. which was trying to put an ailing. Korba. NTPC came into being and with it came a bold way of looking at the power infrastructure that could support the economy. NTPC has led the power sector with the creation of an immensely efficient and reliable power generation infrastructure. Capacity addition by NTPC was meant to supplement the efforts of state electricity boards (SEBs). until then.

bringing the curtain down on stage –I of the project. what was a dream became a reality –power. the boiler was lit up and the cleaning process completed by Oct. Singrauli stands tall among India‟s foremost power plants. The fifth and the last one on 20 Feb. the first T. 7 .‟81. By June‟80 the turbine installation work had already begun. The Forbes Global 2000 ranking for 2005 ranks it as the 5th leading company in India and the 486th leading company in the world. NTPC ranks amongst the top five companies.76. it seems. it was a clean state. signaling the commencement of pressure parts erections.‟1982.‟81. the turbine was steam rolled and the first unit of NTPC was successfully synchronized with the Northern Grid at Dadri. The peak load of 200MW was touched in April‟82. At present. Cleared by the Government of India on eighth Dec. Domestic Banks. a very precise and massive task was completed.In 1978. It is a public listed (Bombay Stock Exchange) Indian public sector company. By Nov. Until the first sketches of an idea were scribbled on it. the erection of the first steam generator had commissioned.5% is held by FIIs. and in Sept. In addition.‟84. Government of India holds 89. Today. on 13 Feb. them. By mid 1978. National Thermal Power Corporation is the largest power generation company in India. An intrepid group of site engineers.5% of the total equity shares of the company and the balance 10.G raft connecting. 78.‟79. Finally. the project began to take shape in early‟78. supervisors. in no time. in terms of market capitalizations. In Nov. the first major milestone in the erection of the main plant was reached with the boiler drum of unit – I being lifted successfully. with majority shares owned by the Government of India. and workers braved the elements to lay the foundations of what at the time was thought to be a dream. India. Public and others.

395 MW). Within a span of 31 years. A total of 170. Net Profit after Tax for the quarter ended June 30. 2005. carried out by Data monitor UK. NTPC is the 6th largest in terms of thermal power generation and the second most efficient in terms of capacity utilization amongst the thermal utilities in the world 8 .51% and it contributed 27.955 MW) and 4 Joint Venture Projects (1. NTPC‟s share on 31 Mar 2006 in the total installed capacity of the country was 19. which has completed its thirty years of existence on November 7. and operation of power generating plants and providing consultancy to power utilities in India and abroad. 202 million. NTPC has emerged as a truly national power company. which is 18. Pursuant to special resolution passed by the Shareholders at the Company‟s Annual General Meeting held on September 23. construction.NTPC‟s core business is engineering. As on date the installed capacity of NTPC is 26. The Net Profit after Tax on March 31. 404 MW through its 14 coal based (21. seven gas based (3.65% more than the same quarter in the previous financial year (2004-2005) where the profit was INR 13087 million. Thus. The company. has made its foray into hydropower and is planning to go into nuclear too). 1956. every `fourth home in India is enlightened by NTPC. 2005. 2006 was INR 58.88 Bus of electricity was produced across all the stations of the company in the financial year 2005-2006.68% of the total power generation of the country during 2005-06. 2006 was INR 15528 million. Based on 1998 data.054 MW). the name of the Company “National Thermal Power Corporation Limited” has been changed to “NTPC Limited” with effect from October 28. with power generating facilities in all the major regions of the country. 2005 and the approval of the Central Government under section 21 of the Companies Act.

Rourkela (120 MW) and Bhilai (74 MW). It is providing power at the cheapest average tariff in the country. generating power at 9 . construction. TPC is committed to the environment. As on date the installed capacity Of NTPC is 24.954 MW through its 14 coal based (20.NTPC has set new benchmarks for the power industry both in the area of power plant construction and operations. seven gas based (3. NTPC is extending consultancy services to various organizations in the power business.68% of the total power generation of the country during 2005-06.51% and it contributed 27. This JV company operates the captive power plants of Durgapur (120 MW). and operation of power generating plants and providing consultancy to power utilities in India and abroad.685MW).955 MW) and 3 Joint Venture Projects (314 MW). (SPSCL).NTPC‟s core business is engineering. With its experience and expertise in the power sector. NTPC‟s share on 31 Mar 2006 in the total installed capacity of the country was 19. NTPC acquired 50% equity of the SAIL Power Supply Corporation Ltd.

The massive forestation by NTPC in and around its Ramagundam Power station (2100 MW) has contributed reducing the temperature in the areas by about 3°c. NTPC has been Placed under the „Excellent category‟ (the best category) every year since the MOU system became operative. As a responsible corporate citizen. (USAID).minimal environmental cost and preserving the ecology approximately the plants. Recognizing its excellent performance and vast potential. 10 . NTPC is making constant efforts to improve the socioeconomic status of the people affected by the projects. eco-friendly and eco-nurturing initiative – a symbol of NTPC‟s concern towards environmental protection and continued commitment to sustainable power development in India. it set up Ash Utilization Division to manage efficient use of the ash produced at its coal stations. In 1991. NTPC has also taken proactive steps for ash utilization. This quality of ash produced is ideal for use in cement. Plantations have increased forest area and reduced barren land. concrete.a potential global giant. NTPC was among the first Public Sector Enterprises to enter into a Memorandum of Understanding (MOU) with the Government in 1987-88. A “Centre for Power Efficiency and Environment Protection (CENPEEP)” has been established in NTPC with the assistance of United States Agency for International Development. NTPC has undertaken massive a forestation near its plants. building material. Cenpeep is efficiency oriented. cellular concrete. Government of the India has identified NTPC as one of the jewels of Public Sector „Navratnas‟.

955 26. of Projects Capacity (MW) NTPC OWNED COAL GAS/LIQ.350 ** Power Plant under JV with GAIL. FUEL GRAND TOTAL * Captive Power 3 1 25 Plant under 314* 740** 27. & MSEB Table: 1. FUEL TOTAL OWNED BY JVCs Coal Gas/LIQ.1 11 .INSTALLED CAPICITY: Commissioned Projects No.395 3.404 JVs with SAIL 14 07 21 22.

7. 5. 6.000 2.395 Total (Coal) Coal Based Power Stations table – 1.100 2. 9.000 440 705 22.600 1. 4.600 3.000 1.Commissioned Coal based State Capacity (MW) 1.340 840 3. 8. 11.2 12 .260 2. 3. 14. 2. 13. Singrauli Korba Ramagundam Farakka Vindhyachal Rihand Kahalgaon NTCPP Talcher Kaniha Unchahar Talcher Thermal Simhadri Tanda Badarpur Uttar Pradesh Chhattisgarh Andhra Pradesh West Bengal Madhya Pradesh Uttar Pradesh Bihar Uttar Pradesh Orissa Uttar Pradesh Orissa Andhra Pradesh Uttar Pradesh Delhi 2. 10.050 460 1. 12.000 1.

955 Kerala 350 Rajasthan Uttar Pradesh Gujarat Uttar Pradesh Gujarat 413 652 645 817 648 Total (Gas) Table 1. Fuel Based Power Stations: Commissioned Gas based State Capacity (MW) 1 2 3 4 5 Anta Auraiya Kawas Dadri Jhanor-Gandhar Rajiv Gandhi CCPP 6 Kayamkulam 7 Faridabad Haryana 430 3.3 13 .Gas/Liq.

Power Chhattisgarh Coal 500 Bihar Coal 1980 500 14 . Barh Bhilai 4. 6. NCTPP (Stage II) Pradesh Andhra 8. Koldam (HEPP) Pradesh Hydro 800 Coal 1000 Coal 980 Coal 500 500 (Exp.Projects under Implementation: Additional Capacity Under Coal / Hydro State Fuel Implementation (MW) Kahalgaon 1. Sipat (Stage I) (Stage II) Chhattisgarh Coal 1000 3. Korba (Stage III) Farakka (Stage III) Chhattisgarh Coal West Bengal Uttar 7. Project-JV with SAIL) 5. Simhadri (Stage II) Pradesh Himachal 9. (Phase I) (Phase II) Stage II Bihar Coal 500 1980 2.

Rourkela Orissa 24.10.4 Vishnugad Uttarakhand Hydro 600 Uttarakhand Hydro 520 11. (HEPP) Total (Coal + Hydro) Table 1. Loharinag Pala (HEPP) Tapovan 11. RGPPL Total(JV) Grand Total (Coal + Gas + JV) Table -1.404 Fuel Capacity 15 . Durgapur West Bengal 23.5 Chhattisgarh Maharastra Coal Coal Coal Naptha/LNG 120 120 74 740 1054 27.360 Power Plants with Joint Ventures: Commissioned Coal State Based (MW) 22. Bhilai 25.

India Chapter in collaboration with The Economic Times. The corporation has been simultaneously ranked #15. Forbes Global 2000‟ ranking of the World‟s biggest companies. Best Workplace in India among large organizations for the year 2008.  NTPC has been awarded No. 2004 & 2005 in a row.  NTPC has been rated as one of the top most “Best Employer” of the country for the year 2003.a potential global giant.  NTPC ranked 317th in the „2009. overall in Asia amongst the energy companies. it has developed into a multi-location and multi-fuel company over the past three decades. 16 .Business Today Survey 2004. NTPC in the fourth Global Leadership Summit by Amity University for Sect oral Excellence in Power industry for his outstanding contribution to the growth of Indian business & bringing glory to the country through his pioneering leadership. Government of the India has identified NTPC as one of the jewels of Public Sector 'Navratnas'. by the Great Places to Work Institute.ACHIEVEMENTS: Recognizing its excellent performance and vast potential.1.  It has also been rated as one of the “Best Companies to Work for in India” by Mercer HR Consulting.  Ranked #1 independent power producer in Asia in the THIRD ANNUAL PLANTS TOP 250 GLOBAL ENERGY COMPANY AWARDS 2008 for outstanding Global financial & Industrial performance at the award ceremony in Singapore.  Leadership Award for CMD.

NTPC Vindhyachal Stage-III (2x 500MW) has been conferred the IPMA SILVER MEDAL for Project Excellence by International Project Management Association. Italy. economic performance and giving outstanding support to the local community. at the IPMA Congress. held in Rome. NTPC‟s excellence in executing power projects & its initiative in Decentralized Distributed Power Generation has been recognized and awarded at IEEMA Power Awards 2008. 17 . for implementation of project in record time & achieving excellent environmental.

ORGANIZATION STRUCTURE OF NTPC : 18 .

LOCATION OF NTPC PLANTS: 19 .

V.FINANCIAL DEPARTMENTS IN DADRI: Dadri is also having their own separate financial department and FAS (Online Integrated Material and Financial Accounting System). which is related to the finance or fund of the company. It is organized into following ways:I. Bills and PSL (Price Store Ledger) Section Commercial Section Weighting and Concurrences Cash and Bank Books and Budget section Miscellaneous 20 . VII.  DADRI SECTIONS:There are various section are working in the NTPC Dadri for managing all the work in better way this section are divided according to the nature of work . VI. VIII. III. II. Establishments Works and Bills section Store. This department does all the function. IV. It use a specific language in the computer for manage zing all the work or communicating with other department and this language is ingress.

TA etc. The monthly Salary is processed based on inputs provided by Site HR. LTC. The section is processing the salary for the employees of Dadri Thermal. Salary Preparation or processing & payment of Establishment or Employee Bills like Medical. (Stores) etc. Dadri Gas and Muradnagar. C&M Department.ESTABLISHMENT SECTION: Establishment Section Salary Processing Input Data from HR Department Input Data from C&M Department Other Input like Medical. Pension are made as per the prevailing law while the income tax at source is deducted based on estimated Gross 21 . Bill. Processing of the Salary Monthly Salary Slip The establishment Section of F&A is mainly involved into two activities viz. The latter is temporary while the former is permanent in nature. The data can be either master data or temporary data. The statutory deductions like PF. Deduction etc.

Tax Audit 22 . based on the deductions made from their salary as per procedure. Internal. at the end of each Financial Year. The TDS certificate in the Form 16 is issued.    Coordination with various Auditors viz. above. Preparation & review of General Ledger.     Coordination with other sections of finance for review of Sectional Accounts.Income/Savings of the employee and as per the prevailing Income tax rules/act. ACCOUNTING BOOKS: The Books Section of Finance Department is mainly involved in the following activities: Preparation of Balance Sheet and P&L A/C. Similarly. to the concerned employee. policies & procedure of the NTPC. Besides. Reconciliation of Inter Unit Accounts with Corporate Centre/Other Units of NTPC. the sections also pay/reimburse TA. based on available/prevailing accounting guidelines/policies. B/Sheet and P&L A/c. employees are issued pension & PF Slips/ statements. Statutory and Government Auditors. at the year end. Coordination with corporate accounts for preparation of final accounts viz. LTC and medical bill payments as per the prevailing rules. Preparation & review of Trial Balance.

Dadri is engaged in preparation of Three Balance Sheets. PNB. namely Dadri Thermal. 23 . The books section also prepares/controls DCO (Capital) budget and MBOA budget in consultation with site P&S. above.The Books Section at NCPS. Besides. SBI. ICICI. Dadri Gas & Muradnagar that is a unique accomplishment by any station of NTPC. OBC. CASH & BANK (TREASURY):         Fund management Payment of cash transactions Preparation of cash book Payment of Cheque/DD transactions Receipt of cash Receipt of outstation cheque/DD etc. it is also maintaining various documents what are required as per the various prevailing laws & procedures. it is maintaining fixed assets register. which contains all the relevant details of various fixed assets in the station/projects. For instance. Preparation of Bank Book Preparation of Bank Reconciliation Statements with various banks viz.

WORKS & MISC SECTION:  Payment to various work contractors for capital works. & measurements recorded Measurement Book. & measurements recorded in the Measurement Book by the executing deptartment. 24 .  Payment to various O&M contractors for various operation & maintenance jobs carried out in plant & township.  Payment of Final Bill and contract closing. The payment is released based on LOA/WO issued by contracts Department. by the executing Department in the    Accounting for the payments made to various works & O&M contractors. as per LOA/WO issued by site/corporate contracts deptartment. Deduction of Income Tax from the payments made to various contractors and issues of TDS certificate(s) thereon. Preparation of material reconciliation statement.

   Accounting for the payments made to various suppliers. with financial implication  Vetting of time extension proposals as per laid down guidelines.O. 25 . o Extra item statement o Substituted item statement o Interim deviation statement o Final deviation statement o Modification of any terms & conditions in the LOA/P. Preparation and filing of sales tax return. Reconciliation & Audit of accounts with various suppliers. based on SRV/Purchase order/invoices issued /authenticated by the materials department.STORES BILL SECTION:  Payment to various suppliers for procurements made.  Vetting of deviation statements viz.O/W. procurements and O&M works as per laid down guidelines regarding availability of Budget(s). canons of financial proprietary.  Interpretation of delegations of powers. delegation of powers etc. FINANCIAL CONCURRENCE:  Vetting of cost estimates for civil.

 Accounting for material transferred from the station/project to other projects/stations of NTPC.PRICED STORES LEDGER (PSL):    Accounting for material issued by the central stores. Accounting for material received by the central stores from the suppliers. Accounting for the material returned to the stores deptartment by the executing department.   Accounting for scrap material Physical verification of central stores items as per the available/existing guidelines lay down by the corporation. 26 .

is the main activity of the station. To achieve this end. For 27 . a comprehensive internal control system has been devised for all aspects of the corporation working in the Commercial Section. The price of washed coal and terms & conditions are determined by the various MOMs between NTPC & CCL. The sheer size and complexity of operations make it imperative that an effective system of internal controls is in place to ensure accuracy of record and reduce the scope for the interests of the corporation being compromised in any manner. The coal is mainly washed coal in nature. The latter are kept under joint seal and have to be recalibrated in the presence of representatives of both the parties as and when desired by either party. The various steps in coal accounting are enumerated below1. it has twin projects of Gas & Coal based units. Total quantity of coal supplies in a year/ quarter/month are done based on linkage committee of the ministry of coal. The system for fuel accounting is summarized belowCoal:The supply of coal is linked up with the Piparwar mine at Jharkhand. For. The Gas Project has dual fuel capability of using HSD as well as gas for power generation. Commercial.COMMERCIAL SECTION: At the operating stage of a power plant.Quantity:Coal is dispatched from the mines by railway wagons after weighment at the loading point with the help of weight meters. The total installed capacity of the twin project is 1669 MW. which mainly involves selling of electricity to various SEBs. while that of raw coal is based on various price notifications. The NCPS occupies a unique position among all the power stations of NTPC.

There is adjustment on A/c of moisture content. Credit/Debit adjustments are passed on by the supplier based on the grade determined. moisture content etc. A Stores Issue Voucher (SIV) is then prepared and entry made in the Priced Stores Ledger (PSL) as the quantity consumed.Billing and payment:Bills are initially raised by the coal company based on declared grade. which convert it to a fine powder. 3. Basic coal recovery is built into notified tariff based on coal price and Gross 28 . 2. It is at this point that the weight of coal actually being fed into the Gravimetric/Merrick feeders is recorded.Grade variances:Both supplier & third party conduct chemical analysis of their respective samples in order to ascertain the actual grade of the coal received. Payment to the coal company is released after making adjustments for grade difference.Periodic Stock verification Stock verification of coal is done on six monthly/ annually basis as per the guidelines issued by the corporate centre. 4. Recovery of Coal Cost Thru Tariff:Coal cost is recovered through tariff under two heads: Basic Cost Recovery and Fuel Price Adjustment. The pulverized coal is then loaded into the coalbunkers from where it is fed into the boilers thru the Gravimetric feeders.accounting purposes. Actual quantity in stock is compared with book stocks and adjustments are made in the books of account after the approval of the Competent Authority. a Store Receipt Voucher (SRV) is made out for entry into the Priced Stores Ledger (PSL) for quantity determined as above. 5.Consumption :Coal from the track hopper or the stockyard is passed thru crushers before being sent to the pulverized mills.

railway freight. note etc. Daily availability of gas is intimated in advance. Billing and payment:In accordance with the terms of the Gas supply agreement. In the same fashion. surface transportation charges. a rebate proportionate to the difference between the actual and standard calorific value is given to NTPC. royalty. Fuel Price Adjustments are billed on a monthly basis by taking into account the weighted average cost of coal and actual GCV in that particular month. all costs that are attributable to the purchase of coal are taken into account in the priced stores ledger (PSL). of India whereas the Commercial terms and conditions of supplies are laid down in the Gas supply agreement entered into with GAIL. credit. debit. Such costs include basic price. Sales Tax. if the actual calorific value of the Gas supplied is less than the specified GCV in the agreement. billing for gas is fortnightly and payments are to be made within three working days of presentation of invoice. In the computation of weighted average cost of coal for a particular month. In case of discrepancy/dispute. Gas Price is fixed by the Govt. a premium proportionate to the difference between the actual & standard calorific value is payable by NTPC. Gas:Similar to the case of coal. However. Recovery of Gas Cost Through Tariff:Gas cost is recovered thru tariff under two heads: 29 . gas linkage are also linked up with the source at the time of project identification itself. excise duty. a claim is to the lodged with the seller within fourteen days of receipt of the invoice under question.Calorific Value (GCV) on fired basis at the time of calculation of basic tariff.

Liquid Fuels:In case of gas station while gas is the primary fuel.  Interface with suppliers of various fuels viz. Handling and accounting for all liquid fuels being procured is done based on purchase order placed on the various oil companies. and gas. o IOCL o BPCL o HPCL o GAIL o CCL 30 . The other activities are being carried out in the commercial section are summarized below:  Payment and accounting of various kinds of fuel viz.  Preparation of monthly cost sheet and cost sheet as per cost accounting record rules.Basic Gas Recovery and Fuel Price Adjustment. site P&S/MTP. it is done only at the specific instruction of the Regional Board/Ministry.  Preparation & control of O&M budget in consultation with respective deportments. Fuel Price Adjustments are billed on a monthly basis by taking into account the weighted average cost of gas and actual GCV in that particular month. Since liquid firing is a very costly option. In the computation of weighted average cost of gas for a particular month all costs that can be attributed to the purchase of gas are taken into account.  Computation of Fuel Price Adjustment. liquid. Basic Gas Recovery is built into notified tariff based on Gas Price and Gross calorific value (GCV) at the time of computation of basic tariff. HSD is the alternate fuel under the dual fuel provisions. solid. Regional HQ & Corporate Office.

Dadri o C&M o O&M: Thermal & Gas o P&S o HR o TS o EDP & Communication o TA  Preparation of various MIS Reports as per the requirement of Site/Regional HQ/Corporate Office. o Northern Railway  Interface with other departments at NCPS.  Interaction with various auditors viz.o o Railways: Eastern Eastern Central.  Reconciliation of Accounts with Coal Companies/Oil Companies/Railways  Sales Reconciliation with Regional Office/Corporate Office for Sale of Electricity to different SEBs. Internal/Statutory/Government. 31 .

strategic alliances as well as acquisitions & diversifications as viable and desired options for its business development. SUBSIDIARIES OF NTPC: COMPETITORS: 32 . Acquisitions & Diversifications in the areas related to the core business not only ensure growth but also add to the robustness of the company. in the entire value chain of the power business. NTPC as a partner endows the Joint Venture Alliances with a winning edge. Diversification is carried out either directly or through subsidiaries/JV.JOINT VENTURES: NTPC has identified Joint Ventures. NTPC looks for opportunity to create such joint ventures & strategic alliances.

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SWOT ANALYSIS OF NTPC: STRENGHTS  Good corporate image.  Excellent growth prospects with significant additions.  Highly motivated and dedicated workers and officers and no industrial problems.  The company has kept with itself sufficient liquid funds to meet any kind of cash requirement.  Company with an excellent record and high profits.  An early starter – more than 32 years of experience in power sector.  Upcoming hydro and nuclear sector.  Some of the plants have become old and need investment in renovation and modernization.  Established brand name. 34 .  Strong and wide networks of manpower across India.  Efficient and timely completion of projects.  Huge opportunity in consultancy services. WEAKNESS  Depleting raw materials. OPPORTUNITY  Huge investment leading to greater demand of goods and services. modifications and replacements.

35 .  Emergence of competitors in the market like Reliance energy.  Huge capital requirement for expansion and diversification.  Change in government policies for open trade or stock trading or energy trading.THREATS  Rising prices of raw materials. Tata power and other private development.  Increase in number of small contractors leading to price war.

In short. The need for working capital (Gross) or current assets cannot be overemphasized.  In order to know the working capital management. it is necessary to generate sufficient profits.NEED OF THE STUDY: The financial parameters are the ultimate performance indicator of any company. In case adequate working capacity is not available for this period. However. the company will not be in a position 36 . The objective of financial decision making to maximize the shareholder‟s wealth. this study is conducted so that the financial performance evaluation serves as an eye opener to the company.  To know the proper utilization of working capital.  To identify liquidity position of the company. The amount of such profits largely depends upon the magnitude of sales. sales do not convert into cash instantaneously.  In order to understand the movement of profit over a period of time  To know the reason for the variation of profit. There is always a time gap between of goods and receipt of cash. The following are stated to be in the need for the study: To enhance the financial performance of the NTPC Company. This is because variability in all costs and efficiency activities and solvency position of the company will reflect the financial status of the company. Working capital is required for this period in order to sustain the sales activity.  To know the operating efficiency of company.

This time gap is technically termed as operating cycle of the business. since it may not be in an opposition to purchase raw materials. In other words. 37 . the term cash cycle of operating cycle refers to the length of time necessary to complete the following cycle of events.of sustaining the sales. pay wages and other expenses required for manufacturing the good to be sold. Working capital is required because of the time gap between the sales and their actual realization in cash.

 This will show the liquidity position of the company and also how do they maintain a particular liquidity position.SCOPE OF THE STUDY: This project is vital to me in a significant way. These are as follows –  This project will be a learning device for the finance student.  The project will be a learning of planning and financing working capital.  The project would also be an effective tool for credit policies of the companies. It does have some importance for the company too.  This will show different methods of holding inventory and dealing with cash and receivables. 38 .  Through this project I would study the various methods of the working capital management.

The main purpose of my project training is to render a better understanding of the concept “Working Capital Management” theoretically and practically. But they are some more and they are . 39 . cash.  To focus on problem areas of working capital management at NTPC.  To study the working capital requirement at NTPC. receivables at NTPC Ltd.OBJECTIVE OF THE STUDY: The objective of this project is to study and analyze the inventory.  To know about the working capital management in NTPC  To study working capital and its different components.

In fact. to be studied. correct or verify knowledge whether that knowledge aids in constructing of theory or in the practice of an art” Types of research: .  Sampling: There are following steps in my sampling design:Clifford woody 1. formulating a hypothesis. Type of universe: The first step in developing any sample design is to clearly define the set of objects. It is the finite universe because the numbers of items is certain. analyzing the fact for finding the solution. collecting the facts or data.RESEARCH METHODOLOGY: Research can also define as a systematic & scientific search for pertinent information on a specific topic. the term “Research” refers to the systematic method consisting often uncrating of the problem. “Systematic effort to gain new knowledge” Redman & Mory “The manipulation of things. concepts or symbols for the purpose of generally to extend.The basic types are Descriptive & Analytical  Applied & Fundamental  Qualitative & Quantitative  Conceptual & empirical As such. 40 . it is art of scientific investigation. technically called the universe.

Sampling unit is following. 2. Reading of annual reports of NTPC:41 .Financial Department. Sampling unit: Decision has to be taken concerning a sampling unit before selecting sample. RESEARCH INSTRUMENTS: When I do the research on working capital management. Human Resources and Electrical Office.  Regression DATA COLLECTION: SECONDARY DATA While doing the research on working capital. I got the knowledge of working capital management. Control & Instrumentation. i collected the following things: 1. Township Administration. then I use some tools that are given below  ANNOVA  Correlation  Accounting research tools like ratio analysis etc. Above all the sampling units that are used by me for study. I do the study through Questionnaire Method & Interview method. Civil/ Electrical Maintenance Department. NTPC through reading the Financial Policy file.2. Finance & Account. Fuel Management.

Reading of NTPC Financial Reports. 42 . 30th Edition 3. 4.Reading of Reports of NTPC. 5.Reading of NTPC Magazine like      Dakshin Dhwani Alok Bharti Uttar Jyoti Roshni Damini 6.i.Reading of Journals of NTPC. 29th Edition ii.

any error in data may have significant effects on the results arrived in this study.LIMITIONS:  The research study focuses on working capital management only and does not include other areas of financial management.  Working capital management is also effected by several environmental variables in managing working capital due to lack of time and resources. 43 .  Data used at various places for this research study are basically from published sources and thus.

It is a public listed (Bombay Stock Exchange) Indian public sector company. so there are not any types of raw material in term of finished goods for the company are present. The Forbes Global 2000 ranking for 2005 ranks it as the 5th leading company in India and the 486th leading company in the world. Therefore. the company does not having any types of semi-finished goods in their production cycle. which are use by other company as a raw material. In addition.DISCRIPTIVE WORK ON SUB TOPIC OF STUDY: WORKING CAPITAL MANAGEMENT IN NTPC: National Thermal Power Corporation is the largest power generation company in India. according to its nature it is clear that this company required hues Working capital for the fulfillments of basic need of the company. 44 . The company engage to producing electricity which not having physical existence. Its main business of this company is to generate electricity. with majority shares owned by the Government of India.

drafts. cashbudgets. The system of cash management. the internal organization structure and the nature of the concerned finance executive. It is both the means and ends of an organization.  Investment of surplus cash in marketable security to keep it fully employed and working towards greater profits. it refers to his manageability to forecast cash problems and to solve them when they arise with help of an expert in this field.e.  Maintenance of adequate supply of cash to meet projected cash requirement. etc. thus. the specific nature of cash management of an organization depends upon the nature of the business enterprise. claques. and also marketable security i. Cash to an organization is what food to human bodies. and day-to-day demands. short-term investment of cash. Cash management is simple terminology means forecasting cash requirement and marketing arrangements thereof. aims at making the optimum use of the cash resources. yet he is expected to carry out certain specific generalized functions in the fields of cash management which are as enumerated below: Collection and Custody of cash and securities. providing sufficient cash at the time Place required meeting obligations.  Control of disbursements e.CASH MANAGEMENT: Cash management has existed in business since the initial use of money as medium of exchange. Though. 45 .g. In other words. For cash management purposes cash is used broadly to cash and generally accepted equivalents of cash such as demand and time deposit in banks.

 Maintenance of sound relations and adequate deposits to meet operating needs and to compensate the banks for their services. Cash management is equally important of both small concerns and big concerns. Even a fast growing concern yielding handsome profit may face shortage of cash posing threat to the interrupter flow of production. So deducing adequate fund requirement for the operating needs of the organization happens to be the perennial objective of finance executive.

MOTIVES OF HOLDING CASH:
A distinguishing futures of cash as an assets irrespective of the firm in which it is held, is that it does not earn any substantial return for the business. In spite of this fact cash in held by the firm and with the following motives. (1) Transaction Motives The transaction motives for holding cash arise to enable the concern to conduct its business in the normal course. A firm needs cash to make payment for purchases, wages, operating expense, taxes, dividend etc.

(2)

Precautionary Motive A firm keeps cash balance to meet unexpected cash needs arising out of unexpected contingencies such as floods, presentment of bills of payment earlier than the expected data, unexpected slowing down of collection of account receivable, sharp increase in price of raw materials etc.

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(3)

Speculative Motive The speculative motive for holding cash is deriving benefits out of changes in security price, material prices etc. The concern may postpone the purchase of material when its prices are high or it may go to more than the required material when its prices fall down.

(4)

Compensation Motive Banks provide certain services to their clients free of charge. They, there for, usually require clients to keep minimum cash balances with them, which help them to earn interest, and thus compensate them free services so provided.

OBJECTIVE OF CASH MANAGEMENT:
Cash is the vital component of the working capital of a firm, as every transaction results in either an inflow or an outflow of cash. The main objectives behind effective management of cash are: (a) (b) The precision of cash needed to meet operational requirement. The provision of reserves liquidity against the forecast outflows and expected payments of cash and. (c) Minimum balance of cash to be held to channelizing otherwise used cash into earning assets. A part of cash required as compensating balance with the banks.

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MANAGEMENT OF CASH AT NTPC:
Cash section is an important section of finance and accounts department. It deals with the employees, contractors and suppliers for their payments. Corporate office plays a dominant role in cash management. The corporate office allocates different amount of each to different coalmines as per its requirements. Corporate office acts as a linkage between the NTPC and main book. The state bank of India, Corporate office has determined the credit facility for every units of NTPC. No one unit of NTPC can get the credit facility more than ones limit. The credit facility is known as rolling cash limit. This keeps on changing from year to year depending upon company‟s position transactions, profitability and inventory position. Although corporate office provides credit limit facilities, yet NTPC is fully dependent on the corporate office. The sale of scrap materials of defective at plant level generates the cash. Thus, at a time, plant can also pay liabilities and then the balance amount is only intimated to the corporate office. NTPC gives priority in cash payment, which is urgent, and sends the report to corporate office.

FUND ALLOCATION:
Here the initial allocation for funds at NTPC is done by corporate office and all supplementary requirements are to look by NTPC itself. The corporate office allocates the funds for all coalmines and particularly about NTPC.

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funds are deployed to different departments as per their requirements. Daily.e. fixed assets. Cash planning may be done on daily. whether funds position is tight. normal. It becomes the prime responsibility of the financial controller to make adequate arrangements of the payment of operating expenses. 49 . then the plant has to justify its more utilization and if the justifications are not found satisfactory then the corporate office gives the letter of improvement. The basic objective of cash planning is to enable the concern to meet cash disbars committed for this purpose because holding of cash involves cost in the form of opportunity cost. or liberal. large concern prepare daily or weekly plan.FUND UTILISATION: NTPC operates an annual cash budget and a rolling cash plan drawn up every month. Even a profit-earning concern may face shortage of cash with its growing needs. Weekly. weekly or monthly basis depending upon the size concern and management‟s Normally. the allocation of funds. actual utilization of cash and allocation of fund is compared. creditors etc. A daily report on cash transaction is prepared by cash section to keep a track of all payment in the days work. inventories. medium size concern go for weekly or monthly plan and small firms go for monthly plan. If the utilization of cash is more then. The periodicity of cash planning (i. CASH PLANNING AND MANAGEMENT: Cash planning is an important technique of operation. Every month. Although specific forecasting technique is used. cash transaction report is sent to corporate office showing the all transaction of cash.e. monthly) depends upon the position of funds i.

NTPC needs cash to carry out the day-to-day functions of business just as the level of operations affects working capital requirements.CASH FORECASTING AND BUDGETING: Cash budget is the more significant device to plan for and control the cash receipts. this cash budget is broken into month wise budget where allocation of cash done on month basis with the help of projection of cash on month wise it becomes easier to allocate the amount. plan for the financing of these needs and exercise control over the cash and liquidity of NTPC. The information of expected cash flows and cash balance helps to financial managers of NTPC to determine the future cash need of the firm. it affects the need for cash. Cash has been receiving from customers and has been providing for adequate cash for their liabilities. 50 . These days the direct sale of billets and merchant products are increasing cash. Cash budget is a summary of NTPC expected cash inflows and outflows. Again.

Fig: 9 Parties involved in working capital managements 51 .

remittances in transit. Cash in hand and cheques on hand. cash balances of the selected undertakings have been divided into two segments.Current Assets Current Liabilities II. cheques in hand. cash flow statement.Cash Turnover Ratio:Cash Turnover Ratio are the two known about the relationship between how much company hold the ideal balance of the cash in the organization. Acid Test ratio:.EVALUATION OF CASH MANAGEMENT: Composition and growth of cash: Cash balance represents the aggregate of cash in hand. and balances with banks in current accounts and in fixed deposits with others. 52 . To bring uniformity on the components of cash. Cash management at NTPC includes the discussion on size of each. and I clear the importance of cash management with the help of following graph representation which are based on the formula of ration analysis I.Liquid Current Assets Current liabilities 3. On the bases of above points it is clear that cash is to important term for the organization. current ratio:. and liquidity position of the firm.

Cash Turnover Ratios: Interest & Finance Charges Average Cash Balance 4-Cash Holding Period:This ratio show the actually.Average Balance of Cash Interest & Finance Charges 5. no.Cash to Receivables Ratio = Cash Receivables 53 .Cash to Current Assets:This cash to current assets ration show the relationship between cash and current assets in the organization and show that how much cash affect to the current assets: Cash to Current Assets: Cash Current Assets 6. of days on which company holds the cash in the organization: Cash Holding Period: .

The role of inventory has grown with advances in production technology. personnel.INVENTORY MANAGEMENT: Inventory is an integral part of every business origination. move and control materials and final products to optimize usage of facilities. MEANING OF INVENTORY MANAGEMENT: Inventory management can be defined that co-coordinated function responsible to plan for. 54 .  Complexities of business. use.  Government policy in procurement and distribution of materials.  Availability of credit in the economy. Inventory management is the vital area of management covering the sum total of activities need for the acquisition. In sample words inventory refers to the stock of products that a concern is offering for sale and the components that make up the product. acquire. The following arc the important factors affecting inventory management. The various forms in which inventory are exists in the company. capital goods and to provide customer service in line with corporate goal. and raw materials. storage. store. and transformation of materials in an optimal manner. It is a technique of controlling the purchase.

 Maintaining sufficient stock of raw material in periods of short supply.  Maintaining sufficient stock of finished goods for smooth sales operations. to determine and maintain the optimum level of investment in inventories.  Ensuring a continuous supply of materials of production department facilitating uninterrupted production.  Investment in Inventories at the optimum level. Precautionary motive which necessities holding of inventories to guard against the risk of unpredictable changes in demand and supply forces and other factors.  Minimizing the carrying costs. which help in achieving the following objectives. OBJECTIVES OF INVENTORY MANAGEMENT: The objective of the inventory management is therefore. 55 . Speculative motives influence the decision to increase or reduce inventory level to take advantage of price fluctuations.MOTIVES FOR HOLDING INVENTORIES: The transaction motives emphasize the need to maintain inventories to facilitate smooth production and sales operation.

ICU. Whereas at the point of induction at the store it is valued at the invoice price. which is manufacturing for sale and component that make up the product. chemicals consumables and some other material. INVENTORY: The inventory of NTPC is unique for not having semi-finished goods. XYZ. finished goods or raw materials. Fuel is some way could be considering raw material but by most definitions it would not qualify to be raw material because the product is intangible. The optimum level of inventory lies between two-danger point of excess and inadequate inventories. FSN. The inventory of NTPC is very large comprising 73000 material codes. The inventory at Singrauli alone consist of 53000 material codes. the objective of NATIONAL THERMAL POWER CORPORATION LTD. is to determine and maintain optimum level of inventory investment. the inventory is valued by the monthly weighted moving average method.” In managing inventories. The inventory is regularly verified for a match between the Bin Card 56 . Inventory means. VED. Being a large inventory some of which is to be maintained permanently for to continuity and security of generation.INVENTORY MANAGEMENT AT NTPC: Inventory is stock of a company. loose tools and components. The consumption is valued at PSL rate. The inventory of NTPC consist of fuel. spare parts. “A schedule of items held at a particular point of time. The inventory of NTPC is subject to several analysis including ABC.

raw material is purchased by central procurement and regional procurement unit of central marketing organization as per the requirement of the individual coal plant.balances and the physical stock as with the PSL run. 57 . RAW MATERIAL: Raw materials are the inputs used by the concern for products of finished goods through manufacturing process. The bulk purchase are procured and sent to the place of the need. Basic objectives in holding raw materials inventory is turn separate purchase and production activities. which have been purchased and are stored for future production. This inventory in NTPC is also subject to regular checks and control exercises. In NATIONAL THERMAL POWER CORPORATION LTD. purchase would have to be made continuously at the usage rate in production. Raw material inventory are those. If raw material inventories were not held.

Account receivable represents the extension of credit on an open account by the firm to its customers. In order to keep current customer and attract new ones.” Account receivable management is also an important aspect of working capital management.Inventory Turnover Ratio: 1. When a firm sells its products and services and does not receive cash for it is immediately. Average Holding Period Average Holding Period: - Average Inventory Cost of Goods Sold 2. Receivable constitute a substantial portion of current assets of several firms. Cash to Inventory Ratio Cash to Inventory: Cash Inventory RECEIVABLES MANAGEMENT: The term receivable is defined as "Debt own to the firm by customer arising from sale of goods or services in ordinary course of business. most manufacturing firms find it necessary to offer credit. The practices give birth to accounts receivables. the firm is said to have granted trade credit to the customer and the customer from whom receivables or took debt have to be collected in future are called trade debtor. 58 .

59 . it should be noted the delay in payment of account payable may result in saving of some interest cost but it can prove costly to the firm in the form of loss of credit in market. it is done within 30 days. the objectives in cash of account payables is to slow down the payment process much as possible. NTPC produce electricity which have no any physical existence like other finished goods and it sale their goods to the customers on the only credit bases. MANAGEMENT OF PAYBLE: Management of account payable is as much important as management of account receivables. However.MANAGEMENT OF RECEIVABLES IN NTPC: Receivables of NTPC are very important because of the nature of a product and the credit policy followed by NTPC. MANAGEMENT OF ACCOUNT PAYABLES AT NTPC: The creditors are managed at plant level only. NTPC gives 60 days (two months) time to their customer for making payment. In case of small-scale industries. Whereas the underlying objectives in cash accounts receivable is to maximize the acceleration of the collection process. its means all the sales of the NTPC are on the credit bases. This is done as per terms and condition with respective parties. to insure that the payment to the creditors is made at the stipulated times after obtaining the best credit terms possible. The finance manager has therefore. Mostly the creditor comprises of contractors to whom payment are to be given and the capital works.

1. in an organization like NTPC which provides loans to its employees and also advances both to the employees and supplier as well as contractors. The advances given to contractor are mainly the nature of mobilization 60 . which are rapid as per act that is one month due is given. receivables and Cash. Average Collection Period Average Collection Period: Average Receivables Sales 3. it is only done after the file reaches the department as per the individual case. Receivables to Current Assets Ratio Receivables to Current Assets Ratio: .Receivables Current Liabilities Loan and Advances Management: Although current assets traditionally comprise inventory. Major chunk is from statutory liabilities. excise tax one month due is there. The schemes allow having a security deposits which is refundable at the end of contract. Receivables to Current Liability Ratio Receivables to Current Liability Ratio: .Receivables Current Assets 4. In case of statutory payment that is the income tax. Cash to Inventory Ratio Cash to Inventory Ratio: Cash Inventory 2.There is also a scheme of earnests money deposits for the registered small-scale industries. the loan and advances are also an important part of the company. When the final payment is to be made to ex-employee.

 Loan and Advances to Current Assets Ratio Loan and Advances to Current Assets Ratios: Loan & Advances Current Assets CURRENT LIABILITIES MANAGEMENT: Current Liability shows the different combination of liabilities. It generally shows on the liability side in the balance sheet under the head of liabilities. multipurpose advances and furniture advance recoverable in 12 and 60 installment respectively. The interest is levied on the diminishing balance of principal and there is no interest on interest.advances and to the employees with the purpose of providing assistant to them by way facilities to help in the discharge of their duties. contractor. Beside these all other loan and advances are on interest. Others liabilities represent amount of income tax deducted at source. and its employees are the major part of its current assets. which includes various liabilities. Their loans are included in the category of current assets for their regular recovery from the employees adjust and recovery from supplier within a very short period. The recovery of these interests bearing loan done as such a way that the principal is recovered first and the interest there after. redemption amount payable on 61 . The loan and advances given by the company to its suppliers. These other mainly on interest or free of charge advances given to suppliers and contactor are mostly free two of the advances given to employees are interest free. These loan and advances are categorized as current assets because their recovery is continuous immediately from the after the drawn month and the principal is first recovered.

CERC vide its order dated 09//11/2008 discontinued the billing and realization of development surcharge.426 million from Development Surcharge Fund. The share of each constituent to total current liabilities determines to some extent the availability of current liabilities. the management remains more concerned with the administration of current assets. development surcharge amount to be transferred to customers etc. Besides current assets. Bank over-draft.maturity of bonds. creditors for goods supplied. and taxes are the main constituents of current liabilities. unpaid dividend. Current Liabilities to Inventory:This is a way to show the relationship between Inventory and total Current Liabilities. 2. In the previous years as per the regulations of central electricity regulatory commission (CERC) development surcharge was being charged from customer and kept invested in instruments as required by the regulations. Current Liabilities to current Inventory: Current Liability Inventory 62 . Other liabilities have increased due to transfer of as amount of Rs. It further directed that the amount collected earlier from the state utilities and invested in instruments corresponding to the amount contributed by each of the state utilities shall be transferred in the name of the concerned utility. sales tax payable. current liabilities also count in framing the structure of working capital.

cheques on hand. Cash at bank etc.) 2. cash flow statement and liquidity position of the firm.EVALUATION OF CASH MANAGEMENT: Composition and growth of cash Cash balance represents the aggregate of cash in hand. Current ratio:. Cash in hand and cherubs on hand. and I clear the importance of cash management with the help of following graph representation which are based on the formula of ration analysis 1. Acid Test ratio:.) (A current asset includes Bills payable. On the bases of above points it is clear that cash is to important term for the organization. cash balances of the selected undertakings have been divided into two segments. Debtors. Bills Receivables. Cash in hand.Current Assets Current liabilities (Current assets includes Inventory. To bring uniformity on the components of cash.Liquid Current Assets Current liabilities 63 . Cash management at NTPC includes the discussion on size of each. remittances in transit. Bank Overdraft. Creditors etc. and balances with banks in current accounts and in fixed deposits with others.

of days on which company holds the cash in the organization: Cash Holding Period: - Average Balance of Cash Interest & Finance Charges 5. no.3. Cash Turnover Ratio: - Interest & Finance Charges Average Cash Balance 4. Cash to Receivables Ratio = Cash Receivables 64 . Cash Turnover Ratio:Cash Turnover Ratio is known about the relationship between how much company hold the ideal balance of the cash in the organization. Cash to Current Assets:This cash to current assets ration show the relationship between cash and current assets in the organization and show that how much cash affect to the current assets: Cash to Current Assets: Cash Current Assets 6. Cash Holding Period:This ratio show the actually.

65 .  Minimizing the carrying costs. to determine and maintain the optimum level of investment in inventories. Speculative motives influence the decision to increase or reduce inventory level to take advantage of price fluctuations. which help in achieving the following objectives.  Ensuring a continuous supply of materials of production department facilitating uninterrupted production.  Maintaining sufficient stock of finished goods for smooth sales operations.  Maintaining sufficient stock of raw material in periods of short supply. Precautionary motive which necessities holding of inventories to guard against the risk of unpredictable changes in demand and supply forces and other factors.  Investment in Inventories at the optimum level.MOTIVES FOR HOLDING INVENTORIES: The transaction motive emphasizes the need to maintain inventories to facilitate smooth production and sales operation. OBJECTIVES OF INVENTORY MANAGEMENT: The objective of the inventory management is therefore.

Inventory means.” In managing inventories. which is manufacturing for sale and component that make up the product. loose tools and components. are to be maintained permanently for continuity and security of generation. The inventory of NTPC is very large comprising 73000 material codes. Being a large inventory some of those. The valued inventory are called priced stores ledger (PSL). INVENTORY: The inventory of NTPC is unique for not having semi finished Shed goods. The inventory of NTPC consist of fuel.INVENTORY MANAGEMENT AT NTPC: Inventory is stock of a company. the inventory is valued by the monthly weighted moving average method. This is regulated by the four instruments. consist of 53000 material codes. finished goods. chemicals consumables and some other material. The optimum level of inventory lies between two-danger point of excess and inadequate inventories. is to determine and maintain optimum level of inventory investment. The inventory at Singrauli alone. or raw materials. PSL is run on monthly basis. “A schedule of items held at a particular point of time. (1) MRN (2) MTN (3) SRV 66 . Fuel is some way could be considering raw material but by most definitions it would not qualify to be raw material because the product is intangible. the objective of NATIONAL THERMAL POWER CORPORATION LTD. spare parts.

it is valued at the invoice price.(4) SIV. The inventory of NTPC is subject to several analysis including ABC. raw material is purchased by central procurement and regional procurement unit of central marketing organization as per the requirement of the individual coal plant. In NATIONAL THERMAL POWER CORPORATION LTD. The bulk purchase are procured and sent to the place of the need. Raw material inventory are those. At the point of induction at the store. If raw material inventories were not held. Inventory Turnover Ratio  Average Holding Period:Average Inventory Cost of Goods Sold 67 . The inventory is regularly verified for a match between the Bin Card balances and the physical stock is with the PSL run. RAW MATERIAL: Raw materials are the inputs used by the concern for products of finished goods through manufacturing process. FSN. Basic objectives in holding raw materials inventory is turn separate purchase and production activities. which have been purchased and are stored for future production. XYZ. The consumption is valued at PSL rate. VED. ICU. purchase would have to be made continuously at the usage rate in production. This inventory in NTPC is also subject to regular checks and control exercises.

NTPC produce electricity which have no any physical existence like other finished goods and it sale their goods to the customers on the only credit bases. the firm is said to have granted trade credit to the customer and the customer from whom receivables or took debt have to be collected in future are called trade debtor. Cash to Inventory :- Cash Inventory RECEIVABLES MANAGEMENT: The term receivable is defined as "Debt own to the firm by customer arising from sale of goods or services in ordinary course of business. most manufacturing firms find it necessary to offer credit. The present system of Tariff is Availability Based Tariff (ABC) where as the previous tariff system called the KP Rae Tariff 68 . NTPC gives 60 days (two months) time to their customer for making payment. There is a rebate on early or prompt payment. Receivable constitute a substantial portion of current assets of several firms. MANAGEMENT OF RECEIVABLES IN NTPC: Receivables of NTPC are very important because of the nature of a product and the credit policy followed by NTPC.” Account receivable management is also an important aspect of working capital management. Account receivable represents the extension of credit on an open account by the firm to its customers. In order to keep current customer and attract new ones. When a firm sells its products and services and does not receive cash for it is immediately. The practices give birth to accounts receivables. its means all the sales of the NTPC are on the credit bases.

MANAGEMENT OF PAYBLE: Management of account payable is as much important as management of account receivables. the objectives in cash of account payables is to slow down the payment process much as possible. The billing is completed during the first five days of the month following and therefore the billing cycle of NTPC comes to be 35 days. it should be noted the delay in payment of account payable may result in saving of some interest cost but it can prove costly to the firm in the form of loss of credit in market. the present system is a three part Tariff.was a two part Tariff essentially rewarding efficiency or PLF. (1) Fixed charge (2) Variable charge (now called energy charge) (3) Unscheduled interchange charge rewarding availability between the power producers i.e. However. SEBE there is a monitor in the institution of the regional electricity board which coordinates the Availability schedule awarded to each of power producer in the region as well as the joint meter reading and both the ends. In addition. Whereas the underlying objectives in cash accounts receivable is to maximize the acceleration of the collection process. 69 . NTPC and the customer. to insure that the payment to the creditors is made at the stipulated time periods after obtaining the best credit terms possible. implement the new resume. The finance manager has therefore.

Mostly the creditor comprises of contractors to whom payment are to be given and the capital works.Receivable Current Assets 70 . it is done within 30 days. excise tax one month due is there. There is also a scheme of earnests money deposits for the registered small-scale industries. The schemes allow having a security deposits which is refundable at the end of contract. Major chunk is from statutory liabilities. When the final payment is to be made to ex-employee. which are rapid as per act that is one month due is given. it is only done after the file reaches the department as per the individual case. In case of small-scale industries. In case of statutory payment that is the income tax.  Cash to Inventory Ratio Cash to Inventory Ratios: - Cash Inventory  Average Collection Period Average Collection Period: Average Receivables Sales  Receivables to Current Assets Ratio Receivables to Current Assets Ratio: .MANAGEMENT OF ACCOUNT PAYABLES AT NTPC: The creditors are managed at plant level only. This is done as per terms and condition with respective parties.

These other mainly on interest or free of charge advances given to suppliers and contactor are mostly free two of the advances given to employees are interest free. receivables and Cash. The 71 . in an organization like NTPC which provides loans to its employees and also advances both to the employees and supplier as well as contractors. Receivables to Current Liability Ratio Receivables to Current Liability Ratio: - Receivable Current Liability  Investment to Receivable Ratio Investment to Receivable Ratio: - Investment Receivables Loan and Advances Management : Although current assets traditionally comprise inventory. Their loans are included in the category of current assets for their regular recovery from the employees adjust and recovery from supplier within a very short period. the loan and advances are also an important part of the company. contractor. The advances given to contractor are mainly the nature of mobilization advances and to the employees with the purpose of providing assistant to them by way facilities to help in the discharge of their duties. multipurpose advances and furniture advance recoverable in 12 and 60 installment respectively. and its employees are the major part of its current assets. The loan and advances given by the company to its suppliers. Beside these all other loan and advances are on interest.

72 . unpaid dividend. The share of each constituent to total current liabilities determines to some extent the availability of current liabilities.  Loan and Advances To Current Assets Ratio Loan and Advances to Current Assets Ratios: Loan & Advances Current Assets CURRENT LIABILITIES MANAGEMENT: Current Liability shows the different combination of liabilities. development surcharge amount to be transferred to customers etc. Bank over-draft. These loan and advances are categorized as current assets because their recovery is continuous immediately from the after the drawn month and the principal is first recovered. current liabilities also count in framing the structure of working capital. Besides current assets. sales tax payable.recovery of these interests bearing loan done as such a way that the principal is recovered first and the interest there after. which includes various liabilities. The interest is levied on the diminishing balance of principal and there is no interest on interest. and taxes are the main constituents of current liabilities. Others liabilities represent amount of income tax deducted at source. redemption amount payable on maturity of bonds. creditors for goods supplied. It generally shows on the liability side in the balance sheet under the head of liabilities. the management remains more concerned with the administration of current assets.

Current Liabilities to Inventory:This is a way to show the relationship between Inventory and total Current Liabilities. 2. In the previous years as per the regulations of central electricity regulatory commission (CERC) development surcharge was being charged from customer and kept invested in instruments as required by the regulations. Current Liabilities to current Inventory: Current Liability Inventory 73 .426 million from Development Surcharge Fund.Other liabilities have increased due to transfer of as amount of Rs. CERC vide its order dated 09//11/2008 discontinued the billing and realization of development surcharge.

00 0.245.245.190.138.70 33.245.717.00 Net worth Secured Loans Unsecured Loans Total Debt Total Liabilities 73.10 93.90 54.50 8.188.10 58.572.267.60 7.46 8.021. ------------------Mar '12 Mar '11 Mar '10 Mar '09 Mar '08 Sources Of Funds Total Share Capital Equity Share Capital Share Money Preference Capital Reserves 65.90 0.00 0.00 0.079.36 101.245.00 0.00 0.33 120.40 9.291.17 9.50 Revaluation Reserves 0.60 111.50 68.562.521.245.90 8.50 8.245.245.969.50 8.03 47.71 60.00 0.629.797.46 8.40 46.567.749.12 63.277.045.00 34.00 0.00 0.in Rs.90 43.00 8.10 25.50 8.50 8.458.245.Balance Sheet of NTPC ------------------.30 38.478.00 74 .314.20 19.00 Application 0.384.66 55.68 9.598.70 81.00 0.994.24 37.724.245.46 8.875.80 27.60 50.00 Share 0.338.910.00 0.245. Cr.182.00 0.46 8.56 28.156.

575.82 45.404.648.639.274.396.10 7.519.825.10 13.146.30 12.90 22.70 38.34 11.415.353.584.807.651.20 35.863.290.38 3.00 33.441.80 29.925.30 30.545.40 81.583.40 3.00 11.460.80 75 .815.94 66.10 6.70 634.30 39.858.85 5.10 6.723.00 32.093.983.80 473.19 32.12 Depreciation Net Block Capital Progress Investments Inventories Sundry Debtors Cash Balance Total Current Assets Loans and Advances Fixed Deposits Total CA.70 2.088.00 53.702.675.982.80 14.889.84 32.527.80 62.40 3.368.73 0.84 14.50 15.267.633.826.357.20 3.20 Advances 25.258.243.999.00 and Bank 16.099.064.79 30.10 7.30 27.347.924.937.50 15.40 7.12 7. Loans & 42.20 15.832.70 26.60 26.11 326.465.51 Work in 41.206.00 271.936.31 3.70 30.92 13.52 (Rs.131.478.20 2.827.70 6.77 10. In Crores) 72.40 9.47 16.344.75 34.681.663.Financial Statements of NTPC Mar '12 Mar '11 Mar '10 Mar '09 Mar '08 Application Of Funds Gross Block Less: Accumulated 36.

361.94 77.30 Net Current Assets Miscellaneous 0.40 7.16 Book Value (Rs) 88.00 16.00 5.93 19.00 0.439.80 0.00 0.070.55 7.458.360.60 10.32 0.00 0.896.388.675.50 0.562.720.00 Contingent Liabilities 42.70 81.236.20 3.208.55 65.00 0.50 Total CL & Provisions 20.249.28 71.688.548.730.90 13.80 2.819.30 10.29 40.00 0.70 12.Deffered Credit Current Liabilities Provisions 0.572.629.618.86 10.336.967.36 101.00 111.20 29.10 93.60 17.044.308.083.848.00 Expenses Total Assets 120.00 7.40 20.00 66.50 22.89 33.81 76 .00 21.909.945.98 3.80 82.227.521.31 3.

866. cr.237.771.092.688.954.832.673.83 11.326.00 52.66 9.34 23.42 7.611.75 JSW Energy Torrent Power CESC IndiaBPower 48.629.84 5.562.68 17.068.33 13.223.33 3.69 4.33 20.615.27 9.85 153.Competitors of NTPC Name List price Market (Rs.82 8.50 Net Profit Total Assets Neyveli Lignite 81.00 320.948.70 77 .42 16.99 22.70 Jaiprakash Pow 31.64 1.00 11.119.706.92 1.50 Reliance Infra Adani Power SJVN 505.61 30.20 141.411.333.00 1.448.931.906.15 310.12 39.011.95 8.50 1.83 10.178.77 1.917.46 565.551.091.032.55 Tata Power NHPC 99.035.162.669.000.73 120.016.254.101.60 8.82 4.01 Grid 117.68 402.927.99 66.90 1.57 27.46 4.654.053.25 23.35 54.67 3. Sales Turnover 62.) NTPC Power Corp Reliance Power 84.829.717.495.90 41.15 8.169.228.00 3.60 20.58 9.26 -293.11 171.329.67 7.12 8.56 5.85 17.95 62.73 2.35 Cap.068.15 15.153.90 18.86 13.304.33 2.95 234.66 4.71 8.86 1.

II phase: . 78 .Raw material is converted into work-in-progress. V phase: .Cash are converted into raw material.Work-in-Progress is converted into finished goods. the firm is forced to have current assets. OPERATING CYCLE:If it were possible to complete the sequences instantaneously. However. III phase: . firm have to necessarily keep cash or invest in short term liquid securities so that they will be in a position to meet obligations when they become due.The operating cycle consists five phases:I phase .Sales are converted into debtors. If cash inflows and outflows do not match. IV phase: . there would be n-o need for current assets (working capital). since it is not possible.Finished goods are converted into sales.

Therefore. There are mainly three part of Working Capital in the company. Cash section is an important section of finance and accounts department. No one unit of NTPC can get the credit 79 . which is as follow:A) Cash B) Inventory C) Bills Receivable  CASH: Cash is the most important component of current assets. The goal of cash management is to maintain the minimum cash balance that provides the firm with sufficient liquidity needed to meet its financial objectives. All other components such as debtors and inventories ultimately are converted into cash and this fact further emphasizes the importance of management of cash. contractors and suppliers for their payments. The term cash includes not only currency but also near cash assets such as marketable securities and demand deposits in bank. Corporate office plays a dominant role in cash management. due to above statement it is clear that why the companies are needed working capital. It deals with the employees. Corporate office acts as a linkage between the NTPC and main book. The state bank of India. The corporate office allocates different amount of each to different coalmines as per its requirements. Corporate office has determined the credit facility for every units of NTPC.

In brief. NTPC gives priority in cash payment.   It use to buying loose tools. making payment to the employees in the organization.facility more than ones limit. the main uses of the cash in organization are as follow:  It required paying for the fuel and coal charges to the supplier. yet NTPC is not fully dependent on the corporate office. spare parts. etc. road. at a time. This keeps on changing from year to year depending upon company‟s position transactions. and sends the report to corporate office. on every day or week or monthly bases. In addition. Thus. 80 . The credit facility is known as rolling cash limit. and inventory position. It also use to making payment for other construction in organization like building. etc. plant can also pay liabilities and then the balance amount is only intimated to the corporate office. which is urgent. profitability. Although corporate office provides credit limit facilities. The sale of scrap materials of defective at plant level generates the cash.

The current assets consist of inventory. cash. Current liabilities usually comprise the borrowings. assessed tax and unpaid dividend or any other things. receivables. trade credits.STRUCTURE OF WORKING CAPITAL: CIRCULATION SYSTEM OF WORKING CAPITAL The structural study of working capital involves the analysis of composition of current assets and current liabilities. 81 . and marketable securities.

In other words. II.  Amount of payment working capital remains in the business in one from another. In other words. it represents additional current assets required at different times during the operating years. The suppliers of such working capitals should not accept its return during the lifetime of the firm.  Temporary or short-term working capital The amount of such working capital keeps on fluctuating from time to time because of business activities. Permanent working capital is permanently needed for the business and therefore it should be financed out of long-term funds. Permanent or long-term working capital This refers to that minimum amount of investment in all current assets. extra inventory has to be maintained to support cells during peak sales period. which is required at all times to carry out minimum level of business activities.” The following are the characteristics of this type of working capital. it represents the current assets required on a continuing basis over the entire year. I. Similarly receivable also increase and must be financed during 82 .TYPES OF WORKING CAPITAL: Working capital can be divided into two categories of the basis of time. Tondon committee has referred to this type of working capital as “CORE CURRENT ASSETS. For example. This is particularly from the point of view of financing.  It also grows with the size of the business. In other words greater the size of the business greater is the amount of such working capital and vice versa.

if the working capital is sufficient. and loyalty not only throughout the business itself but also among its customer‟s creditors and business associates.If proper cash balance is maintained the business can avail the advantages of cash discount by paying cash for the purchase of raw materials and the merchandise. ADVANTAGES OF WORKING CAPITAL: I Cash Discount. On the other hand. good opportunities can be exploited. On the contrary. Banks favor in generating seasonal loans. It will result in reducing the cost of production II. if business has a good credit standing and reputation. V. Company may make off-season purchase 83 . ample dividend can be declared. confidence. Distribution of dividend – If company is sort of working capital it cannot distribute the good dividend to its shareholders in spite of sufficient profits. Sound goodwill and debt capacity . VI. receivable etc will decrease in period of depreciation. IV. investments in inventories. Easy loans for the banks – An adequate working capital helps the company to borrow insecure loans from the banks because the access provides a good security to the insecure loans.In case of adequacy of capital in a concern.The promptness of payment in business creates goodwill and increases the debt capacity of business. It creates a feeling of security and confidence – Adequate working capital creates a sense of security. Exploitation of good opportunities.period of high sales. III.

X. productions will suffer particularly in the era of cutthroat 84 . Increased Production efficiency – A continuous supply of raw materials research programme innovations and technical developments and expansion programmes can successfully carried out if adequate working capital is maintained in the business. and confidence. it is necessary that sufficient amount of funds be available to make all the payments in time and when they are due. Maintaining Solvency and containing production – In order to maintain the solvency of the business. High moral. XI.The provision of adequate working capital improves the moral of the executive because they have an environment of certainty. which is a great psychological. business oscillations etc can easily be overcome if company maintains adequate working capital. Without ample working capital. It increases fixed assets efficiency – Adequate working capital increases the efficiency of fixed assets of the business because of its proper maintenance. factor in improving the overall efficiency of the business and of the person who is at helm of affairs in the company. security.resulting in substantial savings or it can fetch big supply orders resulting in good profits. VIII. IX. VII. Meeting unseen contingencies – Financial crisis due to heavy losses.

(b) Bond financing-Another source of permanent working capital is bond financing but it has a fixed maturity period and ultimately repayment has to be made. (d) Short term. company provides sinking funds for retirement of bonds issued for permanent working capital. FINANCING OF WORKING CAPITAL: Sources of financing of working capital differ as per the classification of working capital into permanent working capital and variable working capital.are the main source sale of equity or preference stock could provide a permanent working capital to the business with no burden of repayment particularly during short period. (c) Term loan. Sources of permanent working capital: (a) Owner’s funds. These funds can be retained in the business permanently. For repayment of his source.Borrowing is also a source of working capital finance on permanent basis.from banks of financial institutions has the same characteristics as the bond financing or permanent working capital. 85 .competition and business can never flourish in the absence of adequate working capital. Permanent working capital provides more strength to the business.

(f) Other miscellaneous sources are Dealer‟s Deposits. old age retirement benefits excise taxes.Trade creditors provide a quite effective source of financing variable working capital for the period falling between the point when goods are purchased and the point when payment is made.Differed payment of taxes is also a source of working capital.Sources of temporary working capital: (a) Trade creditors.bank loan is used for variable or temporary working capital such loans run for 30 days to several months with renewals being very common. (c) Commercial paper.It can be defined as a short-term money market instrument issued in the form of promissory notes for a fixed maturity. etc. providend fund. (e) Tax liabilities. staff deducted at source. sales taxes. 86 . etc. It will be much unsecured and will have a maturity period running from 90 days to 180 days.The entire amount deducted towards depreciation to fixed assets is not invested in the acquisition of fixed assets and is saved and utilized in business as working capitals. Besides it. (b) Bank loan. It will meet the short-term finance requirements of the companies and will be good short-term investment for parking temporary surpluses by corporate bodies. (d) Depreciation as a source of working capital. and retain them for some period in business to be used as working capital. business organizations collect taxes by way of income tax payable on salaries. Customer‟s Advances. Taxes are not paid from day to day but estimated liability for taxes is indicated in balance sheets.

Current Liabilities Rs.5882679 2.236.00 22.20 35.80 Working capital management year current ratio Mar '12 Mar’11 Mar’10 mar'09 Mar'08 2.688.396.675.208.925.675.2532916 2.618.8932705 2.90 21.30 13.720.545.105333 2.79 30.336.86 10.70 12.84 20.86 13.80 20.527.30 30.70 30.139.364846231 87 .DATA ANALYSIS AND INTERPRETATION: Working Capital = Current Assets . In cores year Total Current Assets Total Current Liabilities Working capital Mar '12 Mar’11 Mar’10 mar'09 Mar'08 42.909.815.60 17.93 17.

2:1 88 . Therefore.e.  Current ratio of the organization match to the standard ratio i. we can conclude that the organization is growing faster than previous years.INTERPRITATION: Working Capital is comparatively good in the year 2012.

 The main thing.  The above analysis enables the company to understand the financial position and financial soundness of NTPC. based on their educational qualification.  High credit payable period.  Consistently maintaining higher inventories. I got that most of the employees are having some satisfaction and few are not satisfied in NTPC as some employees are getting more salary than they deserve. 89 .  The firm‟s Liquidity position in terms of short term and long term are good.CONCLUSION & SUGGESTIONS: CONCLUSION:  The tools applied in the study to analyze the efficiency and effectiveness in financial management is most appropriate ones. FINDINGS AND INFERENCES:  Blockage of high cash and bank balances in government securities. Dadri.  Excessive working capital during rising cost of materials.

 The Company should try to control its cost to enhance its profit margins.  The Company should try to focus on avoiding wastage of raw materials i.e.  High cost cutting measures should be adopted. 90 .Suggestions to the company: Effective computerization: All the departments should be computerized and SAP should be properly implemented. coal during inbound transportation.. Improved coordination: A proper co-ordination between all the departments should be improved Training: All the employee should properly trained about the technologies which are being implemented  The Company should pump more money into business through debt or equity and should reduce reliance on short term creditors.

P.M.com.php?option=com_content&view=article&id=312&Itemid  http://www. New Delhi: Excel Publication (2005) Websites:  http://www.co.ntpc. Financial accounting for management (1st edition): Sultan Chand & Sons New Delhi(2009)  Maheshwari S.in  http://www.  NTPC news Magazine of different years.  http://www.com  http://www. New Delhi: Vikash Publishing House  Khan and Jain. Financial management (9th edition).indiabudget. Working Capital Management (Ist edition).N & Maheshwari S. Rostagi.org.nic.  Employee‟s hand book. : Tata McGraw-Hill Publishing Company Limited New Delhi (2009)  R.BIBLIOGRAPHY: Books :  Mukherjee. Financial management (5th edition Ed): GalGotia Publishing Company New Delhi(2008)  Krish Rangarajan & Anil Mishra.in/index. An introduction to accountancy (9th edition: Vikas) Publishing House New Delhi (2008)  Panday /I.K.rbi. 91 . Financial management (5th edition Ed).indianfoline.moneycontrol.in Financial Information from the Company:  Financial policy report of different years issued by NTPC.

Financial management: Principles & Practice.2007-08 o 29th Edition. Vol.  C.245. New Delhi. Sultan chand & sons (9th edition). “Inventory Management Program” Management Accounting. 2004. Annual reports of NTPC: o 28th Edition.S.57(December 1975) p. p. “Learning & the Lessee.33  Dr.53 (July 1971). Levin &Charles A Kirkpatrick. MacDonald and Evans. ch.J.J.Slay Baugh. Tanna and Karam Singh. Plymouth.9. Vol. 3rd Edition (New York: McGraw-Hill 1975) Chapter 7 & 8  Happy Pierce. Maheswari.N.. References:  Woolf.13  Richard I. First Edition.E.: Management.  Solomon.Prentic-Hall of India. p.an introduction to financial management.182 92 . Financial Management.and Pringle.  Horizon journal. Quantitative Approaches to Management.1977 p.2008-09 o 30th Edition -2009-10 o 31th Edition -2010-11 o 32th Edition -2011-12  News flash – NTPC journal.J.

 K.J.”Working capital management in practice. Minn. K.Sell.” in readings on the management of working capital.Smith and S.B.B.Tersiree. pp.B.: West publishing 1980. 2nd edition. Material management & inventory control (New York : Elsevier North Holland 1976)  Rajmani Rajan & Ajay Shah.Smith (St.  R. October 2003 93 . Paul. “ New directions in Indian financial sector policy‟.

ANNEXURES

QUESTIONNAIRRE

1. Which of the following types of company will have the lowest level of investment in working capital to finance? a) Supermarkets b) Car manufacturers c) Ship builders d) Water suppliers e) Chemical manufacturers

2. Which of the following factors does not need to be considered when formulating policies on the level and financing of working capital?

a) The relative cost of short-term and long-term finance b) The nature of current business operations c) The attitude to risk of a company‟s managers d) The availability of revenue reserves and capital reserves e) Terms of trade offered by competitors

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3. Which of the following statements relating to working capital financing is not correct? a) b) c) Short-term debt is cheaper than long-term debt An aggressive policy uses long-term debt to finance fluctuating current assets The matching principle indicates that fluctuating current assets should be financed by s hort-term debt d) e) Long-term funds are more expensive than short-term funds but also riskier Long-term debt is less risky that short-term debt

4.

Identify the incorrect statement in connection with working capital management.

a) Long-term funds are more expensive than short-term funds but also riskier b) Permanent current assets should be financed from long-term sources if a moderate or matching policy is adopted c) The objectives of working capital management are profitability and liquidity d) Conservative financing policies use short-term funds to finance only part of fluctuating current assets e) Aggressive financing policies increase profitability at the cost of higher risk

95

5. Which of the following will improve a company's working capital management position? a) An increased level of bad debts b) An increased debtor collection period c) An increase in the credit period allowed by suppliers d) An increase in the stock turnover period e) An increase in the length of the production process

6. Identify which technique will not help a company to optimize its working capital cycle. a) Offering discounts for early payment by debtors b) Applying the economic order quantity model to stock management c) Adopting the use of just-in-time stock management methods d) Taking full advantage of credit offered by trade suppliers e) Using cash management models to optimize the level of cash held

96

Which statement is it? a) Assessment of the credit status of prospective customers can reduce the risk of bad debts b) A key variable affecting the level of debtors is the financing policy of the company c) Credit analysis depends on the provision of relevant information. Which of the following investments is not acceptable as a way for companies to invest short-term cash surpluses? a) Sterling certificates of deposit b) Treasury bills c) Ordinary shares d) Sterling commercial paper e) Money market deposits 8. One of the following statements concerning debtor management is incorrect.7. for example trade references d) Credit limits should be reviewed periodically e) Longer credit terms may increase turnover. but they also increase the risk of bad debts \ 97 .

Identify which of the following measures is not likely to make debtor management more effective. a) Offering discounts for earlier payment b) Undertaking an aged debtor analysis on a regular basis c) Assessing the creditworthiness of new customers prior to granting credit d) Employing the services of a factor e) Delaying payment of invoices 98 . Identify the executives working are satisfied with their colleagues payoffs? a) Very satisfied b) Satisfied c) Not satisfied d) dissatisfied 10.9.