INTRODUCTION ON FINANCE Finance is one of the major elements that activate the overall growth of the economy.

Finance is the life blood of economic activity. A well - knit financial system directly contributes to the growth of the economy. An efficient financial system calls for the efficient performance of institution, financial instruments and financial markets.

Finance which acts as the lifeblood in the modern business types is one of the most important consideration for an entrepreneur-company. While Implementing, expanding, diversifying, modernizing or rehabilitating any project the meaning of finance is better understood. In this section we have covered finance related information and the process of managing the same.

Finance is a science of managing money and other assets. It is the process of channelization of funds in the form of invested capital, credits, or loans to those economic agents who are in need of funds for productive investments or otherwise. E.g. On one hand, the consumers, business firms, and governments need funds for making their expenditures, pay their debts, or complete other transactions. On the other hand, savers accumulate funds in the form of savings deposits, pensions, insurance claims, and savings or loan shares, etc which becomes a source of investment funds. Here, finance comes to the fore by channeling these savings into proper channels of investment,

In general, finance is that business activity which is concerned with acquisition and Conservation of capital funds in meeting financial needs and over all objectives of a business entrepreneur.

Finance is the common denominator for a vast range of corporate ., projects and the major part of any corporate plan must be expressed in financial terms. The main reasons a business needs finance are to: Start a business Finance expansions to production capacity To develop and market new products

 To enter new markets Take-over or acquisition Moving to new premises To pay for the day to day running of business

MEANING OF WORKING CAPITAL

Working capital refers to the management of current assets. Working capital refer to that part of total capital which is used for carrying out the routine or regular business operation. In other words, it is the amount of funds used for financing the day-to day operation. In short, it is the capital with which the business is worked over. Thus, the capital invested and locked up in various current assets , such as stocks of raw material, work in progress , stocks of finished goods account receivable and cash and bank balances constitutes the working capital.

Working capital may be regarded as life blood of a business. Its effective provision can do much to ensure the success of a business while its in provision can do much to ensure the success of a business while its in efficient management can lead not only to loss of profits but also to the ultimate downfall of what otherwise might be considered as a promising concerns. > According to shoo-in, Working Capital is the amount of funds necessary to cover the cost of operating the enterprise. Working Capital is also known as Revolving or Circulating Capital. > According to Genesterberg, Circulating Capital means current assets of a company that are changed in the ordinary cause of business from one to another form. Example: From cash to inventory, inventories to bills receivable and bills receivable to cash.

Concept of working capital

There are five concepts of working capital :-

o Gross Working Capital

o Net Working Capital

o Negative working capital

o Permanent working capital

o Variable working capital

On the basis of the components or items comprised in working capital, working capital can be classified into the following types:

Gross Working capital: Simply called as working capital, refers to the firms investment in current assets. Current assets which can be converted in to cash with in the accounting year (or operating cycle) and includes cash, short term securities, debtors, Bills receivable and stock (inventory) .

Net Working Capital: Refers to the difference between current assets and current liabilities. Current liabilities are those claims of outsiders, which are expected to mature for payment with in a year and include creditors, Bills payable and outsiders expenses.

Negative working capital or working capital deficit: means the excess of current liabilities over the current assets. It accurse when the current liabilities exceed the current assets

Permanent working capital or fixed working capital: refer to the minimum amount of investment in current assets required throughout the year for carrying out the business. In other words , it is the amount of working capital which remains in the business permanently in one form or other.

Variable working capital or fluctuating working capital: refer to the amount of working capital which goes on fluctuating or changing from time to time with the change in the volume of business Ratios : The term ratio simply means one number expressed in terms of another. It describes in mathematical terms the quantitative relationship that exists between two numbers. activities.

NEED FOR WORKING CAPITAL Every business undertaking requires funds for two purposes, investments in fixed assets & investment in current assets.

Funds required for investing in inventory, debtors & other current assets keep changing in shape & volume. Company has some cash in the beginning; this cash may be the source of raw material, keeping the labor cost & other overheads. These three combined would generate work in progress, which will be converted into finished goods on the completion of the production process into debtors & when the debtor pay, the firm may generate cash. Working capital is needed for sustaining (i.e., maintaining) the sales activities. If adequate working capital is not maintain for this period ,the firm will not be able to sustain or maintain the sales , since it may not be in a position to purchase raw material and pay wages and other expenses ands produce the goods required for the sales.

NATURE OF WORKING CAPITAL In ordinary parlance, Working Capital is taken to be the fund available for meeting day-to-day requirements of enterprises. It cannot be denied that a part of the fixed or permanent capital is

invested in assets, which are kept in the business or for a long period for the purpose of earning profit. These are usually known as fixed assets viz. Land & buildings, plant & machinery, furniture & fitting & intangibles like goodwill, patents, trademarks & long-term investment.

Another part of permanent capital left in the business for supporting the day-to-day normal operation is known as the Working Capital. This Working Capital generates the important element of cost viz. Material, wages & expenses. These cost usually lead to production & sales in case of manufacturing concerns & sales alone in others. These costs occur gradually in a flow & do not come into being abruptly at a given moment.

Hence the initial investment of cash as working capital for this specific purpose has to be continued until the sales revenue commences flowing in substantially & in a regular way. From this stage the business is found to acquire a momentum of its own. The flow of revenue is expected to continue to replace the cost lost in its day-to-day out flow for the generation of the revenue mentioned above.

SOURCE OF WORKING CAPITAL The financial manager is always interested in obtaining the working capital at the right time, at a reasonable cost and at the best possible favorable terms. A part of the working capital investment are permanent investments is fixed assets. The following is snapshot of various source of working Sources of working capital divided into two Long term Short term capital.

Sources of long term working capital Issue of shares

 Floating of debentures Ploughing back of profit Loans Public deposit

Sources of short-term working capital

Internal sources Depreciation Taxation Accured expenses

External sources Trade credit Credit papers Bank credit Customers credit

 Govt. Assistances Loans from director Security of employees

WORKING CAPITAL CYCLE:-

The working capital of a concern goes on changing in shape and volume. For Instance, a concern may have some cash in the beginning. The cash may be used by the concern for the purpose of purchase of raw material, payment of wages and other expenses. These elements of cost or items of expenses, raw material , wages and overheads , will result in work- in-progress during the process of manufacture. On the in compilation of the production process, the work- in progress becomes finished goods.

Meaning The length of time involved in this cycle of conversion of cash into raw material, raw material into work-in progress, work-in-progress into finished goods, finished goods into debtors and debtors into cash again is called the operating cycle or working capital cycle of the firm, in other words, it is period between the date raw material are purchased and the date the sale proceeds of finished goods are realized by concern.

INTER-DEPENDENCE OPERATING CYCLE :

AMOUNG

COMPONENTS

OF

WORKING

CAPITAL

A company starting with cash purchase raw materials, components etc., on a cash or credit basis. These materials will be converted into finished goods after undergoing various stages of work-

in-process. For this purpose the company has to make payments towards wages, salaries and manufacturing costs. Payments to suppliers have to be made on purchases in the case of cash purchases and on the expiry of the credit purchases. Further, the company has to meet other operating costs such as selling and distribution costs, general administration costs and nonoperating costs described as financial costs (interest on borrowed capital). In case the company sells its finished goods on cash basis, it will pass through one more stage, viz, accounts receivable and gets back cash along with profit on expiry of credit period. Once again the cash will be used for the purchase of materials and / or payments to suppliers and the whole cycle is termed as working capital or operating cycle repeats itself. This process indicates the dependents of each stage or components of working capital on its previous stage or component.

WORKING CAPITAL MANAGEMENT

Introduction Working capital management is one of the most important aspects of financial management. It forms a major function of the finance manager.

Meaning

Working capital management means management or administrating of all aspect of working capital, i.e., currents assets and currents liabilities. In other words of Smith, working capital management is concerned with the problems that arise in attempting to manage the current assets, the current liabilities and the inter-relationship that exists between them.

BASIC OBJECTIVE OF WORKING CAPITAL MANAGEMENT : The basic objective of working capital management is to manage the firms working capital (i.e., currents assets and currents liabilities) in such a way that a satisfactory level of working capital (i.e., neither excessive nor inadequate working capital) is maintained. This is necessary because, if the working capital is excessive or large, the liquidity position of the firm would, no doubt,

improve, but its profitability would be adversely affected, as funds would remain idle. Conversely, if the working capital is too small, the, profitability of the firm may improve, but the liquidity position of the firm would be adversely affected.

Advantages of working capital: It helps the business concern in maintaining the goodwill. It can arrange loans from banks and others on easy and favorable terms. It enables a concern to face business crisis in emergencies such as depression. It creates an environment of security, confidence, and over all efficiency in a business. It helps in maintaining solvency of the business.

Disadvantages of working capital: Rate of return on investments also fall with the shortage of working capital. Excess working capital may result into over all inefficiency in organization. Excess working capital means idle funds which earn no profits. Inadequate working capital can not pay its short term liabilities in time.

COMPANY PROFILE

BHARAT HEAVY ELECTRICAL LIMITEDBHEL is India's largest engineering company and one of its kind in this part of the hemisphere. It manufactures a wide range of state of the art power generation equipment and systems besides equipment for industry, transmission, defence, telecommunication and oil business. The first plant of BHEL was set up in Bhopal in 1956, which signaled the dawn of the heavy electrical industry in India. In the early 60's three more major plants were set up in Hardwar, Hyderabad and Tiruchirapalli. The company now has 14 manufacturing divisions, 10 services centers and power sectors regional centers besides project sites spread all over India and also abroad to provide prompt and effective service to customers.

BHEL's business broadly covers conversions, transmission, utilizations and conservation of energy in core sectors of economy that fulfill vital infrastructure needs of the country. Its product have established an enviable reputation of high quality and reliability, which is largely due to emphasizes placed all along on contemporary some of the best technologies of the world from the leading companies in U.S.A., EUROPE, and JAPAN together with technologies from its own R&D centers technologies B.H.E.L. has consistently upgraded its design and manufacturing facilities to international standards by acquiring and assimilating.

HISTORICAL PROFILE:The construction of heavy electrical equipment Plant commenced in Oct.1963after indo-soviet technical co-operation agreement in Sept.1959 The first product to roll out from the plant was an electric motor in January 1967.This was followed by first 100 MW Steam Turbine in Dec.1969and first 100MW Turbo Generator in August 1971. The plants break even was achieved in March 1974.BHEL went in for technical collaboration with M/s Siemens, Germany to undertake design and manufacture to large size thermal sets upto a unit rating of 1000 MW in the year 1976.First 200 MWTG set was commissioned at Obra in 1977. The continum of technological advancement subsequently saw the commissioning of 500

MW TG Set in 1984 .The technical cooperation of Gas Turbine manufacture was also signed with M/s Siemens Germany. First 150 MW ISO rating gas Turbine was exported to Germany in Feb1995.Our 250 MW thermal set up at Dahanu Plant of BSES made a history by continuous operation for over 150 days and notching up a record plant load factor greater than 100%.

B.H.E.L A CORPORATE GIANT

Established in the late 50's BHARAT HEAVY ELECTRICALS LIMITED (BHEL) is a name which is recognized across the industrial world. It is one of the largest engineering and manufacturing enterprises in INDIA and is one of the leading international companies in the power field. BHEL offers a wide spectrum of products and services for core sectors like power transmission, industrial transportation, oil and gas, telecommunication etc. Besides supply of non-conventional energy systems. It has also embarked into other areas including defence and civil aviation. A dynamic 63000 strong team embodies the BHEL philosophy excellence through continuous striving for state of the art technology. With corporate headquarters in NEW DELHI, fourteen manufacturing units, a wide spread regional services network and projects sites all over India and even abroad, BHEL is India's industrial ambassador to the world with export presence in more than 50 countries.

BHEL's range of services extent from project feasibility studies to after sales services, successfully meeting diverse needs through turnkey capability. BHEL has had a consistent track record of growth, performance and profitability. The World Bank in its report on the Indian Public Sectors, has described BHEL as one of the most efficient enterprises in the industrial sector, at par with international standards of efficiency". BHEL has acquired ISO 9000 certificate for most of its operations and has taken up Total Quality Management (TQM). All the major units/divisions of BHEL have been upgraded to the latest ISO-9001: 2000 version quality standard certification for quality management. All the major units/divisions of BHEL have been awarded ISO-14001 certification for environmental management systems and OHSAS-18001 certification for occupational health and safety management systems.

BHEL occupies an all-important niche as evident by its ranking by CII amongst top eight PSUs based on financial performance. Recently in survey conducted by business India, BHEL has been rated as seventh Best Employer in India.

VISION, MISSION AND VALUES

MAJOR MILE STONES

1975 1978 1982 1993 1995 1997 1997 1998

Job Redesign concept launched for FIRST time in India. well documented Suggestion Scheme launched. Launched Productivity Movement & Quality Circle. Concept Accreditation of ISO 9001 quality System. Adopted EFQM model of TQM for achieving Business Excellence. BHEL one of the 9 PSEs declared Navratna by Govt. of India . National Productivity Award for HEEP by the President of India. Certificate of Merit by National Productivity Council for Outstanding performance for 2nd consecutive year.

1998 1999

Accreditation of U stamp. Accreditation of R Stamp from National Board of Boiler and Pressure Vessel Inspector, USA .

1999 1999 1999 1999

AD-Merkblatt HPO Recertification by RWTUV for Gas Turbine Combustion Chambers INSAAN Award for Excellence in Suggestion for 9th consecutive year Launching of 5s concept PCRI recognized as Environmental Lab by Haryana State Board for Prevention and Control of Pollution

1999 2000 2001 2001 2001 2002 2002 2002

Accreditation of ISO 14001-Enviornment management system CII Site Visit for CII-EXIM Business Excellence Award-2000 Top Management TQM Workshop at Rishikesh and HRDC INSAAN Award for excellence in Suggestion for 11th consecutive year Launching of QTM & RCA at HEEP Hardwar by CMD Launching of delivery Index, Turnover Index and Manufacturing Index Accreditation of ISO 9000-2k JBE Workshop of Apex TQM Group at Tehri to evolve Business policy and CSF

TOTAL QUALITY FOCUS: To face the increased competition from MNCs (due to liberalization policy of Government) in early 90s and to enter European market we moved towards ISO 9000 Certification.Concept of Business Excellence through EFQM Model was launched in entire BHEL on pilot scale in Oct.1995 In 1997 HEEP launched TQM in the entire Plant and since then Self-Assessment is done every year in September.Based on feedback Report of Assessment, critical success factors are identified.and TQ action plans are drawn. The philosophy of ISO 9001, TQM and ISO 14001 has been integrated BHEL Hardwar for ultimately achieving BUSINESS EXCELLENCE. HEEP Hardwar plant is accredited for ISO 9001 and ISO 14001 and is now on March towards TQM.5-S was launched in March 1999 in a big way and now it has become a way of life in the organisation. In 2000 HEEP applied for CII-EXIM Business excellence award and site visit was conducted Bu CII team in Seot.2000.Cii feedback has gone a log way in carrying out further improvement plans and giving a structured thrust to TQM movement. In July 2001, Units TQ Council reviewed the TQ Action Plans 2001 -02 for its effectiveness and impact on accelerating the pace of improvement and consequent TQ Score. Executive Director laid the challenge of achieving the TQ score of 650.With an objective to bring awareness about he CIIEXIM Business Excellence Model amongst the Sr. Executives, the first Top Management TQM Workshops held at Rishikesh during oct.2001Executive Director who is TQ Assessor also, himself steered the Workshop with assistance from some experienced TQ Assessor of HEEP.It followed by second Top Management TQM Workshop steered again by Ed was held at HRDC on Oct29,2001.Subsequantly the third Top Management TQM Workshop was held in Nov2001,where-in Sr. Counselor, CII deliberate the detail on Best practices of TATA STEEL-the winner of CII-EXIM Business Excellence Award 2000.Simultaneously ,TQ Assessors training program for the select group of young managers(to be developed as Think Tanks)was organized in Nov2001.To give further boost Apex Group was formed. Apex Group developed Roadmap to Business Excellence based on Criteria Linkage of CII-EXIM Business Model and the initiatives taken at Hardwar was drawn by the group and it was widely circulated amongst the employees through special issue of Hardwar Current in April 2002.It followed by JBE workshop of Apex TQM Group held at Tehri on June 30 and July 1,02 where-in following business policy and critical factors was evolved.

BHEL has acquired certifications to Quality Management System ( ISO 9001 ), Environmental Management System ( ISO 14001 ) and Occupational Health & SAFETY management System (OHSAS 18001 ) and is also well on its journey towards Total Quality Management.

BHEL has
Installed equipment for over 90,000 MW of power generation for Utilities , Captive and Industrial users. Supplied over 225000 MV. A transformer capacity and other equipment operating in Transmission & Distribution network up to 400 Kv (AC&DC). Supplied over 25000 Motors with Drive Control System to Power Refineries, Steel, Aluminum, Fertilizer, Cement plants, etc. Supplied Traction electrics and AC/DC locos to power over 12000 kms Railway network. Supplied over one million Valves to Power Plant and other Industries. BHELs operations are organized around three business sectors, namely Power,Industry including Transmission, Transportation, Telecommunication & Renewable Energy and Overseas Business. This enables BHEL to have a strong customer orientation, to be sensitive to his needs and respond quickly to the changes in the market. projects, Petrochemicals,

PRODUCT RANGE:
This list is intended as a general guide and does not rep resent all of BHELs product and systems.

THERMAL POWER PLANTS

Steam turbines and generators of up to 500 MW capacity for utility and combined cycle applications; up to 1000 MW unit size.

Steam turbines for CPP application; capability to manufacture condensing, extraction, back pressure, injection or any combination of these types.

 GAS BASED POWER PLANT

Gas turbine of up to 255MW ( ISO ) rating. Gas turbine based co-generation and combined cycle systems for industry and utility applications.

HYDRO POWER PLANTS

Custom-built conventional hydro turbines of Kaplan, Francis and Pelton types with matching generators, pump turbines with matching motor-generators. Mini/micro hydro sets. Spherical, butterfly and rotary valves and auxiliaries for hydro station.

DG POWER PLANTS
USD, LDO, FO, LSUS. natural gas/biogas based diesel power plants, unit rating up to 20MW and voltage up to 11Kv, for emergency, peaking as well as base load operations on turnkey basis.

INDUSTRIAL SETS
Industrial turbo sets of rating from 1.5 to 120MW. Gas turbines land matching generators ranging from 3 to 255MW (ISO) rating. Industrial stream turbines and gas turbines for drive applications.

BOILERS
Combination of these fuels: capability to manufacture boilers with super critical parameters up to 1000 MW unit size. Steam generators for industrial applications, ranging from 40 to 450 t/hour capacity using coal, natural gas, industrial gases, biomass, lignite, oil, biogases or a combination of these fuels. Pulverized fuel fired boilers. Stoker boilers. Atmospheric fluidized bed combustion boilers.

Circulating fluidized bed combustion boilers. Waste heat recovery boilers. Chemical recovery boilers for paper industry, ranging from capacity of 100 to 1000 t/day of dry solids. Pressure vessels.

BOILER AUXILIARIES
Fan Air-Pre-heater Gravimetric Feeders Pulverizes Pulse Jet and Reverse Air Type Fabric Filters ( Bag Filters ) Electrostatic Precipitators Mechanical Separators Soot Blowers Valves

HEAT EXCHANGERS AND PRESSURE VESSELS

Air cooled heat exchangers. Surface condensers. Reactors, drums.

PUMPS
Pumps for various applications to suit utilities up to a capacity of 660MW. Boiler feed pumps (motor or steam turbine driven ). Boiler feed booster pumps. Emergency oil pumps. Lubricating oil pumps.

POWER STATION CONTROL EQUIPMENT

Microprocessor-based distributed digital control systems. Data acquisition systems. Man-machine interface.

SWITCHGEARS
SF6 circuit breakers (132 kV 400 Kv ). Vacum circuit breakers (3.3 Kv 33k V ).

BUS DUCTS
Bus ducts with associated equipment to suit generator power output of utilities of up to 500 MW capacity.

TRANSFORMERS
Special transformers: earthing; furnace; rectifier; electrostatic precipitator; freight loco and ACEMU and traction transformers.

INSULATORS
High- tension ceramic insulator

CAPACITORS
Coupling/CVT capacitors for voltages up to 400 Kv. Low Tension Thyristor Switched Capacitors ( LTTSC ) for dynamic power factor correction.

ENERGY METERS
Single phase, Poly Phase and Special purpose electro mechanical and electrical meters.

BUSINESS POLICY
In-line with Companys Vision, Mission and values, we dedicate ourselves to sustained growth with increasing positive Economic Value Addition and Customer focussed business leadership in the Power and Industry Sector.

CRITICAL SUCCESS FACTORS:

Increase Orders of Spares/Services to 230 Cr. Decrease Capital employed by Rs. 120 Cr. Saving in Material Cost by 16 Cr. i.e. 5%- Rs. 4 Cr. Decrease in indirect material +miscellaneous expenses by 5%- Rs. 4 Cr. Effective implementation of QTM/RCA/CTQ Strengthening Internal customer concept Development of an Incentive Scheme Reward Scheme including EXCEL Awards Effective implementation of PMS Effective Contract Management Technology Upgradation

Excellence triangle for each Critical Success Factor is now being drawn comprising improvement projects. These projects will be centrally registered under On-line Central Registration system to be developed for it. While CSF Champion will take the total stock of position in the improvement

projects undertaken in his respective CSF, progress of individual projects will be reviewed by Area TQ Council (ATQC) and Functional TQ Council (FTQC).

One of the major strengths of HEEP Hardwar is its free, open and consistent work culture for making continuous improvement evident from the participation of employees in Suggestions and Quality Circles. To recognize their efforts various productivity drives and competition are organized throughout the year and Executive director awards the winners in the special Award Distribution Functions. National Award for Excellence in Suggestion Scheme for 11th consecutive year by INSSAN, National Award for excellence in Energy Conservation as an Energy Efficient unit by CII, CMDs Rolling Trophy for 3rd consecutive year, Well known Forge Shop by Central Boiler Board etc. are some Vir Award 2001 and 12 employees honored with Vishwakarma Rashtriya Puraskarduring 2001-02.

The journey to excellence is unending .It is a continuous search with commitment and belongings. Sky indeed is not the limit for perfection. The transition has strongly experienced a silent internalization with a blend of commitment of the existing human resource for creating benchmarks for excellence. The emergence of role models and clear-cut driving force at the top provide an anvil to unleash the potential, which remain unexplored in search of Attitude to perform. The surge has started and is being communicated down the. BHEL today through TQM is on March towards excellence.

CASH MANAGEMENT

Introduction: Cash management is one of the key areas of working capital management. Cash is the liquid current asset. The main duty of the finance manager is to provide adequate cash to all segments of the organization. The important reason for maintaining cash balances is the transaction motive. A firm enters into variety of transactions to accomplish its objectives which have to be paid for in the form of cash. Meaning of cash: The term cash with reference to cash management used in two senses. In a narrower sense it includes coins, currency notes, cheques, bank drafts held by a firm. n a broader sense it also includes near-cash assets such as marketable securities and time deposits with banks.

Objectives of cash management:

There are two basic objectives of cash management. They are To meet the cash disbursement needs as per the payment schedule. To minimize the amount locked up as cash balances.

Basic problems in Cash Management:

Cash management involves the following four basic problems. Controlling level of cash Controlling inflows of cash Controlling outflows of cash and Optimum investment of surplus cash. Determining safety level for cash:

The finance manager has to take into account the minimum cash balance that the firm must keep to avoid risk or cost of running out of funds. Such minimum level may be termed as safety level of cash. The finance manager determines the safety level of cash separately both for normal periods and peak periods. Under both cases he decides about two basic factors. They are-

Desired days of cash: It means the number of days for which cash balance should be sufficient to cover payments.

Average daily cash flows: This means average amount of disbursements which will have to be made daily.

Criteria for investment of surplus cash: In most of the companies there are usually no formal written instructions for investing the surplus cash. It is left to the discretion and judgment of the finance manager. While exercising such judgment, he usually takes into consideration the following factors-

Security: This can be ensured by investing money in securities whose price remains more or less stable. Liquidity: This can be ensured by investing money in short term securities including short term fixed deposits with banks.

Yield: Most corporate managers give less emphasis to yield as compared to security and liquidity of investment. So they prefer short term government securities for investing surplus cash.

Maturity:

It will be advisable to select securities according to their maturities so the finance manager can maximize the yield as well as maintain the liquidity of investments.

Cash Management in BHEL: The cash management is carried out in seaways by CTM (Corporate Treasury Management). CTM is a commonly followed procedure in most of the companies.

Now we see the cash ratio / quick ratio in bhel 1. CASH RATIO It is relationship between cash and current liabilities. Cash Cash ratio = _______________________ Current liabilities

STATEMENT SHOWING CASH RATIO TABLE 3 Rs in lakhs

YEAR CASH CURRENT LIABILITIES CASH RATIO 0.40 0.40 0.42 0.36 0.30 2005 -2006 413398 1032002 2006-2007 580900 1442000 2007-2008 838600 2002230 2008-2009 1031467 2833290 2009-2010 979008 3244172

SOURCE: SECONDARY DATA FROM BHEL ANNUAL REPORTS

INTERPRETATION

The Cash ratio of BHEL in the 2005-2010 was fluctuation in 2009-2010 it was 0.30 times and in 2005-2006 it was 0.40 times and 2007-2008 it was reduced to 0.42. The standard norms of absolute quick ratio are 0.5:1. From the above table the firms not maintain the sufficient level of quick assets because of the day-to-day expenses .It is fluctuating between the standard norms for this ratio is 1:2 means for every 2 rupees of current Liabilities, Company must have 1 rupee of cash and bank balance and marketable securities.

CHART- 3

CASH RATIO

0.6 PERCENTAGE 0.4 0.2 2005 - 2006 - 2007 2008 - 2009 2006 2007 -2008 2009 2010 YEARS CASH 0
CASH

RECEIVABLES MANAGEMENT

Introduction: Receivables constitute a significant portion of the total assets of the business. When a firm seller goods or services on credit, the payments are postponed to future dates and receivables are created. If they sell for cash no receivables created.

Meaning:

Receivable are asset accounts representing amounts owed to the firm as a result of sale of goods or services in the ordinary course of business.

Purpose of receivables: Accounts receivables are created because of credit sales. The purpose of receivables is directly connected with the objectives of making credit sales. The objectives of credit sales are as follows

Achieving growth in sales.

Increasing profits. Meeting competition.

Factors affecting the size of Receivables: The main factors that affect the size of the receivables are Level of sales. Credit period. Cash discount.

Costs of maintaining receivables: The costs with respect to maintenance of receivables are as follows-

Capital costs: This is because there is a time lag between the sale of goods to customers and the payment by them. The firm has, therefore to arrange for additional funds to meet its obligations.

Administrative costs: Firm incur this cost for manufacturing accounts receivables in the form of salaries to the staff kept for maintaining accounting records relating to customers.

Collection costs: The firm has to incur costs for collecting the payments from its credit customers.

Defaulting costs: The firm may not able to recover the over dues because of the inability of customers. Such debts treated as bad debts.

Receivables management: Receivables are direct result of credit sale. The main objective of receivables management is to promote sales and profits until that point is reached where the ROI in further funding of receivables is less than the cost of funds raised to finance that additional credit (i.e.; cost of

capital). Increase in receivables also increases chances of bad debts. Thus, creation of receivables is beneficial as well as dangerous. Finally management of accounts receivable means as the process of making decisions relating to investment of funds in this asset which result in maximizing the overall return on the investment of the firm.

Receivables management and Ratio Analysis:

Ratio Analysis is one of the important techniques that can be used to check the efficiency with which receivables management is being managed by a firm. The most important ratios for receivables management are as follows-

DEBTORS TURNOVER RATIO: Debtors constitute an important constituent of current assets and therefore the quality of the debtors to a great extent determines a firms liquidity. It shows how quickly receivables or debtors are converted into cash. In other words, the DTR is a test of the liquidity of the debtors of a firm. The liquidity of firms receivables can be examined in two ways they are DTR and Average Collection Period. It indicates the number time debtors turned over each year. Generally the higher value of debtors turnover shows high efficiency to manage the credit management. Total sales Debtors turnover ratio = ______________________________ Debtors

TABLE 4

STATEMENT SHOWING DEBTORS TURNOVER RATIO Rs in lakhs

YEAR TOTAL SALES DEBTORS DEBTOR TURNOVER RATIO 1.87 1.78 1.61 1.64 1.59 716806 969582 1197487 1597550 2068875 2005 -2006 1337403 2006-2007 1723753 2007-2008 1930464 2008-2009 2621233 2009-2010 3286144

SOURCE: SECONDARY DATA FROM BHEL ANNUAL REPORTS

INTERPRETATION Debtors constitute an important constituent of current assets and therefore the quality of the debtors to a great extent determines a firms liquidity. It shows how quickly receivables or debtors are converted into cash. In other words, the DTR is a test of the liquidity of the debtors of a firm. The liquidity of firms receivables can be examined in two ways they are DTR and Average Collection Period. .The higher the ratio, the better it is, since it would indicate that debts are being collected promptly. In the year 2009 - 2010 the debt is 1.59 comparing to the previous year came downwards.

CHART- 4 DEBTOR TURNOVER RATIO

2
PERCENTAGE

1.5 1 2005 2006 2007 2008

YEARS

2009 2010

DEBT COLLECTION PERIOD

Debtors collection period is nothing but the period required to collect the money from the customers after the credit sales. A speed collection reduces the length of operating cycle and vice versa. The more quickly the customers pay, the less risk from bad debts, the lower the expenses of collection and more liquid the nature of of this asset.

It indicates the speed with which debts are collected. Days/months in a year Debt collection period = _______________________________ Debtors turnover ratio

DEBTORS

TABLE 5 Rs in lakhs

YEAR DAYS DEBT TURNOVER RATIO DEBT

2005 -2006 365

2006-2007 365

2007-2008 365

2008-2009 365

2009-2010 365

1.87

1.78

1.61

1.64

1.59

COLLECTION 195 PERIOD

205

227

223

230

SOURCE: SECONDARY DATA FROM BHEL ANNUAL REPORTS

INTERPRETATION The debt collection period of BHEL in the 2005-2006 was 195 days and in goes to 2009 2010 it was increased in (0.18%) 230 days. Standard Debt Collection Period of a firm is less than 90 days. But, above tables consists of increased of DCP in rapidly.

CHART 5 DEBT COLLECTION PERIOD

2005 2006

2007 2008
YEARS

2009 2010

CREDITORS TURNOVER RATIO

The ratio shows on an average the number of times creditors turned over during the year. Credit purchase Creditors turnover ratio = ________________________ Average creditors

DTCP

240 220 No. of Days 200 180 160

DTCP

TABLE 6 Rs in lakhs

YEAR CREDIT PURCHASE SUPPLIERS / CREDITORS CREDITORS TURNOVER RATIO

2005 -2006 709940

2006-2007 1018186

2007-2008 1182087

2008-2009 1762005

2009-2010 2067232

280409

353895

442400

585285

757980

2.53

2.88

2.67

3.01

2.73

SOURCE: SECONDARY DATA FROM BHEL ANNUAL REPORTS

INTERPRETATION The Creditors turnover ratio of BHEL was fluctuating during the year 2005 2010. It was upward in (2008 2009) was 3.01 times and it was downward in 2009 2010 is 2.73 times. Greater the CTR the more time firm has to pay to their creditors.

CHART -6 CREDITORS TURNOVER RATIO

3.2 3 2.8 PERCENTAGE 2.6 2.4 2.2

2005- 2006

2006 - 2007

2007 - 2008

CTR

2008 - 2009

YEARS

2009 - 2010

TABLE 7 CASH TO CURRENT ASSETS RATIO Rs in lakhs

YEAR CASH CURRENT ASSETS CAS CURRENT ASSETS RATIO TO 0.25 0.27 0.30 0.28 0.23 2005 -2006 413398 1633078 2006-2007 580900 2106400 2007-2008 838600 2770400 2008-2009 1031467 3690107 2009-2010 979008 4293481

SOURCE: SECONDARY DATA FROM BHEL ANNUAL REPORTS

INTERPRETATION The Cash to current assets turnover ratio of BHEL was fluctuating during the year 2005 2010. It was upward in (2005 2008) was 0.25 times to 0.30 times and it was downward in 2008 2010 is 0.23 times.

CHART -7 CASH TO CURRENT ASSETS RATIO

CASH TO CURRENT ASSETS RATIO

0.3 0.2 0.1

C.C.A.R

PERCENTAGE

0 200506 200607 200708 YEARS 200809 20092010

TABLE 8 CASH TURNOVER RATIO Rs in lakhs

YEAR SALES 2005 -2006 1337403 2006-2007 1723753 2007-2008 1930464 2008-2009 2621233 2009-2010 3286144

CASH CASH TURNOVER RATIO

413398

580891

838602

1031467

979008

3.24

2.97

2.31

2.54

3.36

SOURCE: SECONDARY DATA FROM BHEL ANNUAL REPORTS

INTERPRETATION The cash turnover ratio in the years 2005-2010 it was on fluctuating ratios, in the year 2009-2010 it was increased (0.037%) 3.36.

CASH TURNOVER RATIO

4 3 PERCENTAGE 2 1 0 2005-06 2006-07 2007-08 2008-09 2009-10 YEARS
C.T.R