SUMMER TRAINING REPORT

ON
“Working capital management of UPPCL”

In partial fulfillment of the requirements for the award of

the degree
MASTER OF BUSINESS ADMINISTRATION

Faculty Guide SUBMITTED BY

Mr.
MBA 3rd sem
Roll no-

1
 DECLARATION
This is to declare that I (Roll No.) student of MBA, have personally

worked on the project entitled “Working capital management of

UPPCL” The data mentioned in this report were obtained during

genuine work done and collected by me. The data obtained from other

sources have been duly acknowledged. The result embodied in this

project has not been submitted to any other University or Institute for

the award of any degree.

Date:

Place: Lucknow (Roll No.)

2
 ACKNOWLEDGEMENT

It is said that “accomplishment must be credited to those who have

put the foundation of particular chore”.Here i pay gratitude to my

parents for lifting me up till this phase of life.I am thankful for their

love , trust, patient and support.

I wish to express my sincere gratitude to Mr (Faculty Guide) and

Mr. (Industry Guide, for providing me an opportunity to do my

project work on “Working capital management of UPPCL”.

UPPCL

Words defeat me in expressing my heartfelt thanks to my friends for

their help,love and constant encouragement during my project

session.

3
 PREFACE

MBA (Finance) program is one of the most reputed

professional courses in the field of management. This course includes
both theory and its application contents of curriculum.

Summer training is an integral part of the MBA program, as

each student is required to undergo summer training from an institute
of repute after 1st Year. As complimentary to that, every trainee has to
prepare and submit a report on the work conducts by the student
during his/her Summer Training.

This report is in continuation of the above tradition. This

summer training was done at “UPPCL”, Lucknow (U.P.). The topic of
the training was “Working capital management of UPPCL”.

During my training period, I did a summer training in UPPCL under

the guidance of market professionals at UPPCL. This report is an

attempt to give an overview of financial study of UPPCL

4
 EXECUTIVE SUMMARY

This report is a summary of the dissertation done at UPPCL. The first

few pages of the report talk about an introduction to the UPPCL & the

need for specialists in Bank independently since their incorporation &

then with the profile of financial analysis. Hereafter the report talks

about the Research i.e. trend analysis of organization. Here we talk

about the process of financial analysis followed by principles of trend

analysis. In the next few pages an attempt has been made to clarify the

details & descriptions which one should know the qualities & reasons

for benefits provided by Identify costs of quality.

The last pages constitute of the findings of the Research & the

conclusion.

5
 TABLE OF CONTENTS

Page No.

1. INTRODUCTION

2. COMPANY PROFILE

3. OBJECTIVES OF THE STUDY

4. RESEARCH METHODOLOGY

5. LIMITATIONS

6. DATA ANALYSIS AND INTERPREATATION

7. FINDINGS

8. CONCLUSION

9. APPENDIX

10.BIBLIOGRAPHY

6
INTRODUCTION

7
 INTRODUCTION

WORKING CAPITAL

Working capital, also known as net working capital or NWC, is a

financial metric which represents operating liquidity available to a

business. Along with fixed assets such as plant and equipment,

working capital is considered a part of operating capital. It is

calculated as current assets minus current liabilities. If current assets

are less than current liabilities, an entity has a working capital

deficiency, also called a working capital deficit.

Net Working Capital = Current Assets − Current Liabilities

A company can be endowed with assets and profitability but short of

liquidity if its assets cannot readily be converted into cash. Positive

working capital is required to ensure that a firm is able to continue its

operations and that it has sufficient funds to satisfy both maturing

short-term debt and upcoming operational expenses. The management

of working capital involves managing inventories, accounts receivable

and payable and cash.

8
Calculation

Current assets and current liabilities include three accounts which

are of special importance. These accounts represent the areas of the

business where managers have the most direct impact:

 accounts receivable (current asset)

 inventory (current assets), and

 accounts receivable (current asset)

Accounts receivable

Accounts receivable (A/R) is one of a series of accounting

transactions dealing with the billing of customers who owe money to a

person, company or organization for goods and services that have

been provided to the customer. In most business entities this is

typically done by generating an invoice and mailing or electronically

delivering it to the customer, who in turn must pay it within an

established timeframe called credit or payment terms.

An example of a common payment term is Net 30, meaning payment

is due in the amount of the invoice 30 days from the date of invoice.

Other common payment terms include Net 45 and Net 60 but could in

9
reality be for any time period agreed upon by the vendor and the

customer.

While booking a receivable is accomplished by a simple accounting

transaction, the process of maintaining and collecting payments on the

accounts receivable subsidiary account balances can be a full time

proposition. Depending on the industry in practice, accounts

receivable payments can be received up to 10 - 15 days after the due

date has been reached. These types of payment practices are

sometimes developed by industry standards, corporate policy, or

because of the financial condition of the client.

On a company's balance sheet, accounts receivable is the amount that

customers owe to that company. Sometimes called trade receivables,

they are classified as current assets assuming that they are due within

one year. To record a journal entry for a sale on account, one must

debit a receivable and credit a revenue account. When the customer

pays off their accounts, one debits cash and credits the receivable in

the journal entry. The ending balance on the trial balance sheet for

accounts receivable is always debit.

Business organizations which have become too large to perform such

tasks by hand (or small ones that could but prefer not to do them by

10
hand) will generally use accounting software on a computer to

perform this task.

Associated accounting issues include recognizing accounts receivable,

valuing accounts receivable, and disposing of accounts receivable.

Accounts receivable departments use the sales ledger. Accounts

receivable is more commonly known as Credit Control in the UK,

where most companies have a credit control department.

Other types of accounting transactions include accounts payable,

payroll, and trial balance.

Since not all customer debts will be collected, businesses typically

record an allowance for bad debts which is subtracted from total

accounts receivable. When accounts receivable are not paid, some

companies turn them over to third party collection agencies or

collection attorneys who will attempt to recover the debt via

negotiating payment plans, settlement offers or legal action.

Outstanding advances are part of accounts receivables if a company

gets an order from its customers with payment terms agreed in

advance. Since no billing is being done to claim the advances several

times this area of collectible is not reflected in accounts receivables.

Ideally, since advance payment is mutually agreed term, it is the

11
responsibility of the accounts department to take out periodically the

statement showing advance collectible and should be provided to sales

& marketing for collection of advances. The payment of accounts

receivable can be protected either by a letter of credit or by Trade

Credit Insurance.

Companies can use their accounts receivable as collateral when

obtaining a loan (asset-based lending) or sell them through factoring.

Pools or portfolios of accounts receivable can be sold in the capital

markets through a securitization.

Book keeping for Accounts Receivable

Companies have two methods available to them for measuring the net

value of account receivables, which is computed by subtracting the

balance of an allowance account from the accounts receivable

account.

The first method is the allowance method, which establishes a liability

account, allowance for doubtful accounts, or bad debt provision, that

has the effect of reducing the balance for accounts receivable. The

amount of the bad debt provision can be computed in two ways -

either by reviewing each individual debt and deciding whether it is

doubtful (a specific provision) or by providing for a fixed percentage,

12
say 2%, of total debtors (a general provision). The change in the bad

debt provision from year to year is posted to the bad debt expense

account in the income statement.

The second method, known as the direct write-off method, is simpler

than the allowance method in that it allows for one simple entry to

reduce accounts receivable to its net realizable value. The entry would

consist of debiting a bad debt expense account and crediting the

respective account receivable in the sales ledger.

The two methods are not mutually exclusive, and some businesses will

have a provision for doubtful debts and will also write off specific

debts that they know to be bad (for example, if the debtor has gone

into liquidation.)

For tax reporting purposes, a general provision for bad debts is not an
[1]
allowable deduction from profit - a business can only get relief for

specific debtors that have gone bad. However, for financial reporting

purposes, companies may choose to have a general provision against

bad debts in line with their past experience of customer payments in

order to avoid over stating debtors in the balance sheet.

 inventory (current assets)

13
 INVENTORY

Inventory is a list for goods and materials, or those goods and

materials themselves, held available in stock by a business. It is also

used for a list of the contents of a household and for a list for

testamentary purposes of the possessions of someone who has died. In

accounting inventory is considered an asset.

Origins of the word Inventory

The word inventory was first recorded in 1601. The French term

inventaire, or "detailed list of goods," dates back to 1415. Inventory

management is primarily about specifying the size and placement of

stocked goods. Inventory management is required at different

locations within a facility or within multiple locations of a supply

network to protect the regular and planned course of production

against the random disturbance of running out of materials or goods.

The scope of inventory management also concerns the fine lines

between replenishment lead time, carrying costs of inventory, asset

management, inventory forecasting, inventory valuation, inventory

visibility, future inventory price forecasting, physical inventory,

available physical space for inventory, quality management,

replenishment, returns and defective goods and demand forecasting.

14
Other definitions of inventory management from across the web:

Involves a retailer seeking to acquire and maintain a proper

merchandise assortment while ordering, shipping, handling, and

related costs are kept in check.

Systems and processes that identify inventory requirements, set

targets, provide replenishment techniques and report actual and

projected inventory status.

Handles all functions related to the tracking and management of

material. This would include the monitoring of material moved into

and out of stockroom locations and the reconciling of the inventory

balances. Also may include ABC analysis, lot tracking, cycle counting

support etc.

Management of the inventories, with the primary objective of

determining.controlling stock levels within the physical distribution

function to balance the need for product availability against the need

for minimizing stock holding and handling costs.

In business management, inventory consists of a list of goods and

materials held available in stock.

An inventory can also be a self examination, a moral inventory.

15
Labels: Inventory Management, Procurement, Supply Chain, Supply

Chain Management

Business inventory

The reasons for keeping stock

There are three basic reasons for keeping an inventory:

1. Time - The time lags present in the supply chain, from supplier

to user at every stage, requires that you maintain certain amount

of inventory to use in this "lead time"

2. Uncertainty - Inventories are maintained as buffers to meet

uncertainties in demand, supply and movements of goods.

3. Economies of scale - Ideal condition of "one unit at a time at a

place where user needs it, when he needs it" principle tends to

incur lots of costs in terms of logistics. So bulk buying,

movement and storing brings in economies of scale, thus

inventory.

All these stock reasons can apply to any owner or product stage.

 Buffer stock is held in individual workstations against the

possibility that the upstream workstation may be a little delayed

in long setup or change-over time. This stock is then used while

16
 that change-over is happening. This stock can be eliminated by

tools like SMED.

These classifications apply along the whole Supply chain not just

within a facility or plant.

Where these stocks contain the same or similar items it is often the

work practice to hold all these stocks mixed together before or after

the sub-process to which they relate. This 'reduces' costs. Because they

are mixed-up together there is no visual reminder to operators of the

adjacent sub-processes or line management of the stock which is due

to a particular cause and should be a particular individual's

responsibility with inevitable consequences. Some plants have

centralized stock holding across sub-processes which makes the

situation even more acute.

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Special terms used in dealing with inventory

 Stock Keeping Unit (SKU) is a unique combination of all the

components that are assembled into the purchasable item.

Therefore any change in the packaging or product is a new

SKU. This level of detailed specification assists in managing

inventory.

 Stockout means running out of the inventory of an SKU.[1]

 "New old stock" (sometimes abbreviated NOS) is a term used in

business to refer to merchandise being offered for sale which

was manufactured long ago but that has never been used. Such

merchandise may not be produced any more, and the new old

stock may represent the only market source of a particular item

at the present time.

Typology

1. Buffer/safety stock

2. Cycle stock (Used in batch processes, it is the available

inventory excluding buffer stock)

3. De-coupling (Buffer stock that is held by both the supplier and

the user)

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 4. Anticipation stock (building up extra stock for periods of

increased demand - e.g. ice cream for summer)

5. Pipeline stock (goods still in transit or in the process of

distribution - have left the factory but not arrived at the

customer yet)

Inventory examples

While accountants often discuss inventory in terms of goods for sale,

organizations - manufacturers, service-providers and not-for-profits -

also have inventories (fixtures, furniture, supplies, ...) that they do not

intend to sell. Manufacturers', distributors', and wholesalers' inventory

tends to cluster in warehouses. Retailers' inventory may exist in a

warehouse or in a shop or store accessible to customers. Inventories

not intended for sale to customers or to clients may be held in any

premises an organization uses. Stock ties up cash and if uncontrolled it

will be impossible to know the actual level of stocks and therefore

impossible to control them.

While the reasons for holding stock are covered earlier, most

manufacturing organizations usually divide their "goods for sale"

inventory into:

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  Raw materials - materials and components scheduled for use in

making a product.

 Work in process, WIP - materials and components that have

begun their transformation to finished goods.

 Finished goods - goods ready for sale to customers.

 Goods for resale - returned goods that are salable.

 Spare parts

For example:

Manufacturing

A canned food manufacturer's materials inventory includes the

ingredients to form the foods to be canned, empty cans and their lids

(or coils of steel or aluminum for constructing those components),

labels, and anything else (solder, glue...) that will form part of a

finished can. The firm's work in process includes those materials from

the time of release to the work floor until they become complete and

ready for sale to wholesale or retail customers. This may be vats of

prepared food, filled cans not yet labelled or sub-assemblies of food

components. It may also include finished cans that are not yet

packaged into cartons or pallets. Its finished good inventory consists

of all the filled and labelled cans of food in its warehouse that it has

20
manufactured and wishes to sell to food distributors (wholesalers), to

grocery stores (retailers), and even perhaps to consumers through

arrangements like factory stores and outlet centers.

Examples of case studies are very revealing, and consistently show

that the improvement of inventory management has two parts: the

capability of the organisation to manage inventory, and the way in

which it chooses to do so. For example, a company may wish to install

a complex inventory system, but unless there is a good understanding

of the role of inventory and its perameters, and an effective business

process to support that, the system cannot bring the necessary benefits

to the organisation in isolation.

Typical Inventory Management techniques include Pareto Curve ABC

Classification and Economic Order Quantity Management. A more

sophisticated method takes these two techniques further, combining

certain aspects of each to createThe K Curve Methodology. A case

study of k-curve benefits to one company shows a successful

implementation.

Unnecessary inventory adds enormously to the working capital tied up

in the business as well as the complexity of the supply chain.

Reduction and elimination of these inventory 'wait' states is a key

21
concept in Lean. Too big an inventory reduction too quickly can cause

a business to be anorexic. There are well proven processes and

techniques to assist in inventory planning and strategy, both at

business overview and part number level. Many of the big MRP/and

ERP systems do not offer the necessary inventory planning tools

within their integrated planning applications.

High level inventory management

It seems that around about 1880[2] there was a change in

manufacturing practice from companies with relatively homogeneous

lines of products to vertically integrated companies with

unprecedented diversity in processes and products. Those companies

(especially in metalworking) attempted to achieve success through

economies of scope - the gains of jointly producing two or more

products in one facility. The managers now needed information on the

effect of product mix decisions on overall profits and therefore needed

accurate product cost information. A variety of attempts to achieve this

were unsuccessful due to the huge overhead of the information

processing of the time. However, the burgeoning need for financial

reporting after 1900 created unavoidable pressure for financial

accounting of stock and the management need to cost manage

products became overshadowed. In particular it was the need for

22
audited accounts that sealed the fate of managerial cost accounting.

The dominance of financial reporting accounting over management

accounting remains to this day with few exceptions and the financial

reporting definitions of 'cost' have distorted effective management

'cost' accounting since that time. This is particularly true of inventory.

Hence high level financial inventory has these two basic formulas

which relate to the accounting period:

1. Cost of Beginning Inventory at the start of the period +

inventory purchases within the period + cost of production

within the period = cost of goods

2. Cost of goods − cost of ending inventory at the end of the

period = cost of goods sold

The benefit of these formulae is that the first absorbs all overheads of

production and raw material costs in to a value of inventory for

reporting. The second formula then creates the new start point for the

next period and gives a figure to be subtracted from sales price to

determine some form of sales margin figure.

Manufacturing management is more interested in inventory turnover

ratio or average days to sell inventory since it tells them something

about relative inventory levels.

23
Inventory turn over ratio (also known as inventory turns) = cost of

goods sold / Average Inventory = Cost of Goods Sold / ((Beginning

Inventory + Ending Inventory) / 2) and its inverse

Average Days to Sell Inventory = Number of Days a Year / Inventory

Turn Over Ratio = 365 days a year / Inventory Turn Over Ratio

This ratio estimates how many times the inventory turns over a year.

This number tells us how much cash/goods are tied up waiting for the

process and is a critical measure of process reliability and

effectiveness. So a factory with two inventory turns has six months

stock on hand which generally not a good figure (depending upon

industry) whereas a factory that moves from six turns to twelve turns

has probably improved effectiveness by 100%. This improvement will

have some negative results in the financial reporting since the 'value'

now stored in the factory as inventory is reduced.

Whilst the simplicity of these accounting measures of inventory are

very useful they are in the end fraught with the danger of their own

assumptions. There are in fact so many things which can vary hidden

under this appearance of simplicity that a variety of 'adjusting'

assumptions may be used. These include:

 Specific Identification

24
  Weighted Average Cost

 Moving-Average Cost

 FIFO .

Inventory Turn is a financial accounting tools for evaluating inventory

and it is not necessarily a management tool. Inventory management

should be forward looking. The methodology applied is based on

historical cost of goods sold. The ratio may not be able to reflect the

usability of future production demand as well as customer demand.

Business models including Just in Time (JIT) Inventory, Vendor

Managed Inventory (VMI) and Customer Managed Inventory (CMI)

attempt to minimize on-hand inventory and increase inventory turns.

VMI and CMI have gained considerable attention due to the success

of third party vendors who offer added expertise and knowledge that

organizations may not possess.

25
Accounting perspectives

The basis of Inventory accounting

Inventory needs to be accounted where it is held across accounting

period boundaries since generally expenses should be matched against

the results of that expense within the same period. When processes

were simple and short then inventories were small but with more

complex processes then inventories became larger and significant

valued items on the balance sheet. This need to value unsold and

incomplete goods has driven many new behaviours into management

practise. Perhaps most significant of these are the complexities of

fixed cost recovery, transfer pricing, and the separation of direct from

indirect costs. This, supposedly, precluded "anticipating income" or

"declaring dividends out of capital". It is one of the intangible benefits

of Lean and the TPS that process times shorten and stock levels

decline to the point where the importance of this activity is hugely

reduced and therefore effort, especially managerial, to achieve it can

be minimised.

26
ACCOUNTING FOR INVENTORY

Each country has its own rules about accounting for inventory that fit

with their financial reporting rules.

So for example, organizations in the U.S. define inventory to suit

their needs within US Generally Accepted Accounting Practices

(GAAP), the rules defined by the Financial Accounting Standards

Board (FASB) (and others) and enforced by the U.S. Securities and

Exchange Commission (SEC) and other federal and state agencies.

Other countries often have similar arrangements but with their own

GAAP and national agencies instead.

It is intentional that financial accounting uses standards that allow the

public to compare firms' performance, cost accounting functions

internally to an organization and potentially with much greater

flexibility. A discussion of inventory from standard and Theory of

Constraints-based (throughput) cost accounting perspective follows

some examples and a discussion of inventory from a financial

accounting perspective.

The internal costing/valuation of inventory can be complex. Whereas

in the past most enterprises ran simple one process factories, this is

quite probably in the minority in the 21st century. Where 'one process'
27
factories exist then there is a market for the goods created which

establishes an independent market value for the good. Today with

multi-stage process companies there is much inventory that would

once have been finished goods which is now held as 'work-in-process'

(WIP). This needs to be valued in the accounts but the valuation is a

management decision since there is no market for the partially

finished product. This somewhat arbitrary 'valuation' of WIP

combined with the allocation of overheads to it has led to some

unintended and undesirable results.

Financial accounting

An organization's inventory can appear a mixed blessing, since it

counts as an asset on the balance sheet, but it also ties up money that

could serve for other purposes and requires additional expense for its

protection. Inventory may also cause significant tax expenses,

depending on particular countries' laws regarding depreciation of

inventory, as in Thor Power Tool Company v. Commissioner.

Inventory appears as a current asset on an organization's balance sheet

because the organization can, in principle, turn it into cash by selling

it. Some organizations hold larger inventories than their operations

28
require in order to inflate their apparent asset value and their perceived

profitability.

In addition to the money tied up by acquiring inventory, inventory also

brings associated costs for warehouse space, for utilities, and for

insurance to cover staff to handle and protect it, fire and other

disasters, obsolescence, shrinkage (theft and errors), and others. Such

holding costs can mount up: between a third and a half of its

acquisition value per year.

Businesses that stock too little inventory cannot take advantage of

large orders from customers if they cannot deliver. The conflicting

objectives of cost control and customer service often pit an

organization's financial and operating managers against its sales and

marketing departments. Sales people, in particular, often receive sales

commission payments, so unavailable goods may reduce their

potential personal income. This conflict can be minimised by reducing

production time to being near or less than customer expected delivery

time. This effort, known as "Lean production" will significantly

reduce working capital tied up in inventory and reduce manufacturing

costs (See the Toyota Production System).

29
Inventory Accounting

By helping the organization to make better decisions, the accountants

can help the public sector to change in a very positive way that

delivers increased value for the taxpayer’s investment. It can also help

to incentivise progress and to ensure that reforms are sustainable and

effective in the long term, by ensuring that success is appropriately

recognized in both the formal and informal reward systems of the

organization.

To say that they have a key role to play is an understatement. Finance

is connected to most, if not all, of the key business processes within

the organization. It should be steering the stewardship and

accountability systems that ensure that the organization is conducting

its business in an appropriate, ethical manner. It is critical that these

foundations are firmly laid. So often they are the litmus test by which

public confidence in the institution is either won or lost.

Finance should also be providing the information, analysis and advice

to enable the organizations’ service managers to operate effectively.

This goes beyond the traditional preoccupation with budgets – how

much have we spent so far, how much have we left to spend? It is

about helping the organization to better understand its own

30
performance. That means making the connections and understanding

the relationships between given inputs – the resources brought to bear

– and the outputs and outcomes that they achieve. It is also about

understanding and actively managing risks within the organization and

its activities.

31
 FIFO VS. LIFO ACCOUNTING

When a dealer buys goods from inventory, the value of the inventory

is reduced by the cost of goods sold (COGS). This is simple where the

COGS has not varied across those held in stock; but where it has, then

an agreed method must be derived to evaluate it. For commodity items

that one cannot track individually, accountants must choose a method

that fits the nature of the sale. Two popular methods which normally

exist are: FIFO and LIFO accounting (first in - first out, last in - first

out). FIFO regards the first unit that arrived in inventory as the first

one sold. LIFO considers the last unit arriving in inventory as the first

one sold. Which method an accountant selects can have a significant

effect on net income and book value and, in turn, on taxation. Using

LIFO accounting for inventory, a company generally reports lower net

income and lower book value, due to the effects of inflation. This

generally results in lower taxation. Due to LIFO's potential to skew

inventory value, UK GAAP and IAS have effectively banned LIFO

inventory accounting.

STANDARD COST ACCOUNTING

Standard cost accounting uses ratios called efficiencies that compare

the labour and materials actually used to produce a good with those

32
that the same goods would have required under "standard" conditions.

As long as similar actual and standard conditions obtain, few problems

arise. Unfortunately, standard cost accounting methods developed

about 100 years ago, when labor comprised the most important cost in

manufactured goods. Standard methods continue to emphasize labor

efficiency even though that resource now constitutes a (very) small

part of cost in most cases.

Standard cost accounting can hurt managers, workers, and firms in

several ways. For example, a policy decision to increase inventory can

harm a manufacturing managers' performance evaluation. Increasing

inventory requires increased production, which means that processes

must operate at higher rates. When (not if) something goes wrong, the

process takes longer and uses more than the standard labor time. The

manager appears responsible for the excess, even though s/he has no

control over the production requirement or the problem.

In adverse economic times, firms use the same efficiencies to

downsize, rightsize, or otherwise reduce their labor force. Workers

laid off under those circumstances have even less control over excess

inventory and cost efficiencies than their managers.

33
Many financial and cost accountants have agreed for many years on

the desirability of replacing standard cost accounting. They have not,

however, found a successor.

Theory of Constraints cost accounting

Eliyahu M. Goldratt developed the Theory of Constraints in part to

address the cost-accounting problems in what he calls the "cost

world". He offers a substitute, called throughput accounting, that uses

throughput (money for goods sold to customers) in place of output

(goods produced that may sell or may boost inventory) and considers

labor as a fixed rather than as a variable cost. He defines inventory

simply as everything the organization owns that it plans to sell,

including buildings, machinery, and many other things in addition to

the categories listed here. Throughput accounting recognizes only one

class of variable costs: the trully variable costs like materials and

components that vary directly with the quantity produced.

Finished goods inventories remain balance-sheet assets, but labor

efficiency ratios no longer evaluate managers and workers. Instead of

an incentive to reduce labor cost, throughput accounting focuses

attention on the relationships between throughput (revenue or income)

on one hand and controllable operating expenses and changes in

34
inventory on the other. Those relationships direct attention to the

constraints or bottlenecks that prevent the system from producing

more throughput, rather than to people - who have little or no control

over their situations.

35
 NATIONAL ACCOUNTS

Inventories also play an important role in national accounts and the

analysis of the business cycle. Some short-term macroeconomic

fluctuations are attributed to the inventory cycle.

Distressed inventory

Also known as distressed or expired stock, distressed inventory is

inventory whose potential to be sold at a normal cost has or will soon

pass. In certain industries it could also mean that the stock is or will

soon be impossible to sell. Examples of distressed inventory include

products that have reached its expiry date, or has reached a date in

advance of expiry at which the planned market will no longer

purchase it (e.g. 3 months left to expiry), clothing that is defective or

out of fashion, and old newspapers or magazines. It also includes

computer or consumer-electronic equipment that is obsolescent or

discontinued and whose manufacturer is unable to support it. One

current example of distressed inventory is the VHS format.

Inventory credit

Inventory credit refers to the use of stock, or inventory, as collateral to

raise finance. Where banks may be reluctant to accept traditional

36
collateral, for example in developing countries where land title may be

lacking, inventory credit is a potentially important way of overcoming

financing constraints. This is not a new concept; archaeological

evidence suggests that it was practiced in Ancient Rome. Obtaining

finance against stocks of a wide range of products held in a bonded

warehouse is common in much of the world. It is, for example, used

with Parmesan cheese in Italy.[5] Inventory credit on the basis of stored

agricultural produce is widely used in Latin American countries and in

some Asian countries. A precondition for such credit is that banks

must be confident that the stored product will be available if they need

to call on the collateral; this implies the existence of a reliable network

of certified warehouses. Banks also face problems in valuing the

inventory. The possibility of sudden falls in commodity prices means

that they are usually reluctant to lend more than about 60% of the

value of the inventory at the time of the loan.

ACCOUNTS PAYABLE

(CURRENT LIABILITY)

Accounts payable is a file or account that contains money that a

person or company owes to suppliers, but has not paid yet (a form of

debt). When you receive an invoice you add it to the file, and then you

37
remove it when you pay. Thus, the A/P is a form of credit that

suppliers offer to their purchasers by allowing them to pay for a

product or service after it has already been received.

The profession is unregulated, though there are international standard

setting bodies, an example of which is the International Accounts

Payable Professionals (IAPP), an association of more than 5,000

members in the United States, Canada, the United Kingdom and other

countries.[1] As part of its Professional Standards Framework,[2] the

IAPP has established a new definition of accounts payable:

Accounts payable is a strategic, value-added accounting function that

performs the primary non-payroll disbursement functions in an

organization. As such, the AP operation plays a critical role in the

financial cycle of the organization. AP enables an organization to

accomplish its objectives by bringing a systematic, disciplined

approach to evaluate and improve the effectiveness of the entire

payables process. In addition to the traditional AP activities whereby

liabilities to third-party entities (suppliers, vendors, taxing authorities,

etc.) are recognized and paid based on the credit policies agreed to

between the company and its suppliers, today's AP departments have

taken on much wider roles including fraud prevention, cost reduction,

38
workflow system solutions, cash-flow management, internal controls

and vendor (supply chain) financing.

In households, accounts payable are ordinarily bills from the electric

company, telephone company, cable television or satellite dish service,

newspaper subscription, and other such regular services. Householders

usually track and pay on a monthly basis by hand using cheques or

credit cards. In a business, there is usually a much broader range of

services in the A/P file, and accountants or bookkeepers usually use

accounting software to track the flow of money into this liability

account when they receive invoices and out of it when they make

payments. Increasingly, large firms are using specialized Accounts

Payable Automation to automate the paper and manual elements of

processing an organization's invoices.

Commonly, a supplier will ship a product, issue an invoice, and collect

payment later, which creates a cash conversion cycle, a period of time

during which the supplier has already paid for raw materials but hasn't

been paid in return by the final customer.

When the invoice arrives it is matched to the packing slip and

purchase order, and if all is in order, the invoice is paid. This is

referred to as the three-way match.

39
Quite a few organizations have been told that their vendors won’t be

sending paper invoices in the future. They insist on e-invoicing, fax or

email. You can take advantage of this new methodology in an

organized manner. It’s not that hard. Here’s what Accounts Payable

Now & Tomorrow suggests:

1) Set up a single e-mail address to be used exclusively for the receipt

of invoices. Whoever is responsible for either processing the invoices

that come into this address or forwarding them for approval should

have the password, as should their backup and perhaps the department

manager. The important thing is the e-mail account not belong to one

person but several in case of absences etc.

2) Set up a dedicated fax number to be used for accounts payable

invoices only. Invoices can be retrieved throughout the day and

integrated into the normal accounts payable workflow.

3) Set up an e-fax facility to receive faxed invoices into an e-mail

account. This should eliminate the problem of illegible invoices.

4) Make sure your new e-mail address and fax number are included in

all correspondence with vendors, especially your New Vendor

Welcome kit

40
EXPENSE ADMINISTRATION

Expense administration is usually closely related to accounts payable,

and sometimes those functions are performed by the same employee.

The expense administrator verifies employees' expense reports,

confirming that receipts exist to support airline, ground transportation,

meals and entertainment, telephone, hotel, and other expenses. This

documentation is necessary for tax purposes and to prevent

reimbursement of inappropriate or erroneous expenses. Airline

expenses are, perhaps, the most prone to fraud because of the high

cost of air travel and the confusing nature of airline-related

documentation, which can consist of an array of reservations, receipts,

and actual tickets.

Petty cash is also usually paid out by A/P personnel in the form of a

check made out to an employee, who cashes the check at the bank and

puts the cash in the petty cashbox.

41
 INTERNAL CONTROLS

A variety of checks against abuse are usually present to prevent

embezzlement by accounts payable personnel. Separation of duties is

a common control. Nearly all companies have a junior employee

process and print a cheque and a senior employee review and sign the

cheque. Often, the accounting software will limit each employee to

performing only the functions assigned to them, so that there is no

way any one employee – even the controller – can singlehandedly

make a payment.

Some companies also separate the functions of adding new vendors

and entering vouchers. This makes it impossible for an employee to

add himself as a vendor and then cut a cheque to himself without

colluding with another employee. This file is referred to as the master

vendor file. It is the repository of all significant information about the

company's suppliers. It is the reference point for accounts payable

when it comes to paying invoices.

In addition, most companies require a second signature on cheques

whose amount exceeds a specified threshold.

Accounts payable personnel must watch for fraudulent invoices. In the

absence of a purchase order system, the first line of defense is the

42
approving manager. However, A/P staff should become familiar with a

few common problems, such as "Yellow Pages" ripoffs in which

fraudulent operators offer to place an advertisement. The walking-

fingers logo has never been trademarked, and there are many different

Yellow Pages-style directories, most of which have a small

distribution. According to an article in the Winter 2000 American

Payroll Association's Employer Practices, "Vendors may send

documents that look like invoices but in small print they state "this is

not a bill." These may be charges for directory listings or

advertisements. Recently, some companies have begun sending what

appears to be a rebate or refund check; in reality, it is a registration for

services that is activated when the document is returned with a

signature."

In accounts payable, a simple mistake can cause a large overpayment.

A common example involves duplicate invoices. An invoice may be

temporarily misplaced or still in the approval status when the vendors

calls to inquire into its payment status. After the A/P staff member

looks it up and finds it has not been paid, the vendor sends a duplicate

invoice; meanwhile the original invoice shows up and gets paid. Then

the duplicate invoice arrives and inadvertently gets paid as well,

perhaps under a slightly different invoice number.

43
 AUDITS OF ACCOUNTS PAYABLE

Auditors often focus on the existence of approved invoices, expense

reports, and other supporting documentation to support checks that

were cut. The presence of a confirmation or statement from the

supplier is reasonable proof of the existence of the account. It is not

uncommon for some of this documentation to be lost or misfiled by

the time the audit rolls around. An auditor may decide to expand the

sample size in such situations.

Auditors typically prepare an ageing structure of accounts payable for

a better understanding of outstanding debts over certain periods (30,

60, 90 days, etc). Such structures are helpful in the correct

presentation of the balance sheet as of year end.

The current portion of debt (payable within 12 months) is critical,

because it represents a short-term claim to current assets and is often

secured by long term assets. Common types of short-term debt are

bank loans and lines of credit.

An increase in working capital indicates that the business has either

increased current assets (that is received cash, or other current assets)

or has decreased current liabilities, for example has paid off some

short-term creditors.
44
Implications on M&A: The common commercial definition of

working capital for the purpose of a working capital adjustment in an

M&A transaction ( i .e for a working capital adjustment mechanism in

a sale and purchase agreement) is equal to:

CASH BALANCE:

Current Assets - Current Liabilities excluding deferred tax

assets/liabilities, excess cash, surplus assets and/or deposit

balances.

items often attract a one-for-one purchase price adjustment.

45
 WORKING CAPITAL MANAGEMENT

Decisions relating to working capital and short term financing are

referred to as working capital management. These involve managing

the relationship between a firm's short-term assets and its short-term

liabilities. The goal of working capital management is to ensure that

the firm is able to continue its operations and that it has sufficient cash

flow to satisfy both maturing short-term debt and upcoming

operational expenses.

Decision criteria

By definition, working capital management entails short term

decisions - generally, relating to the next one year period - which are

"reversible". These decisions are therefore not taken on the same basis

as Capital Investment Decisions (NPV or related, as above) rather they

will be based on cash flows and / or profitability.

 One measure of cash flow is provided by the cash conversion

cycle - the net number of days from the outlay of cash for raw

material to receiving payment from the customer. As a

management tool, this metric makes explicit the inter-

relatedness of decisions relating to inventories, accounts

receivable and payable, and cash. Because this number

46
 effectively corresponds to the time that the firm's cash is tied up

in operations and unavailable for other activities, management

generally aims at a low net count.

 In this context, the most useful measure of profitability is

Return on capital (ROC). The result is shown as a percentage,

determined by dividing relevant income for the 12 months by

capital employed; Return on equity (ROE) shows this result for

the firm's shareholders. Firm value is enhanced when, and if,

the return on capital, which results from working capital

management, exceeds the cost of capital, which results from

capital investment decisions as above. ROC measures are

therefore useful as a management tool, in that they link short-

term policy with long-term decision making. See Economic

value added (EVA).

MANAGEMENT OF WORKING CAPITAL

Guided by the above criteria, management will use a combination of

policies and techniques for the management of working capital. These

policies aim at managing the current assets (generally cash and cash

equivalents, inventories and debtors) and the short term financing,

such that cash flows and returns are acceptable.

47
 Cash management. Identify the cash balance which allows for

the business to meet day to day expenses, but reduces cash

holding costs.

 Inventory management. Identify the level of inventory which

allows for uninterrupted production but reduces the investment

in raw materials - and minimizes reordering costs - and hence

increases cash flow; see Supply chain management; Just In

Time (JIT); Economic order quantity (EOQ); Economic

production quantity

 Debtors management. Identify the appropriate credit policy,

i.e. credit terms which will attract customers, such that any

impact on cash flows and the cash conversion cycle will be

offset by increased revenue and hence Return on Capital (or

vice versa); see Discounts and allowances.

 Short term financing. Identify the appropriate source of

financing, given the cash conversion cycle: the inventory is

ideally financed by credit granted by the supplier; however, it

may be necessary to utilize a bank loan (or overdraft), or to

"convert debtors to cash" through "factoring".

48
Working capital is directly affecting by other management issues, such

as product mix, supply chain design and business model (for example

agent vs. distributor)

49
COMPANY

PROFILE

50
 COMPANY PROFILE

Uttar Pradesh Power Corporation Limited

Uttar Pradesh Power Corporation Limited

(UPPCL)

Uttar Pradesh State Government

Type
Undertaking

Industry Electric Power

Website [1]

Uttar Pradesh Power Corporation Limited (UPPCL) is the

company responsible for electricity transmission and distribution

within the Indian state of Uttar Pradesh. Its chairman is Mr. Sanjay

Agarwal.

UPPCL will be professionally managed utility supplying reliable and

cost efficient electricity to every citizen of the state through highly

motivated employees and state of art technologies, providing an

economic return to our owners and maintaining leadership in the

country.

We shall achieve this being a dynamic, forward looking, reliable, safe

and trustworthy organization, sensitive to our customers interests,

profitable and sustainable in the long run, providing uninterrupted

51
supply of quality power, with transparency and integrity in operation,

providing

TO OUR CONSUMERS:

High productivity reflected in a fair, equitable and cost based tariff

across consumer categories, accurate and timely billing on a rational,

comprehensible billing basis reflecting actual consumption, and

convenient system for payment of dues. Simple and well-advertised

procedures, guaranteed connection of requested load within

reasonable time, prompt breakdown attendance, and Efficient

Complaint handling.

Timely actions based on anticipation of the future & perspective

planning, and Clear Communication on customer issues.

TO OUR SHAREHOLDERS :

A secure and well managed asset, corporate governance in line with

Kumaramagalam Birla committee recommendations, a business

growing organically and through diversification, and satisfied

stakeholders.

52
TO OUR EMPLOYEES :

Opportunities for career growth and development, Pride in the

Organization, and a sense of belongingness, with the ability to

contribute to the organization. Well defined service conditions and full

compliance with Labour Laws. Accountability and Responsibility for

actions including performance incentives based on fair and transparent

assessment and compensation in line with the best in the industry, and

an increased sense of security based on the increased success of the

organization.

TO THE REGULATOR :

The equitable satisfaction of all stakeholders, ensuring the long-term

stability of the section and an Adherence to Regulations and

Guidelines issued by the Regulator, including inter alias Compliance

with License Conditions, Furnishing Accurate and Timely

Information, Ensuring techno-economic feasibility of investments, and

an effective consumer grievance redressed systems.

TO OUR FINANCIAL INSTITUTIONS :

Sustained growth and profitability, sound economic appraisal of

projects to be undertaken, security of loan and timely servicing of

debts, and Timely Publication of Audited Financial statements,

53
including sound accounting & financial practice in accordance with

Law.

TO THE STATE GOVERNMENT :

Implementation of Reform Legislation and of all Government Policies

and directives as far as is practical, applying Public Funding and

Subsidies to the intended category of Consumers. Compliance with

the rule of law and electrical safety rules. The satisfaction of

stakeholders.

In return Government will assist us by Ensuring Law and order and

enforcement and assistance with revenue realization.

TO OUR SUPPLIERS :

Transparent and efficient procedures for tendering and timely ordering

and settlement in adherence with Commercial Agreements.

TO OTHER UTILITIES :

Reliable and secure system operations in accordance with Grid Code,

0.2 class metering, and timely readings, an Integrated Information

system to provide fast and accurate interface data, Timely settlement

observing Proper Commercial Agreements between entities, and

54
Adherence to System operating procedures in terms of merit order

dispatch, security, etc.

TO THE PUBLIC :

Effective communication of policies and procedures, a Reliable supply

to essential public services, enforcing adequate safety norms and

environmental and social norms, minimizing inconvenience dare to

disruptions etc.

We shall be a diversified business with a core function of providing

quality, uninterrupted power, Commercial focus considering all

techno-economic issues of investments, and a high level of Consumer

Service with new connections on demand and low complaint

resolution times. Diversifications shall include optic fiber based

activities, consultancy, manufacture, and repairs, and we shall have a

Diversified investment portfolio around the globe.

We shall satisfy all stakeholders including the regulator.

We shall be a global industry Leader working in close cooperation

with other utilities supporting self-sustained growth through

financially viable business units and technological leadership,

providing a world class cost of supply, and world class profits,

doubling turnover every 5 years. We shall function independently;

implementing prudent safety and environment norms, with a cost of

55
supply based tariff, without external interference, in a transparent

corruption free operating environment, in compliance with statutory

requirements. We shall add value to our shareholders, safeguard the

environment, and maintain our asset base. We shall maintain a strong

image with the general public.

We shall measure success on global standards, e.g.

Parameter Measurement

Reliability of supply 99.50%

Technical losses 10%

Commercial losses 2%

Collection efficiency 97%

Billing efficiency 100%

Employee cost 25 p/u

We shall have a Long-term dynamic vision based on strong

perspective planning. We shall have sophisticated procedures

including on line billing, on line queries and eBusiness functions.

We shall have the most motivated. Satisfied and best-trained

employees with full competence in all key areas optimally deployed

and the most satisfied customers in the sector.

Our Supply quality shall be: 2% variation in voltage and 0.5 Hz

variation in frequency, with Fault repairs in 1 to 2 hours and redressal

of 100% and new connections will be made on demand.

56
Restructuring

For efficient operation & management Uttar Pradesh Power

Corporation Limited (UPPCL) is further restructured into;

 Dakshinanchal Vidyut Vitaran Nigam Limited (DVVNL)[2] -

Agra Zone Discom

 Madhyanchal Vidyut Vitaran Nigam Limited (MVVNL)[3] -

Lucknow Zone Discom

 Pashchimanchal Vidyut Vitaran Nigam Limited (PVVNL)[4] -

Meerut Zone Discom

 Purvanchal Vidyut Vitaran Nigam Limited (PUVVNL)[5] -

Varanasi Zone Discom

 Kanpur Electricity Supply Company (KESCO)[6] - Kanpur City

Discom

 Lucknow Electricity Supply Administration (LESA) - Lucknow

City Discom

 Uttar Pradesh Power Transmission Limited (UPPTCL)[7] -

State Transmission Utility

Power Procurement

Uttar Pradesh Power Corporation Limited (UPPCL) procures power

from; state government owned power generators (Uttar Pradesh Rajya

57
Vidyut Utpadan Nigam & Uttar Pradesh Jal Vidyut Nigam Limited),

central government owned power generators (NTPC Limited &

THDC Ltd) and Independent Power Producers - IPP (mostly private

power companies) through power purchase agreement for lowest per

unit cost of electricity.

Financial Condition & Line losses

The total loss of the UP Power Corporation Limited (UPPCL) is

estimated somewhere between Rs 29,000 crore to 55,000 crore. Thus

UPPCL is finding it hard to make payment to state, central and other

private power companies against electricity procurement.

The causes of such a poor financial conditions of UPPCL include:

 Higher line losses due to aging over stressed infrastructure

 Pilferage of power at large scale

 Inferior quality of transformers and other equipments

 Selling power much below its purchasing cost

Discom wise Aggregate Technical & Commercial (AT & C) Loss /

Total line losses (in %) for a period of 2010-11;

 Dakshinanchal Vidyut Vitaran Nigam Limited (DVVNL) -

46.80%

58
  Madhyanchal Vidyut Vitaran Nigam Limited (MVVNL) -

31.81%

 Pashchimanchal Vidyut Vitaran Nigam Limited (PVVNL) -

29.59%

 Purvanchal Vidyut Vitaran Nigam Limited (PUVVNL)[5] -

38.67%

Power Plants SPVs

In line of Power Finance Corporation, UPPCL created SPVs (Shell

Companies);

 To attract private investment in implementation of New Power

Plant Projects in state of Uttar Pradesh,

 To meet the growing power demand of Uttar Pradesh state,

 To procure power at lowest possible feasible rates.

The Role of SPVs (Shell Companies) are preparing feasibility report

(including Technology, Size, Coal linkages, Land & Water issues) , all

clearances (including environment clearances) & Land Acquisition

etc. These SPVs (Shell Companies) are transferred to developer

private company through bidding for lowest per unit cast of selling

electricity to UPPCL.

UPPCL SPVs;
59
 Bara Thermal Power Project, Prayagraj Power Generation

Company Limited (Tehsil - Bara, Distt. Allahabad) - 3 x 660

MW (Under Construction)

 Karchana Thermal Power Station, Sangam Power Generation

Company Limited (Tehsil - Karchana, Distt. Allahabad) - 2 x

660 MW (Under Construction)

60
OBJECTIVES OF

THE STUDY

61
 OBJECTIVES OF THE STUDY

1. To know the causes of the working capital management of UPPCL

2. To know procedure of working capital management of UPPCL .

3. To know the working capital management of UPPCL

62
 RESEARCH METHODOLOGY

The report is the result of a survey which was undertaken in UPPCL .

The objectives of the project has been fulfilled by getting response

from the Employee's associated to these segments through a personal

interview in finance department. The responses available through the

balance sheet and personal interview are used to evaluate the working

capital management of the company.

THE RESEARCH PROBLEM

The problem formulation is the first step to a successful research

process. The summer training undertaken the problem of analyzing

the trend analysis of Banking industry of the company and to find out

the ratio analysis of company.

THE RESEARCH DESIGN

The research design used in the project is Descriptive

Research. The investigation is carried upon the working capital in

63
UPPCL in Lucknow. The reason for choosing this design is to get

responses from the company’s Balance sheet.

COLLECTION OF DATA

The data has been taken from secondary source

 Secondary data source

Secondary data was collected from following sources

Balance sheet

Websites

Books

Personal consultation

THE AREA OF WORK

The field work is conducted in the UPPCL in financial

department Lucknow .

64
 THE ANALYTICAL TOOLS USED

The analytical tools used are mostly graphical in nature

which include

 Bar Charts

 Tables showing percentage

65
 LIMITATIONS

It is not possible to remove the limitation of any investigators. So this

project also has certain limitation that is:

1) Information was gathered through the rating of the subject, thus

biasness is possible.

2) As the sample size was small it is possible that it may not

represent the precise picture.

3) Employees of the organization may hide the fact.

4) The management did not agree to disclose all the confidential

data.

5) Number of respondent are very less, so clear conclusion can’t

be drawn.

66
 DATA ANALYSIS

PERFORMANCE HIGHLIGHTS

Company has completed another successful year in 2016-17

registering impressive growth over the previous year. During the year,
the company has registered a net profit of Rs. 30.50 million by
increasing production to Rs. 191.77 million from a level of Rs. 149.83
million during the previous year. The turnover during the year has
increased by 35.40% to Rs. 194.59 million from Rs. 143.72 million
during the previous year. During the year 2015-16, net worth of the
company reached a level of Rs. 87.28 million. The major highlights of
performance during the year 2015-16 are summarized below.

(Rupees in million)

s.no. Particulars 2016-17 2015-16 Increased by

1 Turnover 194.59 143.72 35.40%
2 Production 191.77 149.83 27.99%
3 Value added 74.91 61.46 21.88%
4 Net profit before 30.50 19.14 59.35%
tax
5 Value added per 6.69 5.06 32.21%
employee (Rs. In
lacs)
6 New worth 87.28 56.96 53.23%

67
 1 What is Profitability Ratio (EBIT) in UPPCL in last 5 year?

PROFITABILITY RATIO -:

EBIT (Earnings Before Interest and Taxes)

EBIT = Revenue - COGS- Operating Expenses

Year EBIT
2012-13 -24.94
2013-14 -10.86
2014-15 1.84
2015-16 19.14
2016-17 30.5

INTERPETATION:

Profitability Ratio (EBIT) in UPPCL in last 5 year is increased year by

year in 2012-13 is -24.94 and in 2016-17 is 30.50

68
Q.2 What is Return on Assets in UPPCL in last 2 year?

Return on Assets
Return on Assets = Net Income / Assets * 100

2015-16 33.52%
2016-17 34.94%

INTERPETATION:

Return on Assets in UPPCL in last 2 year is increased year by year in

2015-16 is 33.52 and in 2016-17 is 34.94%

69
Q. 3 What is solvency ratio in UPPCL in last 5 year?

SOLVENCY RATIO

2012-13 -113.4%
2013-14 -121.61%
2014-15 -117.14%
2015-16 56.96%
2016-17 87.28%

INTERPETATION:

solvency ratio in UPPCL in last 5 year is increased year by year in 2012-

13 is -113.40 and in 2016-17 is 87.28%

70
 Q.4 What is Liquidity Ratio in UPPCL in last 2 year?

2015-16 1.4
2016-17 4.57
LIQUIDITY RATIO

In finance, the Acid-test or quick ratio or liquid ratio measures the

ability of a company to use its near cash or quick assets to
immediately extinguish or retire its current liabilities. Quick assets
include those current assets that presumably can be quickly converted
to cash at close to their book values.

INTERPETATION:

2009-10 The quick2008-09

ratio 2015-16 is 1.4 and in 2016-17 the ratio is increasing
4.57.

71
Q. 5 What is Current Ratio in UPPCL in last 2 year?

2016-17 4.53
2015-16 2.4
CURRENT RATIO

The current ratio is a financial ratio that measures whether or not a

firm has enough resources to pay its debts over the next 12 months. It
compares a firm's current assets to its current liabilities. It is expressed
as follows:

INTERPETATION:

The current ratio 2015-16 is 2.40 and in 2016-17 the ratio is increasing

4.53.

72
Q. 6 What is Networking Capital in UPPCL in last 2 year?

NETWORKING CAPITAL

Net Working Capital =Current Assets –Current Liabilities

2016-17 2015-16
Current assets 30581.46 13222.70
Current liabilities 6749.80 5506.25
Net W.C. 23831.66 7716.45

INTERPETATION:

The NETWORKING CAPITAL 2015-16 is 7716.45 and in 2016-17 the

ratio is increasing 23831.66.

73
Q.7 What is activity ratio in UPPCL in last 5 year?

ACTIVITY RATIO

Rs. In million

2012-13 51.4
2013-14 70.07
2014-15 94.42
2015-16 143.72
2016-17 194.59

INTERPETATION:

The activity ratio in UPPCL in last 5 year is increase year by year 2012-
13 is 51.40 and in 2016-17 the ratio is increasing by 194.59.

74
Q.8 What is debt equity ratio in UPPCL in last 2 year?

2015-16 1.26%
2016-17 1.02%
DEBT EQUITY RATIO

Debt equity ratio =total liabalities /share holders equity

2007-08 2008-09

INTERPETATION:

The Dept equity ratio 2015-16 is 1.02 and in 2016-17 the ratio is

increasing 1.26.

75
Q. 9 What is value added per employee in UPPCL in last 5 year?
VALUE ADDED PER EMPLOYEE

Rs. In Lakhs

2012-13 1.93
2013-14 2.8
2014-15 4.02
2015-16 5.06
2016-17 6.69

INTERPETATION:

The value added per employee in UPPCL in last 5 year 2012-13 is 1.93

and in 2016-17 the ratio is increasing 6.69.

76
FINDINGS

77
 FINDINGS

The summary of results of various ratios are presented. The summary

of major findings are mentioned below :-

(I) Gross Working Capital :- Trend of Gross Working Capital

( GWC) or total current assets showed an upward trend. The total

investment in current assets increases from Rs. 7716.45 million to Rs.

23831 million during the period under reviewed. This is a good

indication from the smooth running of the day-to-day operation as

well as paying the current obligation points of review. But since 2013-

14 it has been decreased continuously the main factor for this is

decrease in sundry debtors.

Net Working Capital ( NWC) :- Likewise GWC trend of NWC also

showed an increasing trend up to 2016-17 but thereafter it has

decreased year by year. The highest NWC was in the year of 2013-14

and lowest being in the year of 2014-15. The factor contributed to

decrease is the decrease in sundry debtors considerably and also

increase in sundry creditors and other current liabilities. This must be

reviewed and attempts to reduce the other current liabilities. This

attempts shall improve the liquidity position of organization.

78
Position of Liquidity or Trend in liquidity :- Analysis of various

liquidity ratio express the trend of liquidity over the past twelve years.

Analysis of current ratio reveals that the ratio shown an increasing

trend up to 1999-00 but thereafter it decreased . It was highest in the

year of 2016-17 being 3.97:1 thereafter it has decreased continuously

and comes to 1.09 in 2014-15. This is below the norms. It should be

improve by reducing the other current liabilities and sundry creditors.

However current ratio in many cases does not reveal the real picture of

liquidity as the same is trend analysis only . It takes into consideration

all the components of current assets (e.g.) inventory and debtors,

which ultimately takes some times for conversion into cash.

Analysis of the Super quick ratio also reveals that the trend is

increasing up to 2012-13 but after that it decreased. It has .71:1 in

2016-17 and then comes to .66:1 except slightly increased in the year

2014-15 .In the year 2015-16 it is below than the standard norms of

1:1. These leads to analysis of super quick ratio which is quite

relevant in this case.

The results shows a gloomy picture in comparison to current & quick

ratio. Since super quick ratio excludes aspects of sundry debtors from

the components of current assets in comparison to super quick ratio,

79
hence analysis of sundry debtors needs for the investigation. This

aspect is further summarized and explained in expressing the results of

efficiency of working capital used.

Over all receivable management shows a gloomy picture, which

indicates inefficiency in receivable management. However the

situation is quite improving due to continuous efforts of present

management. In a nut shell the position of sundry debtors requires

more constituent collection effort, special cell to monitor and review

the position incessantly, pressure on various state electricity

department and SEB through central govt. for speed collection of

receivable.

80
CONCLUSIONS

81
 CONCLUSIONS
In spite of various obstacle hurdles, limitations and bottlenecks,

working capital management of UPPCL has a bright future for growth

and expansion. The organization is a profit making and contributing

lot in the path of the progress of the nation by providing easy working

capital management of UPPCL to various states including some

strategic remote areas. working capital management of UPPCL is the

only pioneer organization in the field of financial analysis in UPPCL

sector at present . As mentioned in this chapter the organization is

already working on its planning for rapid growth by commissioning

more projects, entering. Our nation is facing acute shortage of

technology . Thus to achieve rapid industrialization & growth of other

sector including software. working capital management of UPPCL

has to play a greater role by increasing its capacity manifold in

future / coming days and the organization has great importance from

the nations point of view.

Trend analysis in a business enterprise is synonymous with the blood

of the human body. The importance of Trend analysis from liquidity

and profitability point of view can not be over emphasized. Both these

significant aspects largely depends upon efficient management of

Trend analysis, (i.e.) management of inventory, receivable, cash &

82
bank balances and short term creditors & other short-term liabilities,

liquidity which refers to the ability of a firm to meet its current

obligations encompasses current assets and their structure. In recent

times high importance is being given corporate liquidity as it has

direct impact on profitability as well as long term survival of the

firms. Maintaining sound liquidity and profitability position ultimately

depends upon efficient and smooth management of working .

The present study is divided into five parts. In this part

importance of the study, importance of financial analysis and

potential, status and development of working capital management of

UPPCL , data and methodology of the study has been discussed. In the

second part the objectives of the study has clearly defined. In third

chapter deals with various concepts, aspects & dimensions of working

capital. In forth part an attempt is made to know the trend, status and

management of Trend analysis through analysis by using various

financial and statistical techniques. In fifth chapter summery of result,

findings, scope of futures research limitations of study etc. has been

described briefly.

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BIBILIOGRAPHY

84
 BIBILIOGRAPHY

1- I M PANDEY FINANCIAL MANAGEMENT

2- C.R. KOTHARI Research Methodology

3- Website : www.UPPCL.com

4- www.google.com

5- www.wikipedia.com

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APPENDIX

86
 Questionnaire
Q.1 What is Profitability Ratio (EBIT) in UPPCL in last 5 year?

Year EBIT
2012-13
2013-14
2014-15
2015-16
2016-17

Q.2 What is Return on Assets in UPPCL in last 2 year?

2015-16
2014-15
Q. 3 What is Solvency Ratio in UPPCL in last 5 year?

2012-13
2013-14
2014-15
2015-16
2016-17

Q.4 What is Liquidity Ratio in UPPCL in last 2 year?

2015-16
2016-17
Q. 5 What is Current Ratio in UPPCL in last 2 year?

2015-16
2016-17

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Q. 6 What is Netwroking Capital in UPPCL in last 2 year?

2016-17 2015-16
Current assets
Current liabilities
Net W.C.

Q.7 What is activity ratio in UPPCL in last 5 year?

2012-13
2013-14
2014-15
2015-16
2016-17

Q.8 What is debt equity ratio in UPPCL in last 2 year?

2015-16
2016-17

Q. 9 What is value added per in UPPCL in last 5 year?

2012-13
2013-14
2014-15
2015-16
2016-17

88
Balance Sheet of UPPCL ------------------- in Rs. Cr. ----------------
Mar '17 Mar '16 Mar '15 Mar '14 Mar '13

12 mths 12 mths 12 mths 12 mths 12 mths

Sources Of Funds
Total Share Capital 489.52 489.52 489.52 489.52 489.52
Equity Share Capital 489.52 489.52 489.52 489.52 489.52
Reserves 31,804.92 32,563.83 33,595.08 32,557.53 29,954.58
Networth 32,294.44 33,053.35 34,084.60 33,047.05 30,444.10
Secured Loans 0.00 0.00 0.00 2,550.00 1,286.00
Unsecured Loans 89.55 126.29 61.00 104.77 129.20
Total Debt 89.55 126.29 61.00 2,654.77 1,415.20
Total Liabilities 32,383.99 33,179.64 34,145.60 35,701.82 31,859.30
Mar '17 Mar '16 Mar '15 Mar '14 Mar '13

12 mths 12 mths 12 mths 12 mths 12 mths

Application Of Funds
Gross Block 5,279.20 12,965.92 12,304.80 11,812.47 10,585.56
Less: Accum.
1,683.32 9,002.73 8,164.28 7,119.53 6,127.07
Depreciation
Net Block 3,595.88 3,963.19 4,140.52 4,692.94 4,458.49
Capital Work in Progress 168.34 315.36 517.80 642.12 1,171.59
Investments 661.42 663.40 417.67 420.17 429.17
Inventories 7,372.38 9,637.39 10,101.66 9,797.55 11,763.82
Sundry Debtors 22,075.56 24,428.98 26,223.50 28,071.92 29,234.49
Cash and Bank Balance 10,491.79 10,085.99 9,812.70 11,872.93 7,732.05
Total Current Assets 39,939.73 44,152.36 46,137.86 49,742.40 48,730.36
Loans and Advances 16,864.83 17,595.79 17,253.28 17,293.54 15,338.84
Total CA, Loans &
56,804.56 61,748.15 63,391.14 67,035.94 64,069.20
Advances
Current Liabilities 19,653.30 22,069.67 23,281.09 26,763.33 29,327.02
Provisions 9,192.91 11,440.79 11,040.44 10,326.02 8,942.13
Total CL & Provisions 28,846.21 33,510.46 34,321.53 37,089.35 38,269.15
Net Current Assets 27,958.35 28,237.69 29,069.61 29,946.59 25,800.05
Total Assets 32,383.99 33,179.64 34,145.60 35,701.82 31,859.30

Contingent Liabilities 13,992.77 8,778.10 6,016.83 11,337.90 3,441.04

89
Book Value (Rs) 131.94 135.04 139.26 135.02 124.38

90