Shivam Mba Project

TRAINING REPORT

Submitted For The Partial Fulfillment of

Master In Business Administration

UNDER THE GUIDENCE OF: SUBMITTED BY:Dr.Mayank Sharma Prashant Shukla

UNITED COLLEGE OF

ENGENEERING & RESEARCH ALLAHABADDECLARATION

This is a bonafide work done by Prashant Shukla and has not been submitted anywhere else. This report is the property of United College of Engineering & Research, Allahabad (U.P) and it can not be taken or used with out prior permission.

Prashant ShuklaACKNOWLEDGEMENT

I Acknowledge with most sincere gratitude the co-operation

extended by all those who helped and aided me in the

completion of my project on FINANCIAL MANAGEMENT

SYSTEM IN ITI LTD.RAE BARELIMy heartful thanks are due to my guide Mr. Sudhir Kumar Verma, Dy.FM(Central Finance), who provided me all the help during this project.It is indeed a great pleasure & privilege to express my thanks to friends, well wishers, faculty members, who in their different ways had given splendid help and valuable suggestions. PRASHANT SHUKLAPREFACE

Every organization, irrespective of its size and mission, may be viewed as a financial entity. Management of an organization, particularly a business firm, is confronted with issues and discussions, which have financial implication.

An attempt has been made to relate theory to practice. Of course, the theory presented has its imperfections and inadequacies. Yet, it is a important tool to understand the various aspects of ITI Limited Raebareli..

Working Capital is an important aspect of business management. The capacity of an enterprise to earn profit depends upon its ability to manage working capital efficiently. Working capital, in qualitative approach explained as excess of current assets over current liabilities. To carry out day-to-day operations, every business concern needs funds. In this way working capital refers to that part of the firms capital, which is required for financing short term or current assets. The companies should maintain a sound working position, and there should be optimum investment in working capital. Thus, there is an unavoidable need to manage working capital well.

The study has enabled me to enhance my knowledge as regard the actual proceedings of the enterprise particularly in ITI Limited Raebareli. It has also made me aware of the problems faced by the trainee or researcher while conducting a project report. The study have provided me the enterprise on how to conduct such type of industrial project work and what procedures to be followed and necessary steps to be taken to gather useful information in the minimum time.

The scope of this study is confined to the appraisal of the ITI Limited Raebareli. In the matter of performance appraisal, I have covered general working of finance department and the working capital management.

The present study is mainly based on the data made available from various sources. The data and information has been collected by compiling the figures from the balance sheet and profit and loss account of ITI Limited Raebareli and the books concerned with ITI Limited.

Availability of the data on actual performance as required for analysis is very important in carrying out a meaningful project. The interpretation and the analysis of the data depend entirely upon the reliability of the data. The time of 4 weeks for my training is very short to study the various finance patterns of the ITI Limited Raebareli. Contents: Introduction to ITI limited.

Introduction to topic.

Working of finance Department.

Sales billing department.

Bills payable procedure.

Over view of payroll department.

Working Capital Analysis

Conclusion

Suggestion.

Annexure

I- Annual Report Of ITI Ltd.

II- M I S Report.

III- Bibliography.

Company profile I T.I Ltd. PROFILE

I.T.I Ltd. RAEBARELI

I.T.I STRENGTH

JOINT VENTURES

AWARDS

ISO CERTIFICATION

MISSION

To be the leader in the domestic market and an important Global player in Voice, Data and Image communications by providing total solutions to customers. To build on core competencies to enter new business areas.

CURRICULUM VITAE

CAREER OBJECTIVE---- To establish myself in field of Finance & Marketing.

Educational Qualification----

Examination CollegeBoardYEAR

S.S.E.Kendriya Vidyalaya, Raebareli.C.B.S.E Board2004

S.S.C.E.Kendriya Vidyalaya, Raebareli.C.B.S.E Board2006

Graduation (B.Com)F.G. College RaebareliC.S.J.M. University, Kanpur.2009

Specialisation Opting :- Major -Finance

Minor-MarketingLanguage Known:-

HINDI, ENGLISH.

Personal Details:-

NAME:PRASHANT SHUKLA

DATE OF BIRTH:28/06/1989

FATHERS NAME:Mr. Pradeep Kumar Shukla

OCCUPATION:Service

MOTHERS NAME:Mrs. Sudha Shukla

PERMANENT ADDRESS:798 Gandhi Nagar, Raebareli.

CONTACT No. 9454343131, 9452901068

ITI RAIBARELI GROUP-AN INTRODUCTION

ESTABLISHED IN 1973 FOR MANUFACTURING STROWGER EXCHANGES

I.C.P. PRODUCTION COMMENCED IN 1982-83.

UPGRADED IN 1988-89 FOR ELECTRONIC SWITCHING SYSTEM /ELECTRONIC PRODUCTS.INFRASTRUCTURE OF ITI RAEBARELI *TOTAL AREA

250 ACRES

*COVERED AREA1,10,0000 SQ. MTS.

*A/C AREA

15,000 SQ.MTS.

4400KVA CAPTIVE POWER FOR UNINTRRUPTED POWER SUPPLY WELL COMMUNICATED ALL OVER THE WORLD

MAN POWER

*OFFICERS

1299*NON-OFFICERS

2413*GRAND TOTAL

3712PRODUCTS

ITI limited has a range of telecommunication products which are being manufactured under different units throughout the country. The products of ITI limited Raebarelli are as follows: -

EPD

Cor DECT

SMPS

HDSL

BTS

GPON

Mech. Items

MPD C -DOT Equipment

CDMA WLL-FWT

Mech. Items

C DOT-CRC

RTT

Shelter

BTS-Rack

OVERVIEW

Corporate Head Quarter: - ITI Bhavan,DoorvaniNager

Bangalore,

Manufacturing Units: - Bangalore,

Electronic City (Near Bangalore)

Naini (Allahabad) (U.P)

Raebareli (U.P)

Mankapur (Gonda) (U.P)

Palakkad (Kerala)

Srinagar (J&K)

Network System Unit: - Bangalore

Regional Offices: -

New Delhi Bangalore

Kolkata

Lucknow

Mumbai

Chennai

Hyderabad

Ahmedabad

Bhuvaneshwar

Bhopal

R&D Base: - Bangalore

Naini

Mankapur

Quality System: - ISO 9000 compliant.

Board of Directors of ITI LIMITEDMr. K.L.DHINGRA - Chairman & Managing director.

Mr. K.K.GUPTA - Director [Production]Mr. RAVI KHANDELWAL- Director [Finance]Mr. R.K.AGGRAWAL- - Director [Marketing]Mr. A.K.SHRIVASTAVA - DirectorLt. Gen. P.MOHAPATRA - Director

Mr. A.K.JAIN - Independent Director Mr. M.BALAKRISHAN- Independent Director Mr. V.H.RON - Independent Director

Mr. A.S.BANSAL - Independent Director

Mr. S.K. CHAUDHARY - Independent Director

Mr. KESHAV SHARAN - Independent Director

Mr. T.S.NARAINSWAMY - Independent Director

ITI STRENGTH

ITI has inherent strength that have constituted an effective counter to the difficult environment assistance the company having availed of budgetary support in 1988-89 for the purpose of R&D only the summarized below:- Large technical resources and manufacturing base. R&D facility catering to a large product range and has continually made investment in new product and technology (an average of 50 crore a year). The company also has an ample access to international technologies affected by its large numbers of the technologies. Tie ups.

It has always been up to date in technologies .

Substantial local expertise to adopt imported technologies to Indian condition.

High skills (paying builts 75% of the existing telecom infrastructure).

A country wide service network.

Predators lost money and now pricing is more realistic.Scenario- 9th five-year plan(Broad Objectives)

1- To provide telephone on demand with waiting period not exceeding three months.

2- To provide phone facility in remaining three lacks villages by the year 2000.

3- NSD facility to the remaining exchanges by the year 2000.

4- All exchanges up to SDHQ level to have digital connectivity.

5- To provide N-ISDN/IN service in large commercial areas of the country.

6- ISDN facility will be introduce up to DHQ level.

JOINT VENTURES1. India Satcom Ltd. (ISL)- Bangalore :- This JV was incorporated in 1986 for supply of Satellite Terminals for Data communication. The scope of business increased to include the installation and commissioning of VSAT terminals and software development for satellite money orders and others.

Partners are:

Equatorial pacific international company (EPIC)-USA&UTI-India

Board consists of:

Chairman-CMD ITI ltd., &3directors from ITI, 3 directors from EPIC, 1 director from UTI.

TURNOVER: RS 25.43 CRORES DURING 1999-00.

2. Fibcom India ltd- New Delhi

Incorporated in 1994 for fiber optic communication equipment (SDH) Manufacture.

Partners are:

Tellab (Denmark)& industrial fund for developing countries (IFU).

Board consists of:

Chairman-CMD ITI ltd., & 2 directors from ITI, 2 directors from tellab, director from IFU

Turnover: Rs. 155 crores during 1999-00

AWARDS

1. SCOPE Award for excellence & outstanding contribution to the Public Sector Management.

2. First forthe Excellence in Design &Display in the Indian Trade Exhibition held at Kathmandu, Nepal in Sep., 2000.

3. The Best Display Set-up at the Convergence India 2001 held at New Delhi.

4. Management Excellence Award was presented to ITI Ltd. By Bangalore Management Association in the Institutional- 1 category for the year 2000-01.

5. The Best Stall Display Award at the convergence India 2002 held at New Delhi.

Technical Collaborations & Alliances

ALCATEL, France :- Large Digital Switches, DLC (SDH)

C-DOT, India :- Small, Medium & Large Digital

Switches

NERA, Norway :- Microwave Equipment(SDH)

Tellab, Denmark :- PDH/SDH Fibre Optic Systems

ASCOM, Switzerland :- Switch Modes Power Supply

Ericsson, U.S.A :-

Voice over IP

Compaque :- Billing Software Fraud Management

SAGEM, France :- DLC (PDH)

Sun Micro System USA :- Software Development Partner

Oracle Corp., USA :- Software Development Partner

Microsoft Corp., USA :- Software Development partnerISO CERTIFICATION

The international organization for standardization (ISO) is the specialized international agency for standardization, at present comprising the national standards bodies of 91 countries including the India. ISO is made up of approximately180 technical committee. Each technical committee is responsible for one of many areas of specialization.

The object of ISO is to promote the development of standardisation and related world activities with a view of facilitating international exchange of goods and services and to develop co-operation in the sphere of intellectual, scientific, technological and economic activity.

The result of ISO technical work is published as international standards. The standards discussed here are result of this process.

ISO 9000 SERIES STANDARDS: MOTIVATES EXPORTERS.

SET A BASE LINE.

ESTABLISHES REASONABLE STANDARDS FOR GOVERNMENT PROCUREMENT.

FOCUSES TRANING AND PROFESSIONAL DEVELOPMENT.

SETS GENERAL MARKET PROCEDURE FOR REGULATING HEALTH AND SAFETY.

AND EC-92 POSITIONING.

RAISES LEVLS OF MOTIVATION, COOPERATION, WORKMANSHIP AND QUALITY AWARENESS.

IMPROVES EFFECIENCY: REDUCES SCRAP AND REWORK.

EQUIVALENT QUALITY SYSTEM STANDARFS ISO TITLE

9000 =>QUALITY MANAGEMENT AND QUALITY ASSUARANCE

STANDARDS SELECTION AND USE.

9001=>MODEL FOR QUALITY ASSURANCE IN DESIGN/DEVELOPMENT, PRODUCTION AND INSTALLATION.

9002=>MODEL FOR QUALITY ASSURANCE IN PRODUCTION AND INSTALLATION.

9003=>MODEL FOR QUALITY ASSURANCE IN FINAL INSPECTION.

9004=>GUIDELINES ON DEVELOPMENT OF QUALITY MANAGEMENT SYSTEMS TO MINIMISE COSTS AND MAXIMIZE BENEFITS.

ISO 9002

OBJECTIVE:

RECOGNITION OF QUALITY SYSTEM.

MODEL FOR QUALITY ASSURANCE IN PRODUCTION

INSTALLATION OF SERVICING.

PREVENTION ORIENTED QUALITY MANAGEMENT QUALIFICATION

TO SELL ACROSS THE NATIONAL BOUNDARIES.

ADVANTAGES: -

SUSTAINED PRODUCT QUALITY.

CUSTOMER IMAGE BUILDING.

HIGHLIGHTING QUALITY AWARENESS.

CATALYST FOR CULTURAL CHANGE.

REDUCTION OF PRODUCT LIABILITY DANGER.

FUSION OF FIELD FEEDBACK.

REDUCTION OF CUSTOMER AUDIT.

COMPANY BECOMES MORE PROFITABLE BY REDUCING COST OF CONFORMANCE.

A GENERAL VIEW OF THE FINANCE DEPARTMENT OF ITI LIMITED RAEBARELI

The finance department of I.T.I. Limited raebareli is a very large department and divided into eight sections to facilitate the working of the finance department. Each of section has a specific job to perform. All these sections work in coherence and in a integrated manner to provide the best financial services as required by the organization. The sections of finance department are as follows:

Central Finance

Cash & bank

Pay roll

Sales billing

Bills services

Cost & material

Internal audit

Management information report

A conceptual view of the working of all these sections is explained under following paragraph.

CENTRAL FINANCE: - Central finance, the main finance department of ITI limited Raebareli. All these financial work is finalized through this department; all other finance department has responsibility to give the monthly report to this department. With the help of information given by other department, this department prepares all these all the annual financial statements like profit and loss a/c and balance sheet etc.this department also prepares the budgets for the future financial expenditure.

CASH & BANK: -

This section deals with the procurement of cash in the unit. This section is divided into two parts to facilitate the management of cash. First part is cash section, which deals all type of cash transactions of the unit. Second part in cash & bank section, which deals all the transactions, related to the bank. Cash & bank section prepares monthly cash &fund flow statement.

SALES BILLING: -

Sales billing department, the motto behind establishing this department is to realize money from the customers. The work of this department is to prepare sales bills with the help of various information received from shipping department. This department also prepares the budgets for future financial expenditure.

BILLS SERVICES: -

This finance department of ITI limited Rae Bareli is very large department. Reason of establishing this department is to clear several bills related to employees & contractors. This section deals with all the payments (through bills) given by ITI limited Rae Bareli. This section deals with following payments: -

Personal claim

Insurance & Co-ordination

Bills Payable (work)

Imprest purchase

COST & MATERIAL: -

The whole manufacturing work depends on this department. Costing held on the basis of past expenditures and current market rates. The material cell deals with the procurement of material, this cell calculated the rates of all materials whether that is finished goods, raw material or work-in-progress.

INVENTORY CONTROL:-

The word inventory means stock of goods. The stock of goods be for manufacture or for sale .Inventories constitute about 60% of current assets of public ltd. company in India. Because of large size of inventories maintained by firms a considerable amount of funds required. It is therefore, absolutely imperative to manage inventories efficiently & effectively in order to avoid unnecessary investment. It possible for a company to reduce its levels of inventories to a considerable degree i.e. 10%-20%, without any adverse effect on production & sales, by using simple inventory planning & control techniques.

The reduction in excessive inventories carries a favorable impact of companys profitability.

The manufacturing companies hold inventories in the form of :

RAW MATERIAL

WORK IN PROGRESS

FINISHED GOODS.

There are at least three motives for holding inventories:

1-TRANSACTION MOTIVE : to facilitate smooth production & sales operation.

2-PRECAUTIONARY MOTIVE: to guard against the risk of unpredictable changes in usage rate & delivery rate.

3-SPECULATIVE MOTIVE: To take advantage of price fluctuations.

The firm should consider

-cost,

-return,

-risk factors in establishing inventory policy.

AIM OF INVENYORY MANAGEMENT

Inventories represents investment of firm funds. The objective of inventory managemen should maximize the profit of the firm.1-To maintain the size of inventory for efficient & smooth production &sales operations.

2-To maintain a minimum investment in inventories to maximize profitability.

3-Ensure a continuous supply of raw materials, finished goods inventory for smooth sales operation,& efficient customer service.

4-Minimize the carrying cost & time.

5-Control investment in inventories & keep it at an optimum level.FACTORS INFLUENCING INVETORY

To fundamental questions which normally arise in inventory control.

1-How much to buy at one time?

2-When to buy this quantity?

Four factors govern the answers of these questions.

1-Requirements broken down timewise: This based upon information from sales forecast & production schedule.

2-Quantity in stock or in order: This info. is usually obtained from stores stock ledger balances & unfulfilled purchase order.

3-Procurement time or lead time: This the actual length of time required to obtain the materials.

4-Absolescence : Inventory that is purchased & stored &which is of no importance for the organization. It may be due to the following reasons:

Technology changes

Changes in the product line

Changes in the machines

Changes in the designs & layouts

Overbuying & thereby making inventory idle & excess

Wrong preservation methods

Wrong handling & storage

The term inventory control therefore relates to a set of policies & procedures by which an organization determines which materials it will hold in stock & the quantity of each it will carry.

These days we here the concept of zero level inventory or JIT (just in time) system of inventory. This situation might perhaps not be possible in Indian condition but as a concept it is worth considering.

The idea behind this is one should keep low inventory levels & not waste the companies money in unwanted stock within the industry.IMPORTANCE

It prevents wasting of time & energy in making improvements.

It lies in relaxing rather than tightening of inventory control.

It helps in rationalizing no. of orders & reduce average inventory. It recognizes that A items should be ordered more.

This approach helps the material manager to exercise selective control & focus attention only to few items.

INTERNAL AUDIT: -

As the name indicates, this section mainly deals in checking the faults in the financial statements for the purpose of facilitating at the time of audit. This department first internally audits all the financial statements and then it is presented to the auditor.

MANAGEMENT INFORMATION:

The ITI limited Raebareli has its own MIS department, commonly known as EDP department i.e. Electronic Data Processing department. this department is responsible for presenting the information whenever it is required by the corporate office. It gathers information from all the departments and from the production unit.

WORKING CAPITAL MANAGEMENT

INTRODUCTION: -

Working capital management is concerned with the problems of managing current assets, current liabilities and the inter-relationship that exist between them. In other words it refers to all aspects of administration of both current assets and current liabilities. The term current assets refers to those assets which are in the ordinary course of business can be, or will be turned into cash. With in one year without undergoing a diminution in value and without disrupting the operations of the firm. The major current assets are marketable securities, bill receivables, inventories, debtors etc. thus; current assets are of short-term nature. Current liabilities are those liabilities, which are intended at their inception to be paid in the ordinary course of business, with in a year, out of current assets or earning of the concern. The basic current liabilities are bills payable, bank overdraft and outstanding expenses.

The basic goal of working capital management is to manage the firms current assets and current liabilities in such a way that a satisfactory level of working capital is maintained. This is so because if the firm cannot maintain a satisfactory level of working capital, it is likely to become insolvent. The current assets should be large enough to cover its current liabilities in order to ensure a reasonable margin of safety.

Each of short-term sources of finance must be continuously managed to ensure that they are obtained and used in the best possible way. Thus, the main theme of the theory of working capital management is the interaction between current assets and current liabilities.

WHAT IS WORKING CAPITAL: -

Every business needs funds for two purposes- for establishment and to carry out its day-to-day operations. Long term funds are required to create production facilities through purchase of fixed assets such as plant, machinery, land, building, furniture etc. investment in these assets represents that part of firms capital which is blocked on a permanent basis and is called fixed capital. Funds are also needed for short-term purposes such as purchase of raw materials, payment of wages and other day-to-day expenses. These funds are known as working capital. Thus, working capital is required for financing the day-to-day operations of a business.

Working capital is commonly defined as the excess of current assets over current liabilities, it is also known as short term capital or circulating capital. Thus, working capital is the amount of funds, which required to cover the operating cost of an enterprise.CONCEPT OF WORKING CAPITAL:

The term working capital in its broader sense refers to the gross working capital and represents the amount of funds invested in current assets. thus, the gross working capital is the capital invested in total current assets of the enterprise.

In narrower sense, the term working capital refers to the net working capital. Net working capital is the excess of current assets over current liabilities. The net working capital may be suitable only for proprietory form of organizations such as sole-trader or partnership firms. But, the gross concept is very suitable to the company form of organization.

ROLE OF WORKING CAPITAL:-

Business operations cannot be conducted merely on the basis of fixed capital. In addition to this, a minimum level of working capital has also to be kept in order to serve as a working fund or conducting day-to-day operations smoothly and efficiently. Adequate amount of working capital is essential to meet the following needs of business:-

To finance the purchase of raw material and other sources.

To finance the entire process of converting raw material into finished goods such as salaries, wages, light, fuel and other direct factory expenses.

To finance credit sales.

To meet day-to-day expenses of petty nature.

To meet unforeseen contingencies.

Thus, the management of working capital is an endless process which involves constant vigil and watch of flow of funds during an operating cycle.

OPERATING CYCLE:

Operating cycle is the time duration required to convert sales, after the conversion of resources into inventories, into cash. The operating cycle of a manufacturing co. involves three phases:Acquisition Of Resources: Raw material, labour, power & fuel.

Manufacture Of Product: Conversion of raw material into w.i.p. into finished goods.

Sale of Product: Either for cash or on credit. Credit sales create a/c receivable for collection.

It is also known as working capital cycle. Each operating cycle begins with a cash out Flow & after a time gap ends with a cash in flow. The process does not cease there but another operating cycle with a fresh outflow starts and again ends with a subsequent inflow of cash after a time lag. In this way a series of operating cycles begins and end again and again during the conduct of business operations. The shorter is the time lag between the outflow and inflow of cash, the larger will be the volume of total business turnover with minimum of investment of funds in current assets. Thus, both the fixed assets as well as current assets are essential for profitable business operations and should be treated as complementary to each other.

FIGURE OF OPERATING CYCLE

KINDS OF WORKING CAPITAL

KINDS OF WORKING CAPITAL

On the basis of concept On the basis of time

GROSS WORKING CAPITAL

It refers to the firm's investment in the current assets. Current assets are the assets, which are converted into cash within an accounting year. It includes cash, short term securities ,debtors & stock.

NET WORKING CAPITAL

It refers to the difference between current assets & current liabilities. Current liabilities are these claims of outsiders which are expected to mature for payment within an accounting year. It includes creditors, bills payable or outstanding expenses. It can be positive or negative.PERMANENT WORKING CAPITAL:

It is that minimum amount of working capital, which ought to be kept in current assets regularly in order to conduct business operations smoothly. It is also called as regular or fixed working capital, which financed through long-term funds. Requirement for regular working capital are estimated at the project planning stage and are included in the amount of total project costs. Out of the total funds a major part is blocked in creating fixed assets and the balancing amount is left to serve s regular or permanent working capital.

TEMPORARY WORKING CAPITAL:

It is that part of total or gross working capital ,the variation in the volume of business operations. It rises during busy or brisk seasons and goes down during slack season. It can therefore, be called seasonal working capital. Variable part of gross working capital is financed through short-term sources so as to enable the firm to make proper adjustments in its size as and when the situation so demands. This imparts flexibility for making necessary changes in the size of current assets.SOURCES OF WORKING CAPITAL:-

Working capital can be financed through three types of sources of funds which are

Long-term sources

Short-term sources

Spontaneous sources

LONG-TERM SOURCES

The source of long term financing include ordinary share capital, preference share capital, debentures, long term borrowings from financial institutions or reserve & surplus.

SHORT-TERM SOURCES

The source of short term financing include is obtained for a period less than one year. It is arranged in advance from the banks & other suppliers in the money market .It includes W.C funds from banks , public deposits , commercial papers.

SPONTANEOUS SOURCES

It refers to the automatic sources of short term finds arising in the normal course of business. Trade credit & outstanding expenses are the ex. of spontaneous financing. there is no explicit cost of short financing. A firm is expected to utilize these sources of finances to the fullest extent.

CHANGES IN WORKING CAPITAL

The changes in the level of working capital occur for the following three basic reasons:-

1-Changes in the level of sales and /or operating expenses

The first factor causing a change in the working capital requirement is a change in the working expenses. The changes in this factor may be due to three reasons. First , there may be a long-run trend of changes for instance, the price of raw material may constantly the second place, cyclical changes in the economy leading to ups and downs in business activity will influence the level of working capital both permanent and temporary. The third source of change is seasonality in sales activity. The change in sales and operating expenses may be either in the form of an increase or decrease. An increase in the volume of sales is bound to be accompanied by higher level of cash, inventory and receivables. The decline in sales will have exactly the opposite effect.2-Policy changes

The second major cause of changes in the level of working capital is because of policy changes initiated by management. There is a wide choice in the matter of current assets policy. A firm following a conservative policy in this respect having a very high level of current assets in relation of sales may deliberately opt for a less conservative policy and vice-versa. These conscious managerial decisions will certainly have an impact on the level of working capital.

3-Changes in technology

Finally, another factor that can cause changes in level of working capital is technological changes. If a new process emerges as a result of technological developments, which shortens the operating cycle, it will reduce the need for working capital and vice-versa.

WORKING CAPITAL MANAGEMENT IN ITI LIMITED RAEBARELI

Since, ITI limited Raebareli is a unit and it has corporate office at Bangalore.

Corporate level, working is done as follows :

-Realization of billing

-Public Borrowing

-Cash credit from Bank consortium

-Preference share from BSNL

-Government funding

-VRS Reimbursement from Government

-Others 1.Commercial Papers

2.Bank Loan

At unit level, i.e. ITI Raebareli unit performs working as

-Realization from customer

-Sales Billing

-Realization from from sister unit against suppliers - sales billing

-Corporate looked by Central Finance

-Monitoring cash flow projection and cash flow statement.

So ITI limited Raebareli has no right to issue shares and debentures. It has only reserve & surplus, secured/unsecured loans as the main long and medium sources of working capital.

For the short-term sources of working capital ITI limited Raebareli has bank credit through which it can fulfill the requirement of working capital. There are three banks who provides cash credit to ITI limited Raebareli, they are- STATE BANK OF INDIA- 7 Crores

BANK OF BARODA- 2.5 Crores

ITI limited Raebareli is eager to modify the accounting system they also accept bills payable and hundies in the form of trade credit. Corporate office Bangalore and other manufacturing units also provide cash to fulfill the additional requirements of each other.

WORKING OF SOME MAIN FINANCE

DEPARTMENT

OF ITI LIMITED RAEBARELI

As per the instructions of DGM(F),I had gone to different sections of finanace department to understand there working.These departments are:- - Sales billing Department

- Bills Services Department

- Cash & Bank Department

- Pay Roll Department

A brief description of the working of these departments are explained under following headings:-

SALES BIILING DEPARTMENT

Sales billing department, the motto behind establishing this department is to realize money from the customers of ITI limited Raebarelli. Working of sales billing department starts from A.P.O. (advance purchase order). For example directorate of BHARAT SANCHAR NIGAM LIMITED, the leading customer of ITI limited Raebarelli issues A.P.O.

Advance purchase contains:

A.P.O is likely to be converted into detailed purchase order under the following terms and conditions:

Quantity of item & general (commercial) terms &conditions

Prices

Delivery period

Cancellation of purchase order

Technical /commercial compliances

Placement of detailed purchase order

Withdrawal of the advance purchase order

Then the next thing, which is, received that is purchase order. Purchase order contains:

Purchase order number: The number, which is assigned for the purchase order.

Reference number: It is assigned with the help of files, which refers that this order is related to that order.

Terms & conditions: Purchase no. & reference no. are given into the purchase order. The other thing, which is given in, it that is terms & conditions. The terms & conditions are as follows:

Name of purchaser: Name of the unit, which has ordered it.

Name & address of the firm: The other thing is the name & address to whom the product is to be supplied.

Factory address & place of inspection: The address & place where the inspection is being made.

Suppliers tender offer number & date: It tells about ordering date and what is the tender offer no.

Description of stores: A full description of store.

Specification number:This number specifies about right product.

Sales tax: During the time of sale this tax is paid to the government. It is generally included into the value of product. According to ITI limited Raebarelli it is2% of total product value.

Freight: This is charge given during transportation. According to ITI limited Raebarelli it is 1% of total product value.

Consignee details: All the reports like inspection certificate, consignee report and other reports are given under this head.

Paying authority: Purchase order gives the details about Who is the paying authority.

Delivery : In how many days the order should be supplied and what are the bifurcation procedures (if there is any).

Performance security: Purchase order also contains that what are the conditions for the performance security.

Price variation: It tells how does the price varies under the order.

Raw material assistance: If with any product, any other product is also supplied it involves raw material assistance.

Inspection: What is the process of inspection and name of peoples who are involved in the inspection to prepare the inspection certificate.

Insurance: What are the terms & conditions for the insurance and how insurance is being made. According to ITI limited Raebarelli it is 0.08% of total product value.

Mode of dispatch: Which mode is used by the suppliers for the purpose of dispatch.

Dispatch instructions: This involves that who will responsible for dispatch, the manufacturer or purchaser.

Liquidated damage charge: These charges are paid to the purchaser if supplier is unable to deliver the product with in time. And these charges are charged at the basic value. These charges are not fixed.

Payment terms: It declares the terms and conditions of payment it is being signed by the AGM.

95% payment shall be made on proof of receipt by the consignee. For claiming 95% the following documents are to be produced before paying authority-

Invoice

Delivery claim

Clear RR/Goods carrier receipt

Supplier certificate for dispatch

Excise gate pass

Inspection certificate of quality assurance

Consignee receipt in case of dispatch by road

The sea freight receipt as per the rates approved by the ministry of water.

Purchase order also indicates that to whom purchase order is send. Mainly it is send to the paying authority, receiving authority and the head office etc.

After the preparation of purchase order the next thing, which is, used that is inspection certificate. It is made with the help of purchasing authority and purchase department. Inspection certificate involves IC No. and the type of ordered product.

After this packing note is prepared , the difference between packing note and bill is that, in P/N only total product value is calculated and in the bill the value of claim cut of from the total value.

The sales billing department have developed its own accounting system, which is convenient to themselves, they post a single and combined journal entry that is-

Debtors A/C Dr

To excise duty a/c

To freight a/c

To invoice a/c

mostly they cut off-

excise duty @10%

freight @ 1%

sales tax @2%

insurance @ 0.08%

upto @ 2.5% of the total product value. PAY ROLL DEPARTMENT

This department paramount work is to calculate the salary of the employees under given rules and regulation .The working of this department starts from the attendances of the employees given by the central time office attendance of the employees is calculated after 13th of the month , it is assumed that employee will be there for the rest of the month. But in case employee is absent after 13th it will adjust in the coming month.

The rules and regulation for computing salary is formulated under the industrial instrumental act and central government. The salary of employees is calculated as per the personal manual. This manual classifies the employees into various grades (for officers) and categories(for non-officers).

According to the payroll department the basic salary of officers and non-officers are as follows;

GRADE

BASIC SALARY

1

6500-200-11350

2

8600-250-14600

3

10750-300-16750

4

13000-350-18250

5

14500-350-18700

6 16000-400-20800

CATEGORY

BASIC SALARY

A0

3000-35-4750

A

3650-60-5130

B

3730-65-4510-70-5420

C

3875-75-4775-85-5880]

D

4040-90-5120-95-6355

E

4240-105-5500-115-6995

F

4460-120-5900-125-7525

G

4700-130-6200-140-8080

H

5100-155-6960-160-9040

In addition to basic salary an employee of ITI limited also receives different allowances, among them main are:

DEARNESS ALLOWANCE

HOUSE RENT ALLOWANCE

CITY COMPENSATORY ALLOWANCE etc.

Among these some other allowances are given which are vehicle allowance, magazine allowance and several other allowances and facilities are given to the employees of ITI limited Raebarelli.

Now we should know that how these allowances are calculated-

Dearness Allowance:

It is given on the basis of price index which changes from time to time, current rate of price index is 148.6%.

In case of officers: Dearness allowance is 148.6%. of basic salary.

In case of non-officers: Dearness allowance is 148.6%. of

(basic salary + service weightage)

House Rent Allowance:

According to rules and regulations it is computed @10% of basic salary. For officers it is 10% of basic salary and for non-officers it is 10% of basic salary + service weightage.

City Compensatory Allowance:

Raebareli is an unclassified city thats why there is no provision regarding to city compensatory allowance to the officers.

For non-officers this allowance is payable with another name that is special allowance.

A table received from payroll department of special allowance is as follows:

Below Pay Range

Special Allowance (Per month (Rs))Below Rs 4000

25

Rs 4001-5250

35

Rs 5251-6499

65

Rs 6500 and above

120

An employee is also entitled to get incentives which is based on productivity. Any employee who is directly attached with production is entitled to get direct incentives.

Any employee who is not directly attached with production is also entitled to get indirect incentives. Indirect incentives are given to those employees who are non-operating workers and officers.

After receiving the balance sheet I come to know that only ITI limited Raebarelli unit pays Rs 9.25 crores approx. salary per annum.

BILLS SERVICES DEPARTMENT

The motto behind establishing this department is the clearance of several bills of employees and contractors in a right time and accounting there of. Bills services department is a large deptt. having following sub-departments.

Personal claims department

Insurance & co-ordination department

Bills payable (Works) department

Imprest

A complete detail of these department with their working system is as follows :

PERSONAL CLAIMS DEPARTMENT

1 PURPOSE

To settle the personal claim bills relating to TA/LTC/Medical/Officers Conveyance and Lunch Conveyance & accounting there of.

2 SCOPE

To settle and pass personal claims of ESL-I/II & Central Services employees.

3 REFERENCE DOCUMENTS

1. Company quality manual No.COR/Q/CM/001

2. Quality system procedure No.COR/Q/QSP/01

3. Unit supplement to Company Quality Manual

4. TA as per Administrative Circular No. 743 dt. 27.12.92

5. LTC as per Administrative Circular No.845 dt. 24.04.94

6. Medical as per Administrative Circular No. 330 dt. 22.03.82 & Amended time to time.

7. Lunch/Conveyance as per Administrative Circular No. 824 dt. 20.01.94.

8. Material handling as per Financial Circular No. 240 dt. 27.09.94.

4 AUTHORITY & RESPONSIBILITY

The Head of Personal Claims has the authority to implement & control the procedure and insure achieving the stated purpose. To manage perform & verify the functions of personal claims, a suitable organization shall be established & responsibility assigned. The Head of personal claims shall prepare & maintain the following :

a) Organization chart.

b) Responsibility & interfacing department matrix.

5 PROCEDURE

Personal claim section is dealing with three types of payments.

1. Advance towards Travelling Allowance, Leave Travel Concession & Medical Reimbursement.

2. Final settlement of claims towards Travelling Allowance, Leave Travel Concession & Medical Reimbursement.

3. Payment of Lunch & Conveyance Allowance to non-officers and Vehicle Allowance Reimbursement to the Officers.

5.1 MEDICAL ADVANCE

a) Sanction memo comes from Establishment Section in case of non-officers & in case of officers from Confidential Cell.

b) After proper checking after sanction memo payment voucher is prepared & entered in Medical Advance Journal & Ledger.

c) Payment voucher is sent to cash section for cash/cheque/DD payment through voucher dispatch register.

5.2 TRAVELLING ALLOWANCE ADVANCE

a) Advance application supported by movement order duly approved/sanctioned by establishment section/confidential cell comes to personal claim section.

b) After proper checking of rate of fair/dearness allowance/hotel rent, payment voucher is prepared & entered in travelling allowance advance journal & ledger.

c) After proper recording payment voucher is sent to cash section for payment through dispatch register.

5.3 LEAVE TRAVEL CONCESSION ADVANCE

Advance application duly approved/sanction by establishment/ confidential cell comes to personal claim then after proper checking of charges admissible payment voucher is prepared & entered in LTC advance journal & ledger & send to cash section for payment through dispatch register.

5.4 FINAL PAYMENT

5.4.1 PAYMENT OF MEDICAL CLAIM

i) TREATMENT BY ITI DISPENSARY

Medical claim supported by cash memo duly verified by treating Doctor/CMO comes from establishment/confidential cell. All the claims are recorded in receipt register on day to day basis. The claims are settle as per guidelines of medical attendant & Personnel & Administration department Circulars issued time to time. Passed claims are recorded in Medical Ledger Staff number wise and on fixed date advise is sent to payroll section for payment through salary. In exceptional cases payment voucher is prepared for cash payment.

ii) TREATMENT BY OUTSIDE ITI DISPENSARY

Claims are supported by proper movement order of ITI hospital & verified & signed by CMO comes through establishment/confidential cell. All other systems for payment is as stated above.

iii) PAYMENT AGAINST HOMEOPATHIC/AYURVEDIC SYSTEMS

Claim verified by any Registered Medical Practitioners supported by cash memo & prescription comes through establishment/confidential cell for payment. In these cases signature of Companys CMO is not required. All other system is as above.

5.4.2 PAYMENT OF TRAVELLING ALLOWANCE FINAL CLAIM

Employee/Officer submit TA Final Bill to concerned establishment/confidential cell with in 15 days after completion of journey. TA Final claim should be supported by Original Movement Order period of lodging & local conveyance charges counter signed by competent authority. Establishment section/confidential cell forwarded the same to concerned personal claim section after due checking and recording/personal claim section process the claim/pass as per companys TA rule. The passed bill is recorded in TA Journal & Ledger. If any excess amount due the same is paid & if recovery falls the same is advised to Payroll section for recovery from the salary.

5.4.3. FINAL SETTLEMENT OF LEAVE TRAVEL CONCESSION CLAIM

After completion of journey bill have to be submitted in establishment/confidential cell supported by proof of journey performed. Establishment/confidential cell send the claim to personal claim section. Personal claim section enter the claim in receipt register and process the bill as in the case of TA Final as stated above.

LEAVE TRAVEL CONCESSION ENCASHMENT PROCEDURE

5.1 INSURANCE

Insurance policies are taken from Insurance Company every year relating to Fire of assets and stock, marine inward/outward, import policy, cash in transit and fidelity guarantee and JPA policy on quotation/negotiation basis. Insurance company submit the bills for the value as declared based on budgeted figures for next year. Payment is being released as per quoted/negotiated rates after recording in premium payment register. We are receiving the policies from Insurance Company. The copy of the same is also being forwarded to concerned department. This cell is also sending the declaration to insurance company based on purchase journal and MIS report. At the end of the year consolidated declaration is sent to insurance company for adjustment/refund of policy.

5.2 CO-ORDINATION

5.2.1 In Co-ordination cell all the cheques related to supplier are being received from cash office. This cell recorded the cheques in cheque dispatch register and prepared envelopes and sent it to Central Dispatch. In some cases it is already directed by Bill Section to send the cheque in respective department and the same is being send to respective department. In some cases payment is released by DD, The same is also received in this cell through concerned bills section. The DD is also sent as per direction of bills section. This cell is also to send one copy of the cheque/DD forwarding letter to concerned Purchase department.

a) proper signature.

b) Receipt signature are tallied with the signature mentioned in the register.

c) Cheque/DDs which are to be deposited into bank are deposited at the same time as per instructions.5.3 WORK IS CARRIED OUT AS FOLLOWSCheques and DDs are received by the dealing persons and entries made in control register. After that cheques and DDs are either sent to Central Dispatch Section making a required post on envelope or delivered to concerned section getting receiving signature of the officers. The signature of these officers are received through ION and are tallied when the cheques and DDs are handed over.

RECORDS

a) Insurance

- Premium payment register

Declaration register.

Insurance file for each policy.

b) Co-ordination

Cheque dispatch register.

DD dispatch register

Forwarding letter dispatch register

Cheque/DD deposit register.

Adjust voucher register.

c) Safe Custody

Bank guarantee register.

Bank guarantee safe file.

FDR/TDR/NSC register.

FDR/TDR/NSC safe file.

BILLS PAYABLE (WORKS)

DEPARTMENTAL PROCEDURE1 PURPOSE

To pass and account for the payment to contractors.

2 SCOPE

The scope of Bills Payable Works is to release the payment of the contractors and its accounting.

3 REFERENCE DOCUMENTS

1. Company Quality Manual No.COR/Q/CM/001.

2. Quality System Procedure No.COR/Q/QSP/01.

3. Unit supplement to company quality manual.

4. Accounts manual.

5. Work order/MB etc.

6. Financial instructions issued time to time.

4 AUTHORITY AND RESPONSIBILITY

The Head of Bills Payable (Works) has the authority to implement and control the procedure to ensure achieving the stated purpose. To manage, perform & verify the function of Bills Payable Works a suitable Organization shall be established and authority assigned. The Head of Bills Payable Works shall prepare and maintain the following.

a) Organization chart.

b) Responsibility and interfacing departmental matrix.

5 PROCEDURE

5.1 Bills Works Section passed bills of all the contract works relating to constructions/repair of building, electrical new work and maintenance works etc. The works are defined as under.1. Secured advance.

2. Passing of running bills as well as final bills.

3. Passing of security deposit bills.

4. Release of earnest money.

5. Release of bank guarantee.

6. Release of FDR/TDR/NSC.

7. Other related works.

5.2 These bills are passed by works section based on the verifications made by concerned department i.e. Civil, Central Services, Plant etc. The system of passing and recording are as under.5.2.1 RECORDING OF BILLS

As soon as bills received from concerned departments, it is recorded in bills receipt register.

5.2.2 PASSING OF BILLS

Bills are being passed by the concerned officials with reference to work order. It is submitted to concerned officer for final signature. In case of running payment, vouchers are prepared through PC and sent it to cash office for release of payment duly recorded in dispatch register. In case of final bill, It is sent to Audit for pre-auditing. After receipt of audited bills it is again prepared the vouchers through PC and sent it to cash office for release of payment.

5.2.3 ACCOUNTING OF BILLS

After release of payment, bills are recorded in concerned register i.e. contractor journal, sundry creditors ledger, advance ledger, earnest money and security ledger, material issued to contractors ledger etc.

5.2.4 Release of Income Tax/Sales Tax deduction made from contractors bills to Income Tax/Sales Tax Departments on monthly basis. The section also submits annual return to income tax/sales tax department.

5.2 BANK GUARANTEES/FDR/TDR/NSC

This section also receipt above documents, which are being deposited by the Contractors in lieu of earnest money/secured advance through concerned department. These documents are recorded on concerned register and given to co-ordination cell for keeping them in safe custody. After receipt of recommendation from concerned department it is being released after duly recorded in concerned register.

5.3 THE WORK IS CARRIED OUT AS FOLLOWS

5.3.1 Bills received from concerned section duly checked and recommended for payment.

5.3.2 Bills recorded in bill register.

5.3.3 Bills given to concerned officials.

5.3.4 Officials pass the bills with reference to work order etc.

5.3.5 If bills are not in accordance with the work order or there is objection it is returned to concerned department.

5.3.6 If bills are in order, it is put up to concerned officer for approval.

5.3.7 If bills are running, then after approval by concerned officer voucher is prepared and sent to cash for payment.

5.3.8 If bills are final, it is sent to Internal Audit for audit.

5.3.9 After audit, voucher is prepared and signed by the concerned officer and sent to cash office for payment.

6 RECORDS

1. Contractor journal.

2. Sundry creditors ledger.

3. Earnest money ledger.

4. Securities deposit register.

5. Advances to contractor ledger.

6. Material issued to contractor ledger.

7. Income Tax/Sales Tax register.

8. Work in progress register.

9. Bills receipt/dispatch register.

10. Audit register.

11. Voucher dispatch register.

CASH & BANK DEPARTMENT

To manage, perform and verify the various transaction of, this department is established with a motto to deal procurement of cash. To facilitate the job work of this section is divided into two parts which are:-

Cash section

Cash & Bank section

Working of the both section is explained separately under following paragraph.

CASH SECTION: -

This section manages all the cash transactions of ITI limited Raebareli.All the cash payments are made through cash counter of this department. Such as 1/3 employees of this unit withdraw their salary directly from cash counter. This section also deals with the procurement of cash from the customers, various units, different department and corporate office. This section makes a daily record of all cash transaction and prepared a monthly cashbook, which is after internal audit send to the central finance department.

CASH & BANK SECTION: -

This section deals all type of bank transaction of ITI limited Raebareli. All the transactions are recorded in a monthly statement (for cash transactions in cash book and for non-cash transactions in bank-book).

The bankbook is reconciled after a certain time with bank statement for removing the faults. This section also prepares the monthly cash & fund flow statement .All the bank transactions is finalized here and then send to the concerned department.

The cash & bank section allocation funds to the various departments according to their requirement. The allocation of cash for each individual department depends upon the requirement and working capacity of department.

INSURANCE & CO-ORDINATION CELL

This department is established with a motto to implement and control the procedure to ensure risk coverage of iti properties, incoming and outgoing consignments etc. the scope of this department is to send the monthly declaration to insurance company and dispatch the cheque/DD in the time and deposit the cheque/DD in bank timely.

REFERANCE DOCUMENTS

1.company quality manual No.COR/Q/CM/001

2.Quality system Procedure No. COR/Q/QSP/01

3.Unit supplement to company quality manual.

4.Insurance as per manual and requirement of factory act and guidelines issued by the Management from times to time.

5.Co-ordination as per procedure order No.40 dt. 02.02 87& FZ/48 dt. 30.10.93.

6. Safe custody as per financial instructions No. 128 dt.

30.8.85.

PROCEDURE

INSURANCE

Insurance policies are taken from insurance company every year relating to fire of assets and stock, marine inward/ outward, import policy, cash in transit and fidelity guarantee and JPA policy on cotation/nigotiation basis. Insurance company submits the bills for the value as declared based on budgeted figures for next year. Payment is being released as per quoted/-negotiated rates after recording in premium payment register. We are receiving the policies from insurance company. The copy of the same is also being forwarded to concerned department this cell is also sending the declaration to insurance company based on purchase journal and MIS reports. At the end of the year consolidated declaration is send to insurance company for adjustment/refund of policy.

CO - ORDINATION

In co-ordination cell all the cheques related to supplier are being received from cash office. These cells recorded the cheque in cheques in dispatch register and prepared envelopes and send it to central dispatch. In some cases it is already directed by bill section to send the cheques in respective department and the same is being send to respective department. in some cases payment is released by DD, the same is also received in this cell through the concerned bill section. The DD is also send as per direction of bills section. This cell is also to send one copy of the cheque/DD-forwarding letter to concerned purchase department.

This cell is also receives the cheques /DD received fromDOtand other party through cash office the check /DD are recorded in receipt register and after the filling up the bank slip, the same are being deposited in bank. In the case of discounting of the check bank charged their commission charges. this cell also pass/adjust Boucher for the same. This cell also received FDR/TDR/NSC etc./bank guaranty from bills work section to keep I n safe custody. After receipt of the same these documents are recorded in related register and kept in safe custody in case of bank guarantee later is send to concern bank for confirmation of bank guaranty. After receipt of advise from work section for release of FDR/TDR/NSC and bank guaranty, the same is also recorded in relevant register and send it to bills work section .

WORK SEQUENCE

a) Receiving the cheques/DD from concerned section.

b) Making entry in a control register.

c) Received cheques /DDs are dispatched either by registered post by sending to central dispatched section or delivered to concerned section for getting proper signature.

d) Receipt signatures are tallied with the signature messioned in the register.

e) Cheque/DD, which are to be deposited into bank, are deposited at the same time as per instructions.

WORK IS CARRIED OUT AS FOLLOWES:-

CHAQUE AND DDs are received by the dealing persons and entries made in control register. After the cheque and DDs are either send to central dispatch section making a required post on envelope or delivered to concerned section getting receiving signature of the officer. The signatures of these officers are received through ION and are tallied when the cheque and DDs are handed over.

RECORDS: -

a) Insurance

Premium payment register

Declaration register

Insurance file for each policy.

b) Co-ordination

Cheque dispatched register

DD dispatched register

Forwarding letter dispatched register

Cheque/DD deposit register.

Adjust voucher register.

c) Safe custody

Bank guarantee register.

Bank guarantee safe file.

FDR/TDR/NSC register.

FDR/TDR/NSC safe file.

PROCEDURE FOR IMPREST PURCHASE IN ITI LIMITED RAEBARELLI

In supersession of all earlier procedures in imprest purchase the following procedure is to be followed:

Imprest may be sanctioned to only one officer in one functional area.

All request for imprest specifying the type and nature of items of expenditure for which imprest is asked for should be submitted to unit head for approval with financial concurrence through divisional head.

Imprest/cash book may be maintain and written up as and when expenditure is incurred out of imprest.

Statement of expenditure must be sent to accounts department(bills payable section) dully supported by vouchers, cash memo, bills etc. At the end of each month on regular basis.

However the statement of expenditure may be sent earlier if half of the amount has already been spent.

Imprest holder will be physically verify the cash balance daily and the fact to be recorded in the cash book under his signature with date.

Vouchers and cash book must be checked by head of the deptt. As part of his work atleast twice in a month with a surprise element and by the internal audit deptt. Atleast twice in a year.

Expenditure out of imprest may be incurred subject to compliance of relevant procedures and delegation of power. Relevant delegation of powers for imprest purchase is as follows:

(a) Non-production/capital items

Imprest purchase up to Rs 5000 subject to annual ceiling of Rs 25000 could be re-shorted to with approval of divisional head and concurrence of divisional financial head.(b)Production items Purchase up to Rs 1000 and subject to annual ceiling of Rs.50,000 could be re-shorted to with approval of divisional head and concurrence of divisional finance.

All the items except cement, sand and stone grit, irrespective of the value purchased through imprest purchase/cash purchase should invariably entered in the register maintained in C.I.S.F. gate for incoming goods by purchase officials as well as to IGD as the case may be and proper entry with seal affixed by C.I.S.F. on the back of cash memo and bill etc.

In case of cement, sand and stone grit irrespective of the value purchased for township maintenance, should invariably be entered in the register maintained at Bazzar gate by ITI limited Raebarelli. Security official for incoming goods by purchase officials and proper entry with seal affixed by ITI limited Raebarelli security officials on the back of cash memo, bill etc.The preparation of IGA by IGD deptt. Shall be based upon the endorsement by ITI security without physically moving the material to IGD but the endorsement must be made by executives not below grade II on the back of cash memo and bill etc.

Certificate shall be recorded on every cash memo/voucher by purchase official/advance holder as under:

certificate that the materials have been purchased and received by me, are of good quality as per specification and proper entry in store register/advance register have been made at serial number, page number.

It is the responsibility of the concerned officer to clear the advance against him in finance.

When the material is purchase on cash basis and value of cash purchase is more than Rs.500 the material except cement, sand, stone grit is to be brought to IGD so as to prepare its IGA note number rf-122.

Photocopy of cash memo, approval of cash purchase and items except cement, sand, stone grit will be handed over by purchase officials to IGD in-charge for entry in daily receipt register and raising IGA for regularizing cash purchase above Rs.500 with in ten days of the entry of the material.

In any case material should not be directly used by the originator where the value of material is more than Rs. 500 and its IGA is to be prepared.

Report on imprest purchases is to be sent monthly to unit head.

Recoupment of imprest accounting having more than Rs. 1000 may be released after its pre-auditing by internal audit and all the imprest account below Rs. 1000 will be post-audited.

RATIO ANALYSIS OF INVENTORY MANAGEMENT IN ITI RAEBARELI

MEANING OF RATIO :

The valuation of an item to another express in a single mathematical form is known as ratio. A ratio is quotient of two numbers. In fact an analysis of financial statement is possible only when figures are expressed as percentage or ratios. A ratio is mathematical relationship between two quantities. It is the major importance of financial analysis. It engages qualitative measurement and show precisely how adequate is one key item in relation to another. To evaluate the financial condition and the purpose of the firm, the financial analyst needs certain yard sticks. They are to main based to analyze ratio :

1- In the trend analysis, the behavior of ratio across the time st standard

2- In a comparative analysis, the performance of the firm at a single point of time relative either to other firm in the Industry.

LIMITATION OF ACCOUNTING RATIO

1. Comparative study required

2. Limitation of financial statement

3. Ratio alone are not adequate

4. Production of Price level

5. No fixed standard

6. Ratio are composite of many figure

ADVANTAGE OF RATIO ANALYSIS

1.Simplifies financial statement

2.Facilitates inter firm comparison

3.Make intra firm comparison possible

4.Help in planning

5.It is possible to compare "Like with Like"

WORKING CAPITAL ANALYSIS

The analysis of working capital is aimed at ascertaining the current financial soundness of the firm. For the purpose of analysis I have chosen the Ratio Analysis because a comparison of inter firm and inter year working capital ratios provided the clues on the basis of which suitable inference can be drawn. Various ratios for the analysis of working capital are explained below:-

CURRENT RATIO:-This ratio indicates the relationship between current assets and current liabilities. Taking figures from the balance sheet as at in 31st march 2010 of ITI Limited Raebareli, the current ratio is-CURRENT ASSETS

CURRENT LIABILITIES

For the year 2009-2010Current asset is Rs.66013.41(in lacks)

Current liabilities is Rs. 46527.12(in lacks)

After calculating we get current ratio of 1.42:1

For the year 2008-2009Current asset is Rs. 26311.02(in lacks)


After calculating we get current ratio of 0.93:1

For the year 2007-2008Current asset is Rs.22023.42(in lacks)


After calculating we get current ratio of 1.10:1DEBTORS TURNOVER RATIO:-

Debtor turnover ratio indicates the velocity of debt collection of the firm. Hence, the liquidity position of a concern to pay its short-term obligation in time depends upon the quality of its trade debtors. This ratio indicates the number of times average debtors are turned over during a year.

Thus,

NET CREDIT ANNUAL SALES

AVERAGE TRADE DEBTORS

For the year 2009-10For the purpose of calculation taking data from balance sheet of ITI Limited Raebareli.

Total sales Rs 46400.36(in lacks)

Average debtors Rs 33797.28(in lacks)

After calculation we get Debtors Turnover Ratio of 1.37 times, there is no rule of thumb which may be used as a norm to interpret this ratio. This ratio should neither too high nor too low.

Average Collection period:-

365

-----------------------------------------------

Debtors turnover ratio =365/1.37=266.42Average trade debtors= opening debtors + closing debtors 2 For the year 2008-09

For the purpose of calculation taking data from balance sheet of ITI Limited Raebareli.





365

-----------------------------------------------

Debtors turnover ratio =365/0.86=424.41For the year 2007-08For the purpose of calculation taking data from balance sheet of ITI Limited Raebareli.





365

-----------------------------------------------

Debtors turnover ratio =365/0.50=730INVENTORY TURNOVER RATIO:- Every firm has to maintain a certain level of inventory of finished goods as well as raw material so as to able meet the requirements of the business. But the level of inventory should neither be too high nor too low. This is calculated by dividing the cost of goods sold by the amount of average inventory.Inventory turnover :

= Cost of sales

Average inventory

For the year 2009-10

=55157.49 = 8.31 times 6639.52 For the year 2008-09

=31490.09 = 6.23 times 5055.65


= 25596.24 = 5.00 times 5110.23

There is no standard inventory turnover ratio for the interpreting this ratio. The norms may be vary due to the nature of industry and business conditions. On the basis of one year no one can compare the stock velocity so according to me this unit has to quietly increase its inventory turnover ratio because a low inventory turnover ratio indicates an inefficient management of inventor

* Liquid ratio:-

It is more rigid test of working capital analysis. It is also called as quick-ratio or acid-test ratio while computing this ratio stock or inventory is excluded from current assets. Quick ratio of ITI limited Raebarelli is-

QUICK RATIO:- LIQUID CURRENT ASSETS

CURRENT LIABILITIES

For the year 2009-10 Liquid current assets is Rs.53799.54 (in lacks)

Current liabilities is Rs.46527.12 (in lacks)

After calculation we get quick ratio is 1.16:1

For the year 2008-09 Liquid current assets is Rs. 19383.38 (in lacks)

Current liabilities is Rs. 28292.37 (in lacks)

After calculation we get quick ratio is 0.69:1

For the year 2007-08 Liquid current assets is Rs.14419.22 (in lacks)

Current liabilities is Rs.20012.84 (in lacks)

After calculation we get quick ratio is 0.72:1NOTE:

*liquid current assets = current assets - inventoriesCASH RATIO :- This ratio indicates the relationship between cash and total current assets. Cash ratio of ITI limited Raebareli is:

CASH IN HAND

CURRENT ASSETS


Cash in hand is Rs.5455.24(in lakhs)

Current Assets is Rs.66013.41

After calculation we get cash ratio is .08:1

For the year 2008-09 Cash in hand is Rs.133.13 (in lakhs)


After calculation we get cash ratio is 0.005:1

For the year 2007-08 Cash in hand is Rs.143.21(in lakhs)


After calculation we get cash ratio is 0.007:1 Working capital turn-over ratio:-

This ratio indicates the relationship between cost of sales and current assets. With the help of data of working capital turn-over ratio of ITI limited Raebarelli is calculated below:WORKING CAPITAL TURN-OVER RATIO:-

COST OF SALES

WORKING CAPITAL

55157.49 = 2.83:119486.29For the year 2009-10 Cost of sales is Rs.55157.49 (in lacks)

Working capital is Rs.19486.29 (in lacks)

After calculation we get working capital turnover ratio is 2.83:1For the year 2008-09 Cost of sales is Rs.31490.09 (in lacks)

Working capital is Rs.(-)1981.35 (in lacks)

After calculation we get working capital turnover ratio is( -)15.8932:1

For the year 2007-08 Cost of sales is Rs.25596.24 (in lacks)

Working capital is Rs.2010.58 (in lacks)

After calculation we get working capital turnover ratio is 12.73:1NOTE:

working capital = current assets current liabilities

FINDINGS

As we know that ITI limited is the first p.s.u. of India the working of any psu has two aspects. One is to social benefits which means it has sense of responsibility to the society. And another is to gain profits so as not to be a burden on the society i.e. by its commercial functions results out financial returns.

I am thankful to all the departments of ITI limited, Raebareli especially the finance department of the unit. They have given time to me and provide all the required information.

The major findings of the study are as follows:-

Turnover has been increased from 14494.52 in 2008-09 to 46400.36 in 2009-10 i.e. 220.12%. Debtors Turnover Ratios 1.37 which shows that average collection is more than average turnover during the year 2009-10. Total debtors are more than total sale of the unit.

Inventory is not constant & do not has fixed ratio.

Liquid asset & cash ratio has been increased which is not a good sign.

Working capital is increased in respect to last year which is not good which shows that W.C. is used more.

Employees salary & wages almost same has been increased, this shows fixed cost is recovered to same extent. All the computerised work is being performed under control of EDP.CONCLUSION

The analysis shows the essence of working capital of any firm can be grasped from the goal,. The basic financial polices have to assure the success the operation on a continued basis. These would relate to the depreciation of assets, plant replacement, stock evaluation, revenue & dividends, pricing policy & structure, insurance previous schemes & the frame work of financial in general.

In case of the large firm as ITI the ploughing back the profits is the first mean to finance a businb3ss. The proper planning of finance is the important factors of finance which increase the profitability and satisfaction to their employees and shareholders this factor directly affect the firm's financial condition. The preliminary design must also present a fairly detail plan for the overall strategy. That will be used to implement and operate the project.

To gain success in the area of telecommunication business, ITI must have knowledge about the modern technicalities involved, the condition of the market and various other areas.

Economic risk in modern business much greater significance than either physical or technical risk. ITI should have take risk for proper running in today's competitive environment. Creation adequate reserve against risk and contingencies including the operation of trade cycles is a today financial necessity of an ITI.

In today's scenario ITI needs adequate working capital for the expansion of their business in the field of telecommunication business, by dispersal of both manufacturing and selling activities in a wide range of countries.

On the above reasoning we must at the time or the other come to the conclusion that to avoid the recurring phenomenon of the working capital crisis which are in turn tried to the recovered by incurring interest rate to offer incentive for saving thereby increasing the interest rate at the same time profits or saving used for future expansion should not attract tax and with the limited liability one can safely spread his investment. Thus financial Department of ITI has planned a strategy and policy, which ins intelligently completed and competitive.

SUGGESTIONS

On the basis of above finding of the study the following can be given: -

.ITI should prune its manpower from existing level of 10191 to the strength of 8000 by various process, e.g.

(a) Voluntary Retirement Scheme

(b) Closing down some of the unviable Plant/ Section/ Units which will enable the saving of expenditure

ITI limited, Raebareli has incurring losses for years so, to retain in the market it have to earn some profit by any creative strategy.

To forge alliances with multinational/ national companies to undertake turnkey projects.

To undertake services sector activities at national level.

ITI should enter in the market of long distance telephony, international long distance telephony and basic telephone services to make its existence in telecom market.

For a big PSU like ITI limited there should be a centralized cash control systems so it is the best approach in case of this unit.

ITI limited, Raebareli should try to reduce its average collection period and to lower down its debts turnover ratio. The firm should keep adequate inventory level so that profitability of the firm may increase.Bibliography

Fundamentals of Financial Management; JAMES C. VAN HORN publication-Prentice Hall India.

Accounting Theory & Practice M.W.E. GLAUTIER, BUNDERDOWN, -ELBS Publication

Financial Management I.M.PANDAY

Business World

India Today

Annual Report Of ITI Limited.

ITI LIMITED,

RAE BARELI

DGM(A&W)

----DGM(SE)

DGM(W & ASSY)CFM(TT&E2)

----DGM(S)-- CFM(EI)

DGM(Cordect)

FM(EI)

----DGMCD)

DGM(IGD)

CM(MKTG)

----DGM(PCW)DGM(IT)

DGM(E&SH) CM(CS)

---DGM(MFG)

CM(R&D)

--M(QA-P)E I CM(C STORE)

---DGM(P&M)CM(EDP)

--M(QA-P)EII CM(PPI)E L

---FM(E2)

CM(ASSY) --DGM(MED)

----DyM(P&A)

CM(QC&QE)

CM(PC)

CM(F)

M(IGI)

WORKING CAPITAL MANAGEMENT

IN

ITI LIMITED RAEBARELI After understanding the working of some finance department I come to know that since, ITI limited Raebareli is a unit having its corporate office at Bangalore. So ITI limited Raebareli has no right to issue shares it has no share capital and debenture capital, it has only Reserve & surplus and secured/unsecured loans as the main long/medium-term sources of working capital.

For the short term sources of working capital ITI limited Raebareli has short-term loans and bank credit through which it can fulfill the requirements of working capital. Three banks provided bank credit to this unit which are:-

State bank of India

Bank of Baroda

These banks provide bank credit upto a limit, such as state bank of India provided upto Rs.7crores,bank of baroda upto Rs.2.5 crores . ITI limited Raebareli eager to modify the accounting system and provided the needy parties.According to this concept now, it starts to accept Hundies in the form of trade credit.

The other sources of working capital of this unit is corporate office and various units. Atleast 80% requirements of cash is fulfilled by the unit but, for extra requirements corporate office has responsibility to provide the funds to the unit for their requirements. Various units also fulfill the requirement of funds directly or indirectly. For example if a south unit sends any manufactured goods in the north area then north unit will be realize money from the customer on behalf of south unit. Similarly vice-versa.

With the help of comparative balance sheet I prepare a statement which shows upto what extent current assets and current liabilities of ITI limited Raebareli has been increased or decreased.

It is clear from the statement showing changes in working capital that the management of working capital in this unit during the period of 2009-10 is quietly good though it has incurring loss from last five years. The statement shows that the working capital of the unit is increased near about Rs.862 lacks during the period of 2009-2010 which shows that this unit properly utilize its working funds for its day-to-day operations.

It has reduces its miscellaneous expanses near about Rs.30 lacks which also becomes another sources of working capital .Yet,the Raebareli unit also utilize its funds in creating assets during this period it has purchased fixed assets of Rs.102 lacks. Last I want to say though it is a unit which is incurring loss but , it is properly manages its needs of working capital.

COMPANY SECRETARY - Smt. Rachana Chaudhary

LEGAL ADVISERS - M/s Holla & Holla Advocates,

Bangalore

- M/s AZB Partners Advocate

Bangalore

AUDITORES - M/s Karra & Company

Bangalore

- M/s Habibullah & Co.

Mankapur

- M/s Varier & Associates,

Palakkad

- M/s S.C. Singh & Co.

Rae Bareli - M/s Rashid Associates

Srinagar

- M/s S.R. Gupta & Co.

Naini

BANKERS - State Bank of India - Bank of India

- Central Bank of India

- State Bank of Hyderabad

- Indian Bank

- Canara Bank

- State Bank of Mysore

Gross Working Capital

Net Working Capital

Permanent Working Capital

CASH

RAW MATERIAL

RECEIVABLES

FINISHED GOODS

DGM

CIVIL

DGHRD

DGM

P&A

DGM

QA

DGM ADMN

M

VIGG

DGM

CS

AGM-EPD

AGM

MPD

AGM

PPI&QA

DGM

FINANCE

AGM

R&D

DGM

MKTG

GM (RB)

Shivam Mba Project

Documents

Transcript of Shivam Mba Project