SUMMER TRAINING PROJECT REPORT On

“WORKING CAPITAL MANAGEMENT”

At BHEL, HARIDWAR

In partial fulfilment for the award of the degree of

MASTER OF BUSINESS ADMINISTRATION

(Financial Management)

Batch 2017-19

Submitted To:- Submitted by:-

Dr. Ashfaq Ali Name:- Sarthak Sharma

(Head of Department) Roll No:- 1724970075

Submitted to:
SHRI RAM GROUP OF COLLEGES, MUZAFFARNAGAR
ABDUL KALAM TECHNICAL UNIVERSITY, LUCKNOW

[Type here]
 DECLARATION
I, Sarthak Sharma, student of MBA 2nd year, studying at Shri Ram Group
of Colleges, Muzaffarnagar hereby declare that summer training report on
“Working Capital Management” submitted to AKTU, Lucknow in partial
fulfilment of Degree of Master Administration is the original work conducted by
me.

The information and data given in the report is authentic to the best of
my knowledge.

This summer training is not being submitted to any other University for
award of any other Degree, Diploma and Fellowship.

Sarthak Sharma
 ACKNOWLEDGEMENT
I hereby certify that the work, which is being presented in the summer
project report, entitled “Working capital management in BHEL,
HARIDWAR” in partial fulfillment of the requirement for the award of the
degree of Master of Business Administration and submitted to the institution is an
authentic record of my own work carried out during the period from 5 June to 3
August 2017 under the supervision of ………………………….

I would also like to express my gratitude and regards to my mentor Dr.

Asfaq Ali (HOD, SRGC) for his exemplary guidance, monitoring and constant
encouragement throughout the course of the study. The blessing, help and
guidance given by him time to time shall carry me a long way in the journey
of life on which I am about to embark.
I greatly acknowledge …………………………. in Bharat Heavy Electricals
Limited, Haridwar . For giving me the opportunity to work in his prestigious
place.
 PREFACE
The conceptual knowledge acquired by management students is best manifested
in the projects and training they undergo. As a part of curriculum of MBA, I have
got a chance to undergo practical training in BHEL, Haridwar. The present project
gives a perfect vent to my understanding of the financial management specially.

The project entitled “Working Capital Management” is based on them of BHEL

performance on the basis of economic value addition made by the BHEL.

The project will provide all the information regarding Ratio Analysis and on
Working Capital Management and on their importance in BHARAT HEAVY
ELECTRICAL LIMITED,

I also hope that this report will be beneficial for my next batches and for those
who are related to this topic.
 Table of contents
PART-I
1. Industry profile
An overview of BHEL
BHEL Existence
Units in India
BHEL Performance (Corporate Level)
Vision, Mission and Values of BHEL

2. Objectives of BHEL

3. Products of BHEL

4. BHEL Business Areas

5. Statement Showing Shareholding Pattern of BHEL (31-3-2016)

• Shareholding
• Public Shareholding

6. Depart mentation in BHEL ,Haridwar unit

7. Finance Department BHEL, Haridwar unit

8. SWOT Analysis of BHEL

PART- II

1. Introduction of the Study

2. Objective of the Study

3. Research Methodology

4. Balance Sheet of BHEL

5. Analysis and Interpretation

6. Limitation of the Study

7. Conclusion and Comments

8. Bibliography
PART-I
 1. AN OVERVIEW OF BHEL

Company Background
Bharat Heavy Electricals Limited (BHEL) is an Indian state-owned
integrated power plant equipment manufacturer and operates as engineering and
manufacturing company based in New Delhi, India. BHEL was established in
1964, ushering in the indigenous Heavy Electrical Equipment industry in India.
The company has been earning profits continuously since 1971-72 and paying
dividends since 1976-77.It is one of the only 7 mega Public Sector Undertakings
(PSUs) of India clubbed under the esteemed 'Maharatna' status. On 1 February
2013, the Government of India granted Maharatna status to Bharat Heavy
Electricals Limited.

It is engaged in the design, engineering, manufacture, construction, testing,

commissioning and servicing of a wide range of products and services for the core
sectors of the economy, viz. Power, Transmission, Industry, Transportation,
Renewable Energy, Oil & Gas and Defense. It has 15 manufacturing divisions,
two repair units, four regional offices, eight service centers, eight overseas offices
and 15 regional centers and currently operates at more than 150 project sites across
India and abroad. Most of its manufacturing units and other entities have been
accredited to Quality Management Systems (ISO 9001:2008), Environmental
Management Systems (ISO 14001:2004) and Occupational Health & Safety
Management Systems (OHSAS 18001:2007).

It is the 7th largest power equipment manufacturer in the world. In the year
2011, it was ranked ninth most innovative company in the world by US business
magazine Forbes. BHEL is the only Indian Engineering company on the list,
which contains online retail firm Amazon at the second position with Apple and
Google at fifth and seventh positions, respectively. It is also placed at 4th place in
Forbes Asia's Fabulous 50 List of 2010BHEL has been the flag bearer of Indian
engineering enterprises across the globe for over four decades. Continuing its
focus on globalization, BHEL has achieved consistent growth in its exports. Its
references encompass almost the entire range of BHEL products and services,
covering thermal, hydro and gas-based turnkey power projects, substation
projects, rehabilitation projects, besides a wide variety of products like
Transformers, Compressors, Motors, Valves and Oil field equipment,
Electrostatic Precipitators, Photovoltaic equipment, Insulators, Heat Exchangers,
Switchgears, Castings and Forgings, etc.

The cumulative overseas installed capacity of BHEL manufactured power

plants stands at close to 10 GW. The first large turnkey project export by an Indian
company was done by BHEL in Libya (1977) and since the past few decades,
BHEL has been expanding its operations in the field of exports. Currently, BHEL
has established references in 78 countries across the globe with major
contributions in the power sector of various countries and has contracted power
plant equipment of around 17,000 MW outside India. With the growing impetus
on the renewables sector worldwide, BHEL has reinforced its presence in this
segment with orders from Turkey and Nigeria. In 2015-16, BHEL secured export
orders from 17 countries with maiden orders from Belgium and Mozambique.

Some of the major successes achieved by BHEL have been in gas-based

power projects in Oman, Libya, Malaysia, UAE, Saudi Arabia, Iraq, Bangladesh,
Sri Lanka, China, Kazakhstan, Belarus, Yemen; thermal power projects in Cyprus,
Malta, Libya, Egypt, Indonesia, Thailand, Malaysia, Sudan, Syria, Ethiopia,
Senegal, New Caledonia, Ukraine; hydro power plants in New Zealand, Malaysia,
Azerbaijan, Bhutan, Nepal, Taiwan, Tajikistan, Vietnam, Rwanda, Thailand,
Afghanistan, Democratic Republic of Congo, Burundi; and substation projects &
equipment in various countries. Execution of these overseas projects has also
provided BHEL the experience of working with world renowned consulting
organizations and inspection agencies. The company has been successful in
meeting demanding requirements of international markets, in terms of complexity
of work as well as technological, quality and other requirements viz. HSE
requirements, financing packages and associated O&M services, to name a few.
BHEL has proved its capability to undertake projects on fast-track basis. BHEL
has also established its versatility to successfully meet the other varying needs of
various sectors, be it captive power, utility power generation or for the oil sector.
Besides undertaking turnkey projects on its own, BHEL also possesses the
requisite flexibility to interface and complement other international companies for
large projects, and has also exhibited adaptability by manufacturing and supplying
intermediate products.

The company is taking a number of strategic business initiatives to fuel

further growth in overseas business. This includes firmly establishing itself in
target export markets, positioning BHEL as a regular EPC contractor in the
global market both in utility and IPP segments and exploring various
opportunities for setting up overseas joint ventures, etc.

BHEL Awards
BHEL, where Quality Systems as per ISO-9000 have taken deep roots, has now
made significant achievements in Business Excellence by serving recognition
certificates from CII for 4 out of 5 units that participated in the CII-EXIM
Business Excellence Award Scheme in 2010-2011. Continuing its tradition of
bagging prestigious National/International Awards, the company has been
honored with several awards which included “EEPC Star Performer Awards” in
the Product Group of Projects Exports for 20 consecutive years, SCOPE Award
for Excellence and Outstanding Contribution to the Public Sector Management.
“India Power Award for Equipment Manufacturing and for electrifying
Lakshadweep Islands with Solar Power” from Council of power utilities. Six
Prime Minister’s Award including one “Shram Bhushan” and 3” Vishwakarma
Rashtriya Puraskars”, “IEI Industry Excellence Award 2010” for Overall Business
Excellence and Industry Practices from the Institution of Engineers(India); NDTV
Profit Business Leadershi
BHEL EXISTENCE
 UNITS in India
FIRST GENERATION

Bhopal : Heavy Electrical plant.

Haridwar : Heavy Electrical Equipment plant.

Hyderabad : Heavy Electrical Power Equipment plant.

SECOND GENERATION

Tiruchy : High Pressure Boiler plant (Tamil Nadu)

Jhansi : Transformer and Locomotive Plant.

Haridwar : Central foundry and forge Plant.

Tiruchy : Seamless Steel Tube Plant.

UNITS THROUGH ACQUISTION & MERGER
Bangalore : Electronics Division

: Electro Porcelain Division

NEW MANUFACTURING UNITS

Ranipet : Boiler Auxiliaries Plant

Jagdishpur : Insulator plant.

Govindwal : Industrial Valves Plant

Rudrapur : Component and fabrication plant.

Bangalore : Energy Systems Division

BHEL is growing concern to meet the changing needs of the nation has taken it beyond
power into the total gamut of energy, industry and transportation BHEL is able to offer a service
in each of this fields. Its manufacturing capability is supported by a corporate R&D division at
Hyderabad works closely with the research and development cells at various units and Welding
Research Institute at Tiruchinapalli.

BHEL PERFORMANCE (CORPORATE LEVEL)

PARAMETER 2014-15 2 015-16

Turnover (Rs. /Cr.) 30,947 9,792

Order inflow (Rs. /Cr.) 22,096 31,528

Net Profit (Rs. /Cr.) 3,461 2,140

Net Worth (Rs. /Cr.) 33,047 34,085

Megawatts Commissioned 9,270 10,340

R & D Investment (Rs. /Cr.) 1,199 1,248

Patents / Copyrights Filled (Nos.) 351 385

 VISION, MISSION AND VALUES OF BHEL

VISION

A global engineering enterprise providing solutions for a better tomorrow.

MISSION

Providing sustainable business solution in the fields of Energy, Industry &

Infrastructure.

VALUES

• GOVERNANCE: We are stewards of our shareholders investments and

we take that responsibility very seriously. We are accountable and

responsible for delivering superior results that make a difference in the

lives of the people we touch.

• RESPECT: We value the unique contribution of each individual. We

believe in respect for human dignity and we respect the need to preserve the

environment around us.

• EXCELLENCE: We are committed to deliver and demonstrate excellence

in whatever we do.

• LOYALTY: We are loyal to our customers, to our company and to each

other.

• ENTEGRITY: We work with highest ethical standards and demonstrate

a behavior that is honest, decent and fair. We are dedicated to the highest

levels of personal and institutional integrity.

• COMMITMENT: We set high performance standards for ourselves as

individuals and our teams. We honour our commitments in a timely manner.

• INNOVATION: We constantly support development of newer

technologies, products, improved processes, better services and
management practices. .
 COMPANY PROFILE

BHEL is one of the pioneers in engineering industries in the world. The vital
role played by BHEL today in the country is the mark of its continuous efforts to
improve the service in the nation by consultancy, manufacturing and offering
services in power sector.

The success story of BHEL however goes back in 1956 when its first plant
was setup in Bhopal. The three major plants in HARIDWAR, HYDERABAD
AND THRICHIRAPALLI followed this. These plants have been the core of
BHEL’S efforts to grow, diversify, and become one of the most integrated power
and industrial equipment manufacturers in the world. The company now has 14
manufacturing units, 8 service centers and 4 power sectors regional centers,
besides project sites spread all over India and abroad.

BHEL manufactures over 180 products under 30 major product groups and
caters to core sectors of the Indian Economy viz., Power Generation &
Transmission, Industry, Transportation, Telecommunication, Renewable Energy,
oil business etc. Its products have been established an enviable reputation for high
quality and reliability. This is due to the emphasis placed all along on design,
engineering and manufacturing to international standards by acquiring and
adopting some of the best technologies developed in its own R&D centers. BHEL
has acquired ISO 9000 certification for quality management and ISO 14001
certification for environment management. BHEL caters to the needs of different
sectors by designing and manufacturing according to the needs of its clientele in
power sector.
 2. OBJECTIVES of bhel
A dynamic is one which keeps its aim high adopts itself quickly to changing
environment. So here we are in BHEL. The objectives of the company have been
redefined in the corporate plan for the 90’s.

1. BUSINESS MISSION
To be a leading engineering enterprises providing quality product
system and services in the field of conversion, transmission, utilization and
conversion of energy for application in the areas of electric power,
transportation, oil & gas explorations and industries. Utilize company’s
capabilities and resources to extend business into allied areas and other
priority sector of the economy like defence, communication and
electronics.

2. GROWTH
To ensure a steady growth by enhancing the competitive edge of
BHEL in existing business new areas and international market so as to fulfil
national expectation from BHEL.

3. PROFITABILITY
To provide a reasonable and adequate return on capital employed,
primarily through improvement in operational, efficiency, capacity
utilization and productivity and generate adequate internal resources to
finance the company’s growth.
4. FOCUS
To build a high degree of customers confidence by providing
increased value for his money though International standards of product
quality performance and superior customer service.

5. PEOPLE ORIENTATION
• To enable each employees to achieve his potential, improve his capabilities
perceive his role and responsibilities and participate and contribute to the
growth and success of the company.

• To invest in human resources continuously and be alive to their needs.

6. TECHNOLOGY
To achieve technological excellence in operation by development of
indigenous technologies and efficient absorption and adoption of imparted
technologies to suit business and priorities and provide competitive
advantage to the company.

7. IMAGE
To fulfil the expectation this stakes holders like government as owner.
Employees, customers and the country at large have from BHEL.
 3. Products of BHEL

1. Indian Railways WCAM 3 Manufactured By BHEL

2. Boiler (steam generator) under collaboration with Combustion
Engineering, USA
3. Gas generator
4. Hydro generator
5. Steam turbine - under collaboration with Siemens, Germany
6. Gas turbine - under collaboration with GE, USA
7. Hydro turbine
8. Transportation equipment
9. Traction machines
10. AC Motors
11. Transformer
12. Switchgear
13. Oil field equipment (OFE)-under collaboration with National Oil well
Varco.
14. Boiler drum
15. Water wall panel, Coils, Super Heaters, Re heaters, SOFA panels, Burner
panels,
Piping & Headers
16. Wind mill
17. Valves
18. Electrostatic precipitators
19. R & D products
 4. BHEL Business Areas
• POWER GENERATION
Power generation sector comprises thermal, gas, hydro, and nuclear
power plant business.

• TELECOMMUNICATION
BHEL also caters to Telecommunication Sector by way of small,
medium and large switching systems.

• TRANSMISSION AND DISTRIBUTION (T&D)

BHEL offers wide-ranging products and systems for T&D
applications. Products manufactured include: power transformers,
instrument transformers, dry type transformers, series &shunt reactors,
capacitor banks, vacuum &SF6 circuit breakers, gas-insulated switchgears
and insulators.

• INDUSTRIES
BHEL is a major contributor of equipment and systems to industries,
cement, sugar, fertilizer, refineries, petrochemicals, paper, oil and gas,
metallurgical and other process industries. The range of systems &
equipment supplied includes: captive power plants, co-generation plants,
DG power plants, industrial steam turbines, industrial boilers and
auxiliaries, waste heat recovery boilers, gas turbines, heat exchangers and
pressure vessels, centrifugal compressors, electrical machines, pumps,
valves, seamless steel tubes, electrostatic precipitators, fabric filters,
reactors, fluidized bed combustion boilers, chemical recovery boilers and
process controls.
• TRANSPORTATION
BHEL is involved in the development, design, engineering,
marketing, production, installation, and maintenance and after-sales service
of rolling stock and traction propulsions systems. BHEL manufactures
electric locomotives up to 5000 HP, diesel electric locomotives from 350
HP to 3100 HP, both for mainline and shunting duty applications. It also
produces rolling stock for special applications viz.

Overhead equipment cars, special well wagons, and Rail-cum road vehicle.

• RENEWABLE ENERGY
Technologies that can be offered by BHEL for exploiting non-
conventional and renewable sources of energy include: wind electric
generators, solar photovoltaic systems, solar heating systems, solar lanterns
and battery-powered road vehicles.

• OIL AND GAS

BHEL’s products range includes Deep Drilling Oil Rigs, Mobile
Rigs, Work Over Rigs, Well Heads and X-Mas Trees, Choke and Kill
Manifolds, Full Bore Gate Valves, Mudline Suspension System, Casing
Support system Sub-Sea Well Heads, Block valves, Seamless pipes, Motors,
Compressor, Heat Exchangers etc.

• INTERNATIONAL OPERATIONS
BHEL is one of the largest exporters of engineering products &
services from India, ranking among the major power plant equipment
suppliers in the world.
 Category of Shareholders No. of Total No. of
Shareholders Shares

Central Government/ State Government 1 1543452000

Total (A) 1 1543452000

Public Shareholdings

A. Institution

1. Mutual funds/ UTI 90 66355008

2. Financial Institution/ Banks 69 1228617301

3. Insurance Companies 8 255393216

4. Foreign Institutional Investors - -

5. Qualified Foreign Investors 427 341291372

Sub-Total (P) 594 791656897

B. Non-Institution

1. Bodies corporate - -

2. Individuals

a) Individuals holding nominal share capital up to - -

Rs 1 lakh

b) Individuals holding nominal share capital in excess 393424 77945610

of Rs 1 lakh

c) Others 10610 34545493

Sub-Total (Q) 404034 112491103

 Total B= (P+Q) 404628 904148000

Grand Total (A+B) 404629 2447600000

5. Statement showing Shareholding

pattern of BHEL (31-3-2016)

Shareholding Pattern shown by Graph

Shareholding Pattern

Central Government/ State

Government
Public Shareholding
(Institution)
Public Shareholding (Non
Institution)
 Public Shareholding

Public Shareholding
Mutual funds/UTI

Financial Institutions / Banks

Insurance companies

Foreign Institutional Investors

Qualified Foreign Investor

Individual holding nominal share

capital upto Rs 1 lakh
Individual holding nominal share
capital in excess of Rs 1 lakh
other

This above pie-chart shows the public shareholding shareholders institution and noninstitution
both separately.
6. DEPARTMENTATION IN HARIDWAR UNIT
1. Commercial
The function of this department involve tendering, issue of the work
order, coordination with various agencies inside as well as outside BHEL
such as design production, planning, quality control, purchase, stores,
finance, CDC, etc. The outside agencies involved are the business sector,
other units of BHEL and customers. The other functions are dispatch
monitoring, collection of receivable, organization of erection activities and
services after sales.

2. Engineering

The main functions of this department are:

• Technical offer and cost estimation

• Design and drafting
• Specification of component
• Resolving technical problem of manufacturing, sites and warranties

• Analysis of sites complaints.

3. Production planning and control

The main functions are;
• Preparation of annual budget and product wise monthly production
scheduled
• Preparation of the monthly production plan for feeder and assembly
shops
• Get engineering information released from design department so as
to meet production scheduled
 • After release of manufacturing information, PPC decides whether to
make component inside the plant or off loaded them off ancillaries
Preparation of actual output at the end of every month

4. Personnel department
BHEL has been a pioneer in public in many fields including the areas
of human resource management. It is being increasingly acknowledge, that
fair and uniform application of personnel policies and function have a great
impact on morale and its major roles are:

Personnel Role
o Advisory management on effective use of human
resources

o Manpower planning recruitment, selection,

promotion

o Training and development of lineman

o Measurement of assessment of individual and

group behaviour
Welfare Role
o research in personnel and organization
problems

o o managing services like canteen, crèches,

etc

o group dynamics like group counselling,

motivation, leadership, etc
 Clerical Role
o Salary and wages
administration

o o Maintenance of
records

Planning and development (P&D)

The function of P&D may be broadly listed as follow:-

• Preparation of budget and budgeted control:- each year the

department prepares the revenue and capital budget. These budgets
as benchmarks against which actual performance is assessed.

• Data compilation and report generation:- numerous reports are

required to be sent to various internal and external agencies
throughout the year. All these reports are prepared and sent by P&D
department.
• Strategic Planning:- this department is also actively involved in
identification of new business areas, assessment of project viability,
obtaining approval for project and their subsequent execution.

5. Works Engineering and Services

It is concert with maintenance. The function of this department is to
seek break down occurrence in the machine and to get it rectified. Every
type of problem relating to township, electricity, overwork, plant
machinery is looked after by the department.
6. Electronic Data Processing (EDP) Department
EDP involved in computerization of work under the various departments:
Financial Department:- to

O Pay rolls of employees

O Sales accounts of the company

financial accounts

O Report related to supply bills

O Material accounts

• Production Management:- to
Production docket system

• Operation card

• Material issue voucher

• Yellow factory receipt

Engineering Management:- to prepare

o Shipping list
Material Management:- to

o Indent generation

o Monitoring of indents

o Issue of tender notice

o Issue of purchase cards

 o Bin card monitoring

Personnel Management
o To keep records of all employees

o To make MIS possible for timely control measures

7. Publicity and Public Relation

It helps the commercial department to remain indirect contact with
customers. This department acts as a spoke man of the company. Publicity
is generated through the following:

• Meetings
• Arranging seminars
• Arranging press conference- news papers
 7. FINANCE DEPARTMENT IN BHEL
A sound financial management is the crux of the efficient management of a
business enterprise and financial management on scientific and sound lines in a
prime consideration of BHEL. The Finance/Accounts Department of the company
controls all the financial operations. That is directed at improving profitability and
internal resources generation through optional utilization of man, material,
machines, tools and money. According to its various functions the Finance/
Account Department is divided into following sections:

1. Cash
2. Price Store Ledger (PSL)
3. Cost Section
4. Sales section
5. Supply Bill
6. Pay
7. Books Budget and MIS
8. Miscellaneous and Revenue
9. Internal Audit
10. Provident Fund
11. Works
12. Travelling Allowance
13. Export Incentives, Sales Tax and Income Tax
1. Price Store Ledger(PSL)

PSL section is entrusted with the job of material pricing and

determination of material consumption. PSL are used for the material
accounting as well as their financial accounting. The documents involved
are: -

SRV – Store Receipt Voucher

MIV – Material Issue Voucher

SRN – Store Return Note

MTV – Material Transformer Note

RCDV – Receipt cum Dispatch Voucher

Passing of Bills

The Bills Passing process starts after the account section gets the purchase
order, SRV’s and bills from suppliers. The accountant’s section then makes
payment.

Terms of Payment are of three kinds:

a. 10% in advance payment

b. 100% after receipt and acceptance
c. Partial advance and the remaining after the receipt and
acceptance

Foreign Purchase
There are certain items, which are to be imported. A license is
required for such items. The license can reacquired from DGTD. There is
also a provision for forward cover.
2. Cash, & P.F

This section is responsible of banking of all the money worth received by

the company from the costumers and disbursement of all authorized
payment on behalf of the company to suppliers, contractors in form
cheques, cash, drafts, postal orders etc. It is also concerned with payment
of salaries, wages and other personal payments of employees.

Cash section prepares these statements for management information: -

• Daily – cash flow > Direction collection of sales.

• Weekly – Cash inflow > outflow – during week
• Statement of pending bills of cash section status of margin money.
• Monthly – cash flow forecast for 3 months.
• Operating result statement.
• Statement of outstanding letter of credit & bank guarantee.
• Daily bank transfer statement.
• Bank reconciliation statement is also prepared

BHEL has centralized cash credit system.

P.F stands for provident fund that was started from 1952 the rate of
interest decided by time to time rate of reduction is 8.33% to 12% that
whole amount get by employee at the time of retirement. P.F includes same
contribution of employees as well as company.

3. Cost Section

This section is responsible for accounting and reporting of costs. It

determines direct labor rates and Engineers rates and overheads recovery
 factors of manufacturing, engineering, commercial and administration for
cost estimation. The cost accounting is done to record and collect cost for
work orders and product level information. It prepares material/ labor
overheads consumption statements. It furnishes cost reports to management
about: –

a. Profitability –Product wise/ Order wise.

b. Variance _Estimated and Actual Cost
c. Performance –Efficiency and operating results

4. Books, Budget and MIS

General ledger is the consolidated list of general entries. As soon as the

general voucher is received, the general ledger is prepared.

In the general ledger, receipt and expenditure both are recorded. This
section prepares section wise and monthly Trial Balance.

After the preparation of general ledger and trial balance, P&L Account and
the Balance Sheet are prepared yearly. The Balance sheet is prepared in
accordance with the company’s act.

Two types of Audits are done by the BHEL:

a. Internal Audit
b. Government Audit
 Budget

Budget is a target setting for operations. There are two types of Budget
prepared by BHEL: –

• Revenue Budget:

It consists of consolidated production programmed &related expenses

to carry out that program.

• Capital Budget:

It includes the fixed assets. Preparation of budget is done at three levels

a. Internal Level: – Each department is sent information about the

budgeted expenses provided to the department. It is necessary for
control

b. Corporate Level: – Budget of BHEL unit is sent to the corporate

office
c. Government Level: – Budget of BHEL is also sent to Government
level.

5. Management Information System

Three types of information system are generated in the BHEL.

a. Internal for the Unit

b. For the Corporate Office
c. For Government
 Every month’s information is generated regarding allocation of funds on
various aspects for each department and is sent to every department.
Information is generated mainly for control purpose. Other information
generated is:-

a. Cash Flow
b. Inventory Level (non-moving and slow moving items)
c. Inventory of finished goods

6. Pay Section

It is assigned the job of payment of salaries and other personal

payments to employees it looks after provident fund, gratuity and bonuses
insurance facilities extend to employees.

Employees leave encashment, official travelling reimbursement and

this section deals other welfare expenses. It is also entrusted with clearance
of medical claims.

7. Sales Section

The accounting of sales is done in this section. The activity of this section
starts when the commercial department issues a work order. Work order
part II(Financial) summarizes the financial terms of the contract. It contains
the information like the name of customer &consignee, description of
goods to be produced and sold, quantity, sales value, terms of delivery and
payment, price variation clause, sales tax, excise duty, liquidates damages,
 Bank guarantee, fight etc. with the part II W.O. details. Apart from that the
terms and conditions embodied in W.O. part II as regard adjustment of
advances, deferred debts and calculation of PVC, Excise duty and Sales tax
must also be complies with. Sales section submits the bills to the customers
as desired by Commercial either direct or through Financial such as Banks.

This Section does the necessary accounting for the bills raised; money
collected from customers in form of advance or sale proceeds.

8. Miscellaneous and Revenue

Miscellaneous wing of this section deals with the payment of advances to

employees going on official tours, LTC etc. Payment to transporters,
welfare activities, security services, repairs and maintenance, daily wages,
furniture, departmental and other petty expenses. The revenue wing of this
section with recovery of rent, electricity and water charges for other
facilities from the salary of the employees

9. Internal Audit

BHEL is having its own team of internal auditors, who to unearth the
discrepancies in accounting, check periodically the books of accounts as
well as schedules forming part of accounts.

10. Export Incentives, Sales Tax and Income Tax

This section deals with all the procedural work during export of goods
and import of raw material and components. It is responsible for the
assessment of sales tax claim for export incentive and duty drawback and
matters relating to custom duty and sales tax. To promote export and makes
indigenous good compete in the international market the government is
providing a number of incentives in form of duty exemption scheme and
duty drawback scheme.

 Duty Exemption

Under this scheme an Advance License is granted for the import of raw
materials intermediaries, component accessories and packing material used
as an input for the manufacture of goods to be exported without payment of
customs duty. Advance license provide is of two types-

a) Value Based Advance License

b) Quality Based Advance License

All advance license issued subject fulfilment of time bound export

obligation and value addition as per specified at the time of issue of license.

 Duty drawback scheme

Duty drawback is the provision made for the exporter for the refund of
customs and central excise duty charged on the input used for the
manufacture of the export product. Physical and deemed are fully exempted
from sales tax and excise duty. BHEL is provided concession in sales tax
subject to the insurance of CST press from prescribed by the statute.
 8. SWOT ANALYSIS

STRENGTHS:
PSU, Brand name and well known for its Quality.
Well established units and skilled labour force.
Its innovation and integrity.
International certifications
The only company recognized in international market, with Apple and
Google.
It is well known for its Quality and
assurance High operational efficiency.
All the units are controlled by the Head
Office
 A 0 debt company.
WEAKNESSES:

It is well known for its quality because of which the cost involved in
manufacturing goods are high, resulting in high pricing of goods.
As it is ISO certified organization, it has to strictly adhere to the rules and
regulation laid by the parliament
PSU, President is Supreme, his actions are final.

OPPORTUNITIES:

Global demand is high, its overseas operations has given more

opportunities to make their mark.
Exposure to new technology gives an opportunity for every individual
to learn something new.
Innovation is the key for success, the filing of new patents every year
makes them unique and explore further.

THREATS:

New competitors have entered the market.

The goods offered by them are much cheaper and they carry most
advanced technology

Increase is imports of goods by the Government.

PART-II
 1. INTRODUCTION OF WORKING CAPITAL

A measure of both a company’s efficiency and its short term financial

health. If company current assets do not exceed its current liabilities, then it may
run into trouble paying back creditors in the short term. The worst case scenario
is bankruptcy. A declining working capital ratio over a longer time period could
also be a red Flag that warrants further analysis.

For example: - It could be that the company’s sales volumes are decreasing and
as a result its accounts receivables number continues to get smaller. The working
capital is calculated as:

Working Capital = Current Assets – Current Liabilities

Meaning OF Working Capital

“Working capital refers to a firm’s investment in short term assets-cash,

short term securities, accounts receivable and inventories.”

Weston &Brigham

Working capital refers to the part of the firm’s capital which is required for
financing short-term or current assets such as cash, marketable securities, debtors
and inventories. Funds, thus invested in current assets keep revolving fast and are
being constantly converted into cash and this cash flows out again in exchange for
other current assets. Hence it is also known as revolving or circulating capital or
short term capital.
 Working capital can be classified regularly on its requirement. There are two
concepts of working capital

a) Gross working capital

b) Net working capital

Gross Working Capital

Gross working capital is the total cash, and cash equivalents, that a business
has onhand. Cash equivalents may include inventory, accounts receivable, and
investments, such as marketable securities, which may be liquidated within the
year.

The gross working capital concept work over two aspects of current assets
management.

a) Optimum investment in current assets

b) Financing of current assets

Net working capital

Net working capital refers to the difference between current assets and
current liabilities. Current liabilities are those claims of outsiders, which are
expected to mature for payment within an accounting year and include bills
payable and outstanding expenses. Net working capacity indicates the liquidity
position of the firm. Generally net working capacity is referred to as working
capital.

Net working capital may be referring to:

1) Conversion of cash into raw material

2) Conversion of raw material into work-in-progress
3) Conversion of work-in-progress into finished goods
4) Conversion of finished goods into accounts receivable, and
5) Conversion of accounts receivable into cash.

Determinants of working capital:

1. Nature and Size of Business 11. Cash requirements

2. Manufacturing cycle 12. Time
3. Business fluctuation 13. Volume of sales
4. Production policy 14. Terms of purchases and sales

5. Firm’s credit policy 15. Inventory turnover

6. Availability credit 16. Inflation

7. Growth of expansion 17. Seasonal fluctuations

8. Profit margin and profit 18. Re payment ability

appropriation 19. Actives of firm

20. Demand of creditors
9. Price level Changes
10. Operating of efficiency
2.Objective of working capital
management
The basic objective of working capital management is to provide adequate
support of the functioning of normal business operation of a company. The term
adequate working capital is subjective depending on management’s attitude
towards uncertainty /risk.

a) Maintenance of working capital

b) Availability of sample fund at the time of need

MEDIA

Receivable Policy
The customers from whom receivable or book debts have to be collected in
the future are called trade debtors. Trade credit always creates trade debtors or
account receivables. The trade credit arises when a firm sells its product or
services on credit and does not receive cash immediately.

Business firms generally sell goods on credit top facilities sales. When a firm
makes an ordinary sale of goods and services and does not receive payments. The
firm grants trade credit and create accounts receivable that would be collected in
the future.
 The characteristics of credit sales are;
• It involves an element of risk
• It is based on economic value

• It implies for future

 Credit policy is prepared in the receivable management, it is the

combination of three decision variables:

• Credit standard
• Credit terms
• Collection effort
Receivable Policy in BHEL HARIDWAR
1. The main products of BHEL are heavy industrial goods with long operating
cycle. BHEL grant liberal term regarding trade credit to lure the potential
customers to by its products at favourable selling prices.

2. To utilize its capacity, BHEL is granting liberal trade credit to its main
customers like railways, power industries and other private parties.

3. All the BHEL units are having their commercial departments and Regional
Operational Divisions (RODs).

4. Carry out the job of recovery from customers, the sales section also takes a
part in receivable management by preparing and sending invoices and
reminders to customers at appropriate time. They keep track records of
money received from customers as advances, as against dispatch of finished
goods and money recoverable on account of price variation claims and
conversion of deferred department into debtors. Monitoring is done on basis
of work orders and schedule is prepared regarding outstanding balances.
The terms and condition with the customers are finalized according to the
credit policy laid down by corporate office BHEL.
 INVENTORY MANAGEMENT
Inventories are the most significant part of current assets of a large majority
of companies in India. The large size of inventory maintained by the firms as a
considerable amount of fund’s which is required to be committed to them. A firm
neglecting the management of inventories will be jeopardizing its long run
profitability and may fail ultimately.

In a manufacturing firm the level of inventory depends on the operation

cycle, and a long operating cycle bearing firm needs to maintain high levels of
inventory.

Nature of Inventories

Inventory is stocks of the product a company is manufacturing for sale and

components that constitutes the product. They are of following types;

a) Raw material
b) Work in progress
c) Finished goods
d) Supplies or stores and spares

Need of Inventory

It has also same needs as receivable management, viz;

a) Transaction motive
b) Precautionary motive
c) Speculative motive
Techniques of Inventory management

1) EOQ (Economic Order Quantity)

2) Ordering cost: order placing, transportation cost
3) Carrying cost: warehousing, handling
4) Reorder point
5) Safety stock

a) cost of running out of goods

b) material cost
c) order cost
d) carrying cost
e) cost of funds tied up in inventories

Inventory Control Systems

1) ABC inventory control system: - This analytical approach tends to

measure the significance of each item of Inventories in terms of its value.

2) JIT system: - Japanese firm popularize that system which eliminates the
necessity of carrying large inventories and thus, saves carrying and other
expenses.

3) Computerized Inventory Control System:- It is an automatic system of

counting inventories.
 Inventory Management Policy in BHEL

HARIDWAR

The investment in inventory in proportion to total is a dominant determinant

of working capital management. It holds much importance in context in BHEL as
it is having a long production cycle where a good amount of capital is tied up in
form of raw material, work in progress and conversion cost.

Production planning and control department plays a pivotal role in inventory

management. The engineering department plays a supporting role and provides
the requisition regarding technology to be applied and material required to PPC
department.

In BHEL the inventory control is perform with following steps;-

1. Planning:- This is done by PPC department is consultation with purchase,

commercial, design and manufacturing department prepares the planning
schedule. The schedule along with information provided by engineering
and design department help in material planning and inventory control.

2. Procurement:-The procurement is done by purchase department. It is

done with the assistance of PPC and commercial department for
maintaining a trade off between carrying cost and ordering cost.

A single purchase order is placed for the entire quantity of a specific item
and its scattered delivery over a period of time is received. The method
 helps in obtaining cash and quantity discount and saving carrying cost. In
case of foreign purchase also one order in placed for the full requirement
of an item and scattered delivery is obtained because variation caused in
material cost due to fluctuation in exchange rate is much less than the
carrying cost of the material which is approximately 25% of the total
price.

3. Receipt & custody:-For the proper inventory control on receipt of

material in store, quality control department checks the material as per
specification. The cost section fills details of all the purchase by issuing
store receipt voucher and material issue voucher.
4. Issue:-After receiving the material and storing, the management keeps the
information whether these material are being issued to desired destination.
Full record of every issuing of material is kept for the proper inventory
control.

5. Accounting:-The record of every transaction regarding the use of material

in every department is kept. These records give the overall view of how
and where inventories have been used.

Methods use for Inventory Control:-In BHEL, planning and control of

Inventory is done by using two methods-

a) ABC analysis
b) Slow moving and non-moving goods analysis
c) Budgeting material requirement
d) Fixation of raw material levels
e) Variety reduction
 Inventory valuation
1) Inventory is valued at actual/ estimated cost or net realizable value,
whichever is lower.

2) Finished goods in plants and work in progress involving hydro and

thermal sets including gas based power plants, boilers auxiliaries,
compressors and industrial turbo sets are valued at actual / estimated
factory cost or at 97.5% of the realizable value whichever is lower.

3) In respect of valuation of finished goods in plant and work-in-progress,

cost means factory cost, actual/estimated factory cost include excise duty
payable on manufactured goods.

4) The components and other materials purchased/ manufactured against

production order but declared surplus are charged off to revenue retaining
residual value based on technical estimates.

5) In respect of raw material, components, loose tools, stores and spares cost
means weighted average cost.
 Techniques used to forecast the working capital
requirement:

There are basically 3 approaches used to forecast the working capital

requirement.

1. Estimation of components of working capital method.

This method is based on the basic definition of working capital, excess of

current assets over the current liabilities. In other worked the amount of
different constituent of the working capital such as debtors, cash inventories,
creditors etc are estimated separately and the total amount of working capital
requirement is worked out accordingly.

2. Percent sales method

This is the most simple and widely used method in combination with other
scientific methods. According to this method a ratio is determined for
estimating the future working capital requirement. This is generally based on
the past experience of management as the ratio varies from industry to industry.
For example if the past experience shows that the amount of working capital
has been 20% of sales and projected amount of sales for the next year is Rs. 10
lakhs, the required amount of working capital shall be Rs. 2 lakhs.

As seen from above the above method is merely an estimation based on past
experience. Their fore a lot depends on the efficiency of decision maker, which
may not be correct in all circumstances. This method assumes a linear
relationship of working capital and sales, however the relationship can also be
curvilinear.

3. Operating cycle approach

The need of working capital arises mainly because of them gap between the
production of goods and their actual realization after sales. This gap is
technically referred as the “operating cycle” or the “cash cycle” of the business.
If it were possible to complete the entire job instantaneously, there would be
no need for current asset (working capital). Since it is not possible, every
business organization is forced to have current asset and hence operating cycle.
Operating cycle and cash cycle are two important components of
working capital management. Together they determine the efficiency of a firm
regarding working capital management.

Operating cycle:

Operating cycle refers to the delay between the buying of raw materials and
the receipt of cash from sales proceeds. In other words, operating cycle refers
to the number of days taken for the conversion of cash to inventory through
the conversion of accounts receivable to cash. It indicates towards the time
period for which cash is engaged in inventory and accounts receivable. If an
operating cycle is long, then there is lower accessibility to cash for satisfying
liabilities for the short term.

Operating cycle takes into consideration the following elements:

Accounts Payable, Cash, Accounts Receivables, and Inventory

Replacement.

The following formula is used for calculating operating cycle

Operating cycle = age of inventory + collection period

Cash cycle:

It is also termed as net operating cycle, asset conversion cycle, working capital
cycle or cash conversion cycle.

Cash cycle is implemented in the financial assessment of a commercial

enterprise. The more the figure is increased, the higher is the period for which
the cash of a commercial entity is engaged in commercial activities and is
inaccessible for other functions, for instance investments. The cash cycle is
interpreted as the number of days between the payment for inputs and getting
cash by sales of commodities manufactured from that input.
 The fundamental formula that is applied for the calculation of cash conversion
cycle is as follows:
Cash cycle = (Average Stockholding Period) + (Average
Receivables Period) – (Average Payables Period) or Operating
cycle – Average Payable Period Here

Average Receivables Period (in days) = Accounts

Receivable/Average Daily

Average Stockholding Period (in days) = Closing Stock/Average

Daily

Average Payable Period (in days) = Accounts Payable/Average

Daily Credit Purchases

A short cash cycle reflects sound management of working capital. On the other
hand, a long cash cycle denotes that capital is occupied when the commercial
entity is expecting its clients to make payments.
There is always a probability that a commercial enterprise can face negative cash
conversion cycle, in which case they are getting payments from the clients
before any payment is made to the suppliers. Instances of such business entities
are commonly those companies, which apply JIT or Just in Time techniques, for
example Dell, as well as commercial enterprises, which purchase on terms and
conditions of longer duration credits and perform sales against cash, for instance
Tesco. The more the manufacturing procedure is extended, the higher the
amount of cash should be kept engaged in inventories by the company.
Likewise, the more time is taken for the clients for the purpose of bill payment,
the more is the accounts receivable amount. From another viewpoint, if a
company is able to detain the payment for its internal inputs, it can decrease the
amount of money required. Put differently, the net working capital is diminished
by accounts payable
ANALYSIS OF WORKING CAPITAL
MANAGEMENT

The analysis working capital is primarily a test of short term solvency.

There are dangers in having too little or too much working capital. Therefore the
managers have to be very vigilant all throughout about the trends in the items that
make up working capital.

The question to be studied and answered in connection with the analysis of

working capital

1) Is the management utilising working capital effectively?

2) Is the amount of working capital is adequate, excessive or insufficient?
3) Does the firm have favourable credit rating?
4) Is the current financial position improving?

Tools of Working Capital Analysis

• Working capital ratio analysis

• Movement of working capital analysis
• Fund flow analysis
• Cash flow analysis
• Working capital budget
• Working capital report
 3. RESEARCH METHODOLOGY

Scope of the study:

The scope of this project work is confined to the Working Capital

Management Practices at BHEL- EDN Division, the study has been taken to
learn in detail the policies and strategies used in maintaining working capital
at BHEL EDN, Bangalore.

Research Design

In view of the objective of the study listed above, a descriptive research

design has been adopted. The Data is collected by using 2 sources
.
Sources of Data:

There are two sources of collecting data (of both financial and non-
financial in nature).
1) Primary Data
2) Secondary Data

Primary Data:

The primary data was collected by visiting the Organization and by

holding informal discussions with various department heads. Information
pertaining to receivables, cash, inventory and creditors as collected from the
respective departments in the unit. The following departments provided the
details.

Finance Department

Materials Management Department

Public Relations.
 Secondary Data:

Secondary Data was collected from the following sources

Annual report
Journals and books
Research articles
Websites
Public relations Department

Plan of Analysis
The data is collected and analyzed and interpreted with the help of
ratios related to working capital. Tables and graphs are prepared to compare the
performance of the company from one year to another.
 4.Balance Sheet

Resources 2011-12 2012-13 2013-14 2014-15 2015-16

Current 101217 121726 113634 118952 111881.95
Assets
Fixed Assets 30441 32955 31098 29499 28183.53
Total Assets 131658 154681 144732 148451 140065.48
Current 53952 55734 41198 37806 35765.07
Liabilities
Fixed 77706 98947 103532 110644 104300.41
Liabilities
Total 131658 154681 144730 148450 140065.48
Liabilities
Inventories 36733 45581 39726 42411 47593.57

Cash 506 41 9 15 7

Sale/Turnover 130033 137146 111703 70689 63087.50

W. capital 47265 65992 72435 81146 76116 .88

1. Current Ratio
2. Quick Ratio
3. Cash Ratio
4. Turnover Ratio
5. Inventory Turnover Ratio
 6. Total Assets Turnover Ratio
7. Return on Capital Employed
8. Debtors Turnover Ratio
9. Creditors Turnover Ratio

Trends of working capital in BHEL HARIDWAR

(in lakhs)
Working capital = Current assets-current liabilities

Year 2011-12 2012-13 2013-14 2014-15 2015-16

Working 47265 65992 72435 81146 76116.88

Capital

Trends of Working Capital

90000

80000

70000

60000

50000

40000 Trends of Working Capital

30000

20000

10000

0
2011-12 2012-13 2013-14 2014-15 2015-16
Working capital difference between current assets and current
labilities.
 5. Analysis and Interpretation
We are using the technique of ratio analysis as a means of checking upon
the efficiency with which working capital is being used in the company.
These are as follows:-

1. Current ratio

Current ratio represent the margin of safety for creditors, higher the current
ratio greater the margin of safety, larger the amount of current assets in relation to
current liabilities, the more the firm’s liability to meet its current obligations. This
ratio is calculated as follows:

Current Ratio = Current Assets / Current Liabilities

Satisfactory Current Ratio is 2:1

Current ratio measure the short term solvency of the firm, it ability to meet
short term obligation which indicates the rupees of current assets available for
each rupee of current liability the current ratio of 2:1 is been considered
satisfactory.

Year 2011-12 2012-13 2013-14 2014-15 2015-16

Current ratio 1.87 2.18 2.76 3.15 3.12

 Current Ratio
3.5

2.5

Current Ratio
1.5

0.5

0
2011-12 2012-13 2013-14 2014-15 2015-16

Analysis: From the above ratios it can be seen that Current Ratio for year 2014-
15 has growth by approx. 3 % from the previous year which indicates that short
term solvency of the firm has gone grow. But the current ratios of last three years
are less than one and on an average it is 1.2616:1. This means for every one Re.
of current liabilities there is 1.2616 of current assets available to meet the short
term obligation. So this indicates that the short-term liquidity position of the
company is very good and short-term conditions are safe as far as payment is
concerned, although, as a conventional rule, a current ratio of 2 to 1 is considered
far better.

2. Quick Ratio

The quick ratio is a measure of how well a company can meet its short-
term financial liabilities. Also known as the acid-test ratio, it can be calculated as
follows:
 Quick Ratio = Current Assets - Stock
Current Liabilities

Year 2011-12 2012-13 2013-14 2014-15 2015-16

Quick ratio 1.195 1.366 1.793 2.024 1.797

Quick Ratio
2.5

1.5

Quick Ratio
1

0.5

0
2011-12 2012-13 2013-14 2014-15 2015-16

Analysis: The liquid ratio of 1:1 is considered to be satisfactory in case of any

organization whereas in case of BHEL Jhansi Liquidity Ratio is not even
approaching one, hence there is liquidity problem in payment in time. Here
payments to creditors are not made in time due to lack of cash / liquid fund.

3. CASH RATIO

Cash is the most liquid assets and it should be minimum in the firm as the
excess of cash in hand or bank implies loss of interest i.e. the wrong utilization of
funds, which could have been utilized/invested elsewhere. There is nothing to be
worried about lack of cash if the company has the reserve borrowing power.
 Cash Ratio = _____Cash_______
Current Liabilities

Year 2011-12 2012-13 2013-14 2014-15 2015-16

Cash Ratio 0.0937 0.000735 0.000218 0.000396 0.000195

Cash Ratio
0.1
0.09
0.08
0.07
0.06
0.05
Cash Ratio
0.04
0.03
0.02
0.01
0
2011-12 2012-13 2013-14 2014-15 2015-16

Analysis: This cash ratio graph shows that the cash ratio 2012-13 decrease because cash flow
decrease in past financial year but current liabilities is increase so this ratio 0.092 down and
2012-13 to 2015-16 not more variable.
 4. Turnover Ratio

A company uses working capital to fund operations and purchase inventory.

These operation and inventory are then converted into sales revenue for the
company. The working capital turnover ratio is used to analyze the relationship
between the money used to fund operations and the sales generated from these
operations. In a general sense, the higher the working capital turnover, the better
because it means that the company is generating a lot of sales compared to the
money it uses to fund the sales.

Turnover Ratio = Turnover /Working capital

Year 2011- 2012-13 2013-14 2014-15 2015-16

12
Working Capital
2.75 2.08 1.54 0.87 0.82
Turnover Ratio
 Working Capital Turnover Ratio
3

2.5

1.5 Working Capital Turnover

Ratio
1

0.5

0
2011-12 2012-13 2013-14 2014-15 2015-16

Analysis: Turnover ratio show this manufacturing BHEL, Jhansi unit financial
position in not good because sales is decrease constantly year by year.

5. Inventory Turnover Ratio

It shows how rapidly the inventory is turning into receivable through sales.
High ratio is indicates of good inventory management. A low ITR implies
excessive inventory levels.

Ratio should not be too high and should not be low.

Inventory Turnover Ratio = Sales______

Avg. Inventory
 Inventory Turnover Ratio
4.5

3.5

2.5

2 Inventory Turnover Ratio

1.5

0.5

0
2011-12 2012-13 2013-14 2014-15 2015-16

Year 2011-12 2012-13 2013-14 2014-15 2015-16

Current ratio 3.88 3.33 2.62 1.77 1.40

Analysis: Inventory turnover ratio indicates that how quick inventories are
uncontrolled into sales. It gives the position of the inventory management of the
company. The average of this ratio for past five years comes out to be 2.6 which
show that for every ratio 2.6 of net sales. The efficiency of BHEL, Jhansi in
turning its inventory for year 2015-16 has dropped from last five years which
indicates that in the plant.

\
 6. Total Assets Turnover ratio

Total assets turnover computation is for just to get an idea for net assets
turnover the ratio shows organization ability in generating sales from all financial
resources committed to total assets. The total assets of turnover of BHEL show.

Total Assets Turnover Ratio = Sales_____

Total Assets

Year 2011-12 2012-13 2013-14 2014-15 2015-16

Total Assets
0.987 0.886 0.771 0.476 0.450
Turnover Ratio

Total Assets Turnover Ratio

1.2

0.8

0.6
Total Assets Turnover Ratio

0.4

0.2

0
2011-12 2012-13 2013-14 2014-15 2015-16
Analysis: This graph shows the relation between total turnover and total assets.
In 2011-12 to 2015-16 sales is constantly down so the ratio is also decrease, Total
Assets Turnover Ratio was 0.987 and an decrease to last five year 2016 to 0.450

7. Return on capital employed

Return on capital employed of financial year

PBIT

Return on Capital employee = Capital Employed

Year 2011-12 2012-13 2013-14 2014- 2015-

15 16
Return on 0.226 0.133 0.00828 -0.118 0.267
capital
employed

Return on Capital Employed

0.3

0.25

0.2

0.15

0.1
Return on Capital Employed
0.05

0
2011-12 2012-13 2013-14 2014-15 2015-16
-0.05

-0.1

-0.15
 In this graph the return on capital employed in 2011-12 was 0.226 and
decreased to three year 2014-15,0.118 but in 2015-16 was 0.267 and from this
point it start falling down and reached at 2015-16 was 0.267

8. Debtors’ turnover Ratio

This ratio expresses the amount of unrealized debts out of credit sales. Thus,
debtor’s turnover ratio is calculated to obtain the information regarding success
or failure of organization in collection of debts. This ratio is also known as
Receivable Turnover Ratio.

Debtors Turnover Ratio = ___Credit Sales___

Avg. Receivables

Avg. Collection Period (Days) = ____365_________

Debtors Turnover Ratio

Year 2011-12 2012-13 2013-14 2014-15 2015-16

Sales avg. 2.120 2.114 1.609 1.022 0.982

Debtors Ratio
 Debtors Turnover Ratio
2.5

1.5

1 Debtors Turnover Ratio

0.5

0
2011-12 2012-13 2013-14 2014-15 2015-16

Analysis: This ratio was indicates that how quick debtors are collected
and higher ratio show better position of the company. Here from the graph it is
clear that in 2011-12 debtors were collected normally but from 2012-13 to 2015-
16 is condition has worsened as ratio has decrease it mean debts are not being
collected rapidly.

9. Creditors Turnover Ratio

This ratio is also known as Payable Turnover ratio. It depicts the relation
between Credit Purchase and Creditors. This ratio indicates the condition of an
organization with regard to payment of creditors. Higher ratio indicates quicker
payment and vice-versa.
 Creditors
Turnover Ratio = ___Net Credit Purchase/Consumption___
Creditors

Credit Payment Period (Days) = _________365__________

Creditors Turnover Ratio

Year 2010-11 2011-12 2012-13 2013-14 2015-16

Credit -- 2.51 2.63 2.27 2.34

Payment

Ratio

Creditors Turnover Ratio

2.7

2.6

2.5

2.4

2.3 Creditors Turnover Ratio

2.2

2.1

2
2011-12 2012-13 2013-14 2014-15

Analysis: This ratio was indicates that how quick creditors are collected
and higher ratio show better position of the company. Here from the graph it is
clear that in 2011-12 to 2012-13 creditors were collected quickly but from 2012-
13 to 2015-16 is condition has worsened as ratio has decrease it mean creditors
are not being collected rapidly.

Standard credit period for industry like BHEL Jhansi is 90days. As against
that actual period is very high. This is basically because the time involved in
procurement and acceptance of material is very long due to technical reason.
 Comparative graph of Turnover and
PBIT

Through this graph we understand easily that turnover increases year by

year in 20115-16 it was 130032.72 lakhs and reached to 137146 lakhs in 2012-13
in 2013-14 the rate of turnover decrease is more. And the profit of BHEL in 2015-
16 was 13001 lakh and it decreases to 10260 in 2012-13 but fall down in 2012-13
to 10260. This shows that last 4 years profit of company decreased and last two
year sufferer loss.

Year 2011-12 2012-13 2013-14 2014-15 2015-16

Total Turnover 130032.72 137145.84 111703 70689 63087.50
PBIT 13001 10260 709 -11328 -23817.67
 6. Limitation of the study

• Since time available is only six weeks for the project work, a detailed

analysis was not possible.

• The researcher was not able to focus on qualification factors, which

influences the financial position of the organisation.

• The study was limited to BHEL, so the result could not be generalized to
macro level.

• Ratio analysis is only tools used for the financial statement analysis.

• Since the finance and accounting is an organisation being a very sensitive

area, analysis is based on the assumed data of BHEL.

• As the study is only for one particular company, inter firm comparison is
not possible.

77
 7. Conclusion & comments
At the end of this project I’m feel that I have gained a lot of knowledge
about this Haridwar unit and “Working Capital Management” procedure followed
in BHEL Haridwar unit.

In rotation work I learned about its working routine and collecting a lot of
information related to stream like Engineering and physics and employees mutual
relations.

So, through this project I have learned:

 Object of finance
 Analysis of finance
 Analysis of estimation of working capital
 Analysis of receivable management
 Inventory management of BHEL Haridwar

 The firm BHEL liquidity position in terms of short term and long

term are good.  The efficiency of the company is also good but last

some years not better.

 The above analysis enables the company to understand the financial

position and financial soundness of BHEL Haridwar unit.

78
So, at last I am highly obliged of BHEL Haridwar unit for providing me the
knowledge about their unit and we are thankful to all member of BHEL Haridwar
unit.

79
 8. BIBLIOGRAPHY

• Annual reports of BHEL

• Collected the Data from BHEL Jhansi

• S.N Maheshwari Management Accounting

• Management Accounting by I.M Pandey

• WEBSITES VISITED

 www.bhel.com

 www.bheljhs.co.in

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