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In the post independence era when India was moving towards industrialization, the thrust by the government was in the core sector. With this objective BHARAT HEAVY ELECTRICALS LIMITED was setup in Bhopal in August 1956, with a view to reach self sufficiency in industrial products and power equipments. This plan was setup under collaboration of M/s. AEJ, U.K. Now more plants were setup at Tiruchy, Hyderabad and Haridwar with Czechoslovakian and Soviet Union assistance in May 1956, Dec. 1965, Jan. 1967 respectively. Today B.H.E.L. has become the largest engineering plant employing managing approximately 72000 employees. Its headquarters are located at Delhi. B.H.E.L. is the largest engineering and manufacturing enterprise in India in the energy/infrastructure sector, today. B.H.E.L. was established more than forty years ago ushering in the indigenous heavy electrical equipments industry in India a dream that has been more than realized with a well-recognized track
record of performance. It has been earning profits since 1971-72 and paying dividends since 1976-77. B.H.E.L. manufactures over 180 products under thirty major product groups and caters to core sectors of the Indian Economy viz., Power Generation and Transmission, Industry, Transportation, Telecommunication, Renewable Energy, etc. The wide network of B.H.E.L.’s fourteen manufacturing divisions, four power sector regional centers, over hundred project sites, eight service centers and eighteen regional offices, enables the company to promptly serve its customers and provide them with suitable products efficiently and at competitive prices. The quality and reliability of its products is due to the emphasis on design, engineering and manufacturing to international standards by acquiring and adapting some of the best technologies from leading companies in the world, together with technologies developed in its own R&D centers. B.H.E.L. has acquired certifications to Quality Management Systems- ISO 9001, Environmental Management Systems-ISO 14001 and Occupational Health and Safety Management SystemsOHSAS 18001 and has also adopted the concepts of Total Quality Management.
B.H.E.L. has installed equipment for over 90,000 MW of power generation- for Utilities, Captive, and Industrial users. It supplied over 2,25,000 MVA transformer capacity and sustained equipment operating in transmission and distribution network up to 400 KV- AC & DC. It supplied over 25,000 motors with Drive Control System to power projects, petrochemicals, refineries, steel, aluminum, fertilizer, cement plants, etc. It also supplied traction electrics and AC/DC locos to power over 12,000 Km railway network. Supplied over one million valves to power plants and other industries. B.H.E.L.’s operations are organized around three business sectors, namely Power Industry including Transmission, Transportation, Telecommunication and Renewable Energy and Overseas Business. This enables B.H.E.L. to have a strong customer orientation, to be sensitive to his needs and respond quickly to the changes in the market. B.H.E.L.’s vision is to become a world class engineering enterprise, committed to enhance stakeholder value. The company is striving to give shape to its aspirations and fulfill the expectations as a Navratna Company. The greatest strength of B.H.E.L. is its highly skilled and committed 44,000 employees. Every employee is given an equal
opportunity to develop himself and improve his position. Continuous training and retaining, career planning, a positive work culture and participative style of management have engendered development of a committed and motivated work force leading to enhanced productivity and higher levels of quality.
BHEL OBJECTIVE A dynamic is one its aim high adopts itself quickly to changing environment. So here we are in BHEL. Business mission
People Orientation To enable each employee to achieve his potential. transportation. systems and services in the field of energy. Customer Focus To build a high degree of customer confidence by providing increased value for his money through international standards of product performance superior customer service. infrastructure. Profitability To provide a reasonable and adequate return on capital employed. perceive his role and responsibilities and . capacity utilization and productivity and generate adequate internal resources to finance the company’s growth. improve his capabilities.To be a leading engineering enterprises providing quality product. and their potential areas Growth To ensure steady growth by enhancing the competitive edge of BHEL in existing. primarily through improvement in operational efficiency. industry. new areas and international operations so as to fulfill national expectation for BHEL.
participate and contribute to the growth and success of the company. employees. Technology To achieve technological excellence in operations by development of indigenous technologies and efficient absorption and provide competitive advantage to the company. Image To fulfill the expectations which stakeholders like government as owner. . to invest in human resources continuously and be alive to their needs. customers and the country at large have from B.E.H.L.
MANUFACTURING UNITS OF B.E.H. First Generation Units BHOPAL HARDWAR HYDERABAD Plant TIRUCHY High Pressure Boiler Plant Heavy Electrical Plant Heavy Electrical Equipment Plant Heavy Electrical Power Equipment Second Generation Units JHANSI HARDWAR TIRUCHY Transformer and Locomotive Plant Central Foundry and Forge Plant Seamless Steel Tube Plant Unit Through Acquisition and Merger BANGALORE Electronic Electro Porcelain Division New Manufacturing Units .L.
traction transformer for railway etc. decided to set up a plant which would manufacture power and other type of transformer in addition to he capacity available at B. A Brief Introduction By the end of five year plan it was envisaged by the planning commission that the demand for power transformer would raise in the coming years.L. Anticipating the country’s requirement B. JHANSI I.L. This unit of Jhansi was established around 14 Km from the city on the NHNO 26 on Jhansi Lalitpur Road.E.E.H.L. set up in 1974 at an estimated . It was called second generation plant of B.H.RANIPAT JAGDISHPUR RUDRAPUR BANGALORE Boiler Auxiliaries Plant Insulator Plant Component and Fabrication Plant Industrial System Group BHARAT HEAVY ELECTRICALS LIMITED. Bhopal. The Bhopal plant was engaged in manufacturing of transformer of large rating and Jhansi unit would concentrate on power transformer like instrument transformer.H.E.
Jhansi. The material that is needed for maintenance is used only after through material testing in the testing lab and with strict quality checks at various stages of productions. 1974.cost of Rs.1 crores for township.H. This plant of BHEL is equipped with the most modern manufacturing processing and testing facilities for the manufacture of power. which after inspection are sent to main assembly bay. Indira Gandhi.L. . Diesel shunting locomotive and AC/DC locomotive. special transformer and instrument transformers. 53 lacks since then there has been no looking back for B. the prime minister on 9th Jan. with the growing competition in the transformer section in 1985-88 it under took the re powering of DSNL. The layout of the plant is such that it is well streamlined to enable smooth material flow from the raw material stages to finished goods. All the feeders bays have been laid perpendicular to main assembly bay and in each feeder bay raw material smoothly gets converted to subassemblies. This unit BHEL is basically engaged in the production and manufacture of transformer of various type and capacities.E. 16. 2. Its foundation was laid by Late Mrs.22 crores inclusive of Rs. The commercial production of the unit began in 1976-77 with an output of Rs.
H. Power Transformer MVA Up to 220 KV Class 250 ..L.E. JHANSI 1.THE PRODUCT PROFILE OF B.
Instrument Transformer 9. KV AC/1500V DC) 11. Bus duct KVA(Generating Up to 3150 KVA Up to 15. Ballast Cleaning Machine .2. Over Head Equipment Cum Test Car 13. Diesel Electric Locomotive 10. ACEMU Transformer Up to 1000 KVA 25 KV (1Phase) 6. Dynamic Track Stabilizer 14. Well Wagon 200Tone AC/DC Locomotive VT and CT Up to 220 KV Up to 2600 HP Up to 5000 HP(25 12.75 Voltage) 8. Freight Loco Transformer Up to 110 KVA 1000 KVA 3900-5400 KVA&6500KVA (3 Phase) 5. ESP Transformer 4. Special Transformer 3. Dry Type Transformer 7.
GROWTH OF PRODUCTION AND MILESTONES OF BHEL JHANSI UNIT YEAR MILESTONES 1976-77 1977-78 Start of Instrument Transformer Production Start of Traction Transformer and Power Transformer (Up To132 KV) 1978-79 1979-80 Start of HFTT type freight Locomotive Commissioning of 2.500 KV DG Set (due to Server power cuts) 1980-81 1981-82 Start of ESP Transformer Start of 220 KV Power Transformers .
1982-83 1983-84 1984-85 1985-86 1986-87 1987-88 1988-89 1990-91 Achieve Break Even Start of Bus duct Start of Dry Type Transformer Re powering of Diesel Locomotive Started Start of Diesel Locomotive Started Manufacturing Facilities for AC Locomotive Crossed Core Target Successful Design and Manufacturing of 400 HP 3 Axel Diesel CCI 1991-92 1992-93 Manufacture of First 2600 HP Diesel for NTPC Successful Design and Development of 5000 HP Thruster Control Locomotive 1993-94 Unit has been Awarded ISO-19001 Certificate for Quality Systems 1994-95 240 MVA Power Transformer Produced First Time 1995-96 AC/DC Locomotives first time in India .
Plates. 2) Fabrication shop is the shop which deals with the manufacturing of transformer and locomotive components such as Tanks. Fabrication shop is divided into three parts BAY-0 BAY-1 . Nuts and Bolts.1996-97 1997-98 1998-99 Car 1999-00 Hundredth Locomotive Manufactured 250 MVA Transformer Produced First Developed Over Head Equipment cum Test Diesel Hydraulic Shunting PRODUCTION UNIT DEPARTMENTS FABRICATION (BAY-0. 1.
2) These are fabrication shops established in 1978 and mainly deal with fabrication with fabrication work of transformers and locomotive. half is consist of machine shop and the other half is consist of winding of dry type transformer. BAY–4 Here winding work of the power transformer& dry type transformer is carried out. bus duct are used to transformer electricity from the generator to the transformer. BAY-2 BAY-(0.1. BAY–5 . BAY-3 It is split in two parts.
The coils of dry type transformer are casted . it involved in the manufacturing of instruments transformer like 132KV and 220KV voltage/ current transformer.It is core and punch section but in a part of it cast resin coil encapsulation plant is situated. cut and finally prepared. ESP transformer is also manufactured here. . BAY–8 This bay was established in the year 1974. it is one of the earliest bay to setup . BAY-6 It is also engaged in two processes one half is the traction transfer assembly BAY–7 In this bay various types of insulation are prepared which is to be used in transformers.
The time taken for assembly ranges from 4-12 weeks. It is department that places the contracts of building the transformer and after delivery further interacts with the customer regarding faults. TRANSFORMER COMMERCIAL (TRC) The objective of this department is to interact with the customers. failure and maintenance is done by this department. All such snags are reported to them and they forward the information to the concerning department.BAY–9 This is one of the largest bay in the unit engaged in the assembly of power and rectifier transformer. The works of the commercial department are: Tenders and notices Interaction with design department Place of work Approximate cost of the work . It brings out tenders arid notices and also responds to them.
Contracts are bagged through negotiations. In transformer testing section there are for MG. Earnest money Place and time where contract document can be seen. The electrical specification of the entire test is . Before inviting tenders it must be sure that BHEL is ready to undertake the contract and before full knowledge of scope of work is essential. The department also invites tenders and notices. sets. Amount if any to be paid for such document TENDERS AND NOTICES: The department response to the tenders calls of companies or organization which requires transformer. TESTING TRANSFORMER TESTING In this shop testing on the transformer is carried out in one section and for loco in other section.
If this . This is very important because the product must not get obsolete in the market otherwise they will be rejected by customer. TECHNOLOGY This department analyses the changes tacking place in the world and suggest changes accordingly. insulations are the major problems and frequent insulation breakdown occurs. These tests are done on demand of customer on transformer manufactured. The various transformers manufactured in this unit.already given. BUS DUCT Bus duct is used as connection between generators and transformer. Bus duct are used in power connection over 150 M V. in this unit there are basically of test. The question now arise that why are bus duct preferred over normal conductors. In high power application. TRANSFORMER ENGINEERING (TRE) The transformer manufactured in BHEL Jhansi range from the 10MVA to 240MVA and up to 200 KV.
A locomotive has no payload capacity of its own. There are three sections in store. “Loco” means from a place “Motive” means causing motion. It have also the separate department BUS DUCT COMMERCIAL LOCOMOTIVE A locomotive is a rail vehicle that provides the motive power for a train. STORE There are separate stores for different type of material in the BHEL newly technique has been put name provincial inventory means continuation of maintains inventory. .does happens then possibility of shorting of conductor’s and hence serious damage may occur to both transformer and generators. It is used to move a train.
A total of 08 SVR’s are prepared. . If material is found as par standard SRV (Store Receipt Voucher) is issued for each material. insulating material etc are directly stored in the Bays. Control Receiving Section Custody Section Scrap Disposal Section Functions: A list of material coming in store is prepared and Quality Control people are called for inspection. Transformer oil. Scraps are also sold through that unit by a MATERIAL SCRAP TRADING –DELHI CENTRAL QUALITY SERVICE First we get acquainted with a few terms concerning this department. Some materials such as Silicon oil.
Quality control: Activity such as measuring testing. .Quality: It is the extent to which product and service satisfy the customer needs. gauging one or more characteristics of product or service and comparing these with specified requirement to determine conformity are termed quality section. Quality assurance: All those plants and systematic action necessary to provide adequate confidence that the product or the service will satisfy the given requirement is called quality assurance.
WORK ENGINEERING AND SERVICES (WE&S) .
steam and power equipments. Services: This section deals with air. It has following Sections: Plant Equipment: This has electronics and electrical/mechanical maintenance.As the name suggest this section deals with services and maintenance. Telephone Exchange: Township Electrical Maintenance: WE & S Planning .
Substation and LOCO.This section deals with stores and new machines procurement and others general things. There are three maintenance centers at Bay 2. FINANCE DEPARTMENT OF BHEL JHANSI UNIT .
FINANCE DEPARTMENTS IN BHEL JHANSI The finance department is very broad in that unit and has also many sub department under finance department Administration Pay Sales and sales bill .
T.L.S. PAY In this section they credit the salary on every months 25th the salary calculate under that date 15th of a month up to 14th of next month for crediting the salary in there in 2 modes 1) CASH . Costing Budget & books Miscellaneous expenses Price bill ADMINISTRATION In this section main focus is to manage the functions of finance section. P. And to provide the facility to employee working in department.F . Cash .A P.
convance bill SALES & SUPPLY BILL It include all sales made in an organization that process started when accounts section gets purchase order SRV’s bills from supplier Terms of payment of three kinds 1) 10% in advance payment 2) 100% after receipt and acceptance 3) Partial advance and the remaining after receipt and acceptance.2) BANK To prepare salary accounts section needed some data 1) staff no 2) Master data 3) Attendance 4) Any bill remaining like medical bill. In case of foreign purchase a license is required from DGTD .
drafts. T. P. postal orders etc.A This section is responsible for banking of all the money worth received by the customer and disbursement of all authorized payment on the behalf of the company to suppliers.This license is of 2 types 1) Quantity base 2) Value base Value base license changes according to change in market variation but quantity base are fixed for appropriate quantity BHEL have quantity base license CASH. Cash section prepares these statements for management information DAILY-CASHFLOW >DAILY COLLECTION OF CASH WEEKLY-CASH INFLOW > OUTFLOW – DURING WEEK Cash flow forecast foe 3 months Operating result statement Statement of outstanding letter of credit & bank guarantee . contractors in the form of cheque. cash.F.
A Leave travel assistance In this section also check whether paper are appropriate or not To check whether the claim is according to company rules or not PSL PSL stands for price store ledger through this we get a current status of material in the market the we calculate cost of a product and offer product to a customer some terms comes under this are as follows .C Leave travel concession L.Daily bank transfers statement.T.F includes same contribution of employee as well as company.33%-12% that whole amount get by employee at the time of retirement P.A stands travel allowance in this section all convences of tours and travel company runs two things under this L. T. P.F stands for provident fund that was that was started from 1952 the rate of interest decided by time to time rate of reduction is 8.T.
Reciept issue 2.SRV. In the MIR 1.Material issue voucher SRN.direct material issue voucher PSL’s monthly information report are prepared &sent to different HOD’s and users. Suspence balance status 4.Store receipt voucher MIV.Material transfer note RCDV. Non-moving & slow moving items COST SECTION This section is responsible for calculating the cost incurred over a product and some expanses like . Direct & Indirect material 3.Store return note MTV.Receipt cum dispatch voucher SIV – Store issue voucher DIV.1 details regarding 1.
gifts. MISCELLANEOUS EXPENSES This section deals with miscellaneous expenses which are out of routine work like payment of contract worker. . Predetermined overhead matters in it also known as budget shop wise they calculate all expenses according to total job.1) Material cost 2) Labour cost 3) Direct expanses 4) Overhead Material cost calculate through that data like Material cost = MIV* PSL MIV collect from store and PSL check regularly another department Labour cost calculates through collecting labors number on particular job there respective rate and the coast of job.
BOOKS AND BUDGET Budget section deals to with preparing revenue and capital budget and to match all predetermined cost with its actual by which regularly maintain balanced nature in organization. PRICE BILL This section is new section in this unit which checks SRV pricing on the basis of P. This section also check whole recording of books as per company law act minimum 8 years they have to maintain. Budget is a coordinating agency that provides as a interface with other units as well as corporate.O purchase order according to there terms and conditions approximately 12000 SRV’s processed under this section. Books section deals with maintains books of accounts regularly by which they keep records for future. .
INTRODUCTION OF WORKING CAPITAL MANAGEMENT .
” -Weston & Brigham Working capital can be classified regularly on its requirement. There are two concepts of working capital 1) Gross working capital 2) Net working capital GROSS WORKING CAPITAL Gross working capital may be defined as a firm’s investment in current assets. Current assets are the assets which can be converted into cash with in an year and include cash. short term securities.“Working capital refers to firm investment in short term assetscash. Short term securities. The gross working capital concept works over two aspects of current assets management. 1) Optimum investment in current assets 2) Financing of current assets . debtors (accounts receivable or book debts) bill receivable and stock. accounts receivable & inventories.
After the conversion of resources into inventories into cash Operating cycle of a manufacturing company involves three phases 1) Acquisition of resources 2) Manufacture of goods 3) Sale of the product . Current liabilities are those claims of outsiders which are expected to mature for payment within a year and include creditors. OPERATING CYCLE Operating cycle involved in the conversion of sales into cash. bills payable and outstanding expenses Net working capital may be negative or may be positive. Operating cycle is the time duration required to convert sales.NET WORKING CAPITAL Net working capital refers to the difference between current assets and current liabilities.
Like a company has some cash in the beginning. which will be converted into finished goods on the completion of the production process. This cash may be to the suppliers of raw material to meet labor costs and other overheads. WIP. the firm will again have cash.It is clear that working capital is required because of the time gap between the sales and their actual realization in cash. After analyzing requirement s well The Cash Cycle Stock Understand credit terms Reorder Sales Keep sale count s Supplier Payment Cash Understanding Inventory management and control is important . This time gap is technically termed as “operating cycle” of the business. Thus. On sale these finished goods gets converted into debtors and debtors pay. Funds required investing in inventories. debtors and other current assets keep on changing shape and volume. WIP. finished goods.etc. there is a complete cycle when cash gets converted into raw material. These three combined would generate WIP. This cash will again used for financing raw material. debtors and finally again cash.
In case of manufacturing company. (2) Conversion of raw materials into work-in-process. OBJECTIVE MANAGEMENT OF WORKING CAPITAL . the operating cycle is the length of time necessary to complete the following cycle of events: (1) Conversion of cash into raw materials. (4) Conversion of finished goods into accounts receivable. (3) Conversion of work-in-process into finished goods. The operation cycle of manufacturing business can be show as in the following chart. and (5) Conversion of accounts receivable into cash.
Availability of ample fund at the time of need. The term adequate working capital is subjective depending on management‘s attitude towards uncertainty/ risk. SAFTEY CREDIT MGMT MINIMIZE TIME LIQUIDITY PROFITABILITY BANK MGMT MINIMIZE TIME EXCESS CAS H ACCT RECEIVABLE MGMT MINIMIZE TIME ACCT PAYBLE MGMT OPTIMIZE TIME MEDIA . Maintenance of working capital. 1. 2.The basic objective of working capital is to provide adequate support of the smooth functioning of normal business operation of a company.
Dangers facts of excessive working capital Unnecessary accumulation of inventories.Goals of working capital management BALANCED WORKING CAPITAL The firm should maintain a sound working capital position there two cases one is excessive and inadequate working capital positions. Excessive working capital means holding cost and idle funds which earn no profits for the firm. There is managerial efficiency degeneracy Inadequate working capital is also dangerous because it interrupt production Dangers facts of inadequate working capital Stagnates growth it becomes difficult for the firm to undertake profitable projects It becomes difficult to implement operating plans If operating efficiencies affected so it is difficult to meet day to day need . Defective credit policy and slack collection period.
A firm’s net working capital position is not only important as index liquidity but it is also as measure the firm’s risk. GUIDELINES AND SOUCES OF FUNDS FOR WORKING CAPITAL REQUIREMENT OF BHEL . Fixed assets are not efficiently utilized Firm loses their reputation in front of customer and society An enlightenment management should maintain the right amount of working capital on a continuous basis.
New Delhi. RECEIPTS FROM CUSTOMERS The bulk of the working capital requirement are met from the advances from the customers in accordance with the contract conditions as approved by the board. All the banking transactions have been centralized at corporate office.1. 4. 2. 3. CASH CREDIT FROM BANKS The requirements of working capital will be met either from internal resources or borrowings from banks. WORKING CAPITAL LOAN FROM GOVT The funds for working capital over and above cash credit limits may also be Arranged through government loans. The corporate office will negotiate with consortium of banks for total cash credit required for the company as a whole. FIXED DEPOSITS FROM MEMBERS OF PUBLIC . The receipt are deposited in the centralized account.
Subject to the approval of the govt and board of director. The IDBI does not itself discount bill of exchange but rediscount those discounted by any other approved bankers. 6. The manufacturer of indigenous Capital equipment can push up the sales of their products by offering the prospective purchaser deferred payments facilities. 5. . OTHER SOURCES OF FUNDS a) Bill rediscounting scheme of IDBI: The scheme was introduced in 1965. Current accounts will be authorized to be opened with branches of SBI or any other nationalized bank. PROVISIONS OF THE FUNDS FOR SITE OFFICES Funds required to site offices will be provided by divisions under which they are functioning and for the purpose. the funds may be raised from public by obtaining fixed deposit under the provisions of the company rules to meet the working capital requirements of the company.
This facility enables the Supplier to get the payments for their supplies at a reduced rate of interest. .b) Bill market scheme RBI providing rediscounting facility for bills having maturity of not more then 120 days introduced in the scheme.
CASH MANAGEMENT Cash is the important current assets for the operation s of the business. 2) Cash flows within the firm 3) Cash balances held by the firm at appoint of time by financing deficit or investing surplus cash. CASH MANGEMENT CYCLE Error: Reference source not found . Cash management is concerned with the managing of 1) Cash flows into and out of the firm. Cash is the money which a firm can disburse immediately without any restriction.
transaction motive requires a firm to hold cash to conduct its business in the ordinary course. Speculative motive . Precautionary motive – precautionary motive is the need to hold cash to meet contingencies in the future. TECHNIQUE TO MANAGE CASH Cash planning Cash forecasting & budgeting .speculative motive relates to the holding of cash for investing in profit making opportunities as and when they arise.MOTIVES FOR HOLDING CASH Transaction motive .
Under this system all the sales proceeds of the units are deposited in a centralized account. This account number is universal for all units at ROD’s. the centralized cash credit system id followed. the units have to prepare the estimates of such expenses. Only corporate office operate it.CASH MANANGEMENT IN BHEL Jhansi In BHEL. which are then sent to corporate . From 24-07-75 all the banking transaction of the company have been centralized at corporate office at Delhi. For meeting day to day expenses. They have to deposit the sales the process if this account withdraws money from it.
A consortium deed for hypothecation of stocks and stores of company is executed by corporate office. The inflows and outflows are estimated on following basis.office weekly or monthly. Arrangement have already been made with state bank of India . the cash budget is prepared on yearly basis for estimating the expected cash inflows and cash outflows. documents etc required in this connection will be called for by corporate office from the division. The sale proceeds cannot be directly utilized. or both. The units will send estimated. monthly cash flow statement to the corporate office by 18th of every month. All the information. Based in the above requisition. . the units have furnished the required information inder the following document. the corporate office allocate the funds. canara bank. The only source of cash inflow for units is the corporate office. Under this scheme. HDFC bank. Bank of Baroda for centralizing cash credit limit at Delhi. For cash credit corporate office will negotiate with consortium of banks for total cash credit required for the company a a whole. At unit level.
These report are send to corporate office on – 1st (showing the transaction from 25th to 30th ) 8th (showing the transaction from 1st to 7th of current month ) 16th (showing the transaction from 8thto 15thof the current month ) 25th (showing the transaction from 16th to 21st if current month ) . Debit and credit transaction appearing in bankbooks of the company. These reports show the details of daily. enabling the posting of corporate bankbooks as well as verification of bank statement received from bank. to the corporate office. The actual cash flow statement will be sending to corporate office monthly.Based on these cash flow statement the corporate office will allocate the sub limits will be transferred to the consortium of banks by 25th of the month the units can utilize this fund. 1st of succeeding month. The units are also required to send the weekly report of daily bank transaction.
may be noted or avoided . ADVATAGES OF CENTRALISED SYESTEM Excess cash at various units can be efficiently used for various purposes and improvement. This report will be sent quarterly after inter unit reconciliation meeting. to what extent the firms should rely on bank financing and how to invest in marketable securities. Thus cash forecast & budget are the principle tools of cash management. Forcasting helps manger to know how much cash will be held in balance. The total interest payable on cash credit availed by corporate office is to be allocated among the units in the ratio of utilization of funds.The units are required to send the comparative statement of estimated and annual cash flow of the proceeding month. Deficit of cash at various units can be sorted out through centralized cash system Idle cash at various units.
. Business firms generally sell goods on credit to facilitaes sales. The firm grants trade credit and create accounts receivable that would be collected in the future. The characteristics of credit sales are It involves an element of risk It is based on economic value It implies for future Credit policy are prepared in the receivable management it is the combination of three decision variables. When a firm makes an ordinary sale of goods on services and does not receive payments. Trade credit always create trade debtors or accounts receivables The trade credit arises when a firm sell its product or services on credit and does not receive cash immediately.RECEIVABLES MANAGEMENT The customers from whom receivable or book debts have to be collected in the future are called trade debtors.
. Two methods to monitor management of receivables Average collection period Average collection period = Debtors *360/credit sales Aging schedule – it break down receivables according to the length of time for which they have been outstanding. Credit standards Credit terms Collection efforts GOALS OF CREDIT POLICY A firm always follows a two type of credit policy Lenient credit policy.To sell on credit on a high selective basis only to those who always good credit worthiness and able to pay in future MONITORING RECEIVABLE A firm need to continuously monitor and control its receivable to ensure success of collection efforts.To sell on credit to customers on my liberal terms and standards Stringent credit policy.
To utilize its excess capacity.RECIEVABLE MANAGEMENT OF BHEL Jhansi The main products of BHEL are heavy industrial goods with long operating cycle. BHEL has overseas sales also. The main customers of BHEL are railways. BHEL is granting liberal trade credit terms to its customers. All the BHEL units are having their commercial department. Commercial department and regional operational divisions ( RODs ) primarily . BHEL grant liberal term regarding trade credit to lure the potential customers to by its products at favorable selling prices. power industries and other private parties.
They keep track of money received from customers as advances. The terms and condition with the customers are finalized according to the credit policy laid down by corporate office BHEL. installation. BHEL demands considerable payments in advance in different phases of completion of work i. The aging schedule of customers if also prepared which gives the picture regarding period of outstanding balances. as against dispatch of finished good and money recoverable on account of price variation claims and conversion of deferred depts into debtors. maintenance etc. The sales section of finance department also actively takes part in receivable management by preparing and sending invoices and reminders to customers at appropriate time. industry conditions are taken into consideration. This monitoring is done works order wise. Seeing huge investment in execution of work order. commissioning. erection.e.Carry out the job of recovery from customers. While lying down of credit policy by head office. However deviation are permitted with the due approval from corporate office. despite all these BHEL is presently facing cash crunch because a major chunk of .
The large size of inventory maintained by the firms a considerable amount of funds is required to be committed to them. which are very casual in clearance of dues. A firm neglecting the management of . INVENTORY MANAGEMENT Inventories are the most significant part of current assets of a large majority of companies in India.BHEL’s customers consists of Govt bodies.
There are three type of inventory Raw material Work in progress Finished goods Supplies or stores and spares The forth type of inventory is not very common some firms maintain it like BHEL maintains it. In a manufacturing firm the level of inventory depends on the operation cycle.inventories will be jeopardizing its long run profitability and may fail ultimately. A manufacturing firm with a long operating cycle has to maintain a high inventory level. NEED FOR INVENTORY . NATURE OF INVENTORIES Inventories are stock of the product a company is manufacturing for sale and components that make up the product.
Reorder point Safety stock INVENTORY CONTROL SYESTEM ABC inventory control system – This analytical approach tends to measure the significant of each item of inventories in terms of its value JIT system – Japanese firm popularize that system it eliminates the necessity of carrying large inventories and thus. saves carrying and other expences. . handling. b) Carrying cost – warehousing . transportation.It have also same need as receivable management Transaction motive Precautionary motive Speculative motive TECHNIQUES OF INVENTORY MANAGEMENT EOQ (Economic order quantity) a) Ordering cost – ordering placing .
000 Investment Inventory Turns Rs 10.500 4 .000 Rs 5. Computerized inventory control system – it is an automatic system of counting inventories These cost of holding inventories are Material cost Order cost Carrying cost Cost of funds tied up in inventory Cost of running out of goods Inventory Turnover Annual Example Annual Inventory Cost of Goods Sold Rs 10.000 1 Rs 10.000 2 Rs 10.000 Rs 2.
It holds much importance in context in BHEL as it is having a long production cycle where a good amount of capital is tied up in form of raw material. Production planning and control department plays a pivotal role in inventory management. work in progress and conversion cost. In BHEL the inventory control is perform with following steps – 1. The engineering department plays a supporting role and provides the requisition regarding technology to be applied and material required to PPC department.INVENTORY MANAGEMENT IN BHEL Jhansi The investment in inventory in proportion to total is a dominant determinant of working capital management. Planning – .
Receipt & Custody For the proper inventory control on receipt of material in store. design and manufacturing department prepares the planning schedule. The schedule along with information provided by engineering and design department help in material planning and inventory control 2. 3. A single purchase order is placed for the entire quantity of a specific item and its scattered delivery over a period of time is received. quality control department checks the material as per . The method help in obtaining cash and quantity discount and saving carrying cost.This is done by PPC department is consultation with purchase. In case of foreign purchase also one order in placed for the full requirement of an item and scattered delivery is obtained because variation caused in material cost due to fluctuation in exchange rate is much less than the carrying cost of the material which is approximately 25% of the total price. It is done with the assistance of PPC and commercial department for maintaining a tradeoff between carrying cost and ordering cost. Procurement – The procurement done by purchase department. commercial.
Accounting – The record of every transaction regarding the use of material in every department is kept. PLANNING AND CONTROL OF INVENTORY IS DONE BY USING TWO METHODS – (1). 4. ABC analysis (2). 5. These records give the overall view of how and where inventories have been used. Issue After receiving the material and storing. Method Use For Inventory Control IN BHEL.specification. Slow moving and non-moving goods analysis. Full record of every issuing of material is kept for the proper inventory control. . The cost section fills detail of all the purchase by issuing store receipt voucher and material issue voucher. the management keeps the information whether these material are being issued to desired destination.
Variety reduction.(3). whichever is lower.5% of the realizable value whichever is lower. Inventory is valued at actual / estimated cost or net realizable value. cost means factory cost. actual/ estimated factory cost includes excise duty payable on manufactured goods. (3). Budgeting material requirements. compressors and industrial turbo sets are valued at actual/ estimated factory cost or at 97. Inventory Valuation (1). In respect of valuation of finished goods in plant and work in progress. (2). boilers auxiliaries. Fixation of raw material levels. (4). Finished goods in plants and work in progress involving hydro and Thermal sets including gas based power plants. (5). .
(4). (5). In respect of raw material. loose tools. stores and spares cost means weighted average cost. components. . The components and other materials purchased / manufactured against production order but declared surplus are charged off to revenue retaining residual value based on technical estimates.
Movement of working capital analysis 3. Therefore The financial manager has to be very vigilant all though out about the trends in the items that make up working capital.ANALYSIS OF WORKING CAPITAL MANAGEMENT The analysis working capital is primarily a test of short term solvency. Fund flow analysis . There are dangers in having too little or too much working capital. The question to be studied and answered in connection with the analysis of working capital include the following – Is the management utilizing working capital effectively? I the amount of working capital adequate. excessive or insufficient? does the firm have a favorable credit rating? Is the current financial position improving? TOOLS OF WORKING CAPITAL ANALYSIS 1. Working capital ratio analysis 2.
These are as follows – (1) CURRENT RATIO Current ratio represent margin of safety for creditors. Working capital budget 6. This ratio is calculated as follows: Current ratio = Current assets / Current liabilities . Cash flow analysis 5. These ratios would increase or decrease that measure the working capital of management of BHEL. the greater the margin of safety. the larger the amount of current assets in relation to current liabilities. The higher the current ratio. Working capital report We are using the technique of ratio analysis as a means of checking upon the efficiency with which working capital is being used in the company. the more the firm ability to meet its current obligations.4.
A ratio of 1:1 is considered satisfactory.Current ratio of 2:1 is satisfactory. Observing the current ratio of last five year 2004 to 2008 it was seen that unit is having sufficient working capital. Ratio is computed as under – Quick ratio= Current asset .01 from standard ratio. In the unit this ratio is 1. this has difference of only 0.Inventory / Current liabilities In the unit quick ratio has been decreasing in last 5 years. This gives the interference that the firm is having more liquidity than what is prescribed. This reflects that the working capital is sufficient. However a deep analysis reflects that ratio is . A firm’s inventory cannot be easily being converted in to cash so it is not taken into account here.99 in 2004-05. (2) QUICK RATIO: This ratio provides a better measure of over all liquidity.
Cash ratio is calculated by this formula – Cash ratio= Cash / Current liabilities There does not seem any standard ratio for measuring cash position.e. the wrong utilization of funds.00036 that shows our cash worthiness then in the year 2007-08 the ratio decreases . There is nothing to be worried about lack of cash if the company has reserve borrowing power. (3) CASH RATIO: Cash is the most liquid asset and it should be minimum in the firm as the excess of cash in hand/bank implies loss of interest i.The realization of debtors is not very quick & regular As such the reflection of excess liquidity as reflected by very high ratio is a false picture. There are old un realized debt of long periods which are hiking up the debtors limit .high level of debtors. which could have been utilized/invested elsewhere. In the unit cash ratio in 2004-05 is 0.
Ratio should neither be low nor too high. (4) Inventory turnover ratio: It shows how rapidly the inventory is turning into receivable through sales. High ratio is indicative of good inventory management. This unit is following a centralized cash management system under which the unit is not required to keep cash with it on regular basis. A monthly cash budget is prepared and allocation is required from corporate office. It is computed as follows – ITR= Sales / Average inventory .00020 that shows position of unit in cash shows good.to . A low ITR implies excessive inventory levels.
In the unit ratio in 2005-06 is 2.Ratio 1 0.Ratio 1.1 2007-08 1. The reason for that ratio is that the inventory is also not justified with reduced turnover and lack of orders.99 .5 C.9 C.30 which shows total inventory turnover of that year.5 2 C.ratio = Current assets / Current liabilities YEAR 2004-05 2005-06 1. during last five year it shows fluctuation means in year 2006-07 it decreases then it increases.Ratio 2. if we see according to year 2006-07 to 2007-08 there is some changes in inventory turnover it increases that shows blockage of funds.71 Current Ratio 1. the high inventory turn over always adversely affect to unit due to which profit goes down CURRENT RATIO C.5 0 2004-05 2005-06 year 2006-07 2007-08 2006-07 2.
46 2007-08 1. In context of BHEL.45 2005-06 1.It measures the short term solvency of the firm. Jhansi the current ratio in the year 2004-05 was 1. The current ratio of 2:1 is been considered satisfactory.27 . it ability to meet short term obligations which indicates the rupees of current assets available for each rupee of current liability.71 decreased around 14% that shows the whole status of current assets and liability means in this year company ratio of liability decrease from previous year.35 2006-07 1. The increasing ratio always shows ability to meet current obligation the higher current ratio shows higher liquidity low profit because there is load of current liability. QUICK RATIO Quick ratio = (Current assets –Inventory) / Current liabilities YEAR Quick Ratio 2004-05 1.99 and the year 2007-08 is 1.
5 1.45 then in year 2007-09 it get changed around 12% it shows changing working capital position of BHEL Jhansi unit.Ratio 1.Ratio It is widely available test of measure of liquidity position of firms.Ratio 1.3 1.4 Q.2 1.45 1. CASH RATIO Cash ratio = Cash / Current liability . The quick ratio of 1:1 is considered to be satisfactory as a firm can easily meet all current claims while calculating expenses and inventory are been excluded from current assets.35 1.15 2004-05 2005-06 Year 2006-07 2007-08 Q. The ratio in BHEL is almost shows fluctuating trend if we see in year 2004-05the ratio is 1.Q.25 1.
.00033 then in current year it increases in comparison of preceding year but not much effected.0002 C.0004 0.Ratio 0.00035 0.Year Cash Ratio 2004-05 0.00017 2007-08 0.00025 0.Ratio Cash is the most liquid asset all investment are equal to cash shows the liquidity of an organization Every and each company want to carry small amount of cash this type of position can be easily shown in the organization.00005 0 2004-05 2005-06 year 2006-07 2007-08 C.00033 2006-07 0. The cash ratio start to fall from 2004-05 to 2005-06 approximately 8% then year 2005-06 to 2006-07 it falls up to .0003 0.00015 0.00017 from .0002 0.Ratio C.00036 2005-06 0.0001 0.
35 2.3 I.18 2.T 2.1 2004-05 2005-06 Year 2006-07 2007-08 .25 I.T ratio 2.2 2.33 I.T 2.15 2. 30 2.INVENTORY TURNOVER RATIO Inventory turnover ratio = Cost of good sold / Average inventory Year 2004-05 2005-06 2006-07 2007-08 Inventory Turnover Ratio - 2.
In a manufacturing company inventory of finished goods is used to calculate turnover.Inventory turnover ratio indicates the efficiency of the firm in producing and selling its product. inventory . In the unit there is no provision for inventory for finished goods there is inventory of raw material and its components which holds average of 12 months if we see the inventory turnover from 200506 to 2006-07 there is some downward that shows there is no blockage of funds in that year and if we see according to year 2006-07 to 2007-08 there is some changes in inventory turnover it increases that shows blockage of funds. the high inventory turn over always adversely affect to unit due to which profit goes down.
Ratio 1.WORKING CAPITAL TURNOVER Working capital turnover = Sales / Net current assets Year Working Capital Turnover Ratio 2 WCT.Ratio 1.83 .Ratio 2004-05 2005-06 2006-07 2007-08 1.5 0 2004-05 2005-06 year 2006-07 2007-08 WCT.5 1 0.73 1.52 1.48 WCT.
4 0.Ratio Turnover Ratio 1. In next two years it becomes . It may thus compute net working capital.7 2006-07 Year .43 2007-08 2007-08 T.2 1 0. TURNOVER RATIO Turnover ratio = Net salesT.57 2006-07 1.Ratio 1.6 0.4 1. If we see the reciprocal of first two years .57 & .8 1.A firm may also like to relate net current assets to sales.54 current assets .65 In the year 2007-08 that shows changing rate comparitible its preceding year if we find it’s reciprocal .67 of net current assets this gap will maintain from borrowings this process same way work for whole years.6 1.2 0 2004-05 2005-06 1.Ratio / Capital employed Year T.8 0.34 2004-05 2005-06 1.67 that shows 1 rupee of sales the company needs .54 means for sale of 1 rupee they need .
RETURN ON CAPITAL EMPLOYED Return on capital employed = PBIT / CE . In the 2004-05 total turnover was 31008 Lakh then in the year 2005-06 it increases up to 41151 Lakh then it decreases not just a sale but in a comparison to there capital employed in the year 2006-07 then in current year it increases again.Turnover ratio is just an inter firm analysis a firm just to know its financial standing and check status in comparison of other competitor. The turnover ratio show the expectation according to capabilities which may be achieve or not it is just a target which they want to achieve according to there capital employed .
037 ROCE 0.14 0.Year 2004-05 2005-06 2006-07 2007-08 Return on Capital Employed 0.118 0.048 0.04 0.118 0.02 0 2004-05 2005-06 Year 2006-07 2007-08 ROCE Return on capital employed means those capital in any way put in market by a business what its return comes out which shows as profit of organization if we see return in the year 2004-05 to 200506 there is return in a efficient manner according to there capital .12 0.08 0.1 ROCE 0.06 0.
25 1.45 1.2 2004-05 2005-06 Year 2006-07 2007-08 DTR .35 1.5 1.39 1.32 2004-05 2005-06 2006-07 2007-08 DTR 1.4 DTR 1. DEBTORS TURNOVER RATIO Debtors turnover ratio = sales / Average debtor Year Debtors turnover ratio 1.47 1.employed but if we see return in the year 2005-06 to 2006-07 it is constant same ratio is there between PBIT and capital employed at last from 2006-07 to 2007-08 the get less then expectation according their capital employed.3 1.
A firm sells out the goods on credit. Credit is just a marketing tools debtors are convertible into a cash according to given policy of company If we see in the year 2005-06 to 2006-07 there is higher value of debtors turnover that shows company is good in efficient management in credit but in the year 2006-07 to 2007-08 there is poor management policy towards debtors turnover so it diminish. COMPARITIVE GERAPH OF TURNOVER AND PBIT Year 2004-05 2005-06 41151 2814 2006-07 50094 3951 2007-08 62071 1250 Turnover(Rs in lakh) 31008 PBIT(Rs in lakh) 1029 70000 60000 Turnover/PBIT 50000 40000 30000 20000 10000 0 2004-05 2005-06 Year 2006-07 2007-08 turnover PBIT .
In the year 2004-05 to 2005-06 there is increase in turnover so there is also increase in profit in next two year turnover increases profit also increases according to there preceding year but if we see in current year there is a low level of profit according to its preceding year in this profit should be increase according there turnover but it get decreases. BHEL’S financial performance .That graph shows over all performance of that unit turnover and its profit.
That graph show whole net sales, net profit, EPS of whole BHEL units working in whole country this position is check out by Head office of BHEL from DELHI in this we can see that the sales increases according to this the net profit increases and decreases from year 99-00 to year 2006-07 in the year 06-07the sales is 98.7 In crores profit also increase. That shows all over technological development the orders are increasing day by day for BHEL and BHEL also capable to meet its customer demand according terms and condition.
RECOMMENDATIONS AND SUGGESTIONS
During my project period, I have studied the working capital management in BHEL, Jhansi. On the basis of my study I am putting forward some suggestions. Implementation of which may certainly improve the efficiency of working capital management in the unit.
1. Estimation of working capital requirement should be done on the basis of the length of operating cycle of different products.
W.C Requirement = Average daily requirement of working Capital X Length of operating cycle. 1. Working capital requirement can be minimized by decreasing the length of operating cycle of different products this can be done by adopting technology or state of art, mechanized operations and by adopting of Critical Path Method (CPM) of production operation. 2. The credit policy of BHEL, Jhansi should be made more practical to shorten the debt collection period. The age wise schedule of debtors shows that debtors pertaining since financial year 1991-92 are outstanding. This an alarming phenomenon as a point out that the terms and conditions of pavements as well as recovery procedure had been very-very liberal. The financial crunch would have been not there had all the recoveries been made on time. A new credit policy is the need of the hour which should specify strict terms and penalties in case of delay release of payments without doing my to relations with BHEL’s customers.
3. To decrease loss due to bad debts and to reduce collection period credit rating of customers should be done more efficiently. Evaluation of credit worthiness is a precursor to the final decision whether to grant credit or not for decision making.” Decision tree approach” can be adopted. Under this approach probability of default and payment by the customer are determined. The weighted net benefit is calculated as .
P (Revenue-cost)- (1-P) Cost Where P is the probability that customer pay his dues. The customer should not be granted credit if answer is negative. Quality of the product should be improved so that company can dictate the term of payment. This will screen out unworthy customers and recovery position will definitely be improved.
4. Inventory management plays an important role in effective working capital management for a business firm producing industrial goods.
For improvement in the area of inventory management, suggested steps are as under:
I. The ABC analysis used considers only the value of material and quantity of uses .It does not considers the importance of the material in production function .To over come this VED analysis could also be used which categories the item according to their importance as vital, essential and desirable I. Suggest though research in this regard to arrive at some suitable mix of both these method which gives due consideration to value, quantity importance etc of stock item. II. The maximum and minimum level of each item should be indicated avoid over stock or under stock situation. III. Internal performance report on inventory on at least monthly basis should be prepared to study the material price variance, material uses variance and inventory level variance from the estimated figures. IV. The indenting and tendering process for purchase should be made expeditious to decrease the lead time and to reduce the change of stocks out situations.
This should be avoided as it lowers the performance rating of the company.V. VI. The capital employed should not be maximum by which return can not be appropriate. The company should increase its credit sale at a certain limit by which it can easily stand in market in front of customer. X. In the case of inventory management there is lack of doing proper treatment for obsolete product. It has been seen that delay in supply of raw materials is regularly occurring on this ultimately to delay in supply to customers. There should not be excess of turnover by which it becomes work load for a employee. IX. The Material procurement period should be low by which production is not to be delayed VII. Therefore we can see easily this year the debtor turnover ratio decreases and profit also decreases. VIII. .
M Pandey) Management accounting (6th edition) Writer (S.BIBLOGRAPHY Financial management (9th edition) Writer (I.D Chowdhary) Financial reports of BHEL Jhansi unit .
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