PROJECTREPORT ON

FINANCIAL WORKING CAPITAL AND ANALYSIS

SUBMITTED IN PARTIAL FULFILLMENT

BACHELOR OF BUSINESS MANAGEMENT

UNDER THE GUIDANCE OF :

SUBMITTED BY:

MD. HEENA HASSAN FACULTY OF MANAGEMENT COLLEGE OF COMMERCE

ABHISHEK KUMAR ROLL NO. BBM 2 N D YEAR, SESSION- 2009-12

GUIDE CERTIFICATE
This is to certify that ABHISHEK KUMAR, Roll No. - 52, Session

2009-12, a student of BBM 2nd year of COLLEGE in BSNL,

OF COMMERCE has prepared his project report entitled FINANCIAL and WORKING CAPITAL ANALYSIS Buddha Marg, Patna under my supervision. To the best knowledge he has exposed his good effort to make his project more analytical and purposeful. His attitude and interest shown in the completion of project report is highly appreciable. I wish him success in all his future endeavors.

PROJECT IN-CHARGE

MD. HEENA HASSAN

CERTIFICATION
TO WHOM IT MAY CONCERN
This is to certify that ABHISHEK KUMAR , Roll No. - 52, Session 2009-12, a student of BBM 2nd year of COLLEGE OF COMMERCE has prepared his project report in entitled BSNL, FINANCIAL and WORKING CAPITAL ANALYSIS

Buddha Marg, Patna in partial fulfillment of the BBM project. The project is done with his own efforts and his sincerity in completing the project report was appreciable.

ATUL SINHA Additional GM (S&M) Bharat Sanchar Nigam Limited Bihar Telecom Circle

ACKNOWLEDGEMENT
I want to place on record my gratitude to the organization and its people whose generous help and support enabled me to complete this project within the stipulated time period. My special thanks to my project guide, MD.Heena Hasan, Lecturer of Management and Dr. P.K.Verma, Director, College of Commerce for his active help, guidance and support in accomplishment of the report. I am greatly indebted to all those people who have helped me in some way or other in the completion of the project. I am also grateful to the management especially Atul Sinha, Additional G.M. (S&M), BSNL for their support and co-operation during the course of my summer training. The Faculty of my institute deserves the praise for their role in shaping this summer training project. A special thanks to my parents who encourage me a lot during my project session. I once again thanks to all those who extended their support and cooperation in bringing out this project work successfully.
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C O NT E N T S

P AG E NO .

CHAP 1: - INTRODUCTION
1-A:-OVER VIEW OF COMPANY 1-B:-MEANING OF WORKING CAPITAL 1-C:-WORKING CAPITAL IN BSNL 4 28 38

CHAP 2: -OBJECTIVE OF STUDY

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CHAP 3: -ANA LYSIS AND FINDINGS

3-A:-CASH MANAGEMENT 3-B:-DEBTOR MANAGEMENT 3-C:-INVENTORY MANAGEMENT 3-D:-SWOT ANALYSIS 46 49 51 53

CHAP 4: - CONCLUSION

B IBLOGRA PHY

CHAPTER I INTRODUCTION
(I-A) Overview of the Company Bharat Sanchar Nigam Ltd. formed in October, 2000, is World's 7th largest Telecommunications Company providing

comprehensive range of telecom services in India: Wireline, CDMA mobile, GSM Mobile, Internet, Broadband, Carrier service, MPLS-VPN, VSAT, VoIP services, IN Services etc. Presently it is one of the largest & leading public sector unit in India. BSNL has installed Quality Telecom Network in the country and now focusing on improving it, expanding the network, introducing new telecom services with ICT applications in villages and wining customer's confidence. Today, it has about 46 million line basic telephone capacity, 8 million WLL capacity, 52 Million GSM Capacity, more than 38302 fixed exchanges, 46565 BTS, 3895 Node B ( 3G BTS), 287 Satellite Stations, 614755 Rkm of OFC Cable, 50430 Rkm of Microwave Network connecting 602 Districts, 7330 cities/towns and 5.6 Lakhs villages.

BSNL is the only service provider, making focused efforts and planned initiatives to bridge the Rural-Urban Digital Divide ICT sector. In fact there is no telecom operator in the country to beat its reach with its wide network giving services in every nook & corner of country and operates across India except Delhi & Mumbai. Whether it is inaccessible areas of Siachen glacier and North-eastern region of the country. BSNL serves its customers with its wide bouquet of telecom services. BSNL is numero-uno operator of India in all services in its license area. The company offers vide ranging & most transparent tariff schemes designed to suite every customer.

BSNL cellular service, CellOne, has 55,140,282 2G cellular customers and 88,493 3Gcustomers as on 30.11.2009. In basic services, BSNL is miles ahead of its rivals, with 35.1 million Basic Phone subscribers i.e. 85 per cent share of the subscriber base and 92 percent share in revenue terms.

BSNL has more than 2.5 million WLL subscribers and 2.5 million Internet Customers who access Internet through various modes viz. Dial-up, Leased Line, DIAS, Account Less Internet (CLI). BSNL has been adjudged as the NUMBER ONE ISP in the country.

BSNL has set up a world class multi-gigabit, multi-protocol convergent IP infrastructure that provides convergent services like voice, data and video through the same Backbone and Broadband Access Network. At present there are 0.6 million DataOne broadband customers. The company has vast experience in Planning, Installation, network integration and Maintenance of Switching & Transmission Networks and also has a world class ISO 9000 certified Telecom Training Institute. Scaling new heights of success, the present turnover of BSNL is more than Rs.351,820 million (US $ 8 billion) with net profit to the tune of Rs.99,390 million (US $ 2.26 billion) for last financial year. The infrastructure asset on telephone alone is worth about Rs.630,000 million (US $ 14.37 billion). The turnover, nationwide coverage, reach, comprehensive range of telecom services and the desire to excel has made BSNL the No. 1 Telecom Company of India

BSNL Registered Bharat Sanchar Office Bhavan Harish Chandra Mathur Lane Janpath, New Delhi-110 001 BSNL Corporate Bharat Sanchar Office Bhavan Harish Chandra Mathur Lane Janpath, New Delhi-110 001

Board of Directors

Designation CMD

Name KULDEEP GOYAL Director(Enterprise) RAJENDRA 23734064 23734166 dir.enterprise@bsnl.co.in SINGH Director(Finance) GOPAL DAS 23714141 23314141 dirfin@bsnl.co.in Director(Human GOPAL DAS 23734070 23734072 dirhrd@bsnl.co.in Resource) Director(Consumer Rajesh 23037142 23734242 diro@bsnl.co.in Fixed Access) Wadhwa 23738999 Director(Consumer R.K.Aggarwal 23734073 23734075 dirplg@bsnl.co.in Mobility) Company Secretary H.C.PANT 23353395 23353389 csgml@bsnl.co.in & GM(Legal)

Phone (Office) Fax No Email 23372424 23372444 cmdbsnl@bsnl.co.in

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ASPIRATION OF THE COMPANY

Be the leading Telecom Service Provider in India with global presence. Create a customer focused organization with excellence in sales, marketing and customer care. Leverage technology to provide affordable and innovative products/services across customer segments. Provide a conducive work environment with strong focus on performance. Establish efficient business processes enabled by IT.

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MAIN SERVICES PROVIDED BY BSNL BSNL provides almost every telecom service, however following are the main Telecom Services being provided by BSNL in India:1) BSNL Landline BSNL is the largest telecom operator in India and is known to everybody for Basic Telephony Services for over 100 years. Presently the Plain old, Countrywide telephone service is being provided through 32,000 electronic exchanges, 326 Digital Trunk Automatic Exchanges(TAX), Digitalized Public Switched

Telephone Network (PSTN) all interlinked by over 2.4 lakh km of Optical Fiber Cable, with a host of Phone Plus value additions to our valued Customers. BSNL's telephony network expands throughout the vast expanses of the country reaching to the remotest part of the country.

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2) BSNL Mobile

India's fastest growing cellular service, along with postpaid and prepaid services brings cellular telephony to the masses, through innovative technology and strategic pricing. This ambitious service uses state-of-the-art GSM technology to attain global excellence and leadership in business. Our entry into this sector has brought GSM cellular service at an affordable cost to the common man. All serving a single objective, to provide better communication to millions across India. Customers have reposed tremendous faith in BSNL and it has enrolled over 30 Lakh Cellular customers within ten months of launch of Cellular service, an unprecedented mark in Indian Cellular Market.

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3) BSNL WLL-M BSNL WLL-M is a communication system that connects

customers to the The BSNL Landline network using radio frequency signals instead of conventional copper wires, for the full or part connection between the subscriber and the exchange This comes with superior voice quality and high speed data capabilities. CDMA is popular with more than 100 million subscribers worldwide, and the number keeps on increasing exponentially.

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4) Internet Services BSNL is India's no. 1 Internet service provider with more than 17 lakh subscribers, providing Internet service throughout the entire country (except in New Delhi and Mumbai) under the brand name of "Sancharnet". Sancharnet provides free all India roaming and enables it's users to access their accounts, using the same access code (172233) and user ID from any where in the Country. In order to make Internet available through out the length and breadth of the Country Internet Dhabas are being commissioned at all the Block Headquarters. BSNL has also started DIAS and Account free internet access (CLI based) facility on few select cities recently.

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5) BSNL Broadband BSNL is in the process of commissioning of a world class, multigigabit, multi-protocol, convergent IP infrastructure through National Internet Backbone-II (NIB-II), that will provide convergent services through the same backbone and broadband access network. The Broadband service will be available on DSL technology (on the same copper cable that is used for connecting telephone), on a countrywide basis spanning 198 cities. In terms of infrastructure for broadband services NIB-II would put India at par with more advanced nations. The services that would be supported includes always-on broadband access to the Internet for residential and business customers, Content based services, Video multicasting, Video-on-demand and Interactive gaming, Audio and Video conferencing, IP Telephony, Distance learning, Messaging: plain and feature rich, Multi-site MPLS VPNs with Quality of Service (QoS) guarantees. The subscribe will be able to access the above services through Subscriber Service Selection System (SSSS) portal.

6) Intelligent Network (IN): BSNL is providing IN services like tele-voting, toll free calling, premium calling etc.
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Products BSNL LANDLINE BSNL MOBILE - POSTPAID - PREPAID - UNIFIED MESSAGING - SMS & BULK SMS BSNL WLL INTERNET SERVICES - NETWORK - BROADBAND - TYPES OF ACCESS - WI-FI - CO-LOCATION SERVICE - BSNL WEB HOSTING - INTERNET TARIFF
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- DIAL UP INTERNET BSNL BROADBAND BSNL MANAGED NETWORK SERVICES BSNL MPLS-VPN ISDN LEASED LINE INTELLIGENT NETWORK - FREE PHONE SERVICE - PREMIUM RATE SERVICE - INDIA TELEPHONE CARD - VIRTUAL PRIVATE NETWORK (VPN) - VOICE VPN - UNIVERSAL NUMBER - UNIVERSAL PERSONAL NUMBER - TELE VOTING VIDEO CONFERENCING
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 AUDIO CONFERENCING I NET TELEX/ TELEGRAPH EPABX - EPABX - CENTREX HVNET TRANSPONDER

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Challenges
During Financial Year 2007-2008 (From April 01, 2006 to March 31, 2007) BSNL has added 9.6 million new customers in various telephone services taking its customer base to 64.8 million. BSNL's nearest competitor Bharti Airtel is standing at a customer base of 39 million. However, despite impressive growth shown by BSNL in recent times, the Fixed line customer base of BSNL is declining. In order to woo back its fixed-line customers BSNL has brought down long distance calling rate under OneIndia plan, however, the success of the scheme is not known. However, BSNL faces bleak fiscal 2006-2007 as users flee, which has been accepted by the CMD BSNL. Presently there is an intense competition in Indian Telecom sector and various Telcos are rolling out attractive schemes and are providing good customer services. However, BSNL being legacy operator and its conversion from a Government Department earns lot of criticism for its poor customer service. Although in recent past there have been tremendous improvement in working of BSNL but still it is much below the Industry's Expectations. A large aging (average age 49 years (appx)) workforce (300,000 strong), which is mostly semi-illiterate or illiterate is the main reason for the poor customer service.

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Further, the Top management of BSNL is still working in BSNL on deputation basis holding Government employee status thus having little commitment to the organization. Although in coming years the retirement profile of the workforce is very fast and around 25% of existing workforce will retire by 2010, however, still the workforce will be quite large by the industry standards. Quality of the workforce will also remain an issue.

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Opportunities and Growth plans BSNL has continued its growth story ever since its formation & has reached a customer base of 81.49 million as on 31 st March,2009 from 28.11 million as on 31 st March,2001. BSNL further plans to increase its customer base to 160 Million by March, 2014. New Services introduced/planned by BSNL 3G Services: BSNL has started 3G services in 290 cities and acquired more than 6lakh customers. It has planned to roll out 3G services in 760 cities across the country in 2010-11. Broadband services: The shift in demand from voice to data has revolutionized the very nature of the network. BSNL is poised to cash on this opportunity and has planned for extensive expansion of the Broadband services. The Broadband customer base of 3.56 Million customers in March'2009 is planned to be increased to 16.00 million by March 2014. BSNL is also offering prepaid Broadband services. The customers availing prepaid broadband have many advantages over post paid broadband like control on usage, Mobility etc.

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In addition to wire line broadband services, BSNL is also in the process of rolling out its Wi-MAX network in rural areas to take an initial lead and provide wireless broadband services in all rural blocks in the country during 2010-11. The Urban Wi-Max is also being deployed in Kerala & Punjab Circles and shall cover all the major cities in these circles. Wi-Max services are also being provided through a Franchisee agent with M/s SOMA in three states of Gujrat, AP and Maharashtra. Value Added Services : BSNL is focusing on provision of value added services/features to attract high end customers and to double its revenues from VAS Fibre to Home(FTTH) : To meet the demand for high bandwidth services, BSNL is rolling out FTTH services (GPON & GE-PON) for the first time in the country, which is likely to generate substantial revenue in coming years. Services are likely to start by March 2010. Mobility in WLL: BSNL is planning to provide full mobility on its WLL network from March 2010.

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BSNL Network

TELEPHONE

Basic Telephone (Bfone) Total Number of connections WLL (Tarang) Total Number of connections Village Public Telephones as on 5,54,928 31.07.09 Public Telephones (Local, STD and Highway) Total Number of Public as on 19,31,182 Telephones 30.09.08 STD Stations as on Number of STD Stations 33,206 30.09.08 Transmission Systems as on 30.09.08 Transmission Systems Digital (Route kms) (Route kms) Coaxial 6,024 Microwave 50,430 UHF 45,130 Optical Fiber 5,60,086 Total Number of Telephones as on 46,96,641 30.09.08 as on 3,01,22,269 30.09.08

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Satellite Based Services (as on 30.09.08) MCPC-VSATs 82 IDR Systems (2 Mb/ 8 Mb) 99/38

TELEGRAPH 961 716 44,754 1427

Departmental Telegraph Offices Telecom Centers Combined Offices Bureau-Fax Centers

MOBILE SERVICES (As on 28.2.2010)

Total number of 2G connections Total number of 3G connections

59945215 973378

District Headquarters covered

- 618(All covered) - 362117

Total number of villages covered

Total number of Town/cities covered - 24769

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National Highway covered (Km) State Highway covered (Km) Railway route covered (Km)

- 56705 (OUT OF 62373) - 85772(OUT OF 130007) - 43950(OUT OF 53522)

INTERNET SERVICES (As on No. of Working connections 2851 173105 17005 16064 19990 146658 63702 17758
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30.10.2006) SN 1 2 3 4 5 6 7 8

Name of the No. of Telecom nodes Circle ANDAMAN & NICOBAR ANDHRA PRADESH ASSAM BIHAR GUJARAT HARYANA HIMACHAL 1 23 15 15 22 16 6

CHHATTISGARH 8

PRADESH 9 JAMMU & KASHMIR 2 7 27 15 43 27342 18964 162722 260799 71198 211950 9750 11958 33629 122120 96362 298509 26381 67081

10 JHARKHAND 11 KARNATAKA 12 KERALA 13 MADHYA PRADESH

14 MAHARASHTRA 36 15 NORTH EAST-I 17 ORISSA 18 PUNJAB 19 RAJASTHAN 20 TAMILNADU 21 UTTRANCHAL UTTAR 22 PRADESH (EAST) UTTAR 23 PRADESH (WEST) 24 WEST BENGAL 25 WESTERN TELECOM 5 13 19 32 31 10 39 16 NORTH EAST-II 5

20 12 1

67883 36932 291

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REGION KOLKATA 26 TELECOM DISTRICT CHENNAI 27 TELECOM DISTRICT NORTHERN 28 TELECOM REGION TOTAL 1 219202

119714

1 427

1129 2747624

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Consumer Grievances Redressal Mechanism in BSNL Consumer Grievances Redressal Mechanism (Public Grievance Redressal Mechanism) BSNL has a well structured and multilayered Public Grievances Redressal Mechanism including Dispute Resolution Mechanism. The Public Redressal setup in BSNL has been introduced right from the Corporate Office to SSA(Secondary Switching Area) levels. Subscribers having complaints or grievances can interact with the organization through the following for Public Grievance / Dispute settlements: (i) Complaints are being booked on "198". This Toll Free Service of booking complaints are available in every telephone system. Grievances can be booked on "12727"(for Circle Office) or "1095" (for District Office). This special Toll Free Service has been introduced by BSNL for booking public grievances. (ii) In every office 'visiting hours' are prescribed where the subscribers having complaints or grievances can approach the officers of BSNL at various levels,

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(iii) Public Grievance Officers are available right from Corporate Office to SSA (Secondary Switching Area) level. The

complainant can approach these officers in person or through written complaints or communicate through e-mail or contact on telephones, (iv) Special attention is being given to holding meetings with consumer organizations. (v) Telephones Advisory Committees have been constituted, (vi) Senior Officers are available for public without prior appointment during specified hours on working days. (vii Customer Service Centers have been opened for IMPCS. II Open House Session:

Complaints/suggestions of general nature as regard to improving the telecom services in the area are discussed in the Open House Sessions. The basic idea of conducting such Open House Sessions is to establish direct channels of communications with our customers and also to enable the telecom staff to appreciate and evaluate the customers difficulties and complaints from their point of view. A press notification is issued in leading newspaper to hold the Open House Session for inviting customers to attend and submit their suggestions/grievances.

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Subscribers are invited in a public hall. The session is presided over by Senior Officers i.e. Area GM/Area Manager. Customers are requested to place general grievances which are recorded. Replies are given on the spot. In few cases, which cannot be settled on the spot a time frame is given. Efforts are made to settle the case within the given time frame. Written reply is sent to the customers. III. Telephone Adalats:

Subscribers whose grievances remained unsettled are invited to make petitions for redressal of their grievances in Telephone Adalats. SSA(Secondary Switching Area) Level Telephone

Adalats are being conducted on bimonthly periodicity and Circle level Telephone Adalats are being conducted once in three months. Customers are asked to give their grievances in writing with all supporting documents within stipulated period to District Complaint Officer (DCO). The concerned office to whom the case relates examines the case received by DCO and settles the case. A speaking order settling the case is communicated to the customers. For unsettled cases, a date is fixed for holding the Telephone Adalat. The customers are invited to attend the Telephone Adalat. The Adalat is presided over by General Manager of the area. The concerned officers of the Department are also called to be present

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in the Adalat. The full details of the case is presented to the presiding officer. The order of the presiding officer is communicated in the Adalat after hearing the arguments from both the parties. Appellate Jurisdiction of Telephone Adalats: Circle level adalats headed by CGMs can consider the cases of the appeals against the decisions of the adalats chaired by SSA Heads. Adalats headed by SSA Heads can consider cases of excess billing which have been rejected by them as administrative heads of SSAs. IV. Grievances BSNL ensures prompt rectification of any fault or complaint booked through its extensive grass root level online fault restoration system (FRS). However, in case you still have your problem unsolved timely, BSNL has implemented a three tier consumer grievance redressal mechanism comprising of call centres for various services, nodal officers at SSA and Circle level and an appellate authority for deciding cases that the consumers may wish to appeal against. As a first step, you may contact our Call Centre on toll free helpline numbers given below. Telecom consumers Protection and Regulation of

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For basic services including broadband services:1500 (toll free number) For GSM Mobile services: 9400024365 (toll free number). For Broadband &Internet services:1800-424-1600 (toll free number). For MPLS & Other Data services: 1800-425-1957 (toll free number). 1. Procedure for handling grievances by Call Centers.

The Call Centers, immediately on receipt of your complaint: (a) Shall register such complaint by allotting a unique identification number to be called the docket number; (b) Communicate, at the time of lodging the complaint, the unique identification number to be called docket number, date and time of registration of the complaint, to you; (c) Record details in respect of such complaint; (d) Intimate you (i) Through telephone or other electronic means or any other means; and

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(ii) Within the time limit specified the action taken on your complaint; and (e) give you contact details of the Nodal Officer (including his name, telephone number and address) in case you are not satisfied with the redressal of your grievance or when requested by you. 1.1 Time limit for redressal of grievance of consumers by

Call Centres. (1) Unless specified elsewhere, all complaints relating to fault or disruption of service or disconnection of service shall be redressed within three days from the date of registration of complaint; (2) Unless specified elsewhere, all other complaints shall be redressed within seven days from the date of registration of complaint; (3) where lesser time limit has been specified by any other law for the time being in force or other regulations of TRAI or DOT or by BSNL for redressal of grievance, the Call Centres shall redress the grievances of the consumer within such specified time. In case you are not satisfied with the redressal of your grievance at the Call Centre level or in case the Call Centre within the above time limit does not attend to the complaint, you may approach the Nodal Officer for redressal of your grievance.

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2.

Redressal of Consumer Grievances by Nodal Officers.

You may approach, by a letter in writing, or through telephone, or web based online filing of complaints or through short message service or through other electronic means and any other means, the Nodal Officer of the concerned SSA of the Circle/District for redressal of your grievance. In emergent situation, one can approach at the first instance itself a Nodal Officer instead of a Call Centre and the Nodal Officer shall redress the grievance. 2.1 Handling of grievances of consumers by Nodal Officers.

The Nodal Officer shall be accessible to the consumers at the address made available by the public notice and telephone bills, as referred to above register every complaint lodged by the consumers; 1. Communicate, within three days from date of the receipt of

the complaint, the unique complaint number to the consumer; 2. After taking the remedial measure for redressal of the

grievance or decision thereon, intimate, within the time limit specified as below the remedial measure or decision taken, to the consumer.

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2.2

Time limit for redressal of complaints by Nodal Officer.

The Nodal Officer shall redress the complaints of the consumer within ten days of the registration of the complaint, provided that complaints relating to fault or disruption of service or disconnection of service shall be redressed within three days from the date of registration of complaint. In case the consumer is still not satisfied with the redressal of his grievance by the Nodal Officer or in case his complaint is not redressed by the Nodal Officer within the time limit specified or no reply is received regarding resolution of the complaint from Nodal Officer, he may appeal to the appellate authority for redressal of his grievance.

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Accounting Policies Basis of Preparation of Financial Statements The financial statements of Bharat Sanchar Nigam Limited (the Company or BSNL) are prepared under the historical cost convention adopting the accrual method of accounting in accordance with Indian Generally Accepted Accounting Principles and in accordance with the provisions of the Companies Act, 1956 (the Act). Revenue Recognition Income from services is accounted for on accrual basis and in conformity with Accounting Standard 9 of ICAI. Accordingly, a) Revenue for all services is recognized when earned and are realizable at the time of billing. Unbilled revenues from the billing date to the end of the year are recorded as accrued revenue during the period in which the services are provided. Provision is made in respect of bills considered to be disputed (by the management), debts outstanding for more than two years and for debts due for less than 2 years, to the extent considered necessary by the management.

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b) Installation Charges recovered from subscribers at the time of new telephone connections are recognized as income in the first year of the billing. c) In terms of the arrangement between Department of Telecommunications (DoT) and the Company, the charges for telecommunication services and other infrastructural services provided by BSNL to DoT are neither being billed nor provided for. d) Sale proceeds of scrap arising from maintenance and project works are taken into miscellaneous income in the year of sale. e) Income from SIMs, recharge coupons of Mobile, Prepaid Calling Cards, and Prepaid internet connection cards are treated as income of the year in which the payment is received since the extent of use of these cards within the financial year could not be ascertained. f) Wherever there is uncertainty in realization of income, such as liquidated damages, claims on Government Departments & local authorities etc., these are recognized on collection basis.

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g) The claims on account of reimbursement for provision of infrastructure, operation and maintenance of Village Public Telephones (VPTs) and Rural Household Connections (RDELs) receivable from U.S.O. fund are accounted for as revenue on account of the fact that the claim for infrastructure cannot be credited to the concerned asset account since the claim amount could not be segregated asset wise. h) Other income by way of interest on loans to employees, security deposit with Government Departments and local authorities, being not material, are accounted for on collection.

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Fixed Assets a) Fixed assets are carried at cost less depreciation. Cost includes directly related establishment and other expenses including employee remuneration and benefits, directly identifiable to the construction or creation of the assets. b) Expenditure on replacement of assets, equipments, instruments and rehabilitation works is capitalized if, in the opinion of the management, it results in enhancement of revenue generating capacity. c) Assets are capitalized to the extent completion certificates have been obtained, wherever applicable. d) The cost of stores and materials at the time of issue to a project, is debited to CWIP. e) Apparatus and plants principally consisting of telephone exchanges, transmission equipments and air conditioning plants etc. are capitalized as and when an exchange is commissioned and put to use. f) Cables are capitalized as and when ready for connection to the main system. g) Intangible assets are stated at cost of acquiring the same less accumulated depreciation / amortization.
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Depreciation/Amortization Depreciation is provided based on the Written down Value method at the rates prescribed in Schedule XIV to the Companies Act, 1956 except for Subscriber Installation. The Subscriber Installation is depreciated over the useful life of 5 years on Written Down Value method. Assets costing up to Rs. 5,000 are depreciated fully in the year of purchase. Similarly, partition works costing up to Rs. 2,00,000 are depreciated fully in the year of construction. The depreciation on machinery & tools used both for project and maintenance work is charged to profit and loss account instead of capitalization. All telephone exchange buildings, administrative offices and captive consumption assembling premises/workshops are considered as normal building and not as factory building. Accordingly depreciation is charged uniformly. Intangible assets such as Entry License Fee for Telecom Service operations are amortized over the license period (i.e. 20 years) and standalone computer software applications are amortized over the license period subject to maximum of 10 years as per straight line method.

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Impairment of Assets Assets, which are impaired by disuse or obsolescence, are segregated from the concerned assets category and shown as Decommissioned Assets and provision made for the loss, if any, due to the difference between their net carrying cost and the net realizable value. Investments Long-term investments are carried at cost, after providing for any diminution in value, if such diminution is of a permanent nature. Foreign Currency Transactions a) Transactions in foreign currency are recorded at the exchange rate prevailing on the date of the transaction i.e. on the date of payment or receipt as the case may be. b) All Foreign Currency Liabilities and monetary assets are stated at the exchange rate prevailing as at the date of Balance Sheet and the difference taken to Profit and Loss Accounts as Exchange Fluctuation Loss or Gain. Extraordinary Items Extra-ordinary items of income and expenditure, as covered by AS 5, are disclosed separately.

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Manufacturing Expenses Expenses incurred at Factory units are allocated to the cost of the manufactured products. Prior Period Items Items of Income/expenditure exceeding Rs. 5 lakh are only considered for being treated as 'prior period items'. Taxes on Income Taxes on Income for the current period are determined on the basis of taxable income and tax credits computed in accordance with the provisions of the Income Tax Act, 1961. In accordance with the AS-22, Deferred Tax Liability is recognized on the timing differences between accounting income and the taxable income for the period taking into consideration the contents of Accounting Standard Interpretations 3 and quantified using the tax rates in force or substantively enacted as on the Balance Sheet date. Deferred Tax Assets are recognized and carried forward to the extent there is a virtual certainty that such deferred tax assets can be realized.

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Provisions Provisions are recognized when the Company has a present obligation as a result of past events; it is more likely than not that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Contingent Liabilities Liabilities, though contingent, are provided for if there are reasonable chances of maturing such liabilities as per management. Other contingent liabilities, barring frivolous claims, not acknowledged as debts, are disclosed by way of notes. Segment Reporting The primary segment consists of basic and cellular services provided. The manufacturing activities have not been treated as a separate segment since such activities are essentially carried on as support service to other segments. The following specific accounting policies have been followed for segment reporting: Segment Revenue includes service income and other income directly identifiable with/allocable to the segment.

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Income/expense, which relates to the Company, as a whole and not allocable to individual business segment is included in Unallocable Corporate Income/expense respectively. Expenses that are directly identifiable with/allocable to segments are considered for determining Segment Results. Segment Assets and Liabilities include those directly identifiable with the respective segments. Un-allocable corporate assets and liabilities represent the assets and liabilities that relate to the Company as a whole and not allocable to any segment

(I-B) MEANING OF WORKING CAPITAL Working Capital is commonly defined as the difference between current assets and Current liabilities. Efficient working capital management requires that firms should Operate with some amount of working capital, the exact amount varying from firm To firm and depending, among other things on the nature of industry. Capital required for a business can be classified in two main categories viz. 1) 2) Fixed capital, and Working capital.

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Every business needs funds for two purposes-for establishment and to carry out its day-to-day operations. Long term funds are required to create production facilities. Through purchase of fixed assets such as plants and machinery, land, building, furniture, etc. An investment in these assets represents that part of firms capital which is blocked on permanent or fixed basis and is called fixed capital. Funds are also needed for short-term purpose for the purchase of raw material, payment of wages and other day-to-day expenses, etc. These funds are known working Capital. In simple words, working capital refers to that part of the firms capital, which is required for financing short-term or current assets such as cash, marketable securities, debtors and inventories. Funds thus invested in current assets keep revolving fast and are being constantly converted into cash and these cash flows out again in exchange for other current assets. Hence, it is also known as revolving or circulating capital or short-term capital.

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CLASSIFICATION OF WORKING CAPITAL Working Capital may be classified on two bases:On the basis of Concept:-On the basis of concept, working capital can be classified as, Gross Working Capital Net Working Capital

On the basis of Time:-On the basis of time, working capital can be classified as, Permanent or Fixed Working Capital Temporary or Variable Working Capital

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Gross Working Capital:The Gross Working Capital is the Capital invested in the total current assets of the enterprises. Current assets are those assets, which can be converted into cash within a short period, normally an accounting year. Gross Working Capital = Total Current Assets Net Working Capital:The term Net Working Capital refers to the excess of current assets over current liabilities, or say, Net Working Capital= Current Assets Current Liabilities Net Working Capital can be positive or negative. When the current asset exceeds the current liabilities the working capital is positive and the negative working capital results when the current liabilities are more than the current assets. Current liabilities are those liabilities, which are intended to be paid in the ordinary course of business within a short period of normally one accounting year out of the current assets of the income of the business. The gross working capital concept is financial or going concern concept whereas net working capital is an accounting concept of working capital. Both the concepts have their own merits.

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The gross concept is sometime preferred to the concept of working capital for the following reasons:# It enables the enterprise to provide correct amount of working capital at correct time. # Every management is more interested in total current assets with which it has to operate then the sources from where it is made available. # It takes into consideration of the fact every increase in the funds of the enterprise would increase its working capital. # The concept is also useful in determining the rate of return on investments in working capital. The net working capital concept, however, is also important for the following reasons:# It is a qualitative concept, which indicates the firms ability to meet its operating expenses the short term liabilities. # It indicates the margin of protection available to short term creditors. # It is an indicator of financial soundness of enterprise. # It suggest the need of financing a part of working capital requirement out of the permanent sources of funds.

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Permanent or Fixed Working Capital Permanent or fixed capital is the minimum amount, which is required to ensure effective utilization of fixed facilities and for maintaining the circulation of current assets. Every firm has to maintain a minimum level of current assets is called permanent or fixed working capital as this part of working capital is permanently blocked in current assets. As the business grow the requirement of working capital also increases due to increase in current assets. Temporary or Variable Working Capital Temporary or variable working capital is the amount of working capital, which is required to meet the seasonal demands and some special exigencies. Variable working capital can further be classified as seasonal working capital and special working capital. The capital required to meet the seasonal need of the enterprise is called the seasonal working capital. Special working capital is that part of working capital which is required to meet special exigencies such as launching of extensive marketing campaign for conducting research etc. Temporary working capital differs from permanent working capital in the sense that it is required for short periods and cannot be permanently employed gainfully in business.

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NEEDS AND OBJECTIVES FOR WORKING CAPITAL Every business needs some amount of working capital. The needs for working capital, arises due to time gap between production and realization of cash from sales. There is an operating cycle involved in sales and realization of cash. There are time gaps in purchase of raw material and production, production and sales, and realization of cash. Thus working capital is needed for the following purposes: For the purchase of raw material, component and spares. To pay wages and salaries. To incur day- to- day expenses and overhead costs such as fuel, power and office expenses etc. To meet the selling costs such as packing, advertising etc. To provide credit facilities to the customers. To maintain the inventories of raw material, work in progress, store and spares and finished stock. For studying the need of working capital in a business, one has to study the business under varying circumstances such as new concern, as a growing and one, which has attained maturity.

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A new concern requires a lot of funds to meets its initial requirement such as promotion and formation etc. These expenses are called preliminary expenses and are capitalized. The amount needed for working capital depends upon the size of the company and the ambition of its promoters. Greater the size of the business unit generally will be the requirement of the working capital. The requirement of the working capital goes on increasing with the growth and expansion of the business till its gains maturity. At maturity the amount of working capital required is called normal working capital. FACTORS DETERMINING THE WORKING CAPITAL REQUIREMENT NATURE OF BUSINESS The requirement of working capital is very limited in public utility undertaking such as Electricity, Water Supply and Railways because they offer cash sales only and supply services not products and no funds are tied up in inventories and receivables. On the other hand the trading and financial firm requires less investment in fixed assets but have to invest large amounts in current assets. The manufacturing undertakings requires sizable amount of working capital along with fixed investments.

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PRODUCTION POLICY The determination of working capital needs depends upon the production policy of the business. The demand for certain products is seasonal i.e., such products are purchased in certain months of a year. For such industries two types of production policy can be followed. Firstly they can produce the goods in the months of demand or secondly, they produce for the whole year. If the second alternative is followed, it would mean that till the time of demand finishes, product will have to be kept in stock. It would require additional working capital. LENGTH OF PRODUCTION CYCLE The longer the manufacturing time, the raw material and other supplies have to be carried for a longer time in the process with progressive increment of labor and service costs before the final product is obtained. So working capital is directly proportional to the length of the manufacturing process. RATE OF STOCK TURNOVER There is an inverse co-relationship between the quantum of working capital and the velocity or speed with which the sales are affected. A firm having a higher rate of stock turnover will need lower amount of working capital as compared to a firm having a low rate of turnover.
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CREDIT POLICY Credit policy affects the working capital requirements in two ways: Terms of credit allowed by customer to the firm, Terms of credit available to the firm. A concern that purchases its requirements on credit and sells its product/services on cash requires lesser amount of working capital and vice-versa.

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WORKING CAPITAL CYCLE The speed with which the working cycle completes one cycle determines the requirements of working capital. Longer the cycle larger is the requirement of working capital.

DEBTORS

CASH GOODS

FINISHED

RAW MATERIALS PROGRESS

WORK IN

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RATE OF GROWTH AND EXPANSION OF BUSINESS The larger size businesses require more permanent and variable working capital in comparison to small business. If a company is growing, its working capital requirements will also go on increasing. Thus, the growing concerns require more working capital as compared to the stable industries. SEASONAL VARIATION Generally, during the busy season, a firm requires larger working capital than in the slack season. BUSINESS FLUCTUATION In period of boom, when the business is prosperous, there is a need for larger amount of working capital due to rise in sales, rise in prices, optimistic expansion of business etc. On the contrary in time of depression, the business contracts, sales decline, difficulties are faced in collection from debtors and the firm may have a large amount of working capital idle.

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EARNING CAPACITY AND DIVIDEND POLICY Some firms have more earning capacity than other due to quality of their products, monopoly conditions, etc. Such firms may generate cash profits from operations and contribute to their working capital. The dividend policy also effects the requirement of working capital. A firm maintaining a steady high rate of cash dividend irrespective of its profit needs more working capital than the firm that retains larger part of its profits and does not pay so high rate of cash dividend. PRICE LEVEL CHANGES Price level changes also affect working capital needs. If the prices of different goods increase, to maintain same level of production, more working capital is needed AVAILABITY OF RAW MATERIAL Availability of raw material on the continuous basis affects the requirement of working capital. There are certain types of raw materials which are not available regularly. In such a situation firm requires greater working capital to meet the requirements of production. Some raw materials are available in particular.

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CASH REQUIRED FOR WORKING CAPITAL For estimating the actual cash requirement you may follow the following two-step procedure: 1. Estimate the cash cost of various current assets requirement: The cash cost of a current asset is: Value of current asset (-) Profit element, if any, included in the value. (-) Non-cash charges like depreciation, if any, included in the value. 2. Deduct the spontaneous current liabilities from the cash cost of current assets: A portion of the cash cost of current assets is supported by trade credit and accruals of wages on expense, which may be referred to as spontaneous current liabilities. The balance left after such deduction has to be arranged from other sources In 1997, the RBI permitted banks to evolve their own norms for assessment of the Working Capital requirements of their clients.

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CASH FLOW BASED COMPUTATION OF WORKING CAPITAL _ Drawing up cash flow statements (monthly or quarterly) for the past few years clearly indicate the seasonal and secular trend in utilization of working capital. _ The projections drawn up by the entrepreneur may then be jointly discussed with the banker as modified in light of the past performance and the bankers opinions. _ The peak cash deficit is ascertained from the cash budgets. _ The promoters share for such requirement maybe mutually arrived at by the banker and the borrower with the balance requirement forming the Bank financed part of Working Capital. Cash flow based computation of working capital requirement has been recommended by the RBI for assessment of working capital requirement permitting the banks to evolve their own norms for such assessment However the reluctance to provide the cash budgets thereby revealing additional information to the banks, has led to even larger companies shying away from Cash Budget method of assessing Working Capital. Consequently Cash Budget method is currently prevalent mainly in case of seasonal industries, construction sector as well as other entities whose operations are linked to projects
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NEED OF CASH i. Transaction motive: firm needs cash for transaction purpose. ii. Precautionary motive: The magnitude and time of cash inflows and outflows is always uncertain and hence the firms need to have some cash balances as a buffer. iii. Speculative motive: All firms want to make profits from fluctuations in commodity prices, security prices, interest rates and foreign exchange rates . The firm must decide the quantum of transactions and precautionary balances to be held, which depends upon the following factors: _ The expected cash inflows and outflows based on the cash budget and forecasts, encompassing long/short range cash needs of the firm. _ The degree of deviation between the expected and actual net cash flow. _ The maturity structure of the firms liabilities. _ The firms ability to borrow at a short notice, in case of emergency. _ The philosophy of management regarding liquidity and risk of insolvency.

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OPTIMAL CASH BALANCE Cash balance is maintained for transaction purposes and an additional amount may be maintained as a buffer or safety stock. It involves a trade off between the costs and the risk. If a firm maintains a small cash balance, it has to sell its marketable securities and probably buy them later more often, than if it holds a large cash balance. More the number of transactions more will be the trading cost and vice-versa; also, lesser the cash balance, less will be the number of transaction and vice-versa. However the opportunity cost of maintaining the cash rises, as the cash balance increases. KEY OF WORKING CAPITAL On the basis of Concept There are two concept of working capital (i) Balance sheet Concept (ii) Operating Cycle (i) Balance Concept There are two interpretation of working capital under the balance sheet concept .(a) Gross Working Capital (b) Net Working Capital
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(ii) Operating cycle Concept The gross operating cycle of a firm is equal to the length of the inventories and receivables conversion period. (c) Gross Operating Cycle: = RMCP + WIPCP+ FGCP+ RCP Where RMCP = Raw material conversion period WIPC = work in -progress conversion period FGCP = Finished Goods conversion period RCP = Receivables conversion period RMCP = Avg. stock of RM / RM Consumption per day WIPC = Avg. Stock of WIP / Total cost of production per day FGCP = Avg. Stock of finished Goods / total cost of sales per day RCP = Avg. Account Receivables / Net Credit sales per day (d) Net Operating Cycle : Gross operating Cycle Period Payables Deferral period Payable Deferral Period =Avg. payables / Net credit purchases per day

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(I-C) WORKING CAPITAL MANAGEMENT IN BSNL To maintain the optimum level of working capital in such a big organization is really a challenging task. The three basic components that determine the level of working capital in any organization are: Cash Debtors\ B/R Inventory. But before looking into these factors the finance policies and revenue strategies must be given due importance. These are as follows:Finance Policy of BSNL Standards of Financial Proprieties Ever officer incurring or authorizing expenditure from public funds should be guided by high standards of financial propriety. Every officer should also enforce financial order and strict economy at every step and see that all relevant financial rules and regulations are observed, by his own officer and by subordinates disbursing officers.

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Among the principles on which emphasis is generally laid are the following: 1. Every officer is expected to exercise the same vigilance in respect of expenditure incurred from public moneys as a person of ordinary prudence would exercise in respect of expenditure of his own money. 2. The expenditure should be prima-facie more that the occasion demands. 3. No authority should exercise its powers of sanctioning expenditure to pass an order which be directly or indirectly to its own advantages. 4. Expenditure from pubic moneys should not be incurred for benefit of a person or section of the people unless. a claim for the amount could be enforce in a Court of Law, or b. the expenditure is in pursuance of a recognized policy or custom. 5. The amount of allowances granted to meet expenditure of a particular type should be so regulated that the allowances are not on the whole a source of profit to the recipients.

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6. The responsibility and accountability of every authority delegated with financial powers to procure any item or service on Government account is total and indivisible. Government expects that the authority a concerned will have the public interest uppermost in its mind while making a procurement decision. The responsibility is not discharged merely by the selection of the cheapest offer. 7. Whenever called for, the concerned authority must place on record in precise terms, the considerations which weighed with it while talking the procurement decision. Revenues Strategies The telecom sector is the most competitive sector post liberalization. This has resulted in a movement from growth based business model that emphasized growth in numbers to profit-based model where the success is measured by margins. BSNL as part of the transition has to adopt both cost reduction and revenue enhancement measures, which would directly impact profitability. It is evident that there is a declining trend in basic services and there is stagnation in cellular revenues. Revenue maximization strategies will have two components, one internal to the organization and the other external.

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The internal aspect would involve an initiative for change of process, technology, organizational structure etc. This is proactive strategy to capture all revenues due for the services provided. Presently, BSNL generates bills through different softwares across the zones of operation, which are disintegrated and provide only basic solutions. The industry standard for revenue leakage is about 3 to 7% percent of revenue, which in money terms translates to about Rs.2100 crores for BSNL. Therefore plugging revenue leakages is just the first and most obvious part of a Revenue Assurance initiative. The key concerns for BSNL for effective revenue realization are _ The delay in customer billing after activation _ Time lag between calls generated and billed _ Scope of fraud _ Non-availability of uniform database. Therefore the focus should be on immediate implementation of CDR based billing. This would require huge investment but the return would more than commensurate. The implementation of CDR based system will also generate the following benefits: _ Plugging of leakage of revenue. _ Formulation of appropriate marketing strategies.
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On the basis of our research in the BSNL, Cash, Debtors, Inventories are managed in the organisation, in the under mentioned manner. CASH AND BANK BALANCES MANAGEMENT The unit is dependent on the Corporate Office for the procurement of the cash. The Corporate Office fulfills all the cash requirements of the unit. The unit prepares cash budget for the whole year. A copy of the cash budget is sent to the Corporate Office. The Corporate Office examines the cash budget and sanctions the funds accordingly. The current position of the company is as follows. Bank reconciliation statements in respect of six collection accounts of units under four circles have not been prepared. In fourteen circles, it has been noticed that cheques deposited with the bank & TT sent, have not been credited in the relevant bank accounts of the company amounting to Rs. 8,596 lakh (P.Y. Rs. 4,012 lakh) as on 31.03.2009. The management has taken up the case with the concerned banks for early crediting of the amount in the respective account.

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In sixteen circles (P.Y. eleven circles), unlinked credit items amounting to Rs. 1,677 lakh (P.Y. Rs. 2,160 lakh) and in thirteen circles (P.Y. nine circles) unlinked debit items amounting to Rs. 1,446 lakh (P.Y. Rs. 907 lakh) are appearing in the bank reconciliation statement as at 31.03.2009. The management is in the process of reconciling all such items at the earliest possible. Bank balances in one circle include cheques in hand pending to be deposited in to bank on 31.03.2009. Amount has not been quantified. In three circles cash/cheque/DD amounting to Rs. 46 lakh (P.Y. not ascertained) has been received but remains pending to be accounted in the books as on 31.03.2009.

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DEBTORS MANAGEMENT According to the extent of security deposits held by the company, thecclassification of the sundry debtors as secured

unsecured/considered good and considered doubtful, to the extent available as per sub ledger is as follows:

Rs. In lakhs PARTICULARS AS AT 31ST MAR. AS AT 31ST MAR. 2009 Considered good & 127592 secured Considered good but 122543 unsecured Doubtful Debts Total 399731 649866 422609 748281 145959 2008 179713

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In twenty eight circles, the difference in the closing balance of subsidiary ledger and the sundry debtor figure of the General Ledger has been noticed the General Ledger balance which are considered for preparation of financial statement, being more by Rs. 8,788 lakh (P.Y. Rs. 13,887 lakh - GL excess) to the extent identified. The management is in the process of reconciling these differences; pending reconciliation no adjustment has been made. The provision for doubtful debts is made on the basis of information available in the subsidiary records. The requirement of Schedule VI of the Companies Act, 1956 has been complied with respect to classification of Sundry Debtors as Secured, Unsecured & Doubtful and with respect to age wise analysis as Debtors exceeding six months and other debts as per sub ledger.

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INVENTORY MANAGEMENT Inventories, in BSNL, are valued at cost or net realizable value as the case may be cost ascertained generally on weighted average method; obsolete/non moving inventories are valued at net realizable value. The position of inventories as on 31st march 2009 is as follows. Physical inventory taken is being reconciled with the detailed inventory records and the same will be further reconciled with the balance as per the financial books. Prices for the transfer of stock from Telecom Factories to circles for self-consumption are predetermined. The predetermined rates include direct cost including overhead allocation at a fixed rate. This practice has resulted in internal profit of Rs. 1,404 lakh (P.Y. Rs. 1,546 lakh) for the year ended 31st March 2009 arising out of such transfer. The said amount has been netted off against the administrative expenses in the profit and loss statement for the year since it is not possible to identify the individual items of stores, which have been capitalized or expensed off.

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In certain cases, the Company has placed orders for procuring inventory at provisional prices say 80-90% of the previous purchase price. Final purchase price in such cases is determined at a later date. Price difference in such cases is adjusted on the total material available in stock at the time of finalization of purchase price. The proportionate price differential on the already consumed material is adjusted on the existing stock. In all circles, the non-moving, slow moving and obsolete inventories are in the process of identification. Pending finalization of the process, no provision if any, that may be required, has been made. At several locations physical verification of stock has been conducted by the management during the year. Physical inventory taken is being reconciled with the detailed inventory records and the same will be further reconciled with the balance as per the financial books. In all circles, the difference between the Store Ledger and the General Ledger to the extent identified amounting to Rs. 575 lakh (net) has been noticed and is under reconciliation. The consequential adjustment will be made after the process of reconciliation is over.

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CHAPTER II OBJECTIVE OF THE STUDY The basic objective of the report is to evaluate the Performance of Working Capital in BSNL regards to all factors includes Liquidity, Cash, Debtor and Inventory so as to optimize the resources of Working Capital. In nutshell the project seeks the position of Working Capital in BSNL.

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CHAPTER III ANALYSIS AND FINDINGS (3-A) Cash Management DIFFERENT SOLUTION FOR CASH MANAGEMENT SOLUTION OF THE PROBLEM OF CASH MANAGEMENT WITH THE HELP OF CERTAIN RATIOS CURRENT RATIO It is the best ratio to find relationship between the current assets and current liabilities of BSNL. We can easily calculate the current ratio with the help of the following formula. Current ratio = current assets/current liabilities

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Years 2004-2005 2005-2006

Calculations 3847879/1461 541 4953909/1612 334

Ratio 2.6:1 3.07:1

2006-2007

5374788/1667 919

3.22:1

2007-2008

5805843/1739 788

3.33:1

2008-2009

5774861/2072 702

2.78:1

Interpretation: As we know that the current ratio of any company may be 2:1 but according to the U.S.A. Accounting standard a company should maintain a ratio of 1.33:1.

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From the above table we can analyze that the current ratio of BSNL in 2005 is 2.6:1 which has risen to 3.07:1 in 2006, which shows an increase in current assets greater than the increase in current liabilities. In 2007 the ratio has increased to 3.22:1, in 2008 it has risen upto 3.33:1, which shows that the increase in current assets is more than current liabilities consistently for three years. In 2009 the ratio has decline to 2.78, which shows that the increase in current liabilities is more than current assets in this

year.LIQUIDITY RATIO:This ratio establishes a relationship between quick assets and current liabilities. The major objective to compute this ratio is to measure the ability of the firm to meet its short-term obligations as and when due without relying upon the realization stock. We can easily calculate this ratio with the help of the following formula: Liquidity ratio= liquid assets/current liabilities

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Years 2004-2005 2005-2006

Calculations 2432016/1461 541 3400497/1612 334

Ratio 1.66:1 2.10:1

2006-2007

4102291/1667 919

2.45:1

2007-2008

4514851/1739 788

2.59:1

2008-2009

4357927/2072 702

2.10:1

Interpretation Liquid ratio indicates that what amounts of liquid assets are available for each rupee of current liability. We know that the liquid ratio of any company may be 1:1, is considered to be satisfactory.
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Now comparing the companys position according to the liquid ratio. In 2007-08 the ratio is 2.59:1 which the best liquidity position years were for the company.But it followed a downward trend in 2008-09 i.e. to 2.10. Otherwise in 2004-05, 2005-06, 2006-07, the ratios are 1.66:1, 2.10:1, 2.45:1 respectively. It means that the liquidity position of the company is constantly increasing (upto 2008) it is because of large amount of liquid assets as compared to current liabilities. Also the numbers of debtors of the company are increasing. This is not better from managements point of view. As more of amount is blocked in the debts and chances of bad debt will increase.

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(3-B) Debtors Management

SOLUTION FOR DEBTOR MANAGEMENT PROBLEMS Analysis of debtor management with the help of following ratio DEBTORS TURN OVER RATIO

Debtors turn over ratio establishes a relationship between net credit sales and average trade debtors. The major objective to calculate ratio is to determine the efficiency with which the trade debtors are managed. We can easily calculate this ratio with the help of the following formula:

Debtors turn over ratio =Net credit sales / average debtor

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YEAR

2004-05 ACTUAL

2005-06 ACTUAL

2006-07 2007-08 2008-09 ACTUAL ACTUAL 323595 3 552308 ACTUAL 302685 7 509302

Turnover

3345004 3613894 346162 1

AVERAGE Debtors Ratio

663703

646954

594135

5.03:1

5.58:1

5.82:1

5.85:1

5.94:1

INTERPRETATION: It indicates the speed with which the debtors turnover an average each year. In general a high ratio indicates the shorter collection period which implies prompt payments by debtors and a low ratio indicates a long collection period which implies delayed payment by debtors. So we can see from the above table that in the last five years the company is trying to improve the debtors turnover ratio.

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In 2004-05 it is the least i.e. 5.03:1 but it again started improving in 2005-06 5.58:1, in 2006-07 5.82:1, in 2007-08 5.85:1 in 200809 5.94:1. It depicts that how efficiently debtors are collected.

AVERAGE COLLECTION PERIOD AVERAGE COLLECTION PERIOD = Turnover YEAR 2004-05 ACTUAL Turnover 2005-06 ACTUAL 2006-07 2007-08 2008-09 ACTUAL ACTUAL 323595 3 552308 ACTUAL 302685 7 509302 365/ Debtors

3345004 3613894 346162 1

AVERAGE Debtors Ratio Days of inventory

663703

646954

594135

5.03:1 73

5.58:1 65

5.82:1 63

5.85:1 62

5.94:1 61

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Interpretation We can check the managerial efficiency with the help of this ratio by the comparison of average collection period and credit policy of the company. From the table we can analyze that in the year 2004-05 it was 73 days , but in year 2005-06 & 2006-07 there was a decrease and it falls down to 65 & 63 respectively . This indicates that the company was following a liberal policy, comparatively, in 2004-05 but it improved in the succeeding years. If the days are increasing it indicates that the bad debts are also increasing but the case is just reverse in BSNL. It is difficult to lay down a standard collection period; it depends upon the nature of the business. As a general rule the receivables should not exceed 4 to 5 months of credit sales.

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(3-C) Inventory Management SOLUTION PROBLEMS Analysis of inventory management with the help of following ratio INVENTORY TURN OVER RATIO Inventory turn over ratio establishes a relationship between net credit sales and average inventory. The major objective to calculate ratio is to determine the efficiency with which inventories are managed. We can easily calculate this ratio with the help of the following formula: Inventory turn over ratio =Net credit sales / average inventory Days of Inventory Holding =365 / inventory Turnover Ratio FOR INVENTORY MANAGEMENT

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YEAR

2004-05 ACTUAL

2005-06 ACTUAL

2006-07 2007-08 2008-09 ACTUAL ACTUAL 323595 3 188664 ACTUAL 302685 7 188404

Turnover

3345004 3613894 346162 1

AVERAGE Inventory Ratio Days of Holding

184480

186250

188333

18.13:1 20

19.4:1 19

18.38:1 20

17.15:1 21

16.06:1 23

INTERPRETRATION

If we see from the above table that the days of inventory holding in the year 2005-06 has come down to 19 days from 20 days in the previous year. In spite of increase in turnover i.e. 3613894 in 200506 from 3345004 in the year 2004-05, the days of inventory holding decreases. This indicates that the company is using effective strategy to bring down its inventory level. This makes very less investment in inventory. But from 2007 the case is just reverse. The inventory holding period has increased consistently.

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(3 -D) SWOT Analysis STRENGTHS Pan-India reach. Experienced telecom service provider. Total telecom service provider. Huge Resources (financial & technical pool). Huge customer base. Most trusted telecom brand. Transparency in billing. Easy deployment of new services. Huge Optical Fibre network and associated bandwidth. WEAKNESSES Non-optimization of network capabilities. Poor marketing strategy. Bureaucratic organizational set up. Inflexibility in mindset. Limited number of value added services.

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 Poor franchisee network. Legacy of poor service image. Huge and aged manpower. Procedural delays. Lack of strategic alliances. Problems associated with incumbency like unproductive rural assets, social obligations. Poor IT penetration within organization. Poor knowledge Management. OPPORTUNITIES Tremendous market growing at 20 lac customers per month. Untapped broadband services. Untouched international market. Can capitalize on public sector image to grab governments ICT initiatives. ITEB service markets. Diversification of business to turn-key projects. Leveraging the brand image to source funds.
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 Almost un-invaded VSAT market. Fuller utilization of slack resources. Can make a kill through deep penetration and low cost advantage. Broaden market expected from convergence of broadcasting, telecom and entertainment industry. THREATS Competition from private operators. Keeping pace with fast technological changes. Market maturity in basic telephone segment. Manpower churning. Multinational eyeing Indian telecom market. Private operators demand for sharing last mile. Decreasing per line revenues due to competitive pricing. Private operators demand to do away with ADC can seriously affect revenues. Populist policies of government like OneIndia rates.

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CHAPTER- IV CONCLUSION In short time I have done vocational training in BSNL. It is very difficult to elaborate all the work of working capital management. This project was undertaken in order to know the effectiveness of working capital section of finance department of the company. I would like to conclude my project with these points: The company is able to reduce its working capital from, 1647722 lacks to 3208281 lacks in a span of five years without affecting the sales of the company which means that company is sincerely utilizing its funds and has reduced the locking of funds. The current liabilities of the company have increased which means that company has adopted a good realization policy. The current ratio of the company in last five years has increased from 2.6 to 2.78 which revels that company is moving from conservative working capital strategy to aggressive working capital strategy. The quick ratio of the company has inclined from 1.66 to 2.10 in the span of five years.

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 The latest working capital ratio indicates the efficiency of utilization of net working capital is increased from 2.427 to 6.891 in a span of five years. The current assets turnover ratio has increased from .63 to 1.18 in a span of six years which indicates that current assets are efficiently turning into sales. The debtors turnover ratio has gone up from 5.03 to 5.94 which show that the company is collecting its debtors efficiently. The debtors collection period has decreased from 73 days to 61 days which shows that the company is collecting its debts speedily. The inventory holding period has increased from 20 to 23 days which shows that inventory is not turning into finished goods very quickly and the company has not been able to reduce the locking of funds in inventories. So at last I can say it was a good experience. I learnt a lot from there and I am sure that this knowledge will helpme forever. I can never forget these 45 days of internship in BSNL.

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BIBLIOGRAPHY

To complete this summer training project report the following sources were referred: www.bsnl.co.in FINANCIAL MANAGEMENT - I.M. PANDAY MANAGEMENT OF WORKING CAPITAL S.P.GUPTA FINANCIAL ACCOUNTING- R. NARAYANASWAMY BSNL- BALANCE SHEET

BSNL- ANNUAL REPORT

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