DI

SSERTATI
ON(
KMB-
405)
ON
ASTUDYON“
WORKI
NGCAPI
TALMANAGEMENT”

SUBMI
TTEDI
NPARTIALFULFI
LMENTOFTHEREQUI
REMENTFOR
THEAWARDOFDEGREEOF

Mast
erofBusi
nessAdmi
nist
rat
ion
(
MBA)

SUBMI TTEDBY
TARABRAFEE
RollNo.
1901750700085

MR.ASADALI
(
ASSISTANTPROFESSOR)

AL-
BARKAATINSTI
TUTEOFMANAGEMENTSTUDI ESANOOPSHAHR
ROAD,ALIGARH
(
Aff
il
iat
edt
oDrAPJAbdulKal
am Techni
calUni
ver
sit
y,Lucknow)
(2020-
21)
 DECLARATI
ON

ITarabRaf eest udentofMBA,f rom Al-BarkatInsti

tuteof
Managementst udies,Ali
garhappr ovedbyAI CTEaffi
li
ated
to Dr.APJAbdulKal am TechnicalUni versit
y,Lucknow
herebydecl aredt hatthedissert
ationreporton“ ASTUDY
ONWORKI NGCAPI TALMANAGEMENT”
Furt
her ,Ial so declaret hatIhav et ri
ed my bestt o
completet hi
sr eportamostsi ncerel
yandaccur acy,even
thenifanymi st
akeorer rorhasbeencr epti n,Ishal
lmost
humblyr equestt her eaderstopoi ntoutt hoseer r
orsor
omissionandgui demef ortheremov aloft hoseerrorsin
thefuture.

TarabRafee
(4thSEMESTER)
ABIMS,Ali
garh
 ABSTRACT

AWor kingcapi t
almanagementensur esacompanyhas
suffi
cientcashf l
owi nordertomeetitsshor t
-t
er m debt
obli
gat ionsandoper atingexpenses.Theneedsof
eff
icientwor kingcapitalmanagementmustbe
consider edinrelati
ont ootheraspect
soft hefirms’
fi
nanci alandnon- fi
nancialperf
ormance.Anef fici
ent
Wor kingCapi t
al Managementi sexpectedt ocontri
buteto
thehighf i
nancialperf
or mance.The
mainpur poseoft hi
sst udywast oinv
estigatethewor ki
ng
capitalmanagementandi tsimpactonf i
rms’ f
inancial
performance.
 ACKNOWLEDGEMENT

Witht hedeepsenseofgr ati

tude,Iwi shtoacknowl edge
the suppor tand hel p extended by al lthe peopl e,in
successf ulcompletionofthi
spr ojectwor k.
Iexpressmygr ati
tudet omySuper vi
sorMr .
AsadAl i
(AssistantProfessor)forhi
sconsi stentsuppor tandf or
hisencour agement .Iwouldli
ket othankal lt
hef acult
y
member swhohav ebeenast rongsour ceofinspirat
ion
throughoutt heprojectdir
ectl
yori ndirectl
y.
 TABLEOFCONTENTS

CONTENTS PAGENUMBERS

CHAPTER1:
INTRODUCTION 7
OBJECTIVES 9
LIMITATI
ONS 10
RESEARCHMETHODOLOGY 11
CHAPTER2:
LI
TERATUREREVI
EW 13
CHAPTER3:
WORKI
NGCAPI
TAL 17
CHAPTER4:
I
MPACTSOFCOVI
D-19ONWORKI
NG
CAPI
TAL 36
CHAPTER5:
DATAANALYSI
S&I
NTERPRETATI
ONS
41
CHAPTER6:
FI
NDINGS 67
SUGGESTI
ONS 68
CONCLUSIONS 69
BI
BLIOGRAPHY 71
CHAPTER:
1
 I
NTRODUCTI
ON

Everybusi nesswhet herbi g,medi um orsmal l,needsf inancet o

carryoni tsoper ationsandt oachi evei t
st arget.Inf act, fi
nancei s
soindi spensabl etodayt hati tsri
ghtlysai dt obet hel ifebl oodof
an ent erpr i
se.Wi thoutadequat ef inance,no ent erpr i
se can
possi blyaccompl ishi tsobj ecti
ves.Sot hischapt erdeal swi th
study i
ngv ar iousaspect sofwor kingcapi talmanagementt hatis
necessar yt o car ry outt he day -t
o-day oper ations.The t er
m
worki ng capi talr ef erst ot hatpartoff irm’scapi talwhi ch is
requiredf orf inanci ngshor tterm orcur r
entasset ssuchascash,
mar ket ablesecur ities,debt orsandi nv entoriesfundsi nv est edin
currentasset s keep r ev olving f
astand ar e being const antl
y
conv ertedi nt ocashandt hiscashf l
owsoutagai ni nex change
forot hercur rentasset s.Hence i ti s known as r ev ol ving or
cir
cul atingcapi t
al.Ont hewhol e,Wor ki
ngCapi talManagement
perfor msakeyf unct i
onandi soft oppr iorit
yf orev eryf i
nance
manager .Al lmanager smust ,howev er,keepi nmi ndt hatnt hei
r
pursui ttol iqui di
ty,t heyshoul dnotl osesi ghtoft herebasi cgoal
ofpr of i
tabi l
ity.Theyshoul dbeabl et oat tainaj udiciousmi xof
l
iquidityandpr ofi
tabi li
tywhi lemanagi ngthei rwor kingcapi tal.

Workingcapit
almanagementdealswit
ht hemostdy namicfiel
ds
i
nf i
nance,whi chneedsconstantint
eracti
onbetweenf inance
and otherfuncti
onalmanagers.The finance manageract i
ng
al
onecannoti mpr ov
et heworkingcapitalsi
tuat
ion.Inrecent
ti
mesaf ew casest udi
esregardi
ngmanagementofwor ki
ng
7|
Page
capitalinselect
edcompani eshav ebeeni nordertomakei n-
depth anal y
sis of the sever alexperts of worki
ng capital
management ,Thefi
ndingofsuchst udiesnotonlythrowsnew
l
ightsont hetechni
calloopholesofmanagementact iv
iti
esofthe
concerned compani es, but al so helps the scholars and
researcherstodevelopnew i deastechniquesandmet hodsfor
effecti
vemanagementofwor kingcapit
al.

Decisionsrelat
ingt owor ki
ngcapitalandshor
tter
mf inancingare
ref
erred to as wor king capit
almanagement .These i nv
olve
managi ngt her elati
onshipbetweenaf i
rm'sshort
-term assets
and it s short
-term l iabi
l
iti
es.The goalof wor king capit
al
managementi st oensur ethatthef i
rmisabletocont i
nueits
operationsandt hati thassuffi
cientcashflow t
osat isf
ybot h
maturingshor t
-ter m debtandupcomi ngoper
ati
onalexpenses.

8|
Page
 OBJECTI
VESOFTHESTUDY

Tost
udyt
hev
ari
ouscomponent
sofwor
kingcapi
tal
.

Toanal
yzet
hel
i
qui
dit
ytr
endofacompany
.

Toapprai
setheut
il
izat
ionofcurr
entassetandcur
rent
l
iabi
l
iti
esandfi
ndoutshort-comi
ngsifany.

9|
Page
 LI
MITATI
ONSOFTHESTUDY

Timefact
ori
sthemostcruci
alone.Thest
udywas
conduct
edwit
hinashor
tperi
odoft i
me.

Duetobusywor
kschedul
e,det
ail
eddi
scussi
onswer
enot
possi
ble.

Theanal
ysi
sisl
i
mit
edt
ofi
vey
ear
sofdat
ast
udy
.

10|
Pag
e
 RESEARCHMETHODOLOGY

I
nthi
spr
ojectExpl
orat
oryResear
chhasbeenused.

I
npr
epar
ingoft
hispr
ojectt
hei
nfor
mat
ioni
scol
l
ect
ed

t
hrought
hef
oll
owi
ngsour
ce.

SECONDARYDATA:

Themaj orsourceofdataf orthi

sprojectwascollect
edfrom
annual r
epot
s,profi
tandl ossaccountf orf
iveyearperi
odfrom
2015-2019thatwasupl oadedont hecompanywebsi t
e&some
morei nf
ormati
oncollectedfrom int
ernetandtextsource.

SAMPLEDESI
GN:

SAMPLI
NGUNI
T: Fi
nanci
alSt
atement
s

SAMPLI
NGSI
ZE: Fi
veYear
sFi
nanci
al

St
atement
s

11|
Pag
e
CHAPTER:
2

12|
Pag
e
 LI
TERATUREREVI
EW

Worki
ngcapitalisveryimpor
tantforeverycompanytomeetday
todayoperat
ionexpensesandur gentpayments.Eff
ecti
ve
worki
ngcapit
al i
ncreasethecompanypr ofi
tandvicever
sa.For
eff
ecti
veworkingcapital
,col
l
ecti
onday sshouldbelessand
paymentdaysshouldbemor eov eral
lcashconversi
oncycl
e
daysshoul
dv eryloworinnegati
ve.

Manyresearchershavestudiedworki
ngcapital
from di
ff
erent
vi
ewsandi ndiff
erentenvi
ronments.Thefol
lowingoneswere
ver
yint
eresti
ngandusef ulforourr
esearch:

Elj
elly( 2004)I dent i
fi
edt her elationbetweenpr ofitabil
ityand
l
iquidit ywhowasexami ned, asmeasur edbycur rentrat i
oand
cashgap( cashconv er sioncy cle)onasampl eofj ointstock
fi
rmsi nSaudi Arabia.Thest udyf oundt hatt hecash
conv er si
oncy clewasofmor ei mportanceasameasur eof
l
iquidit ythant hecur rentr atiot hataf f
ectsprof i
tabi l
i
ty.Thesi ze
variabl ewasf oundt ohav esi gni fi
canteffectonpr ofit
abili
tyat
thei ndust rylev el.Ther esultswer estableandhadi mpor tant
i
mpl i
cat i
onsf orl i
quiditymanagementi nv ar
iousSaudi fi
rms.
First,itwascl eart hatt her ewasnegat i
ver el
at i
onshi pbet ween
profitabili
tyandl iquidityi ndicator ssuchascur rentr ati
oand
cashgapi nt heSaudi sampl eexami ned.Second, thest udyalso
reveal edt hatt her ewasgr eatv ariati
onamongi ndust r
ieswi t
h
respectt ot hesi gnifi
cantmeasur eofli
quidit
y .

13|
Pag
e
Lazari
disandTr y
fonidi
s( 2006)hav eexploredther elati
onship
betweencorporateprofit
abili
tyandWCM i ntheAt hensSt ock
Exchange.Thef i
ndingofr esul
tsshowsanegat iver elati
onship
betweenprofit
abil
it
yandwor kingcapitali
ndicator
sl i
keday sof
accountsrecei
vable,accountpay ableandcashconv ersioncycl
e.
Theyconcludedthatf i
rmscancr eatepr ofi
tsbyeff ectively
handli
ngeachcomponentoft hecashconv er
sioncy cle.

Saswat aChat terjee( 2010)Focusedont hei mpor tanceoft he

fi
xedandcur rentasset si nt hesuccessf ulrunni ngofany
organizat i
on.I tposesdi recti mpact sont hepr of it
abi l
ityliqui
di t
y.
Therehav ebeenaphenomenonobser vedi nt hebusi nesst hat
mostoft hecompani esi ncr easet hemar ginfort hepr ofit
sand
l
ossesbecauset hi
sactshr i
nkst hesi zeofwor kingcapi tal
rel
ativet osal es.Buti fthecompani eswantt oi ncr easeor
i
mpr ov eitsliquidi t
y,t heni thast oincreasei tswor kingcapi t
al.
Inther esponseoft hi spol icyt heor gani zat i
onhast ol ower
downi tssal esandhencet hepr ofit
abi l
i
t ywi l
lbeaf fect edduet o
thi
sact ion.Fort hispur pose30Uni tedKi ngdom based
compani eswer esel ect edwhi chwer eli
st edi ntheLondonSt ock
exchange.Thedat awer etakenoft hreey ears2006- 2008.I t
analyzedt hei mpactoft hewor kingcapi tal ont hepr ofitabil
it
y .
Thedi mensi onsofwor ki ngcapi talmanagementi ncl udedi nt hi
s
researchwhi chi squi ckr atios, currentr atiosC. C. C,av erage
daysofpay ment , I
nv ent oryt urnov er,andA. C.P( average
coll
ectionper iod.ont henetoper atingpr of i
tabilityoft heUK
compani es.

14|
Pag
e
MohamadandSaad( 2010)UsedBl oomber g'
sdatabase
of172l i
stedcompani esr andoml ysel ectedf r
om Bursa
Malaysiamai nboar dforf iveyearper iodf rom 2003to
2007.Appl yi
ngcor r
elat i
onsandmul t
ipleregressi
on
analy
sis,theyf oundthatcur rentasset stot ot
alasset
rat
ioshowsposi ti
vesi gnifi
cantr elati
onshi pwithTobinQ,
ROAandROI .Cashconv ersi
oncy cle,currentassetto
curr
entliabil
i
tiesrati
oandcur rentliabil
iti
est otot
alasset
s
rat
ioil
lustrat
enegat iv
esi gnif
icantr el
ationswi thTobinQ,
ROAandROI C.

Alltheabov estudiesprovi
deusasol idbaseandgiveus
i
dear egardingwor kingcapitalmanagementandi ts
component s.
Theyal sogiveust heresult
sandconcl usi
onsofthose
researchesalreadyconduct edont hesamear eafordi
ffer
ent
countriesandenv ironmentfrom diff
erentaspect
s.Onbasis
oftheser esearchesdonei ndi f
fer
entcountri
es,wehave
developedourownmet hodol ogyf
orresearch.

15|
Pag
e
CHAPTER:
3

16|
Pag
e
I
NTRODUCTI
ONOFWORKI
NGCAPI
TAL:
Wor kingcapi tal(abbr ev i
atedWC)i saf inanci almet ric
whichr epresent soper atingliquidit
yav ailabl etoa
business, or ganization, orot herent it
y ,includi ng
gover nment alent i
ti
es.Al ongwi t
hfixedasset ssuchas
plantandequi pment , wor kingcapi talisconsi deredapar t
ofoper ati
ngcapi tal
.Gr osswor ki
ngcapi tal i
sequal to
currentasset s.Wor kingcapi tal i
scal cul atedascur rent
asset smi nuscur rentl i
abi l
it
ies.Ifcur rentasset sarel ess
thancur r
entl iabili
ti
es, anent i
tyhasawor kingcapi tal
deficiency ,alsocal l
edawor kingcapi tal def icit
.
Acompanycanbeendowedwi thasset sandpr ofit
abi l
i
ty
butmayf allshor tofliqui di
tyi fit
sasset scannotbe
readilyconv ertedintocash.Posi tiv
ewor ki ngcapi tal i
s
requiredt oensur ethataf i
rmi sablet ocont i
nuei ts
oper ati
onsandt hati thassuf fici
entf undst osat isfyboth
mat uringshor t-t
erm debtandupcomi ngoper ati
onal
expenses.Themanagementofwor kingcapi talinvolves
managi ngi nvent ori
es, account sreceiv abl eandpay able,
andcash.

17|
Pag
e
CALCULATI
ON:

Wor ki
ng capi
talist he di
ff
erence bet
ween curr
ent
assetsandcurrentl
iabi
li
ti
es.Iti
snott obeconfused
withtr
adeworkingcapit
al(t
helatt
erexcl
udescash)
.

Thebasi
ccalcul
ati
onofworki
ngcapi
tal
isbasedont
he
ent
it
y'
sgrosscurr
entasset
s.

WORKI
NGCAPI
TAL=CURRENTASSETS–CURRENT
LI
ABI
LITI
ES

18|
Pag
e
I
NPUTS:

Currentasset
sandcurr
entli
abil
i
tiesi
ncl
udefouraccount
s
whichareofspecial
impor
tance.Theseaccount
s
repr
esenttheareasoft
hebusinesswheremanagershave
themostdi r
ecti
mpact:
cashandcashequi
val
ent
s(cur
rentasset
)
account
srecei
vabl
e(cur
rentasset
)
i
nvent
ory(
cur
rentasset
),and
account
spay
abl
e(cur
rentl
i
abi
l
ity
)

Thecurrentporti
onofdebt(payabl
ewi t
hin12mont hs)is
cri
ti
calbecauseitrepr
esentsashort
-ter
m clai
mt o
curr
entassetsandi sof
tensecuredbylong-t
erm assets.
Commont ypesofshort-
ter
m debtarebankloansand
l
inesofcredit.

Anincreaseinnetwor kingcapital
indicatesthatthe
busi
nesshasei therincreasedcurrentassets(thati
thas
i
ncreaseditsreceiv
ablesorot hercurrentassets)orhas
decreasedcurrentl
iabil
iti
es—forexampl ehaspai doff
someshor t
-term cr
editors,oracombi nationofboth.

19|
Pag
e
DEFI
NITI
ON:

Wor kingcapi t
al alsoknownasnetwor kingcapi tal.
Wor kingcapi t
al iscomput edast hesum of :I
nv entori
es(+)
Trader eceivables( +)Cash( -)Tr adepayabl es.The
worki ngcapi t
al cycl e( WCC) ,alsoknownast hecash
conv ersi
oncy cl
e, ist heamountoft i
mei ttakest ot urn
thenetcur r
entasset sandcur rentliabi
li
tiesintocash.
Thel ongert hi
scy cle, thelongerabusi nessi sty i
ngup
capitalinitswor ki
ngcapi tal withoutearningar eturnonit.
Compani esst ri
vet or educet heirwor ki
ngcapi t
al cycleby
coll
ect i
ngr eceivabl esqui ckerorsomet i
messt retching
account spay abl e.Undercer t
aincondi ti
ons, minimi zi
ng
worki ngcapi t
al mi ghtadv ersel
yaf f
ectthecompany '
s
abil
itytor eali
zepr ofitabil
ity
, e.
g.whenunf oreseenhi kes
i
ndemandexceedi nv entori
es, orwhenashor t
falli
ncash
rest
r i
ctsthecompany 'sabil
itytoacqui ret r
adeor
product i
oni nput s.

20|
Pag
e
MEANI
NG:

Aposi ti
v ewor ki
ngcapi talcyclebal ancesi ncomi ngand
outgoi ngpay ment st omi ni
mi zenetwor kingcapi t
aland
maxi mi zef reecashf l
ow.Forexampl e,acompanyt hat
pay sitssuppl i
ersin30day sbutt akes60day stocol l
ect
i
tsr eceiv ableshasawor ki
ngcapi talcy cleof30day s.
This30- daycy cleusual l
yneedst obef undedt hrougha
bankoper atingl i
ne, andt heinter estont hisf i
nancingisa
carryingcostt hatr educest hecompany '
spr ofi
tabil
it
y.
Growi ngbusi nessesr equi r
ecash, andbei ngabl et ofree
upcashbyshor teni ngt hewor kingcapi tal cycleisthe
mosti nexpensi vewayt ogr ow.Sophi sticat edbuy ers
reviewcl oselyat arget '
swor ki
ngcapi tal cyclebecausei t
prov i
dest hem wi thani deaoft hemanagement '
s
effectivenessatmanagi ngthei rbal ancesheetand
gener atingf reecashf lows.

Asanabsol ut
er uleoff under s,eachoft hem want stosee
aposi ti
vewor kingcapi tal.Suchsi t
uati
ongi vesthem t he
possibil
itytothinkt haty ourcompanyhasmor ethan
enoughcur rentasset st ocov erfinancialobli
gati
ons.
Though, thesamecan' tbesai daboutt henegat i
ve
workingcapi t
al.[2]Al argenumberoff under sbeli
ev ethat
businessescan' tbesust ainabl
ewi thanegat ivewor ki
ng
capital
,whichi sawr ongwayoft hi
nking.Inordertor una
sustainablebusi nesswi thanegat i
vewor kingcapital,
it'
s
essent i
altounder standsomekeycomponent s.
21|
Pag
e
1.Approachyoursupplier
sandpersuadethem tol
ety
ou
purchasetheinventor
yon1-2mont hcredi
tter
ms,but
keepinmi ndthatyoumustsell
thepurchasedgoods,
to
consumers,formoney .

2.Eff
ect i
v el
ymoni t
ory ourinvent
orymanagement ,
make
surethati t'
softenref
ill
edandwi ththehelpofyour
supplier,backupy ourwar ehouse.
Plus,bigcompani eslikeMcDonal d'
s,Amazon,Dell
,
General Electr
icandWal -Martareusingnegat
iveworki
ng
capit
al .

22|
Pag
e
WORKI
NGCAPI
TALMANAGEMENT:

Decisionsrelatingtowor kingcapi talandshor t-

ter
m
fi
nancingar er efer
redtoaswor kingcapi talmanagement .
Thesei nvol
v emanagi ngt her elati
onshi pbet weenaf i
rm'
s
short-
term asset sanditsshor t
-terml i
abi
lit
ies.Thegoalof
workingcapi talmanagementi stoensur ethatthefir
mi s
abl
et ocont i
nue
i
tsoper ati
onsandt hati
thassuf ficientcashf l
owt o
sati
sfybot hmat ur
ingshor t-
term debtandupcomi ng
operationalexpenses.

Amanager ialaccountingstrategyfocusi
ngon
maintaini
ngeffici
entlevel
sofbot hcomponentsof
workingcapit
al,currentassets,andcurrentl
i
abil
it
ies,
in
respecttoeachot her.Workingcapitalmanagement
ensuresacompanyhassuf fici
entcashf l
owinordert
o
meeti t
sshort-t
erm debtobligationsandoperat
ing
expenses.

23|
Pag
e
MANAGEMENTOFWORKI
NGCAPI
TAL:

Guidedbyt heabovecr i
ter
ia,managementwi l
lusea
combi nati
onofpoliciesandt echniquesforthe
managementofwor kingcapital
.Thepol i
ciesaim at
managi ngthecurr
entasset s(generall
ycashandcash
equivalent
s,i
nventoriesanddebt ors)andt heshort-
ter
m
fi
nancing,suchthatcashf lowsandr etur
nsare
acceptable.

 Cashmanagement .Identi
fythecashbal
ancewhich
al
lowsf ort
hebusinesstomeetdayt odayexpenses,
butreducescashholdingcosts.

 I
nv entorymanagement .Ident i
fyt helevelofinvent
ory
whichal l
owsf orunint
erruptedpr oductionbutr educes
theinvestmenti nrawmat erials—andmi ni
mi zes
reorderi
ngcost s—andhencei ncreasescashf l
ow.
Besidest hi
s,theleadti
mesi npr oducti
onshoul dbe
l
ower edt oreduceWor kinPr ocess( WI P)andsi mil
arl
y,
theFinishedGoodsshoul dbekeptonasl owl evelas
possibletoav oidover
product i
on—seeSuppl ychain
management ;JustInTime( JIT); Economi corder
quantity(EOQ) ;
Economicquant ity.

 Debtorsmanagement.I
denti
fytheappr opr
iat
ecr edi
tpol
i
cy,
i
.e.credi
tter
mswhichwillat
tractcustomers,such
thatanyimpactoncashfl
owsandt hecash
24|
Pag
e
 conversi
oncy
clewil
lbeoffsetbyi
ncr
easedrev
enue
andhenceRetur
nonCapi t
al(orvi
cever
sa)
;see
Discount
sandall
owances.

 Short
-termf i
nancing.Ident
if
ytheappropriatesourceof
fi
nancing,giventhecashconv er
sioncycle:the
i
nventoryisideall
yf i
nancedbycreditgr
ant edbythe
suppl
ier;howev er,
itmaybenecessar ytout i
li
zeabank
l
oan( orov er
draft
),orto"conver
tdebtorstocash"
thr
ough" factor
ing".

25|
Pag
e
TYPESOFWORKI
NGCAPI
TAL:

Wor kingCapitalisdi
videdi nt
ov ari
oust y
pesbased
balancesheetv i
ewandoper ati
ngcy cl
ev i
ew.Bal ance
sheetv i
ewdi vi
deswor kingcapi t
alintogrosswor king
capitalandnetwor ki
ngcapi t
alandt heoperatingcy cle
viewdi vi
desthewor ki
ngcapi t
alint
oper manentand
tempor aryworkingcapital.Permanentwor kingcapi talis
furt
herdi vi
dedintoseasonal andspeci alworkingcapi tal
wher eastempor aryworkingcapi t
alintoregularand
reservewor ki
ngcapital.

Workingcapit
alist
hecapit
al/
fundsr equi
redfordaytoday
operati
onsofthebusi
ness.Worki
ngcapi tali
sinvest
ed
usuall
yinallt
ypesofi
nventor
iessuchasr awmat eri
als,
spares,f
ini
shedgoodsetcandcreditextensi
ontodebt or
s
andcashi nhand.

Worki
ngcapit
ali
sclassi
fi
edint
odiff
erentt
ypesandt
he
cl
assi
fi
cat
ionisbasedonthefol
lowi
ngv i
ews:

1. Bal
anceSheetVi
ew
2. Oper
ati
ngCycleVi
ew

26|
Pag
e
OnthebasisofBal
anceSheetVi
ew,
typesofwor
kingcapi
talar
e
descr
ibedbel
ow:

GROSSWORKI
NGCAPI
TAL(
GWC)
:
Currentasset sint hebal ancesheetofacompanyar e
knownasgr osswor kingcapi tal
.Cur r
entasset sarethose
short-term assetswhi chcanbeconv ert
edi ntocash
withinaper iodofoney ear.
Thegr eyareainthemanagementofcur rentassetsor
grosswor ki
ngcapi tal i
sitsunpr edict
abil
ityi.
e.iti
svery
dif
ficulttoascertaint heexactt i
meofconv er
sionofsuch
asset s.Whyi ssuchanat ureproblematic?Itisbecause
theliabili
ti
esoccuratt heirtimeanddonotwai tforour
currentassett orealize.Thi smismat chort hegapcr eat
es
aneedf orarrangingwor kingcapitalfi
nancing.

NETWORKI
NGCAPI
TAL(
NWC)
:

Networ kingcapitali
sav er yfrequent lyusedt erm.Ther e
aretwoway stounderstandnet wor kingcapi tal
.Fir
st,one
saysi ti
ssimplyt hedi
fferencebet weencur rentassets
andt hecurrentl
iabil
it
iesont hebal ancesheetofa
business.Theot herunderst andingdi sclosesl i
tt
ledeeper
orhiddenmeani ngoft het erm.Aspert hat,NWCi sthat
partofcur r
entassetswhi char ei ndir
ect l
yfinancedby
l
ong- ter
m assets.Compar edt ogr osswor kingcapi t
al,net
workingcapi t
alisconsideredmor erelevantf oreff
ective
workingcapi t
alfi
nancingandmanagement .

27|
Pag
e
OnthebasisofOper
ati
ngCy
cleVi
ew,
typesofwor
king
capi
talar
easbelow:

PERMANENT/FI
XEDWORKI
NGCAPI
TAL:
Deali
ngwi thcurrentassetandf i
xedasset sist ot
all
y
dif
ferent.Determi ningthefi
nancingr equirementi nthe
caseoff ixedasset si ssi
mplythecostoft heasset .Same
i
snott ruef orcurrentassetsbecauset hev alueofcurrent
assetsisconst ant l
ychangingandi tisdi f
ficultto
accuratelyforecastt hatval
ueatanypoi ntint i
me.To
si
mpl if
yt hecompl exit
ytosomeext ent ,ont hebasisof
pasttrendandexper i
ence,wecanf indal ev elbelow
whichcur rentassethasnev ergone.Thecur rentassets
belowt hi
sl evelarecal l
edpermanentorf i
xedwor ki
ng
capit
al.Seet heexampl ebelow:

TEMPORARY/VARI
ABLEWC:

Tempor ar
ywor ki
ngcapi tali
seasytounder standaf t
er
gett
ingholdovert hepermanentwor kingcapi tal
.Insimple
ter
ms, i
tisthedifferencebetweennetwor kingcapitaland
permanentworkingcapi tal
.Themai nchar acteri
sticwhich
canbemadeoutoft heexampl eis“f
luctuation”.The
temporaryworkingcapi t
al,t
heref
ore,cannotbe
for
ecasted.Int
hei nterestofmeasurabil
ity,thiscanbe
fur
therbif
urcat
edasbel owwhi chcancr eateatl east
somebaset ofor ecast.
28|
Pag
e
29|
Pag
e
Det
ermi
nant
sofWor
kingCapi
tal
:

Someoft hemostdet er
minantsofwor kingcapit
alare:
1.Natureofbusi ness
2.Lengthofper iodofmanuf acture
3.Volumeofbusi ness
4.Thepropor t
ionoft hecostofr awmat eri
alstotot
al cost
5.UseofManual LabourorMechani sat
ion
6.Needt okeepl argestocksofr awmat eri
alsoffi
nishedgoods
7.Turnoverofwor ki
ngcapit
al
8.TermsofCr edit
9.Seasonal Variati
ons
10.Requirement sofCashand
11.OtherFactors.

Ther equir
ement sofworkingcapitalarenotuni
forminall
enterpri
ses,andtheref
ore,factor
sr esponsi
blefora
parti
cularsizeofworki
ngcapi tal
inonecompanyar e
dif
ferentthaninotherenterpri
se.
Ther ef
ore,asetpatt
ern
offactorsdetermini
ngtheopt i
mum si zeofworking
capit
al i
sdiffi
cul
ttosuggest .

30|
Pag
e
WORKI
NGCAPI
TALCYCLE:

TheWor ki
ngCapi t
alCy cleforabusi nessisthelengthof
ti
mei tt
akest oconv ertthet ot
al networki
ngcapi t
al(cur
rent
assetslesscurrentli
abilit
ies)intocash.Businesses
ty
picall
yt r
ytomanaget hiscyclebyselli
nginventory
quickl
y,coll
ecti
ngr evenuef rom customer squickl
y,and
payingbill
sslowlytoopt i
mizecashf low.

31|
Pag
e
STEPSI
NTHEWORKI
NGCAPI
TALCYCLE:

Formostcompani
es,
thewor
kingcapi
tal
cycl
ewor
ksasf
oll
ows:
1.
Thecompanypur chases,oncredit
,material
sto
manufact
ureapr oduct(f
orexampl e,
theyhav e90
daystopayfortherawmat eri
als).
2.
Thecompanysel l
sitsinv
entoryin85day s,on
aver
age.(day
spay ableoutst
anding)
3.
Thecompanyr ecei
vespay mentfrom customers
fort
heproductssoldin20day s,onaverage.

Inthef irststepoft hepr ocess, t

hecompanyget st he
mat eri
al sitneedst opr oducei nvent orybutdoesn’ t
i
niti
allyhav eanycashexpense( pur chasedoncr edit
underaccount spay able).In90day s’time,itwillhaveto
payf ort hosemat eri
als.Ei ghty-f
ive
(85)day saf terbuy i
ngt hemat erials, t
hef i
nishedgoods
aresol d, butthecompanydoesn’ treceivecashf orthem
i
mmedi ately,astheyar esol doncr edit(r
ecor dedunder
account sr eceivable).Twent y(20)day saftersel l
ingthe
goods, thecompanyr eceiv escash, andthewor king
capitalcy cleiscompl ete.

32|
Pag
e
WORKI
NGCAPI
TALCYCLEFORMULA:

Basedontheabovest
eps,
wecanseet
hatt
hewor
king
capi
tal
cycl
eformulai
s:

WORKINGCAPITALCYCLESAMPLECALCULATI
ON
Nowthatweknowthest
epsi
nthecy
cleandt
hefor
mul
a,
l
et’
scal
culat
eanexampl
ebasedont
heabove
i
nfor
mation.
 I
nventor
ydays=85
 Recei
vabl
edays=20
 Payabl
edays=90
Wor
kingCapi
tal
Cycl
e=85+20–90=15
Thi
smeanst
hecompanyisonl
youtofpocketcashf
or15
day
sbef
orer
ecei
vi
ngful
lpayment
.

POSI TI
VEVSNEGATI VEWORKI NGCAPI TALCYCLE
I
nt heabov eexample,wesawabusi nesswit
hapositi
ve,
ornor mal,
cycleofworkingcapi
tal
.Sometimes,howev
er,
businessesenjoyanegat i
veworki
ngcapit
alcycl
ewhere
theycoll
ectmoneyf asterthant
heypayoffbi
ll
s.
Sti
cki
ngwiththeabov
eexampl
e,imagi
nenowthatthe
companydecidest
obecomea“cashonl
y”busi
nesswith
i
tscustomers.
33|
Pag
e
Byonl
yaccept
ingcash(nocredi
tcar
dsorpayment
ter
ms)
,it
saccountsrecei
vabl
edaysbecome0.
Let’
suset
hesamef
ormul
aagai
nandcal
cul
atet
hei
rnew
cycl
eti
me.
 I
nventor
ydays=85
 Recei
vabl
edays=0
 Payabl
edays=90
Wor
kingCapi
tal
Cycl
e=85+0–90=–5
Thismeanst
hecompanyr
eceiv
espaymentfr
om
customer
s5daysbef
orei
thastopayi
tssuppl
ier
s.

34|
Pag
e
CHAPTER:
4

35|
Pag
e
I
mpact
sOfCOVI
D-19OnWor
kingCapi
tal
:

Theout breakofnovelCor
onav i
rus(2019-nCoV)thatwas
fi
rstreportedinWuhanbyChi nesehealt
haut hor
it
iesi n
January2020hasbeencl assifi
edasagl obalpandemi c.
Whileheal t
hcarepr
ofessi
onalsacrosstheglobest r
iveto
al
levi
atehumansuf f
eri
ng,economistsandf i
nancial
i
nstit
utionsaretryi
ngtoaddresstheimpactont hegl obal
economy .

Thesizableeconomiceffectsoft hepandemi careonly

begi
nningtobecomeappar ent.Dat afrom theOffi
cef or
BudgetResponsibil
it
yreportedt hattheUKeconomy
coul
dshr i
nkby35%wi t
h2mi l
lioninj oblosses;other
countr
iesforcedtoimplementaggr essiv
esoci al
di
stancingwilll
i
kelyexperi
encesi mi l
areffects.

“Theout br
eakisthewor l
d’smostpr essinguncertai
nty.
”
Krist
ali
naGeorgieva,
Internati
onal Monet aryFund
Managi ngDir
ector
From acompanyper spective,t
hel argestimpacti sf
eltby
smallandmedi um-si
zedent erpr
ises( SMEs)struggl
ing
withslowingdomesticandcr oss-bor derdemand.These
fi
rmsar emorev ul
nerablenowf ort wor easons:

36|
Pag
e
(i
)Di srupti
onsofsuppl ychai
nsandani ncreaseincredit
ri
skwi t
hmor ereporteddefaults,insolvencies,and
bankr uptci
es.Thei mpactoft hecor onav i
ruspandemi con
global supplychainsi samajordi srupt i
on, wit
hev en
wor seef f
ectst hantheonesf rom t hepr evious2008
fi
nanci alcri
sis.Itunderli
neswhathasal readybecome
clear:Globalsuppl ychainsarei ncrediblyfragil
ewi t
ht he
economybui ltonout sourci
ng, j
ust -
in-t
imei nventory,and
thinmar gins.

(i
i)Const raintsi nLi quidit
yandCashFl owwi t
hi ncr eased
pay mentdel aysonr ecei vables, whichadded–t oget her
withani ncr easei ni nvent ories-resultinanendemi c
deplet i
onofwor kingcapi t al
.Wi ththecur rentdownt urnin
salesr evenue, customer shav estartedext endingpay ment
delaysont heirpay ables,leadi ngrapi dl
yt odepl etionof
wor kingcapi tal f
ort heircount erparti
es,especi allythe
smal lersuppl i
eror ganizat i
on.Wi t
ht heincreasedl iquidit
y
challengesduet ol owersal esr evenueandl atepay ment s
fr
om compani es,theov erallriskofcr editisri
singshar pl
y.
Manycompani esar eincreasi nglygoi ngintobankr upt cy.

37|
Pag
e
SOLUTI
ONS

Accesst of i
nancingcontinuest obeoneoft hemost
si
gni f
icantchal l
engesforthecr eati
on,survi
val,and
growthofSMEsi nallkeymar kets.Current
ly,soluti
ons
suchasbankl oansorfactori
ng, atypeofreceivable
fi
nanci ngsolutionarenotwidelyav ail
able,
andi nmost
cases, fi
nancingr at
esareexpensi veandnotav ail
ablef
or
al
l businesses.

Pay ablesFi nanceal sor eferredt oasSuppl yChainFi nance

orRev erseFact ori
ngi sasol utionthatal l
owsbuy ing
organi zationst omai ntainthei rwor kingcapit
al whi l
ethei
r
suppl i
er simpr ov et heirliquidity.Mor especi f
icall
y, f
orthe
suppl i
er ,thebenef itsar ethei mpr ov ementinwor king
capi t
al byr educi ngi tsaccount sreceivabl
esandDay s
SalesOut standi ng( DSO) .Financi ngof fer
edt othesel l
eris
off-balancesheet ,non- recour sef i
nance, andpr ovides
certaintyofpay ment .Financi ngfeesorear l
ypay ment
discount sar el owasi tisbasedandl ever
agest hebuy er’
s
strongcr editrating.

Thissoundslikeani dealsol
uti
onforSMEst oimprove
thei
rli
quidi
ty,getaccesst ol
ow-costfundi
ng,andoff
er
ri
skmi t
igat
ionagai nstcr
editr
iskandlatepayment.
Unfort
unately
, cur
rentSupplyChainFi
nancesoluti
onsare
focusi
ngmai nlyonlyonaf ewlargesuppli
erswit
h
38|
Pag
e
substanti
alsal
est othei
rcust
omer s,
sett
ingupthe
fi
nancingfacil
i
t i
es,l
eavi
ngthelar
genumberofSMEswi t
h
noaccesst ofinanci
ng.Thi
sisalsohighl
i
ghtedbyrecent
researchfr
om t hePWC.

Thisisinl
argecontrastwit
hacompany ’sover
all
numberofsupplier
s, wit
hagreatdealofnetwor
k
valueandtr
appedliquidi
tyi
nasupplychainresi
dingi
n
the‘l
ongtai
l’
.Thisentir
esupplychai
nsegmenti snot
servi
cedaspartofcur r
entSuppl
yChainFinance
programsandofferi
ngs.

39|
Pag
e
CHAPTER:
5

40|
Pag
e
I
NTRODUCTI
ONOFNTPCDADRI

Nat i
onal Capi t
alPowerSt ation( NCPS)OrNTPCDadr i
,i
s
thepowerpr ojecttomeett hepowerdemandofNat ional
CapitalRegi on( I
ndia).Ithasahugecoal -f
ir
edt hermal
powerpl antandagas- fir
edpl antandhasasmal l
townshi plocat edinUt tarPr adesh, I
ndiaforit
sempl oyees.
I
ti slocatedi nGaut am BudhNagardi st
ri
ctofUt t
ar
Pradeshabout25km f rom Ghazi abadandabout9km
from Dadr i
.Itisnear ly48km f rom New
Delhi t
owar dsHapur .Thet ownshi phasanar eaofabout
500acr esov erall
.NTPCDadr iisabranchofNat i
onal
Thermal PowerCor poration, whichisapubl i
csect ornow.
I
ti sabout20km f rom Ghazi abadv iaBadalpur,Mahawar ,
Bamabawar ,andAki lpurJagi r.

HI
STORY,
FEATURESANDPLACESTOVI
SIT

NTPCDadr iplantandt ownshi par epr opert

yofnt pclt
d
andwer ebui
ltaround1988- 1990.Thet ownshi pis
surroundedbyboundar ywallsfrom al lsi
desf orsecuri
ty
reasons.Thenei ghbour ingvill
ageswhi chprov i
deitwit
h
milkv eget
ableset c.Thought hetownshi phassel f-
suffi
cientmar ket
si nsideit,r
esident susuallygot o
GhaziabadorDel hi forextrashoppi ng.
NTPCDadr ihast woshoppi ngcent ers(old,new)whi ch
caterstotheneedofempl oy eesandt hei
rfami l
iesaswell
41|
Pag
e
asot herpeopl e,andt heSi l
verJubil
eePar k( f
ormerly
knownasCent ralPar k) ,
af ountai
nparki nfrontofnew
mar ketandnumer oussmal l
parksforchildrenand
empl oyeesf orrecr eation.Italsohasahel ipadforlandi
ng
ofsmal lhelicopter( thoughnotwel l
mai ntained)
.Thereis
aspor tsstadium i nsidet hecampuswhi chi sequipped
withfloodli
ght sforday /nightdomest i
ctour naments.
NTPCDadr ihasf ourschool sinsi
dether esident
ial
townshi pnamel y
Kendr i
yaVi dyalaya
DelhiPublicSchool
DAVPubl i
cSchool
Saraswat iShishu
Mandi r

Teacher smai nlyresidei nsidethet ownshi pandar e

grantedquar tersbyt het ownshipadmi nistrati
on.Students
fr
om ci t
iesl i
keHapurandsmal ltownssuchasDadr i
,
Pilkhuwa, andDasna, comet ostudyi nt heseschool s.
I
nsi dethecampust her eisaTempl e,aChur chanda
Gur udwaraandwi t
hinr angeoft het ownshi paMosque.I t
i
speacef ulplacewi thlot sofplants,treesandf l
owers.
Ther earet woclubsi nsi detheboundar y: VRCknownas
vidyutnagarr ecreat i
oncent reandNTPCCLUB.Ther eare
twogy mswi ththel atestmachi nes.Al sot hecl ubandVRC
hav eswimmi ngpool s, l
ibrari
es,cafeterias, swingsand
otherrecreational f
eat ures.ThereisoneETHost elwhere
ETs( Execut i
veTr ainees)ar ekeptf ortrainingi nthenearby
42|
Pag
e
 EDC( Empl oymentDev elopmentCentre).OneUrjaBhavan
&oneVI PGuestHousei salsother
e.Forempl oyeest
here
aregov tquartersanddependingupondesi gnati
onare
divi
dedi nt
oa, b,c,
dtypes.Thelowestdesignati
on
employ eesget ti
ng'a'
typeandsoont ill
'd't
ypein
ascendingor der.Thetownshiphaswel lpavedroadsand
alsorecentlytataskyconnectionwaspr ovi
dedathomes
forallemploy ees.

Bal
anceSheetNTPC

Bal
anceSheetofNTPC -
--
--
--
--
--
--
--
--
--i
nRs.Cr
.--
--
--
--
--
--
--
--
--
-
Mar'
18 Mar'
17 Mar'
16 Mar'
15 Mar'
14

12mt
hs 12mt
hs 12mt
hs 12mt
hs 12mt
hs

SourcesOfFunds
TotalShareCapital 8,
245.
46 8,
245.
46 8,
245.
46 8,
245.
46 8,
245.
46
EquityShareCapital 8,
245.
46 8,
245.
46 8,
245.
46 8,
245.
46 8,
245.
46
ShareAppl i
cat
ion
0.
00 0.
00 0.
00 0.
00 0.
00
Money
PreferenceShare 0.
00 0.
00 0.
00 0.
00 0.
00
Capital
Reserv es 73,
411.
89 77,
569.
86 72,
142.
05 65,
045.
71 59,
646.
79
Networt
h 81,
657.
35 85,
815.
32 80,
387.
51 73,
291.
17 67,
892.
25
Secur
edLoans 23,
017.
83 12,
311.
00 9,404.
05 9,156.
30 30,
558.
47
Unsecur
edLoans 55,
514.
50 50,
094.
75 43,
849.
61 36,
751.
97 9,
177.
21
Tot
alDebt 78,
532.
33 62,
405.
75 53,
253.
66 45,
908.
27 39,
735.
68
Tot
alLi
abi
l
iti
es 160,
189.
68 148,
221.
07 133,
641.
17 119,
199.
44 107,
627.
93
43|
Pag
e
 Mar'
18 Mar'
17 Mar'
16 Mar'
15 Mar'
14

12mt
hs 12mt
hs 12mt
hs 12mt
hs 12mt
hs

Appli
cat
ionOfFunds
GrossBl
ock 128,
323.
66 116,
855.
56 103,
124.
82 81,
723.
48 72,
665.
61
Less:
0.
00 0.
00 0.
00 0.
00 0.
00
Revaluati
on
Reserves
Less:Accum.
49,
474.
59 44,
744.
73 40,
188.
72 36,
465.
12 33,
429.
65
Depreciat
ion
NetBl
ock 78,
849.
07 72,
110.
83 62,
936.
10 45,
258.
36 39,
235.
96
CapitalWorki
n 56,
493.
49 44,
888.
67 37,
109.
42 41,
827.
86 35,
495.
33
Progress
I
nv estment
s 9,
032.
13 9,
757.
86 10,
760.
10 11,
206.
38 12,
344.
84

44|
Pag
e
I
nvent
ori
es 7,
453.
00 5,
373.
35 4,
057.
19 3,
702.
85 3,
639.
12
Sundr
yDebt
ors 7,
604.
37 5,
220.
08 5,
365.
49 5,
832.
51 1,
434.
96
CashandBankBal
ance 12,
878.
81 15,
311.
37 16,
867.
70 16,
146.
11 16,
185.
26
Tot
alCur
rentAsset
s 27,
936.
18 25,
904.
80 26,
290.
38 25,
681.
47 21,
259.
34
LoansandAdv
ances 24,
773.
85 26,
892.
02 24,
020.
46 16,
863.
73 17,
403.
41
Fi
xedDeposits 0.
00 0.
00 0.
00 0.
00 0.
00
Tot
al CA,
Loans&
52,
710.
03 52,
796.
82 50,
310.
84 42,
545.
20 38,
662.
75
Advances
Def
erredCredi
t 0.
00 0.
00 0.
00 0.
00 0.
00
Cur
rentLi
abi
l
iti
es 28,
020.
58 23,
151.
15 19,
730.
83 17,
819.
04 15,
358.
52
Pr
ovi
sions 8,
874.
46 8,
181.
96 7,
744.
46 3,
819.
32 2,
752.
43
Tot
alCL&Pr
ovi
si
ons 36,
895.
04 31,
333.
11 27,
475.
29 21,
638.
36 18,
110.
95
NetCurrentAsset
s 15,
814.
99 21,
463.
71 22,
835.
55 20,
906.
84 20,
551.
80
Miscell
aneous 0.
00 0.
00 0.
00 0.
00 0.
00
Expenses
TotalAssets 160,
189.
68 148,
221.
07 133,
641.
17 119,
199.
44 107,
627.
93

Cont
ingentLi
abi
li
ti
es 65,
900.
89 81,
582.
53 73,
660.
54 53,
173.
05 44,
055.
80
BookValue(Rs) 99.
03 104.
08 97.
49 88.
89 82.
34

Prof
it&Lossaccount
-
--
--
--
--
--
--
--
--
--i
nRs.Cr
.--
--
--
--
--
--
--
--
--
-
ofNTPC
Mar'
18 Mar'
17 Mar'
16 Mar'
15 Mar'
14

12mt
hs 12mt
hs 12mt
hs 12mt
hs 12mt
hs

I
ncome
Sal
esTur
nov
er 73,
915.
69 72,
018.
93 65,
673.
93 62,
052.
23 55,
062.
65
Exci
seDut
y 669.
64 0.
00 0.
00 0.
00 0.
00
NetSal
es 73,
246.
05 72,
018.
93 65,
673.
93 62,
052.
23 55,
062.
65
Ot
herI
ncome 2,
116.
32 2,
688.
89 4,
785.
69 2,
778.
42 2,
344.
65
St
ockAdj
ust
ment
s 0.
00 0.
00 0.
00 0.
00 0.
00
Tot
alI
ncome 75,
362.
37 74,
707.
82 70,
459.
62 64,
830.
65 57,
407.
30
Expendi
tur
e
RawMat er
ial
s 48.
34 47.
60 46.
35 45.
24 31.
33
Power&Fuel
Cost 49,
500.
86 46,
510.
29 41,
661.
34 42,
171.
65 35,
796.
37
Employ
eeCost 3,
669.
78 3,867.
99 3,360.
12 3,090.
48 2,789.
71
45|Pag
e
46|
Pag
e
OtherManufact
uring
0.
00 0.
00 0.
00 0.
00 0.
00
Expenses
Sell
ingandAdminExpenses 0.
00 0.
00 0.
00 0.
00 0.
00
Miscell
aneousExpenses 4,
275.
30 3,
815.
67 3,
521.
78 3,
007.
36 4,
472.
36
Preoperat
iveExpCapi
tal
i
sed 0.
00 0.
00 0.
00 0.
00 0.
00
TotalExpenses 57,
494.
28 54,
241.
55 48,
589.
59 48,
314.
73 43,
089.
77
Mar'
18 Mar'
17 Mar'
16 Mar'
15 Mar'
14

12mt
hs 12mt
hs 12mt
hs 12mt
hs 12mt
hs

Oper
ati
ngPr
ofi
t 15,
751.
77 17,
777.
38 17,
084.
34 13,
737.
50 11,
972.
88
PBDI
T 17,
868.
09 20,
466.
27 21,
870.
03 16,
515.
92 14,
317.
53
I
nter
est 2,
743.
62 2,406.
59 1,924.
36 1,711.
64 1,420.
96
PBDT 15,
124.
47 18,
059.
68 19,
945.
67 14,
804.
28 12,
896.
57
Depr
eci
ati
on 4,
911.
65 4,
142.
19 3,
396.
76 2,
791.
70 2,
485.
69
Ot
herWr
it
tenOf
f 0.
00 0.
00 0.
00 0.
00 0.
00
Prof
itBeforeTax 10,
212.
82 13,
917.
49 16,
548.
91 12,
012.
58 10,
410.
88
Extr
a-ordi
naryit
ems 333.
83 -
12.
84 29.
72 313.
58 1,638.
72
PBT( PostExtr
a-or
dIt
ems) 10,
546.
65 13,
904.
65 16,
578.
63 12,
326.
16 12,
049.
60
Tax 255.
79 2,
929.
91 3,
959.
24 3,
102.
43 2,
947.
01
ReportedNetProf
it 10,
290.
86 10,
974.
74 12,
619.
39 9,223.
73 9,102.
59
TotalValueAddi
ti
on 57,
445.
94 54,
193.
95 48,
543.
24 48,
269.
49 43,
058.
44
Prefer
enceDivi
dend 0.
00 0.
00 0.
00 0.
00 0.
00
Equit
yDividend 2,
061.
38 4,
741.
15 4,
741.
16 3,
298.
19 3,
133.
26
Corporat
eDi vi
dendTax 417.
40 804.
74 781.
87 527.
92 514.77
Pershar
edat a(
annual
ised)
Sharesi
nissue(l
akhs) 82,
454.
64 82,
454.
64 82,
454.
64 82,
454.
64 82,
454.
64
Earni
ngPerShare(
Rs) 12.
48 13.
31 15.
30 11.
19 11.
04
Equit
yDi
v i
dend(%) 25.
00 57.
50 57.
50 40.
00 38.
00
BookValue(Rs) 99.
03 104.
08 97.
49 88.
89 82.
34

47|
Pag
e
 CURRENTRATI
O

Cur
rentRat
ioi
sameasur
eofgener
all
i
qui
dit
yandi
tismostwi
del
yusedt
omake

t
heanal
ysi
sofshor
tter
mfi
nanci
alposi
ti
onorl
i
qui
dit
yofaf
ir
m.Ishowst
he

abi
l
ityofaf
ir
mtomeeti
tsshor
tter
m obl
i
gat
ions.Cur
rentr
ati
oisgi
venby

Cur
rentRat
io=Cur
rentAsset
s/Cur
rentLi
abi
l
iti
es

Cur
rentAsset
sincl
udecash,
mar
ket
abl
esecur
it
ies,
bil
lrecei
vabl
es,
sundr
ydat
a’s,

i
nvent
ori
esandwor
kinpr
ogr
ess.Cur
rentl
i
abi
l
iti
esi
ncl
udeout
standi
ngexpenses,

bi
l
lspay
abl
e,di
vi
dendpay
abl
eet
c.

Ar
elat
ivel
yhi
ghcur
rentr
ati
oisani
ndi
cat
iont
hatt
hef
ir
misl
i
qui
dandhast
he

abi
l
ityt
opayi
tscur
rentobl
i
gat
ionsi
nti
me.Ont
heot
herhand,al
ow cur
rent

r
ati
onr
epr
esent
sthatt
hel
i
qui
dit
yposi
ti
onoft
hef
ir
misnotgoodandt
hef
ir
m

shal
lnotbeabl
etopayi
tscur
rentl
i
abi
l
iti
esi
nti
me.ARat
ioequalorneart
othe

Rul
eofThumbof2:
1thati
scur
rentasset
sdoubl
ethecur
rentl
i
abi
l
iti
esi
s

consi
der
edt
obesat
isf
act
ory
.

48|
Pag
e
 CURRENTRATI
OOFNTPC(
inmi
l
li
ons)

Year Cur
rent Cur
rent Rat
io
Asset
s
Li
abi
l
iti
es

2014 21259.
34 15385.
52 1.
384

2015 25681.
47 17819.
04 1.
441

2016 26290.
38 19730.
83 1.
332

2017 25904.
80 23151.
15 1.
118

2018 27936.
18 28020.
58 0.
996

49|
Pag
e
I
nter
pret
ati
on:

Cur
rentr
ati
oshowst
hef
ir
m’sabi
l
ityt
opayi
tscur
rentobl
i
gat
ions.I
tist
hebench

mar
koft
hef
ir
m’sl
i
qui
dit
y.Sat
isf
act
oryl
evelofcur
rentr
ati
ois2:
1.Asper

anal
ysi
sNTPCshowi
mpr
ovementi
nthecur
rentr
ati
o.I
nthey
ear2015butaf
ter

2015cur
rentr
ati
ohasst
art
edt
odecl
i
neandi
nthey
ear2018i
tsr
eachesati
ts

l
owesti
.
e.0.
996.so i
tindi
cat
ethei
ncr
easedl
evelofcur
rentl
i
abi
l
iti
esand

r
educt
ioni
nfi
rmsabi
l
ityt
opayi
tsshor
tter
m obl
i
gat
ion.

50|
Pag
e
QUI
CKRATI
O:

Qui
ckRat
ioi
samor
eri
gor
oust
estofl
i
qui
dit
ythancur
rentr
ati
o.Qui
ckRat
iomay

bedef
inedast
her
elat
ionshi
pbet
weenQui
ck/
Liqui
dasset
sandCur
rentorLi
qui
d

l
i
abi
l
iti
es.Anasseti
ssett
obel
i
qui
d,i
fitcanbeconv
ert
edi
ntocashwi
thi
na

shor
tper
iodwi
thoutl
ossofv
alue.I
tmeasur
est
hef
ir
m'scapaci
tyt
opayof
fthe

cur
rentobl
i
gat
ionsi
mmedi
atel
y.

Qui
ckRat
io=Qui
ckAsset
s/Cur
rentLi
abi
l
iti
es

Qui
ckAsset
sincl
udes mar
ket
abl
e secur
it
ies,cash i
n hand,cash i
n bank

anddebt
ors.AsaRul
eofThumb,r
ati
o1:
1isconsi
der
edsat
isf
act
ory
.Iti
s

gener
all
ythoughtt
hati
fqui
ckasset
sar
eequalt
ocur
rent l
i
abi
l
iti
es,t
hent
he

concer
nmaybeabl
etomeeti
tsshor
tter
m obl
i
gat
ions.Howev
er,
afi
rm hav
ing

hi
ghqui
ck r
ati
o

maynothav
easat
isf
act
oryl
i
qui
dit
yposi
ti
on,
ifi
thassl
owpay
ingdebt
ors.

Qui
ckr
ati
oofNTPC(
inmi
l
li
ons)

Year Quick Cur

rentLi
abi
l
iti
es Rat
io
Asset
s

2014 17620.
22 15358.
52 1.
147

2015 21978.
62 17819.
04 1.
233

2016 16233.
19 19730.
83 0.
822

2017 20531.
45 23151.
15 0.
88

51|
Pag
e
2018 20483.
18 28020.
58 0.
73

52|
Pag
e
I
nter
pret
ati
on:

Fr
om t
hisgr
aph,
iti
sseent
hatt
hef
ir
m’squi
ckr
ati
oisv
erysound.Fr
om t
hebegi
nni
ng

i
.e.2014t
o2018,
NTPChasagoodl
i
qui
dit
yposi
ti
on.I
nthey
ear2010and2011,

decr
easei
nCash&Bankbal
anceofNTPC

 decr
easei
nLoan&Adv
ances

 Ov
eral
lther
eisdecr
easei
ndebt
ors

53|
Pag
e
ABSOLUTELI
QUI
DITYRATI
O:

Al
thoughr
ecei
vabl
es,
debt
orsandbi
l
lsr
ecei
vabl
esar
egener
all
ymor
eli
qui
dthan

i
nvent
ori
es,y
ett
her
e may be doubt
sregar
ding t
he r
eal
i
zat
ion i
nto cash

i
mmedi
atel
yori
nti
me.So,absol
utel
i
qui
drat
ioshoul
dbecal
cul
atedt
oget
her

wi
thcur
rentr
ati
oandaci
dtestr
ati
osoast
oexcl
udeev
enr
ecei
vabl
esf
rom t
he

cur
rentasset
sandf
indoutt
heabsol
utel
i
qui
dtest
s.

Absol
uteLi
qui
dRat
io=Absol
uteLi
qui
dAsset
/Cur
rentLi
abi
l
iti
esAbsol
uteLi
qui
d

Asset
s=Cash&Bankbal
ance+Mar
ket
abl
eSecur
it
ies

Absol
uteLi
qui
dRat
io(
inmi
l
li
ons)
:

Year Absol
utel
iqui
d Cur
rentLi
abi
l
iti
es Rat
io
Asset
s

2014 16185.
26 15358.
52 1.
053

2015 16146.
11 17819.
04 0.
906

2016 16867.
70 19730.
83 0.
854

2017 15311.
3 23151.
15 0.
661

2018 12878.
85 28020.
58 0.
459

54|
Pag
e
I
nter
pret
ati
on:

Fr
om t
hisgr
aph,i
tisseent
hatt
hef
ir
m hassuf
fi
cientcashbal
ancet
omeeti
ts

cur
rentobl
i
gat
ionsexcepti
nthey
ear2014.I
nthey
ear2014,
thef
ir
m'sr
ati
owas

1.
053whi
chwasv
eryhi
gh.I
n2015&2016,
aft
ert
hatt
hef
ir
m hasachi
evedav
ery

st
rong cash bal
ancet
o meeti
tsobl
i
gat
ionsbutwecan seet
hatt
her
ati
o

decr
easedi
n2014&2018.Themai
nreasonf
ort
hisdecr
easecanbeat
tri
but
ed

t
oincr
easei
ncash&bankbal
anceatav
eryhi
ghr
atewi
thasubsequenti
ncr
ease

i
ncur
rentl
i
abi
l
iti
es.

55|
Pag
e
 GROSSPROFI
TRATI
O

Thepr
ofi
tmar
ginmeasur
est
her
elat
ionshi
pbet
weenpr
ofi
tandsal
es.Ast
hepr
ofi
tmay

begr
ossornet
,ther
ear
etwot
ypesofpr
ofi
tmar
gins:
Grosspr
ofi
tmar
ginandNetpr
ofi
t

mar
gin.

GROSSPROFI
TMARGI
N GROSSPROFI
T 100
NETSALES

Gr
osspr
ofi
trat
ioi
sther
esul
toft
her
elat
ionshi
pbet
weenpr
ices,sal
esv
olume

andcost
.Achangei
nthegr
ossmar
gincanbebr
oughtaboutbychangesi
nany

oft
hesef
act
ors.Thegr
ossmar
ginr
epr
esent
sthel
i
mitbey
ondwhi
chf
alli
nsal
es

pr
icesar
eout
sidet
het
oler
ancel
i
mit
.

Ahi
ghr
ati
otogr
osspr
ofi
ttosal
esi
ssi
gnofgoodmanagementasi
timpl
i
est
he

costofpr
oduct
ionofaf
ir
misr
elat
ivel
ylow.I
tmayal
sobei
ndi
cat
iveofahi
gher

sal
espr
icewi
thoutt
hecor
respondi
ngi
ncr
easei
ncostofgoodssol
d.I
tmi
ght

al
sol
i
kel
ythatt
hecostofsal
esmi
ghthav
edecl
i
newi
thoutt
hedecl
i
nei
nsal
e

pr
ice.

GROSSPROFI
TRATI
O

Year Gr
ossPr
ofi
t NetSal
e Rat
io

2014 18789.
89 55062.
65 34.
12

2015 19523.
28 62052.
23 31.
46

2016 25391.
81 65673.
93 38.
66

56|
Pag
e
2017 24281.
94 72018.
93 33.
71

2018 22143.
39 73246.
05 30.
23

57|
Pag
e
I
nter
pret
ati
on:

Gr
osspr
ofi
trat
ior
eveal
spr
ofi
tear
ningcapaci
tyofear
ningwi
thr
efer
encet
oit

sal
e.I
ncr
easedi
ngr
osspr
ofi
trat
iowi
l
lmeansr
educt
ioni
ncostandv
icev
ersa.

I
ncr
easedgr
osspr
ofi
trat
ioi
sal
way
sint
hei
nter
estoft
hebusi
ness.I
nthey
ear

2016gr
osspr
ofi
trat
ioofNTPCwas38.
66%butaf
teri
tsgr
osspr
ofi
trat
iost
art
ed

t
odecl
i
neandr
eachedat30.
23whi
chi
ndi
cat
ethesal
eatl
esspr
ice.

58|
Pag
e
 NETPROFI
TRATI
O

Thi
smeasur
est
her
elat
ionshi
pbet
weennetpr
ofi
tandsal
esofaf
ir
m.Dependi
ng

ont
heconceptoft
henetpr
ofi
templ
oyed,t
hisr
ati
ocanbecomput
edi
nthr
ee

way
s:

OPERATI
NGPROFI
TRATI
O EBI
T

NETSALES

PRE-TAXPROFI
TRATI
O EBT

NETSALES

NETPROFI
TRATI
O EAT

NETSALES

Thenetpr
ofi
tmar
gini
sindi
cat
iveofmanagementabi
l
ityt
ooper
atet
hebusi
ness

wi
thsuf
fi
cientsuccessnotonl
ytor
ecov
erf
rom r
evenuesoft
heper
iod,t
hecost

ofmer
chandi
seorser
vices,t
heexpensesofoper
ati
ngt
hebusi
ness(
incl
udi
ng

depr
eci
ati
on)andt
hecostoft
hebor
rowedf
unds,butal
sot
oleav
eamar
ginof

r
easonabl
ecompensat
ionoft
heowner
sforpr
ovi
dingt
hei
rcapi
talatr
isk.The

r
ati
oofnetpr
ofi
t(af
teri
nter
estandt
axes)t
osal
esessent
ial
l
yexpr
essest
he

costpr
iceofef
fect
ivenessoft
heoper
ati
ons.

Ahi
ghnetpr
ofi
tmar
ginwoul
densur
eadequat
eret
urnt
otheowner
saswel
las

enabl
eaf
ir
mtowi
thst
andadv
erseeconomi
ccondi
ti
onswhensel
l
ingpr
ices

decl
i
ning,
costofpr
oduct
ioni
sri
si
nganddemandf
orpr
oducti
sfal
l
ing.

59|
Pag
e
NETPROFI
TRATI
O:

Year NetPr
ofi
t NetSal
e Rat
io

2014 9102.
59 55062.
6 16.
53
5

2015 9223.
73 62052.
2 14.
86
3

2016 12619.
39 65673.
9 19.
21
3

2017 10974.
74 72018.
9 15.
23
3

2018 10290.
86 73246.
0 14.
04
5

60|
Pag
e
I
nter
pret
ati
on:

Netpr
ofi
tshow t
heoper
ati
onalef
fi
cient
yofbusi
ness.Decr
easei
nther
ati
o

i
ndi
cat
emanager
atei
nef
fi
cencyandexcesssel
l
inganddi
str
ibut
ionexpenses.

NTPCshowsupanddownt
rends.I
nNTPCr
ati
oaf
tery
ear2016netpr
ofi
trat
io

NTPCst
artt
odecl
i
newhi
chi
ndi
cat
est
her
educt
ioni
nmaneger
ial
eff
ici
ency
.

OPERATI
NGPROFI
TRATI
O

mar
ginTheoper
ati
ngpr
ofi
tmar
gin(
OPM)showst
hef
ir
m`spr
ofi
tmar
ginaf
ter

deduct
ing costofgoods sol
d and oper
ati
ng expenses butbef
orei
nter
est

expensesandt
axes.Theoper
ati
ngpr
ofi
tist
heear
ningsbef
orei
nter
estand

t
axesorEBI
Tasaper
centofsal
es.

Oper
ati
ng Pr
ofi
tmar
gin = The OPM r
efl
ect
sthe t
rue pr
ofi
tabi
l
ityoff
ir
m`s

busi
nessi
nthati
tiscal
cul
atedbef
orededuct
ingi
nter
estcost
s,whi
char
ea

r
esul
tfr
om f
ir
m`sf
inanci
ngdeci
si
on,andt
axes,whi
char
eout
sidet
hecont
rolof

t
hef
ir
m.I
not
herwor
ds,r
egar
dlessoft
hewayt
hef
ir
misf
inanced,whet
her

t
hroughdebtorequi
ty,andr
egar
dlessoft
het
axesi
mposedbyt
hegov
ernment
,

t
hef
ir
misabl
etoear
nthi
smar
gin.

61|
Pag
e
Year Oper
ati
ng NetSal
e Rat
io
Pr
ofi
t

2014 11972.
88 55062.
6 21.
74
5

2015 13737.
50 62052.
2 22.
13
3

2016 17084.
34 65673.
9 26.
01
3

2017 17777.
38 72018.
9 24.
68
3

2018 15751.
77 73246.
0 21.
50
5

62|
Pag
e
I
nter
pret
ati
on:

Oper
ati
ng pr
ofi
trat
ioi
s used t
o det
ermi
ne t
he oper
ati
onalef
fi
cincyoft
he

busi
nessandi
ncr
easei
nther
ati
oshowst
hei
mpr
ovementi
ntheoper
ati
onal

ef
fi
ciency of t
he busi
ness f
rom t
he y
ear2014 t
o 2016.NTPC showed

i
mpr
ovementi
nnetpr
ofi
trat
io whi
chi
ndi
cat
ethei
mpr
ovementi
j
noper
ati
onal

ef
fi
ciencyoft
hebusi
nessbutaf
ter2016oper
ati
onalr
ati
ost
art
edt
odecl
i
neand

i
nthey
ear2018 t
hisr
ati
oreached at21.
50 whi
ch showst
her
educt
ion i
n

oper
ati
onal
eff
ici
encyoft
hebusi
ness.

63|
Pag
e
DEBTOREQUI
TYRATI
O

A measur
eofacompany
'sf
inanci
all
ever
agecal
cul
atedbydi
vi
dingi
tst
otal

l
i
abi
l
iti
esbyst
ockhol
der
s'equi
ty.I
tindi
cat
eswhatpr
opor
ti
onofequi
tyanddebt

t
hecompanyi
susi
ngt
ofi
nancei
tsasset
s.Theobj
ect
iveoft
hisr
ati
oist
o

ascer
tai
nsoundnessoft
hel
ongt
ermf
inanci
alpol
i
ciesoft
hef
ir
m.Ther
ati
o

expr
essest
her
elat
ionshi
pbet
weendebt(
ext
ernalequi
ti
es)andequi
ty(
int
ernal

equi
ti
es)
.

Debtequi
tyr
ati
o=Debt(
longt
erml
oans)
/Equi
ty(
shar
ehol
der
’sf
und)

DEBTOREQUI
TYRATI
O

Year Out
siderf
unds Pr
opr
iet
orf
unds Rat
io

2014 39735.
68 67892.
25 0.
58

2015 45908.
27 73291.
17 0.
62

2016 53253.
66 80387.
51 0.
66

2017 62405.
75 85815.
32 0.
72

2018 78532.
33 81657.
35 0.
96

64|
Pag
e
I
nter
pret
ati
on:

Thi
srat
ioi
scal
cul
atet
oknowaboutt
her
epay
mentcapaci
tyofl
ongt
erm

debtar
erat
ioar
ati
oof1:
1maybeusel
l
yconsi
der
edt
obeasat
isf
act
oryr
ati
o.I
t

showst
her
elat
ionshi
pbet
weenl
ongt
erm debtandshar
ehol
derf
undsi
nspi
red

oft
hef
act
sthatt
heDebt
orequi
tyr
ati
oofNTPCi
ncr
easedbyy
earbutt
her
eisa

l
argemar
ginofsaf
etyf
ort
hel
ongt
erm cr
edi
tor
sbecausei
tisdecl
i
net
hanone.

65|
Pag
e
DEBTORTURN-
OVERRATI
O

Debt
ort
urnov
err
ati
oindi
cat
est
hepaceofdebtcol
l
ect
ionoff
ir
m.Ahi
ghdebt
or

t
urnov
err
ati
oindi
cat
est
heef
fi
ci
entmanagementofdebt
orormor
eli
qui
dit
yis

t
hedebt
or.Si
mil
arl
ylow debt
or'
stur
nov
err
ati
oimpl
i
esi
nef
fi
cientmanagement

ofdebt
orandl
essl
i
qui
dit
ydebt
or.Ther
eisnor
uleoft
humbf
orani
dealdebt
or

t
urnov
err
ati
o.I
tvar
iesf
rom f
ir
mtof
ir
m.

DTR=Tur
nov
erRat
io/
Debt
orsDebt
or

Tur
nov
erRat
io(
inmi
l
li
ons)

Year Tot
alsal
es Debt
ors Rat
io

2014 55062.
65 1434.
96 38.
372

2015 62052.
23 5832.
51 10.
639

2016 65613.
93 5365.
49 12.
228

2017 72018.
93 5220.
08 13.
796

2018 73246.
05 7604.
37 9.
632

66|
Pag
e
I
nter
pret
ati
on:

I
tisseenf
rom t
hegr
apht
hatt
hedebt
ort
urnov
err
ati
ooft
hef
ir
m hascan’
t

gr
owni
ntheper
iodf
rom 2015t
o2018.I
tshowst
hef
ir
msef
fi
cientmanagement

ofdebt
s.Ther
easonsf
ori
ncr
easei
ndebt
ort
urnov
err
ati
ois-

1)I
ncr
easei
nSal
esact
ivi
ty

2)Li
ber
alCr
edi
tPol
i
cybyt
hef
ir
m

Butaf
tert
hatf
ir
m'sdebt
ort
urnov
err
ati
ohasdecl
i
ned.Ther
easonsf
ort
hesamecoul
d
be

1)I
ncr
easei
nsal
esatal
owerr
ate

2)Rest
ri
ctedCr
edi
tPol
i
cybyt
hef
ir
m

67|
Pag
e
AVERAGECOLLECTI
ONPERI
OD

Av
eragecol
l
ect
ionper
iodr
epr
esent
stheav
eragenumberofday
s,t
hef
ir
m hast
o

wai
tbef
orei
tsr
ecei
vabl
ear
econv
ert
edi
ntocash.I
tmeasur
est
hequal
i
tyof

debt
or.Gener
all
yshor
tert
heav
eragecol
l
ect
ionper
iodt
hebet
teri
squal
i
tyof

debt
or.Si
mil
arl
ythe hi
ghercol
l
ect
ion per
iod i
mpl
i
es i
nef
fi
cientcol
l
ect
ion

per
for
mancewhi
chi
ntur
nadv
ersel
yaf
fect
sthel
i
qui
dit
yorshor
tter
m pay
ing

capaci
tyoft
hef
ir
msoutofi
tscur
rentl
i
abi
l
ity
.

Al
so,l
ongert
heav
eragecol
l
ect
ionper
iod,t
her
ear
emor
echancesofbaddebt
.

Thought
her
eisnor
uleoft
humbf
ort
heav
eragecol
l
ect
ionper
iod,
iti
sgener
all
y

gi
ven2t
o3mont
hs.I
tal
sov
ari
esf
rom f
ir
mtof
ir
m.

Av
erageCol
l
ect
ionPer
iodofNTPC(
inmi
l
li
ons)

Year No.ofday
sina Debt
ort
urnov
er Day
s
y
ear r
ati
o

2014 365 9.
63 37.
9
0

2015 365 13.

7 26.
4
9 6

2016 365 12.

2 29.
8
2 6

2017 365 10.

6 34.
4
3 3

2018 365 38.

3 9.
51
7

68|
Pag
e
I
nter
pret
ati
on:

Av eragecol l
ectionper i
odshow t heef fi
ciencyoft herecei
vable
managementdepar tmentoft hebusi nessor ganizati
on.Lesser
theav eragecol lecti
onper i
odbet t
erther eceivable.NTPCshows
upanddownt rendsi ntheav eragecol l
ectionper iod.Intheyear
2015av eragecol lecti
onper i
odwas26. 46butaf t
eritsaverage
collecti
onper i
odr eachedat34- 43.Int hey ear2017duet ot he
l
iber alcreditpol i
cy.Int he y ear2018 NTPC showed huge
i
mpr ovementinav eragecoll
ecti
onper i
odandr eachedat
9.51day s,whi chshowst heef fectiv
eper formanceofr ecei
vable
amountdepar tment .

69|
Pag
e
CHAPTER:
6

70|
Pag
e
 FI
NDI
NGS

 NTPCi
ndi
cat
est
hei
ncr
easedl
evelofcur
rentl
i
abi
l
iti
esand

r
educt
ioni
nfi
rmsabi
l
ityt
opayi
tsshor
tter
m obl
i
gat
ion.

 A decr
eased av
erage l
i
qui
dit
yrat
io ofNTPC shows t
o

i
ncr
easei
ncashandbankbal
anceatav
eryhi
ghr
atewi
tha

subsequenti
ncr
easei
ncur
rentl
i
abi
l
iti
es.

 Af
ter2016 NTPC showsr
educt
ioni
nthenetpr
ofi
trat
io

whi
ch i
ndi
cat
ereduct
ion i
n oper
ati
onalef
fi
ciencyoft
he

company
.

 Netpr
ofi
thaschar
gedmar
ginf
ort
hecr
edi
tbecauseDebt
or

equi
tyr
ati
ooft
hecompanyi
slesst
hanone.

 NTPC showed r
educt
ioni
ngr
osspr
ofi
trat
io becauseof

char
gingl
esspr
icet
othecust
omer
s.

 NTPC showedt
her
educt
ioni
ntheoper
ati
onalpr
ofi
trat
io

whi
chi
ndi
cat
ether
educt
ional
oper
ati
onal
eff
ici
ency
.

71|
Pag
e
 SUGGESTI
ONS

1.NTPCshoul
dmai
ntai
nit
srest
ri
ctedcr
edi
tpol
i
cyt
oear
ncash

andi
ncr
easedi
tscashbal
anceandpay
ingi
tsl
i
abi
l
iti
es.

2.NTPCshoul
dfocusoni
ncr
easedi
tsnetsal
eandshoul
dwor
k

onopt
imi
zi
ngi
tsoper
ati
ngexpenses.

3.Fi
rmsshoul
dtr
ytomai
ntai
nit
squi
ckr
ati
owhi
chi
spr
esent
ly

hi
ghert
hant
henor
malr
ati
oi.
e.1:
1.Al
sot
heabsol
utel
i
qui
d

r
ati
oisv
eryhi
gh.

4.Cl
osescr
uti
nyofpr
esentr
isei
ninf
lat
ioni
ncostofv
ari
ousr
aw

mat
eri
alsshoul
dbedone,andwi
thoutcompr
omi
sing on t
he

qual
i
ty,cheapestmat
eri
alsshoul
dbeacqui
redandt
hust
ryt
o

r
educet
hecostofpr
oduct
ion.

72|
Pag
e
 CONCLUSI
ON

From t her ati

osobserv edint hest
udyIconcl udet hatNTPCi s
maint aini
ngagoodWor ki
ngCapi t
alManagementbase.I ndi
a'
s
numberonepowermaj orisfinanci
all
ywellequippedt orai
sethe
fundr equiredforit
spl annedCapacityAddit
ionPr ogr amme.The
i
nternalaccr ualsoftheCompanywoul dbesuf fi
cientt ofi
nance
theequi t
ycomponentf orthenewpr oject
s.Givenit slowgear i
ng
andst r
ongcr edi
trat
ings,thecompanyi swellpositionedt orai
se
ther equi r
edbor r
owingswi thoutgoingforanyot herf ol
l
owing
Publi
cOf feri
ng.

Theabov epar ametersareusedf orcrit

icalanalysisoffi
nanci al
posi
ti
on.Wi t
ht heev al
uationofeachcomponent ,thefi
nanci al
posi
ti
onf r
om di ff
erentanglesistri
edt obepr esentedinwelland
syst
emat i
cmanner .Bycrit
icalanalysi
swi ththehel pofdi
f f
erent
tool
s,itbecomescl earhow t hefinancialmanagerhandl est he
fi
nancemat tersinpr ofi
tablemanneri nt hecrit
icalchal
l
engi ng
atmosphere,therecommendat i
onar emadewhi chwouldsuggest
theorgani
zationinf ormulati
onofaheal t
hyandst r
ongposition
fi
nanci
all
ywithpr opermanagementsy stem.

Thef i
nancialstat
ementsar eexpr essedi nmonet aryv al
ue,so
theyappeartogivefi
nalandaccur atepositi
on.Thev al
ueoff ixed
assetsi
nt hebalancesheetneitherrepresentthevalueforwhi ch
fi
xedasset scanbesoldnort heamountwhi chwil
lber equir
edt o
repl
ace these asset
s.The bal ance sheeti s pr
epared on t he
presumptionofagoi ng concern.Theconcer nisexpect ed to
conti
nue inf ut
ure.So fixed assets are shown atcostl ess
accumulateddeprecati
on.Mor eover,therearecertainassetsi n
73|
Pag
e
t
he bal
ance sheetwhi
ch wi
l
lreal
i
ze nothi
ng att he t
ime of
l
i
qui
dati
onbuttheyar
eshownint
hebal
ancesheets.

Therefor
einconclusi
onwecansayt hatNTPCLt d.i
sfi
nanciall
y
capable enough to carr
y outits pl
anned Capaci
ty Addi
tion
programmeandwoul dcont i
nuetoenjoythetopmostposi
ti
oni n
thepowersectorf
oral ongti
meinthefutur
e.

74|
Pag
e
 BI
BLI
OGRAPHY

SI
TES:
 www.
ntpc.
com
 www.
ntpc.
co.
in
 www.
wiki
pedi
a.com
 www.
googl
e.com

BOOKS:
 Wor
kingCapi
tal
ManagementandFi
nanceby
R.
K.Gupt
aandHi
manshuGupt
a

75|
Pag
e