Working Capital Management PRJCT(Bhpv Vizag)

8/10/2019 Working Capital Management PRJCT(Bhpv Vizag)

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A STUDY ON

MAMAGEMENT OF WORKING CAPITAL

With reference to Bharat ea!" P#ate$ %&e$$e#$ Li'ite( )BP&*

A +ro,ect re+ort in the area of -Finance. $/0'itte( to BERHAMPUR

UNIVERSITY f/#fi##'ent of the re1/ire'ent$ for the a2ar( of (e3ree of

BAECLOUR OF BUSINESS ADMINISTRATION4

B"

REYYA ISWAR REDDY5

Re3 no67 89:;:<=>8>

Under the esteemed guidance of

Mr4 $4?4+a(h" Asst. Professor

College of Business Administration, Berhampur

PRESIDENCY COLLEGE’SCOLLEGE OF USINESS !D"INIS#R!#ION

ER$!"PUR%ORISS!



ACKNOWLEDGEMENTS

I would like to forward my sincere thanks and gratitude

to Mr4 $4?4+a(h" for availing me the opportunity to do this

project work.

My deep gratitude also goes to Mr4 $4?4+a(h" , faculty

member, who has patiently guided me to the successful

completion of this project work.

I would like to express my sincere gratitude to Shri

B.V. ao5 Manager !"#I$I$%&, ' department, B'(V, for

his valuable support and guidance during the entire course of

the project work.

I would also like extend my gratitude to my parents and

friends without whose help and advice this project would not

have been possible.

REYYA ISWAR REDDY



CONTENTS

CAPTER78

INTRODUCTION

OB@ECTI&ES OF STUDY

NEED FOR TE STUDY

DESIGN OF TE STUDY

SCOPE OF TE STUDY

METODOLOGY

LIMITATIONS

CAPTER7=

INDUSTRY PROFILE

COMPANY PROFILE

CAPTER7

TEORITICAL FRAMEWORK OF TE STUDY

CAPTER7

ANALYSIS % INTERPRETATION OF TE STUDY

CAPTER79

SUMMARY

FINDINGS

SUGGESTIONS

BIBILIOGRAPY

ANNEURE



CAPTER78

INTRODUCTION

OB@ECTI&ES OF TE STUDY

NEED FOR TE STUDY

DESIGN OF TE STUDY

SCOPE OF TE STUDY

METODOLOGY

LIMITATIONS

INTRODUCTION TO TE TOPIC



FINANCIAL MANAGEMENT

Financia# 'ana3e'ent i$ 'ana3eria# acti!it" 2hich i$ concerne( 2ith the +#annin3

an( contro##in3 of fir'$ financia# re$o/rce$4 It 2a$ a 0ranch of econo'ic$ ti## 8:>

an( a$ a $e+arate (i$ci+#ine it 2a$ of recent ori3in4 Sti## it ha$ no /ni1/e 0o(" of ?no2#e(3e of it$ o2n an( (ra2$ hea!i#" fro' econo'ic$ for it$ theoretica# conce+t$

e!en to(a"4 Theor" of financia# 'ana3e'ent +ro!i(e$ conce+t/a# an( ana#"tica#

in$i3ht$ to 'a?e (eci$ion$ re#atin3 to the financia# a$+ect$ of or3aniation $?i##f/##"4

Definition$ of financia# 'ana3e'ent

-Financia# 'ana3e'ent i$ concerne( 2ith the efficient /$e of an i'+ortant

re$o/rce na'e#"5 ca+ita# f/n($.4 EHRA SOLOMAN

-Financia# 'ana3e'ent i$ concerne( 2ith the 'ana3eria# (eci$ion$ that re$/#t in

the ac1/i$ition an( financin3 of #on37ter' an( $hort7ter' cre(it$ for the fir'.4

PILLIPPATUS4

-Financia# 'ana3e'ent i$ that 0/$ine$$ acti!it" 2hich i$ concerne( 2ith the

ac1/i$ition an( con$er!ation of ca+ita# f/n($ in 'eetin3 financia# nee($ an(

o!era## o0,ecti!e$ of a 0/$ine$$ enter+ri$e.4 WEELER

The$e (efinition$ 2e can /n(er$tan( the f/nction$ of the financia# 'ana3e'ent4 Tho$e

are +roc/re'ent of f/n($ an( effecti!e /ti#iation an( +art of the$e f/nction$ /$e(ifferent techni1/e$4

OB@ECTI&ES OF FINANCIAL MANAGEMENT

/ite o0!io/$#"5 the o0,ecti!e of the fir' $ho/#( 0e the 'aJi'iation of it$ !a#/e of the

$hareho#(er$4 The +rice of $hare$ in the 'ar?et in(icate$ the !a#/e of the fir'4 Factor$

#i?e in!e$t'ent5 financin3 an( (i!i(en( eJerci$e an inf#/ence on the 'ar?et +rice of

the $hare$4 The 'ain o0,ecti!e$ of financia# 'ana3e'ent can 0e $ai( a$6

PROFIT MAIMIHATION

The o0,ecti!e of e!er" or3aniation i$ +rofit 'aJi'iation4 Profit MaJi'iation

'ean$ 'aJi'iin3 the r/+ee inco'e of fir'$4 Profit i$ con$i(ere( a$ the 'o$t

a++ro+riate 'ea$/re of a fir'$ +erfor'ance4

WEALT MAIMIHATION



NEED FOR TE STUDY

BP& ha$ e'er3e( a$ one of the #ea(in3 hea!" en3ineerin3 In(/$trie$ after it$incor+oration5 in the "ear 8:;; to 'an/fact/re c/$to' B/i#t ca+ita# e1/i+'ent

re1/ire( 0" the +roce$$ in(/$trie$ #i?e ferti#ier$5 Petro che'ica# % che'ica#

in(/$trie$4

After it$ co''i$$ionin3 % co''ence'ent of +ro(/ction5 the Co'+an" ha$ 0een

contin/o/$#" /+(atin3 it$ techno#o3ie$5 0" enterin3 into Co##a0oration$ 2ith reno2ne(

co'+anie$ #i?e M<$ BSL5 Dea#$ 7 France5 CG7Nether#an($5 ahn % C#a"7USA etc4

Ma''oth En3ineerin3 ca+a0i#itie$ % eJce##ent (e$i3nin3 net2or? % Man/fact/rin3

faci#itie$5 hi3h (e3ree of c/$to'er confi(ence5 2ith $o/n( 2or? C/#t/re$ are $o'e of

the !ita# factor$ in!o#!e( in achie!in3 contin/o/$ 3ro2th of BP&4

o2e!er in the ear#" =>>>$5 the financia# +erfor'ance of the in(/$tr" 2ent /n(er

3reat $train5 (/e to a co'0ination of a(!er$e factor$5 2hich 3ot 0/nche( "ear 0" "ear4

Since =>>8 $tee+ ri$e in eJor0itant intere$t co$t$5 increa$e( inf#ation5 3#o0a#

co'+etition5 Go!ern'ent +o#ic" etc f/rther a33ra!ate( the $it/ation4

o2e!er5 fro' the "ear =>>5 the co'+an" $tarte( $ho2in3 +o$iti!e $i3n$ in the

o+eration$ an( $tare( earnin3 +rofit$4 The 'ain rea$on for thi$ (e!e#o+'ent i$ the

(eci$ion of the Go!ern'ent to (e#in? the co'+an" fro' BYNL5 A##aha0a( an( 'a?e it

+art of ea!" E#ectrica# E1/i+'ent Con3#o'erate BEL4 The "ear =>> can 0e $ai(

a$ RE-BIRTH "ear for BP&4

BEL5 fro' the (ate of ta?in3 o!er BP& in =>>5 $tarte( to #oo? after ?e" area$ #i?e

/ti#iation of +#ant ca+acit" to the f/##e$t eJtent5 attention on financia# (i$ci+#ine5 R

re#ate( +ro0#e'$5 Ca+eJ etc4 Fro' the "ear =>> the co'+an" re7$tarte( it$ 0/$ine$$

2ith ne2 #oo?5 $trate3ie$5 (i!er$ification an( once a3ain $tarte( 3ainin3 c/$to'er

confi(ence5 there0" earnin3 +o$iti!e financia# fi3/re$ an( on the 2a" of re3ainin3 +a$t

3#or"4

The i'+ortance of the $t/("5 Wor?in3 Ca+ita# Mana3e'ent in BP&5 &i$a?ha+atna'

+re$/++o$e$ that one !er" i'+ortant rea$on$ for 2hich P/0#ic $ector Enter+ri$e$ in

In(ia ha!e $/ffere( financia# $train$ in the #ate >$ an( in :>$ or earne( #o2 Le!e# of +rofit 'a" re#ate to the 'i$con$tr/in3 of the financia# a$+ect$4 a( the$e Enter+ri$e$

'ana3e( the o!era## finance o+eration$ in an efficient 'anner5 the" 2o/#( ha!e

3enerate( re$o/rce$ for it$ 3ro2th a$ 2e## a$ econo'ic 3ro2th4

OB@ECTI&ES OF TE STUDY



Thi$ $t/(" of BP& ha$ 0een /n(erta?en to e!a#/ate the financia# efficienc" of the

or3aniation 0" e$ta0#i$hin3 the fo##o2in3 o0,ecti!e$4

To ?no2 a0o/t the !ario/$ $o/rce$ of finance$5 2or?in3 ca+ita# to BP&4

To ,/(3e the financia# +o$ition5 i4e4 the $hort7ter' #i1/i(it" +o$ition an( the #on37ter'

$o#!enc" of BP&4

To 'ea$/re the o+erationa# efficienc" of BP&4 To (eter'ine the +rofita0i#it" tren($ of

BP&4

To a$$e$$ the o!era## financia# +o$ition of the co'+an" thro/3h !ario/$ e$ta0#i$he(

techni1/e$4

RATIO ANALYSIS6

Ratio ana#"$i$ i$ a techni1/e of ana#"$i$ an( inter+retation of financia# State'ent$4 It i$

the +roce$$ of e$ta0#i$hin3 an( inter+retin3 ratio$ for he#+in3 in 'a?in3 certain

(eci$ion$4 o2e!er ratio ana#"$i$ i$ not an en( for it$e#f4 It i$ a on#" a 'ean$ of 0etter

/n(er$tan(in3 of financia# $tren3th$ an( 2ea?ne$$ of a fir'4

SCOPE OF TE STUDY6

The $co+e of the $t/(" i$ connecte( to one of the ?e" area$ of finance i4e4

Ana#"$i$ % Inter+retation of Financia# State'ent$4 The $t/(" a++rai$e$ the

co'+an"$ 'eetin3 the re1/ire'ent$ for the +roce$$ in(/$trie$ in the core

$ector $/ch a$ ferti#ier5 oi# refinerie$5 che'ica#$ etc4

METODOLOGY6

The ana#"$i$ of the +ro,ect 2a$ 0a$e( on the a!ai#a0#e infor'ation4 An"

infor'ation a0o/t the to+ic i$ ca##e( the (ata4 The (ata 2a$ 3athere( fro'

!ario/$ $o/rce$ i4e45 Pri'ar" an( Secon(ar" $o/rce$4

T"+e of Data6

Pri'ar" Data

Secon(ar" Data



Pri'ar" Data6

An" infor'ation that i$ co##ecte( afre$h an( for the fir$t ti'e i$ ca##e( Pri'ar"

(ata 4The +ri'ar" (ata ha++en to 0e ori3ina# in character4 The

Infor'ation i$ 3athere( fro' concerne( e'+#o"ee$4 The e'+#o"ee$ an('ana3er of the financia# (e+art'ent ha!e +ro!i(e( the infor'ation nee(e( for

the $t/("4

Secon(ar" Data6

Infor'ation 2hich ha$ a#rea(" 0een co##ecte( 0" $o'e0o(" e#$e or $o'e other

a3enc" 2ith (efinite +/r+o$e an( 2hich ha$ a#rea(" 0een +roce$$e( i$ ca##e(

$econ(ar" (ata4 The $econ(ar" (ata for the $t/(" ha!e 0een 3athere( fro' the

0a#ance $heet$5 +rofit an( #o$$ acco/nt$ ann/a# re+ort$ an( other 0oo?$ an(

'an/a#$ of the BP& LTD4

LIMITATIONS OF TE STUDY 6

E!er" $t/(" i$ con(/cte( /n(er certain #i'itation$4 The $t/(" re#ate$ on#" to

financia# (ata an( other area$ are not ta?en into con$i(eration4 The $t/(" i$

carrie( o/t on#" for a +erio( of = 'onth4 It 2a$ not +o$$i0#e to 3et cent +ercent

correct infor'ation4 The re$earch 2a$ 'a(e accor(in3 to the infor'ation

a!ai#a0#e fro' re#ate( (e+art'ent$ an( thro/3h ann/a# re+ort$ +/0#i$he(4 The

$ent $t/(" co!er$ on#" for a +erio( of fi!e "ear$4 So the ana#"$i$ 2i## 0e 'a(e onthi$ 0a$i$4

=>>;7=>>

=>>7=>>

=>>7=>>:

=>>:7=>8>

=>8>7=>88



CAPTER7=

INDUSTRY PROFILE

COMPANY PROFILE

INDUSTRY PROFILE

BP& i$ a $/0$i(iar" of BEL )Bharat ea!" E#ectrica#$ Lt(*5 na!aratna Centra#

P/0#ic Sector Enter+ri$e an( ea!" E#ectrica# E1/i+'ent Con3#o'erate4

MARKET PROFILE67

In a((ition to BP& #e3ac" +ro(/ct$ $/ch a$ +roce$$ +#ant$5 co'0/$tion $"$te'$5

0oi#er$5 cr"o3enic e1/i+'ent$ for refinerie$5 ferti#ier +#ant$5 $tee# +ant$ etc5 2ith the

ta?eo!er of the co'+an" 0" BEL5 the co'+an" (i!er$ifie( into 'an/fact/rin3

e1/i+'ent$ re1/ire( for +o2er 3eneration +#ant$ in an( a0roa(4

CUSTOMER PROFILE67

BP&S c#iente#e inc#/(e$7 P/0#ic5 Pri!ate5 Co7o+erati!e Sector or3aniation$ in

a#'o$t a## the core $ector of econo'" $/ch a$ a## the ferti#ier +#ant$5 +etro#e/'

refinerie$ an( $tee# +#ant$ in In(ia an( a0roa(4 No25 2ith the (i!er$ification a## 'a,or

+o2er +#ant$ in In(ia4 Other 'a,or c/$to'er$ are fro' +a+er5 che'ica#$5 (efence5

$+ace $ector$4



COMPETITOR PROFILE

In the area of +roce$$ +#ant6 L%T5 GR En335 L#o"($ $tee#5 ISGEC5

@ohn Tho'$on5 Go(re, etc

In the area of cr"o3enic$6 ICCP5 INO5 Shan3hai$ oJ"3en5 L%T5Lin(a5 &@U5 E$$ar5 LINDE5 Air

+ro(/ct$5 Ko0e5 itachi5 OPM5 PraJair

In the area of co'0/$tion $"$te'6 ISGEC5 Ba0coc? Ther'aJ5 I3nif#/i( 0oi#er$5

ABL L%T KTI5 Ther'aJ etc

COMPANY PROFILE

EAD OFFICE67 &i$a?ha+atna'5 An(hra Pra(e$h4

BRANC OFFICE6 7 M/'0ai5 Chennai5 Ne2 De#hi

Bharat ea!" P#ate$ an( &e$$e#$ Lt(5 it i$ a +/0#ic Li'ite( Co'+an"4 It i$ a ,o0 or(er<

$ho+ +ro(/ction in(/$tr"4 Accor(in3 to c/$to'er $+ecification$ an( re1/ire'ent$ it

+ro(/ce$ !ario/$ +ro(/ct$4 Fore $eein3 the co/ntr"$ nee( for fa0ricatin3 e1/i+'ent of

an eJc#/$i!e Factor" 2ith the 'ain o0,ect of re(/cin3 (e+en(ence on forei3n $/++#ier$

an( 0eco'e $e#f $/fficient o/r$e#!e$4

Th/$ the 0irth of BP& in the "ear 8:;; to 'eet the (e'an($ of +roce$$ e1/i+'entfor core in(/$tr" #i?e Ferti#ier$5 +etroche'ica#$5 +etro#e/' an( other che'ica#

in(/$trie$ initia##"4 BP& /$in3 (ifferent t"+e$ of 'ateria#$ 'an/fact/re( an(

$/++#ie( $e!era# 0/i#t e1/i+'ent$ $/ch a$ +re$$/re !e$$e#$5 heat eJchan3er$5 co#/'n$5

interna# tra"$ etc4 After eJec/tin3 $o'e i'+ortant or(er$5 BP& LTD 3aine( f/##

confi(ence of c/$to'er$ 2hich c#eare( the 2a" to enter the #ine of cr"o3enic

fie#(5 +/#+ coo?in3 +#ant5 e!a+oration +#ant an( in(/$tria# 0oi#er$ on a tota# t/rn?e"

0a$i$ 2hich of #ater "ear$ he#+e( in a/3'entin3 t/rno!er of the co'+an" an(

increa$in3 +rofita0i#it"4

INTRODUCTION ABOUT BP& LTD6

In the #i0era#ie( econo'" of In(ia an( in the era of 3#o0a#iation a co'+an" '/$t

rethin? it$ 0/$ine$$ 'i$$ion an( a## f/nctiona# $trate3ie$4 In the$e (a"$ co'+anie$ fin(

the'$e#!e$ co'+etin3 in a race 2here the roa( $i3n$ an( r/#e$ ?ee+ (a"$ 2hen it 2a$

-0/$ine$$ a$ /$/a#. co'+anie$ co/#( $/ccee( on#" 0" ha!in3 inno!ati!e i(ea$

co'0ine( 2ith 0" effecti!e financia# 'ana3e'ent4

Therefore5 it i$ not $/r+ri$in3 that to(a"$ 2innin3 co'+anie$ are tho$e 2hich fore$ee

the f/t/re an( 'ana3e the finance effecti!e#"4 One can 'ana3e finance effecti!e#" 0"

'ana3in3 2or?in3 ca+ita#5 ca+ita# $tr/ct/re an( ta?in3 (eci$ion on ca+ita# 0/(3etin34



U#ti'ate#"5 finance i$ at it$ 0e$t a0o/t !a#/e a((in35 (e!e#o+in3 ne2 +ro(/ct$ an(

rai$in3 the 2or#($ $tan(ar($ of #i!in34

The hea!" en3ineerin3 in(/$tr" i$ a 'a,or $tren3th of an" econo'"4 The$e hea!"

en3ineerin3 in(/$trie$ 2hich +ro(/ce ca+ita# 3oo($ are the 'o$t 'o(ern of the entire

in(/$tria# 3ro/+4

In In(ia the$e hea!" en3ineerin3 in(/$trie$ occ/+" a cr/cia# ro#e in it$ econo'ic

(e!e#o+'ent in !ie2 of the h/3e in!e$t'ent a$ 2e## a$ the critica# i'+ortance to

nation4 The$e in(/$trie$ are 'o$t#" confine( to the +/0#ic $ector on#"4 BP& Lt(4 i$ the

#ar3e$t fa0ricator of +roce$$ e1/i+'ent in In(ia for the +etro#e/'5 che'ica# an( a##ie(

in(/$trie$4 It i$ f/##" o2ne( 0" the 3o!ern'ent of In(ia an( i$ 'ana3e( 0" an

a/tono'o/$ 0oar( of (irector$4

Sit/ate( in the Cit" of (e$tin" of &i$a?ha+atna' on the 2e$tern $ee coa$t of the

Deccan P#atea/5 BP& i$ acce$$i0#e 0" roa(5 rai#5 $ea an( i$ 2e## connecte( to a##

'etro+o#itan citie$ 0" air4

BP&5 &i$a?ha+atna' i$ a +/0#ic $ector /n(erta?in3 BP& ha$ 0een $e#ecte( for the

$t/("4 The to+ic $e#ecte( i$ -A $t/(" on Wor?in3 Ca+ita# Mana3e'ent.4

Bharat ea!" +#ate$ % &e$$e#$ Lt(45 $tarte( off in 8:;; a$ f/##" o2ne( Go!ern'ent

Co'+an" for De$i3n5 Man/fact/re % S/++#" of ca+ita# e1/i+'ent re1/ire( for +roce$$

in(/$trie$ in the core $ector $/ch a$ ferti#ier$5 oi# refinerie$ % +etroche'ica#$ etc4 Sri

D4 San,ee!a""a #ai( the fo/n(ation $tone5 the then Mini$ter of In(/$tr" on th @an 8:;

in &i$a?ha+atna'4 It co'e$ /n(er the +/r!ie2 of the De+art'ent of ea!" In(/$tr"5

Mini$tr" of In(/$tr"4

With the technica# co##a0oration of SKODA EJ+ort Co'+an" of Cecho$#o!a?ia in the

"ear 8:;5 it 3ot eJ+erti$e an( 3/i(ance for e$ta0#i$hin3 the +ro,ect an( for the De$i3n

% 'an/fact/re of !ario/$ +roce$$ e1/i+'ent$4 BP& 0eca'e a f/##" o2ne( $/0$i(iar"

of Bharat ea!" E#ectrica#$ Lt(4

Licen$e( in$ta##e( ca+acit" i$ ==8>MT4 The initia# ca+ita# o/t#a" i$ R$4849 crore$4 The

+ro(/ct 'iJ inc#/(e( heat eJchan3er$5 co#/'n$5 an( +re$$/re !e$$e#$5 Stora3e !e$$e#$5

+i+in3 etc4 D/rin3 the "ear of it co''ercia# +ro(/ction i4e4 8:878:= the t/rno!er 2a$

,/$t R$ 9 #a?h$4 In 8::;7: it ha$ recor(e( on t/rno!er of R$ =::: #a?h$ i4e4 a## ti'e

hi3h4 La$t Fi!e "ear +erfor'ance i$ +ro(/ce( here /n(er4



PYSICAL OUTPUT

S# Year Licen$e( Ca+ In$ta##e( Ca+acit" Achie!e( T<o )R$7Cr$*

8 =>>87>= ==8> MT ==8> MT 8: MT =

= =>>=7> ==8> MT ==8> MT > MT 8

=>>7> ==8> MT ==8> MT =8> MT ;>

=>>7>9 ==8> MT ==8> MT ;>8> MT 8>:

9 =>>97>; ==8> MT ==8> MT = MT 8==

; =>>;7> ==8> MT ==8> MT >8 MT 8>

=>>7> ==8> MT ==8> MT 88 MT 8>

=>>7>: ==8> MT ==8> MT 9; MT

: =>>:78> ==8> MT ==8> MT 98>> MT 8>

8> =>8>788 ==8> MT ==8> MT

8==:

MT 8

R$ #a?h$

De$cri+tion

=>8>788

=>>:78> =>>7>: =>>7> =>>;7> =>>97>;

I GTO )Net of EJci$e D/t"*

8=;>4

;4:> =84= 884; 89;4: 8>:=4

II &a#/e A((e( ) I7 II*

9;4

9994= 8:4> 9;4;; ;>84; ;4>

III Gro$$ Mar3in)PBDIT*

94>8

7:4= 748: 7>:4= ==489 784=

I& Gro$$ Profit)PBIT*

=4>:

78>8:4> 7:9=4 7=>4; =;94 78:48:

& EJtra Or(inar" Inco'e

4

>4>> =>>4= >4>>

>4>> >4>>

&I Profit 0efore TaJ )PBT*

4=

79>4:: :;:=4:7994>

7;:4 784:>

&II Inco'e TaJ

>48;

8>4> 9488;4>9

>4>> >4>>



&III Profit after TaJ )PAT*

49;

79:4;: :;949= 79;>49 7;:4 784:>



ISTORY OF BP&

Licen$e( to $tart con$tr/ction of +#ant at &i$a?ha+atna' in 8:;;5 BP& confronte(

'an" o0$tac#e$ $/ch a$ 2ater +ro0#e'$5 fre1/ent +o2er c/t$ 0oth at initia# $ta3e a$

2e## a$ at the ti'e 2hen con$tr/ction 2a$ 3oin3 on4

In $+ite of a## tho$e o0$tac#e$ the ci!i# an( $tr/ct/ra# 2or? 2a$ co'+#ete( to a 'a,or

eJtent 0" the en( of 8$t March8:;4The #icen$e( an( in$ta##e( ca+acit" i$ ==8> MT4

The initia# ca+ita# o/t#a" 0ein3 R$4849 crore$4 Later after Co'+#etion of in$ta##ation

2or? BP& ha( recei!e( or(er$ for the 8$t ti'e fro' M<S BOKARO $tee# +#ant an(

Ferti#ier Cor+oration of In(ia #t(45 for fa0rication an( $/++#" of e1/i+'ent4

The factor" at initia# $ta3e$ ha( $/ffere( a #o$$ in fa0rication an( (e#i!er" of

e1/i+'ent to c/$to'er$ (/e to (e#a" in the +roc/re'ent of re1/ire( ra2 'ateria#4 The

factor" 2a$ $che(/#e( to 3o into +ro(/ction initia##" in @/#" 8:;5 0/t (/e to 0ac?#o3 of

$o'e /nco'+#ete( con$tr/ction 2or? the Co'+an" 2ent into co''ercia# +ro(/ction

on#" in 8:84 Sir K4C4Panth then the Mini$ter of State for $tee# an( hea!" en3ineerin3ina/3/rate( the initia# +ro(/ction in 8:> 2here $o'e +ro(/ction faci#itie$ ha(

a#rea(" 0een e$ta0#i$he( 0" in$ta##ation of fa0ricatin3 'achiner" #i?e 0en(in3 ro##$5

2e#(in3 e1/i+'ent etc4

D/rin3 the fir$t "ear +ro(/ction5 the co'+an" ha$ inc/rre( a #o$$ of R$ =4 #a?h$

'ain#" (/e to inci(ence of fiJe( eJ+en(it/re a++ortion7a0#e to Pro(/ction #i?e

e$ta0#i$h'ent (e+reciation etc4 The $a'e #o$$ +o$ition 2a$ contin/e( ti## 8: 7 8::4

The contin/o/$ #o$$e$ +/t BP& far fro' +rofiteerin3 co'+anie$4



In 8::7> BP& ha$ 2itne$$e( $e!era# $i3nificant e!ent$ 0oth on financia# a$ 2e## a$

+ro(/ction front$4 BP& for the fir$t ti'e in it$ "ear$ of co''ercia# +ro(/ction

attaine( a 0rea?7e!en #e!e# 2ith a 'ar3ina# +rofit of R$ 4>: #a?h$ a$ a3ain$t a net

#o$$ of R$ 8=: #a?h$ +ro,ecte( at the 0e3innin3 of the "ear4

D/rin3 8:>78 the co'+an" for the $econ( con$ec/ti!e "ear5 earne( a net Profit )aftertaJ* R$ 4=8 #a?h$ fro' it$ o+eration$4 Thi$ "ear BP& Lt( o+eration$ inc#/(e(

'an/fact/rin3 of !er" critica# an( $o+hi$ticate( e1/i+'ent to core in(/$trie$4 A3ain in

8:87= the co'+an" o+eration$ re$/#te( in a net +rofit of R$ ;>48: #a?h$ a$ a3ain$t a

0/(3ete( #o$$ of R$ =><7 #a?h$4

Ma,or +en(in3 intere$t on #oan fro' GOI 2a$ c#eare( in thi$ "ear4 D/rin3 8:=7

BP& reache( 8>> tar3et +ro(/ction an( re$/#te( in a net +rofit of R$8>48 #a?h$

a$ a3ain$t the 0/(3ete( #o$$ of R$ :9 #a?h$4 With +re$ti3io/$ 2or? or(er$ fro'

&i$a?ha+atna' $tee# +#ant for $/++#" of air an( 3a$ $e+aration +#ant$ BP& cro$$e( a

tar3et +ro(/ction an( it$ o+eration$ re$/#te( in a net +rofit of R$ 99 #a?h$4

A3ain in 8:7 BP&$ +ro,ect$ 2ere $/cce$$f/##" fa0ricate( an( it$ +rofit$ too? an

/+2ar( tren( an( it$ o+eration$ re$/#te( in PAT of R$ =:> #a?h$4 It 2a$ eJ+ecte( to

e'er3e an increa$in3 tren( in the +rofit$ of BP& for the "ear 8:7:4

o2e!er5 (/e to chan3e$ in the econo'" 2ith entr" of 3#o0a# +#a"er$ in 8::>$5

increa$e( +ri!ate $ector co'+etition5 intro(/ction of LSTK conce+t 0" c/$to'er$ an(

Go!ern'ent$ +o#ic" to2ar($ PSU i4e4 i'+#e'entation of &RS an( +ro+o$a#$ for

(i$in!e$t'ent5 the Co'+an" ha$ $/ffere( h/3e #o$$e$ in =>>=7> an( =>>7>4 B" !irt/e

of thi$5 entire net 2orth of the co'+an" 3ot ero(e(4 Thi$ re$/#te( for reference of the

co'+an" to BIFR in A/3/$t =>>4

&ario/$ re!i!a# +ro+o$a#$ trie( after =>> for reha0i#itation of the co'+an" thro/3h

o/tri3ht $a#e5 'er3in3 2ith other PSU$5 $tan( a#one re!i!a# etc4 o2e!er5 (/e to

chan3e in Go!ern'ent +o#ic" after =>>9 an( con$i(erin3 the +otentia# of BP&5 GOI

ha$ fina##" 'a(e the co'+an" a$ $/0$i(iar" of BEL5 a Navaratna PSU4

AN O&ER&IEW OF TOP MANAGEMENT6

Fro' Ma" =>> the co'+an" 0eca'e $/0$i(iar" of BEL4 At Cor+orate #e!e# the

co'+an"$ affair$ are 'ana3e( 0" the Boar( con$i$t of f/## ti'e Mana3in3 Director

an( CMD5 BEL a$ the chair'an of the 0oar(4 In a((ition5 8 EJ officio Director fro'DI )a('ini$trati!e 'ini$tr"* % = f/nctiona# Director$ a#$o con$tit/te the Boar(4

Techno#o3" % Mar?et I$$/e$6

The +re$ent +#ant % 'achiner" % infra$tr/ct/re /ti#iin3 0" the co'+an" i$ of >

"ear$ o#( an( ha!e 0een f/##" (e+reciate(4 At +re$ent the interna# #ea( ti'e i$ hi3h

2hen co'+are to co'+etitor$4 Si'i#ar#" in the area$ of en3ineerin3 the #ea( ti'e

re1/ire( for (e$i3n an( (ra2in3$ i$ to 0e re(/ce( 2hich re1/ire$ i'+#e'entation of

$o+hi$ticate( +roce$$ (e$i3n $oft2are4



A$ +er reha0i#itation $che'e a++ro!e( 0" GOI5 BEL 2i## in!e$t R$ =8 crore$ for

'o(erniation of the +#ant in the "ear$ =>8878= to =>8784

Pro(/ct Di!er$ification

The co'+an" ha$ /n(erta?en $e!era# EPC contract$ on EPC<LSTK 0a$i$ at !ario/$

#ocation$ in In(ia an( a0roa(4 The Co'+an" R%D De+art'ent ha$ (e!e#o+e(

techno#o3" for 'an/fact/re of co'+act eat EJchan3er for the #i3ht Co'0at Aircraft

)LCA* /n(er the f/n(in3 0" Aerona/tica# De!e#o+'ent A3enc" )ADA*4 BP& no2

2ith the techno#o3" ac1/ire( fro' BEL )o#(in3 Co'+an"*5 (i!er$ifie( into +o2er

+#ant e1/i+'ent5 na'e#" RSG Boi#er$5 Dearator$ etc4

Re!i!a# an( T/rnaro/n( of the co'+an"6

On 09.05.2008, the company was orma!!y ta"en over #y BHE$, a navaratna %&', as per

the rev(va! scheme sanct(one) #y *OI.

The $a#ient feat/re$ of re!i!a# $che'e are a$ 0e#o24

)A$ +er the Go!t4 of In(ia5 Mini$tr" of ea!" In(/$trie$ % P/0#ic Enter+ri$e$5

De+art'ent of ea!" In(/$tr"5 #etter F4No4 8 )88* < =>> PE )I&* Date( >4>94=>>*

). GOI 2i## 2ai!e an( 2rite off #oan an( intere$t a'o/ntin3 to R$4894;8 Cr$4

*. GOI to +ro!i(e 3/arantee a'o/ntin3 to R$4=9> Cr$ to ena0#e BP& torai$e 0on($ fro' the (o'e$tic 'ar?et $/0,ect to the con(ition$ a$ inti'ate(

!i(e thi$ office #etter of e!en no4 (ate( =:4>4=>>

+. The entire +ai( /+ ca+ita# of BP& to the t/ne of R$4 4: Cr$ 2o/#( 0e

tran$ferre( to BEL at a notiona# !a#/e of Re4 8<74

. BEL 2i## ta?e o!er 0oth the a$$et$ an( #ia0i#itie$ )inc#/(in3 contin3ent

#ia0i#itie$* of BP& a$ a 3oin3 concern4

-. The ta?eo!er 2i## entai# the fo##o2in3 conce$$ion$ fro' the

. Go!ern'ent of An(hra Pra(e$h6

a* Tran$fer of tit#e of #an( 'ea$/rin3 ;4 acre$ in +o$$e$$ion of BP& a$ 3ift

a#on3 2ith 2ai!er of re3i$tration an( $ta'+ (/t"4

0* Wai!er of Sa#e$ TaJ arrear$ a'o/ntin3 to R$4=48; Cr$

c* Wai!er of NALA TaJ of R$4 #a?h an(

(* Wai!er of (/e$ to2ar($ Water TaJ5 Pro+ert" TaJ5 an( &acant Lan( TaJ of

R$44:; Cr$4



/. The con$orti/' of Ban?er$ ha$ a3ree( for One7Ti'e7Sett#e'ent BEL 'a"

ta?e ti'e#" a(!anta3e of the offer4

0. BEL 2i## inf/$e at #ea$t R$4 Cr$ a$ a((itiona# E1/it" Ca+ita# an( a(e1/ate

f/n($ for /+73ra(ation of 'an/fact/rin3 faci#itie$5 Ca+eJ an( Wor?in3

Ca+ita#4

:4 BEL 2i## ta?e o!er BP& 2ith a## it$ e'+#o"ee$4

8>4 DI 2i## a$$i$t BEL in $ett#in3 the (i$+/te( (e'an($ re#atin3 to eJci$e5

c/$to'$5 inco'e7taJ etc45 on a ca$e to ca$e 0a$i$4

884 BEL 2i## ta?e7o!er BP& a$ it$ $/0$i(iar" an( ta?e a## +o$$i0#e $te+$ for it$

re!i!a#4 The 'atter re3ar(in3 recon$tit/tion of the Boar( of Director$ i$ /n(er

con$i(eration of the co'+etent a/thorit"4

The Sanctione( Reha0i#itation7c/'7Ta?e7o!er Sche'e

The Re!i!a# Sche'e en!i$a3e$ ta?e7o!er of Bharat ea!" P#ate an( &e$$e#$ Li'ite(

)BP&*5 a Go!ern'ent of In(ia Enter+ri$e an( S/0$i(iar" of Bharat Yantra Ni3a'

Li'ite( )/n(er The Mini$tr" of ea!" In(/$trie$ an( P/0#ic Enter+ri$e$* 0" Bharat

ea!" E#ectrica#$ Li'ite( )BEL*5 a Go!ern'ent of In(ia Enter+ri$e )a#$o /n(er the

Mini$tr" of ea!" In(/$trie$ an( P/0#ic Enter+ri$e$* a$ it$ $/0$i(iar"4

A$ +er the $che'e5 the entire /n(erta?in3 of BP& $ha## 0e tran$ferre( to BEL a$

it$ $/0$i(iar"4 The entire +ai(7/+ ca+ita# of R$ 4: Cr$ 2o/#( 0e tran$ferre( to

BEL at a no'ina# !a#/e of Re 8<7 4

BEL 2i## ta?e7o!er 0oth a$$et$ an( #ia0i#itie$ )inc#/(in3 contin3ent #ia0i#itie$*

of BP& a$ a 3oin3 concern4 BEL 2i## ta?e7o!er BP& 2ith a## it$ e'+#o"ee$4

BEL 2i## inf/$e at #ea$t R$ Cr$ a$ a((itiona# E1/it" Ca+ita# an( a(e1/ate f/n($

for /+73ra(ation of 'an/fact/rin3 faci#itie$5 CAPE an( 2or?in3 ca+ita#4 A0o!e cite(

-Sanctione( Reha0i#itationo!er7Sche'e. ha$ 0een fo/n( acce+ta0#e to a## the

e'+#o"ee$ an( $ec/re( cre(itor$4

A0o!e $che'e 2a$ a++ro!e( 0" BIFR in Octo0er =>8>4



S"ner3" of B/$ine$$ 0et2een BEL an( BP&6

In a((ition to i'+ro!e'ent in +re$ent 0/$ine$$ of BP&5 the ta?e7o!er 0" BEL 2i##

ha!e the fo##o2in3 a(!anta3e$6

• Mana3eria# an( 'ar?etin3 $/++ort fro' BEL4

• Di!er$ification into i3h Pre$$/re Po2er Boi#er$4

• Techno#o3ica# S/++ort for ne2 +ro(/ct$4

• Financia# S/++ort for /+ 3ra(ation of 'an/fact/rin3 faci#itie$5 Ca+eJ

an( Wor?in3 Ca+ita# Re1/ire'ent$4

• En$/re( f#o2 of ne2 or(er$4

• S"ner3" 0et2een the t2o or3aniation$ in !ie2 of $i'i#arit" of

+ro(/ct$<techno#o3ie$4• B/$ine$$ a(!anta3e (/e to eJce##ent Bran( I'a3e of BEL4

Factor$ for re!i!a# of BP& thro/3h ta?eo!er 0" BEL6

BEL on it$ +art ha$ 2or?e( o/t the !ia0i#it" of the BP& ta?eo!er5 ta?in3 into

con$i(eration the +oint$6

BEL to enhance the ca+a0i#itie$ % ca+acitie$ of BP& to 0/i#( /+on it$ $tren3th$ in

the eJi$tin3 0/$ine$$ of $/++#"in3 +roce$$ e1/i+'ent to $ector$ #i?e Oi#5

Petroche'ica#$5 Ferti#ier$ etc4

In a((ition5 BEL +#an$ to enhance BP&$ ca+a0i#itie$ % ca+acitie$ in the area of

in(/$tria# 0oi#er$5 heat eJchan3er$5 con(en$er$ etc4In ca+ita# in!e$t'ent of R$4 =9 Cr$

i$ en!i$a3e( for the /+73ra(ation of re1/ire( faci#itie$4

EJ+ecte( 3ro2th in the 'ar?et for BP&$ +ro(/ct$ 5 e$+ecia##" in +roce$$

e1/i+'ent an( cr"o3enic$4 A$ +er In(/$tr" ana#"$i$5 or(er$ 2orth R$4 8>> Cr$ +er

ann/' are eJ+ecte( in the neJt fi!e "ear$ fro' oi# Refinerie$ an( Petroche'ica#+ro,ect$ to f#o2 to the en3ineerin3 % fa0rication in(/$tr"4

With a 'ar?et $hare of BP& of 89 8 in the +a$t in thi$ $e3'ent5 BP& can

0eco'e 'ore confi(ent in a((re$$in3 thi$ 'ar?et o!erco'in3 it$ financia# con$traint$

0" +artici+atin3 in $o'e of the ten(er$ 2ith BEL $/++ort4

A$ $/ch5 BP&$ financia# 2ea?ne$$ 2o/#( 0e 'iti3ate( once it$ re$tr/ct/rin3 i$

co'+#ete( an( BEL ta?e$ o!er it$ f/nctionin34 The Ca+ti!e Po2er Pro,ect$ )CPP*

an( In(/$tria# 0oi#er$ 'ar?et $e3'ent i$ eJ+ecte( to 3ro2 fro' aro/n( R$4 8>> Cr$

in =>>7> to an e$ti'ate( #e!e# of R$4 =>> Cr$ in neJt fi!e "ear$ 0a$e( on +ro,ecte(

8= in(/$tria# 3ro2th in the co'in3 "ear$4



BP& can tar3et a $hare of =9 > of thi$ 'ar?et5 +ro!i(e( 'ar?et eJ+ectation$

on (e#i!er" an( +rice are f/#fi##e(4 C/rrent#"5 the Trich" /nit of BEL i$ con$traine(

in tar3etin3 the in(/$tria# 0oi#er$ 'ar?et (/e to hea!" #oa( of 0oi#er or(er$ fro'

the /ti#it" $e3'ent4 In thi$ re3ar(5 BP& can 0e (e!e#o+e( a$ a (e(icate( center for

in(/$tria# 0oi#er$ 0" BEL4

The $a#e$ t/rno!er fro' thi$ $e3'ent ha$ 0een +ro,ecte( to reach to #e!e# of R$5 >>

Cr$ 0" the fifth "ear after f/nctiona# ta?e o!er 0" BEL5 0a$e( on factor$ #i?e

increa$e( !o#/'e5 0etter financia# ca+a0i#itie$ #ea(in3 to #o2er 2or?in3 ca+ita#

0orro2in3 co$t$ etc4

B P & 6 A N O & E R & I E W 4

INTRODUCTION

Incor+oration of the Co'+an" 6 8:;;

Pri'ar" O0,ecti!e 6

Technica# Co##a0oration +ro!i(e( 0" 6 SKODA5 Cecho$#o!a?ia4

Co''ence'ent of Con$tr/ction 6 8:;

Co'+#etion of Con$tr/ction 6 8:8Co''ence'ent of Pro(/ction 6 8:8

Initia# Pro,ect Co$t 6 R$4 849 core$

Initia# Pro(/ct MiJ 6 eat EJchan3er$5 co#/'n$5

Pre$$/re !e$$e#$5 Techno#o3ica#

Str/ct/re$5 Pi+in3 etc4

In$ta##e( Ca+acit" 6 =5 =8> M4T4

T/rno!er for the "ear =>>:78> 6 R$4 8> corer$

R E S O U R C E S

PRODUCTION FACILTIES

Factor" Area 6 8: Acre$

Tota# Co!ere( Area 6 :>5>>> $14 Meter$Co!ere( area of Pro(/ction Sho+$ 6 9;5>>> $14 Meter$

Po2er Re1/ire'ent 6 5>>> KW fro' APSEB

No4 of Anci##ar" Unit$ 6 Aro/n( a Doen

"o manufacture custom built 1apital23uipment for the process of Industries such as 4ertili5ers,(etrochemicals, (etroleum



IMPORTANT MACINERY

The 'aJi'/' crane #iftin3 ca+acit" i$ 8=> tone$5 0/t #oa($ /+ to =9> tone$ can 0e

#ifte( 2ith i'+ro!i$ation4 MaJi'/' Ro##in3 ca+acit" i$ ;>'' in co#( con(ition an(

8>'' in hot con(ition4 BP& ha$ the #ar3e$t heat treat'ent f/rnace in In(ia5 the

$ie 0ein3 Meter$ 2i(th5 949 'eter$ hei3ht an( ;49 'eter$ #on34

One 'ore f/rnace of =>> Ton ca+acit" an( 89'tr$4 Bo3ie #en3th ha$ 0een a((e(4 Other

critica# e1/i+'ent a!ai#a0#e 2ith BP& are Dee+ Dra2in3 "(ra/#ic Pre$$ of 8;>>T

ca+acit" Sin3#e S+in(#e CNC Dee+ ho#e Dri##in3 Machine 2ith G/n Dri##in3

attach'ent an( =No$4 CNC (ri##in3 'achine$ 2hich can e'+#o" con!entiona# (ri##$4

Another CNC Dee+ ho#e (ri##in3 'achine ha$ 0een in$ta##e( recent#" 0" MT4

A n/'0er of We#(in3 Rotator$ of ca+acit" /+ to =9> Tone$4 We#(in3 e1/i+'ent $/ch a$

'an/a# Arc5 S/0 'er3e( Arc5 TIG5 MIG5 P#a$'a inc#/(in3 the #ate$t hi3h

+ro(/cti!e 2e#(in3 e1/i+'ent $/ch t/ne hea( $/0'er3e( arc 2e#(in35 an( Bi7

catho(e TIG 2e#(in3 4T/0e finin3 Machine4A n/'0er of !ertica# an( horionta#

0orin3 'achine$ 2ith a 'aJi'/' ca+acit" of 9 'eter$ (ia an( =>>'' $+in(#e (ia

re$+ecti!e#"4

Different t"+e$ of Non7(e$tr/ction Te$tin3 E1/i+'ent4 We## e1/i++e( Ph"$ica# an(

Che'ica# La0oratorie$4 Metro#o3" $ection etc4 CL S/+er7Mini Co'+/ter5 T2o Mini

co'+/ter$ 9; CAD Machine$ an( 88 Per$ona# co'+/ter$4

MANPOWER )A$ on 8$t Mar5 =>88*

•

Wor?'en < Staff 6• S/+er!i$or$ 6

• EJec/ti!e$ 6

• Tota# 6 88>:

EMPLOYEE WELFARE AMENITIES

• To2n$hi+ Area 7 898 Acre$

• No4 of /arter$ 7 88:=

•=> 0e( o$+ita#

• Protecte( Water S/++#"

• Un(er3ro/n( (raina3e $"$te'

• En3#i$h 'e(i/' $choo# 2ith CBSE S"##a0/$

• Te#/3/ 'e(i/' $choo# 2ith AP State S"##a0/$

• S+ecia# $choo# for 'enta##" han(ica++e( chi#(ren4

• &ocationa# trainin3 centre for 'enta##" han(ica++e(

• Co''/nit" center for c/#t/ra# acti!itie$ % $+ort$ o+en air theatre faci#itie$

• Ka#"ana Man(a+a'4



B" a0$or0in3 ?no27ho2 fro' !ario/$ 2or#( reno2ne( co##a0orator$5 BP& /+3ra(e(

it$ $tat/$ fro' a 'ere fa0ricator of +roce$$ e1/i+'ent to that of an en3ineerin3

co'+an" of internationa# re+/te4

PRO@ECTS OF NATIONAL IMPORTANCE EECUTED<UNDER EECUTION

S4NO4 CUSTOMER PRO@ECT<EUIPMENT

84 IOCL5 Pani+at "(ro crac?er reactor$7No$

=4 IOCL5 Pani+at Reactor5 Re3enerator % Office Cha'0er

4 IOCL5 Pani+at Refor'er % WR Pac?a3e

4 IOCL5 M/'0ai 89> MT Ca+acit" LPC 0/##et$

94 IOCL5 Chennai S+here

;4 BOKARD STEEL PLANT5

Bo?aro

Ar3on Reco!er" /nit

4 NRL5 N/'a#i3arh Air Fin coo#er$<SS C#a( &e$$e#$5 S+here$

etc4

4 PCL5 &i$a?ha+atna' CDU eater 2ith AP S"$te'<&DU

eater

:4 PCL5 &REP II&i$a?ha+atna'

C#a(<CS Co#/'n$<CS heat EJchan3er$ etc

8>4 PCL5 &i$a?ha+atna' Co70oi#er

884 PCL5 &i$a?ha+atna' Re!a'+in3 of 9>TP oi# % 3a$ fire( 0oi#er

8=4 PCL5 M/'0ai 9> TP Boi#er

84 BPCL5 M/'0ai Nitro3en P#ant

84 "/n(ai ea!" In(/$trie$5

Ne2 De#hi

Cr"o Nitro3en +#ant

894 S+ace a++#ication centre5

Ah'a(a0a(

9>9' Dia ther'a# !ac//$ $"$te'

8;4 TECNIMONT ICB LTD4

M/'0ai

Nitro3en +#ant

84 OSWAL CEMI

FERTILIHER LTD7Para (ee+

Wa$te eat LP 0oi#er$



A$ a +art of tota# 1/a#it" 'ana3e'ent +ro3ra'5 BP& ha$ ac1/ire( ISO :>>8

certification (/rin3 the "ear 8::7:5 +artic/#ar#" to 0oo$t /+ it$ eJ+ort$ an( to 0e

co'+etiti!e in the internationa# 'ar?et4

• Re7certification of ISO :>>8 ha$ 0een o0taine( in Se+te'0er5 8::;4

• In reco3nition of hi3h $tan(ar($ of o/r 1/a#it"5 confe(eration of In(ianin(/$tr" )CII*5 So/thern Re3ion5 AP +re$ente( the /a#it" A2ar(4

RESEARC % DE&ELOPMENT

Re$earch % De!e#o+'ent (e+art'ent 2a$ e$ta0#i$he( in 8:9 an( i$ 2e## e1/i++e(

2ith hi3h tech e1/i+'ent to cater to A++#ie$ Re$earch an( Pro(/ct De!e#o+'ent4

R%D ha$ (e!e#o+e( 8; Pro,ect$ $o far4 So'e of the +ro(/ct$ co''ercia#ie( inc#/(e6

• Titani/' Ano(e$

•Titani/' Air Bott#e$

• Cr"o3enic &at$

• In(i!i(/a# /ic? Freein3 Unit

• S/+er In$/#ate( Pi+in34

• S/+er In$/#ate( Cr"o3enic Stora3e tan?$

• D4M4 Water P#ant$

A +re$ti3io/$ or(er for De!e#o+'ent of eat EJchan3er$ for Li3ht Co'0at Aircraft

)LCA* Pha$e7II ha$ 0een recei!e( fro' Aerona/tica# De!e#o+'ent A3enc"5 Ban3a#ore4

•So'e of the A2ar($ recei!e( for eJce##ence in R%D inc#/(e6

• CIS A2ar( for R%D achie!e'ent in 8::=7:4

ANCILLARISATION

BP& ha$ (e!e#o+e( $o'e anci##ar" in(/$trie$ in it$ !icinit" to cater to it$

re1/ire'ent$4 A+art fro' offerin3 $/fficient 2or? #oa( to the$e in(/$tria# /nit$5

BP& ha$ 0een a$$i3nin3 2or? to a n/'0er of $'a## $ector in(/$trie$4 BP&

+ro!i(e$ 'ateria#5 tran$+ortation an( in$+ection $er!ice$ to the Anci##arie$ to

he#+ the' ri$e to it$ 1/a#it" re1/ire'ent$4

PRESENT STRENGTS

• Financia#5 Mana3eria#5 Technica# 0ac?7/+ an( $/++ort of Na!aratna PSU5

BEL

• EJce##ent De$i3n % En3ineerin3 ca+a0i#itie$4

• State of the Art Man/fact/rin3 faci#itie$4

• Acco'+#i$he( i'a3e a$ a $/++#ier of /a#it" Pro(/ct$ in the (o'e$tic an(

internationa# 'ar?et$4

• i3h (e3ree of c/$to'er confi(ence4

• Techno#o3ica# tie7/+ arran3e'ent$4

• We## traine( an( 1/a#ifie( 2or? force an( En3ineer$4



• So/n( 2or? c/#t/re % har'onio/$ In(/$tria# Re#ation$4

• EJten$i!e co'+/teriation4

• Ca+a0i#it" to $/++#" Pro,ect$ % S"$te'$ on t/rn?e" 0a$i$4

• Pro,ect Mana3e'ent S?i##$4

PLANS % STRATEGIES

• To 3ro2 a$ an En3ineerin35 Proc/re'ent an( Con$tr/ction Co'+an"4

• To en#ar3e EJ+ort B/$ine$$4

• To re$ort to eJten$i!e co'+/teriation an( A/to'ation for re(/ction of c"c#e

ti'e5 i'+ro!e'ent of 1/a#it" an( re(/cin3 co$t$4

• To for3e $trate3ic 0/$ine$$ a##iance$ 2ith Internationa# Co'+anie$ to (eri!e

techno#o3ica# an( 'ar?etin3 a(!anta3e$4

• To $tri!e for contin/o/$ /+(atin3 of techno#o3ie$ to 0e on +ar 2ith

Internationa# Co'+anie$4

• To foc/$ on /'an Re$o/rce$ De!e#o+'ent4

• To chan3e the 2or? c/#t/re to 0e co'+ati0#e 2ith 'ar?et (e'an($4

CONSTRAINTS

• Non co'+/teriation < No ERP

• i3h a!era3e a3e of e'+#o"ee$ < no eJec/ti!e recr/it'ent $ince 8::

• Wor?in3 ca+ita# con$traint$

• Re+#ace'ent</+(atin3 of 'achiner"



CAPTER 7

TEORITICAL FRAMEWORK OF TE STUDY

WORKING CAPITAL MANAGEMENT

INTRODUCTION

E!er" 0/$ine$$ nee($ f/n($ for t2o +/r+o$e$ for it$ e$ta0#i$h'ent an( to carr" o/t it$

(a" to (a" o+eration$4 Wor?in3 ca+ita# refer$ to that +art of the fir'$ ca+ita#5 2hich i$

re1/ire( for financin3 $hort ter' or c/rrent a$$et$ $/ch a$ ca$h5 'ar?eta0#e $ec/ritie$5

(e0tor$ an( in!entorie$4 Wor?in3 ca+ita# i$ the a'o/nt of f/n($ to co!er the co$t of

o+eratin3 the enter+ri$e4

The 3oa# of 2or?in3 ca+ita# 'ana3e'ent i$ to 'ana3e the c/rrent a$$et$ an( c/rrent

#ia0i#itie$ of the fir' in $/ch a 2a" that a $ati$factor" #e!e# of 2or?in3 ca+ita# i$

'aintaine(4 Wor?in3 ca+ita# i$ the (ifference 0et2een the inf#o2 an( o/tf#o2 of f/n($4

Wor?in3 ca+ita# i$ a#$o ?no2n a$ re!o#!in3 or circ/#atin3 or $hort ter' ca+ita#4

MEANING AND DEFINITION OF WORKING CAPITAL



DEFINITION

Accor(in3 to Ra#+h Kenne(" an( Ste2ar( Mc M/##er -a $t/(" of 2or?in3

ca+ita# i$ of 'a,or i'+ortance to interna# an( eJterna# ana#"$i$ 0eca/$e of

it$ c#o$e re#ation$hi+ 2ith the c/rrent (a" to (a" o+eration$ of 0/$ine$$.4

MEANING6

Wor?in3 ca+ita# refer$ to the f/n($ in!e$te( in c/rrent a$$et$ i4e4 in!e$t'ent in $toc?$5

$/n(r" (e0tor$5 ca$h an( other c/rrent a$$et$4 C/rrent a$$et$ are e$$entia# to /$e fiJe(

a$$et$ +rofita0#" 4 For eJa'+#e a 'achine cannot 0e /$e( 2itho/t ra2 'ateria#4 Th/$

it i$ o0!io/$ that certain a'o/nt of f/n($ i$ a#2a"$ tie( /+ in ra2 'ateria#$5 2or? in

+ro3re$$ an( fini$he( 3oo($4 o2e!er5 the 0/$ine$$ a#$o en,o"$ cre(it faci#itie$ fro'

it$ $/++#ier$ 2ho 'a" $/++#" ra2 'ateria#$ on cre(it an( the fir' 'a" not +a"

a## the eJ+en$e$ i''e(iate#"4 Therefore5 certain a'o/nt of f/n($ i$ a/to'atica##"

a!ai#a0#e to finance the c/rrent a$$et$ re1/ire'ent$4 o2e!er the re1/ire'ent$ for

c/rrent a$$et$ are /$/a##" 3reater than the a'o/nt of f/n($ +a"a0#e thro/3h c/rrent

#ia0i#itie$ 4 In other 2or($5 c/rrent a$$et$ are to 0e ?e+t at a hi3her #e!e# than the

c/rrent #ia0i#itie$4

CONCEPTS OF WORKING CAPITAL

There are t2o conce+t$ of 2or?in3 ca+ita#

)a* Gro$$ 2or?in3 ca+ita#

)0* Net 2or?in3 ca+ita#

Gro$$ 2or?in3 ca+ita#

Gro$$ 2or?in3 ca+ita# refer$ to the fir'$ in!e$t'ent in c/rrent a$$et$4 C/rrenta$$et$ are the a$$et$5 2hich can 0e con!erte( into ca$h 2ith in an acco/ntin3 "ear

an( inc#/(e ca$h5 $hort7ter' $ec/ritie$5 (e0tor$ )acco/nt$ recei!a0#e$ or 0oo? (e0t$*5

0i##$ recei!a0#e$ an( $toc? )in!entor"*4

Net 2or?in3 ca+ita#

Net 2or?in3 ca+ita# refer$ to the (ifference 0et2een c/rrent a$$et$ An( c/rrent

#ia0i#itie$4 C/rrent #ia0i#itie$ are tho$e c#ai'$ of o/t$i(er$ 2hich are eJ+ecte( to

'at/re for +a"'ent 2ith in an acco/ntin3 "ear an( inc#/(e cre(itor$ )acco/nt$

+a"a0#e*5 0i##$ +a"a0#e an( o/t$tan(in3 eJ+en$e$4 Net 2or?in3 ca+ita# can 0e +o$iti!e

or ne3ati!e4 A +o$iti!e 2or?in3 ca+ita# 2i## ari$e 2hen c/rrent a$$et$ eJcee( c/rrent



#ia0i#itie$4 A ne3ati!e 2or?in3 ca+ita# 2i## occ/r 2hen c/rrent #ia0i#itie$ are in eJce$$ of

c/rrent a$$et$4

Li$t of c/rrent a$$et$ an( c/rrent #ia0i#itie$

CURRENT ASSETS CURRENT LIABILITIES

o Ca$h in han( Bi##$ +a"a0#e

o Ca$h at 0an? S/n(r" cre(itor$

o Bi##$ recei!a0#e$ Accr/e( eJ+en$e$

o S/n(r" De0tor$ Short ter' #oan$

o Stoc? Di!i(en( +a"a0#e

o Pre+ai( eJ+en$e$ Ban? o!er(raft

o Accr/e( inco'e Pro!i$ion for taJe$

o Short ter' in!e$t'ent$

CLASSIFICATION OF WORKING CAPITAL

Wor?in3 ca+ita# 'a" 0e c#a$$ifie( in t2o 2a"$4

On the 0a$i$ of conce+t

Gro$$ Wor?in3 Ca+ita#

Net Wor?in3 Ca+ita#

• On the 0a$i$ of ti'e

• Per'anent or FiJe( Wor?in3 Ca+ita#

• Re3/#ar Wor?in3 Ca+ita#

• Re$er!e Wor?in3 Ca+ita#

• Te'+orar" or &aria0#e Wor?in3 Ca+ita#

• Sea$ona# Wor?in3 Ca+ita#

• S+ecia# Wor?in3 Ca+ita#

SOURCES OF WORKING CAPITAL

There are t2o $o/rce$ of 2or?in3 ca+ita#4

Per'anent or FiJe(

The fiJe( +ro+ortion of 2or?in3 ca+ita# $ho/#( 0e 3enera##" finance( fro' the fiJe(

ca+ita# $o/rce$ #i?e

o Share$

o

De0ent/re$o P/0#ic (e+o$it$



o Retainin3 +rofit$

o Loan$ fro' financia# in$tit/tion$

=4 Te'+orar" or &aria0#e

Te'+orar" 2or?in3 ca+ita# re1/ire'ent of a concern 'a" 0e 'et fro' the $hort ter'$o/rce$ of ca+ita# #i?e

o Co''ercia# 0an?er$

o In(i3eno/$ 0an?er$

o Tra(e cre(itor$

o Accr/e( eJ+en$e$

o Co''ercia# +a+er$

o Acco/nt$ recei!a0#e$

Wor?in3 ca+ita# i$ !er" e$$entia# to 'aintain the $'ooth r/nnin3 of 0/$ine$$4 No0/$ine$$ can r/n $/cce$$f/##" 2itho/t an a(e1/ate a'o/nt of 2or?in3 ca+ita#4

o2e!er it '/$t a#$o 0e note( that 2or?in3 ca+ita# i$ a 'ean$ to r/n the 0/$ine$$

$'ooth#" an( +rofita0#" an( not an en( in it$e#f4 Th/$ conce+t of 2or?in3 ca+ita#

can 0e con(/cte( thro/3h a n/'0er of (e!ice$ $/ch a$

o Ratio ana#"$i$

o F/n($ f#o2 ana#"$i$

o B/(3et

RATIO ANALYSIS

A ratio i$ a $i'+#e arith'etic eJ+re$$ion of the re#ation$hi+ of one n/'0er to another4

The techni1/e of ratio ana#"$i$ can 0e e'+#o"e( for 'ea$/rin3 $hort ter'

#i1/i(it" or 2or?in3 ca+ita# +o$ition of a fir'4 Se!era# ratio$ #i?e c/rrent ratio 5

1/ic? ratio 5 in!entor" t/rno!er ratio 5 recei!a0#e t/rno!er ratio 5 +a"a0#e$

t/rno!er ratio 5 2or?in3 ca+ita# t/rno!er ratio5 ca$h +o$ition ratio etc4

=4FUNDS FLOW ANALYSIS

F/n($ f#o2 ana#"$i$ i$ a technica# (e!ice (e$i3nate( to $t/(" the $o/rce$ fro' 2hich

a((itiona# f/n($ are (eri!e( an( the /$e to 2hich the$e $o/rce$ are +/t4 It i$ an

effecti!e 'ana3e'ent too# to $t/(" chan3e$ in the financia# +o$ition )2or?in3

ca+ita#* of a 0/$ine$$ enter+ri$e 0et2een 0e3innin3 an( en(in3 financia# $tate'ent$

(ate$4 The f/n($ f#o2 ana#"$i$ con$i$t$ of6

)a* Pre+arin3 $che(/#e of chan3e$ in 2or?in3 ca+ita#

)0* State'ent of $o/rce$ an( a++#ication of f/n($4

4 WORKING CAPITAL BUDGET



Wor?in3 ca+ita# 0/(3et5 a$ a +art of tota# 0/(3etin3 +roce$$ of a 0/$ine$$5 i$

+re+are( e$ti'atin3 f/t/re #on3 ter' an( $hort ter' 2or?in3 ca+ita# nee($ an( the

$o/rce$ to finance the'5 an( then co'+arin3 the 0/(3ete( fi3/re$ 2ith the

act/a# +erfor'ance for ca#c/#atin3 !ariance$5 if an"5 $o that correcti!e action$ 'a"

0e ta?en in the f/t/re4 It$ 'ain o0,ecti!e i$ to en$/re a!ai#a0i#it" of f/n($ a$ an(

2hen nee(e( 5 an( to en$/re effecti!e /ti#iation of the$e re$o/rce$ 4 The$/cce$$f/# i'+#e'entation of 2or?in3 ca+ita# 0/(3et in!o#!e$ +re+arin3 $e+arate

0/(3et$ for !ario/$ e#e'ent$ of 2or?in3 ca+ita#5 $/ch a$5 ca$h5 in!entorie$ an(

recei!a0#e$4

OB@ECTI&ES OR NEED OF WORKING CAPITAL

The nee( for 2or?in3 ca+ita# cannot 0e o!er e'+ha$ie(4 E!er" 0/$ine$$ nee($ $o'e

a'o/nt of 2or?in3 ca+ita#4 The nee( for 2or?in3 ca+ita# ari$e$ (/e to the ti'e 3a+

0et2een +ro(/ction an( rea#iation of ca$h fro' $a#e$4

It re1/ire$

• For the +/rcha$e of 'ateria#$5 co'+onent$ an( $+are$4 To +a" 2a3e$ an(

$a#arie$4

• To inc/r (a"7 to7 (a" eJ+en$e$ an( o!erhea($ $/ch a$ f/e#5 +o2er an( office

eJ+en$e$ etc4

• To 'eet the $e##in3 co$t$ a$ +ac?in35 a(!erti$in3 etc4 To +ro!i(e cre(it faci#itie$

to the c/$to'er$4

• To 'aintain the in!entorie$ of ra2 'ateria#$5 2or? in +ro3re$$5 $tore$ an(

$+are$5 an( fini$he( $toc?4

IMPORTANCE OF WORKING CAPITAL

Wor?in3 ca+ita# i$ ,/$t #i?e the heart of the 0/$ine$$4 If it 0eco'e$ 2ea? the 0/$ine$$

can har(#" +ro$+er an( $/r!i!e4 It i$ an in(eJ of $o#!enc" of a concern4 It$ +ro+er

circ/#ation +ro!i(e$ to the 0/$ine$$ the ri3ht a'o/nt of ca$h to 'aintain in

0/$ine$$4 Witho/t a(e1/ate a'o/nt of 2or?in3 ca+ita#5 +ro(/ction interr/+tion 'a"

ta?e +#ace an( re$/#t$ in re(/ction of +rofit4

@/$t a$ circ/#ation of 0#oo( i$ !er" nece$$ar" in h/'an 0o(" to 'aintain #ife5

$'ooth f#o2 or circ/#ation of 2or?in3 ca+ita# i$ nece$$ar" for the hea#th of the

enter+ri$e4 The +ri'e o0,ect of 'ana3e'ent i$ to 'a?e +rofit4 Whether or not thi$

i$ acco'+#i$he( in 'o$t 0/$ine$$ (e+en($ #ar3e#" in the 'anner in 2hich the

2or?in3 ca+ita# i$ a('ini$tere(4

KEY AREAS OF WORKING CAPITAL



Genera##" in the 2or?in3 ca+ita# 'ana3e'ent there are three i'+ortant area$4

Tho$e are

• Ca$h 'ana3e'ent

• Recei!a0#e$ 'ana3e'ent

• In!entor" 'ana3e'ent

AD&ANTAGES OF ADEUATE WORKING CAPITAL

Wor?in3 ca+ita# i$ the #ife 0#oo( of the 0/$ine$$4 @/$t a$ circ/#ation of 0#oo( i$ e$$entia#

in the h/'an 0o(" for 'aintainin3 #ife5 2or?in3 ca+ita# i$ !er" e$$entia# to 'aintain

the 0/$ine$$4 The 'ain a(!anta3e$ of 'aintainin3 a(e1/ate a'o/nt of 2or?in3 ca+ita#

are a$ fo##o2$6

Goo( $o#!enc" +o$ition in the 0/$ine$$Goo(2i##5 it i$ ea$" to 3et #oan$

Ca$h (i$co/nt$

Re3/#ar $/++#" of ra2 'ateria#$

Re3/#ar +a"'ent of $a#arie$5 2a3e$ an( other (a" to (a" Co''it'ent$

EJ+#oitation of fa!ora0#e 'ar?et con(ition$

A0i#it" to face cri$i$

/ic? an( re3/#ar ret/rn on in!e$t'ent

i3h 'ora#e

E!er" 0/$ine$$ concern $ho/#( ha!e a(e1/ate 2or?in3 ca+ita# to r/n it$ 0/$ine$$

o+eration$4 It $ho/#( not ha!e either re(/n(ant< eJce$$ or $horta3e of 2or?in3 ca+ita#4

DISAD&ANTAGES OF ECESSI&E WORKING CAPITAL

EJce$$i!e 2or?in3 ca+ita# 'ean$ i(#e f/n($ 2hich earn no +rofit for the 0/$ine$$ an(

hence the 0/$ine$$ cannot earn a +ro+er rate of ret/rn on it$ in!e$t'ent4 Where there

i$ a re(/n(ant 2or?in3 ca+ita#5 it 'a" #ea( to /nnece$$ar" +/rcha$in3 an(

acc/'/#ation of in!entorie$ ca/$in3 'ore chance$ of theft5 2a$ta3e an( #o$$e$4

EJce$$i!e 2or?in3 ca+ita# i'+#ie$ eJce$$i!e (e0tor$ an( (efecti!e cre(it +o#ic" 2hich

'a" ca/$e hi3her inci(ence of 0a( (e0t$4 It 'a" re$/#t in o!era## inefficienc" in the

or3aniation4 When there i$ eJce$$i!e 2or?in3 ca+ita#5 re#ation$ 2ith 0an?$ an( other

financia# in$tit/tion$ 'a" not 0e 'aintaine(4 D/e to #o2 rate of ret/rn on

in!e$t'ent$ the !a#/e of $hare$ 'a" a#$o fa##4

The re(/n(ant 2or?in3 ca+ita# 3i!e$ ri$e to $+ec/#ati!e tran$action$4

DISAD&ANTAGES OF INADEUATE WORKING CAPITAL



A concern5 2hich ha$ ina(e1/ate 2or?in3 ca+ita#5 cannot +a" it$ $hort ti'e #ia0i#itie$

in ti'e4 Th/$ it 2i## #oo$e it$ re+/tation an( $ha## not 0e a0#e to 3et 3oo( cre(it

faci#itie$4 it cannot 0/" it$ re1/ire'ent$ in 0/#? an( cannot a!ai# of (i$co/nt etc4

It 0eco'e$ (iffic/#t for the fir' to eJ+#oit fa!ora0#e 'ar?et con(ition$ an( /n(erta?e

+ro,ect$ (/e to #ac? of 2or?in3 ca+ita#4 The fir' cannot +a" (a" to (a" eJ+en$e$ of it$o+eration$ an( it create$ inefficiencie$5 increa$e co$t$ an( re(/ce$ the +rofit$ of the

0/$ine$$4 It 0eco'e$ i'+o$$i0#e to /ti#ie efficient#" the fiJe( a$$et$ (/e to non

7a!ai#a0i#it" of #i1/i( f/n($4 The rate of ret/rn on in!e$t'ent$ a#$o fa##$ 2ith the

$horta3e of 2or?in3 ca+ita#4

FACTORS DETERMINING TE WORKING CAPITAL REUIRMENTS

A fir' $ho/#( +#an it$ o+eration$ in $/ch a 2a" that it $ho/#( ha!e neither too '/ch

nor too #itt#e 2or?in3 ca+ita# 4 The 2or?in3 ca+ita# re1/ire'ent$ are (eter'ine( 0"

a 2i(e !ariet" of factor$4

Nat/re an( $ie of 0/$ine$$

Wor?in3 ca+ita# re1/ire'ent$ of a fir' are 0a$ica##" inf#/ence( 0" the nat/re of it$

0/$ine$$4 Tra(in3 an( financia# fir'$ ha!e a !er" $'a## in!e$t'ent in fiJe( a$$et$5 0/t

re1/ire a #ar3e $/' of 'one" to 0e in!e$te( in 2or?in3 ca+ita#4 Wherea$ +/0#ic

/ti#itie$ ha!e a !er" #i'ite( nee( for 2or?in3 ca+ita# an( ha!e to in!e$t a0/n(ant#" in

fiJe( a$$et$4

Their 2or?in3 ca+ita# re1/ire'ent$ are no'ina# 0eca/$e the" 'a" ha!e ca$h $a#e$ on#"an( $/++#" $er!ice$ 0/t not +ro(/ct$4 Wor?in3 ca+ita# nee($ of 'o$t 'an/fact/rin3

concern$ fa## 0et2een too eJtre'e re1/ire'ent$ of tra(in3 fir'$ an( +/0#ic /ti#itie$4

S/ch concern$ ha!e to 'a?e a(e1/ate in!e$t'ent$ in c/rrent a$$et$ (e+en(in3 /+on

the tota# a$$et$ $tr/ct/re an( other !aria0#e$4

The $ie of the 0/$ine$$ that i$ 'ea$/re( in ter'$ of $ca#e of o+eration$ a#$o ha$ an

i'+act on the 2or?in3 ca+ita# nee($4 A$ BP&$ $ca#e of o+eration$ i$ #ar3e5 the fir'

nee($ 'ore 2or?in3 ca+ita# then $'a## fir' (oe$4

Man/fact/rin3 c"c#e

The 'an/fact/rin3 c"c#e co'+ri$e$ of the +/rcha$e an( /$e of ra2 'ateria# in the+ro(/ction of fini$he( 3oo($4 A$ the fir'$ 'an/fact/rin3 c"c#e i$ #en3th" the 2or?in3

ca+ita# re1/ire'ent of the fir' i$ #ar3e4

Sa#e$ 3ro2th

The 2or?in3 ca+ita# nee($ of fir' increa$e a$ it$ $a#e$ 3ro24 C/rrent a$$et$ 2i## ha!e to

0e e'+#o"e( 0efore 3ro2th ta?e$ +#ace4 A 3ro2in3 fir' nee($ to in!e$t f/n($ in

fiJe( a$$et$ in or(er to $/$tain it$ 3ro2in3 +ro(/ction an( $a#e$ 4 Thi$ in t/rn

increa$e in!e$t'ent in c/rrent a$$et$ to $/++ort en#ar3e( $ca#e of o+eration$5 a

3ro2in3 fir' nee($ f/n($ contin/o/$#"4



De'an( con(ition$

The 0/$ine$$ !ariation$ $/ch a$ $ea$ona# an( c"c#ica# f#/ct/ation$ in the (e'an( for

+ro(/ct$ an( $er!ice$ affect the 2or?in3 ca+ita# re1/ire'ent$4 When there i$ an

/+2ar( $2in3 in the econo'"5 $a#e$ 2i## increa$e4 Corre$+on(in3#"5 the fir'$

in!e$t'ent in in!entorie$ an( 0oo? (e0t$ 2i## a#$o increa$e4 D/rin3 0oo'5 a((itiona#in!e$t'ent$ in fiJe( a$$et$ 'a" 0e 'a(e 0" $o'e fir'$ to increa$e their +ro(/cti!e

ca+acit"4 The$e act a$ f/rther a((ition$ to 2or?in3 ca+ita#4

=4 Pro(/ction +o#ic"

To re(/ce 2or?in3 ca+ita# +ro0#e'$ ari$in3 (/e to chan3e$ in (e'an( for the fir'$

+ro(/ct$5 a $tea(" +ro(/ction +o#ic" 'a" 0e 'aintaine(4 If the fir'$ +ro(/cti!e

ca+acitie$ can 0e /ti#ie( for 'an/fact/rin3 !arie( +ro(/ct$5 it can ha!e the

a(!anta3e of (i!er$ifie( acti!itie$ an( $o#!e it$ 2or?in3 ca+ita# +ro0#e'$4

Price #e!e# chan3e$

Genera##"5 ri$in3 +rice #e!e#$ 2i## re1/ire a fir' to 'aintain hi3her a'o/nt of 2or?in3

ca+ita#4 o2e!er co'+anie$ 2hich can i''e(iate#" re!i$e their +ro(/ct +rice$ 2ith

ri$in3 +rice #e!e#$ 2i## not face a $e!ere 2or?in3 ca+ita# +ro0#e'4

O+eratin3 efficienc" an( +erfor'ance

The o+eratin3 efficienc" of the fir' re#ate$ to the o+ti'/' /ti#iation of re$o/rce$ at'ini'/' co$t$4 The /$e of 2or?in3 ca+ita# i$ i'+ro!e( an( the +ace of ca$h c"c#e i$

acce#erate( 2ith o+eratin3 efficienc"4 Better /ti#iation of re$o/rce$ i'+ro!e$

+rofita0i#it" an( th/$ he#+$ in (ecrea$in3 the +re$$/re on 2or?in3 ca+ita#4

A hi3h net +rofit 'ar3in contri0/te$ to2ar($ the 2or?in3 ca+ita# +oo#4 In fact5 the

net +rofit i$ a $o/rce of 2or?in3 ca+ita# to the eJtent it ha$ 0een earne( in ca$h4 A fir'

can enhance it$ 2or?in3 ca+ita# f/n($ 0" $a!in3 taJe$ thro/3h a++ro+riate taJ

+#annin34

Fir'$ cre(it +o#ic"

The cre(it +o#ic" of the fir' affect$ 2or?in3 ca+ita# 0" inf#/encin3 the #e!e# of 0oo?

(e0t$4 The cre(it ter'$ to 0e 3rante( to c/$to'er$ 'a" (e+en( /+on nor'$ of the

in(/$tr" to 2hich the fir' 0e#on3$4 The fir' $ho/#( 0e (i$cretionar" in 3eneratin3

cre(it ter'$ to it$ c/$to'er4 De+en(in3 /+on the in(i!i(/a# ca$e (ifferent ter'$ 'a"

0e 3i!en to (ifferent c/$to'er$4

A #i0era# cre(it +o#ic" 2itho/t ratin3 the cre(it 2orthine$$ of c/$to'er$ 2i## 0e

(etri'enta# to the fir' an( 2i## create a +ro0#e' for co##ectin3 f/n($ #ater on4 S#ac?

co##ection +roce(/re$ re$/#t in increa$e of 0oo? (e0t$4 The fir' $ho/#( fo##o2 a

rationa#ie( cre(it +o#ic" 0a$e( on the cre(it $tan(in3 of c/$to'er$ an( other

re#e!ant factor$4



WORKING CAPITAL CYCLE OF A MANUFACTURING FIRM

• U$e$ of o+eratin3 c"c#e

The o+eratin3 c"c#e i$ he#+f/# to the co'+an" in t2o 2a"$ 7

It he#+$ in foreca$tin3 2or?in3 ca+ita# re1/ire'ent$4

Contro# of 2or?in3 ca+ita# can 0e (one efficient#" 0" the /$e of o+eratin3 c"c#e4

Deter'ination of the #en3th of o+eratin3 c"c#e6

The #en3th of the o+eratin3 c"c#e of a 'an/fact/rin3 fir' i$ the $/' of6

4

• In!entor" con!er$ion +erio(4

•

Boo? (e0t$ con!er$ion +erio(4

GROSS OPERATING CYCLE )GOC*6

The fir'$ 3ro$$ o+eratin3 c"c#e )GOC* can 0e (eter'ine( a$ in!entor" con!er$ion

+erio( )ICP* +#/$ (e0tor$ con!er$ion +erio( )DCP*4

Th/$5 GOC i$ 3i!en a$ fo##o2$6

Gro$$ o+eratin3 c"c#e In!entor" con!er$ion +erio( De0tor$ con!er$ion +erio(

1ash

aw

Materials

6ork7in7progress

4inished

%oods

8ebtors



IN&ENTORY CON&ERSION PERIOD

The in!entor" con!er$ion i$ the $/' of ra2 'ateria# con!er$ion +erio( )RMCP* 5

2or?7in7+ro3re$$ con!er$ion +erio( )WIPCP* an( fini$he( 3oo($ con!er$ion +erio(

)FGCP*

ICP RMCP WIPCP FGCP

RAW MATERIAL CON&ERSION PERIOD )RMCP*

The ra2 'ateria# con!er$ion +erio( )RMCP* i$ the a!era3e ti'e +erio( ta?en to

con!ert 'ateria# into 2or?7in7+ro3re$$4 It (e+en($ on6

Ra2 'ateria# con$/'+tion +er (a"

Ra2 'ateria# in!entor"

The ra2 'ateria# con!er$ion +erio( i$ o0taine( 2hen ra2 'ateria# in!entor" i$

(i!i(e( 0" ra2 'ateria# con$/'+tion +er (a"4

Ra2 'ateria# in!entor"

Ra2 'ateria# con!er$ion +erio(

QRa2 'ateria# con$/'+tion<;>

WORK7IN7PROGRESS CON&ERSION PERIOD )WIPCP*

Wor?7in7+ro3re$$ con!er$ion +erio( )WIPCP* i$ the a!era3e ti'e ta?en to co'+#ete

the $e'i7fini$he( or 2or?7in7+ro3re$$4 It i$ 3i!en 0" the fo##o2in3 for'/#a6

Wor?7in7+roce$$ in!entor"

Wor?7in7+roce$$ con!er$ion +erio(

QCo$t of +ro(/ction<;>

FINISED GOODS CON&ERSION PERIOD )FGCP*

Fini$he( 3oo($ con!er$ion +erio( )FGCP* i$ the a!era3e ti'e ta?en to $e## the fini$he(

3oo($4 FGCP i$ 3i!en 0" the fo##o2in3 for'/#a

Fini$he( 3oo($ in!entor" Fini$he( 3oo($ con!er$ion +erio(

QCo$t of 3oo($ $o#(<;>

DEBTORS )RECEI&ABLES* CON&ERSION PREIOD )DCP*

De0tor$ con!er$ion +erio( )DCP* i$ the a!era3e ti'e ta?en to con!ert (e0tor$ into

ca$h4 DCP re+re$ent$ the a!era3e co##ection +erio(4 It i$ ca#c/#ate( a$ fo##o2$6

De0tor$

De0tor$ con!er$ion +erio( )DCP*

Cre(it $a#e$<;>



CREDITORS )PAYABLES* DEFERRAL PERIOD )CDP*

Cre(itor$ )Pa"a0#e$* Deferra# Perio( )CDP* i$ the a!era3e ti'e ta?en 0" the fir' in

+a"in3 it$ $/++#ier$ )cre(itor$*4 CDP i$ 3i!en a$ fo##o2$

Cre(itor$

Cre(itor$ Deferra# Perio( )CDP*

Cre(it +/rcha$e$<;>

CAS CON&ERSION OR NET OPERATING CYCLE6

Net O+eratin3 C"c#e )NOC* i$ the (ifference 0et2een 3ro$$ o+eratin3 c"c#e an(

+a"a0#e$ (eferra# +erio(4

Net O+eratin3 C"c#e )NOC* Gro$$ o+eratin3 c"c#e Cre(itor$ (eferra# +erio(4

KEY AREAS OF WORKING CAPITAL

Genera##" in the 2or?in3 ca+ita# 'ana3e'ent there are three i'+ortant area$ 2hich

are !er" i'+ortant 4Tho$e are

Ca$h 'ana3e'ent

Recei!a0#e$ 'ana3e'ent

In!entor" 'ana3e'ent

MANAGEMENT OF CASMANAGEMENT OF CAS

Ca$h 'ana3e'ent i$ one of the ?e" area$ of 2or?in3 ca+ita# 'ana3e'ent4 The ter'Ca$h 'ana3e'ent i$ one of the ?e" area$ of 2or?in3 ca+ita# 'ana3e'ent4 The ter'

ca$h refer$ to ca$h 'ana3e'ent i$ /$e( in t2o $en$e$4 In a narro2 $en$e it i$ /$e(ca$h refer$ to ca$h 'ana3e'ent i$ /$e( in t2o $en$e$4 In a narro2 $en$e it i$ /$e(

0roa(#" to co!er c/rrenc" an( 3enera##" acce+te( e1/i!a#ent ca$h $/ch a$ che1/e$50roa(#" to co!er c/rrenc" an( 3enera##" acce+te( e1/i!a#ent ca$h $/ch a$ che1/e$5

(raft$ an( (e'an( (e+o$it$ in 0an?$4 The 0roa(er !ie2 of ca$h a#$o inc#/(e$ near(raft$ an( (e'an( (e+o$it$ in 0an?$4 The 0roa(er !ie2 of ca$h a#$o inc#/(e$ near

ca$h a$$et$ $/ch a$ 'ar?eta0#e $ec/ritie$ an( ti'e (e+o$it$ in 0an?$ 4The 'ainca$h a$$et$ $/ch a$ 'ar?eta0#e $ec/ritie$ an( ti'e (e+o$it$ in 0an?$ 4The 'ain

characteri$tic of the$e i$ that the" can 0e rea(i#" con!erte( into ca$h 4 Thecharacteri$tic of the$e i$ that the" can 0e rea(i#" con!erte( into ca$h 4 The

three +ri'ar" 'oti!e$ for 'ain ca$h 0a#ance are a$ fo##o2$6three +ri'ar" 'oti!e$ for 'ain ca$h 0a#ance are a$ fo##o2$6

Tran$action 'oti!e$Tran$action 'oti!e$

Thi$ refer$ to the ho#(in3 of ca$h to 'eet ro/tine ca$h re1/ire'ent$ to finance theThi$ refer$ to the ho#(in3 of ca$h to 'eet ro/tine ca$h re1/ire'ent$ to finance the

tran$action$ 2hich a fir' carrie$ on 5 in the or(inar" co/r$e of 0/$ine$$4tran$action$ 2hich a fir' carrie$ on 5 in the or(inar" co/r$e of 0/$ine$$4

Preca/tionar" 'oti!e$Preca/tionar" 'oti!e$

Thi$ 'oti!e of ho#(in3 ca$h i'+#ie$ the nee( to ho#( ca$h to 'eet /n+re(icta0#eThi$ 'oti!e of ho#(in3 ca$h i'+#ie$ the nee( to ho#( ca$h to 'eet /n+re(icta0#e

o0#i3ation$4o0#i3ation$4



S+ec/#ation 'oti!eS+ec/#ation 'oti!e

S+ec/#ation 'oti!e refer$ to the (e$ire of a fir' to ta?e a(!anta3e of o++ort/nitie$S+ec/#ation 'oti!e refer$ to the (e$ire of a fir' to ta?e a(!anta3e of o++ort/nitie$

2hich +re$ent the'$e#!e$ at /neJ+ecte( 'o'ent$ an( 2hich are t"+ica##" o/t$i(e the2hich +re$ent the'$e#!e$ at /neJ+ecte( 'o'ent$ an( 2hich are t"+ica##" o/t$i(e the

nor'a# co/r$e of 0/$ine$$4nor'a# co/r$e of 0/$ine$$4

Ca$h c"c#e6Ca$h c"c#e6

The ca$h c"c#e refer$ to the +roce$$ 0" 2hich ca$h i$ /$e( to +/rcha$e 'ateria# fro'The ca$h c"c#e refer$ to the +roce$$ 0" 2hich ca$h i$ /$e( to +/rcha$e 'ateria# fro'

2hich 3oo($ are +/rcha$e( an( then $o#( to c/$to'er$ to +a" 0i##$ #ater4 The fir'2hich 3oo($ are +/rcha$e( an( then $o#( to c/$to'er$ to +a" 0i##$ #ater4 The fir'

recei!e$ ca$h fro' c/$to'er$ an( the c"c#e re+eat$ it$e#f4recei!e$ ca$h fro' c/$to'er$ an( the c"c#e re+eat$ it$e#f4

Ca$h 0/(3et6Ca$h 0/(3et6

It i$ a (e!ice to he#+ a fir' to +#an an( contro# the /$e of ca$h4 It i$ a $tate'entIt i$ a (e!ice to he#+ a fir' to +#an an( contro# the /$e of ca$h4 It i$ a $tate'ent

$ho2in3 the e$ti'ate( ca$h inf#o2 an( ca$h o/tf#o2 o!er the fir'$ +#annin3 horion4$ho2in3 the e$ti'ate( ca$h inf#o2 an( ca$h o/tf#o2 o!er the fir'$ +#annin3 horion4

CAS MANAGEMENT SYSTEM IN BP&CAS MANAGEMENT SYSTEM IN BP&

Co'+an" ha$ ca$h cre(it arran3e'ent$ 2ith 0an?$4Co'+an" ha$ ca$h cre(it arran3e'ent$ 2ith 0an?$4

Co##ection$ fro' $a#e$ are centra#ie(4Co##ection$ fro' $a#e$ are centra#ie(4

Pa"'ent to in(i3eno/$ $/++#ier$ i$ thro/3h ca$h $ection4Pa"'ent to in(i3eno/$ $/++#ier$ i$ thro/3h ca$h $ection4

MIS for 'onitorin3 ca$h 2ith (etai#$4MIS for 'onitorin3 ca$h 2ith (etai#$4

RECEI&ABLES MANAGEMENT6

When a fir' 'a?e$ an or(inar" $a#e of 3oo($ an( $er!ice$ an( (oe$ not recei!e

+a"'ent5 the fir' 3rant$ tra(e cre(it an( create$ acco/nt$ recei!a0#e$5 2hich 2o/#(

0e co##ecte( in f/t/re4 The 'ana3e'ent of the$e i$ ?no2n a$ recei!a0#e$ 'ana3e'ent4

The 'ana3e'ent of recei!a0#e$ in!o#!e$ cr/cia# (eci$ion in three ?e" area$6 cre(it

+o#icie$5 cre(it ter'$ an( co##ection +o#icie$4

Cre(it +o#ic"6

The cre(it +o#ic" of a fir' +ro!i(e$ a fra'e 2or? to (eter'ine 2hether or not to

eJten( cre(it to c/$to'er4 o2 '/ch cre(it to eJten( Cre(it $tan(ar($ are criteria to

(eci(e the t"+e of c/$to'er to 2ho' the 3oo($ co/#( 0e $o#( on cre(it4 If a fir' ha$

'ore $#o2 +a"in3 c/$to'er$ it$ in!e$t'ent in acco/nt$ recei!a0#e$ 2i## increa$e4

The fir' 2i## a#$o 0e eJ+o$e( to hi3her ri$? of (efa/#t4 The choice of o+ti'/' cre(it

$tan(ar($ in!o#!e$ a tra(eoff 0et2een incre'enta# ret/rn an( incre'enta# co$t4

Ana#"$i$ of c/$to'er$6

Cre(it $tan(ar($ inf#/ence the 1/a#it" of the fir'$ c/$to'er$4 The t2o a$+ect$ of the

1/a#it" of c/$to'er$ 7

The ti'e ta?en 0" c/$to'er to re+a" cre(it o0#i3ation$ an(The (efa/#t rate



CREDIT TERMS6

Cre(it ter'$ $+ecif" the (/ration of cre(it an( tern$ of +a"'ent 0" c/$to'er$4

In!e$t'ent in acco/nt$ recei!a0#e$ 2i## 0e hi3h if c/$to'er$ are a##o2e( eJten(e(

ti'e +erio( for 'a?in3 +a"'ent$4

Cre(it +erio(6

Cre(it +erio( i$ the #en3th of the ti'e for 2hich cre(it i$ eJten(e( to c/$to'er$4 A fir'

#en3then$ cre(it +erio( to increa$e it$ o+eratin3 +rofit thro/3h eJ+an(e( $a#e$4

Ca$h Di$co/nt6

Ca$h (i$co/nt i$ a re(/ction in +a"'ent offere( to c/$to'er to in(/ce the' to re+a"

cre(it a'o/nt 2ithin a $+ecifie( +erio( of ti'e 2hich 2i## 0e #e$$ than the nor'a#

cre(it +erio(4

COLLECTION EFFORTS6

Thi$ (eter'ine$ act/a# co##ection +erio(4 The #o2er the co##ection +erio(5 the #o2er i$

the in!e$t'ent in acco/nt$ recei!a0#e$ an( !ice !er$a4 Pro'+t co##ection i$ nee(e(

for fa$t t/rno!er of 2or?in3 ca+ita#4 Kee+in3 co##ection co$t$ an( 0a( (e0t$ 2ithin

#i'it$ an( 'aintainin3 co##ection efficienc" a#$o inf#/ence the 2or?in3 ca+ita# nee($ of

the fir'4

IN&ENTORY MANAGEMENT6

In!entor" i$ one of the 'a,or c/rrent a$$et$4 The ter' in!entor" refer$ to the

$toc?+i#e of the +ro(/ct a fir' i$ offerin3 for $a#e an( co'+onent$ that 'a?e /+ the

+ro(/ct4 The a$$et$ 2hich fir'$ $tore$ a$ in!entor" in antici+ation of nee( are ra2

'ateria#$5 2or? in +ro3re$$ an( fini$he( 3oo($4

The 'ain o0,ecti!e of in!entor" 'ana3e'ent i$6

84 To 'ini'ie the fir'$ in!e$t'ent in in!entor"

=4 To 'eet a (e'an( for the +ro(/ct 0" efficient#" or3aniin3 the fir'$

+ro(/ction an( $a#e$ o+eration$4

4 The 'a,or o0,ecti!e of in!entor" 'ana3e'ent i$ to 'ini'ie co$t4 The co$t

a$$ociate( 2ith in!entor" 'ana3e'ent fa##$ into t2o 0a$ic cate3orie$4

Or(erin3 < ac1/i$ition < $et7/+ co$t

Carr"in3 co$t

Man" $o+hi$ticate( 'athe'atica# techni1/e$ are a!ai#a0#e to han(#e in!entor"

'ana3e'ent +ro0#e'$4 The 'a,or +ro0#e' area$ that co'+ri$e the heart of in!entor"contro#$ are4 C#a$$ification +ro0#e' to (eter'ine the t"+e of contro# re1/ire(4



The or(er 1/antit" +ro0#e'

Safet" $toc?$

ABC Ana#"$i$

Thi$ techni1/e i$ 0a$e( on the a$$/'+tion that a fir' Sho/#( not eJerci$e the $a'e

(e3ree of contro# for a## ite'$ of in!entor"4 It $ho/#( rather ?ee+ a 'ore ri3oro/$

contro# on ite'$ that are 7

Mo$t re1/ire(5 an( < or $#o2e$t t/rnin3

Ite'$ that are #e$$ eJ+en$i!e $ho/#( 0e 3i!en #e$$ contro# effort$4

On the 0a$i$ of co$t in!o#!e( in!entor" ite'$ are cate3orie( into three c#a$$e$4

A 3ro/+ ite'$ in!o#!e #ar3e$t in!e$t'ent an( in!entor" contro# $ho/#( 0e 'o$t

ri3oro/$ an( inten$i!e4

B 3ro/+ $tan($ 'i(2a"4

C 3ro/+ con$i$t$ of ite'$ of in!entor"5 2hich in!o#!e re#ati!e#" $'a## in!e$t'ent

a#tho/3h the n/'0er of ite'$ i$ fair#" #ar3e4 The$e ite'$ (e$er!e 'ini'/' attention4

The co'+an" ha$ +re+are( #i$t$ of ite'$ of in!entor" i(entif"in3 the $a'e a$ cate3or"

A5 B % C ite'$5 0/t on#" for the +/r+o$e of +h"$ica# !erification4

ECONOMIC ORDER UANTITY

It i$ the o+ti'/' #e!e# of in!entor"5 2hich i$ a#$o (efine( a$ that #e!e# of in!entor"

or(er that 'ini'ie$ tota# co$t$ a$$ociate( 2ith in!entor" 'ana3e'ent4 The t2o

co$t$ a$$ociate( 2ith in!entor" i$ or(erin3 an( carr"in3 co$t$4 The (eter'ination of

a++ro+riate 1/antit" to 0e +/rcha$e( in each #ot to re+#eni$h $toc? a$ a $o#/tion5 2hich

a$$/re$ 7

S'ooth +ro(/ction or $a#e$ o+eration$

Lo2er or(erin3 or $et/+ co$t$

B/t it in!o#!e$ hi3her carr"in3 co$t$4 On the other han( $'a## or(er$ 2o/#( re(/ce the

carr"in3 co$t$ 0/t the or(erin3 co$t 2o/#( increa$e5 a$ there i$ a #i?e#ihoo( of

interr/+tion of o+eration$ (/e to $toc? o/t$4

The co'+an" /$/a##" +roc/re$ in!entor" in eJce$$ of re1/ire'ent 2hich #ea($ to eJtra

carr"in3 co$t$ an( (e'/rra3e chan3e$ (/e to non c#earance of i'+orte( 'ateria#$ in

ti'e fro' +ort$4



SAFETY STOCKS

Safet" $toc? i$ (efine( a$ the 'ini'/' in!entor" to $er!e a$ a $afet" 'ar3in or 0/ffer

to 'eet an antici+ate( increa$e in /$a3e re$/#tin3 fro' an /n/$/a##" hi3h (e'an( an(

or an /ncontro##a0#e #ate recei+t of inco'in3 in!entor"4

It in!o#!e$ t2o t"+e$ of co$t$4 Stoc? o/t co$t a$$ociate( 2ith $horta3e of in!entor"4

Carr"in3 co$t$ a$$ociate( 2ith 'aintenance of in!entor"4

The co'+an" ?ee+$ a $afet" $toc? of on#" e#ectro(e$5 #oo$e too#$ an( $+are +art$4 The

co'+an" ho#($ a $toc? of $iJ 'onth$ con$/'+tion4

Nor'$ for ho#(in3 each cate3or" of in!entor" fiJe( 0" 0/rea/ of +/0#ic enter+ri$e in

8:; 2ere fo##o2e( 0" the co'+an" ti## the co'+an" fiJe( it$ nor'$ in Fe04 8::9

for 0etter in!entor" contro# an( increa$in3 o!era## efficienc"4



CAPTER7

ANALYSIS % INTERPRETATION OF TE STUDY

D/rin3 '" $t/(" 2ith BP& Li'ite(5 I ha!e 3one thro/3h the acco/ntin3 $tate'ent$

of #a$t fi!e "ear$4 Brief (etai#$ of the $a'e are 3i!en 0e#o2 0efore co''encin3 into theana#"$i$ an( inter+retation4



ANALYSIS COMPARISION COMMON SIHE

PROFIT % LOSS ACCOUNT

De$cri+tion =>8>788 =>>:78> =>>7>: =>>7> =>>;7>

Inco'e

T/rno!er 8;:49 8>84= :49 8>=:4:; 8>;4>;

Accretion< Decretion )FG<WIP* 78>94 78>9=48 9:4 ;;>4= 78;4:

Le$$ 6 EJci$e D/t" :9>4:= >>4= :948 89;4>> :;4;

GTO )Net of EJci$e D/t"* 8=;>4 ;4:> =84= 884; 89;4:

Direct EJ+en(it/re

Ra2 Materia# % S/07Cont4 ;=9=48 8>=4:; ;:4: 8>=9=49> ;=48

Erection EJ+en(it/re =>:4 9>4;= 8;;4: =>4=9 ==>4=

Po2er % F/e# =4 =;:4: =94>; =84= =9=4>

Tota# II ;>4: 98=4 ;=;4= 8=994>= =48

&a#/e A((e( ) I7 II* 9;4 9994= 8:4> 9;4;; ;>84;

In(irect EJ+en(it/re

E'+#o"ee Re'/neration ;;84=> :4 ;==>4; >=4 >::48

Man/fact/rin3 EJ+en$e$ 84: =>4; 49 8:4; 9>4>9

Other EJ+en(it/re ;8=4:= ;>4>: 94>; :94> ;949

Pro!i$ion$ =;4>9 849 =>49 9>>;4> 99=48;

Le$$6 Other Re!en/e$ +++.28 529.2 +.08 ++2.5 2.0

Tota# I& 94; 4> 8>8=49: ;>4: :;:49

GROSS MARGIN )PBDIT* 94>8 7:4= 748: 7>:4= ==489

DEPRECIATION 8>:4:= 8=94> 4=: 8;48 84

GROSS PROFIT )PBIT* =4>: 78>8:4> 7:9=4 7=>4; =;94

Intere$t

Go!t >4>> >4>> >4>> :>4;=

Other$ 8>48 7=;4>: 88>4; 8>:;4 8848

DRE >4>> >4>> =9;4 ;>=4: ;>=4:

>4>>

Prior +erio( A(,/$t'ent$ >4>> >4>> 7;94; 984 ::4;9

PROFIT )* < LOSS )7* 8>=4:9 79>4:: 788949 7994> 7;:4

Intere$t < Other$ Wai!e( >4>>

EJtra Or(inar" ite'$ 4 >4>> =>>4= >4>> >4>>

Net Profit < Lo$$ 0efore TaJ

)PBT* 4= 79>4:: :;:=4: 7994> 7;:4

Inco'e TaJ >48; 8>4> 948 8;4>9 >4>>

Net Profit < Lo$$ after TaJ )PAT* 49; 79:4;: :;949= 79;>49 7;:4



BALANCE SEET

De$cri+tion =>8>788 =>>:78> =>>7>: =>>7> =>>;7>

So/rce$ of F/n($

Share o#(er$ F/n($ :4 :4 :4 :4 :4

Re$er!e$ % S/r+#/$ =4>8 =4>8 =4>8 =4>8 =4>8

Sec/re( Loan$ >4>> 8488 >4>> =8894= =84:=Un7Sec/re( Loan$ =;>4> =;:4; =:4; >48 >=948>

Tota# =:>48: >;=49 ===84 ;=>4=8 ;9:848

FiJe( A$$et$ )inc# Ca+ita# WIP* 894 >;49; :::4 :48= :==4>=

Acc/'/#ate( De+reciation 8=49 ;>=4;9 ;49 ;;=499 ;;4>:

Net FiJe( A$$et$ >4:> ;>4:8 9==49 849 894:

In!e$t'ent$ 848 848 848 848 848

In!entor" 9=94>: 9;:4>; 94= 4:> 99>4>8

De0tor$ :99:4;= :=>4:8 ;;=4 :984; 849

Ca$h =>4:: 89;4> >4;: 9949 8;94=;

Loan$ 8>>4> =84>: >>;4 88>:48 ;9:;4

C/rrent A$$et$ =;4 ==;;48> =>=94> =;>84> 8:9;4;

Le$$6 C/rrent Lia0i#itie$ %

Pro!

S/n(r" Cre(itor$ =948 84> 8884:> 88:4=: 88884:

De+o$it$ ;489 >94: =48 =4; ;=>4=

A(!ance fro' C/$to'er$ 9;;4> 8;4;8 9=4= ::48 =9>>49=

Other Lia0i#itie$ :8>4; :;4= 888>:49 8=4 ;>>4>

C/rrent Lia0i#itie$ 8=:94=8 8:=49= 8=;4> 8=48; 88>4>8

Pro!i$ion$ =8=4= =8>:499 8;:4: 8>;4:> =849

C/rrent Lia0i#itie$ % Pro! =8>>4: 8::>=4> 8::;4>: =>8:4>; 88>9499

Wor?in3 Ca+ita# )CA7CL* =;>4=9 =;94> =84: 9=94>8 984>:

Mi$c4 EJ+4 the eJtent not 2rt

off >4>> >4>> >4>> =9;4 8;;4

Acc/'/#ate( Lo$$ =;94 ==94=: =;94;> 9:849 9=;4;

Tota# =:>48: >;=49 ===84 ;=>4=8 ;9:848



R$ La?h$

RAW MATERIAL

PURCASES

Detai#$ 84>488 84>48> 84>4>: 84>4> 84>4>

Ra2 Materia# OB =;4>9 ==4:: =98:4;> :48= =;:48

A((6 P/rcha$e$ ;=84898 984; ;=4>8 8>84: 9:49

Tota# :>;4=> 9:=4; 8;84;8 889=4;8 8>::4=:

Le$$6 I$$/e$ < Con$/'e( 98=48 8>;4;8 ;4; 88;4>8 ;;;>48;

Stoc? a$ on c#o$in3 (ate ;994>; =;4>; ==4: =98:4;> :48

CAS FLOW STATEMENT

Detai#$ 84>488 84>48> 84>4>: 84>4> 84>4>

Ca$h F#o2 fro' O+eratin3

acti!itie$

Net Profit for the "ear 49; 79:4;: :;949= 79;>4 7;:4

A(,/$t'ent$ for 6De+reciation char3e for the "ear 8>:4:= 8=94> 4> 8=4; 849

A(,/$t'ent$ for 6

Increa$e < Decrea$e in in!entor" 7;4> 4; 7::4:= 7=:4: :84

Decrea$e in Loan$ % a(!ance$ 7;4:9 8:4;8 >=48 4== ::84:

Increa$e < Decrea$e in De0tor$ 7=48

7

=4>9 >4; 7=:;4: 84:>

Increa$e in Deffere( Re!en/e

EJ+en(it/re >4>> >4>> =9;4 ;>=4: ;894:

Increa$e < Decrea$e in Lia0i#itie$ 9>=4;: 7:48 7:94; 7:4 7;=>49:

Increa$e < Decrea$e in Pro!i$ion$ ;>=4 ;>48; 789498 8994 8:4

Net ca$h f#o2 fro' O+eratin3

acti!itie$ =:4=8

7

=>949: 8>94 7884>8 7;4

P/rcha$e of FiJe( A$$et$ 7:4:8 7;48 7==48 7994>: 7>4=:

Increa$e < Decrea$e in

in!e$t'ent$ >4>> >4>> >4>> >4>> >4>>

Ca$h f#o2 fro' in!e$tin3

acti!itie$ 7:4:8 7;48 7==48 7994>: 7>4=:

Increa$e in Sec/re( Loan$ 78488 ==4 7=8894= >4 8>49;

Increa$e in Un$ec/re( Loan$ 7:4= =84 78:8:49> ==>4> 9;949

GOI Loan Wai!er ==>4

Ca$h f#o2 fro' financin3acti!itie$ 78>=49 =84> 789=48 ==48 ;=48

Net incr4 in ca$h an( ca$h

e1/i!a#ent$ 74>9 88=49 784 7:4;: ;=49:

Ca$h an( ca$h e1/i!a#ent$ OB 89;4> >4;: 9949 8;94=; ;4;

Ca$h an( ca$h e1/i!a#ent$ CB =>4:: 89;4> >4;: 9949 8;94=;



IMPORTANT RATIOS < OTER INFORMATION

De$cri+tion =>8>788 =>>:78> =>>7>: =>>7> =>>;7>

8

Direct eJ+ a$ a of GTO )net of

ED* 94 9:4> ;4>> 4=9 9;4;

=

&a#/e a((e( a$ a of GTO )net

of ED* ;48 >4: =4>> =;49 4

PBDIT a$ a of T/rno!er =49 749; 78>4: 7==48 894>

PAT a$ a of T/rno!er ;48 74= 8848 784>: 78:4=

9 Intere$t Co!era3e Ratio =49= 4 74:8 74 >49>

; Gro$$ Profit Ratio ;48 >4: =4>> =;49 4

Net Profit Ratio ;4: 7:4:8 88;4:8 7=4;: 7==48=

Co$t Goo($ $o#( 8=:49 :;:4: 8=4> =894> 8>=;488

: Net Sa#e$ < Ca+ita# E'+#o"e( 48= =4;: :4; =4: 849:

8> In!entor" < T/rno!er )(a"$* 8> 8;> =8 : :=

88 C/rrent Ratio 84=: 84= 8488 84= 84:

8= Li1/i(it" Ratio 84>> 84>= >4= 8489 84

8 S/+er /ic? Ratio >4 >4: >4; >4; >4

8 De0t 7E1/it" Ratio 4> 4>8 4>9 8:48 849>

89 Pro+rietar" Ratio 4; 4 ;4 =498 =4;8; FiJe( A$$et$ Ratio >4>= >4>= >4>= >4>= >4>=

8 No of E1/it" Share$ V 8>>> : : : : :

8 Ca+ita# A((ition$ :4:8 ;48 ==48 9948> >4=:

8: A!era3e In!entor" :84> :94 9>:4; ;:4:; 9>>49

=> A!era3e De0tor$ :>4= :84 >>=489 4>> =84

=8 A!era3e Cre(itor$ >849; =:49 894;> 88=94; 889:4;=

== A!era3e Wor?in3 Ca+ita# =;:4; 89498 >49> 84>9 ;>:4;

= A!era3e Ra2 Materia# 94=8 8>:4=> =:4; ;=;49= ;9=4

= A!era3e Wor?7in7+ro3re$$ 8;>4 =8>84>= =8=>4= 8==4: 8=9:4

=9 A!era3e Fini$he( Goo($ >4 88=4; =>4>8 :84 ;=4

=; Ca+ita# E'+#o"e( >8489 ==94: 49; 849 :4>=



READY RECONER

S# Partic/#ar$ =>8>788 =>>:78> =>>7>: =>>7> =>>;7>

8 T/rno!er 8;:49 8>84 :49 8>=:4:; 8>;4>;

= Gro$$ T/rno!er )Net of ED* 8=;>4 ;4: ;4> 8;4:; 8>:4=

&a#/e a((e( 9;949 >4== 8:48 :=94: 8;;4;8

Gro$$ Mar3in )PBDIT* 94>8 7:4= 788;4 794= =;=498

9 De+reciation 8>:4:= 8=94 4=: 8;48 84

; PBIT =4>: 78>8:4> 78==884= 7:84:9 =84

)a* Intere$t on Go!t4 #oan$ >4>> >4>> >4>> >4>> :>4;=

)0* Intere$t on Other #oan$ 8>48 7=;4>: 88>4; 8>:;4 8848

: Profit 0efore TaJ 8>=4:9 79>4:: :;:=4: 7994: 7;48:

8> Profit after taJ 49; 79:4;: :;949= 79;>4 7;:4

88 Gro$$ B#oc? 894 >;49; :::4 :;4> :=>4:

8= Net B#oc? inc# Ca+ WIP >4:> ;>4:8 9==49 849 894:

8 C/rrent A$$et$ =;4 ==;;48 =>=94> =;>84> =>=48;

8 C/rrent Lia0i#itie$ 8=:94=8 8:=49 8=;4> 8=48 8:8:49

89 Pro!i$ion$ =8=4= =8>:499 8;:4: 8>;4:> =849

8; Wor?in3 Ca+ita# =;>4=9 =;94> =84: 9=94>> 984>:

8 L3 ter' #oan$ Intere$t accr/e( :48 8:=;49= 8;:=4 >48 >=948>

8 Sh ter' #oan$ Intere$t accr/e( =9894= =9894= ==849 =8894=9 =84:=

8: Share Ca+ita# :4 :4 :4 :4 :4

=> Re$er!e$ % S/r+#/$ =4>8 =4>8 =4>8 =4>8 =4>8

=8 Ca+ita# e'+#o"e( )Net B# WC* >8489 ==94: 49; 849 :4>=

== Acc/'/#ate( Lo$$e$ =;94 ==94 =;94;> 9:84 9=;4;= Net Worth 7==:94: 7=949 7==::48 79;49; 79=;84;:

= N/'0er of e'+#o"ee$ 88>: 8=9> 8> 89: 898=

=9 &a#/e a((e( +er e'+#o"ee 948> =4:: 84 =4;: 94>

=; Sa#arie$5 Wa3e$ % Benefit$ ;;84=> ;4; ;==>4; >=4= >::48

= &a#/e a((e( +er R/+ee of 2a3e$ 84=8 >4; >4= 848: =4;

= Contri0/tion to EJche1/er 84; =8;49= 8=48= =;84= ==4:

=: EJ+ort$ > > >4>> >4>> >4>>

> Net Profit to Net Worth 4= 74;> 84:> 7:4= 7;49:

8 Sa#arie$ % Wa3e$ to t/rno!er 4> 84 48 84= 848

=

Mat#4 Ua$a3e to GTO )Net of

ED* :4; 9489 94:;=4=>

4;

S/n (e0tor$ to T/rno!er ) (a"$* =99 =; => 8: 89



Inter+retation6

D/rin3 the 9 "ear +erio(5 the 2or?in3 ca+ita# +o$ition of BP&L i$ (ec#inin34 D/rin3=>>;7> to =>8>788 on#" the 2or?in3 ca+ita# $ho2$ an Do2n 2ar( tren(4 Fro' the

a0o!e ta0#e 2e can o0$er!e that the net 2or?in3 ca+ita# i4e45 c/rrent a$$et$ an( c/rrent

#ia0i#itie$ i$ !er" #o2 in the "ear =>>7>: i4e45 =84: 2hen co'+are( to =>>7> an(

a3ain it 2a$ increa$e( 0" =;94> in the "ear =>>:78> an( (ecrea$e( in the "ear =>8>7

884 Thi$ $ho2$ that the fir' i$ not in a +o$ition to 'aintain it$ c/rrent a$$et$ an(

c/rrent #ia0i#itie$4 Beca/$e of thi$ rea$on the net 2or?in3 ca+ita# i$ f#/ct/atin34



State'ent $ho2in3 chan3e$ in 2or?in3 ca+ita# of BP& Lt( fro' =>>:78> to

=>8>788 )R$4 In #a?h$*

Partic/#ar$ =>>:78> =>8>788 Increa$e Decrea$e

)A*C/rrent a$$et$

In!entor"

9;:4>9 9=94>: ;4>

S/n(r" (e0tor$ :=>4:8 :99:4;= =48

Ca$h % 0an? 0a#4 89;4> =>4:: 4>9

Loan$ % a(!ance$ =84>: 8>>4> ;4:9

TOTAL )A* ==;;48> =;4 88=94;; 4>9

)B* C/rrent #ia0i#itie$

S/n(r" cre(itor$

84> =948 4:

De+o$itor$ >94: ;489 94;

A(!ance fro' c/$to'er$ 8;4;8 9;;4> 89884;

Other$ #ia0i#itie$ :;4= :8>4; =4>

Pro!i$ion$ =8>:499 =8=4= ;>=4

TOTAL )B* 8::>=4> =8>>4: 8>;;49 =884;

Net 2or?in3 ca+ita#)A7B* =;94> =;>4=9 84

Decrea$e in 2or?in3

ca+ita#

84

TOTAL =;94> =;94> 9:48 9:48



Inter+retation6

Fro' the a0o!e ta0#e 2e can o0$er!e that In 0et2een =>>:78> an( =>8>788 the net2or?in3 ca+ita# +o$ition $ho2$ a Do2n 2ar( tren( i4e45 84 0eca/$e there i$ a

'ore +ro+ortionate (ecrea$e in c/rrent a$$et$ +o$ition )in!entor"5 (e0tor$ an( #oan$

a(!ance$* o!er the +ro+ortionate increa$e in c/rrent #ia0i#itie$ +o$ition )#ia0i#itie$ an(

+ro!i$ion$ * 2hich /#ti'ate#" re$/#te( in (ecrea$e in 2or?in3 ca+ita# +o$ition

'ana3e'ent at BP&L (/rin3 the a0o!e 'entione( +erio(4 D/rin3 thi$ +erio( the

c/rrent a$$et$ +o$ition i$ not $ati$factor"4

State'ent $ho2in3 chan3e$ in 2or?in3 ca+ita# of BP& Lt( fro' =>>7>: to

=>>:78> )R$4 In #a?h$*



Partic/#ar$ =>>7>: =>>:78> Increa$e Decrea$e

)A* C/rrent a$$et$

In!entor"

94= 9;:4>9 4

S/n(r" (e0tor$ ;;=4 :=>4:8 =94>

Ca$h % 0an? 0a#4 >4;: 89;4> 88=49

Loan$ an( a(!ance$ >>;4 =84>: :4;

TOTAL)A* =>=94> ==;;48> :84 89=48


S/n(r" cre(itor$

8884:> 84> 884:>

De+o$itor$ =48 >94: ;4

A(!ance fro' c/$to'er$ 9=4= 8;4;8 948

Other Lia0i#itie$ 888>:49 :;4= 8>4;

Pro!i$ion$ 8;:4: =8>:499 ;>48;

TOTAL )B* 8::;4>: 8::>=4> 8;;4> 8=4>;

Net 2or?in3 ca+ita# )A7B* =84: =;94> =4>9

Increa$e in 2or?in3

Ca+ita#

=4>9

TOTAL =;94> =;94> =88949 =88949



Inter+retation67

Fro' the a0o!e ta0#e 2e can o0$er!e that In 0et2een =>>7>:an(=>>:78> the net

2or?in3 ca+ita# +o$ition $ho2$ a /+2ar( tren( i4e45 =4>9 0eca/$e there i$ 'ore

increa$e in the c/rrent #ia0i#itie$ +o$ition )#ia0i#itie$ an( intere$t accr/e( on #oan$*

2hich re(/ce$ the 2or?in3 ca+ita# e!en 2hen there i$ an increa$e in c/rrenta$$et$ #i?e in!entor" an( $/n(r" (e0tor$4

State'ent $ho2in3 chan3e$ in 2or?in3 ca+ita# +o$ition of BP& Lt( fro'

=>>7> to =>>7>: )R$4 In #a?h$*



Partic/#ar$ =>>7> =>>7>: Increa$e Decrea$e

)A* C/rrent a$$et$

In!entor"

4:> 94= ::4:=

S/n(r" (e0tor$ :984; ;;=4 >4;

Ca$h % 0an? 0a#4 9949 >4;: 84

Loan$ an( a(!ance$ 88>:48 >>;4 >=48

TOTAL )A* =;>84> =>=94> ::4:= ;=994:=


S/n(r" cre(itor$

88:4=: 8884:> ;=4;8

De+o$itor$ =4; =48 8849

A(!ance fro' c/$to'er$ ::48 9=4=

Other Lia0i#itie$ 8=4 888>:49 :94

Pro!i$ion$ 8>;4:> 8;:4: 89498

TOTAL )B* =>8:4>; 8::;4>: 89498 949

Net 2or?in3 ca+ita# )A7B* 9=94>8 =84: 99>4>

Decrea$e in 2or?in3

Ca+ita#

99>4>

TOTAL 9=94>8 9=94>8 =48 =48



State'ent $ho2in3 chan3e$ in 2or?in3 ca+ita# of BP& Lt( fro' =>>;7> to

=>>7> )R$4 In #a?h$*

Partic/#ar$ =>>;7> =>>7> Increa$e Decrea$e

)A* C/rrent a$$et$

In!entor"

99>4>8 4:> =:4:

S/n(r" (e0tor$ 849 :984; =:;4:

Ca$h % 0an? 0a#4 8;94=; 9949 :4;:

Loan$ an( a(!ance$ ;9:;4 88>:48 =4

TOTAL )A* 8:9;4; =;>84> 848= :4;:


S/n(r" cre(itor$

88884: 88:4=: =4=

De+o$itor$ ;=>4= =4; 8>4:;

A(!ance fro' c/$to'er$ =9>>49= ::48 ;:4:

Other Lia0i#itie$ ;>>4> 8=4 =4>

Pro!i$ion$ =849 8>;4:> 8994;

TOTAL )B* 88>9499 =>8:4>; ;:4: 8::4=

Net 2or?in3 ca+ita# )A7B* 984>: 9=94>8 =;=;4>

Decrea$e in 2or?in3

Ca+ita#

=;=;4>

TOTAL 984>: 984>: =4 =4



Inter+retation67

Fro' the a0o!e ta0#e 2e can o0$er!e that In 0et2een =>>;7> to =>>7>5 the

2or?in3 ca+ita# +o$ition $ho2$ an (o2n2ar( tren( i4e45 =;=;4> o!er it$ +re!io/$ "ear

0eca/$e there i$ a +ro+ortionate increa$e in $/n(r" (e0tor$ an( ca$h o!er the+ro+ortionate (ecrea$e in c/rrent #ia0i#itie$ #i?e #ia0i#itie$ an( 0on($ re+a"a0#e

2hich /#ti'ate#" re$/#te( in net increa$e in 2or?in3 ca+ita# +o$ition +o$in3 a

+o$iti!e $i3n of 2or?in3 ca+ita# 'ana3e'ent at BP&L (/rin3 the a0o!e

'entione( +erio(4

RATIO ANALYSIS



UICK RATIO

/ic? ratio i$ a#$o ?no2n a$ Li1/i( Ratio or Aci( Te$t Ratio4 The ter' #i1/i(it"

refor'$ to the a0i#it" of a fir' to +a" it$ $hort7ter' o0#i3ation a$ an( 2hen the"0eco'e (/e4 /ic? ratio 'a" 0e (efine( a$ the re#ation$hi+ 0et2een /ic? < Li1/i(

a$$et$ an( C/rrent < Li1/i( #ia0i#itie$4 An a$$et i$ $ai( to 0e #i1/i( if it can 0e

con!erte( into ca$h 2ithin a $hort +erio( 2itho/t #o$$ of !a#/e4

UICK ASSETS

UICK RATIO XXXXXXXXXXX

CURRENT LIABILITIES

UICK ASSETS CURRENT ASSETS )IN&ENTORIES PREPAID EPENSES*

Ca#c/#ation of 1/ic? ratio of BP&L fro' =>>;7> to =>8>788 )R$4 In #a?h$*

Year /ic? A$$et$ C/rrent Lia0i#itie$ Ratio

=>8>788 8>4;9 8=:94=8 84>>

=>>:78> 8>:4>9 8:=49= 84>=

=>>7>: 8:8>4=9 8=;4> >4=

=>>7> =88;;48 8=48; 8489

=>>;7> 89=>;4; 88>4>8 84



Inter+retation6 7

A /ic? ratio of 868 i$ con$i(ere( a$ i(ea#4 The /ic? ratio i$ 84 in =>>;7> an( it i$

3ra(/a##" (ecrea$e( in =>>7>5 =>>7>:4an( a3ain increa$e( in =>>:78> i4e45 84>=5 an(

a3ain (ecrea$e( to 84>> in =>8>7884 The /ic? ratio of the fir' i$ 0e#o2 the $tan(ar($4

The $hort ter' #i1/i(it" +o$ition of the fir' i$ not $ati$factor"4



IN&ENTORY TURNO&ER RATIO

E!er" fir' ha$ to 'aintain a certain #e!e# of in!entor"5 $o a$ to 'eet the re1/ire'ent$

of the 0/$ine$$4 B/t the #e!e# of in!entor" $ho/#( neither 0e too hi3h nor too #o24

In!entor" t/rno!er ratio i$ a#$o ?no2n a$ $toc? !e#ocit"4 It 2o/#( in(icate 2hether

in!entor" ha$ 0een efficient#" /$e( or not4

In!entor"

IN&ENTORY TURNO&ER RATIO XXXXXXX ;9 T/rn o!er

Ca#c/#ation of in!entor" t/rno!er ratio of BP&L fro' =>>;7> to =>8>788

YEAR T/rno!er A!era3ein!entor" )in

#a?h$*

In!entor"t/rno!er ratio

No of (a"$

=>8>788 8;:49 :84> >49 8>

=>>:78> 8>84= :94 >4 8;>

=>>7>: :49 9>:4; >4;> =8

=>>7> 8>=:4:; ;:4:; >4=; :

=>>;7> 8>;4>; 9>>49 >4= :=



DEBTORS TURNO&ER RATIO

De0tor$ t/rno!er ratio in(icate$ the !e#ocit" of (e0t co##ection of fir'4 In $i'+#e it

in(icate$ the n/'0er of ti'e$ a!era3e (e0tor$ are t/rne( o!er (/rin3 a "ear4Genera##" the hi3her the !a#/e of (e0tor$ t/rno!er the 'ore efficient i$ the

'ana3e'ent of (e0tor$ < $a#e$ or 'ore #i1/i( the (e0tor$4 Si'i#ar#" #o2 (e0tor$

t/rno!er i'+#ie$ efficient 'ana3e'ent of (e0tor$ < $a#e$ an( #e$$ #i1/i( (e0tor$4

DEBTORS

DEBTORS TURNO&ER RATIO XXXXXXX ;9

TURNO&ER

Ca#c/#ation of (e0tor$ t/rno!er ratio of BP&L fro' =>>;7> 7 =>8>788

YEAR TURNO&ER De0tor$ De0tor$

t/rno!er

Ratio

No of (a"$

=>8>788 8;:49 :99:4;= >4;: =99

=>>:78> 8>84= :=>4:8 >4: =;

=>>7>: :49 ;;=4 >4; =>

=>>7> 8>=:4:; :984; >49= 8:

=>>;7> 8>;4>; 84>8 >4: 89



CREDITORS TURNO&ER RATIO

In the co/r$e of 0/$ine$$ o+eration a fir' ha$ to 'a?e cre(it +/rcha$e$ an( in the

$hort ter' #ia0i#itie$4 The ratio in(icate$ the !e#ocit" 2ith 2hich the cre(itor$ are

t/rno!er in re#ation to +/rcha$e$4 Genera##" hi3her the cre(itor$ !e#ocit" 0etter it i$ or

other2i$e #o2er the cre(itor$ !e#ocit" #e$$ fa!ora0#e are re$/#t$4

CREDITORS

CREDITORS TURNO&ER RATIO XXXXXXXX

PURCASES

Ca#c/#ation of cre(itor$ t/rno!er ratio of BP&L fro' =>>;7>to =>8>788 In La?h$

YEAR CREDITORS PURCASESCre(itor$t/rno!er

Ratio

No of (a"$

=>8>788 =948 ;994>; >4=

=>>:78> 84> =;4>; 848=>:

=>>7>: 8884:> ==44: >4==

=>>7> 88:4:> =98:4;> >49 8;9

=>>;7> 88884: :48 >4=:8>



Inter+retation6 7

The ratio 2a$ recor(e( hi3he$t in =>>7> an( #o2e$t in =>>97>; 2hich i$ a0o!e the

#i'it4 The ratio in(icate$ the co'+an"$ cre(i0i#it" an( tr/$t 2ith cre(itor$ 2hich are

!er" $ati$factor"4



WORKING CAPITAL TURNO&ER RATIO

The 2or?in3 ca+ita# t/rno!er ratio in(icate$ the !e#ocit" of the /ti#iation of net

2or?in3 ca+ita#4 The ratio in(icate$ the n/'0er of ti'e$ the 2or?in3 ca+ita# i$ t/rne(

o!er in the co/r$e of a "ear4 The ratio 'ea$/re$ the efficienc" 2ith 2hich the 2or?in3ca+ita# i$ 0ein3 /$e( 0" the fir'4

T/rno!er

WORKING CAPITAL TURNO&ER RATIO XXXXXXXXXXX

WORKING CAPITAL

Ca#c/#ation of 2or?in3 ca+ita# t/rno!er ratio of BP&L fro' =>>7>9 to =>>7>: in

#a?h$

YEAR T/rno!er W4C4 Ratio

=>8>788 8;:49

=;>4=9 94=

=>>:78> 8>84==;94> 4

=>>7>::49

=84: =;4=

=>>7>8>=:4:;

9=94>> 4>

=>>;7>8>;4>;

984>: =48



Inter+retation6 7

A hi3her W4C4 t/rno!er ratio in(icate$ the efficient 'ana3e'ent of 2or?in3

ca+ita#4 The W4C4T4R4 i$ 4= in =>>7=>>9 It in(icate$ efficient 'ana3e'ent of

2or?in3 ca+ita#4 In =>>97>; it 2a$ (ecrea$e( to 4> Later it 2a$ (ecrea$e( /+ to

=>>7>:4 In =>>7>: it i$ =4 It 'ean$ the 'ana3e'ent fai#$ to +ro+er /$e of 2or?in3

ca+ita#4



Tren($ in 2or?in3 ca+ita# 'ana3e'ent fro' =>>;7> to

=>8>788

Year C/rrent a$$et$

)A*

C/rrent

#ia0i#itie$ )B*

Net2or?in3

ca+ita#

Percenta3e of

chan3e

=>>;7> =>=48; 8:8:49 984>: ;=4;:

=>>7> =;>84> 8=48 9=94>> 8498

=>>7>: =>=94> 8=;4> =84: 8>4

=>>:78> ==;;48> 8:=49= =;94> =4:

=>8>788 =;4 8=:94=8 =;>4=9 =:4=>



Inter+retation6

the a0o!e ta0#e 2e can o0$er!e that the +ercenta3e of chan3e in c/rrent a$$et$ $ho2 ane3ati!e tren($ in the "ear =>>:7=>8> %=>8>788 i4e4 8>4;=4%48> thi$ $ho2 that that the

fir' i$ not in a +o$ition to 'aintain it$ c/rrent a$$et$4



BP&6 Tren($ in c/rrent #ia0i#itie$

Year C/rrent #ia0i#itie$ Percenta3e of chan3e

=>>;7> 8:8:49 7

=>>7> 8=48 94>:

=>>7>: 8=;4> >49=

=>>:78> 8:=49= =4

=>8>788 8=:94=8 )=4*



Inter+retation6

Fro' the a0o!e ta0#e 2e can o0$er!e that the +ercenta3e of chan3e in c/rrent

#ia0i#itie$ $ho2 a ne3ati!e tren( in the "ear =>8>7=>88 i4e4 =44 The hi3he$t +ercenta3e

of chan3e in the "ear =>>7> i4e45 94>: 4The #o2e$t +ercenta3e of chan3e in the "ear

=>>7>: i4e54>49=4

BP&6 Brea? /+ of c/rrent a$$et$

Partic/#ar$<Year$ =>>;7> =>>7> =>>7>: =>>:78> =>8>788

In!entor" 99>4>8 4:> 94= 9;:4>; 9=94>:

S/n(r" (e0tor$ 849 :984; ;;=4 :=>4:8 :99:4;=

Ca$h 0an? 8;94=; 9949 >4;: 89;4> =>4::

Loan$ ;9:;4 88>:48 >>;4 =84>: 8>>4>



Inter+retation6



BP&6 Tren($ in $toc?

Year In!entor" Percenta3e of chan3e

=>>;7> 99>4>8 7

=>>7> 4:> );48*

=>>7>: 94= ):4*

=>>:78> 9;:4>; 84>

=>8>788 9=94>: )84>*



Inter+retation6

Fro' the a0o!e ta0#e 2e can o0$er!e that the +ercenta3e of chan3e in In!entor" $ho2

a +o$iti!e tren( in the "ear =>>:7=>8> i4e4 84>4An( re'ainin3 a## the "ear$ $ho2in3 a

ne3ati!e ter'$4 Thi$ $ho2 that the fir' i$ not in a +o$ition to 'aintain $/fficient

In!entor"4 The fir' ha$ to ta?e 'ea$/re$ to 'aintain in!entor"

BP&6 Tren($ in $/n(r" (e0tor$

Year $/n(r" (e0tor$ Percenta3e of chan3e

=>>;7> 849 7

=>>7> :984; )=948=*

=>>7>: ;;=4 4;

=>>:78> :=>4:8 )>4;;*

=>8>788 :99:4;= )=4:*



BP&6 Tren($ in ca$h % 0an?

Year ca$h % 0an? Percenta3e of chan3e

=>>;7> 8;94=; 7

=>>7> 9949 89>4==

=>>7>: >4;: =4

=>>:78> 89;4> )84=*

=>8>788 =>4:: 88;4:=



Inter+retation6

Fro' the a0o!e ta0#e 2e can o0$er!e that the +ercenta3e of chan3e in ca$h % 0an? in$ho2 ne3ati!e ter' in the "ear =>>:7=>8> i4e4 84 4The hi3he$t +ercenta3e of chan3e in

the "ear =>>7> i4e45 89>4

BP&6 Tren($ in #oan$

Year #oan$ Percenta3e of chan3e

=>>;7> ;9:;4 7

=>>7> 88>:48 )>4=*

=>>7>: >>;4 4

=>>:78> =84>: 884>>

=>8>788 8>>4> )8>4:*



Inter+retation6

Fro' the a0o!e ta0#e 2e can o0$er!e that the +ercenta3e of chan3e in Loan$ in $ho2

ne3ati!e tren($ in the "ear =>>7=>> % =>8>788 i4e4 >4= % 8>4:4 The hi3he$t+ercenta3e of chan3e in the "ear =>>7>: i4e45 44

BP&6 Brea? /+ of c/rrent #ia0i#itie$

Partic/#ar$<Year$ =>>;7> =>>7> =>>7>: =>>:78> =>8>788

S/n(r" cre(itor$ 88884: 88:4=: 8884:> 84> =948

De+o$it$ ;=>4= =4; =48 >94: ;489

A(!ance fro'

c/$to'er$

=9>>49= ::48 9=4= 8;4;8 9;;4>

Other$ #ia0i#itie$ ;>>4> 8=4 888>:49 :;4= :8>4;

Pro!i$ion$ =849 8>;4:> 8;:4: =8>:499 =8=4=



Inter+retation6

BP&6 Tren($ in $/n(r" cre(itor$

Year $/n(r" cre(itor$ Percenta3e of chan3e

=>>;7> 88884: 7

=>>7> 88:4=: )=4:*

=>>7>: 8884:> )48=*

=>>:78> 84> )4>:*

=>8>788 =948 884:



Inter+retation6

Fro' the a0o!e ana#"$i$ 2e can o0$er!e that the fir' i$ not 'aintain $/fficient

a(!ance fro' c/$to'er$ 2h" 0eca/$e it i$ $ho2in3 ne3ati!e ter'$ fro' =>>7> %

=>8>7884the hi3he$t +ercenta3e of chan3e in the "ear =>>7>: i4e458>4;4

BP&6 Tren($ in A(!ance fro' c/$to'er$

Year A(!ance fro' c/$to'er$ Percenta3e of chan3e

=>>;7> =9>>49= 7

=>>7> ::48 )4*

=>>7>: 9=4= 8>4;

=>>:78> 8;4;8 4;8

=>8>788 9;;4> )=;4;=*



Inter+retation6

Fro' the a0o!e ana#"$i$ 2e can o0$er!e that the fir' i$ not 'aintain $/fficient

a(!ance fro' c/$to'er$ 2h" 0eca/$e it i$ $ho2in3 ne3ati!e ter'$ fro' =>>7> %

=>8>7884the hi3he$t +ercenta3e of chan3e in the "ear =>>7>: i4e458>4;4



BP&6 Tren($ in Other #ia0i#itie$

Year Other #ia0i#itie$ Percenta3e of chan3e

=>>;7> ;>>4> 7

=>>7> 8=4 )49*

=>>7>: 888>:49 )94*

=>>:78> :;4= 894=9

=>8>788 :8>4; 48

Inter+retation6

Fro' the a0o!e ana#"$i$ 2e can o0$er!e that the fir' i$ not 'aintain $/fficient other

#ia0i#itie$ 2h" 0eca/$e it i$ $ho2in3 ne3ati!e ter'$ fro' =>>7> % =>>7>: i4e4549 %

94 the fir' ha$ to ta?en 'ea$/re$ to 'aintain other #ia0i#itie$4



BP&6 Tren($ in +ro!i$ion$6

Year +ro!i$ion$ Percenta3e of chan3e

=>>;7> =849 7

=>>7> 8>;4:> )4:*

=>>7>: 8;:4: :49

=>>:78> =8>:499 )=848*

=>8>788 =8=4= )==4==*

Inter+retation6

Fro' the a0o!e ana#"$i$ 2e can o0$er!e that the +ercenta3e of chan3e in Pro!i$ion i$

$ho2 ne3ati!e tren($ in the "ear =>>7=>>5 =>>:78> %=>8>788 i4e4 4:5 =848 % ==4==4

Thi$ $ho2$ that that the fir' i$ not in a +o$ition to 'aintain it$ +ro!i$ion$4

ANALYSIS



FINIDINGS % SUGGESTIONS6

FINDINGS

Po$t =>>>5 'o$t of the centra# +/0#ic $ector enter+ri$e$ in In(ia are (oin3 2e##4 The

rea$on i$5 the PSU$ ha!e ha( intro$+ection a0o/t their (ec#inin3 +erfor'ance (/rin3

#ate >$ an( entire :>$ an( $tarte( a++#"in3 !ario/$ techni1/e$ for i'+ro!e'ent5

there0" to co'+ete 2ith the +ri!ate $ector an( 3#o0a# entre+rene/r$ an( $tan(

the'$e#!e$ in the nationa# a$ 2e## a$ internationa# 'ar?et$4

Go!ern'ent +o#ic" to2ar($ PSU$ a#$o enco/ra3e( the PSU$ to i'+ro!i$e the'$e#!e$4

A$ a +art of reha0i#itation +ro3ra''e5 GOI ha$ 2ritten off #oan$ an( 2ai!e( intere$t

!a#/in3 R$ 89 corer$4 Go!ern'ent of AP 2ai!e( !ario/$ $tate an( #oca# taJe$ to thet/ne of R$ chore$5 0e$i(e$ re3i$terin3 the #an( +o$$e$$e( 0" the co'+an" a$ a 3ift

(ee(4

Si'i#ar#"5 BP& a#$o 2ith the he#+ of Go!ern'ent +o#ic" co/+#e( 2ith chan3e in the

'ana3e'ent $tarte( $ho2in3 +o$iti!e re$/#t$4 The "ear =>> can 0e $ai( a$

T/rnaro/n( "ear or Re0irth "ear for BP&4

After ta?e7o!er of BP& 0" BEL5 the co'+an" i$ en,o"in3 3oo( 'onetar" $/++ort

fro' it$ ho#(in3 co'+an"4 With the $/++ort of the f/n($ +/'+e( 0" ho#(in3 co'+an"5

BP& c#eare( the o/t$tan(in3 #oan$ of con$orti/' 0an?$5 #i1/i(ate( 'o$t of the

$tat/tor" an( other #ia0i#itie$ an( en,o"in3 2or?in3 ca+ita# re1/ire'ent$4

It$ ho#(in3 co'+an" ha$ a#rea(" c#eare( the Ca+eJ +ro3ra' an( in the co'in3 t2o to

three "ear$5 an a'o/nt of R$ => core$ 2o/#( 0e in!e$te( to2ar($ Ca+eJ4

84 The c/rrent ratio of B44P4&4 in =>> i$ 848 an( it i$ (ecrea$e( to >4; in =>>;

an( it i$ (ecrea$e( to >49: in =>>7>4

=4 The /ic? ratio i$ >4 (/rin3 =>> (ecrea$e( in =>>5 >9 an( >; an( $too( at

>4: on 84>4=>>; an( it i$ (ecrea$e( to >49 in =>>7>4

4 The ratio of the fir' i$ >4>= in =>> an( it increa$e( to >4> in =>>7> an(

a3ain (ecrea$e( in =>>7>9 an( to 4>= in =>>97>;4

4 The (e0t of the co'+an" i$ !er" hi3h an( the Net 2orth of the Co'+an" ha$

0eco'e ne3ati!e an( ha$ increa$e( to R$4 )7* :4=>crore$ a$ on 84>4=>>;4 The

cre(itor$ of the co'+an" are in a hi3h ri$?" +o$ition4 In =>>7> a#$o the

co'+an" ha$ in a hi3h ri$?" +o$ition4



94 A #o2er $o#!enc" ratio i$ an in(icator of the fir' 2hich i$ in 3oo( +o$ition4 The

$o#!enc" ratio of the fir' i$ 849= in =>>=7> an( it increa$e( to =4 in =>>97>;4

The $o#!enc" +o$ition of the fir' i$ not $ati$factor"4

i3her o+eratin3 +rofit ratio i$ an in(icator of 3oo( financia# +erfor'ance of the

co'+an"4 The o+eratin3 +rofit i$ +o$iti!e in =>8>788 hence o+eratin3 +rofit ratio of the

fir' i$ 3oo(4

The hi3her the ret/rn on net 2orth ratio the 0etter i$ the financia# +erfor'ance of the

fir' fro' the +er$+ecti!e of the $hareho#(er$4 The net 2orth ratio of the fir' i$

ne3ati!e (/rin3 the a0o!e +erio(4 It in(icate$ the 0a( financia# +erfor'ance of the

fir'4

An In!entor" t/rno!er ratio of i$ con$i(ere( i(ea#4 The in!entor" t/rno!er ratio$ho2$ (ecrea$e in recent "ear$ in B44P4&4 Then the fir' i$ inefficient in!entor"

'ana3e'ent

A hi3her W4C4 t/rno!er ratio in(icate$ the efficient 'ana3e'ent of 2or?in3 ca+ita#4

The W4C4T4R4 i$ =49 in =>>=7> 2hich i$ !er" #o2 an( a$ the Wor?in3 Ca+ita# 0eca'e

ne3ati!e the ratio$ co/#( not 0e ca#c/#ate( fro' =>>7>4 It in(icate$ inefficient

'ana3e'ent of 2or?in3 ca+ita#4

The ratio in(icate$ the $ta0i#it" of efficient /ti#iation of o2ner$ an( #on3 ter'

cre(itor$ f/n($4 The ratio (/rin3 the "ear =>>=7> i$ 4=4 o2e!er a$ the Ca+ita#

e'+#o"e( ha$ 0eco'e ne3ati!e5 the ratio$ co/#( not 0e ca#c/#ate(4 It in(icate$

inefficient /ti#iation of f/n($4

SUGGESTIONS

The 'ar?etin3 (e+art'ent can 0e f/rther $tren3thene( for or(er 0oo? of 'ore #e3ac"

+ro(/ct$4

I'+#e'entation of SAP < ERP i$ i''e(iate re1/ire'ent in BP&4 Thi$ area '/$t 0e

concentrate( e$+ecia##" ?ee+in3 in !ie2 of hi3h tar3et$ $et 0" the co'+an" in the

co'in3 "ear$ an( a#$o ?ee+in3 in !ie2 of +ro+o$e( ca+eJ +ro3ra''e4

Intere$t free a(!ance$ $ho/#( 0e co##ecte( fro' the c/$to'er$4 With thi$ the #i1/i(it"

+o$ition i'+ro!e$4



Yo/n3 an( ener3etic 2or?force in(/ction i$ nee( of the ho/r for BP& a$ it$ a!era3e

e'+#o"ee a3e i$ a0o!e >4

ABC ana#"$i$ i$ to 0e fo##o2e( for effecti!e 'ana3e'ent of in!entor"4 Thi$ i$ re1/ire(

0eca/$e the ra2 'ateria# +ortion i$ aro/n( ;> for e!er" R$ 8>> $+ent 0" theco'+an"4

In or(er to increa$e it$ +ro(/ction an( +rofita0i#it"5 BP& ha$ to $ec/re 'ore eJ+ort

or(er$4 The co'+an" ha$ to i(entif" ne2 eJ+ort 'ar?et$4 Effort i$ to 0e 'a(e to earn

'ore ret/rn on ca+ita# e'+#o"e(4

There '/$t 0e 0etter coor(ination a'on3 +/rcha$e5 +ro(/ction5 'ar?etin3 an(

financia# (i!i$ion$4 Thi$ 2i## he#+ in achie!in3 3reater efficienc" in in!entor"

'ana3e'ent4

BP& ha$ to chec? the 'an +o2er a$ +er the re1/ire'ent an( eJi$te( at +re$ent4

The co$t contro# 'echani$' of the fir' $ho/#( 0e i'+ro!e( $o that 2a$tef/#

eJ+en(it/re can 0e a!oi(e( an( area$ of co$t$ re(/ction can 0e i(entifie(4



BIBILIOGRAPY

84 Ann/a# Re+ort$ of BP&

=4 Mana3e'ent Acco/ntin3 B" R4S4N4 PILLAI5 BAGA&ATI

4 Financia# Mana3e'ent B" R4K4SARMA AND SASI K4 GUPTA

4 Financia# 'ana3e'ent INSTITUTE OF CARTERED ACCOUNTENTS

OF INDIA

94 @o/rna#$ an( Ma3aine$4

Working Capital Management PRJCT(Bhpv Vizag)

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Transcript of Working Capital Management PRJCT(Bhpv Vizag)