Summer Internship Project Report

On

CASH FLOW AND RATIO ANALYSIS OF

OHPC
(Odisha Hydro Power Corporation)

Submitted By: SATTWICK DAS

MASTER IN BUSINESS ADMINISTRATION

(FINANCIAL MANAGEMENT)

Roll No.: 19MBA (FM) 027

Session: 2019-21
Under the Guidance of:
Internal Guide: External Guide:
Dr. Rabindra Kumar Swain Mr. Pravakar Mohanty
Professor Director (Finance)
Utkal University OHPC
 PREFACE

In the age of neck to neck competition, much importance is given to practical knowledge.

The theory to knowledge is not sufficient to understand the boundless field of Business
Management.

Today every person wants to be master in the field they are in; the practical training is the life of
management students. In modern world the importance of management is increasing day by day.

Industrial training provides a student’s sufficient knowledge to develop an education to connect

theory and practical. Therefore, to fulfil our purpose, I have done some training in OHPC Ltd.

With these factors in mind, the students are required to prepare a project report on a topic in any
company. In this regard I have prepared an internship project report on CASH FLOW AND
RATIO ANALYSIS in OHPC Ltd. as per the syllabus of UTKAL UNIVERSITY. This is
presented in best possible manner and to best of mobility.

Date: Name: SATTWICK DAS

Place: UTKAL UNIVERSITY Roll No: 19 MBA FM 27

 ACKNOWLEDGEMENT

It is really a great pleasure to have this opportunity to describe the feeling of gratitude
imprisoned in the core of my heart. I convey my sincere gratitude to DR. RABINDRA
KUMAR SWAIN for giving me the opportunity to prepare my project work in OHPC Ltd. I
express my sincere thanks to all the staff members of OHPC.

I am thankful to SRI.PRAVAKAR MOHANTY for his guidance during my project work and
sparing his valuable time for the same.

I express my sincere obligation and thanks to all the Faculties of Utkal University for their
valuable advice in guiding me at every stage in bringing out this report.

I am also thankful to my family for their kind co-operation which made my take easy.

Name: SATTWICK DAS

Roll No: 19 MBA FM 27

 DECLARATION

I, Mr. Sattwick Das, student of Master of Finance and Control, bearing Roll no 27, from,
UTKAL UNIVERSITY BHUBANESWAR, hereby declare that the presented report of
internship titled “CASHFLOW AND RATIO ANALYSIS” of OHPC Ltd is uniquely prepared
by me after the 30 days’ work at Bhubaneswar, main branch of OHPC Ltd. I also confirm that,
the report is only prepared for my academic requirement not for any other purpose.

It might not be used with the interest of the corporation.

Date: NAME: SATTWICK DAS

Place: UTKAL UNIVERSITY Roll No: 19 MBA (FM) 027

 CERTIFICATE

This is to certify that the project report entitled “CASHFLOW AND RATIO
ANALYSIS at OHPC Ltd.”, Bhubaneswar has been prepared by SATTWICK DAS under
my supervision and guidance, as the fulfilment for the requirement of MBA (Finance) from
Utkal University. His hard work is satisfactory.

DR. RABINDRA KUMAR SWAIN

P.G. Department of Commerce
Utkal University, Bhubaneswar
 CERTIFICATE

This is to certify that the project report entitled “CASHFLOW AND RATIO at OHPC Ltd.”,
Bhubaneswar has been prepared by SATTWICK DAS under my supervision and guidance, as
the fulfilment for the requirement of MBA (Finance) from Utkal University. His hard work is
satisfactory.

Date: Signature of Guide (External)

(Mr. Pravakar Mohanty)

Director (Finance)

OHPC, BBSR.
 INDEX
SL NO. TOPICS PAGE

CHAPTER- 1 1. INTRODUCTION
2. REVIEW OF LITERATURE
3. NEED OF THE STUDY
4. OBJECTIVES
5. SCOPE
6. METHODOLOGY
7. LIMITATIONS
CHAPTER -2 1. COMPANY PROFILE
2. OHPC COMPANY PROFILE
3. OHPC POWER STATION MAPS
4. AT A GLANCE
5. 3 HEADS: FINANCE, TECHNICAL & HRD
6. VISION
7. MISSION AND OBJECTIVES
8. BIRTH OF OHPC
CHAPTER-3 CONCEPTUAL STUDY

a. Cash Flow Statement:

i. Meaning & Concept
ii. Classification of Cash Flows
iii. Uses & Significance
iv. Objectives of Cash Flows
v. Limitations of Cash Flows
b. Ratio Analysis:
i. Meaning & Concept
ii. Nature of Ratio Analysis
iii. Use & Significance of Ratio Analysis
iv. Limitations of Ratio Analysis
v. Classification of Ratios
vi. Prominent Ratios for Cash Flow Analysis
CHAPTER- 4 DATA ANALYSIS & INTERPRETATION

1. Interpretation of Operating Cash Flow

Ratio
2. Interpretation of Current Cash Debt
Coverage Ratio
3. Interpretation of Absolute Liquid Ratio
4. Interpretation of Cash Generating Power
Ratio
5. Interpretation of Net Cash Flow to Average
Total Assets Ratio
6. Interpretation of External Financing Index
Ratio
7. Interpretation of Return on Invested
Capital
8. Interpretation of Operating Cash Flow
Margin

CHAPTER- 5 FINDINGS AND SUGGESTIONS

CHAPTER- 6 CONCLUSION
CHAPTER – 1

INTRODUCTION
INTRODUCTION TO FINANCE: The economic development of any country depends upon
the Existence of a well-organized financial system. It is the financial system which supplies the
necessary financial inputs for the Production of goods and services which in turn promote the
well-being and standard of living of the people of a country. Finance is the life blood of
business. Without finance, the heart and brain of business organization cannot function implying
there by its natural death. Right from conceiving the idea of birth of a business to its liquidation,
finance is required. Inputs are made available only with finance. Even managerial ability can be
had with only finance. So, finance is the pivot around which the whole business operations
cluster. Therefore, there is an imperative need to efficiently manage the finances of a company.
Actually, sometimes, it is not the inadequate finance that is the cause of failure of a business but
the mismanagement of sources which is ultimately responsible for it. Proper finance is the real
key to the success of any business enterprise. Without proper finance no business can survive
nor can it be expanded and modernized. It is Useful in decision making. It is a key determinant
of business success. Financial information or results is useful in measurement of performance. It
enables for basis of planning, coordination and control. It is useful to shareholders and investors.
Financial Management is an integral part of Business Management. It is one of the key functions
in an organization.

MEANING OF COST:

COST‟ represents a sacrifice of values, a foregoing or a release of something of value. It is the

price of economic resources used as a result of producing or doing the thing costed. It is the
amount of expenditure incurred on a given thing. Cost has been defined as the amount measured
in money or cash expended or other party transferred, capital stock issued, services performed or
a liability incurred in consideration of goods and serviced received or to be received. By cost, we
mean the actual cost i.e. historical cost. ICWA (UK) defines cost as the amount of expenditure
(actual or notional) incurred on, or attributable to a specified thing or activity.

MEANING OF REVENUE - We know revenue can refer to income, sales or turnover, monetary units or
just plain money. From here, we get the idea of what revenue analysis means. It’s a deliberate, detailed and well-
researched report that indicates revenue for all activities in a company. This can range from sales (products and
services), costs, income, and other variables. Revenue analysis is important for business. With it, you can ensure
your plans and strategies do not deviate from your goal.
Review of literature:

❖ Phil Carroll (Carroll, 1953) in his books on “How to Control Production Costs”
stresses the need for improved cost analyses and control by business to secure
reasonable profit expectations. The book points out various inaccurate and illogical
cost-accounting techniques used by many companies. Every effort is made to create a
questioning attitude by management which will make it aware of its company’s faulty
procedures and lead to improved practical methods of cost control. Great emphasis is
placed upon the need for more detailed cost accounting, depicting actual conditions so
that good judgment can be applied to control and reduce costs.

❖ Charles T. Horngren, the Edmund W. Littlefield (Horngren, Datar, & Rajan, 2014)
Professor of Accounting, Emeritus, at the Stanford Graduate School of Business,
credited with inventive modern-day cost management practices known to everyone as
Chuck. Horngren was inducted into the Accounting Hall of Fame and was honoured
repeatedly for his contributions to the American Accounting Association in 1969, for
which he served as president and director of research. His textbook of Cost
Accounting: A Managerial Emphasis which is now in its 14th edition. It is just one of
several of his books that have shaped the education of generations of accounting
students of the whole world.

❖ Spence (Spence, January, 1984), in his study based on a conference proceeding

(Stiglitz & Mathewson) stated that in so many markets, the purpose of reducing their
costs organizations are competing over time to expanding their resources. Sometimes
the cost reducing investments function directly on costs. In so many cases it is found
that, they take the form of developing new products that bring in market and whatever
customers need more economic. Therefore, product development can have the
ultimate effect on direct cost reduction. In fact, if one thinks of the product as the
services it delivers to the customer, then product development often considered as cost
reduction. The factor of determining the value of the cost for research and
development is profitability or revenue. He also stated that since research and
developments in any organization represents the fixed cost, and are majorly affected
by the technological infrastructure.
❖ Charles F. Kettering, (Charles F. Kettering, n.d.) for many years’ chief of research for
Ford Motors in the USA. once defined research as “an organized process of finding
out what you're going to do when you can't keep on doing what you're doing now”.
The dictionary definition of “a course of critical investigation” is also enlightening.

❖ Dr. Pramod Kumar (Kumar, 1991) published a Book in 1991, “Analysis of Financial
statements of Indian industries.” The study covered the 17 private, 5 state owned and
1 central public sector companies. He studied the analysis of activities, profitability
assessment, return on capital investment, analysis of financial structure, analysis of
fixed assets and working capital. In his research he discusses several challenges faced
by cement industries and suggested possible solutions. He also suggested for the
improvement of profitability and techniques of cost control.

❖ Boardman (Boardman, Greenberg, Vining, & Weimer, 1996) identifies nine different
steps that are important for cost benefit analysis. He expands these steps and discusses
different drawbacks and difficulties. The Bank of England’s Monetary and Financial

❖ Statistics Division (MFSD) hosted a workshop on Cost Benefit Analysis (CBA) of

statistics, attended by representatives from a range of central banks and statistical
institutions.

❖ John Christian, Gillin, Amar Pandeya (Christian, Gillin, & Pandeya, 1997) talks about
the problems faced by facility managers in any organization. One such problem is the
estimation of operating and maintenance costs in the future. Such predictions are
extremely difficult to make, no matter how accurate or close to reality they are.
Accuracy is obtained by gathering earlier cost analysis and by studying the various
factors that determine and affect the cost. In the research, he described that fourteen
university facilities and eight government offices were investigated “Quantitative data
on the historical operating and maintenance costs of these facilities, along with
knowledge of the factors affecting the costs were elicited through various sources.
Cost prediction models developed, using neural networks, regression analyses, and
random deviation detection methods.
 ❖ Roland T. Rust, Christine Moorman and Peter R. (Roland T. Rust, Oct 2002), states
that financial benefits in terms of profit and cash flows may be derived from revenue
expansion, cost reduction or both simultaneously. The literature on both market
orientation and customer satisfaction provides support for revenue expansion whereas
the literature on both quality and operations provide impressive support for the cost
reduction perspective.

NEED OF THE STUDY

1. Finance enhances for business promotion

2. Useful in decision making.

3. It is a key determinant of business success.

4. Financial information or results is useful in measurement of performance.

5. It enables for basis of planning, coordination and control.

6. Useful to shareholders and investors.

OBJECTIVES

➢ To have an insight in the cost structure of OHPC.

➢ To determine the revenue structure of the company
➢ To compare the cost and revenue of OHPC.
SCOPE OF THE STUDY:

Cost analysis can be used at several levels. At the most basic level, cost allocation is simply
part of good program budgeting and accounting practices, which allow managers to
determine the true cost of providing a given unit of service. It deals with cost allocation, cost
effectiveness and cost benefit.

Five Tiers:

Tier 1 – Program definition

Tier 2 – Accountability

Tier 3 – Understanding & refining

Tier 4 - Program towards objective

Tier 5 – Program impact

Research Methodology:
Information is collected through secondary sources during the project. That information was
utilized for calculating performance evaluation and based on that, interpretations were made.
Sources of secondary data:
1. Most of the calculations are made on the financial statements of the company provided
statements.
2. Referring standard texts and referred books collected some of the information regarding
theoretical aspects.
3. Method- to assess the performance of the company method of observation of the work in
finance department in followed.
LIMITATIONS OF THE STUDY

I have to put whole heart to the project, but still are certain limitations while doing the project
work. Some of the limitations are as follows.

• Unavailability of sufficient time. The project has been done in a short period of time.

• As the study is based on secondary data, the inherent limitation of the secondary data
would have affected the study.
• Lack of communication with the staffs due to their busy schedule.
• Confidential data are not provided.

Chapter Plan:

• Chapter 1 - Introduction
• Chapter 2 - Company profile
• Chapter 3 – Conceptual Study
• Chapter 4 - Data analysis
• Chapter 5 - Findings and suggestions
• Chapter 6 – Bibliography
• Chapter 7 - Conclusion
 CHAPTER 2

COMPANY PROFILE
 COMPANY PROFILE

Consequent to the reform in power sector in Odisha, Odisha Hydro Power Corporation Ltd.
(OHPC) was incorporated in 21st April 1995 under the companies Act 1956.

Its objectives are:

• To acquire, establish, operate, maintain, renovate, modernize in the State of Odisha and else
while hydroelectric generating stations, thermal and nuclear electric generating stations and any
other electric generating stations based on any non-conventional sources of energy.

• To carry on the business of purchasing, selling, importing, exporting, producing, trading,

manufacturing or otherwise dealing in hydroelectric power, thermal and nuclear electric power
based on any non-conventional sources of energy.

• To study, investigate, collect information and data, review operations, plan, research, design,
prepare feasibility reports, prepare project reports, diagnose operational difficulties and
weaknesses and advise on the remedial measures to improve and modernize existing stations
and facilitate and to undertake for and on behalf of others the setting up of hydroelectric power
plants, thermal and nuclear electric power plants and any other power plants based on any non-
conventional source of energy.

The objectives incidental or ancillary to the attainment of the main objects are to acquire
business / companies for carrying on business of electric power, to acquire know-how, to carry
on consultancy services in any field of activity in which it is engaged, to act as an entrepreneur
on behalf of the Central or any State Govt. It is leading profitmaking state public sector
undertaking company which has its power plants at six locations.

• BURLA

• CHIPLIMA

• RENGALI

• UPPER KOLAB

• UPPER INDRAVATI

• BALIMELA
3 HEADS:

OHPC being a large company, has segregated its works into 3 different heads where there are
different activities carried out in different heads. Those are as follows:

1. Technical wings

2. Finance wings

3. HRD wings
Technical wings:

For efficient running of their Hydro Power stations, the technical wing of OHPC has been
reorganized to carry out the following activities.

• Monitoring the functioning of Power Plants.

• Preparation of data base.

• Monitoring of Renovation and Modernization Programs.

• Planning for future R&M Programs and new projects.

• Inventory & procurement monitoring.

• Generation and Maintenance Planning and monitoring.

• Tariff and PPA including coordination with GRIDCO and OERC

• Computerization and online communication

• Coordination with Govt. and Semi Govt. bodies.

2

FINANCE WINGS:

After formation of OHPC under the Reform Act a separate Finance wing with experienced and
qualified executives has been created to manage the corporate finance.

Activities

• Resource management

• Budget & Allocation

• Banking

• Loan and Investment

• Accounts & Audit

• Taxation

• Personnel Entitlement

• Provident Fund, Pension and Gratuity Fund

HRD WINGS:

Consequent to formation of OHPC, Professionals were inducted in the company. The Company
structure of OHPC is annexed Being a newly setup Corporation with employees from erstwhile
OSEB ex-employees of State Govt. and also employees recruited directly by OHPC the HRD
Wing is being faced with challenges to meet the multifarious problems of integration of such
employees into a cohesive group to achieve the company goals. HRD wing is constantly striving
to bring improvement in employee performance motivation and work culture.

FUNCTIONS:
• Implementation of Personnel Policies and rules

• Manpower Planning including recruitment & selection

• Retirement and superannuation

• Salary and other benefits

• Personnel records

VISION:

To be a leading power utility in the energy sector through diversified energy portfolio with due
care & concern to the environment.
MISSION:

• To develop water resources in the State and elsewhere in the Country while augmenting
hydro power generating capacity by setting up new hydro power projects.

• To adopt state of the art technology for up gradation of the existing hydro power stations to
achieve the highest level of efficiency.

• To establish and operate thermal power plants through joint ventures and also explore the
opportunities to develop renewable energy resources viz. small hydro, wind, solar.

• To develop & operate coal mines allocated jointly in favors of OHPC and other public sector
undertakings by the Ministry of Coal, Govt. of India.

• To improve productivity through effective planning and implementation of ERP system with
development of robust & concurrent IT infrastructure.

• To professionalize the work force in line with the modern management / technical know-how.

OBJECTIVES

• To develop the hydro resources in the state on its own or in joint venture with state and/or
central PSUs.

• To renovate and modernize the existing hydro power plant to improve efficiency and supply
reliable and quality power to the state in a cost-effective manner.

• To develop renewable sources of energy available in the state for sustainable development of
state.

• To develop thermal power by itself or in joint venture for long term energy security of the
state.

• Achieve energy generation target of 5200 MU.

• Achieve profitability target of Rs.28.05 Crore.

• Achieve weighted average plant availability factor 80.00%.

BIRTH OF OHPC;

The power sector in Odisha suffered from high transmission and distribution losses, inadequate
accountability for various segments, poor financial performance, poor quality of service and
manpower related issues. There was a pressing need to solve the financial problems of Odisha
State Electrical Board -OSEB and meet the projected demand of funds for investment in
generation, transmission and distribution system.

The Govt. of Odisha decided to restructure and substantially privatize the power sector, to make
supply more efficient and to be able to meet the investment needs of the sector. The Odisha
Govt.’s ultimate objective was to withdraw from the power sector as an operator of utilities,
having instead privately managed utilities operating in a competitive and appropriately regulated
power market.

Two Govt. owned corporate utilities were formed with agreement ensuring full autonomy with
effect from 1st April 1996. There were;

• Odisha Hydro Power Corporation- OHPC-responsible for hydro power generation.

• Grid Corporation of Odisha –GRIDCO-responsible for transmission and distribution.

• Pursuant to the Odisha Electricity, Reform rules, 1998, Govt. of Odisha transferred the
distribution companies with effect from 26th November1998. These four distribution companies
are CESCO, NESCO, WESCO and SOUTHCO

HIRAKUD HYDROEKECTRIC PROJECT, BURLA

Hirakud Dam Project is a multipurpose scheme intended for flood control, irrigation and power
generation. The dam is built across river Mahanadi at about 15 km upstream of Sambalpur town
in the state of Odisha.

BRIEF HISTORY OF THE PROJECT

After the heavy floods in 1937, Er. M. Visveswaraya gave proposal for detail investigation for
storage reservoirs in Mahanadi basin to tackle problem of flood in Mahanadi delta. The
multipurpose Hirakud Dam project is the first stage of the plan of Dr. Ajodhya NathKhosla, the
then Governor of Odisha. The commissioning of Unit III of Burla Power House was completed
on 18.12 56. The project was formally inaugurated by Pandit Jawaharlal Nehru on 13th January
1957.

CHIPLIMA HYDROELECTRIC PROJECT, CHPILMA

The multi-purpose Hirakud Dam across the river Mahanadi was constructed for flood control,
irrigation and power generation. Hirakud Dam is a composite structure of earth, concrete and
masonry. The main dam having an overall length of 4.8 km spans between hills Laxmi-Dungri on
left and Chandli-Dunguri on the right. The dam is flanged by 21 km log earthen dykes, both on
left and right sides to close the low saddles beyond the abutment hills. It has the distinction of
being at one time the longest earth dam in the world, being 25.8 km long with dams and dykes
taken together. It also has the rare distinction of forming the biggest artificial lake in Asia with
reservoir spread of 743 sq km at full reservoir level. Hirakud dam intercepts 83400 sq. km of
Mahanadi catchments. The reservoir has life storage of 5818 million cubic meters with gross
storage of 8136 million cubic meters.
Water from dam enters the turbine through trash-rack, intake structure and penstock and gets
discharged to the tailrace through draft tube. To control the flow, hydraulic intake gates are
provided for each machine.

RENGALI HYDROELECTRIC PROJECT,RENGALI

Rengali Multipurpose Project of Odisha State has been constructed for utilization water of
Brahmani for power generation benefit and providing flood control in the low-lying areas of the
river valley. The main Dam across river Brahmani with the Power Station is situated near village
Rengali of Talcher Sub-Division of Angul District at a distance of 65 K.Ms. upstream of Talcher
Town.

Project Cost

It was approved by planning commission in their letter no. II 2 (64) / 724 KI Dated 04.06.73 for
Rs.3532.68 lakhs.

BALIMELA HYDROELECTRIC PROJECT, BALIMELA

The Balimela Power Project forms the second stage of development of Machkund - Sileru River,
the first stage being the Machkund Project. The water released from Machkund Power House and
the inflow from intermediate catchment between Machkund-Balimela Dam is impounded by a
Earth-cum-Rock fill at Chitrakonda known as Balimela Dam. Balimela Dam is a joint project of
Odisha and Andhra Pradesh Governments and the inflow into Balimela Reservoir is shared
between the two States on 50:50 basis. The original estimates framed in the year 1962 for the
purpose of agreement between the two States of Odisha and Andhra Pradesh was for 24 Corer
rupees. Subsequently, this estimate was revised in the year 1972 for 46.30 corer rupees. Again,
the estimate was revised in the year 1975 for 52.14 Crore rupees. The revision of the estimate at
different phases of investigation and construction of the Project was necessitated for different
reasons, which include the rising costs of different spares, consumables and wages of different
categories of Workmen and Employees, decrease in the efficiency of the machineries, due to
longer use and also idling for non-availability of spares, increase in the distance to borrow areas
and height of the Dam from year to year etc.

The requisites Civil and Electrical works for the Balimela Reservoir for Power Generation in
Balimela Power House constitutes the Balimela Power Project. Thus, while the Balimela Dam
Project has been a joint project of Odisha and Andhra Pradesh, the BALIMELA POWER
PROJECT is entirely of ODISHA STATE.

UPPER KOLAB HYDRO ELECTRIC PROJECT, BARINIPUT

Upper Kolab Hydro Electric Project, located in the district of Koraput (Odisha) was taken up for
excavation in the year 1976 by the Irrigation and Power Department, Govt. of Odisha at an
estimated cost of Rs. 74.63 Corers. This Project is utilizing the water potential of river 'KOLAB a
tributary of river Godavari. It is a multipurpose project aimed at Generation of 95MW
Hydro Electric Power, providing irrigation facilities to 47,985 H.A. by lift canal irrigation and
supplying drinking water to Damonjodi, Koraput, Sunabeda and Jeypore town.

The Project work was completed in two stages i.e. STAGE-I & STAGE-II. In stage -I,3 nos. of
80MW Hydro Generators along with their auxiliaries, 220 KV Switchyard, water conductor
system, Reservoir etc. were completed and commissioned; Under Stage-II, only the Installation
and commissioning of Unit IV was completed. Major Works of Stage-I were completed during
1993. The total revised expenditure for completion of major electrical works under stage-I and
stage-II comes out to be 8880 lakhs (Approx.).

UPPER INDRAVATI HYDRO ELECTRIC PROJECT, MUKHIGUDA

The Upper Indravati Project envisages diversion of water, of the Indravati River in its upper
reaches into the Mahanadi valley for power generation and irrigation. The project would involve
construction of 4 dams across the Indravati and its tributaries 8 dykes and two inter-linking
channels to from a single reservoir with a live capacity of 1435.5 MW, 4.32 km. tunnel, a power
house with installation of 4 units of 150 MW each, 9 km. tail race channel and an irrigation
barrage across Hati river with the associated irrigation canals.

Achievements:

• Taking suitable action for preventing the failure of the Units/equipment’s by

repair/replacement of parts./
• Increasing the performance & efficiency of existing machines.
• Making generation planning in co-ordination with DoWR& SLDC, such that the
water available in the reservoir is utilized in an efficient manner both during
monsoon and non-monsoon period. The Planning & Coordination Cell shall be
responsible for monitoring the generation vis-à-vis availability of water in co-
ordination with DoWR& SLDC.
 • Under taking R, M & U of old machines of old Power Stations to improve their
efficiency, reliability, performance and availability with increase in life
expectancy.

• Forming subsidiaries & Joint Venture Companies as per the mandate of Govt. of
Odisha towards diversification of its business.

• Setting up new Projects for augmenting the generation capacity.

• Obtaining Record of Right (RoR) of the land of all the projects in favor of
OHPC.

• Transfer of electrical distribution System in project areas from OHPC to

Distribution Companies.

• Construction of Corporate Office Building at Bhubaneswar.

• Renovation & construction of new office buildings in different Project of

OHPC.

• Construction of Staff Quarters at Bhubaneswar and in all hydro power stations.

• Implementation of ERP in OHPC across all the domains i.e. HR, Finance and
Technical department.

• Establishment of a new Safety & disaster management cell for formulating

policies for ensuring safety of employees and power house equipment’s.

• Establishment of a separate Vigilance cell headed by a senior level officer.

Retirement Benefits of OHPC Employees:

• Liabilities towards Pension & Leave Encashment as at the end of the year are
provided on the basis of actual valuation.
• For meeting the service gratuity liability, the Corporation has taken a group gratuity
insurance policy with LIC of India. Gratuity provision is made on the basis of
actuarial valuation.
• The Pension and service gratuity liabilities of ex- Hirakud Dam Project employees are
accounted for on cash basis.
-

CHAPTER 3

CONCEPTUAL STUDY
 CASH FLOW STATEMENT:
MEANING AND CONCEPT:

Cash Flow Statement is statement which describes the inflows (sources) and
outflows (uses) of cash and cash equivalents in an enterprise during a specific period
of time. Such a statement enumerates net effect of various business transactions on
cash and its equivalents and takes into account receipts and disbursement of cash. A
cash flow statement summary the causes of changes in cash position of a business
enterprise between dates of two balance sheets.

According to Ind AS-7 (Existing AS-3), an enterprise should prepare a cash flow
statement and should present it for each period for which financial statements are
prepared. The cash, cash equivalents and cash flow are used in this statement with
the following meanings:

• Cash comprises cash on hand and demand deposits with banks.

• Cash equivalents are short term, highly liquid investments that are readily
available convertible into known amounts of cash and which are subject to an
insignificant risk of changes in value. Cash equivalents are held for the
purposes of meeting short-term cash commitments rather than for
investment or other purposes.
• Ind AS-7 has further provided that bank borrowings are generally considered
to be financing activities. However, where bank overdrafts are repayable on
demand form an integral part of an entity’s cash management, bank
overdrafts are included as a component of cash and cash equivalents.
• Cash flows are inflows and outflows of cash and cash equivalent. Flow of cash
is said to have taken place when any transaction makes changes in the
amount of cash and cash equivalents available before happening of the
transactions. If the effect of transactions results in the increase cash and its
 equivalents, it is called an inflow (source) and if it results in the decrease of
total cash, it is known as outflow (use) of cash.

CLASSIFICATION OF CASH FLOWS:

According to Ind AS-7 (Existing AS-3) the cash flows statement should report
cash flows during the period classified by operating, investing and financing
activities.

Thus, cash flows are classified into three main categories:

• Cash flow from operating activities

• Cash flow from investing activities
• Cash flow from financing activities

Cash Flow from Operating Activities:

Operating activities are the principal revenue producing activities of the

enterprises and other activities that are not investing or financing activities.

In other words, revenue generated activities are called operating activities. The
amount of cash flows arising from operating activities is a key indicator of the extent
to which the operations of the enterprises have generated sufficient cash flows to
maintain the operating capability of the enterprises, pay dividends, repay loans, and
make new investments without recourse to external source of financing.

Examples of cash flows from operating activities:

• Salaries paid out to employees

• Cash paid to vendors and suppliers
• Cash collected from customers
• Interest income and dividends received
• Income tax paid and interest paid
 • Cash receipts from royalties, fees, commissions, and other revenue
• Payments for purchase of securities

Cash Flow from Investing Activities:

Investing activities are the acquisition and disposal of long-term assets and
other investments not included in cash equivalents. The separate disclosure of cash
flows arising from investing activities is important because the cash flows represent
the extent to which expenditures have been made for resources intended to
generate future income and cash flows.

Examples of cash flows arising from investing activities are:

• Cash payments to acquire fixed assets (including intangibles). These payments

include those relating to capitalized research and development costs and self-
constructed fixed assets.
• Cash receipts from disposal of fixed assets (including intangibles).
• Cash advances and loans made to third parties (other than advances and loans
made by a financial enterprise)
• Cash receipts from the repayment of advances and loans made to third parties
(other than advances and loans of a financial enterprises)

Cash Flows from Financing Activities:

Financing activities are activities that result in change in the size and
composition of the owner’s capital (including preference share capital in the case of
a company) and borrowings of the enterprises.

Examples of cash flows arising from financing activities are:

• Cash proceeds from issuing shares or other similar instruments
 • Cash proceeds from issuing debentures, loans, bonds and other short term or
long-term borrowings and
• Cash repayments of amounts borrowed such as redemption of debentures,
bonds, preference shares.

USES:

• Since cash flow statement is based on cash basis of accounting it is very much
useful in evaluation of cash position of the company.
• A projected cash flow statement can be prepared in order to know to future
cash position of the concern so as to enable the company to plan and
coordinate financial operation properly.
• Cash flow statement helps in planning the repayment of loans, replacement of
fixed assets and also helps in capital budgeting decision.
• A comparison of the historical and projected cash flow statements can be
made so as to find the variations and deficiency or otherwise in the
performance so as to enable the company to take immediate and effective
action.
• A series of intra-company and inter-company cash flow statements reveals
whether the company’s liquidity (short-term paying capacity) is improving or
deteriorating over a period of time and in comparison, to other companys
over a given period of time.

OBJECTIVES OF CASH FLOW STATEMENT:

The objective of cash flow statement is:

• To provide the users of financial statements with a basis to assess the ability
of the enterprises to generate cash equivalents.
• To ascertain the inflows of cash and cash equivalents classified under
operating, investing and financing activities.
• To ascertain the outflows of cash and cash equivalents.
 • To ascertain the net increase or decrease in cash and cash equivalents
between the dates of two balance sheets.

LIMITATIONS OF CASH FLOW STATEMENT:

• Despite a number of uses, cash flow statements suffer from the following
limitations:
• As cash flow statement is based on cash basis of accounting, it ignores the
basic accounting concept of accrual basis.
• Some people feel that as working capital is a wider concept of funds a fund
flow statement provides a more complete picture than cash flow statement.
• Cash flow statement is not suitable for judging the profitability of the
company as non-cash charges are ignored while calculating cash flow from
operating activities.
• A cash flow statement is not a substitute of an income statement, it is
complementary to an income statement. Ney cash flow does not mean the
net income of the company.
• A comparative study of cash flow statements may give misleading results.
 CASH FLOW FORMAT

CALCULATION OF PROFIT BEFORE TAX AND EXTRA ORDINARY ITEMS

PARTICULARS AMOUNT
Difference between profit of current year and previous year XX
Add- Transfer to reserve XX
Add- Proposed dividend of previous year XX
Add- Transfer to any other reserve XX
Add- Closing provision for taxation XX
Add- Extraordinary items XX
Add- Exceptional items XX
Total- PBT and Extraordinary items XXXX
 CALCULATION OF OPERATING PROFIT

PARTICULARS AMOUNT
PBT and extraordinary items XX

Less- Non operating incomes XX

Interest received XX
Dividend received XX
Rent received XX
Commission received XX
Discount received XX
Royalty received XX
Refund of tax XX

Add- Non operating expenses

Interest paid XX
Dividend paid XX

Operating profit XXX

CALCULATION OF CASH FLOW FROM OPERATING ACTIVITIES

PARTICULARS AMOUNT
Operating Profit XX
Add- Non cash Expenses
Depreciation XX
Amortisation XX

Cash flow from operating activities XX

 CASH FLOW STATEMENT
ARTICULARS DETAILS AMOUNT

A- Cash flow from operating activities

PBT and extra ordinary items XX
Add- Non cash and Non-operating expenses
Depreciation XX
Amortisation XX
Interest paid XX
Dividend paid XX
Rent paid XX
Commission paid XX
XXX

Less- Non operating incomes XX

Interest received XX
Dividend received XX
Commission received XX
Refund of tax XX
Royalty xx
XXX
Cash from operation before working capital
(XX)
Increase in current assets XX
Decrease in current assets XX
Increase in current liabilities (XX)
Decrease in current liabilities

Cash from operation before tax and extra ordinary items XXXX
Less- Tax paid (XX)
Less- extraordinary items paid (XX)

Cash flow from operating activities XXXX

B- Cash flow from investing activities

SALE PROCEEDS FROM THE SALE OF TANGIBLE FIXED ASSETS
i- sale proceeds from land XX
ii- sale proceeds from building XX

SALE PROCEEDS FROM INTANGIBLE ASSETS-

i- goodwill sold XX
ii- patent sold XX
iii- copyright sold XX
iv- trademark sold XX

PROCUREMENT OF TANGIBLE FIXED ASSETS-

i- purchase of land XX
ii- purchase of building XX

PROCUREMENT OF INTANGIBLE FIXED ASSETS-

i- purchase of goodwill XX
ii- purchase of trademark XX
INTEREST RECEIVED XX
DIVIDEND RECEIVED XX

Cash flow from investing activities XXXX

C- CASH FLOW FROM FINANCING ACTIVITIES

Issue of shares XX
Issue of debentures XX
Issue of bond XX
Redemption of preference share (XX)
Redemption of debentures (XX)
Redemption of bond (XX)
Raising of bank loan XX
Interest paid (XX)
Dividend paid (XX)
Buy back of shares (XX)
Payment of bank loan (XX)

Cash flow from financing activities XXXX

Net cash flow from business activities (A+ B+C) XX

Add- Cash and cash equivalent at the beginning of the period XXXX
Cash in hand XX
Cash at bank XX
Short term investment XX
Marketable securities XX
Bank overdraft (XX)
Cash and cash equivalent at the end of the period XXXX
XXXX
RATIO ANALYSIS

MEANING AND CONCEPT:

Ratio analysis is a form of Financial Statement Analysis that is used to obtain a

quick indication of a companies financial performance in several key areas. A ratio
analysis is a quantitative analysis of information contained in a company’s financial
statements. Ratio analysis is used to evaluate various aspects of a company’s
operating and financial performance such as its efficiency, liquidity, profitability and
solvency. The ratios are categorised as short term solvency ratios, debt management
ratios, asset management ratios profitability ratios and market value ratios.

NATURE OF RATIO ANALYSIS:

Financial ratio analysis is a technique of analysis and interpretation of financial

statements. It is the process of establishing and interpreting various ratios for
helping in making certain decisions. However, ratio analysis is not an end itself. It is
only means of better understanding of financial strength and weakness of a
company.
Calculations of mere ratios does not serve any purpose unless several appropriate
ratios can be analyzed and interpreted. There are number of ratios which can be
calculated from the information given in the financial statements, but the analyst has
to select the appropriate data and calculate only a few appropriate ratios from the
same keeping in mind the objective of analysis. The ratio may be used a symptom
like blood purpose, the pulse rate or the body temperature, and their interpretation
depends upon the caliber and competence of the analyst.

USES AND SIGNIFICANCE OF RATIO ANALYSIS:

Ratio analysis stands for the process of determining relationship of items or

group of items in the financial statement. It is an important technique of financial
analysis. It is way by which financial stability and health of a concern can be judged.
The following are the main points in use ratio analysis.

1) Managerial use of ratio analysis

• Helps in decision making: Financial statements are prepared primarily for
decision making. But the information provided in financial statements is not
an end in itself and no meaningful conclusions can be drawn from these
statements alone. Ratio analysis helps in making decision from the
information provided in these financial statements.
• Helps in financial forecasting and planning: Ratio analysis is of much help in
financial forecasting and planning. Planning is looking ahead and the ratios
calculated for a number of years work as a guide for the future. Meaningful
conclusions can be drawn for the future from these ratios. Thus, ratio
analysis helps in forecasting and planning.
• Helps in communicating: The financial strength and weakness of a company
are communicated in a more easy and understandable manner by the use of
ratios. The information contained in the financial statements is conveyed in a
meaningful manner to the one for whom it is meant. Thus, ratios help in
communication and enhance the value of the financial statements.
• Help in coordination: Ratio even hep in coordination which is of utmost
importance in effective business management. Better communication of
efficiency and weakness of an enterprise results in better coordination in the
enterprise.
• Helps in control: Ratio analysis even helps in effective control of the business.
Standard ratios can be based upon preform financial statements and variances
or deviations, if any, can be found by comparing the actual with the standard
so as to take corrective action at the right time. The weakness or otherwise, if
any, come to the knowledge of the management which helps in effective
control of the business.
2) Utility to shareholders:
An investor in the company will like to assess the financial position of the
concern where he is going to invest. His first interest will be the security of his
investment and then a return in the form of dividend or interest. For the first
purpose he will try to assess the value of fixed assets and the loans raised
against them. The investor will feel satisfied only if the concern has sufficient
amount of assets. Long term solvency ratios will help him in assessing financial
position of the concern. Profitability ratios, on the other hand will be useful to
determine profitability position. Ratio analysis will be useful to the investors in
making up his mind whether present financial position of the concern
warrants further investment or not.
3) Utility to creditors:
The creditors or suppliers extend short term credit to the concern. They
are interested to know whether financial position of the concern warrants
their payments at a specified time or not. The concern pays short term
creditors out of its current assets. If the current assets are quite sufficient to
meet current liabilities then the creditor will to hesitate credit facilities.
 Current and acid- test ratios will give an idea about the current financial
position of the concern.
4) Utility to employees:
The employees are also interested in the financial position of the
concern especially profitability. Their wage increase and amount of fringe
benefits are related to the volume of profits earned by the concern. The
employees make use of information available in financial statements. Various
profitability ratios relating to gross profit, operating profit, net profit etc.
enable employees to put forward their viewpoint for the increase of wages
and other benefits.

5) Utility to government:
Government is interested to know the overall strength of the industry.
Various financial statements published by industrial units are used to calculate
ratios for determining short-term, long-term and overall financial position of
the concern. Profitability indexes can also be prepared with the help of the
ratios. Government may base its future policies on the basis of industrial
information available from various units. The ratios may be used as indicators
of overall financial strength of public as well as private sector. In the absence
of the reliable economic information, governmental plans and policies may
not prove successful.

LIMITATION OF RATIO ANALYSIS:

The ratio analysis is one of the most powerful tools of financial management.
Though ratios are simple to calculate and easy to understand, they suffer from
serious limitations:
• Limited use of single ratio: A single ratio, usually does not convey much of a
sense. To make a better interpretation a number of ratios have to be
calculated which is likely to confuse the analyst than help him in making any
meaningful conclusions.
• Lack of adequate standards: There are no well accepted standards or rules of
thumb for all ratios which can be accepted as norms. It renders interpretation
of the ratios difficult.
• Inherent limitations of accounting: Like financial statements, ratios also suffer
from the inherent weakness of accounting records such their historical nature.
Ratios of the past are not necessarily true indicators of the future.
• Change of accounting procedure: Change in accounting procedure by a
company often makes ratio analysis misleading, example a change in the
valuation of methods of inventories, from FIFO to LIFO increase the cost of
sales and reduces considerably the value of closing stock which makes stock
turnover ratio to be lucrative and an unfavorable gross profit ratio.
• Window dressing: Financial statements can easily be window dressed to
present a better picture of its financial and profitability position of outsiders.
Hence one has to be very careful in making a decision from ratios calculated
from such financial statements. But it may be very difficult for an outsider to
know about the window dressing made by a company.
• Personal bias: Ratio are only meaning of financial analysis and not an end
in itself. Ratios have to be interpreted and different people may interpret
the same ratio in different ways.
CLASSIFICATION OF RATIOS:

The use of ratios analysis is not confined to financial manager only. There are
different parties interested in the ratios analysis for knowing the financial position of
a company for different purpose. In view of various users of ratios, there are many
types of ratios which can be calculated from the information given in the financial
statements. The particular purpose of the user determines the particular ratios that
might be used for financial analysis. For example, a supplier of goods of a company
on credit or a banker advancing a short-term loan to a company, is interested
primarily in the short-term paying capacity of the company. On the other hand, a
financial institution advancing a long-term credit to a company will be primarily
interested in the solvency or long-term financial position of the concern. Similarly,
the interest of the owners and the management also differ. The shareholders are
generally interested in the profitability or dividend position of a company while
management requires information on almost all the financial aspects of the company
to enable it to protect the interest of all the parties. Broadly the ratios are classified
into four categories.

1. Liquidity Ratio.

2. Activity Ratio.

3. Profitability Ratio.

4. Leverage Ratio

1) LIQUIDITY RATIO:

Liquidity ratio refers to the ability of a concern to meet its obligations as and
when these becomes due. The short-term obligations are met by realizing amounts
of current, floating or circulating assets. The current assets should either be liquid or
near liquidity. These should be convertible into cash for paying obligations of short
term nature. The sufficiency or insufficiency of current assets should be assessed by
comparing them with short term liabilities. If current assets can pay off current
liabilities, then liquidity position will be satisfactory. On the other hand, if current
liabilities may not be easily met out of current assets then liquidity position will be
bad. The bankers, suppliers of goods and other short-term creditors are interested in
the liquidity of the concern. They will extend credit only if they are sure that current
assets are enough to pay out the obligations.

To measure the liquidity of a company, the following ratios can be calculated:

• Current ratio
• Quick or acid test ratio
• Absolute liquid ratio or cash position ratio

2) ACTIVITY RATIO:

Activity ratios measure the efficiency or effectiveness with which a company

manages its resources or assets. These ratios are also called turnover ratios because
they indicate the speed with which the assets are converted into sales. Basically,
there are three activity ratios.

• Inventory or Stock Turnover Ratio

• Debtors Turnover Ratio

• Creditors Turnover Ratio

3) PROFITABILITY RATIOS:

Profit ability is the overall measure of efficiency of the operations of the

business, it indicates the effectiveness of the decision taken by the management
from time to time. The main objective behind the calculation of profitability ratios
to enlighten the end results of the business activities which will be main criterion
 for the assessment of the efficiency of the business. The lower profitability ratios
may arise because of high expenditure, and other such reasons, the external
parties like bankers, creditors, suppliers, financial institution etc., look at the
profitability ratio of the company to safeguard for the interest on leading. Equity
shareholders look at the profitability ratio from the point of view of return to their
investment. Let us discuss the important profitability ratios.

4) LEVERAGE RATIO:

The term solvency refers to the ability of a concern to meet its long-term
obligation. The long-term creditors of a company are primarily interested in knowing
the company’s ability to pay regularly interest on long-term borrowings of the
principal amount on maturity and security of their loans. Long-term solvency ratios
indicate a company’s ability to meet the fixed interest and costs and payment of
long-term borrowings. The following ratios determine the solvency of the concern.

• Debt-Equity Ratio.

• Proprietary ratio.

• Interest Coverage Ratio.

 PROMINENT RATIOS FOR CASH FLOW STATEMENT ANALYSIS

1) OPERATING CASH FLOW RATIO:

Operating cash flow ratio measures the adequacy of a company’s cash

generated from operating activities to pay its current liabilities. It is calculated by
dividing the cash flow from operating activities (operations) by the company’s
current liabilities. Operating cash flow ratio determines the number of times the
current liabilities can be paid off out of net operating cash flow. A higher ratio is
better.

Operating cash flow ratio is an important measure of a company’s liquidity i.e.

its ability to pay off short-term financial obligations. It should be considered together
with other liquidity ratios such as current ratio, quick ratio, cash ratio, etc.

Formula

Operating cash flow ratio is calculated by dividing the cash flow from operations (also
called cash flow from operating activities) by the closing current liabilities.

Operating Cash Flow Ratio = Cash Flow from operating activities (Operations)
Current Liabilities
Cash flow from operations is reported on a company’s statement of cash flows
and the current liabilities is presented on a company’s balance sheet.

If cash flow statement is not available, cash flow from operating activities
(operations) can be determined by starting with net income, adding non-cash
expenses such as depreciation expense, etc., subtracting non-cash gains such as gain
on sale of fixed assets, etc., adding any increase in current liabilities or decrease in
current assets and subtracting any decrease in current liabilities and increase in
current assets.

The operating cash flow ratio is a measure of the number of times a company can
pay off current debts with cash generated within the same period. A high number,
greater than one, indicates that a company has generated more cash in a period than
what is needed to pay off its current liabilities.

An operating cash flow ratio of less than one indicates the opposite—the company
has not generated enough cash to cover its current liabilities. To investors and
analysts, a low ratio could mean that the company needs more capital.

However, there could be many interpretations, and not all are indications of poor
financial health.

2) CURRENT CASH DEBT COVERAGE RATIO:

Current cash debt coverage ratio is a liquidity ratio that measures the
relationship between net cash provided by operating activities (operations)
and the average current liabilities of the company. It indicates the ability of the
business to pay its current liabilities from its operations.

Formula:

It is computed by the following formula:

Current Cash Debt Coverage Ratio= Net Cash Provided by Operating Activities
(Operations)/ Average Current Liabilities
 The two components of the formula are net cash provided by operating
activities and average current liabilities. The net cash provided by operating activities
is the net cash generated from its operations during a particular period. The average
current liabilities are equal to opening liabilities plus closing liabilities divided by two.

A higher current cash debt coverage ratio indicates a better liquidity position.
Generally, a ratio of 1: 1 is considered very comfortable because having a ratio of 1:
1 means the business is able to pay all of its current liabilities from the cash flow of
its own operations.

The ultimate purpose of a current cash debt coverage ratio is to identify

whether the company can cover its debt with the current operating cash flow
generation or not.

A high amount of net cash flow from operating activities results in a higher
cash coverage debt ratio. There is no standard or acceptable amount of operating
cash flow since it can vary business to business; however, it should be of a value
higher than the average current liabilities balance. A cash debt coverage ratio of 1 or
higher implies that the business is liquid enough to clear all of its debts on time.

3) ABSOLUTE LIQUID RATIO OR CASH RATIO:

Although receivables, debtors and bills receivables are generally more liquid
than inventories, yet there may be doubts regarding their realization into cash
immediately or in time. Hence some authorities are of the opinion that the absolute
liquid ratio should be calculated together with the current ratio and acid test ratio so
as to exclude even receivables from the current assets and find out the absolute
liquid assets.

Absolute liquid assets= absolute liquid assets / current liabilities

OR

Cash ratio = cash and bank + short term securities / current liabilities

Absolute liquid assets include cash in hand and at bank and marketable
securities or temporary investments. The acceptable norm for this ratio is 50 per
cent or 1:2 that is Re 1 worth absolute liquid assets are considered adequate to pay
Rs 2 worth current liabilities in time as all the creditors are not expected to demand
ash at the same time and then cash may also be realized from debtors and
inventories.

4) CASH GENERATING POWER RATIO:

The Cash Generating Power Ratio is calculated dividing the cash generated
from operations of the company (CFO) by the total cash generated by the company
from all three activities, namely, operations, investments and financing. It measures
the proportion of a company’s positive cash flow that comes from operating the
business vs. cash from investments or financing activities. We calculate this as
follows:

Cash Generating Power Ratio= Cash flow from operating activities

(operations) / (CFO + Cash from Investing Inflows + Cash from Financing
Inflows)

It’s a powerful ratio as it measures the company’s ability to generate cash from
its operations compared to the total cash flows. Not that it only uses the cash inflows
from investing and financing, instead of the all investing and financing activities.
Companies want to have a power ratio of at least 1.0, which indicates
expected revenue levels. A higher power ratio indicates a greater amount of revenue
received from the company's audience share. Power ratios show how well media
companies convert their ratings into advertising revenue. Values greater than one
indicate a company that is outperforming its industry.

Power ratios help media companies evaluate their own performance and, in the
case of a possible acquisition or merger, evaluate the performance of a target media
company. Analysts and investors also pay close attention to power ratios because
they provide insight into how efficient companies are at converting ratings into
revenue. Power ratios can also be used to compare the revenue performance of one
category of media (e.g., the Internet) to another category (e.g., newspapers).

While power ratios measure efficiency at generating revenue relative to the

audience, they do not measure a broadcaster’s profitability. In other words, a
broadcaster might have a high-power ratio yet be unprofitable, for instance, due to
high programming costs.

5) NET CASH FLOW TO AVERAGE TOTAL ASSETS RATIO:

Net cash flow to average total assets ratio is the ratio between net cash flows
from operating activities and average total assets employed in the company. The
objective of this ratio is to evaluate the efficiency with which the resources of a
companies are being used. It can be calculated as:

Net cash flow to average total assets ratio = net cash flow from operating activities
(operations) / average total assets

Cash flow to average total assets ratio is an efficiency ratio that rates actual
cash flow to the company assets without being affected by the income
measurements. The cash flow to average total assets ratio is often used by the
company management to estimate when the cash will be available and how much
cash will be available for future operations. Management can use this ratio to
prepare budgets and future performance predictions. Investors can also use the cash
flow to average total assets ratio to estimate the quality of a company’s earnings.
The cash flow to average total assets ratio shows the investors how efficiently the
business is at using its assets to collect cash from sales and customers. The higher the
ratio, the more efficient the business is.

6) EXTERNAL FINANCING INDEX RATIO:

This ratio compares the cash flow from financing activities with cash from operation
to show how dependent the company is on financing.

External Financing Index Ratio = Cash from Financing / cash flow from
operating activities (operations)

The higher the number, the more dependent the business is on external money.

If the external financing ratio is positive (greater than 0) the company is

dependent on the external sources of finance for the growth of its assets. And if the
value of the ratio is negative (less than 0) then it means the company has generated
more than enough cash to finance for the asset’s growth.

7) RETURN ON INVESTED CAPITAL:

Return on invested capital (ROIC) is a calculation used to assess a company's

efficiency at allocating the capital under its control to profitable investments. The
return on invested capital ratio gives a sense of how well a company is using its
money to generate returns.
The way to write the formula which includes:

ROIC= NOPAT/ Invested Capital

Where:

NOPAT=Net operating profit after tax

Invested capital= fixed assets + intangible assets + current assets- cash balance-
current liabilities

ROIC is always calculated as a percentage and is usually expressed as an

annualized or trailing 12-month value. It should be compared to a company's cost of
capital to determine whether the company is creating value.

If ROIC is greater than a company's weighted average cost of capital (WACC),

the most common cost of capital metric, value is being created and these companies
will trade at a premium. A common benchmark for evidence of value creation is a
return in excess of 2% of the company's cost of capital.

If a company's ROIC is less than 2%, it is considered a value destroyer. Some

companies run at a zero-return level, and while they may not be destroying value,
these companies have no excess capital to invest in future growth.

ROIC is one of the most important and informative valuation metrics to

calculate. That said, it is more important for some sectors than others, since
companies that operate oil rigs or manufacture semiconductors invest capital much
more intensively than those that require less equipment.

8) OPERATING CASH FLOW MARGIN:

Operating cash flow margin is a cash flow ratio which measures cash from
operating activities as a percentage of sales revenue in a given period. Like operating
margin, it is a trusted metric of a company’s profitability and efficiency and its
earnings quality.

Operating cash flow margin measures how efficiently a company converts sales
into cash. It is a good indicator of earnings quality because it only includes
transactions that involve the actual transfer of money.

Cash Flow Margin Formula:

Cash flow margin/ operating cash flow to sales ratio = Cash flows from
operating activities (operations) / Net sales

Operating cash flow margin/ cash flow to sales ratio measures how efficiently a
company converts sales into cash. It is a good indicator of earnings quality because it
only includes transactions that involve the actual transfer of money.

Because cash flow is driven by revenues, overhead and operating efficiency, it

can be very telling, especially when comparing performance to competitors in the
same industry. Has operating cash flow turned negative because the company is
investing in its operations to make them even more profitable? Or does the company
need an injection of outside capital to buy time to continue operating in a desperate
attempt to turn around the business?

Just as companies can improve operating cash flow margin, by using working
capital more efficiently, they can also temporarily flatter operating cash flow margin
by delaying the payment of accounts payable, chasing customers for payment or
running down inventory. But if a company’s operating cash flow margin is increasing
from year to year, it indicates its free cash flow is improving, as is its ability to expand
its asset base and create long-term value for shareholders.
▪ Are the Company’s Sales Genuine: The operating cash flow to sales ratio/
cash flow margin provides the analyst insight into the sales of the company. It
is a known fact that companies can fudge the sales number relatively easily.
This can be done by changing the revenue recognition policy which allows
accountants to book future income as income today. Sometimes companies
do fake transactions to ensure that sales numbers look good to the stock
market. However, the acid test comes when sales need to be converted to
cash. Only genuine sales bring in cash flow. Thus, analysts can make more
accurate prediction of the future year’s cash flows and therefore value the
stock more accurately.
▪ Compare with Days Sales Outstanding: The operating cash flow to sales ratio/
cash flow margin should also be somewhat in line with the day’s receivables
outstanding ratio. For instance, if 90 days receivables are outstanding, it
means on an average the company extends credit for (90/360), 25% of its
sales at any given point of time. Thus, in this case the operating cash flow to
sales ratio must be 75% or close. This makes the analysts surer that the
financial statements of the company are indeed genuine.
 CHAPTER 4:
DATA ANALYSIS

INTERPRETATION
 CAPACITY UTILISATION

18000

16000

14000

12000

10000

8000

6000

4000

2000

0
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19

Available Capacity Capacity Utilized Quantity Available for Sale

Particulars 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19

Available 16726.38 5619.24 5619.24 5619.24 5619.24 5619.24
Capacity (MW)
Capacity 6967.978 6238.457 4262.87 4433.19 5487.265 5897.18
Utilized (MW)
% Capacity 41.66% 111.02% 75.86% 78.89% 97.65% 104.94%
Utilized
Quantity 6834.067 6092.16 4120.64 4310.02 5370.913 5880.145
available for sale
 In the year 2013-14 the available capacity of OHPC is 16726.38 MW from
which 6967.978 MW capacity is being utilized. In the year 2014- 15 the available capacity is
5619.24MW and company over utilized its capacity to 6238.457 MW. In the year 2015-16 the
available capacity is 5619.24MW and the company is utilized 4262.87 MW. In the year
2016-17 the available capacity is 5619.24 MW and company produced 4433.19MW energy. In
the year 2017-18 the available capacity is 5619.24MW and company generated 5487.265MW
of energy which is in the year 2018-19 the available capacity is 5619.24MW and company
generated 5880.145 MW.From the year 2018-19 company increases % of capacity utilization
which symbolize a healthy growth of the company.
 Different Ratio Analysis

1) Interpretation of Operating Cash Flow Ratio:

The operating cash flow ratio is a measure of the number of times a company
can pay off current debts with cash generated within the same period. A high
number, greater than one, indicates that a company has generated more cash in a
period than what is needed to pay off its current liabilities.

An operating cash flow ratio of less than one indicates the opposite—the
company has not generated enough cash to cover its current liabilities. To investors
and analysts, a low ratio could mean that the Company needs more capital.

GRAPH: Operating Cash Flow Ratio

OPERATING CASH FLOW RATIO

2.5

1.5

0.5

0
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
CASHFLOW FROM 39595.43 22884.02 -17049.62 5880.11 24636.6 13458.04
OPERATING ACTIVITIES
CURRENT LIABILITIES 13845.32 8,18,31.24 63,010.03 68,160.32 81,238.22 93427.44
(FINANCIAL LIABILITIES)
OPERATING CASH FLOW 2.85 0.27 0.27 0.086 0.30 0.14
RATIO

TABLE: Operating Cash Flow Ratio

As per the data provided by the above graph and table, the value of
the Operating Cash flow Ratio in 2013-14 is 2.85, for the year 2014-15 is 0.27, for the
year 2015-16 is 0.27, for the year 2016-17 is 0.086, for the year 2017-18 is 0.30 and
for the year 2018-19 is 0.14. By analyzing the flow of operating cash flow ratio from
the above-mentioned years the value of the ratio in the financial year 2013-14 is
2.85 which is an excellent sign of well managed performance and effective and
efficient use of all the available cash and operating resources to meet the company’s
current obligations. However in the next financial year of 2014-15 the value of the
operating cash flow ratio is 0.27 which is less than the desirable and adequate
performance, and in the next financial year of 2015-16 the operating cash flow ratio
remain constant to 0.27.

In the financial year of 2016-17 the performance and the value of operating
cash flow ratio again went up to 0.086 and this clearly shows that the company is
cash flow from operation is positive but as current liabilities is more the ratio is
lower. But the next financial years of 2017-18 had a score of 0.30 and in the financial
year of 2018-19 the ratio was at the least position of 0.14.

However, as the team is fully qualified and efficient to solve this issue very soon and
the management would improve the operating cash flow ratio and raise the value
above the suitable and adequate value.
 2) Interpretation of Current Cash Debt Coverage Ratio:

The ultimate purpose of a current cash debt coverage ratio is to identify

whether the company can cover its debt with the current operating cash flow
generation or not.

A high amount of net cash flow from operating activities results in a higher cash
coverage debt ratio. There is no standard or acceptable amount of operating cash
flow since it can vary business to business; however, it should be of a value higher
than the average current liabilities balance. A cash debt coverage ratio of 1 or higher
implies that the business is liquid enough to clear all of its debts on time.
GRAPH: Current Cash Debt Coverage Ratio
CURRENT CASH DEBT COVERAGE RATIO

90

80

70

60

50

40

30

20

10

0
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19

2013-14 2014-15 2015-16 2016-17 2017-18 2018-19

CASHFLOW FROM 39595.43 22884.02 -17049.62 5880.11 24636.6 13458.04
OPERATING ACTIVITIES
AVERAGE CURRENT 13845.32 22154.01 36811.71 10609.9 295.17 4377.89
LIABILITIES
CURRENT CASH DEBT 2.85 1.03 0.46 0.55 83.46 3.07
COVERAGE RATIO
 TABLE: Current Cash Debt Coverage Ratio

As per the data provided by the above graph and table, the value of the current
cash debt coverage ratio in 2013-14 is 2.85, for the year 2014-15 is 1.03, for the year
2015-16 is 0.46, for the year 2016-17 is 0.55, for the year 2017-18 is 83.46 and for
the year 2018-19 is 3.07. By analyzing the flow of the current cash debt coverage
ratio from the above-mentioned years the value of the ratio in the financial year
2013-14 is 2.85 which is an excellent sign of well managed performance and effective
and efficient use of all the available cash and operating resources to meet the
company’s current obligations. However in the next financial year of 2014-15 the
value of the current cash debt coverage ratio is 1.03, and in the next financial year of
2015-16 the current cash debt coverage ratio went down to 0.46.

In the financial year of 2016-17 the performance and the value of operating
cash flow ratio again went up to 0.55 and this clearly shows that the company
was improved its performance to meet its short-term obligations. But the next
financial years of 2017-18 had a score of 83.46 and in the financial year of 2018-
19 the ratio was at 3.07.
 3) Interpretation of Absolute Liquid Ratio:

Absolute liquid assets include cash in hand and at bank and marketable
securities or temporary investments. The acceptable norm for this ratio is 50 per
cent or 1:2 that is Re 1 worth absolute liquid assets are considered adequate to pay
Rest 2 worth current liabilities in time as all the creditors are not expected to
demand ash at the same time and then cash may also be realized from debtors and
inventories.

GRAPH: Absolute Liquid Ratio

ABSOLUTE LIQUID RATIO

0
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
ABSOLUTE 86233.74 88146.96 109536.39 111944.89 18218.36 15861.67
LIQUID
ASSETS
CURRENT 13845.32 81831.24 63010.03 68160.32 81238.22 93427.44
LIABILITIES
ABSOLUTE 6.22 1.07 1.73 1.64 0.22 0.16
LIQUID RATIO

TABLE: Absolute Liquid Ratio

As per the data provided by the above graph and table, the absolute liquid ratio
for the year 2013-14 is 6.22, for the year 2014-15 is 1.07, for the year 2015-16 is
1.73, for the year 2016-17 is 1.64, for the year 2017-18 is 0.22, for the year 2018-19
is 0.16. By analyzing the flow of absolute liquid ratio among these years indicates
that the OHPC was initially having a very good liquidity position starting from the
year 2013-14 which was much above than the satisfactory level, however in the next
following year of 2014-15 the ratio value decreased to 1.07 which was also good and
in the next financial year of 2015-16 the value of the absolute liquid ratio went up to
the value of 1.73 and it clearly shows that the OHPC was having a very good liquidity
position and they have also shown improvement in maintaining their desirable
current ratio and liquidity position of the company. The company was efficient to
meet the needs of its current liabilities with the available current assets.

However after this phase the liquidity value and the absolute liquid ratio
decreased to 1.64 in the financial year of 2016-17 and in the next financial year of
2017-18 it continues to decrease to 0.22 and the finally in the financial year of
2018-19 the liquidity position of the company went down to 0.16 as per this
results.
 The changes in the economy sector and the changes in the company policies
made it difficult for the company to make a continues growth in the absolute liquidity
position, however the company is having a qualified manpower and they would make
the efficient use of the resources to maintain a satisfactory balance between
absolute liquid assets and current liabilities of the at present and they will definitely
get the growth pace very soon in near future.

4) Interpretation of Cash Generating Power Ratio:

Companies want to have cash generating power ratio of at least 1.0, which
indicates expected revenue levels. A higher power ratio indicates a greater amount
of revenue received from the company's audience share. Power ratios show how
well media companies convert their ratings into advertising revenue. Values greater
than one indicate a company that is outperforming its industry.

Analysts and investors also pay close attention to power ratios because they
provide insight into how efficient companies are at converting ratings into revenue.
 GRAPH 4: Cash Generating Power Ratio

CASH GENERATING POWER RATIO

25

20

15

10

0
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19

2013-14 2014-15 2015-16 2016-17 2017-18 2018-19

CASHFLOW 39595.43 22884.02 - 5880.11 24636.6 13458.04
FROM 17049.62
OPERATING
ACTIVITIES
CASH FLOW OF 1755.9 5013.21 21389.43 2408.5 (89256.36) (6827.53)
THE COMPANY
CASH 22.54 4.56 0.79 2.44 0.27 1.97
GENERATING
POWER RATIO

TABLE 4: Cash Generating Power Ratio

 As per the data provided by the above graph and table, the cash generating
power ratio for the financial year 2013-14 is 22.54, for the financial year 2014-15 is
4.56, for the financial year of 2015-16 is 0.79, for the financial year of 2016-17 is
2.44, for the financial year of 2017-18 is 0.27 and for the financial year of 2018-19 is
1.97. By analyzing all the values and data from the financial reports and statements
of the OHPC, the observations regarding the performance and the value of cash
generating ratio is as follows:

In the year 2013-14 the cash generating power ratio is 22. 54 which is higher than
the desirable and expected score from a financial company. And in the financial
year of 2014-15 the company has made an outstanding and excellent management
of its resources to reach the value of 4.56. In the next financial year of 2015-16 the
value of the cash generating power ratio is 0.79.

However, in the financial year of 2016-17 the company showed improvement

in the cash generating power ratio value to 2.44 which clearly defines that the
company is successfully able to manage its resources to meet up the short-term
obligations throughout the year. In the financial year of 2017-18 the overall
performance and the cash generating power ratio value is 0.27. In the financial year
of 2018-19 the value of the cash generating power ratio reach to 1.97 which is also
above the desired performance and standard for a company to maintain in order to
carry on the business and to meet the short-term obligations.
5) Interpretation of Net Cash Flow to Average Total Assets Ratio:

Cash flow to average total assets ratio is an efficiency ratio that rates actual
cash flow to the company assets without being affected by the income
measurements. The cash flow to average total assets ratio is often used by the
company management to estimate when the cash will be available and how much
cash will be available for future operations. Management can use this ratio to
prepare budgets and future performance predictions. Investors can also use the
cash flow to average total assets ratio to estimate the quality of a company’s
earnings. The cash flow to average total assets ratio shows the investors how
efficiently the business is at using its assets to collect cash from sales and customers.
The higher the ratio, the more efficient the business is.

GRAPH 5: Net Cash Flow to Average Total Assets Ratio

NET CASHFLOW TO AVERAGE TOTAL ASSETS RATIO

0.12

0.1

0.08

0.06

0.04

0.02

0
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
CASHFLOW FROM 39595.43 22884.02 (17049.62) 5880.11 24636.6 13458.04
OPERATING
ACTIVITIES

AVERAGE TOTAL 323943.35 330992.61 344328.13 354568.21 366606.8 387356.8

ASSETS

NET CASH FLOW TO 0.12 0.06 0.04 0.01 0.06 0.03

AVERAGE TOTAL
ASSETS RATIO

TABLE 5: Net Cash Flow to Average Total Assets Ratio

As per the information and data received from the above graph, the value of
the cash flow to average total assets ratio for the financial year of 2013-14 is 0.12, for
the financial year of 2014-15 is 0.06, for the financial year of 2015-16 is 0.04, for the
financial year of 2016-17 is 0.01, for the financial year of 2017-18 is 0.06 and for the
financial year of 2018-19 is 0.03. By analyzing the above said data of the OHPC, we
get the information that the company was able to maintain the cash flow to average
total assets ratio and have made proper and optimum utilization of resources to have
a favorable relationship in-between cash flow and total assets of the company. In the
financial year of 2013-14 the Value of cash flow to average total assets ratio is 0.12
and this implies that the company is having a good control and are able to make the
best and optimum use of their resources for the smooth performance of the business
and the company. In the financial year of 2014-15 the company is having the cash
flow to average total assets ratio of 0.06. In the next financial year of 2015-16 the
cashflow
to average total assets ratio is 0.04 which is also worse than previous year showing a
stable performance in the highly dynamic market environment and conditions.

In the financial year of 2016-17 the company has shown a tremendous growth
in their ability to build up a strong relationship between total assets and cash flow
and by increasing their efficiency to use their assets to obtain cash from sales and
customers by increasing the value of cash flow to average total assets ratio to 0.01
which is quite impressive as the company has clearly proved that they are highly
capable of getting the growth in this competitive market and environment. In the
financial year of 2017-18 the value of its cash flow to average total assets ratio is 0.06
and in the financial year of 2018-19 the value of its cash flow to average total assets
ratio is 0.03. This indicates that the company has the ability to get greater growth
and cash flow and also, they have the efficient and qualified management to
maintain the growth in order to have a smooth flow of the business operations.

6) Interpretation of External Financing Index Ratio:

The External Financing Index ratio shows if a company is able to finance the
investments from the cash generated by business of if the business needs external
finance to meet its investment needs. The higher the number, the more dependent
the business is on external money.

If the external financing ratio is positive (greater than 0) the company is

dependent on the external sources of finance for the growth of its assets. And if the
value of the ratio is negative (less than 0) then it means the company has generated
more than enough cash to finance for the asset’s growth.
 GRAPH 6: External Financing Index Ratio

EXTERNAL FINANCING INDEX RATIO

1.6
1.41
1.4

1.2
1.05

1
0.78
0.8

0.6

0.4 0.32

0.2 0.13
0.002
0
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19

2013-14 2014-15 2015-16 2016-17 2017-18 2018-19

CASHFLOW (31189.85) (24142.96) 24149.29 (817.76) 66.67 (4404.17)
FROM
FINANCING
ACTIVITIES
CASHFLOW 39595.43 22884.02 (17049.62) 5880.11 24636.6 13458.04
FROM
OPERATING
ACTIVITIES
EXTERNAL 0.78 1.05 1.41 0.13 0.002 0.32
FINANCING
INDEX RATIO

TABLE 6: External Financing Index Ratio

As per the information and data received from the above graph and table, the
value of the external financing index ratio for the financial year of 2013-14 is 0.78, for
the financial year of 2014-15 is 1.05, for the financial year of 2015-16 is 1.41, for the
financial year of 2016-17 is 0.13, for the financial year of 2017-18 is 0.002 and for the
financial year of 2018-19 is 0.32. By analyzing the above said data of the OHPC we
get the information that the company was able to maintain the external financing
index ratio and have the sufficient cash resources to meet the investment needs
internally. In the financial year of 2013-14 the value of external financing index ratio
0.78 and this clearly implies that the company is very less dependent on the external
finance sources. In the financial year of 2014-15 the value of the external financing
index ratio increased to 1.05 which shows the company is able to regulate a good
financial system without getting much affected from the external business
environment. In the financial year of 2015- 16 the value of the external financing
index ratio was at the extreme level of 1.41. In the financial year of 2016-17 the
OHPC has shown a tremendous improvement and enhanced their scores and value
of the external financing index ratio by pulling it down to 0.13 and this depicts that
the company has successfully managed their resources in the best efficient way and
became completely independent from the external sources to meet their asset’s
growth. In the financial year of 2017-18 the value of the external financing index
ratio is 0.002 which is also very close to zero and in the financial year of 2018-19 the
external financing index ratio is 0.32 which is very much impressive and all this
information clearly shows that the OHPC is highly efficient and not very much
dependent on external financing for their asset’s growth and investment needs.
7) Interpretation of Return on Invested Capital:

If ROIC is greater than a company's weighted average cost of capital (WACC),

the most common cost of capital metric, value is being created and the company will
trade at a premium. Some companies run at a zero-return level; these companies
have no excess capital to invest in future growth.

ROIC is one of the most important and informative valuation metrics to

calculate. That said, it is more important for some sectors than others, since
companies that operate oil rigs or manufacture semiconductors invest capital much
more intensively than those that require less equipment.

GRAPH 7: Return on Invested Capital

Chart Title

0.08

0.07

0.06

0.05

0.04

0.03

0.02

0.01

0
2013-14 2014-15 2015-16 2016-17 1017-18 2018-19
 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
NET 879.55 1559.44 8729.73 12911.41 9869.94 14439.3
PROFIT
AFTER
TAX
INVESTED 223864.29 146028.15 171781.71 174463.02 267150.22 278067.69
CAPITAL
RETURN 0.0039 0.0106 0.0508 0.074 0.0369 0.0519
ON
INVESTED
CAPITAL

TABLE 7: Return on Invested Capital

As per the data provided by the above graph, the cash generating power ratio
for the financial year 2013-14 is 0.0039, for the financial year 2014-15 is 0.0106, for
the financial year of 2015-16 is 0.0508, for the financial year of 2016-17 is 0.074, for
the financial year of 2017-18 is 0.0369 and for the financial year of 2018-19 is 0.0519.
By analyzing all the values and data from the financial reports and statements of the
OHPC, the observations regarding the performance and the Return on invested
capital is as follows:

In the financial year of 2013-14 the return on invested capital is 0.0039 and in the
financial year of 2014-15 the value is 0.0106. In the financial year of 2015-16 the
value of return on invested capital decreased to 0.0508. In the financial year of
2016-17 the value of the return on invested
capital again decreased to 0.074. In the financial year of 2017- 18 the value of the
return on invested capital is 0.0369 which is higher than the previous performance,
however it also implies that the company is having a margin of profit and they
provide the services with a very attractive rates and prices. In the next financial year
of 2018-19, OHPC again showed the perfect sign of improvement and development
by increasing the value of its return on invested capital to 0.0519 and this gives a
conclusion that the company is having a highly qualified management system to
have a stable return on invested capital.

8) Interpretation of Operating Cash Flow Margin:

Operating cash flow margin measures how efficiently a company converts sales
into cash. It is a good indicator of earnings quality because it only includes
transactions that involve the actual transfer of money. Because cash flow is driven
by revenues, overhead and operating efficiency, it can be very telling, especially when
comparing performance to competitors in the same industry.

The operating cash flow to sales ratio provides the analyst insight into the sales
of the company. It is a known fact that companies can fudge the sales number
relatively easily. This can be done by changing the revenue recognition policy which
allows accountants to book future income as income today. The operating cash flow
to sales ratio should also be somewhat in line with the day’s receivables outstanding
ratio.
 GRAPH 8: Operating Cash Flow Margin

OPERATING CASHFLOW MARGIN

0.9

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19

2013-14 2014-15 2015-16 2016-17 2017-18 2018-19

CASHFLOW 39595.43 22884.02 (17049.62) 5880.11 24636.6 13458.04
FROM
OPERATING
ACTIVITIES
NET SALES 45173.41 49324.12 41912.74 43249.04 46848.3 48008.78

OPERATING 0.87 0.46 0.40 0.13 0.52 0.28

CASH FLOW
MARGIN

TABLE 8: Operating Cash Flow Margin

As per the information and data received from the above graph, the
value of the operating cash flow margin for the financial year of 2013-14 is 0.87, for
the financial year of 2014-15 is 0.46, for the financial year
of 2015-16 is 0.40, for the financial year of 2016-17 is 0.13, for the financial year of
2017-18 is 0.52 and for the financial year of 2018-19 is 0.28. By analyzing the above
said data of the OHPC we get the information that the company was able to
maintain the operating cash flow margin and have made proper and optimum
utilization of resources to convert the sales into cash and have a favorable
relationship in-between them. In the financial year of 2013-14 the Value of
operating cash flow margin is 0.87 and this implies that the company is having a
good control and are able to make the best and optimum use of their resources for
the smooth performance of the business and the company. In the financial year of
2014-15 the OHPC is having the operating cash flow margin of 0.46. In the next
financial year of 2015-16 the operating cash flow margin value is 0.40.

In the financial year of 2016-17 the company has shown a tremendous growth
in their ability to convert their sales to operating cash by increasing the value of its
operating cash flow margin to 0.13 which is quite impressive as the company has
clearly proved that they are highly capable of getting the growth in this competitive
market and environment. In the financial year of 2017-18 the value of its operating
cash flow margin is 0.52 and in the financial year of 2018-19 the value of its
operating cash flow margin is 0.28. And this flow of the operating cash flow margin
depicts that the company was slowly coming down to have a stable and favorable
growth which is good for the company as well as for the consumers to whom the
company provides the services. The company OHPC gives greater importance to the
quality of its services and the satisfaction and this scope has given a lot of
opportunities and growth to the business.
CHAPTER 5:
FINDINGS

SUGGESTION
FINDINGS
The following are the findings of the study for the year 2013 to 2019:

• Operating cash flow ratio is decreasing from 2.85 in 2013-14 to 0.14 in

2018-19. It means that cash flow from operating activities decreases
whereas current liabilities or financial liabilities is increasing from
13845.32 lakh to 93427.44 lakh, which is not so good number.
• In the year 2013-14, absolute liquid asset was 86233.74 lakh where as in
the year 2018-19 it is decreased to 15861.67 which is not a good sign.
OHPC is lacking of generating absolute liquid assets.
• Cash flow the company including cash flow from operation, cash flow
from investing and cash flow from financing in the year 2013-14 is
1755.9 lakh where as in 2018-19 the cash flow of the company is -
6827.53 lakh which is not good for the future of the company.
• In the year 2013-14, total asset size is 32393.35lakh and in the year
2018-19, total asset size is 387356.8lakh which is a good sign that
company is increasing its asset but the return from the asset is not as
expected.
• Cash flow from financing activity in the year 2017-18 is 66.67 lakh and in
the year 2018-19 cash flow from financing activity is -4404.17 which is
not good as well as the cash flow from operation is decreasing. So now
it’s high time for company to change its policy so to earn profit.
• Net profit after tax is increasing year on year as well as invested capital
also increasing year on year. It’s mean that company has to infuse
money every year to earn profit.
• In the year 2013-14 cash flow from operating activity is 39595.43 lakh
but in the year 2018-19 cash flow from operating activity is only
13458.04 lakh. Net sales in 2013-14 is 45173.41 lakh and in the year
2018-19 is 48008.78lakh. This shows that year on year sales is increasing
but cash flow from operation is decreasing which is not good for a
company.
SUGGESTIONS

▪ OHPC is the soul of Odisha’s power generation network and is playing a

pivotal role in making power to meet the demand of the state through
efficiently administering the system of generation.

▪ The company should give more attention to higher utilization of its capacity
and curtail unplanned expenses to increase the further profit.

▪ The management should generate a systematic financial plan for better Cash
Flow Management. There should be a better and proper guideline for
working capital management. It should get detailed view of the operations;
find out the financial requirement on accounts of operation after taking into
consideration the different financial statements.

▪ The corporation should invest more in current assets. If the corporation will
give emphasis on investment in current assets then it will increase the
liquidity position of the corporation.
CHAPTER 6:
CONCLUSION
 CONCLUSION
Odisha Hydro Power Corporation (OHPC) started operations in the year 21 st
April 1995. OHPC is one of the golds rated PSU of the state. OHPC has its registered
office at Bhubaneswar. The company has a very good financial performance and they
also have the capacity and ability to increase their effectiveness and efficiency to a
much greater extent. And all these factors and key areas have been analyzed
critically to evaluate the actual performance and also to evolve their further scope
for improvement.

The changes in the economy sector and the changes in the company
policies made it difficult for the company to make a continues growth in the absolute
liquidity position, however the company is having a qualified manpower and they
would make the efficient use of the resources to maintain a satisfactory balance
between absolute liquid assets and current liabilities of the at present and they will
definitely get the growth pace very soon in near future. As the analysis of the OHPC
and their financial performance by using the financial analysis tools like Cash Flow
Analysis and Ratio Analysis the results have shown a great performance of the
business and they do have some lacuna but they have the resources available with
them to ensure the variations from the desired could be minimized or completely
erased. The company with its java GEDCOL promoting green and renewable energy.
The company is also running the schools for children education. A lot of CSR activity
undertaken by OHPC also in the plant area both in health and education.
 BIBLIOGRAPHY

Links and Websites:

https://www.ohpcltd.com

https://www.accountingtools.com/articles/cash-flow-ratios.html

https://opentextbc.ca/principlesofaccountingv1openstax/chapter/use-information-
from-the-statement-of-cash-flows-to-prepare-ratios-to-assess-liquidity-and-
solvency/

https://finbox.com/blog/top-10-cash-flow-ratios-investors/

https://www.oldschoolvalue.com/stock-valuation/cash-flow-ratios/