I hereby declare that the following documented Summer Training Project Report
me. This summer training project was undertaken in the partial fulfillment of the
Master of Business Administration (full time) Programme of Dr. Hari Singh Gour
KARTIK GUPTA
.
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CERTIFICATE OF SUPERVISOR
This is to certify that the summer Training Project Report Working Capital
Management In BHEL, Jhansi submitted in partial fulfillment for the award of the
Singh Gour (a central) University, Sagar, Madhya Pradesh was carried out by Kartik
Gupta under the guidance of Professor Yashwant Singh Thakur head of the
department. This has not been submitted to any other University for the award of any
degree/diploma/certificate.
Date./......./.........
Place.......................
Signature of Guide
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ACKNOWLEDGEMENT
We take this opportunity to express our heartfelt gratitude to all people who have
extended their assistance and provided us information during the tenure of project and
we are greatly indebted to them for guiding and supporting us throughout the project
We would like to express our deep and sincere gratitude to our project guide Dr.
Yashwant Singh Thakur (Head of the Department) for the valuable advice, precious
time and support that he offered to us and his effort to help us work independently.
Last but not the least we would like to thank all the respondents for giving their
precious time and relevant information we required, without which this project would
KARTIK GUPTA
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PREFACE
Management studies are expected to be not only theoretical but also practical to equip
the students coming out of any Managerial Educational Institution after having been
mounded and shaped with the Knowledge of various Managerial Function would be
able contributing their respective share in the achievement of both organization and
individual motive. This would enrich not only the individuals but also the whole
humanity.
the modern money market economy, finance is one of the basic foundations of all
kinds of economic activities. It is the master key, which provides access to all the
funds. The financial manager must, therefore realize that the action have far reaching
consequence for the firms because these action will influences the size, profitability,
growth, risk, survival of the firms. Therefore, he must have a clear understanding and
Working on a relevant and particular project is a part and parcel of any specialized
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TABLES OF CONTENTS
NO.
1 EXECUTIVE SUMMARY
2 COMPANY OVERVIEW
3 INTRODUCTION TO TOPIC
4 RESEARCH METHODOLOGY
7 CONCLUSION
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CHAPTER 1
EXECUTIVE SUMMARY
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EXECUTIVE SUMMARY
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CHAPTER 1
COMPANY OVERVIEW
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INTRODUCTION
In the post independence era when India was moving towards Industrialization, the
major thrust of the Government was in the core sector i.e.; the public sector. With this
objective, Heavy Electrical (I) Limited was set up in Bhopal in August 1956 with a
view to reach self sufficiency in Industrial products and power equipments. This plant
Three more plants were subsequently set up at Tiruchy, Hyderabad and Haridwar with
Soviet and Czechoslovakian assistance in May 1965, Dec 1965 and Jan 1967
respectively. As there was a need for an integrated approach for the development of
BHEL is the largest engineering and manufacturing enterprise in India in the energy
BHEL manufactures over 180 products under 30 major product groups and caters to
core sectors of the Indian economy viz. Power Generation and Transmission,
over 100 project sites, eight service centers and 18 regional offices, enable the
company to promptly serve its customers and provide them with suitable products,
systems and services efficiently and at competitive prices. The high level of quality
and reliability of its products is due to the emphasis on design, engineering and
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technologies from leading companies in the world, together with technologies
Management Systems (OHSAS 18001) and is also well on its journey towards Total
Quality Management.
BHELs operations are organized around three business sector, namely power
Renewable Energy and Overseas Business. This enables BHEL to have a strong
customer orientation, to be sensitive to his needs and respond quickly to the changes
in the market.
The greatest strength of BHEL is its highly skilled employees. Every employee is
given an equal opportunity to develop himself and grow in his career. Continuous
training and retaining, career planning, a positive work culture and participative style
responsiveness.
BHEL, ranking among the major power plant equipment suppliers in the world is one
of the largest exporters of engineering products and services from India. Over the
years BHEL has established its references in around 60 countries of the world,
ranging from United States in the west to New Zealand in the Far East. BHELs
export range covers individual product to complete Power Stations, Turnkey contracts
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BHEL has assimilated and updated the state-of-the-art technologies in the Power and
Industrial equipment sectors acquired from world leaders. BHEL has successfully
flexibility to interface and complement international companies for large projects, and
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BHEL JHANSI UNIT
By the end of 5th five year plan, it was envisaged by the planning commission that the
demand for power transformer would raise in the coming years. Anticipating the
countrys requirement BHEL decided to set up a new plant, which would manufacture
power and other type of transformers in addition to the capacity available at BHEL
Bhopal. The Bhopal plant was engaged in manufacturing of transformers Upto 220
This unit of Jhansi was established about 16 km from the city on Lalitpur road. It is
called second generation plant of BHEL and was setup in 1974at an initial cost of Rs.
21.03 crores. In 1976, the commercial production of the unit started with an output of
53 lacs in a year.
This plant of BHEL is equipped with the most modern manufacturing processing and
the plant is such that it is well streamlined to enable smooth material flow from the
raw material stages top finished goods. All the feeder bays have been laid
perpendicular to main assembly bay and in each feeder bay raw material smoothly
gets converted to subassemblies, which after inspection are sent to main assembly
bay. The raw material that is needed for manufacturing is used only after through
material testing in the testing lab and with strict quality checks at various stages of
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VISION, MISSION AND VALUES OF BHEL
VISION
A world class, innovative, competitive and profitable engine, providing total business
solutions.
MISSION
To be the leading Indian Engineering enterprise providing quality products, systems
and services in the fields of energy, transportation, industry, infrastructure, and other
potential areas.
VALUES
Meeting commitments made to external and internal customers.
Team Playing.
Zeal to Excel.
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OBJECTIVES OF BHEL
Business Mission
oil and gas exploration and industries. Utilize companys capabilities and resources to
expand business into allied areas and other priority sectors of the economy like
Growth
from BHEL.
Profitability
Customer Focus
To build a high of customers confidence by providing increased value for his money
service.
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People Orientation
To enable each employee to achiever his potential, improve his capabilities, perceive
his role and responsibilities and participate and contribute positively to the growth and
their needs.
Technology
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SHARE HOLDING PATTERN:
BHEL is a public sector unit and thus government has the major share holder of this
Government 67%
FIIs 10%
Public 12%
PUBLIC
12%
FII's
10%
INDIAN
INSTITUTION
11% GOVERNMENT
67%
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BHELs PRODUCTION FACLITIES & PRODUCTS
JHANSI FACILITY
BHOPAL FACILITY
Hydro Sets, Nuclear Turbines, Thermal Sets, Marine Turbines, AC Motors & Large
Electric Motors, Power Transformers, Traction Machines & Controls for Traction and
Turbines.
HYDERABAD FACILITY
Thermal sets, Gas Turbine Generator Sets, Combined Cycle/Cogan Plants, Industrial
HARIDWAR FACILITY
Thermal Sets, Nuclear Generators, Hydro Sets, Industrial Machines, Control Panels,
Light Trainer Aircrafts, Gas Turbines, Defense Equipment, Electric Arc Furnaces for
TRICHY FACILITY
Utility & Industrial Bowlers, Valves, Nuclear Steam Generators, Steam less Steel
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Tubes.
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BANGALORE FACILITY
Variable Speed Drives, Programmable Logic & Digital Controllers, Metes, Photo
RANIPAT FACILITY
RUDRAPUR FACILITY
GOINDWAL FACILITY
Industrial valves.
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BUSINESS AREA
BHEL covers a wide area in production. These areas are mentioned in following
details
POWER
Provide a gamut of equipment Thermal, hydro and Nuclear power plant range.
Include product and system for power generation, transmission and utilization.
TRANSMISSION
BHEL is manufacturing transmission equipment for all voltage ratings including the
INDUSTRY
TRANSPORTATION
BHEL offers a variety of transportation equipments to meet the growing needs of the
country, 65% of Indian railways are equipment with BHEL manufactured traction
free transportation. BHEL also offers a battery operated passenger Van to Delhi
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Government.
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OIL AND GAS
Equipment for oil and gas exploration and transportation are manufactured by BHEL.
The range covers super deep rigs, mobile and desert rigs with matching draw works
NON-CONVENTIONAL ENERGY
BHEL plays a vital role in helping to harness the vast renewable source of solar wind
and biogas energy. BHEL has supplied several water heating systems, windmills,
TELE-COMMUNICATIONS
BHEL has entered the field of tele-communication with electronic PABX system
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MANUFACTURING TECHNOLOGY
14 manufacturing plants spread over different parts of the country have unique
ton Hydraulic press. Other heavy-duty machine tools like lathe, milling and shaping
designing processes.
Aerostatic bearings
BHEL has 8 organized service centers geographically distributed through the country
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EXPORTS
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ACTIVITY PROFILE OF BHEL
PRODUCTS OF BHEL
USA
3. Gas Generator
4. Hydro generator
7. Hydro turbine
8. Transportation equipments
9. Traction machine
10. AC motors
11. Transformers
12. Switchgear
13. Oil field equipments under collaboration with National Oil well Varco
15. Water wall panel, coils, super heaters, Re heaters, SOFA Panels, Burners
17. Valves
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POWER SECTOR PROJECTS
Electronic precipitators
Motors
Transformers
Rectifiers
Pumps
Heat exchangers
Capacitors
Porcelain/ceramic insulators
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SYSTEM SERVICES
Power system
TRANSPORTATION SECTOR
AC/DC locomotives
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INDUSTRY SECTOR
Boilers
Valves
T.G.Sets
Power devices
Solar cells
Gas turbines
Compressors
Drive turbines
Oilrigs
Blow out
Windmills
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MAJOR CUSTOIMERS IN BUSINESS SECTOR
POWER GENERATION
POWER TRANSMISSION
PETROLEUM INDUSTRY
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TRANSPORTATION
Indian Railways
Steel Plants
Cement Plants
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VARIOUS DEPARTMENT AT BHEL JHANSI
The objective of the department is interaction with the customers. It brings out tenders
and notices and also responds to them. It is this department that bags contracts of
building transformers. After delivery regarding faults, this department does failures
and maintenance. All such snags are reported to them and they forward the
One of the major tasks of this department is to earn decent profits over all
offering the lowest price gets the contract but this process may continue does the work
on very low profits. To avoid such a situation, a body by the name of India Electrical
and Electronics Manufacturers Association (IEEMA) was set up. This association
appliances.
The transformer manufactured in BHEL Jhansi range from 10 MVA to 250 MVA and
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POWER TRANSFORMER
a) Generator transformer
b) System transformer.
c) Auto transformer.
SPECIAL TRANSFORMER
b) ESP transformer
c) Instrument transformer
It is a sub part of Fabrication. It is the preparation shop while the other two bays
form the assembly shop. This section has the following machines:
Shearing machine
CNC / ANC Flame Cutting machine To cut Complicated shaft items using
Oxy-Acetylene flame
Bending machine
Rolling machine
Flattening machine
Drilling machine
Nibbling machine
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BAY-1
tank come from bay 0. Here welding processes are used for assembly, after which a
rough surface is obtained Grinder operating at 1200 rpm is used to eliminate the
roughness.
BAY-2
Tank assembly
Foot Assembly
Before assembly, short blasting (firing of small materials i.e., acid pickling) is done
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NON- DESTRUCTIVE TEST
1. Ultrasonic test to detect the welding fault on the CRO at the fault place high
2. Die Penetration test Red solution is put at the welding and then cleaned.
After some time white solution is mixed. Appearance of a red spot indicates
3. Magnetic crack detection Magnetic field is created and then iron powder is
put at the welding. Sticking of the iron powder in the welding indicated a
fault.
4. X-Ray Test: It is same as human testing and the fault is seen in X-ray film.
BAY-3
Machine section
Copper section
Tooling section
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BAY- 4
3. Tertiary coil
4. Tap coil
The type of winding depends upon job requirement. Also, the width and thickness
of the conductors are designed particulars and are decided by design department.
Conductors used for winding is in the form of very long strips wound on a spool, the
For winding first the mould of diameter equal to inner dia meter of required coil is
made .The specification of coil are given in drawing. The diameter of mould is
adjustable as its body is made up of wooden sections that interlock with each other.
This interlocking can be increased or decreased to adjust the inner diameter of coil.
1. Belly types
2. Link types
3. Cone type
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BAY-5
It is core and punch section. The lamination used in power, dry, ESP transformer etc
CRGO (cold rolled grain oriented) silicon steel is used for lamination, which is
imported in India from Japan, U.K. Germany. It is available in 0.27 and 0.28 mm
thick sheets, 1mt wide and measured in Kg. The sheets is coated with very thin layer
For the purpose of cutting and punching the core three machines are installed in
shop.
BAY-6
This Freight locomotive transformers are used where there is frequent change in
speed. In this bay core winding and all the assembly and testing of traction
transformer is done.
Three-phase transformers for ACEMU are also manufactured in this section. The
supply lines for this transformer are of 25 KV and power of the transformer is 6500
KVA. The tap changer of rectifier transformer is also assembled in this bay.
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Rectified transformer is used in big furnace like the thermal power stations / plants
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(TPP).
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BAY-7
5. PRESS BOARD: This is used for separation of coils e.g. L.V. from H.V. It
is up to 38 mm thick.
8. FIBRE GLASS: This is a resin material and is used in fire prone areas.
9. BAKELLITE
BAY- 8
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INSTRUMENT TRANSFORMER
Instruments but these transformers serve the purpose of stepping down the voltage
to protect the measuring instrument. They are used in AC system for measurement
of current voltage and energy and can also be used for measuring power factor,
power system and for the operation of over voltage, over current, earth fault and
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ESP TRANSFORMER
used to filter in a suspended charge particle in the waste gases of an industry. They
The ESP is a single-phase transformer. It has a primary and secondary. The core is
connected in series with primary coil. The output of the transformer must be DC the is
several hundred diodes). A radio frequency choke (RF choke) is connected in series
with the DC output for the protection of the secondary circuit and filter circuit. The
The DC output from the secondary is given to a set of plates arrange one after the
others. Impurity particles being positively charged stick to these plates, which can be
jerked off. For this a network of plates has to be setup all across the plant. This is very
costly process in comparison with the transformer cost. A relive vent is also provided
to prevent the transformer from bursting it higher pressure develops, inside it. It is the
weakest point in the transformer body. An oil temperature indicator and the secondary
One side of the transformer output is taken and other side has an marshalling box
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BAY-9
In this bay power transformer are assembled. After taking different input from
different bays 0-9 assembly is done Power transformer is used to step and step down
voltages at generating and sub-stations. There are various ratings 11KV, 22KV,
1. Generator-transformer.
2. System
3. Auto-transformer.
transformer is done by the design department & is unique of each job; depends on the
Core building
Core Lifting.
Unlacing.
High voltage terminal gear and low volt terminal gear mounting
Case fitting.
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STORE
2. Custody Section
WAG-5H
AC./D.C. Loco
WCAM-2P
WCAM-3
W-broad gauge
A-running in AC mode
C-running in DC mode
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350 HP
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700 HP
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Single Power Pack (SPP): One 700 HP m/c is made as a single unit.
450 HP
1400 HP
1150 HP
1350 HP
2600 HP
1150 HP and 1350 HP DESL s are non-standard locomotives and are modified
UTV(Utility vehicle )
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LOCOMOTIVE MANUFACTURING (LMM)
This section deals with manufacturing of locomotives. The main parts of the
locomotive are under frame: The frame on which a locomotive is built Super
sheet of
Mild steel
DC motor
Alternator
Compressor
Flower
Static Rectifier-MSR
contains
2-Suspension
3-Brake rigging
Traction transformer: It is fixed on under frame and gets supply from an overhead
This transformer steps down voltage and is fitted with a tap changer. Different taps
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are taken from it for operating different equipment. One tap is taken and is rectified
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Railways has two types of power supplies 25 KV, 1 Phase, 50 Hz AC
-1500 V DC
An AC/DC loco is able to work on both of these supplies. For e.g. WCAM-3.
This department looks after the commissioning and maintenance of all the
machinery used in the factory. It also has 3 two-stage air compressors for supplying
Electrical Engineering
Electronics Engineering
Mechanical Engineering
ELECTRICAL ENGINEERING:
This division looks after all the electrical machinery and power distribution of the
factory. Snags detected in the system are immediately reported to this dept by the
The factory has a feeder of 11KV .The total load sanctioned for the factory is
2500MVA But the maximum demand reaches the range of 1700-2000 MVA.
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Here are various sub-stations (SS) inside the factory, for distribution of power to
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different sections.
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o SS -1 Supplies Bay-6 to Bay 9
plant
o SS -5 Supplies Bay -5
o SS -6 Supplies Administrative
building
TECHNOLOGY
This department analyses the changes taking place in the world. and suggest
changes accordingly. This is very important because the products must not get
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FUNCTIONS:
QUALITY
It is the extent to which products and services satisfy the customer needs.
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QUALITY ASSURANCE
All those plants and systematic action necessary to provide adequate confidence that a
product or service will satisfy the given requirement is called quality assurance.
QUALITY CONTROL
The operational technique and activities that are used to fulfill requirement for quality
QUALITY INSPECTION
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FINANCE DEPARTMENT OF BHEL JHANSI
Sales Section
Pay
Excise duty
Stock Verification
Cash
Revenue
Miscellaneous work
Fixed Assets
Cost Section
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PRICE STORE LEDGER (PSL)
1. Material pricing
2. Accounting
Receipt Issue, Direct & Indirect Material, Suspense Balance Status, Non Moving &
SALES SECTION
1. Advance payment
3. Cash on delivery
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In case of foreign purchase a license is required from DGTD; this license is of two
types:
1. Quantity base
2. Value base
The accounting of sales is done in this section. The activity of this section starts when
the commercial section starts issuing a work order. Work order part 2 financial
summarize the financial terms of the contract. It contains the information like the
name of the customer & consignee, descriptions of the goods to be produced and sold,
quantity, sales value, terms of delivery and payment price valuation clauses, sales tax,
PAY
This section credits the salary of the employees on every 25th of the month.
Calculation of salary is done from 15th of the previous month to 14th of the current
month.
1. Cash
It is also assigned the other personal payment to employees it looks after gratuity,
Employees leave encashment, official travelling reimbursement and this section deals
with other welfare expenses. Its also entrusted with clearance of medical claims.
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EXCISE
This department is a small department which levies 12% excise on the products
STOCK VERIFICATION
This department appointed two employees for verification of the stock. There are two
types of stock i.e. for BHEL township stock verification and for BHEL office or
industry verification.
BHEL office and industry include: - verification of chairs, tables, AC, Coolers, etc.
CASH
This section is responsible for banking of all the money worth received by the
BHEL has two major institutions from which it makes most of the transactions:
HDFC
SBI
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Cash flow focuses on following:
REVENUE
Bus pass
Crane
Drum
Ground rent
Holiday homes
I card
Library
Mb medical
Meter checking
Tender cost
Testing charges
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MISCELLANEOUS
This section deals with miscellaneous expenses, which are out of routine work like
This section checks whether the claims credited are as per the norms of the company
or not.
P.F. stands for provident fund and it was started in 1952. It is of two types:
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VOUCHERS AND FOREIGN PURCHASE
Passing of Bills
The Bills Passing process starts after the account section gets the purchase order,
SRVs and bills from suppliers. The accountants section then makes payment.
Partial advance and the remaining after the receipt and acceptance
Foreign Purchase
There are certain items, which are to be imported. A license is required for such items.
The license can be acquired from DGTD. There is also a provision for forward cover.
This is one of the most crucial tasks in the finance department. To have a balanced
budget or surplus in budget is favorable for the organization. This helps in estimating
The book section deals with maintaining the books of accounts as per the movement
of cash and stock of the organization. It prepares the trading, profit & loss and the
balance sheet.
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Budget
Budget is a target setting for operations. There are two types of budget prepared by
BHEL:
Internal level
Corporate level
Government level
c. For Government
aspects for each department and is send to every department. Information is generated
mainly for control purpose. Other information generated in:- Cash flow, Inventory
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FIXED ASSETS
This department managed all fixed assets working and maintenance work.
Assets code
Description of assets
Date of comm.
Location
Gross Block
Rate of depreciation
Period
Adjustment depreciation
Acc. depreciation
Net block
WDV
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COST SECTION
This section is responsible for accounting and reporting of costs. It determine direct
labour rates and engineer rates and overhead recovery factors of manufacturing,
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SWOT ANALYSIS OF BHEL
STRENGTHS:
The company has 180 products under 30 major product groups cater to the needs of
BHEL ability to acquire modern technology and make it suitable to Indian conditions
of Rs.52 billion and based on the past, 85% of NTPC projects have been bagged by
WEAKNESSES:
PSU status is a big weakness for BHEL as it is subject to their rules and regulations
and is forced to carry a huge amount of labor force, which it is not able to retrench.
The company offers very stringent credit facilities to the customers and this is a
On the other hand the customers in the power segment, SEBs, have a huge amount of
receivables standing against their name in the companys balance sheet. This is a
The company is vertically integrated, which could have been avoided by outsourcing
its components for power generation and transmission. This could have reduced the
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cost.
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OPPORTUNITIES:
The power sector reforms are expected to pick up in the near future in India, which
Increase in defense budget will increase the top line for the company.
BHEL could benefit a lot as it had happened in the past that significant portions of the
projects of NTPC are handled by BHEL. Nearly, 85% of the NTPC projects were
India. The disinvestments plans of the government would bring in new resources and
Joint venture with Siemens in the name of Power Plant Performance Improvement Ltd
(PPIL) is a major strength for the company. The tie up is beneficial as there is a lot of
THREATS:
The global trend of consolidation has already resulted in a fall in turnover of the
company and this will prove to be a major threat in the years to come, as well. The
Recently, the government has permitted its import of second hand capital goods that
are 10 years old without a license. This move will definitely increase competitive
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CHAPTER 2
INTRODUCTION TO TOPIC
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WORKING CAPITAL MANAGEMENT
Working capital refers to firm investment in short term assets-cash, short term
Working capital can be classified regularly on its requirement. There are two concepts
of working capital
Gross working capital may be defined as firms investment in current assets. Current
assets which can be converted into cash within a year and include cash, short term
securities, debtors, bill receivable and stock. The gross working capital concept works
2. Financing of current assets with some cash in the beginning. This cash may be
to the suppliers of raw materials to meet labor costs and other overheads.
These three combined would generate WIP, which will be converted into
finished goods get converted into debtors, the firm will again have cash. This
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cash will again be used for financing raw materials, WIP, etc.
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3. Thus, there is a complete cycle when cash gets converted into raw materials,
Net working capital refers to the difference between current assets and current
liabilities. Current liabilities are those claims of outsiders, which are expected to
mature for payment within a year and include creditors, bills payable and outstanding
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OPERATING CYCLE
Stock
Reorder Sales
Supplier
Cash
Management
Operating cycle involved in the conversion of sales into cash. Operating cycle is the
time duration required to convert sales. After the conversion of resources into
1. Acquisition of resources
2. Manufacture of goods
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It is clear that working capital is required because of the time gap between the sales
and their actual realization in cash. This time gap is technically termed as operating
cycle of the business. Funds required in investment of inventories; debtors and other
current assets keep on changing shape and volume. Like a company, the operating
In case of manufacturing company, the operating cycle is the length of time necessary
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ANALYSIS OF WORKING CAPITAL MANAGEMENT
The analysis of working capital is primarily a test of short-term solvency. There are
dangers in having too little or too much of working capital. Therefore, the managers
have to be very vigilant about the fluctuations in the items that make up working
capital.
The question to be studied and answered in connection with the analysis of working
capital is:
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This project reflects the analysis of working capital through ratios as a means for
checking the efficiency with which working capital is being used in the company.
These ratios would increase of decrease that measures the working capital
Current Ratio
Quick Ratio
Cash Ratio
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BALANCED WORKING CAPITAL
The firm should maintain a sound working capital position. A balanced working
means holding cost and idle funds, which earn no profits for the firm.
Stagnant growth and it becomes difficult for the firm to undertake profitable
projects
A firms net working capital position is not only important as index liquidity but it
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GUIDELINES AND SOURCES OF FUNDS FOR
WORKING
The requirement of working capital will be met either from internal resources or
borrowing from banks. All the banking transactions have been centralized at corporate
office, New Delhi. The corporate office negotiates with requirements of banks for
The funds for working capital over and above cash credit limit may also be arranged
The bulk of working capital requirements are met from the customers in accordance
with the contract conditions as approved by the board .The entry of the receipt is
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FIXED DEPOSITS FROM MEMBERS OF PUBLIC
Subject to the approval of the government and board of directors, the funds may be
raised from public by fixed deposits under the provisions of the company rules to
Funds required to site offices will be provided by divisions under which they are
manufacture of indigenous capital equipment can push up the sales of their product by
The IDBI does not discount the bills of exchange but rediscounts it by any other
approved banks...
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MOTIVES FOR HOLDING CASH
Cash planning
RECEIVABLES MANAGEMENT
The customers from whom receivables or book debts have to be collected in the future
are called trade debtors .Trade credit always create trade debtors or accounts
receivables. Trade credit arises when a firm sells its product or services on credit and
When a firm makes an ordinary sale of service and does not receive payments , the
firm grants trade credit and creates accounts receivable that would be collected in the
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future.
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The characteristic of credit sales are
It is futuristic
Credit Standards
Credit Terms
Collection Effort
standards
Stringent credit policy -To sell on credit on a high selective basis only to those
who always posses good credit worthiness and are able to pay in future.
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MONITORING RECEIVABLES
A firm needs to continuously monitor and control its receivable to ensure collection
on time
Ageing schedule: It breaks down receivables according to the length of time for which
The main products of BHEL are heavy industrial goods with long operating cycle.
BHEL grants liberal term regarding trade credit to ensure that potential customers by
To utilize its excess capacity, BHEL is granting liberal trade credits to its main
All BHEL, units are having their commercial departments and Regional Operational
Divisions (RODs). To carry out the job of recovery from customers, the sales section
also takes part in receivables management by preparing and sending invoices and
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Monitoring is done on basis of work orders and schedule is prepared regarding
outstanding balances. The terms and conditions with the customer are finalized
INVENTORY MANAGEMENT
Inventories are the most significant part of current assets of a large majority of
In a manufacturing firm the level of inventory depends on the operation cycle ,and a
long operating cycle bearing firm needs to maintain high level of Inventory.
NATURE OF INVENTORIES
Raw material
Work in progress
Finished goods
Supplies or stores and spares(not very common but BHEL maintains it)
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NEED FOR INVENTORY
Transaction motive
Precautionary motive
Speculative motive
Reorder point
Safety stock
b) Material cost
c) Order cost
d) Carrying cost
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CHAPTER 3
RESEARCH METHODOLOGY
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RESEARCH METHODOLOGY
data pertaining to the subject in question. The objective is to examine all the issues
involved and conduct situational analysis. The methodology includes the overall
research design, sampling procedure and fieldwork done and finally the analysis
procedure.
RESEARCH DESIGN
Research design outlines the methods used for data collection, measurement and
analysis (Cooper & Schindler, 2001) to obtain answers to research questions. The
researcher collected data from selected various respondents sampled in the study
using descriptive survey design. Descriptive survey research method was used in
order to obtain accurate information for large numbers of people with a small sample
population.
DATA SOURCES
After identifying and defining the research problem and determining specific
information required to solve the problem. The researcher will look for the type and
sources of data which may yield the desired results, while deciding about the method
of data collection to be used for the study, there are two types of data. They are as
follows:
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Primary Data
Page
Secondary Data
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PRIMARY DATA
of closed and open-ended items. Close-ended items enabled the respondents to choose
what they felt was best from the given alternatives while open-ended items enabled
SECONDARY DATA
Secondary data means data that are already available i.e. they refer to the data which
have been collected and analyzed by someone and can save both money and time of
the researcher. Secondary data may be available in the form of company records,
Various websites
Journals
Research papers.
My research is fully based upon Secondary data, which I gained from Annual reports
of the company. Annual reports include Trading and manufacturing account, Profit
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TOOLS OF ANALYSIS
The tool used for the analysis of financial position of the company and working
SAMPLING DESIGN
Sampling method- Sampling method refers to the rules and procedures by which some
elements of the population are included in the sample. Some common sampling
method are simple random sampling, stratified sampling, and cluster sampling.
Estimator- the estimation process for calculating sample statistics is called the
estimator. Different sampling methods may use different estimators. For example, the
formula for computing a mean score with a simple random sample is different from
the formula for computing a mean score with a stratified sample. Similarly, the
formula for the standard error may vary from one sampling method to the next.
The best sample design depends on survey objectives and on survey resources.
SAMPLE SIZE
any empirical study in which the goal is to make inferences about a population from
a sample.
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SAMPLE UNIT
A sample unit is one of the units into which an aggregate is divided for the purpose
sampling, each unit being regarded as individual and indivisible when the selection is
made.
The sample unit of this survey was the senior accountants and managers of the Bharat
1. Since time available is only six weeks for the project work, a detailed analysis
2. The researcher was not able to focus on qualification factors, which influences
3. The study was limited to BHEL, so the result could not be generalized to
macro level.
4. Ratio analysis is only tools used for the financial statement analysis.
6. As the study is only for one particular company, inter firm comparison is not
possible.
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CHAPTER 4
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RATIO ANALYSIS
CURRENT RATIO
Current ratio represent margin of safety for creditors, higher the creditor greater the
margin of safety.
Large amount of current assets in relation to current liabilities is more the firms
TABLE 1
GRAPH 1
CR
3.5
2.5
1.5 CR
0.5
79
0
2011-12 2012-13 2013-14 2014-15 2015-16
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79
Analysis:
From the above ratios it can be seen that current ratio for the year 2014-15 has growth
by approx. 3% from the previous year that indicates that short term solvency of the
firm has gone grow. But the current ratio of last 3 years is less than 1 and on an
average it is 1.2616:1. This means every 1 Re. of current liabilities there is 1.2616 of
current assets available to meet the short term obligation. So this indicates that the
short term liquidity position of the company is very good and short term conditions
are safe as far as payment is concerned although as a conventional rule, a current ratio
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QUICK RATIO
This ratio provides a better measure of overall liquidity. A firms inventory cannot be
easily being converted into cash so it is not taken into account here. A ratio of 1:1 is
Current Liabilities
TABLE 2
GRAPH 2
QR
2.5
1.5
QR
1
0.5
0
2011-12 2012-13 2013-14 2014-15 2015-16
Analysis:
whereas in case of BHEL Jhansi liquidity ratio is not even approaching one; hence
there is liquidity problem in payment in time. Here payments to creditors are not
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CASH RATIO
Cash is the most liquid assets and it should be Minimum in the firm as the excess of
cash in hand or bank implies loss of interest i.e. the wrong utilization of funds, which
could have been utilized/ invested elsewhere. There is nothing to be worried about
Current Liabilities
TABLE 3
GRAPH 3
CR
0.1
0.09
0.08
0.07
0.06
0.05
CR
0.04
0.03
0.02
0.01
0
2011-12 2012-13 2013-14 2014-15 2015-16
Analysis:
This cash ratio graph shows that the cash ratio 2012-13 decrease because cash flow
decrease in past financial year but current liabilities increase so this ratio 0.093 down
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TURNOVER RATIO
Turnover ratio is just an Inter firm analysis a firm just to know its financial standing
TABLE 4
GRAPH 4
TR
3
2.5
1.5
TR
1
0.5
0
2011-12 2012-13 2013-14 2014-15 2015-16
Analysis:
Turnover ratio shows that manufacturing BHEL, Jhansi unit financial position is not
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INVENTORY TURNOVER RATIO
It shows how rapidly the inventory is turning into receivable through sales. High ratio
TABLE 5
GRAPH 5
ITR
4.5
4
3.5
3
2.5
2 ITR
1.5
1
0.5
0
2011-12 2012-13 2013-14 2014-15 2015-16
Analysis:
Inventory turnover ratio indicates that how quick inventories are uncontrolled into
sales. It gives the position of the inventory management of the company. The average
of this ratio for past five years comes out to be 2.6 which show that for every ratio 2.6
of net sales. The efficiency of BHEL, Jhansi in turning its inventory for year 2015-16
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has dropped from last five years which indicates that in the plant.
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RETURN ON CAPITAL EMPLOYED
TABLE 6
GRAPH 6
ROCE
0.3
0.25
0.2
0.15
0.1
ROCE
0.05
0
2011-12 2012-13 2013-14 2014-15 2015-16
-0.05
-0.1
-0.15
Analysis:
In this graph ROCE, in 2011-12 was 0.226 and decreased to three year 2014-15 was -
0.118 but in 2015-16 was 0.267 from this point it start falling down and reached at
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DEBTORS TURNOVER RATIO
This ratio expresses the amount of unrealized debts out of credit sales. Thus, debtors
Ratios.
TABLE 7
GRAPH 7
DTR
2.5
2
1.5
1 DTR
0.5
0
2011-12 2012-13 2013-14 2014-15 2015-16
Analysis:
This ratio was indicates that how quick debtors are collected and higher ratio show
better position of the company. Here from the graph is clear that in 2011-12 debtors
were collected normally but from 2012-13 to 2015-16 is condition has worsened as
ratio and decrease it means debt are not being collected rapidly.
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CREDITORS TURNOVER RATIO
This ratio is also known as Payable Turnover ratio. It depicts the relation between
Credit Purchase and Creditors. This ratio indicates the condition of an organization
with regard to payment of creditors. Higher ratio indicates quicker payment and vice-
versa.
TABLE 8
Year 2011-12 2012-13 2013-14 2014-15 2015-16
GRAPH 8
CTR ..
2.7
2.6
2.5
2.4
2.3 CTR ..
2.2
2.1
2
2011-12 2012-13 2013-14 2015-16
Analysis:
This ratio was indicates that how quick creditors are collected and higher ratio show
better position of the company. Here from the graph it is clear that in 2011-12 to
2012-13 creditors were collected quickly but from 2012-13 to 2015-16 is condition
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has worsened as ratio has decrease it mean creditors are not being collected rapidly.
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WORKING CAPITAL
The goal of working capital management is to ensure that a firm is able to continue its
operations and that it has sufficient ability to satisfy both maturing short-term debt
In 2014
WC = 52395 25998
= 26397
In 2015
WC = 49041 22727
= 26314
In 2016
WC = 47051 21432
= 25619
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TABLE 9
GRAPH 9
30000
25000
20000
Year
15000
WC (Rs. In Cr.)
10000
5000
0
1 2 3
Analysis:
In 2014 working capital is Rs. 26397, In 2015 it decreases to Rs. 26314 and in 2016 it
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CHAPTER 5
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FINDINGS
Current ratio indicates that the short term liquidity position of the company is
very good and short term conditions are safe as far as payment is concerned
better.
whereas in case of BHEL Jhansi liquidity ratio is not even approaching one;
creditors are not made in time due to lack of cash/ liquid fund.
Cash ratio graph shows that the cash ratio 2012-13 decrease because cash flow
decrease in past financial year but current liabilities increase so this ratio 0.093
Turnover ratio shows that manufacturing BHEL, Jhansi unit financial position
Inventory turnover ratio indicates that average of this ratio for past five years
comes out to be 2.6 which show that for every ratio 2.6 of net sales. The
efficiency of BHEL, Jhansi in turning its inventory for year 2015-16 has
dropped from last five years which indicates that in the plant.
ROCE, in 2011-12 was 0.226 and decreased to three year 2014-15 was -0.118
but in 2015-16 was 0.267 from this point it start falling down and reached at
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Debtor Turnover Ratio was indicates that the graph is clear that in 2011-12
debtors were collected normally but from 2012-13 to 2015-16 is condition has
worsened as ratio and decrease it means debt are not being collected rapidly.
Creditor Turnover Ratio was indicates that the graph it is clear that in 2011-12
condition has worsened as ratio has decrease it mean creditors are not being
collected rapidly.
In 2014 working capital is Rs. 26397, In 2015 it decreases to Rs. 26314 and in
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CONCLUSION
At the end of this project Im feel that I have gained a lot of knowledge about this
Jhansi unit and Working Capital Management procedure followed in BHEL Jhansi
unit.
In rotation work I learned about its working routine and collecting a lot of information
related to stream like Engineering and physics and employees mutual relations.
Object of finance
Analysis of finance
The firm BHEL liquidity position in terms of short term and long term are
good.
The efficiency of the company is also good but last some years not batter.
The above analysis enables the company to understand the financial position
and financial soundness of BHEL Jhansi unit.
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BIBLIOGRAPHY
Bharat Heavy Electricals Limited. (n.d.). Retrieved october 2017, from BHEL:
http://www.bhel.com/home
(WCM)
(Ratio Analysis)
https://www.myaccountingcourse.com/financial-ratios/
Ratio Analysis. (n.d.). Retrieved october 2017, from Management study Guide:
http://managementstudyguide.com/ratio-analysis.htm
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