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Summer Training Project Report


Calculation of Working Capital ”

Bharat Sanchar Nigam Limited

GMTD Gwalior (M. P.)



Affiliated to Jiwaji University, Gwalior

Submitted to : Submitted by
Mrs. Ritu Singh Praveen Mishra
(HOD) MBA MBA (Finance)
III sem
Executive Summary
Chapter-1 Introduction
1.1. Overview of the BSNL 1
1.2. Objectives of the study 2
1.3. Profile of the Organisation 3
o Overview of BSNL Gwalior Circle 6
o Vision, Mission & objectives 7
o Products 8
o Management Profile 9
o Fact Sheet 10
o Revenues Strategies 11
o Policy of Accounting and finance 12
1.4. Comparative Study 18
1.5. SWOT Analysis 20

Chapter-2 Research Methodology

2.1. Statement of the Problem 22
2.2. Research Design 22
2.3. Methodology 23
2.4. Sampling Techniques used 23
2.5. Selection of Sample Size 23
2.6. Data Collection 23
2.7. Statistical Tools Used 24
2.8. Limitations of the Study 24
Chapter-3 Data Analysis and Findings
3.1. Introduction 25
3.2. Calculation of Working Capital 35
3.3. Comparative Graph of Working Capital 40
Chapter-4 Conclusion and Suggestions
4.1. Finding 41
4.2. Analysis 41
4.3. Conclusion 41
4.4. Suggestions 42
Appendix 43
Bibliography 45
I had sincerely expressed my ineptness & gratitude towards
Mr. Ram Sadal (AO-SBP) of B.S.N.L. GWALIOR, for giving me an
opportunity to join this esteem organization for 45 days of summer training.

My summer training in B.S.N.L. GWALIOR, of duration 45 days has been

quite successful. During my stay for 45 days, I had received full co-operation from
employees and officers of the Bharat Sanchar Nigam Limited Gwalior. The
practical visualization of the summer training has helped me to understand a lot of
practical things.

In order to acquire myself to the task of the organization and to analyze them,
I met staff who helped by their kind co-operation and guidance. During the training
they have been giving the practical knowledge.

I would be pleased to thank Mr. Chandrshekhar (SS-SBP) of B.S.N.L This

Acknowledgement would be incomplete if I fail to express my deep gratitude
towards all the staff of BSNL who gave me a lot of support.

I would be special thank to our college faculty Mrs. Ritu Singh (HOD),
Mr. Rakesh Rajput, Mr. Sudeep Shrivastava and Ms. Jyoti Jain under
supervision this topic. This Acknowledgement would be incomplete if I fail to
express my deep gratitude towards all the facility of NRI College of Management
who gave me a lot of support and guidance.

Last but not least I would be special gratitude to Mr. Mahendra Sikarwar and
our all friends who heartening me to complete this project.

This project is based on the annual reports of the Bharat Sanchar Nigam Limited. It
is done to find out whether the BSNL are improving our capital structure or not.

Further, in this Project

Chapter 1 includes the introduction of the company wherein I told about the
Objectives of the study and profile of the Bharat Sanchar Nigam Limited.

Chapter 2 includes the Research Methodology wherein I have discussed the Research
Design and Various sources of the Data Collection.

Chapter 3 includes the Data analysis and Findings wherein I have analyze the data
collected from the departmental records, annual reports and web site records.

Chapter 4 represents the conclusion and the suggestions based on the departmental
records and annual report.
Chapter 1
Introduction of BSNL
Type Communication Service Provider

Availability Countrywide except Delhi & Mumbai

Owner The Government of India

Key people S.D. Saxena (CFO); A.K. Sinha (CEO)

Founded 19th century, incorporated 2000


1.1 Overview of the BSNL:

BSNL is India's oldest and largest Communication Service Provider (CSP).
Currently BSNL has a customer base of 64.8 million (Basic & Mobile
telephony). It has footprints throughout India except for the metropolitan cities
of Mumbai and New Delhi which are managed by MTNL. As on March 31, 2007
BSNL commanded a customer base of 33.7 million Wireline, 3.6 million
CDMA-WLL and 27.5 million GSM Mobile subscribers. BSNL's earnings for the
Financial Year ending March 31, 2006 stood at INR 401.8b (US$ 9.09 b) with
net profit of INR 89.4b (US$ 2.02 billion). Today, BSNL is India's largest Telco
and one of the largest Public Sector Undertaking of the country with authorized
share capital of US$ 3.95 billion (INR 17,500 Crores) and networth of US$
14.32 billion.
1.2 Objective of Study:
The main objective of this study is to carry on brief study on “Analysis of five
year balance sheet of BSNL through comparative balance sheet in
Comparative Statement” through this I am able to get the difference of various
assets and liabilities of the BSNL.

Other objectives of this project are as follows:

• To identify the various assets amount of the BSNL with respect to
Annual Repots of the BSNL.
• Comparative study of five year Annual reports.
• To study the various departments for come to know all condition of
BSNL Gwalior city center.
1.3 Profile of Organisation:
Over Views of Organisation
The foundation of Telecom Network in India was laid by the British sometime in
19th century. The history of BSNL is linked with the beginning of Telecom in
India. In 19th century and for almost entire 20th century, the Telecom in India
was operated as a Government of India wing. Earlier it was part of erstwhile Post
& Telegraph Department (P&T). In 1975 the Department of Telecom (DoT) was
separated from P&T. DoT was responsible for running of Telecom services in
entire country until 1985 when Mahanagar Telephone Nigam Limited (MTNL)
was carved out of DoT to run the telecom services of Delhi and Mumbai. It is a
well known fact that BSNL was carved out of Department of Telecom to provide
level playing field to private telecoms.Subsequently in 1990s the telecom sector
was opened up by the Government for Private investment, therefore it became
necessary to separate the Government's policy wing from Operations wing. The
Government of India corporatised the operations wing of DoT on October 01,
2000 and named it as Bharat Sanchar Nigam Limited (BSNL).BSNL operates as
a public sector.

Main Services being provided by BSNL

BSNL provides almost every telecom service, however following are the main
Telecom Services being provided by BSNL in India:-

1. Universal Telecom Sevices : Fixed wireline services & Wireless in Local

loop (WLL) using CDMA Technology called bfone and Tarang
respectively. BSNL is dominant operator in fixed line. As on March 31,
2007 (end of financial year) BSNL had 76% share of fixed and WLL

BSNL Mobile Pre-paid Mobile

2. Cellular Mobile Telephone Services: BSNL is major provider of
Cellular Mobile Telephone services using GSM platform under
brandname Cellone. Pre-paid Cellular services of BSNL are know as
Excel. As on March 31, 2007 BSNL had 17% share of mobile telephony
in the country.

BSNL Broadband

3. Internet: BSNL is providing internet as dial-up connection (Sancharnet)

and ADSL-Broadband Dataone. BSNL has around 50% marketshare in
broadband in India. BSNL has planned aggressive rollout in broadband
for current financial year.

4. Intelligent Network (IN): BSNL is providing IN services like tele-

voting, toll free calling, premium calling etc.

BSNL Present & Future

Since its corporatisation in October 2000, BSNL has been actively providing
connections in both Urban and Rural areas and the efficiency of the company has
drastically improved from the days when one had to wait for years to get a phone
connection to now when one can get a connection in even hours. Pre-activated
Mobile connections are available at many places across India. BSNL has also
unveiled very cost-effective Broadband internet access plans (DataOne) targeted
at homes and small businesses. At present BSNL enjoy's 47% of market share of
ISP services.

Year of Broadband 2007

Former Indian Communications Minister Thiru Dayanidhi Maran had declared

year 2007 as "Year of Broadband" in India and BSNL is gearing up to provide 5
million Broadband connectivity by the end of 2007. BSNL has upgraded existing
Dataone (Broadband) connections for a speed of up to 2 Mbit/s without any extra
cost. This 2 Mbit/s broadband service is being provided by BSNL at a cost of
just US$ 5.5 per month. Further, BSNL is planning to upgrade its broadband
services to Triple play (telecommunications) in 2007.

BSNL has been asked to add 108 million customers by 2010 by Former Indian
Communications Minister Thiru Dayanidhi Maran. With the frantic activity in
the communication sector in India, the target appears achievable, however due to
intense competition in Indian Telecom sector in recent past BSNL's growth has
slowed down.

BSNL is pioneer of Rural Telephony in India. BSNL has recently bagged 80% of
US$ 580 m (INR 2,500 crores) Rural Telephony project of Government of India.

During Financial Year 2007-2008 (From April 01, 2006 to March 31, 2007)
BSNL has added 9.6 million new customers in various telephone services taking
its customer base to 64.8 million. BSNL's nearest competitor Bharti Airtel is
standing at a customer base of 39 million. However, despite impressive growth
shown by BSNL in recent times, the Fixed line customer base of BSNL is
declining. In order to woo back its fixed-line customers BSNL has brought down
long distance calling rate under OneIndia plan, however, the success of the
scheme is not known. However, BSNL faces bleak fiscal 2006-2007 as users
flee, which has been accepted by the CMD BSNL.

Presently there is an intense competition in Indian Telecom sector and various

Telcos are rolling out attractive schemes and are providing good customer
services. However, BSNL being legacy operator and its conversion from a
Government Department, earns lot of criticism for its poor customer service.
Although in recent past there have been tremendous improvement in working of
BSNL but still it is much below the Industry's Expectations. A large aging
(average age 49 years(appx)) workforce (300,000 strong), which is mostly semi-
illetrate or illeterate is the main reason for the poor customer service. Further,
the Top management of BSNL is still working in BSNL on deputation basis
holding Government employee status thus having little commitment to the
organisation. Although in coming years the retirement profile of the workforce is
very fast and around 25% of existing workforce will retire by 2010, however,
still the workforce will be quite large by the industry standards. Quality of the
workforce will also remain an issue.

Access Deficit Charges (ADC, a levy being paid by the private operators to
BSNL for provide service in non-lucarative areas especially rural areas) has been
slashed by 37% by TRAI, w.e.f. April 01, 2007. The reduction in ADC may hit
the bottomlines of BSNL.

BSNL at Gwalior Circle

BSNL Gwalior Circle office is situated in City Center area. This office is
undertaking of Bhopal office. This office are works various areas like Marketing,
Planning, Administrative, Operation & Management and Finance. Each
department works under GM telecom district.
GM delegates our some duties to DGM. DGM is the head of the
department. These posts are highly responsible because DGM is the main person
of the department and DGM gives various approvals of works. This approval
leaves various effect of the department like financial, working efficiency,
functions of departments and field officer works.
Basically BSNL city center works in departmental approaches or
functions. This office provides a support to other departments or employees of
BSNL. In this office calculated various function of employees like salary of
employees, departmental information, various tenders, payment of vendors,
departmental expenditure of general provident funds etc.
But this office run a collection center this collection center collect various
telephones/mobiles/broadband bills.
• To become the largest telecom Service Provider.

• To provide world class State-of-art technology telecom services to its
customers on demand at competitive prices.
• To Provide world class telecom infrastructure in its area of operation and to
contribute to the growth.

MP Telecom looks over the management, control and operation of the telecom
network with the following aims and objective
• To build a high degree of customer confidence by sustaining quality and
reliability in service.
• To upgrade the quality of telecom service to international level.
• Provision of telephone connections on demand in all the villages of M.P.
• Expansion of new services like Internet, Intelligent Network, ISDN, Internet
Telephony, Video Conferencing, Broadband etc.
• Popularize Broadband Services and to be on-demand in the whole State.
• Expansion of Cellular Mobile Telephone to all towns.
• To open Internet Kiosks (Cafe's) at all Block Head Quarters.
• To improve the quality of present services being given to the subscribers.
• To open more Customer Service Centers and upgrade the existing Customer
Service Centers for better and friendly Customer care.
• Modernize PSTN network by making RSUs & AN-RAX.
• Plantation of Trees to make environment Clean & Green.
• To raise necessary financial resources for its developmental needs.
• To increase accessibility of services, by providing a large number of Local and
NSD/ISD Public Call Offices (PCOs) so as to reach out to the masses.
Management Profile

Chief General Manager (CGM)

Mr. Hinduja

GM Telecom District
Mr. Prashant Trivedi

Deputy General Manager (DGM) DGM DGM

(Marketing, Planning & Admin) (Operation & Management) (Finance)
Mr. Prashant Trivedi Mr. Vijay Dixit Mr. S. D. Tyagi

Chief Accounting Officer TR (COTR) CO Strategic Business Plans (COSBP)

Account officer TR 1st AO Mob. AO Telecom Revenue 2nd

Mr. S.S. Bahdoriya Mr. Manoj yadav Mr. SC Jain


Mr. Ram Sadal Mr. Naagar Mr. Ram Avatar

Jr. Account Officer

Mr. R.S. Yogik

Section Supervisor Sr. Trunk Supervisor Peon

Mr. Chandrshekhar Mr. K.N. Duwedi Mr. Gyasi Ram

Organisation Functional Structure of BSNL Gwalior Circle

SBP Department
Fact sheets
The Company

Bharat Sanchar Nigam Limited (known as BSNL) is a public sector

communications company in India. It is the largest telecommunication company
in India and the sixth largest in the world. Its headquarters are at Statesman
House, Barakhamba Road, New Delhi. It has the status of Mini-ratana - a status
assigned to reputed Public Sector companies in India.

During the current financial year, the management based on physical verification
of fixed assets and inventory and reconciliation of various heads of assets and
liabilities in the subsidiary and general ledgers which has resulted into
increase/decrease in the following assets and liabilities taken over as on 01st October
2000 amounting to net reduction in the assets of Rs. 5,910 lakh (P.Y. - Rs. 25,452
In pursuance of the Memorandum of Understanding dated 30th September
2000 executed between Government of India and BSNL, all assets and liabilities in
respect of business carried on by DTS and DTO were transferred to the Company
with effect from 01st October 2000 at a provisional value of Rs. 6,300,000 lakh and
up to previous financial year BSNL has identified net assets of Rs. 6,352,028 lakh
against it.

General Information

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Revenues Strategies
The telecom sector is the most competitive sector post liberalization. This has
resulted in a movement from growth based business model that emphasized growth in
numbers to profit-based model where the success is measured by margins. BSNL as
part of the transition has to adopt both cost reduction and revenue enhancement
measures, which would directly impact profitability.
It is evident that there is a declining trend in basic services and there is
stagnation in cellular revenues. Revenue maximization strategies will have two
components, one internal to the organization and the other external. The internal
aspect would involve an initiative for change of process, technology, organizational
structure etc. In this context, revenue assurance is the key to improving the bottom
line for BSNL. This is proactive strategy to capture all revenues due for the services
provided. Presently, BSNL generates bills through different softwares across the
zones of operation, which are disintegrated and provide only basic solutions. The
industry standard for revenue leakage is about 3 to 7% percent of revenue, which in
money terms translates to about Rs.2100 crores for BSNL. Therefore plugging
revenue leakages is just the first and most obvious part of a Revenue Assurance
initiative. The key concerns for BSNL for effective revenue realization are –
The delay in customer billing after activation
Time lag between calls generated and billed
Scope of fraud
Non-availability of uniform database.

Therefore the focus should be on immediate implementation of CDR based

billing. This would require huge investment but the return would more than
commensurate. The software should be scalable and be able to incorporate all the next
generation value added services. The implementation of CDR based system will also
generate the following benefits:
Plugging of leakage of revenue.
Formulation of appropriate marketing strategies –
Accounting Policies
Basis of Preparation of Financial Statements
The financial statements of Bharat Sanchar Nigam Limited (the
“Company” or “BSNL”) are prepared under the historical cost convention
adopting the accrual method of accounting in accordance with Indian Generally
Accepted Accounting Principles and in accordance with the provisions of the
Companies Act, 1956 (the “Act”).

Revenue Recognition
Income from services is accounted for on accrual basis and in conformity with
Accounting Standard – 9 of ICAI. Accordingly,
a) Revenue for all services is recognized when earned and are realizable at the
time of billing. Unbilled revenues from the billing date to the end of the
year are recorded as accrued revenue during the period in which the
services are provided. Provision is made in respect of bills considered to
be disputed (by the management), debts outstanding for more than two years
and for debts due for less than 2 years, to the extent considered necessary by
the management.
b) Installation Charges recovered from subscribers at the time of new
telephone connections are recognized as income in the first year of the
c) In terms of the arrangement between Department of Telecommunications
(“DoT”) and the Company, the charges for telecommunication services and
other infrastructural services provided by BSNL to DoT are neither being
billed nor provided for.
d) Sale proceeds of scrap arising from maintenance and project works are taken
into miscellaneous income in the year of sale.
e) Income from SIMs, recharge coupons of Mobile, Prepaid Calling Cards,
and Prepaid internet connection cards are treated as income of the year in
which the payment is received since the extent of use of these cards within the
financial year could not be ascertained.
f) Wherever there is uncertainty in realization of income, such as liquidated
damages, claims on Government Departments & local authorities etc., these
are recognized on collection basis.
g) The claims on account of reimbursement for provision of infrastructure,
operation and maintenance of Village Public Telephones (VPTs) and Rural
Household Connections (RDELs) receivable from U.S.O. fund are accounted
for as revenue on account of the fact that the claim for infrastructure cannot
be credited to the concerned asset account since the claim amount could
not be segregated asset wise.

h) Other income by way of interest on loans to employees, security deposit

with Government Departments and local authorities, being not material, are
accounted for on collection.

Fixed Assets
a) Fixed assets are carried at cost less depreciation. Cost includes directly
related establishment and other expenses including employee remuneration
and benefits, directly identifiable to the construction or creation of the assets.
b) Expenditure on replacement of assets, equipments, instruments and
rehabilitation works is capitalized if, in the opinion of the management, it
results in enhancement of revenue generating capacity.
c) Assets are capitalized to the extent completion certificates have been obtained,
wherever applicable.
d) The cost of stores and materials at the time of issue to a project, is debited to
e) Apparatus and plants principally consisting of telephone exchanges,
transmission equipments and air conditioning plants etc. are capitalized as and
when an exchange is commissioned and put to use.
f) Cables are capitalized as and when ready for connection to the main system.
g) Intangible assets are stated at cost of acquiring the same less accumulated
depreciation / amortization.

Depreciation is provided based on the Written Down Value method at the
rates prescribed in Schedule XIV to the Companies Act, 1956 except for
Subscriber Installation. The Subscriber Installation is depreciated over the useful life
of 5 years on Written Down Value method.
Assets costing up to Rs. 5,000 are depreciated fully in the year of
purchase. Similarly, partition works costing up to Rs. 2,00,000 are depreciated fully in
the year of construction.
The depreciation on machinery & tools used both for project and
maintenance work is charged to profit and loss account instead of capitalization.
All telephone exchange buildings, administrative offices and captive consumption
assembling premises/workshops are considered as normal building and not as
factory building. Accordingly depreciation is charged uniformly.
Intangible assets such as Entry License Fee for Telecom Service operations
are amortized over the license period (i.e. 20 years) and standalone computer software
applications are amortized over the license period subject to maximum of 10 years as
per straight line method.

Impairment Of Assets
Assets, which are impaired by disuse or obsolescence, are segregated from the
concerned assets category and shown as ‘Decommissioned Assets’ and provision
made for the loss, if any, due to the difference between their net carrying cost and the
net realizable value.

Long-term investments are carried at cost, after providing for any diminution in
value, if such diminution is of a permanent nature.

Inventories are valued at cost or net realizable value as the case may be - cost
ascertained generally on weighted average method; obsolete/non moving inventories
are valued at net realizable value.

Foreign Currency Transactions

a) Transactions in foreign currency are recorded at the exchange rate
prevailing on the date of the transaction i.e. on the date of payment or
receipt as the case may be.
b) All Foreign Currency Liabilities and monetary assets are stated at the
exchange rate prevailing as at the date of Balance Sheet and the
difference taken to Profit and Loss Accounts as Exchange Fluctuation
Loss or Gain.
Extraordinary Items
Extra-ordinary items of income and expenditure, as covered by AS – 5, are disclosed

Manufacturing Expenses
Expenses incurred at Factory units are allocated to the cost of the manufactured

Prior Period Items

Items of Income/expenditure exceeding Rs. 5 lakh are only considered for being
treated as 'prior period items'.

Taxes on Income
Taxes on Income for the current period are determined on the basis of taxable
income and tax credits computed in accordance with the provisions of the Income
Tax Act, 1961.
In accordance with the AS-22, Deferred Tax Liability is recognized on the
timing differences between accounting income and the taxable income for the
period taking into consideration the contents of Accounting Standard Interpretations
3 and quantified using the tax rates in force or substantively enacted as on the
Balance Sheet date.
Deferred Tax Assets are recognized and carried forward to the extent there is a
virtual certainty that such deferred tax assets can be realized.

Provisions are recognized when the Company has a present obligation as a result of
past events; it is more likely than not that an outflow of resources will be
required to settle the obligation; and the amount has been reliably estimated.

Contingent Liabilities
Liabilities, though contingent, are provided for if there are reasonable chances of
maturing such liabilities as per management. Other contingent liabilities, barring
frivolous claims, not acknowledged as debts, are disclosed by way of notes.
Earning Per Share
Earning Per Share ("EPS") comprises the Net Profit after tax (excluding extraordinary
income net of tax). The number of shares used in computing Basic & Diluted EPS is
the weighted average number of shares outstanding during the year.

Segment Reporting
The primary segment consists of ‘basic’ and ‘cellular’ services provided. The
manufacturing activities have not been treated as a separate segment since such
activities are essentially carried on as support service to other segments.
The following specific accounting policies have been followed for segment
Segment Revenue includes service income and other income directly
identifiable with/allocable to the segment.
Income/expense, which relates to the Company, as a whole and not allocable
to individual business segment is included in “Un-allocable Corporate
Income/expense respectively”.
Expenses that are directly identifiable with/allocable to segments are
considered for determining Segment Results.
Segment Assets and Liabilities include those directly identifiable with the
respective segments. Un-allocable corporate assets and liabilities represent the
assets and liabilities that relate to the Company as a whole and not allocable to any
Finance Policy of BSNL
Standards of Financial Proprieties
Ever officer incurring or authorizing expenditure from public funds should be guided
by high standards of financial propriety. Every officer should also enforce financial
order and strict economy at every step and see that all relevant financial rules and
regulations are observed, by his own officer and by subordinates disbursing officers.
Among the principles on which emphasis is generally laid are the following:
1. Every officer is expected to exercise the same vigilance in respect of
expenditure incurred from public moneys as a person of ordinary prudence
would exercise in respect of expenditure of his own money.
2. The expenditure should be prima-facie more that the occasion demands.
3. No authority should exercise its powers of sanctioning expenditure to pass
an order which be directly or indirectly to its own advantages.
4. Expenditure from pubic moneys should not be incurred for benefit of a
person or section of the people unless-
a. a claim for the amount could be enforce in a Court of Law, or
b. the expenditure is in pursuance of a recognised policy or custom.
5. The amount of allowances granted to meet expenditure of a particular type
should be so regulated that the allowances are not on the whole a source of
profit to the recipients.
6. The responsibility and accountability of every authority delegated with
financial powers to procure any item or service on Government account is
total and indivisible. Government expects that the authority a concerned
will have the public interest uppermost in its mind while making a
procurement decision. The responsibility is not discharged merely by the
selection of the cheapest offer.
7. Whenever called for, the concerned authority must place on record in
precise terms, the considerations which weighed with it while talking the
procurement decision.
1.4 Comparative Study Between Years 2008-2007:
During the current financial year, the management based on physical
verification of fixed assets and inventory and reconciliation of various heads of assets
and liabilities in the subsidiary and general ledgers which has resulted into
increase/decrease in the following assets and liabilities taken over as on 01st October
2000 amounting to net reduction in the assets of Rs.5,910 lakh (P.Y. - Rs. 25,452
Figures in Lakhs of Rupees

up to march up to march Absolute Change
Particulars 31, 2007 31, 2008 change Rs. (%)

Fixed Assets 5,417,921 5,416,697 (1,224) -0.02

Capital WIP 503,112 502,631 (481) -0.10

Inventory 188,647 188,681 34 0.02

Sundry Debtors 682,740 684,430 1,690 0.25

Advance to contactors 39,448 39,448 - 0.00

Deposit with Electricity
Board/other 2,086 2,138 52 2.49

Total A 6,833,954 6,834,025 71 0.001


Customer Deposits 391,656 393,704 2,048 0.52

Earnest Money
Deposits 12,525 12,158 (367) -2.93
Security Deposit from
Contractors/ Suppliers 29,454 29,099 (355) -1.21
Working Expense
Liability as on 1st
October 2000 38,283 42,666 4,383 11.45
Contractors Bills
payable as on 1st
October 2000 10,008 10,280 272 2.72
Net Assets taken over
by the Company 6,352,028 6,346,118 (5,910) -0.09

Total B 6,833,954 6,834,025 71 0.001

Interpretation of Comparative Balance Sheet

The comparative balance sheet of the company reveals that during 2008
there has been on increase in final assets of Rs. 1224 lakh i.e. 0.02% while long
term liabilities to other side have relative increase by Rs. 4383 lakh and
contractor bill pay has increased by Rs 272 lakh. This fact depicts the policy of
the company is to purchase fixed assets from the long-term sources of finance
there by not affect the working capital.

Current assets have increased by Rs. 1261 lakh and advance of contractor
not increased on the other hand there has been an increase in inventories amount
Rs. 34 lakh. The current liabilities have increased by Rs. 4582 lakh i.e. 0.06%.
This further confirms that the company has revised long term finances.

The overall financial position of the company is satisfactory.

1.5 SWOT Analysis:
• Pan-India reach
• Experienced telecom service provider
• Total telecom service provider
• Huge Resources (financial & technical pool)
• Huge customer base
• Most trusted telecom brand
• Transparency in billing
• Easy deployment of new services
• Copper in last mile can be used for easy broadband deployment
• Huge Optical Fibre network and associated bandwidth

• Non-optimization of network capabilities
• Poor marketing strategy
• Bureaucratic organizational set up
• Inflexibility in mindset (DOT period legacies)
• Limited number of value added services
• Poor franchisee network
• Legacy of poor service image
• Huge and aged manpower
• Procedural delays
• Lack of strategic alliances
• Problems associated with incumbency like outdated technologies,
unproductive rural assets, social obligations, political interference,
• Poor IT penetration within organization
• Poor knowledge Management
• Tremendous market growing at 20 lac customers per month
• Untapped broadband services
• Untouched international market
• Can capitalize on public sector image to grab government’s ICT initiatives
• ITEB service markets
• Diversification of business to turn-key projects
• Leveraging the brand image to source funds
• Almost un-invaded VSAT market
• Fuller utilization of slack resources
• Can make a kill through deep penetration and low cost advantage
• Broaden market expected from convergence of broadcasting, telecom and
entertainment industry

• Competition from private operators
• Keeping pace with fast technological changes
• Market maturity in basic telephone segment
• Manpower churning
• Multinational eyeing Indian telecom market
• Private operators demand for sharing last mile
• Decreasing per line revenues due to competitive pricing
• Private operators demand to do away with ADC can seriously effect revenues
• Populist policies of government like “OneIndia” rates
Chapter 2
Research Methodology
2.1 Statement of Problem:
The research is carried on in a proper planned and systematic manner.
The research was particularly based departmental research. We have to move
to various department and meet people which include their names and contact
numbers given by BSNL training and Planning department.
During the department we have to know about to departmental works by
explaining the working process of a particular department.
Each department presences section supervisors (SS) this SS will provide
various data of relative department and give opportunity to handling the
working process and resolve our doubts.

2.2 Research Design & Methodology:

The research design of this project is exploratory. Though each research study has its
own specific purpose but the research design of this project on BSNL is exploratory in
nature as the objective is the development of the hypothesis rather than their testing.
The research designs methods of financial analysis. Through of comparative
balance sheet in comparative statement, I am studying on balance sheet of BSNL of
five year. So taking comparative statement, I am going to analyzed of five years
balance sheet of BSNL

Every project work is based on certain methodology, which is a way to systematically
solve the problem or attain its objectives. It is a very important guideline and lead to
completion of any project work through observation, data collection and data analysis.

“Research Methodology comprises of defining & redefining

problems, collecting, organizing & evaluating data, making
deductions & researching to conclusions.”
According to Clifford Woody,
Accordingly, the methodology used in the project is as follows: -
Defining the objectives of the study
Framing of questionnaire keeping objectives in mind (considering the objectives)
Feedback from the employees, Analysis of feedback, Conclusion, findings and
2.3 Sampling Technique Used:
This research has used convenience sampling technique.

2.4 Sampling technique: Convenience sampling is used in exploratory

research where the researcher is interested in getting an inexpensive
approximation of the truth. As the name implies, the sample is selected
because they are convenient
2.5 Selection of Sample Size:
Survey of each department.

2.6 Sources of Data Collection:

Research will be based on two sources:
1. Primary data
2. Secondary data
1) Primary Data:
Survey: Primary data was collected by departmental survey for BSNL.

2) Secondary Data:
Secondary data will consist of different literatures like books which are published,
articles, internet, the company manuals and websites of company-
In order to reach relevant conclusion, research work needed to be designed in
a proper way.
This research methodology also includes:-
Familiarization with the concept of finance and its various merits, demerits.
Thorough study of the information collected.
Conclusions based on findings.

2.6 Statistical Tools Used

The main statistical tools used for the collection and analyses of data in this
project are:
Bar Diagrams
Line Charts
2.7 Limitations of Study
Financial analysis is a powerful mechanism of determining financial strengths
and weaknesses of a firm but, the analysis is based on the information available in the
financial statements. We has also careful about the impact of price level chances,
windows-dressing of financial statements, changes in accounting policies of BSNL,
accounting concepts and conventions, and personal judgments etc.
Due to the following unavoidable and uncontrollable factors the factors, the result
might not be accurate. Some of the problems faced while conducting the survey are as
Chances of some biasness could not be eliminated.
A majority of respondents show lack of cooperation and are biased towards
their own opinions.

Some of the important Limitations of financial analysis are however, summed up as

It is only a study of interim reports.
Financial analysis is based upon only monetary information and non-monetary
factors are ignored.
As the financial statements are prepared on the basis of a going concern, it
does not give exact position. Thus accounting concepts and conventions cause
a serious limitation to financials analysis.
Changes in accounting procedure by a firm may often make financial analysis
Analysis is only a means and not an end in itself. We has to make
interpretation and draw own conclusion

Different people may interpret the same analysis in different ways.

Chapter 3
Data Analysis and Findings

Financial Management is that managerial activity which is concerned with the

planning and controlling of the firms financial resources.
Financial management focuses on finance manager performing various tasks
as Budgeting, Financial Forecasting, Cash Management, Credit Administration,
Investment Analysis, Funds Management, etc. which help in the process of
decision making.
Financial management includes management of assets and liabilities in the
long run and the short run.
The management of fixed and current assets, however, differs in three
important ways: Firstly, in managing fixed assets, time is very important;
consequently discounting and compounding aspects of time element play an important
role in capital budgeting and a minor one in the management of current assets.
Secondly, the large holdings of current assets, especially cash, strengthen firm’s
liquidity position but it also reduces its overall profitability. Thirdly, the level of fixed
as well as current assets depends upon the expected sales, but it is only the current
assets, which can be adjusted with sales fluctuation in the short run.
Here, we will be focusing mainly on management of current assets and current
Management of current assets needs to seek an answer to the following question:
1. Why should you invest in current assets?
2. How much should be invested in each type of current assets?
3. What should be the proportion of short term and long-term funds to
finance the current assets?
4. What sources of funds should be used to finance current assets?


Working Capital Management is the process of planning and controlling the
level and mix of current assets of the firm as well as financing these assets.
Specifically, Working Capital Management requires financial managers to decide
what quantities of cash, other liquid assets, accounts receivables and inventories the
firm will hold at any point of time.
Working capital is the capital you require for the working i.e. functioning of your
business in the short run.
Gross working capital refers to the firm’s investment in the current assets and
includes cash, short term securities, debtors, bills receivables and inventories.
It is necessary to concentrate on the fact that the investment in the current assets
should be neither excessive nor inadequate.
WC requirement of a firm keeps changing with the change in the business activity and
hence the firm must be in a position to strike a balance between them. The financial
manager should know where to source the funds from, in case the need arise and
where to invest in case of excess funds.
The dangers of excessive working capital are as follows:
1. It results in unnecessary accumulation of inventories. Thus the chances of
inventory mishandling, waste, theft and losses increase
2. It is an indication of defective credit policy and slack collection period.
Consequently higher incidences of bad debts occur which adversely affects
the profits.
3. It makes the management complacent which degenerates into managerial
4. Tendencies of accumulating inventories to make speculative profits grow.
This may tend to make the dividend policy liberal and difficult to copes with
in future when the firm is unable to make speculative profits.
The dangers of inadequate working capital are as follows:
1. It stagnates growth .It becomes difficult for the firms to undertake profitable
projects for non-availability of the WC funds.
2. It becomes difficult to implement operating plans and achieve the firms
profit targets
3. Operating inefficiencies creep in when it becomes difficult even to meet
day-to-day commitments.
4. Fixed assets are not efficiently utilized. Thus the rate of return on investment
5. It renders the firm unable to avail attractive credit opportunities etc.
6. The firm loses its reputation when it is not in position to honor its short-term
obligations. As a result the firm faces a tight credit terms.
Net working capital refers to the difference between the current assets and the
current liabilities. Current liabilities are those claims of outsiders, which are expected
to mature for payment within an accounting year and include creditors, bills payable,
bank overdraft and outstanding expenses.
When current assets exceed current liabilities it is called Positive WC and when
current liabilities exceed current assets it is called Negative WC.

The Net WC being the difference between the current assets and current liabilities is a
qualitative concept. It indicates:
• The liquidity position of the firm
• Suggests the extent to which the WC needs may be financed by permanent
sources of funds
It is a normal practice to maintain a current ratio of 2:1. Also, the quality of current
assets is to be considered while determining the current ratio. On the other hand a
weak liquidity position poses a threat to the solvency of the company and implies that
it is unsafe and unsound. The Net WC concept also covers the question of judicious
mix of long term and short-term funds for financing the current assets.

Permanent and variable working capital:

The minimum level of current assets
required is referred to as permanent working
capital and the extra working capital needed
to adapt to changing production and sales
activity is called temporary working capital.


The importance of working capital management stems from the following
1. Investment in current assets represents a substantial portion of the total investment.
2. Investments in current asset and the level of current liabilities have to be
geared quickly to change in sales, which helps to expand volume of business.
3. Gives a company the ability to meet its current liabilities
4. Take advantage of financial opportunities as they arise.
A firm needs WC because the production, sales and cash flows are not instantaneous.
The firm needs cash to purchase raw materials and pay expenses, as there may not be
perfect matching between cash inflows and outflows. Cash may also be held up to
meet future exigencies. The stocks of raw materials are kept in order to ensure smooth
production and to protect against the risk of non-availability of raw materials. Also
stock of finished goods has to be maintained to meet the demand of customers on
continuous basis and sudden demand of some customers. Businessmen today try to
keep minimum possible stock as it leads to blockage of capital. Goods are sold on
credit for competitive reasons. Thus, an adequate amount of funds has to be invested
in current assets for a smooth and uninterrupted production and sales process.
Because of the circulating nature of current assets it is sometimes called circulating


All firms do not have the same WC needs .The following are the factors that affect the
WC needs:
1. Nature and size of business: The WC requirement of a firm is closely
related to the nature of the business. We can say that trading and financial
firms have very less investment in fixed assets but require a large sum of
money to be invested in WC. On the other hand Retail stores, for
example, have to carry large stock of variety of goods little investment in
the fixed assets.
2. Manufacturing cycle: It starts with the purchase and use of raw materials
and completes with the production of finished goods. Longer the
manufacturing cycle larger will be the WC requirement; this is seen mostly
in the industrial products.
3. Business fluctuation: When there is an upward swing in the economy,
sales will increase also the firm’s investment in inventories and book debts
will also increase, thus it will increase the WC requirement of the firm and
4. Production policy: To maintain an efficient level of production the firm’s
may resort to normal production even during the slack season. This will
lead to excess production and hence the funds will be blocked in form of
inventories for a long time, hence provisions should be made accordingly.
Since the cost and risk of maintaining a constant production is high during
the slack season some firm’s may resort to producing various products to
solve their capital problems. If they do not, then they require high WC.
5. Firm’s Credit Policy: If the firm has a liberal credit policy its funds will
remain blocked for a long time in form of debtors and vice-versa.
Normally industrial goods manufacturing will have a liberal credit policy,
whereas dealers of consumer goods will a tight credit policy.
6. Availability of Credit: If the firm gets credit on liberal terms it will
require less WC since it can always pay its creditors later and vice-versa.
7. Growth and Expansion Activities: It is difficult precisely to determine
the relationship between volume of sales and need for WC. The need for
WC does not follow the growth but precedes it. Hence, if the firm is
planning to increase its business activities, it needs to plan its WC
requirements during the growth period.
8. Conditions of Supply of Raw Material: If the supply of RM is scarce the
firm may need to stock it in advance and hence need more WC and vice-
9. Profit Margin and Profit Appropriation: A high net profit margin
contributes towards the WC pool. Also, tax liability is unavoidable and
hence provision for its payment must be made in the WC plan, otherwise it
may impose a strain on the WC.
Also if the firm’s policy is to retain the profits it will increase their WC,
and if they decide to pay their dividends it will weaken their WC position, as the cash
will flow out. However this can be avoided by declaring bonus shares out of past
profits. This will help the firm to maintain a good image and also not part with the
money immediately, thus not affecting the WC position.
Depreciation policy of the firm, through its effect on tax liability and
retained earning, has an influence on the WC. The firm may charge a high rate of
depreciation, which will reduce the tax payable and also retain more cash, as the cash
does not flow out. If the dividend policy is linked with net profits, the firm can pay
fewer dividends by providing more depreciation. Thus depreciation is an indirect way
of retaining profits and preserving the firms WC position.
For estimating the actual cash requirement you may follow the following two-step
1. Estimate the cash cost of various current assets requirement: The cash
cost of a current asset is:
Value of current asset
(-) Profit element, if any, included in the value.
(-) Non-cash charges like depreciation, if any, included in the
2. Deduct the spontaneous current liabilities from the cash cost of current
assets: A portion of the cash cost of current assets is supported by trade credit
and accruals of wages on expense, which may be referred to as spontaneous
current liabilities. The balance left after such deduction has to be arranged
from other sources

In 1997, the RBI permitted banks to evolve their own norms for assessment of
the Working Capital requirements of their clients.


Drawing up cash flow statements (monthly or quarterly) for the past few
years clearly indicate the seasonal and secular trend in utilization of working
The projections drawn up by the entrepreneur may then be jointly discussed
with the banker as modified in light of the past performance and the banker’s
The peak cash deficit is ascertained from the cash budgets.
The promoter’s share for such requirement maybe mutually arrived at by the
banker and the borrower with the balance requirement forming the Bank
financed part of Working Capital.

Cash flow based computation of working capital requirement has been recommended
by the RBI for assessment of working capital requirement permitting the banks to
evolve their own norms for such assessment
However the reluctance to provide the cash budgets thereby revealing
additional information to the banks, has led to even larger companies shying away
from Cash Budget method of assessing Working Capital. Consequently Cash Budget
method is currently prevalent mainly in case of seasonal industries, construction
sector as well as other entities whose operations are linked to projects.


i. Transaction motive: firm needs cash for transaction purpose.
ii. Precautionary motive: The magnitude and time of cash inflows and outflows
is always uncertain and hence the firms need to have some cash balances as a
iii. Speculative motive: All firms want to make profits from fluctuations in
commodity prices, security prices, interest rates and foreign exchange rates .A
cash rich firm is in a better position to exploit such bargains. Hence, the firm
with such speculative leanings may carry additional liquidity.

The firm must decide the quantum of transactions and precautionary balances to
be held, which depends upon the following factors:
The expected cash inflows and outflows based on the cash budget
and forecasts, encompassing long/short range cash needs of the
The degree of deviation between the expected and actual net cash flow.
The maturity structure of the firm’s liabilities.
The firm’s ability to borrow at a short notice, in case of emergency.
The philosophy of management regarding liquidity and risk of
The efficient planning and control of cash.

Cash balance is maintained for transaction purposes and an additional amount may be
maintained as a buffer or safety stock. It involves a trade off between the costs and the

If a firm maintains a small cash balance, it has to sell its marketable securities
and probably buy them later more often, than if it holds a large cash balance. More the
number of transactions more will be the trading cost and vice-versa; also, lesser the
cash balance, less will be the number of transaction and vice-versa. However the
opportunity cost of maintaining the cash rises, as the cash balance increases.

Working capital may be classified in two ways:

(a) On the basis of Concept
(b) On the basis of time
This classification from the point of view of financial manager. On the basis of time,
working capital may be classified as:


On the basis of Concept On the basis of time

Gross WC Net WC Permanent WC Temporary WC

Regular WC Reserve WC Seasonal WC Special WC

(A) On the basis of Concept

There are two concept of working capital
(i) Balance sheet Concept
(ii) Operating Cycle
(i) Balance Concept
There are two interpretation of working capital under the balance sheet
(a) Gross Working Capital
(b) Net Working Capital
(a) Gross Working Capital : The gross working capital is the capital
invested in total current assets of the enterprises
(b) Net Working Capital : The term working capital to the next working
capital. Net working the excess of current assets over current assets.
Net working capital = current assets – current liabilities

(ii) Operating cycle Concept

The gross operating cycle of a firm is equal to the length of the
inventories and receivables conversion period.

(c) Gross Operating Cycle: = RMCP + WIPCP+ FGCP+ RCP

Where RMCP = Raw material conversion period
WIPC = work –in -progress conversion period
FGCP = Finished Goods conversion period
RCP = Receivables conversion period
RMCP = Avg. stock of RM / RM Consumption per day
WIPC = Avg. Stock of WIP / Total cost of production per day
FGCP = Avg. Stock of finished Goods / total cost of sales per day
RCP = Avg. Account Receivables / Net Credit sales per day

(d) Net Operating Cycle : Gross operating Cycle Period – Payables Deferral
Payable Deferral Period =Avg. payables / Net credit purchases per day

Cash Raw material Work in progress

Debtors Sales Finished Goods

Working capital cycle


Calculation of Working Capital in four years

On the Basis of Gross Working Capital

Particular (Current Assets) 2008 2007 2006 2005

Building materials 344 466 534 400
Lines and Wires 14,696 16,354 15,500 12,300
Cables 132,359 106,839 103,125 104,564
Apparatus and Plants 120,566 83,342 130,333 65,548
Telephone and Telex 19,257 19,268 19,272 19,365
Telegraph and Telex Spares 150 149 155 153
Broad Band Equipments 10,218 1,168 1,652 1,109
Satellite Based Broadband 414 227 235 365
Raw material (at Factory) 12,572 11,108 10,985 10,562
Finished goods (at Factory) 952 1,078 1,258 1,365
Finished Stock (at various 15,348 15,932 15,658 15,369
Stores 20,189 13,016 16,015 19,489
Excess/(Short) in Inventory 150 2,186 1,264 1,856
Sundry Debtors 546,551 558,066 630,205 663,703
Cash And Bank Balances 4,055,158 3,745,296 3,057,948 2,193,113
Loans And Advances 744,441 714,431 923,207 752,160
Inventories 322,006 242,847 278,922 224,535
Gross WC / Total 6015371 5531773 5206268 4085956
Gross WC

R s (L ak h )

4000000 5531773 6015371


2005 2006 2007 2008


Above calculation shown in the year of 2008 the gross working capital (WC)
is Rs. 60,15,371 and the WC of the year 2005 Rs. 40,85,956. This statement say the
WC is increase in every year
On the Basis of Net Working Capital

Particular 2008 2007 2006 2005

Building materials 344 466 534 400
Lines and Wires 14,696 16,354 15,500 12,300
Cables 132,359 106,839 103,125 104,564
Apparatus and Plants 120,566 83,342 130,333 65,548
Telephone and Telex 19,257 19,268 19,272 19,365
Telegraph and Telex Spares 150 149 155 153
Broad Band Equipments 10,218 1,168 1,652 1,109
Satellite Based Broadband 414 227 235 365
Raw material (at Factory) 12,572 11,108 10,985 10,562
Finished goods (at Factory) 952 1,078 1,258 1,365
Finished Stock (at various 15,348 15,932 15,658 15,369
Stores 20,189 13,016 16,015 19,489
Excess/(Short) in Inventory 150 2,186 1,264 1,856
Sundry Debtors 546,551 558,066 630,205 663,703
Cash And Bank Balances 4,055,158 3,745,296 3,057,948 2,193,113
Loans And Advances 744,441 714,431 923,207 752,160
Inventories 322,006 242,847 278,922 224,535
Total of Current Assets 6015371 5531773 5206268 4085956

Sundry Creditors 606,327 597,419 498,365 564,235

Advances received from 32,802 24,176 27,256 65,258
Customers and others
Deposits from Customers 582,676 613,555 525,864 586,565
and others
Income received in advance 48,569 39,027 47,589 48,489
against services
Claims payable to DoT 37,610 48,521 54,961 48,753
Claims payable to 19,176 12,469 17,654 15,864
departments of Govt. of
Claims payable to 79,094 68,584 65,864 63,654
Government companies
Licence Fee and 4,662 40,644 45,846 42,696
Transponder charges payable
Payable for revised wages 121,318 18,930 19,631 20,984
Salary & Incentive payable 83,679 84,692 85,693 82,981
to employees
Payable to SAARC 251 569 465 512
Liabilities for services 63,730 62,649 59,894 61,854
Liabilities for Construction 1,128 - - -
Claims Payable for USO 80 - - -
Other Provisions for 41,780 37,154 38,658 40,458
Other liabilities 13,524 16,252 15,856 14,489
Interest accrued but not due 3,241 3,275 3,846 3,964
on Deposits
Total of liabilities (B) 1,739,647 1,667,916 1,507,442 1,660,756
Net Working Capital 4,275,724 3,863,857 3,698,826 2,425,200
Net Working Capital

5000000 4275724
3698826 3863857
Rs. (Lakh)

3000000 2425200
Net WC
2005 2006 2007 2008

Above calculation shown in the year of 2008 the net working capital (WC) is
Rs. 42,75,724 and the net WC of the year 2005 Rs. 24,25,200. This statement say the
Net WC is also increase in every year.
Comparative Graph of Working Capital

Comparative Graph
Rs. in Lakh 8000000
Net WC
Gross WC
2005 2006 2007 2008

Working Capital 2005 2006 2007 2008

Net WC 2425200 3698826 3863857 4275724
Gross WC 4085956 5206268 5531773 6015371
Chapter 4
Conclusion and Suggestions
According to my survey and calculating the important points are:
• Financial position of BSNL is not much good.
• The comparative Graph of BSNL reveals that after year 2005, increase the
working capital in year 2006 and same capital continue to year 2008 yet.
• Financial position of BSNL was much better in 2005 compression to all year.
• There are not good coordination in departments of BSNL.
• Working process of BSNL take long time.
• Handwriting work is more than computerizing work.
• Qualification of employees is not match his posts.
• Salary of employees is much better.
• At present time, investment of BSNL is less than compression year 2004.

4.2 Analysis:
From the calculation it was found that amongst year 2005 to 2008,
• In year 2005, financial position of BSNL is good based on year 2008.
• In year 2006, financial condition of BSNL is improved based on year 2005.

4.3 Conclusion:
After overhauling the Four years balance sheet of BSNL and all condition, I have to
reached this conclusion that;
• There was much good financial position of BSNL in year 2008 comparison
2005 and present year.
• Working process of BSNL is take very long time because of which, BSNL is
not being able to progress. So improved the working process.
• BSNL are facing the capital problem because of which financial position of
BSNL are affected.
• BSNL are paying more taxes. Because of paying more taxes, financial
position of BSNL are affected.
• There was earned more profit in year 2005 but year by year BSNL is on loss.

4.5 Suggestion:
The study has provided with the useful data from the respondents. There has a lot to
be recommended. Following are the recommendations:
• There should be improved the working process of BSNL. Because working
process of BSNL is take more time.
• Departments of BSNL do not have good coordination. So there should be
good coordination in departments of BSNL. If coordination will have good in
departments, than there will not has to face any problem in proper work.
• There should be good communication between each departments of BSNL.
• There should be computerized work in BSNL. But also at this time, paper
work are continue to see in many department.
• There should be increase in investment of BSNL. So that could be earned
more profit. Because, if investment will be high than profit will be earned

• Management Accounting Shashi K. Gupta & R.K. Sharma

• Financial Management I.M. Pandey.
• Research Paper: Financial Analysis Hampton John J. Financial Decision
Making, Second Ed p.75
• Web sites

• Annual Reports of BSNL 2006-2008.

• Departmental Records