A STUDY ON

WORKING CAPITAL MANAGEMENT

With reference to
“BHARATH SANCHAR NIGAM LIMITED.,
RAJAHMUNDRY
A Project Report Submitted in the
Partial fulfillment of the requirements for the award of the degree of
MASTER OF BUSINESS ADMINISTRATION
To
GODAVARI INSTITUTE OF ENGINEERING & TECHNOLOGY (A)
Submitted By
JAMI RAMA SURYA KALA
(Reg. No: 17551E0032)

Under the Guidance of

R SATYANARAYANA
Assistant Professor, DMS

Department of Management Studies

GODAVARI INSTITUTE OF ENGINEERING AND TECHNOLOGY (A)
(Permanently Affiliated to JNTUK Kakinada, approved by AICTE, Accredited by NBA)
Rajamahendravaram
2017-2019
 DECLARATION

I, J.RAMA SURYA KALA declare that the project work is entitled “A

STUDY ON WORKING CAPITAL MANAGEMENT with reference to
BHARATH SANCHAR NIGAM LIMITED., RAJAMANDRY carried by me in
the partial fulfillment for the award of the degree MASTER OF BUSINESS
ADMINISTRATION BY GODAVARI INSTITUTE OF ENGINEERING &
TECHNOLOGY, (AUTONOMOUS) PERMANENT AFFILIATED TO JNTUK,
KAKINADA. This project work was undertaken as a part of academic
curriculum according to JNTUK norms. It is my own work and it is not
submitted to any other organization for any other purpose.

(J. RAMA SURYA KALA)

 GODAVARI INSTITUTE OF ENGINEERING AND TECHNOLOGY (A)
Department of Management Studies

CERTIFICATE

This is to certify that the project work entitled “A STUDY ON

WORKING CAPITAL MANAGEMENT”, with reference to BHARATH
SANCHAR NIGAM LIMITED., RAJAHMUNDRY This is being
submitted by J.RAMA SURYA KALA in partial fulfillment for the
award of the Degree of MASTER OF BUSINESS ADMINISTRATION
in the academic period 2017-19 to the GODAVARI INSTITUTE OF
ENGINEERING AND TECHNOLOGY (A) is a record of bonafied work
carried out by her under our guidance and supervision.

The result presented in this project has not been submitted to

any other university or institute for the award of any degree.

Head of the Department Internal Examiner

External Examiner
 ACKNOWLEDGEMENT
I would like to express my profound sense of gratitude to R.
SATYANARAYANA, Assistant Professor, DMS of Godavari Institute
of Engineering and Technology (A), Rajamahendravaram for her
expert guidance, direction, helpfull comments, constructive
suggestions, unparalleled patience and encouragement.
I would like to express my sincere thanks and gratitude to Dr.
P R K RAJU, Director, DMS GIET (A) for extending every possible
help during the course of the study.
I am also thankful to Dr. D V RAMAMURTHY, Principal, GIET
(A), for his support and encouragement during the course of my
study.
I am also thankful to MANAGEMENT GIET (A)
Rajamahendravaram for extending every possible help during the
course of study.
I am very thankful to my family members and friends for the
support and encouragement even during hard times without which I
wouldn’t have been the person I am now to complete my project
work.
Finally, I acknowledge all those who have helped me directly
or indirectly during the course of my research work.

J. RAMA SURYA KALA

(Reg. No. 17551E0032)
 CONTENTS
CHAPTER-I PAGE NO
 INTRODUCTION 01-17
 OBJECTIVES OF THE STUDY

 SCOPE OF THE STUDY

 NEED FOR THE STUDY

 METHODOLOGY OF THE STUDY

 LIMITATIONS OF THE STUDY

CHAPTER-II
 INDUSTRY PROFILE 18-33
&
COMPANY PROFILE

CHAPTER-III
 THEORETICAL FRAME WORK 34-59

CHAPTER-IV
 DATA ANALYSIS & INTERPRETATION 60-79

CHAPTER-V
 FINDINGS 80-82
 SUGGESTIONS

 CONCLUSIONS

ANNEXURE
FINANCIAL STATEMENTS 83-87
BIBLIOGRAPHY 88

6
 FINANCIAL MANAGEMENT

INTRODUCTION
Financial Management is an academic discipline which is concerned with
decision-making. This decision is concerned with the size and composition of assets
and the level and structure of financing. In order to make right decision, it is
necessary to have a clear understanding of the objectives. Such an objective provides
a framework for right kind of financial decision making. The objectives are concerned
with designing a method of operating the Internal Investment and financing of a firm.
There are two widely applied approaches, viz.

(a) Profit maximization and

(b) Wealth maximization.

The term 'objective' is used in the sense of an object, a goal or decision

criterion. The three decisions - Investment decision, financing decision and dividend
policy decision are guided by the objective. Therefore, what is relevant - is not the
over-all objective but an operationally useful criterion: It should also be noted that the
term objective provides a normative framework. Therefore, a firm should try to
achieve and on policies which should be followed so that certain goals are to be
achieved. It should be noted that the firms do not necessarily follow them.

Profit Maximization as a Decision Criterion

Profit maximization is considered as the goal of financial management. In this
approach, actions that Increase profits should be undertaken and the actions that
decrease the profits are avoided. Thus, the Investment, financing and dividend also be
noted that the term objective provides a normative framework decisions should be
oriented to the maximization of profits. The term 'profit' is used in two senses. In one
sense it is used as an owner-oriented.
 `In this concept it refers to the amount and share of national Income that is
paid to the owners of business. The second way is an operational concept i.e.
profitability.

This concept signifies economic efficiency. It means profitability refers to a

situation where output exceeds Input. It means, the value created by the use of
resources is greater that the Input resources. Thus in all the decisions, one test is used
I.e. select asset, projects and decisions that are profitable and reject those which are
not profitable. The profit maximization criterion is criticized on several grounds.
Firstly, the reasons for the opposition that are based on misapprehensions about the
workability and fairness of the private enterprise itself. Secondly, profit maximization
suffers from the difficulty of applying this criterion in the actual real-world situations.
The term 'objective' refers to an explicit operational guide for the internal investment
and financing of a firm and not the overall business operations. We shall now discuss
the limitations of profit maximization objective of financial management.

1) Ambiguity:
The term 'profit maximization' as a criterion for financial decision is vague and
ambiguous concept. It lacks precise connotation. The term 'profit' is amenable to
different interpretations by different people. For example, profit may be long-term or
short-term. It may be total profit or rate of profit. It may be net profit before tax or net
profit after tax. It may be return on total capital employed or total assets or
shareholders equity and so on.

2) Timing of Benefits:
Another technical objection to the profit maximization criterion is that It
Ignores the differences in the time pattern of the benefits received from Investment
proposals or courses of action. When the profitability is worked out the bigger the
better principle is adopted as the decision is based on the total benefits received over
the working life of the asset, Irrespective of when they were received. The following
table can be considered to explain this limitation.

8
3) Quality of Benefits
Another Important technical limitation of profit maximization criterion is that
it ignores the quality aspects of benefits which are associated with the financial
course of action. The term 'quality' means the degree of certainty associated with
which benefits can be expected. Therefore, the more certain the expected return, the
higher the quality of benefits. As against this, the more uncertain or fluctuating the
expected benefits, the lower the quality of benefits.
The profit maximization criterion is not appropriate and suitable as an
operational objective. It is unsuitable and inappropriate as an operational objective of
Investment financing and dividend decisions of a firm. It is vague and ambiguous. It
ignores important dimensions of financial analysis viz. risk and time value of money.
An appropriate operational decision criterion for financial management should
possess the following quality.
a) It should be precise and exact.
b) It should be based on bigger the better principle.
c) It should consider both quantity and quality dimensions of benefits.
d) It should recognize time value of money.

Wealth Maximization Decision Criterion

Wealth maximization decision criterion is also known as Value Maximization
or Net Present-Worth maximization. In the current academic literature value
maximization is widely accepted as an appropriate operational decision criterion for
financial management decision. It removes the technical limitations of the profit
maximization criterion. It possesses the three requirements of a suitable operational
objective of financial courses of action. These three features are exactness, quality of
benefits and the time value of money.

1) Exactness:
The value of an asset should be determined In terms of returns it can produce.
Thus, the worth of a course of action should be valued In terms of the returns less the
cost of undertaking the particular course of action.
 Important element in computing the value of a financial course of action is the
exactness in computing the benefits associated with the course of action. The wealth
maximization criterion is based on cash flows generated and not on accounting profit.
The computation of cash inflows and cash outflows is precise. As against this the
computation of accounting is not exact.

2) Quality and Quantity and Benefit and Time Value of Money:

The second feature of wealth maximization criterion is that. It considers both
the quality and quantity dimensions of benefits. Moreover, it also incorporates the
time value of money. As stated earlier the quality of benefits refers to certainty with
which benefits are received In future.

The more certain the expected cash inflows the better the quality of benefits
and higher the value. On the contrary the less certain the flows the lower the quality
and hence, value of benefits. It should also be noted that money has time value. It
should also be noted that benefits received in earlier years should be valued highly
than benefits received later.

The operational implication of the uncertainty and timing dimensions of the

benefits associated with a financial decision is that adjustments need to be made in the
cash flow pattern. It should be made to incorporate risk and to make an allowance for
differences in the timing of benefits. Net present value maximization is superior to the
profit maximization as an operational objective.

It involves a comparison of value of cost. The action that has a discounted

value reflecting both time and risk that exceeds cost is said to create value. Such
actions are to be undertaken. Contrary to this actions with less value than cost, reduce
wealth should be rejected. It is for these reasons that the Net Present Value
Maximization is superior to the profit maximization as an operational objective.
Profit Maximization Vs Wealth Maximization
Profit Maximization
It is one of the basic objectives of financial management. Profit maximization
aims at improving profitability, maintaining the stability and reducing losses and
inefficiencies.

Profit in this context can be seen in 2 senses.

1. Profit maximization for the owner.
2. Profit maximization is for others.

Normally profit is linked with efficiency and so it is the test of efficiency.

However this concept has certain limitations like ambiguity i.e. the term is not clear as
it is nowhere defined, it changes from person to person.Quality of profit - normally
profit is counted in terms of rupees. Normally amount earned is called as profit but it
ignores certain basic ideas like wastage, efficiency, employee skill, employee’s
turnover, product mix, manufacturing process, administrative setup.Timing of benefit
/ time value of profit - in inflationary conditions the value of profit will decrease and
hence the profits may not be comparable over a longer period span. Some economists
argue that profit maximization is sometimes leads to unhealthy trends and is harmful
to the society and may result into exploitation, unhealthy competition and taking
undue advantage of the position.

WEALTH MAXIMIZATION

One of the traditional approaches of financial management , by wealth

maximization we mean the accumulation and creation of wealth , property and assets
over a period of time thus if profit maximization is aimed after taking care , of its
limitations it will lead to wealth maximization in real sense, it is a long term concept
based on the cash flows rather than profits and hence there can be a situation where a
business makes losses every year but there are cash profits because of heavy
depreciation which indirectly suggests heavy investment in fixed assets and that is the
real wealth and it takes into account the time value of money and so is universally
accepted.
IMPORTANT FUNCTIONS OF THE FINANCIAL MANAGER:

The important function of the financial manager in a modern business consists of the
following:
1. Provision of capital: To establish and execute program for the provision of
capital required by the business.
2. Investor relations: to establish and maintain an adequate market for the
company securities and to maintain adequate liaison with investment bankers,
financial analysis and shareholders.
3. Short term financing: To maintain adequate sources for company’s current
borrowing from commercial banks and other lending institutions.
4. Banking and Custody: To maintain banking arrangement, to receive, has
custody of accounts.
5. Credit and collections: to direct the granting of credit and the collection of
accounts due to the company including the supervision of required
arrangements for financing sales such as time payment and leasing plans.
6. Investments: to achieve the company’s funds as required and to establish and
co-ordinate policies for investment in pension and other similar trusts.
7. Insurance: to provide insurance coverage as required.
8. Planning for control: To establish, co-ordinate and administer an adequate
plan for the control of operations

Working Capital Management

Introduction

Working Capital Management is the process of planning and controlling the

level and mix of current assets of the term as well as financing these assets. A firm’s
working capital consists of short term assets such as cash and bank balance,
inventories, receivables (including debtors and bills) and marketable securities. The
working Capital Management refers to the management of the level of all these
individual current assets, the current liabilities and the interrelationships that exist
between them. Thus, it is also known as current asset management.
 Existence of Working Capital is imperative to any firm. The fixed assets
which usually require a large chunk of the total funds can be used at an optimum level
only if supported by a proper Working Capital. Working Capital also involves
investment of funds of the firm. If the Working Capital level is not properly
maintained and managed then it may result in unnecessary blocking of scare resources
of the firm. The Working Capital Management includes the management of the level
of current assets as well as the management of the total working capital. However
each individual current asset has unique characteristics which the financial manager
must consider in deciding how much money should be invested in each of the current
assets.

Sales realization, turnover, return on investment net worth capital, efficient

management of financial resources and deliberate analysis of financial results are
prerequisite for the success of an enterprise. In that working capital management is a
capital for day to day business transactions.

Working Capital is of vital significance to an undertaking in several ways, the

management of which did not receive adequate attention until recently. A proper
study on Working Capital Management results in prevention of miss-management and
miss-utilization of funds. It also helps in functioning of organization in the pre-
planned way of achieving all its goals and objectives. A good plan of Working Capital
also results in prospective of the organization. Even now, the management of fixed
assets is getting precedence over the working capital. In fact, working capital forms a
major chunk of the total capital employed in many a business enterprise.

In some cases of industries like tobacco and trading, it forms more than 70per
cent of the total capital employed. Besides it is this area of financial management that
consumes much of the time of a finance manager. It plays a greater role in earning
maximum return on the investment. That is to say, a firm’s profitability may be
increased as more working capital is added to the fixed capital when the firm does not
exceed cent percent of the capacity.
 In Managing this asset, the finance manager of a company is constantly
engaged in endeavoring to maintain a sound Working Capital position. He is often
times confronted with excess and shortages of Working Capital. While an excessive
working capital leads to unremunerative use of scarce funds; inadequate working
capital interrupts the smooth flow paucity of Working Capital has posed to be the
major contributing factor for business failures. Nothing can be more frustrating for
the operating managers of an enterprise than being compelled to function in a
continuing atmosphere of lack of availability of funds to meet their important and
urgent operating needs.

Like most other financial terms, different writers use the concept “Working
Capital” in different connotations. There are two different concepts of working
Capital, viz., gross concept and net concept. The “Gross working capital” also
known as “current Capital” or ‘Circulating Capital’ is represented by the sum total
of all current assets of the enterprise. On the other hand, the term net working
capitals refer to the difference between current assets and current liabilities.

Both the net and gross concepts of Working Capital have their own uses.
The choose of a particular concepts obviously depends upon the purpose in view. If
the objective is to measure the size and extent to which current assets are being used
to optimize productivity of the concern, the gross concept is more useful. If, on the
other hand, the objective lies in evaluating the liquidity position of an undertaking
the concept of net Working Capital becomes pertinent and preferable.

Working Capital Management is one of key areas of financial decision-

making. It is significant because the management must see that an excessive
investment in current assets should be minimized and at the same time it should
protect the company.
 Problems of stock-outs: the management of fixed assets will be impossible
without maintaining proper level of current assets. Current assets will also
determine the liquidity position of the company. The following are some of the
factors, which explain the importance of Working Capital. The Financial Managers
will devote their largest time for Working Capital Financing, control of current
assets, management or liquidity etc. in view of this, it can be said that effective
Working Capital decisions are also significant for successful management of the
company’s affairs.

Characteristically, current assets present more than 60 percent of the total

assets of many firms’ because they represent a large investment in the various
components of current assets. Further, the investment trends tend to be relatively
volatile. Hence, the financial manager has to show special attention for them. The
Management of Working Capital is particularly important to small firms, because for
a small firm it may be possible to minimize its investment in fixed assets but it cannot
avoid an investment in cash, receivables and inventories. Therefore, current assets are
particularly significant for the financial managers of small firms.

Small companies have relatively limited access to long-term capital market.

Therefore, they have to depend heavily on trade credit and short-term loans from
banks, both of which affect the net working capital. The relationship between growth
in sales and increase in current assets investment are very close and direct. An
increase in sales will accompany a similar rate of immediate increase in additional
inventories and cash balance. All such needs must be financed.

Whatever may be the organization, Working Capital plays an important role,

as the company needs capital for its day to day expenditure. Thousands of
companies fail each year due to poor working capital management practices.
Entrepreneurs often don't account for short term disruptions to cash flow and are
forced to close their operations.
 In simple term, Working Capital is an excess of current assets over the current
liabilities. Good working capital management reveals higher returns of current assets
than the current liabilities to maintain a steady liquidity position of a company.
Otherwise, working capital is a requirement of funds to meet the day to day working
expenses. So a proper way of management of working capital is highly essential to
ensure a dynamic stability of the financial position of an organization. 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 money flow to satisfy both maturing short-term debt and upcoming
operational expenses.

Working capital management deals with maintaining the levels of working

Capital to optimum, because if a concern has inadequate opportunities and if the
working capital is more than required then the concern will lose money in the form of
interest on the blocked funds. Therefore working capital management plays a very
important role in the profitability of a company. And also due to heavy competitions
among different organization’s it is now compulsory to look after working capital. At
Avanthi Fees Limited a substantial part of the total assets are covered by current
assets. However this could be less profitable on the assumption that current assets
generate lesser returns as compared to fixed assets.

But in today’s competition it becomes mandatory to keep large current

assets in form of inventories so as to ensure smooth production an excellent
management of these inventories has to be maintained to strike a balance between all
the inventories required for the production. So, in order to manage all these
inventories and determine the investments in each inventories, the system call for an
excellent management of current assets which is really a tough job as the amount of
inventories required are large in number.
 Here comes the need of Working Capital Management or managing the
investments in current assets. Thus in big companies like Avanthi Feeds Limited it is
not easy at all to implement a good Working Capital Management as it demands
individual attention on its different components. The study of Working Capital
Management is very helpful for the organization to know its liquidity position. The
study is relevant to the organization to know the day to day expenditure. This study is
relevant to give an idea to utilize the current assets. This study is also relevant to the
student as they can use it as a reference. This report will help in conducting further
research. Other researcher can use this project as secondary data Working Capital
Management or simply the management of capital invested in current assets is the
focus of study. So topic is to study Working capital Management of Avanthi Feeds
Limited

Working Capital is the fund invested by a firm in current assets. Now in a cut
throat competitive era where each firm competes with each other to increase their
production and sales, holding of sufficient current assets have become mandatory as
current assets include inventories and raw materials which are required for smooth
production runs. Holding of sufficient current assets will ensure smooth and
uninterrupted production but at the same time, it will consume a lot of Working
Capital. Here creeps the importance and need of efficient working capital
management. Working Capital Management aims at managing capital assets at
optimum level, the level at which it will aid smooth running of production and also it
will involve investment of nominal working Capital in capital assets.

“The problem generally explains that, less attention has been paid to the area of
short-term finance, in particular that of working capital management. Such neglect
might be acceptable were working capital considerations of relatively little
importance to the firm, but effective working capital management has a crucial role to
play in enhancing the profitability and growth of the firm. Indeed, experience shows
that inadequate planning and control of working capital is one of the more common
causes of business failure.”
 For increasing shareholder’s wealth a firm has to analyze the effect of fixed
assets and current assets on its return and risk. Working Capital Management of
current assets.

The management of current assets on the basis of the following points:

1. Current assets are for short period while fixed assets are for more than one
year
2. The large holding of current assets ,especially cash, strengthens liquidity
position but also reduce overall profitability ,and to maintain an optimal level
of liquidity and profitability , risk return trade off is involved holding current
assets
3. Only current assets can be adjusted with sales fluctuating in the short run.
Thus the firm has greater degree of flexibility in managing current assets. The
Management of current assets helps affirm in building a good market
reputation regarding its business and economic conditions.
 OBJECTIVE OF THE STUDY
The main objective of the presents study is to focus on various working capital ratio of
M/S bharath sanchar nigam limited for the last 5 years i.e., from 2012-13 to 2016-17 with a
view to find out the financial performace based on the technique of ratio analysis. The study
is more specified aimed.

 This study attempts to examine the growth and performance of the bharat
sanchar nigam limited.
 To study the efficiency with which the firm is utilizing its various assets
in generating sales.
 To study the extent to which the firm has used its long-term solvency by
borrowing funds.
 This study is made to know whether the current assets and current
liabilities are properly managed.
 To review the structure, original growth and performance of BSNL
during study period.
 To give a brief description of the finance department and conceptual
frame work of the working capital management in BSNL.
 To determine the requirement of working capital to the firm.
 SCOPE OF THE STUDY
Each and every study has its own scope. The project intends to study on
cash management position of Bharat Sanchar Nigam LTD. This study helps to
identify the areas that could be improved, further suggestions will quoted which
the company could use it in the further program enhancing better utilization of
resources.
 The study has been conducted to understand the position of the
organization and it's functional areas and operations and industry.
 In financial analyses a ratio is used as a benchmark for evaluating the
financial position and performance of firm.
 The absolute accounting figures reporting in the financial statements
don’t provide a meaning full understanding of the performance and
financial position of a firm.
 An accounting figure conveys meaning when it is related to some other
relevant information.
 NEED FOR THE STUDY

Thinking practically the main concern is of the influence of external

environment on business, providing a modern dimension to business
management. They find solution for many problems in the aspect of financial
analysis. Financial analysis established inter relationship that exists among.
The different items appeared in the financial statements. Which are effectively
helpful to describe the company’s statues, control of sound liquidity and
leverage position.

 It focuses on company’s relative performance in sales growth margins

and assets management.
 It is a simple tool where by a company can make its internal audit to
evaluate internal strengths and weaknesses of integral part of the
strategic planning.
 PERIOD OF STUDY
This study has been conducted by considering the last 5 years data collected
annual reports of BHARAT SANCHAR NIGAM LIMITED. That is from
2013-2014 to 2017-2018.

.
 METHODOLOGY

Every project work is based on certain methodology, which is a way to

systematically solve the problem or attain its objectives. It is a very important
guideline and lead to completion of any project work through observation, data
collection and data analysis.
According to Clifford Woody, “Research Methodology comprises of defining
& redefining problems, collecting, organizing & evaluating data, making
deductions & researching to conclusions.”

Accordingly, the methodology used in the project is as follows: -

 Defining the objectives of the study,
 Framing of questionnaire keeping objectives in mind (considering the
objectives)
 Feedback from the employees
 Analysis of feedback
 Conclusion , findings and suggestions.
Sources of Data Collection:
Research will be based on two sources:
1. Primary data
2. Secondary data

1) Primary Data:
Survey: Primary data was collected by departmental survey for BSNL.
Data is collected through personal interviews and discussion with finance
executive.
Data is collected through personal interviews and discussion with material
planning –Deputy Manager joint accounts officer (JAO’S).
2) Secondary Data:
Secondary data will consist of different literatures like books which are
published, articles, internet, the company manuals and websites of company-
www.bsnl.com.
In order to reach relevant conclusion, research work needed to be designed in a
proper way.

This research methodology also includes:-

o Familiarization with the concept of finance and its various merits,
demerits.
o Thorough study of the information collected.
o Conclusions based on findings.
o From the annual reports maintained by the company
o Data collected from company’s website
o Books and journals pertaining to the topic
www.financeindia.org
www.bsnl.co.in
www.apbsnl.co.in
 LIMITATIONS OF STUDY
The following are the limitations for the study

 There is very less scope of gathering the confidential data as we are only
vocational trainees.
 During the project period as some executives were busy with their work,
they could not afford to give full information.
 The analysis and interpretation of collected data is restricted to necessary
information.
 Since the procedure and policies of the company will not allow to
disclose confidential financial information. The project has to be
completed with available data given.
 The period of study that is 8 weeks is not enough to conduct detailed
study of the project.
 There was no scope of gathering current information, as the auditing has
not been done by the time of project work.
CHAPTER 2
 INDUSTRY PROFILE

History of telecommunications industry started in 1851 when the first

operational land were lines were laid by the government near Calcutta (seat of
British power). Telephone services was introduced in Indian in 1881. In 1883
telephone services were merged with the postal system. Indian radio telegraph
company (IRT) was formed in 1923. After independence in 1947 ; all the
foreign telecommunication companies were nationalized to form the posts,
telephone and telegraph (PTT) a monopoly run by the government’s ministry of
communications. Telecom sector was considered as a strategic services and the
government-owned companies were created: the vides Sanchar Nigam Limited
(VSNL) for international telecommunications and Mahan agar Telephone
limited (MTNL) for service in metropolitan areas.
In 1990s, telecommunication sector benefited from the general opening up of
the economy. Also, example of telecom revolution in many other countries,
which resulted in better quality of service and lower tariffs, led India policy
makers to initiate a change process finally resulting in opening up of telecom
services sector of the first attempt to give a comprehensive road map for the
india (TRAI) was crested. TRAI was formed to act as a regulator to facilitate
the growth of telecome sector.
Telecommunication sector in India can be divided into 2 segments:
Fixed services provider (FSPs)
Cellular services However, private services focus on the business corporate, and
offer reliable, high-end services, such as leased lines, ISDN , closed under group
and video conferencing. Cellular services can be further divided into two
categories : global system for mobile communication (GSM) and code division
multiple access (CDMA).
 The GSM sector is dominated by airtel, Vodafone-hutch, and idea cellular,
while the CDMS sector us dominated by reliance and Tata Indicom. Opening
up of international and domestic long distance telephony services are the major
role drivers for cellular industry. Cellular operators get substantial revenue
from these services, and compensate them for reduction in tariffs on airtime,
which along with rental was the main source of revenue. The reduction un
tariffs for airtime, national long distance international long distance, and
handset raises has driven demand. BSNL has launched global audio
conferencing services in association with British telecom (BT). It is easy to
use, reservation –less conferencing service aimed at Enterprise customer has to
subscribe the service by filling a form as application. There are no charges for
services subscription. Charges are only for the only usage of the service.
Presently following two services are being offered by BSNL.
The telecom industry has been divided into two major segments, that is,
fixed and wireless cellular services for this report. Besides, internet servies,
VAS, PMRTS and VAST also have been discussed in brief in the report.
In today’s information age, the telecommunication industry has a vital role
to play. Considered as the backbone of industrial and economic development,
the industry has been aiding delivery of voice and data services at rapidly
increasing speeds, and thus, has been revolutionizing human communication.
Although the Indian telecom industry is one of the faster-growing industries
in the world, the current teledensity or telecom penetration is extremely low
when compared with global standards. India’s teledensity of 36.98% inFY09 is
amongst the lowest in the world. Further, the urban, teledensity is over 80%,
while rural teledensity is less than 20% and this gap is increasing. As majority
of the population resides in rural areas, it is important that the government takes
certain policy initiatives, which include the creation of the universal service
obligation fund, for improving rural telephony. These measures are expected to
improve the rural tele-density and bridge the rural-urban gap in tele-density.
INTRODUCTION TO EVOLUTION
India telecom sector is more than 165 years old. Telecommunications was
first introduction in india in 1851 when the first operational land lines were laid
by the government near Kolkata, although telephone services were formally
introduced in india much later in 1881. Further,in 1883, telephone services
were merged with the postal system. In 1947 after india attained independence,
all foreign telecommunication companies were nationalized to form the posts,
telephone and telegraph (PPT) a body that was governed by the ministry of
communication. The india telecom sector was entirely under government
ownership until 1984, when the private sector was allowed in
telecommunication equipment manufacturing only. The government
concertized its earlier efforts towards developing R&D in the sector by setting
up an autonomous body- centre for development of telemetric (C-DOT) in 1984
to development state-of-the-art telecommunication technology to meet the
growing needs of the Indian telecommunication network. The actual evolution
of the industry started after the government separated the department of post and
telegraph in 1985 by setting up the department of posts and telegraph in 1985 by
setting up the department of posts and the department of telecommunication
(DoT).
The entire evolution of the telecom industry can be classified into three
distinct phases.
Phase I- pre –Liberalization Era (1980-89)
Phase II – Post Liberation Era (1990-99)
Phase III – Post 2000

Unit the late 90’s the government of india held a monopoly on all types of
communications as a result of the telegraph Act of 1885. As mentioned earlier
in the chapter, until the industry was liberalized in the early nineties, it was a
heavily government-controlled and small-sized market; government policies
have played a key role in shaping the structure and size of the telecom industry
in india.
 As result, the india telecom market I one of the most liberalized market in
the world with private participation in almost all of the its segments. The new
telecom policy (NTP-99) provided the much needed impetus to the growth of
this industry and set the trend for liberalization in the industry.

CURRENT STATUS:
Globalization has made telecommunication an integral part of the
infrastructure of the Indian economy. The telecom sector in india has developed
as a result of progressive regulatory regime.
According to the TRAI, the total gross revenue of the india telecom services
industry was Rs 1,524 bn fin FY09 up from Rs1,291 bn in FY08 registering a
growth of 18.03%over FY08 and its subscribers base grew by 43% over FY08
to touch 429.70 mn subscribers in FY09.
The telecom sector in india experienced a rapid growth over the past decade
on account of regulatory liberalization, structural reforms and competition,
marking telecom one of the major catalysts in india’s growth story. However,
much of this growth can be attributed to the unprecedented growth can be
attributed to the unprecedented growth in mobile telephony as the number of
mobile subscribers grew at an astounding rate from 10 million in 2002 to 392
million in 2009. Besides, the growth in the services in the service and IT and
ITeS sector also increased the prominence of the telecom industry in India.
Telecom has emerged as a key infrastructure for economic and consumer
growth because of its multiplier effect and the fact that it is beneficial to trade in
other industries. The contribution of the sector to GDP has been increasing
gradually.
Telecom is one of the fastest-growing industries in india; on an average the
industry added 8 million wireless subscribers every month in FY08. The
government had set a target of 500 million telecom connection by 2010.
 However, according to the TRAI, the total subscriber base in the industry
crossed the 2009, which took india to the second position in terms of wireless
network in the world next only to china. Prior to liberalization, the telecom
sector was monopolized by the public sector and recorded marginal growth; in
fact, during 1948-1998, thr incremental teledensity in the country was just
1.92%. however, the introduction of NTP’99 accelerated the growth of the
sector and the teledensity increased from 2.33 in 1999 to 36.98 in 2009;
however, much of this growth was brought about by the NTP-99 policy changes
such as migration from fixed license fee to revenue sharing regime and cost-
oriented telecom tariffs. From 2003 onwards the government has taken certain
initiative such as unified access licensing regime, reduced access deficit,
introduction of calling party pays (CPP) and revenue sharing regime in ADC
that has provided further impetus to the sector.
The india telecom industry is characterized is characterized with intense
competition, and continuous price wars. Currently, there are around a dozen
telecom service providers who operate in the wired and wireless segment. The
government has been periodically implementing suitable fiscal and promotional
policies to boost domestic demand and to create volumes for the industry. The
Indian telecom industry has immense growth potential as the teledenssity in the
country is just 36 as compared with 60 in the US, 102 in the UK and 58 in
Canada. The wireless segment growth has played a dominant role in taking the
teledensity to the current levels. In the next few years, the industry is poised to
grow further; in fact, it has already entered a consolidation phase as foreign
players are struggling to acquire a pie in this dynamic industry.
 ROLE IN INDIA’S DEVELOPMENT
Contribution to GDP
According to the UNCTAD, there is a direct correlation between the growth
in mobile teledensity and the growth in GDP per capita in developing countries,
which tend to have a high percentage of rural population. The share of the
telecom services industry in the total GDP has been rising over the past few
years.

Employment
The Indian telecommunication industry employs over 400,000 direct
employees and about 85% of these employees are from government –owned
companies. The ration of number of subscribers to employees, an indication of
efficiency and profitability, is much higher for private companies than for
government companies.
OUTLOOK
The telecom industry in india has experienced exponential growth over the
past few years and has been an important contributor to economic growth;
however, the cut-throat competition and intense tariff wars have had a negative
impact on the revenue of players. Despite the challenges, the Indian telecom
industry will thrive because of the immense potential in terms of new users.
India is one of the most-attractive telecom markets because it is still one of the
lowest penetrated markets. The government is keen on developing rural
telecom infrastructure and is also set to roll out next generation or 3G services
in the country. Operators are on an expansion mode and are investing heavily
on telecom infrastructure. Foreign telecom companies are acquiring
considerable stakes in Indian companies. Burgeoning middle class and
increasing spending power, the government’s thrust on increasing rural telecom
coverage, favourable investment climate and positive reforms will ensure that
inida’s high potential is indeed realized.
 COMPANY PROFILE

TELE-COMMUNICATIONS IN INDIA:
India's telecommunication network is the second largest in the world
based on the total number of telephone users (both fixed and mobile phone). It
has one of the lowest call tariffs in the world enabled by the mega telephone
networks and hyper- competition among them. It has the world's third-largest
Internet user-base. According to the Department of Telecommunication of India
(DoT), as on March 2015, India has 302.35 million internet connections. Major
sectors of the Indian telecommunication industry are telephony, internet and
television broadcast Industry in the country which is in an on-going process of
transforming into next generation network, employs an extensive system of
modern network elements such as digital telephone exchanges, mobile
switching centers, media gateways and signaling gateways at the core,
interconnected by a wide variety of transmission systems using fiber-optics or
microwave radio relay networks. Telecommunication in India has greatly been
supported by the INSAT system of the country, one of the largest domestic
satellite systems in the world. India possesses a diversified communications
system, which links all parts of the country by telephone, Internet, radio,
television and satellite. Indian telecom industry underwent a high pace of
market liberalization and growth since the 1990s and now has become the
world's most competitive and one of the fastest growing telecom markets.
MAJOR TELECOM SERVICE PROVIDER IN TELECOM INDUSTRY:
 BHARATI AIRTEL
 IDEA CELLULER
 BSNL
 TATA DOCOMO
 RELIANCE COMMUNICATIONS
 AIRCEL
 VODAFONE INDIA
 BSNL: BHARAT SANCHAR NIGAM LIMITED
 Building Bharat Sanchar Nigam Ltd. was incorporated on 15th September,
2000 . It took over the business of providing of telecom services and network
management from the erstwhile Central Government Departments of Telecom
Services (DTS) and Telecom Operations (DTO), with effect from 1st October,
2000 on going concern basis. It is one of the largest & leading public sector
units providing comprehensive range of telecom services in India.
BSNL has installed Quality Telecom Network in the country & now
focusing on improving it, expanding the network, introducing new telecom
services with ICT applications in villages & winning customer's confidence.
Today, it has about 36.42 million line basic telephone capacity, 7.13 million
WLL capacity, 95.96 million GSM capacity, 34,727 fixed exchanges, 1,17,090
GSM BTSs, 9,594 CDMA Towers, 102 Satellite Stations, 7,73,976 RKm. of
OFC, 4751 RKm. of microwave network connecting 646 districts,
4519cities/towns & 6.25 lakhs villages .
BSNL is the only service provider, making focused efforts & planned
initiatives to bridge the rural-urban digital divide in 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 the country & operates across India except
New Delhi & Mumbai.
 Whether it is inaccessible areas of Siachen glacier or North-Eastern regions
of the country, BSNL serves its customers with a wide bouquet of telecom
services namely Wire line, CDMA mobile, GSM mobile, Internet, Broadband,
Carrier service, MPLS-VPN, VSAT, VoIP, IN Services, FTTH, etc.
BSNL is one of major service provider in its license area. The company
offers wide ranging & most transparent tariff schemes designed to suit every
customer. BSNL has 94.36 million cellular & 1.02 million WLL customers as
on 31.10.2016. 3G Facility has been given to all 2G connections of BSNL. In
basic services, BSNL is miles ahead of its rivals, with 13.88 million wireline
phone subscribers i.e. 56.96% share of the wire-line subscriber base.
BSNL has set up a world class multi-gigabit, multi-protocol convergent IP
infrastructure that provides convergent services like voice, data & video through
the same Backbone & Broadband Access Network. At present there are 21.86
million broadband customers including both wireline & wireless broadband.
The company has vast experience in planning, installation, network integration
& maintenance of switching & transmission networks & also has a world class
ISO 9000 certified Telecom Training Institute.

During the 2015-16, turnover of BSNL is around Rs. 32,919 Crores.

VISION:
Be the leading telecom service provider in India with global presence.
Create a customer focused organization with excellence in customer care, sales
and marketing. Leverage technology to provide affordable and innovative
telecom. Services/products across customer segments.

MISSION:
Be the leading telecom service provider in India with global presence.
Becoming the most trusted, preferred and admired telecom brand Providing
reliable telecom services that are value for money Generating value for all
stakeholders – employees, shareholders, vendors & business associates.
 Excellence in customer service -friendly, reliable, time bound convenient
and courteous Service Offering differentiated products/services tailored to
different service segments Developing a marketing and sales culture that is
responsive to customer needs To explore International markets for Global
presence Maximizing return on existing assets with sustained focus on
profitability Changing policies and processes to enable transparent, quick and
efficient decision making.

OBJECTIVES OF ORGANIZATION:
To increasing sales revenue with focus on subscriber retention & acquisition
by way of strengthening sales & marketing, quality of service and customer
delivery Accelerate the pace of expansion of mobile & data services with up-
gradation of technology Increasing BSNL visibility in urban, sub-urban and
rural areas Developing sales and marketing team with attitude towards
customer care.
To improve customer care by reducing fault rate, upgrading Customer
service Centres (CSCs) and introducing convergent billing Providing a
conducive work environment with strong focus on performance to enhance
customer delight towards BSNL services Leverage data services to increase
BSNL’s customer’s base & revenues by providing higher bandwidths
capabilities for wire line and wireless broadband customers To strengthen
company’s finances by gainful utilization of its assets through sharing /
monetization of existing infrastructure like land, building and sharing of passive
infrastructure like towers etc. Creating Wi-Fi Hot Spots and replacing Legacy
wire line exchanges by Next Generation Network.
 Expanding the reach of fiber network near to the customer premises
particularly in apartment complexes through FTTH in order to meet the ever
increasing bandwidth requirement for both data & video applications To
leverage the existing infrastructure of BSNL thereby contributing towards
nation building by facilitating the execution of government programs and
initiatives viz. National Optical Fiber Network (NOFN), Network for Spectrum
(NFS), and dwelling on Smart City concept To improve productivity by training
and skill development and redeployment of legacy manpower Developing
knowledge pool exposed to latest technological advancements To explore
opportunities in international telecom in developing markets To become
preferred service provider to the Government for reliable and secure service
Network and to serve National security interests.

Policy of Finance:
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. Among the principles on which emphasis is
generally laid are the following:
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. The expenditure
should be prima-facie more that the occasion demands. No authority should
exercise its powers of sanctioning expenditure to pass an order which be directly
or indirectly to its own advantages. Expenditure from public 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 the expenditure is in
pursuance of a recognised policy or custom.
 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. 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.
Whenever called for, the concerned authority must place on record in precise
terms, the considerations which weighed with it while talking the procurement
decision. Phone Plus Services BSNL offers a host of phone plus services,
converting the basic telephones to a sophisticated tool which can be used for a
variety of application. All the phone plus services are available at free of cost
from 22nd January 2003 onwards.
1. Dynamic Locking
2. Call Waiting
3. Abbreviate using
4. HOT Line
5. Call transfer/ Call forward.
6. Automatic wake up/ reminder call
7. Call hunting service
8. Caller Line Identification Presentation [CLIP].
9. Phone Bell
10. Call Conferencing
11. Voice based value added Services
BSNL AP CIRCLE STRUCTURE
The AP circle of BSNL is headed by CGM. Under him there are PGM’s and
GM’s. The AP Circle is divided into 22 SSA’s.

CGM,AP CIRCLE
EEEECIRCLECIRCL
E
GM(F)
PGM.HD PGM(O).CO

CE
GM(BD)CO GMTD.MDK
GMTD.ADB (CIVIL)
GM(P)

GM(P)CO GMTD.NGD PCE(ELEC)

GMTD.ATP
GM(S)

GMTD.CTR GMTD.NL CHIEF

GM(NC)CO ATCHT
GM(N)
GMTD.NZB
GMTD.CDP
GM(W) GM(MKTG) DGM(VIG)
GMTD.PKM

GMTD.EG
GM(TT)CO
GM(C) GMTD.SKL

GMTD.GTR
GM CELLONE
GM(F) (OP) GMTD.VM
GMTD.KAA
GMTD.VZM
GM CELLONE
GMTD.KHM
(MKTG)
GMTD.WG
GMTD.MBN

GMTD.KNL
Diagramatically we can represent in the following manner
ABD adhilabad
ATP Ananthapur
CTR Chittor
CDP cuddapah
EG East Godavari
GTR Guntur
HYD Hyderabad
KAA Karimnagar
KHM Kammam
KRI Krishna
KNM Kurnool
MBN Mahbubnagar
MDK Medhak
NGD Nalgonda
NL Nellore
NZB Nizamabad
PKM Prakasham
SKL Srikakulam
VSP Visakapatnam
VZM Vizianagaram
WL Warangal
WG West godavari
BSNL SSA LEVEL STRUCTURE (RAJAHMUNDRY):
The basic accounting unit in BSNL is SSA.As of now most of these SSA’s
are headed by an officer of telecom engineering service in rank of PGM /GM .In
addition to the other engineering officers he is supported by a finance officer of
the rank of GM/DGM finance as the case may be who is designated as IFA.
Diagramatically we can represent to the following manner.

GM

IFA(At a level
of DGM)

CAO CAO (TR- CAO(TR-KKD) CAO CAO (Dot Soft)

(PLG) KKD) (Finance)

AO(PLG) AO (CASH)
AO(TR-I) AO (Dot
AO(TR-I) AO (PAY)
AO (TR-II) Soft)
AO(TR- AO (TA&D)
AO (TR-III) Ao ( OPC)
Rural)

JAO (DOT SOFT)

JAO (TR) JAO (TA& CASH) JAO (Task force)
JAO (TR-I) JAO (TR-R) JAO (PAY-I) JAO(OPC)-I
JA0(PLG) JAO (TR-II) JAO (OPC) JAO (OPC)-II
JAO (PAY-II)
JAO(ASSETS) JAO (TR-III) JAO (PAY-III)
 KEY PERSONS (RAJAHMUNDRY SSA)

DESIGNATION NAME OF THE OFFICER

GENERAL MANAGER SRI.G.RAGHAVENDRA RAO
IFA AT DGM LEVEL SRI.G.V.RAMA KRISHNA
CAO PLANNING SRI.K.M.MANILAL
CAO FINANCE SRI.B.K.VENKATESWARLU
CAO TR-RAJAHMUNDRY SRI.K.M.MANILAL
CAO DOT SOFT SRI.ACHARYULU
CAOTR-KAKINADA SRI.BHAGEERADHA RAO
AO (PLANNING) SRI.T.NAGA RAJU
AO (CASH) SMT.GIRIJA
AO (CASH RECIEPTS) SRI.Y.VENKATESWAR RAO
AO (PAY) SRI.K.B.KRISHNA
AO (TA & CLAIMS) SRI.P.B.G.TILAK
AO (DOT SOFT) SRI.RAJU
AO (OPC) SRI.G.V.S.R.K.MURTHY
AO (TR 1) SRI.ASHRAFF
AO (TR 3) SMT.N.V.B.SRI DEVI
JAO (ASSETS) SRI.B.AJAY BABU
JAO (PLANNING) SRI.G.A.K.PRASAD
JAO (CASH) SMT.K.MADHAVI
JAO (CASH RECIEPTS) SRI.E.V RAMANA MURTHY
JAO (PAY 2) SRI.T.S.SRINIVASA RAO
JAO (CLAIMS) SRI.S.RADHA KRISHNA
JAO (TR 1) SMT.G.RATNAVATHI
JAO (TR 2) SRI.B.SUNDARA RAO
JAO (OPC 2) SRI.V.V.R. SATYA NARAYANA
 THEORETICAL FRAMEWORK
WORKING CAPITAL MANAGEMENT

Working Capital is the life blood and nerve centre of a business. Just as
circulation of blood is essential in the human body for maintaining life, Working
Capital is very essential to maintain the smooth running of a business. No business
can run successfully without an adequate amount of Working Capital.

There is operative aspects of working capital i.e. current assets which is known
as funds also employed to the business process from the gross working capital Current
asset comprises cash receivables, inventories, marketable securities held as short term
investment and other items nearer to cash or equivalent to cash. Working capital
comes into business operation when actual operation takes place generally the
requirement of quantum of working capital is determined by the level of production
which depends upon the management attitude towards risk and the factors which
influence the amount of cash, inventories, receivables and other current assets
required to support given volume of production.

Working Capital Management as usually concerned with administration of the

current assets as well as current liabilities. The area includes the requirement of funds
from various resources and to utilize them in all result oriented manner. It can be
stated without exaggeration that effective Working Capital Management is the short
requirement of long term success. The importance of Working Capital Management is
indisputable; Business liability relies on its ability to effective management of
receivables, inventory, and payables. By minimizing the amount of funds tied up in
current assets. Firms are able to reduce financing costs or increase the funds available
for expansion. Many managerial efforts are put into bringing non-optimal level of
current assets and liabilities back towards their optimal levels.
MEANING OF WORKING CAPITAL

Working Capital means the funds (i.e.; capital) available and used for day to day
operations (i.e.; working) of an enterprise. It consists broadly of that portion of assets
of a business which are used in or related to its current operations. It refers to funds
which are used during an accounting period to generate a current income of a type
which is consistent with major purpose of a firm existence.

DEFINITIONS
Many scholars’ gives many definitions regarding term working capital some of
these are given below.

According to Weston & Brigham

“Working Capital refers to a firm’s investment in short-term assets cash, short
term securities, accounts receivables and inventories.

Mead Mallott & Field

“Working capital means current assets”.

BONNERILLE
“Any acquisition of funds which increases the current assets increases
working capital for they are one and the same”. Positive Working Capital means that
the company is able to pay off its short-term liabilities companies that have a lot of
working capital will be more successful since they can expand and improve their
operations. Negative Working Capital means that a company currently is unable to
meet its short-term liabilities with its current assets. . Companies with negative
working capital may lack the funds necessary for growth. Working Capital
Management is the process of planning and controlling the level and mix of current
assets of the firm as well as financing these assets. A firm’s Working Capital consists
of short term assets such as cash and bank balance, inventories, receivables (Including
debtors and bills) and marketable securities. The Working Capital Management refers
to the Management of the level of all these individual current assets, the current
liabilities and the interrelationships that exist between them. Thus, it is also known as
current asset management.
 Existence of working capital is imperative to any firm. The fixed assets which
usually require a large clunk of the total funds can be used at an optimum level only if
supported by a proper Working Capital. Working Capital also involves investment of
funds of the firm. If the working Capital level is not properly maintained and
managed then it may result in unnecessary blocking of scare resources of the firm.
The Working Capital Management includes the management of the level of current
assets as well as the management of the total Working Capital. However each
individual current asset has unique characteristics which the financial manager must
consider in deciding how much money should be invested in each of the current
assets. Sales realization, turnover, return on investment net worth of capital, efficient
management of financial resources and deliberate analysis of financial results are
prerequisite for the success of an enterprise. In that working capital management is a
capital for day business transactions.

Concept of Working Capital Management

There are two concepts of working capital viz. quantitative and qualitative.
Some people also define the two concepts as gross concept and net concept.
According to quantitative concept, the amount of working capital refers to ‘total of
current assets’. What we call current assets? Smith called, ‘circulating capital’.
Current assets are considered to be gross working capital in this concept. The
qualitative concept gives an idea regarding source of financing capital. According to
qualitative concept the amount of working capital refers to “excess of current assets
over current liabilities.”

The excess of current assets over current liabilities is termed as ‘Net working
capital’. In this concept “Net working capital” represents the amount of current assets
which would remain if all current liabilities were paid. Both the concepts of working
capital have their own points of importance. “If the objectives is to measure the size
and extent to which current assets are being used, ‘Gross concept’ is useful; whereas
in evaluating the liquidity position of an undertaking ‘Net concept’ becomes pertinent
and preferable. It is necessary to understand the meaning of current assets and current
liabilities for learning the meaning of working capital, which is explained below.
Current Assets
It is rightly observed that “Current assets have a short life span. These types of
assets are engaged in current operation of a business and normally used for short–
term operations of the firm during an accounting period i.e. within twelve months.
The two important characteristics of Such assets are, (i) short life span, and (ii) swift
transformation Into other form of assets. Cash balance may be held idle for a week or
two, account receivable may have a life span of 30 to 60 days, and inventories may be
held for 30 to 100 days.” Fitzgerald defined current assets as, “cash and other assets
which are expected to be converted in to cash in the ordinary course of business
within one year or within such longer period as constitutes the normal operating cycle
of a business.”

Current Liabilities
The firm creates a Current Liability towards creditors (sellers) from whom it has
purchased raw materials on credit. This liability is also known as accounts payable
and shown in the balance sheet till the payment has been made to the creditors. The
claims or obligations which are normally expected to mature for payment within an
accounting cycle are known as current liabilities. These can be defined as “those
liabilities where liquidation is reasonably expected to require the use of existing
resources properly classifiable as current assets, or the creation of other current assets,
Or the creation of other current Liabilities.

Circulating Capital

Working capital is also known as ‘circulating capital or current capital.’ “The

use of the term circulating capital instead of working capital indicates
Importance of Working Capital Management

The importance of working capital management stems from the following reasons:

1. Investment in current assets represents a substantial portion of the total

investment.
2. Investments in current asset and the level of current liabilities have to be
geared quickly to change in sales, which helps to expand volume of business.
3. Gives a company the ability to meet its current liabilities
4. Take advantage of financial opportunities as they arise.

A firm needs WC because the production, sales and cash flows are not
instantaneous. The firm needs cash to purchase raw materials and pay expenses, as
there may not be perfect matching between cash inflows and outflows. Cash may also
be held up to meet future exigencies. The stocks of raw materials are kept in order to
ensure smooth production and to protect against the risk of non-availability of raw
materials. Also stock of finished goods has to be maintained to meet the demand of
customers on continuous basis and sudden demand of some customers. Businessmen
today try to keep minimum possible stock as it leads to blockage of capital. Goods are
sold on credit for competitive reasons. Thus, an adequate amount of funds has to be
invested in current assets for a smooth and uninterrupted production and sales
process. Because of the circulating nature of current assets it is sometimes called
circulating capital. Different industries have different optimum working capital
profiles, reflecting their methods of doing business and what they are selling.

• Businesses with a lot of cash sales and few credit sales should have minimal trade
debtors. Supermarkets are good examples of such businesses;

• Businesses that exist to trade in completed products will only have finished goods in
stock. Compare this with manufacturers who will also have to maintain stocks of raw
materials and work-in-progress.

• Some finished goods, notably foodstuffs, have to be sold within a limited period
because of their perishable nature.
• Larger companies may be able to use their bargaining strength as customers to
obtain more favorable, extended credit terms from suppliers. By contrast, smaller
companies, particularly those that have recently started trading (and do not have a
track record of credit worthiness) may be required to pay their suppliers immediately.
• Some businesses will receive their monies at certain times of the year, although they
may incur expenses throughout the year at a fairly consistent level. This is often
known as “seasonality” of cash flow. For example, travel agents have peak sales in
the weeks immediately following Christmas

Working Capital Needs Also Fluctuate During the Year

The amount of funds tied up in working capital would not typically be

a constant figure throughout the year.

Only in the most unusual of businesses would there be a constant need for
working capital funding. For most businesses there would be weekly fluctuations.

Many businesses operate in industries that have seasonal changes in demand. This
means that sales, stocks, debtors, etc. would be at higher levels at some
predictable times of the year than at others.

The more permanent needs (fixed assets and the fixed element of working
capital) should be financed from fairly permanent sources (e.g. equity and loan
stocks); the fluctuating element should be financed from a short-term source (e.g.
a bank overdraft), which can be drawn on and repaid
45
Objectives of Working Capital Management

Effective management of working capital is means of accomplishing the firm’s goal of

adequate liquidity. It is concerned with the administration of current assets and current
liabilities. It has the main following objectives-

1. To maximize profit of the firm.

2. To help in timely payment of bills.
3. To maintain sufficient current assets.
4. To ensure adequate liquidity of the firms.
5. It protects the solvency of the firm.
6. To discharge current liabilities.
7. To increase the value of the firm.
8. To minimize the risk of business.

THE NEED FOR THE WORKING CAPITAL

The need for working capital arises due to the time gap between production and
realization of cash from sales. Working capital is must for every business for purchasing
raw-materials, semi finished goods, stores & spares etc and the following purposes.

1. To purchase raw materials, spare parts and other component.

A manufacturing firm needs raw-materials and other components parts for the
purpose of converting them in to final products, for this purpose it requires
working capital. Trading concern requires less working capital.

2. To hold finished and spare parts etc.

Stock represents current asset. A firm that can afford to maintain stock of required
finished goods, work in progress & spares in required quantities can operate
successfully. So for that adequate quantity of working capital is required.

46
 3. To pay selling & distribution expenses.
Working capital is required to pay selling & distribution expenses. It includes
cost of packing, commission etc.
4. Working capital is required for repairs & maintenance both machinery as well as
factory buildings.
5. Working capital is required to pay wages, salaries and other charges.
6. It is helpful in maintain uncertainties involved in business field.

Classification of Working Capital:

Working Capital Management Is Mainly Classified In Two Ways.

Concept of Working Capital:

On This Basis There Are Two Types Of Working Capital.

Gross Working Capital:

It is simply called as working capital and refers to the firm’s investment in current
assets. Current assets are the assets that can be converted into cash within an accounting
year or operating cycle and include cash short term securities, debtors, bills Receivable
and stock gross working capital concept focuses attention on two aspects of current
assets management.

 Optimum investment in current assets.


 Financing of current assets.

Another aspect of gross working capital points to the need of arranging funds to
finance current assets. Whenever a need for working capital funds arises due to an
increasing level of business activity, arrangement should be made quickly

47
NET WORKING CAPITAL:

Net working capital refers to the difference between the current assets and
current liabilities Current liabilities are those claims of outsiders which are expected to
mature for payment with in an accounting year and include creditors, bills payable and
outstanding expenses

Net working capital can be positive or negative. Positive working Capital will
arise if the current assets are more than current liabilities Negative working capital will
arise if current liabilities exceed the current assets TIME BASED:

PERMANENT/ FIXED WORKING CAPITAL:

Permanent or Fixed working capital is the minimum amount, which is required to

ensure effective utilization of fixed facilities and for maintaining the circulation of
current assets, which is continuously required by the enterprise to carry out of its
normal business operations

For example every firm has maintained a minimum level of raw material, work in
progress, finished goods and cash balance. The minimum level of current assets is
called permanent or fixed working capital; as this part of capital is permanently blocked
in current assets As the business grows the required amount of permanent working
capital also increase due to the increase in current assets

The permanent working capital can be further classified into:

Regular working capital: regular working capital is required to ensure the circulation of
current assets from cash to inventories, from inventories to receivable and from
receivables to cash and so on.

48
Reserve working capital: It is the excess amount over the requirement for regular
working capital which may be provided for contingencies that may arise at unstated
periods such as strikes, rise in prices, depression.

TEMPORARY OR VARIABLE WORKING CAPIAL:

Temporary or variable working capital is the amount of working capital, which is
required to meet the seasonal demand and some special needs. Variable working capital
can be further classified as

1. Seasonal Working Capital: Most of the enterprises have to provide additional

working capital to meet the seasonable and special needs. The capital required
to meet seasonal needs of the enterprise is called seasonal working capital.

2. Special working capital: Special working capital is a part of working capital

which is required to meet special needs like launching of extensive marketing
campaigns for conducting research.

IMPORTANCE OF ADEQUATE WORKING CAPITAL:

Working Capital is the life blood of any enterprise. Maintaining enough working
capital is very essential to maintain smooth running of business. No business can run
successfully without an adequate amount of working capital. The main advantages of
maintaining adequate working capital are as follows:
1. Solvency of Business: Adequate working capital helps in maintaining solvency
of a business by providing uninterrupted flow of production.
2. Good will: Sufficient working capital enables businessmen to make prompt
payment and hence helps them in creating and maintaining good will.
3. Easy loans: A concern having adequate high solvency and good credit standing
can arrange loans from banks and others on easy and favorable terms.

49
 4. Cash discounts: Adequate working capital also enables a concern to avail cash
discounts on the purchases and hence it reduces costs.
5. Regular supply: Sufficient working capital ensures regular supply of raw
materials and continues production.
6. Regular payment of salaries and other day to day commitment: A company
which has ample working capital ca makes regular payment of salaries, wages
and other day- to-day commitments which raises the morale of its employee’s
increases their efficiency.
7. Exploitation of favorable market conditions: Only concerns with adequate
working capital can exploit the favorable market conditions such as purchasing
its requirements in bulk quantities when prices are lower and by holding its
inventories for higher prices.
8. Face business crises: Adequate working capital enables a concern to face
business crises in emergencies such as depression because during such periods
generally there is much pressure on the working capital.
9. Quick and regular on investment: Every investor wants a quick and regular
return on his investment. Sufficient working capital enables a concern to pay
quick and regular dividends to its investors as there may not be much pressures
on to plough back the profits. This gains confidence on its investors and crates a
favorable market to raise additional funds in the future.
10. High morale: Adequacy of working capital creates an environment of security
confidence and creates on overall efficiency in the business.

NEED FOR ADEQUATE WORKING CAPITAL:

The need and importance of adequate working capital for daily requirements can
be hardly underestimated. Every firm must maintain a sound working capital position.
Otherwise its business activities may be adversely affected. The financial manager must
see that the firm has sufficient Working capital as and when required so that the fixed
assets of the firm are optimally used. The objective of financial management to
maximize the share holder’s wealth can’t be attained if the operations of the firm are not
optimized. Thus, every firm must have adequate working capital.

50
DISADVANTAGES OF EXCESSIVE WORKING CAPITAL:

1. Excessive working capital means the idle funds, which earn no profit for the
business, and hence the business cannot earn a proper rate of return on its
investments.
2. When there is a redundant working capital it may leads to unnecessary purchases
and accumulation of inventories causing more chances of theft, waste and losses.
3. Exercise working capital implies excessive debtors and infective credit policy
which may cause higher incidence of bad debts.
4. It may result into overall inefficiency in the organization.
5. When there is excessive working capital, relationship with banks and other
financial institutions may not be maintained.
6. Due to low rate of return on investment, the value of shares may also fall.
7. The redundant working capital gibes rise to speculative transaction

DISADVANTAGES OF INADEQUATE WORKING CAPITAL:

Every business concern should have adequate working capital to run it business
operations. It should have neither excess working capital nor inadequate. Both are bad
for the business. However inadequate can be more dangerous because:
1. A concern that has inadequate working capital can’t pay ir short-term liabilities
in time. Thus, it will lose its reputation and shall not be able to get good credit
facilities
2. It can’t buy its requirements in bulk and can’t avail discounts etc.,
3. It becomes difficult for the firm to exploits favorable market conditions and
undertakes profitable projects due to lack of working capital.
4. The firm can’t pay day to day expenses of its operations and it creates
inefficiency because of increasing costs and reducing the profits.
5. It becomes impossible to utilize efficiency the fixed assets due to non-available
of liquid funds.
6. The rate of return on investment also falls with the shortage of working capital.

51
 NETWORKING CAPITAL AS A QUALITATIVE CONCEPT:
 
 It indicates the liquidity position of the firm.

Suggests the extent
to which working capital needs may be financed by the
permanent sources.
A negative working capital position poses threat to the solvency of the firm.

Excessive liquidity is also bad for the company as it may lead to mismanagement of
current assets. Net working capital also covers the question of judicious mix of long
term and short term funds of financing current assets. Therefore, working capital should
be financed by permanent sources of funds such as owner’s capital debentures, long-
term debt and preference capital. In summary, it is emphasized that both gross and net
concepts of working capital are equally important for effective management of working
capital. The date and problems of each company should be analyzed to determine the
amount of working capital. It is not fusible in practice to finance current assets. Since the
current assets involve coast of funds they should be put to productive use.

SOURCES OF WORKING CAPITAL:

The working capital requirement should be met from both short term as well as
long term sources of funds. It will be appropriate to meet at least two thirds if not all of
the permanent working capital requirements from long term sources. The financing of
working capital through short term sources of funds has the benefits of low cost
establishing close relationships with banks. For the convenience of the study the
sources of working capital may be classifies under two heads.
A) Sources of long term of regular working capital.

B) Sources of short term of seasonal working capital.

FINANCING OF LONG TERM WORKING CAPITAL:

The long term W.C requirements include the initial W.C and the regular W.C
along with it the minimum level of investment in various current assets also
determines the Requirements of long term Working Capital. This capital can be
conveniently financed by the following sources.

52
1. Issues of shares or share capital:
A part of long term working capital can be financed with spare capital.

2. Issues of debentures:
Debentures are also an important source of long term working capital because they
are fixed cost sources. Right debentures have also been popular In India since 1978.

3 Retained profits:
A part of the earned profits may be back by the firm in meeting their working
capital requirements. It is regular and cheapest source of working capital as it does not
involve any exploits lost of capital.

4 Idle fixed assets can be sold out and sale proceeds can be utilized for financing the
working capital.

5 Long term loans:

Midterm and long term loans for period above 3 years provide imports
sources of working capital such term loans can be borrowed from the special financial
institutions such as IDBI, IFCI, and LIC etc.

Financing Of Short Term Working Capital:

The category of funds covers the need of working capital for financing day to day
business requirements normally the duration of such requirements does not exceed
beyond a year.
Internal sources:
Depreciation funds:
The depreciation funds constitute import sources of working capital some others of
business finance do not accept them as a source of funds but it is not reasonable.
1. Provision for taxation:
The provision for taxation can also be used by the companies as a source of
funds but it is not reasonable.

53
2. Accrued expenses:
The firm can possible the payment of expenses for short periods. Hence those
accrued expenses also constitute an important source of working capital.

External sources:

1. Trade credit:
One of the most important forms of short term finance is trade credit extended by
one of business enterprise to another on the purchase and sale of goods and
equipments. The use of trade credit has increased in recent years due mainly
perhaps to the credit squeeze.

2. Bank credit:

Commercial bankers are also principal source of working capital. They provide
working capital in a number of ways such as over drafts, the cash credit, line of
credit, sort term loans etc, compare with others methods of borrowing this is the
most flexible source because when debt is no longer require it can be quickly
reduced.

3. Credit papers:
In the category of credit papers, bills of exchange, promissory notes of shorter
duration varying between a month and six months are used. These papers are
discounted with a bank and capital can be arranged. Accommodation bill is an
important method of such finance

4. Public Deposits:

Public deposits are also an important source of short term and medium term finance.
Due to shortage of bank credit in recent past the importance of public deposits has
increased. They have been very popular among Indian companies during last three
years.

54
5. Customers Credit:
Advance may also be obtained on contracts entered into by the enterprise. The
customers are after asked to make some advance payment in cash in lieu of a Contract to
purchase such advance can be utilized in purchasing raw material paying wages and so
on.

6. Government Assistance:
Sometimes, central and state government also provides short term finance on easy terms.

7. Loans from Directors:

An enterprise can also obtain loans from its officers, directors, M.D’s etc.
These loans are often obtained at almost negligible rates of interest. Sometimes, no
interest is charged on them other fellow companies working capital with the same group.

8. Security of employees:
Its employees are required to make deposits with their employer; companies
such companies can utilize those amounts in meeting working capital needs.

9. Factoring:
Factoring involves raising funds on the security of the company’s debts, so that
cash is received easier.

Approaches For Determining The Financing Mix:

There are three basic approaches for determining the working capital financing mix.

THE HEADING APPROACH:

According to this approach the maturity of the source of fund should much the
nature of assets to be financed. The Approach is therefore also termed as “Matching
approach” it divides the requirements of working capital funds into two categories.

55
  Permanent working capital funds required for the purchases of core current
asset such do not vary over time.

 Temporary or seasonal working capital funds which fluctuate over time.

The permanent working capital requirements should be financed by long term

funds while seasonal working capital requirements should be financed by short term
funds.

The Conservative Approach:

According To This Approach All Requirements To Working Capital Should Be
Met From Long-Term Sources. The Short-Term Sources Should Be Used Only For
Emergencies. The Conservative Approach Is Less Risky But More Costly As Compared
To The Heading Approach. In Other Results In High Profit, High Risk And Low Cost,
Low Net Working Capital.

Trade Of Between Heading and Conservative Approach:

The heading and conservative approach both can give satisfactory results. The
level of such trade off will different from case depending upon perception of the risk by
persons involved in financial decision making. However, one way of determining the
level of trade off is by finding the average of the minimum and maximum requirements
of the working capital during a period. The average working capital so obtained may be
filled again either by long term funds or short-term funds

Factors Influencing Working Capital Requirements:

The working capital needs of a firm are influenced by numerous factors. The important
ones are:

  Nature of business
  Seasonally of Operations
  Production Policy
  Market Conditions
 Conditions of supply

56
1. Nature of Business:
The working capital requirements of a firm are closely related to the nature of its
business. A service firm, like an electricity undertaking or a transport corporation, which
has a short operating cycle and which sells predominantly on cash basis, has a modest
working capital requirement. On the other hand, a manufacturing concern like a machine
tools unit, which has a long operating cycle and which sells largely on credit, has a very
substantial working capital requirement.

2. Seasonality of operations:

Firms which have marked seasonally in their operations usually have high
fluctuating working capital requirements. To illustrate consider a firm manufacturing
ceiling fans. The sale of ceiling fans reaches a peak during the summer months and
drops sharply during the winter period. The working capital need of such a firm is likely
to increase considerably in summer months and decrease significantly during the winter
period.

1. Production policy:
A firm marked by pronounced seasonal fluctuation in its sales may pursue a
production policy which may reduce the sharp variations in working capital
requirements. For example, the manufacturer of ceiling fans may maintain a stead
production throughout the year rather than intensify the production activity during the
peak business season. Such a production policy may dampen the fluctuations in working
capital requirements.

2. Market conditions:
The degree of competition prevailing in the market place has an important bearing on
working capital needs. When competition is keen, a larger inventory of finished goods is
required to promptly serve customers who may not be inclined to wait because other
manufactures are ready to meet their needs. Further, generous credit terms may have to
be offered to attract customers in highly competitive market.

57
 Thus working capital needs tend to be high because of greater investment in
finished goods inventory accounts receivables.

3. Conditions of supply:

The inventory of raw materials spares and stores depends on the conditions of
supply. If the supply is prompt and adequate, the firm can manage with small inventory.
However, if the supply is unpredictable and scant then the firm to ensure continuity of
production would have to acquire stocks as and when they are available and carry larger
inventory on an average. A similar policy may have to be followed when the raw
material is available only seasonally and production operations are carried out round the
year.

Estimation of Working Capital Requirements

Managing the Working Capital is a matter of balance. The firms must have
sufficient funds on hand to meet its immediate needs. The AVANTHI FEEDS
LIMITED is manufacturing oriented organization.
The following aspects have to be taken into consideration while estimating the
working capital requirements.
They are:
1. Total costs incurred on material, wages and overheads.
2. The length of time for which raw material are to remain in stores before they
are issued for production.
3. The length of the production cycle or work-in-process, i.e., the time taken for
conversion of raw material into finished goods.
4. The length of sales cycle during which finished goods to be kept waiting for
sales.
5. The average period of credit allowed to customers.
6. The amount of cash required paying day-today expenses of the business.
7. The average amount of cash required to make advance payments.
The average credit period expected to be allowed by suppliers.

58
 ESTIMATION OF CURRENT ASSETS
1. Raw Material Inventory
The Investment in Raw Material can be computed with the help of the following
formula:-
Budgeted Cost of Raw Average Inventory
Production X Material(s) x Holding Period
(In units) per unit (months/days)
12 onths / 52 weeks / 365days

2. Work-in-progress (W/P) Inventory

The relevant cost of determine work in process inventory are the proportionate
share of cost of raw material and conversion costs (labours and Manufacturing over
Head cost excluding depreciation) In case, full until of raw material is required in the
beginning the unit cost of work is process would be higher, i.e., cost of full unit + 50%
of conversion cost compared to the raw material requirement. Throughout the production
Cycle, working process is normally equivalent to 50% of total cost of production.
Symbolically,

Budgeted Estimated work- Average Time

Production x in-progress cost per Span x of work-in-progress
(In units) unit inventory (months/days)
12 onths / 52 weeks / 365day

13

3.Finished Goods Inventory

Working capital required to finance the finished goods inventory is given by
factors summed up as follows:-

Budgeted Cost of Goods Produced Finished Goods

Production x per unit (excluding x Holding Period
(in units) depreciation) (months/days)
12 onths / 52 weeks / 365days

59
4.Debtors
The working capital tied up in debtor should be estimated in relation to total cost
price (excluding depreciation) symbolically,

Budgeted Cost of Sales per Average Debt

Production x unit excluding x Collection Period
(In units) depreciation (months/days)
12 months / 52 weeks / 365days

5.Cash and Bank Balances

Apart from Working Capital needs for Financing Inventories and Debtors, Firms
also find it useful to have such minimum cash Balances with them. It is difficult to lay
down the exact procedure of determining such an amount. This would primarily be
based on the motives of holding cash balances of the business firm, attitude of
management towards risk, the access to the borrowing sources in times of need and past
experience.

Estimation of Current Liabilities

The Working Capital needs of business firms are lower to the extent that such
needs are met through the Current Liabilities(other than Bank Credit) arising in the
ordinary course of business. The Important Current Liabilities in this context are Trade-
Creditors, Wages and Overheads:-
1. Trade Creditors:
The Funding of Working Capital from Trade Creditors can be computed with the
help of the following formula:-
Budgeted Yearly Raw Material Credit Period
Production X Cost x Allowed by creditors
(In units) per unit (months/days)
12 months / 52 weeks / 365days
Note: - Proportional adjustment should be made to cash purchases of Raw Materials.

60
2. Direct Wages
The Funding of Working Capital from Direct Wages can be computed with the
help of the following formula:-
Budgeted Yearly Direct Labour Average Time-lag in
Production X Cost x Payment of wages
(In units) per unit (months/days)
12 months / 52 weeks / 365dayss
Note: - The average Credit Period for the payment of wages approximates to half-a-
month in the case of monthly wage payment. The first days monthly wages are paid on
the 30th of the month, extending credit for 29 days, the second day’s wages are, again,
paid on the 30th Day, extending credit for 28 days, and so on. Average credit period
approximates to half-a-month.

3.Overheads (other than Depreciation and Amortization)

The Funding of Working Capital from Overheads can be computed with the help
of the following formula:
Budgeted Yearly Overhead Average Time-lag in
Production X Cost x Payment of overheads
(In units) per unit (months/days)
12 months / 52 weeks / 365days
Note: - The amount of Overheads may be separately calculated for different types of
Overheads. In the case of Selling Overheads, the relevant item would be sales volume
instead of Production Volume.

OPERATING CYCLE:

Working Capital is required because of the some gap between the sales and their
actual realization in cash. This time gap is technically terms as upsetting cycle of the
business.

61
 In case of manufacturing company, the operating cycle is the length of time
necessary to complete the following cycle of event.
 Conversion of cash into raw materials.

 Conversion of raw materials into works in progress.

 Conversion of progress into finished goods.

 Conversion of account receivables into cash.

This cash is continues phenomena. In case of “Trading firm” the operating cycle will
include the length of time required to:
a) Cash into inventories.
b) Inventories into Accounts receivables.
c) Accounts receivables into cash.

In case of “Financing firm”, the operating cycle includes he length to time for 1 Year.
 
 Conversion of cash debtors and
 
Conversion of debtors into cash.

RAW
CASH
MATERIALS

FINISHED
RECEIVABLES
GOODS

62
STATEMENT OF CHANGES IN WORKING CAPITAL FOR THE
YEAR XXX-XXX

Working Capital Management

Year Working capital

Particulars
Previous Current Increase Decrease

1. Inventories xxx xxx

2. Sundry debtors xxx xxx
3. Cash/bank balances xxx xxx
4. Other current assets xxx xxx
5. Loans and advances xxx xxx
xxx Xxx
(a) Total current assets

Current liabilities

1. Liabilities xxx xxx

2. Provisions xxx xxx
xxx Xxx
(b) Total current
liabilities
xxx xxx

Net Working Capital (a-b)

xxx xxx

Decrease/increase in
Working Capital xxx Xxx
 DATA ANALYSIS AND INTERPRITATION

STATEMENT SHOWING THE CHANGES IN WORKING CAPITAL

FOR THE YEAR 2012-2013

PARTICULARS 2012 2013 INCREASE DECREASE

Inventories
Sundry trade
receivables
Cash &bank
Loans and
advances
Other current
assets
Total
CURRENT
LIABILITIES
Short term
borrowings
Trade payables
Other liabilities
Short term
dividends

TOTAL C.L
A-B (W.C)
Net change IN
W.C
TOTAL

STATEMENT SHOWING THE CHANGES IN WORKING CAPITAL

FOR THE YEAR 2013-2014

PARTICULARS 2013 2014 INCREASE DECREASE

Inventories
Sundry trade
receivables
Cash &bank
Loans and
advances
Other current
assets
Total
CURRENT
LIABILITIES
Short term
borrowings
Trade payables
Other liabilities

Short term
dividends

TOTAL C.L
A-B (W.C)
Net change IN
W.C
TOTAL
STATEMENT SHOWING THE CHANGES IN WORKING CAPITAL
FOR THE YEAR 2014-2015

PARTICULARS 2014 2015 INCREASE DECREASE

Inventories 354728 369688 14960

Sundry trade 276258 232660 43598

receivables

Cash &bank 93195 122477 29282

Loans and 76344 69135 7209

advances
Other current 1321806 911286 410520
assets
Total 2122331 1705246 461971 43598

CURRENT
LIABILITIES
Short term 373853 632871 259018
borrowings
Trade payables 870657 828914 41743

Other liabilities 682363 734591 52228

Short term 67459 63980

dividends

TOTAL C.L 1994332 2260356 311246 41743

A-B (W.C) 127999 (555110)

Net change IN 148870

W.C
TOTAL 150725 1855
STATEMENT SHOWING THE CHANGES IN WORKING CAPITAL FOR
THE YEAR 2015-2016

PARTICULARS 2015 2016 INCREASE DECREASE

Inventories 369688 443371 73683

Sundry trade 232660 261515 28855

receivables
Cash &bank 122477 103509 18968

Loans and 69135 101918 32783

advances

Other current 911286 1058576 147290

asset
Total 1705246 1968889 282540 18968
CURRENT
LIABILITIES
Short term 632871 283672 349199
borrowings
Trade payables 828914 682370 146544

Other liabilities 734591 858270 123679

Short term 63980 27995 35985

dividends

TOTAL C.L 2260356 1852307 123679 531728

A-B (W.C) 555110 16582

Net change IN 353899

W.C
TOTAL 158861 512760
 STATEMENT SHOWING WORKING CAPITAL CHANGES FOR THE
YEAR 2016-2017

PARTICULARS 2016 2017

INCREASE DECREASE
CURRENT
ASSETS
INVENTORIES 19129 20473 1344

FINANCIALASSETS
1.INVESTMENTS 20000 20000
2. TRADE 261551 309881 48330
RECEIVABLES
3.CASH AND CASH
EQUIVALENTS 102572 338737 236165
4.BANK - 126 126
BALANCES
5.LOANS 731 445 286
6.OTHER
FINANCIAL 1004268 722212 282056
ASSETS
NET CURRENT 542981 38669 504312
TAX ASSETS
OTHER CURRENT 206647 138285 68362
ASSETS
TOTAL CURRENT 2157879 1588828 286251 854730
ASSETS
CURRENT
LIABILITIES
FINANCIAL
LIABILITIES
1.BORROWINGS 283672 59613 224059
2.TRADE 685060 592993 92067
PAYABLES
3.OTHER
FINANCIAL 700056 791388 91332
LIABILITIES
OTHER CURRENT
LIABILITIES 428327 492259 63932
PROVISIONS 24020 795 23225
TOTAL CURRENT
LIABILITIES 2121135 1937048 155264 339351
A-B(WORKING 36744 (348220)
CAPITAL)
Net change IN 384392
WORKING
CAPITAL
TOTAL 130987 515379

RATIO ANALYSES:

CURRENT RATIO: The ratio 2:1 considered an idle for current ratio and it is a conventional rule.
It represents a margin of safety of creditors. the higher the current ratio, the greater the margin of
safety: the larger the amount of current assets in relation in current liabilities the most the firms
ability to meet its current obligations. however, current ratio should not be followed blind
because a company with less than 2:1 ratio may be doing well and the one of high ratio only
struggles to meet its obligations because current ratio only measures the quantity and not the
quality.
Current ratio= current assets/ current liabilities

Calculation of current ratio of bsnl: (RS.IN LAKHS)

Year Current assets Current liabilities Ratio
2012-13 1655204 1944007 0.85
2013-14 2122331 1994332 1.06
2014-15 1705246 2260356 0.75
2015-16 1968889 1852307 1.06
2016-17 1588828 1937048 0.82
 current ratio
1.2
1.06 1.06
1
0.85 0.82
0.8 0.75

0.6
Series 1

0.4

0.2

0
2012-13 2013-14 2014-15 2015-16 2016-17

INTERPRETATION:
 As a conventional rule a current ratio of 2:1 or more is considered satisfactory. BSNL has
a current ratio in the financial year 2012-13 gone up to 0.85 times and it gradually
increasing in year 2015-16 and then decreasing .Hence BSNL is maintaining a slightly a
standard current ratio which is not a good sign of property.

 Also it is not always necessary that a good current ratio indicates a comfortable liquidity
position. If current assets comprise a greater proposition of less marketable assets or
investments , current ratio has not significance.

 Larger the amount of current assets in relation to current liabilities greater the firms
ability to meet its current obligations.

Quick ratio:
This is also known as acid test ratio:it establishes a relationship with quick or liquid assets and
current liabilities.it indicates the ability of the company to meet its short term liabilities from its
current assets without having to sell stock.it is a vital index of the firms liquidity .the ratio of 1:1
is essence does not imply sound liquidity position because a high value of quick ratio in a
company may have frauds shortage, if it has a slow paying doubtful and longer period
outstanding debtors.at that same time ,if the firms are able to meet its current obligations in time
by turning over their inventories efficiently they can prosper. although quick ratio is a more
penetrating test of liquidity than the current ratio, yet it should be used cautiously.
QUICK RATIO=QUICK ASSETS / CURRENT LIABILITIES

CALCULATION OF QUICK RATIO OF BSNL:

YEAR QUICK ASSETS CURRENT RATIO
LIABILITIES
2012-13 1277995 1944007 0.65
2013-14 1767603 1994332 0.88
2014-15 1335558 2260356 0.59
2015-16 1525518 1852307 0.82
2016-17 1548355 1937048 0.799
1
0
201 2-1 3 201 3-1 4 201 4-1 5 201 5-1 6 201 6-1 7 RATIO

1
0.88
0.9
0.82 0.799
0.8
0.7 0.65
0.59
0.6
Series 1
0.5
Column1
0.4
Column2
0.3
0.2
0.1
0
2012-13 2013-14 2014-15 2015-16 2016-17
1

0 .8 2 0 1 2 -1 3

0 .6 2 0 1 3 -1 4

0 .4 2 0 1 4 -1 5

0 .2 2 0 1 5 -1 6

0 2 0 1 6 -1 7

R A TI O

INTERPRETATION:
 The quick ratio of BSNL is below acceptable norms 2:1. Comparing to 2013 and 2017
quick ratio has fallen further. It shows that the absolute liquid assets of BSNL are not
sufficient to meet the current liabilities and is question against liability. The trend shows
 that quick ratio is falling down and is necessary to take preventive measures. They should
give more emphasis for debt collection and generating more cash through operating
activities.
NET PROFIT RATIO:
The ratio indicates the firms ability withstand adverse economic conditions.it establishes a
relationship between net profit and sales and also indicates managements efficiency in
manufacturing ,administering and selling of products .net profit margin ratio is the overall
measure of the firms ability to turn each naira sales into net profit,it is measured by dividing
profit after tax by sales .
NET PROFIT RATIO=NET PROFIT/ SALES*100

CALCULATION OF NET PROFIT RATIO OF BSNL:

YEAR NET PROFIT/PAT SALES/TOTAL %

REVENUE
2012-13 (788444) 2712789 (29.06)
2013-14 (701976) 2799635 (25.07)
2014-15 (823409) 2864520 (28.75)
2015-16 (387992) 3291870 (11.78)
2016-17 (479321) 3153344 (15.20)
SOURCES: computed on the basis of the information given in the annual reports of BSNL.
 NET PROFIT RATIO
0
2012-13 2013-14 2014-15 2015-16 2016-17
-5

-10

-11.78
-15
-15.2 Series 1
-20

-25
-25.07
-30 -28.75
-29.06

-35

NOTE: Sales are inclusive of other incomes.

INTERPRETATION:
 BSNL had net loss of 29.06% in the year 2012-13. Then after it was increasing , now it is
at a loss of 15.20%.
 Over all financial position is not good, it will not meet future requirements also.
OPERATING PROFIT RATIO:

YEAR PROFIT BEFORE TURNOVER %

TAX
2012-13 (795536) 2712789 (29.32)
2013-14 (712419) 2799635 (25.44)
2014-15 (884342) 2864520 (30.87)
2015-16 (416931) 3291870 (12.66)
2016-17 (479321) 3153344 (15.20)
Average ration can be calculated from the balance sheet items to determine the proportion of
debt in total financing. And can equally be calculated from the profit and loss account to
determine the extent to which operating profit are sufficient to cover the fixed charges.

OPERATING PROFIT RATIO =PROFIT AFTER TAX/TURNOVER* 100

SOURCES: computed on the basis of the information given in the annual reports of BSNL.

OPERATING PROFIT RATIO

0
2012-13 2013-14 2014-15 2015-16 2016-17
-5

-10

-15 -12.66
-15.2 Series 1
-20

-25
-25.44
-30
-29.32
-30.87
-35

INTERPRETATION:
 The operating profit ratio indicates that in 2012-13 BSNL have -29.32%. After 4 years it
has been increased to -15.20% i.e In 2016-17. Because operating expenses are more.
Higher operating profit ratio enables the firm to meet interest, income tax dividends and
retain profits for expansion.

Return on investment:
This ratio is a useful measure of the profitability of all the financial resources invested in the
firm’s assets. return of investment(ROI),measures the gain or loss generated on an investment
relative to the amount of money invested. ROI is usually expressed as a percentage and is
typically use for personal financial decisions , to compare a company’s profitability or to
compare the efficiency of different.

PAT/(TOTAL CAPITAL+RESERVE+SURPLUS)*100

CALCULATION OF RETURN ON INVESTMENT OF BSNL:

YEAR PAT TOTAL %
CAPITAL+RESERVE+SURLUS
2012-13 (788444) 1250000+5076240+37633 (12.38)
2013-14 (701976) 1250000+4470295+33037 (12.20)
2014-15 (823409) 1250000+3506443+28497 (17.21)
2015-16 (387992) 1250000+3116774+24533 (8.83)
2016-17 (479321) 13103840 (3.65)
SOURCES: computed on the basis of the information given in the annual reports of BSNL.
 RETURN ON INVESTMENT
0
2012-13 2013-14 2014-15 2015-16 2016-17
-2
-4
-3.65
-6
-8
-10 -8.83 Series 1
-12
-12.38 -12.2
-14
-16
-18 -17.21
-20

INTERPRETATION:
 Return on investment of BSNL have -12.38% in the year 2012-13.After 4 years it has
been increased to -3.65%.i.e In 2016-17.

DEBT EQUITY RATIO:

This ratio expresses the direct proportion of debt to owner’s equity.it is indirectly computed by
dividing total debt by net worth.

DEBT EQUITY RATIO=TOTAL DEBT/EQUITY

CALCULATION OF DEBT EQUITY RATIO OF BSNL:

YEAR EQUITY DEBT RATIO
2012-13 6363873 574043 0.090
2013-14 5753332 402074 0.069
2014-15 4784940 350096 0.073
2015-16 4391307 831061 0.189
2016-17 13103840 1304269 0.099

SOURCES: computed on the basis of the information given in the annual reports of BSNL.

DEBT EQUITY RATIO

0.2 0.189
0.18
0.16
0.14
0.12
0.099
0.1 0.09
Series 1
0.08 0.069 0.073

0.06
0.04
0.02
0
2012-13 2013-14 2014-15 2015-16 2016-17

INTERPRETATION:
 The lower the Debt-Equity ratio, the higher the degree of protection enjoyed by the
creditors.
 The Debt-Equity ratio is increasing constantly till 2015-16.-----------
 It can have a financial leverage on company but as BSNL is not making profits from
2013 it is not advisable to admit more debt capital as it may cause the company to bear
more financial burden in terms of financial payments. Instead they can make effective
utilization of its reserves.
FIXED ASSET TURNOVER RATIO:
It measures the willingness of the firm to efficiently utilize its fixed assets and current assets
separately.
It is computed by the following:

FIXED ASSETS TURNOVER RATIO= NET SALES/NET FIXED ASSETS

CALCULATION OF FIXED ASSETS TURNOVER RATIO:

YEAR FIXED ASSETS REVENUE FATR
2012-13 6455700 2712789 0.42
2013-14 5449945 2799635 0.51
2014-15 4713414 2864520 0.61
2015-16 4250701 3291870 0.77
2016-17 11419935 3153344 0.27
SOURCES: computed on the basis of the information given in the annual reports of BSNL.

FIXED ASSET TURNOVER RATIO

0.9

0.8 0.77

0.7
0.61
0.6
0.51
0.5
0.42
0.4 Series 1

0.3 0.27

0.2

0.1

0
2012-13 2013-14 2014-15 2015-16 2016-17
INTERPRETATION:
 It indicates the firm’s ability to generate sales per rupee of investment in fixed assets. In
general, higher the ratios, the more efficient the management and utilization of fixed
assets, and vice versa, may be noted that there is no direct relationship between sales and
are influenced by other factor. The main reason is the drop in operating profits.

CURRENT ASSETS TURNOVER RATIO:

It measures the willingness of the firm to efficiently utilize its fixed assets and current assets
separately.
It is computed by the following:

CURRENT ASSETS TURNOVER RATIO=CURRENT ASSETS/SALES (OR)

REVENUE

CALCULATION OF CURRENT TURNOVER RATIO OF BSNL:

YEAR CURRENT ASSETS SALES CATR
(OR)REVENUE
2012-13 1655204 2712789 0.61
2013-14 2122331 2799635 0.75
2014-15 1705246 2864520 0.60
2015-16 1968889 3291870 0.59
2016-17 1588828 3153344 0.50
SOURCES: computed on the basis of the information given in the annual reports of BSNL.
 CURRENT ASSETS TURNOVER RATIO
0.8 0.75

0.7
0.61 0.6 0.59
0.6
0.5
0.5

0.4
Series 1
0.3

0.2

0.1

0
2012-13 2013-14 2014-15 2015-16 2016-17

INTERPRETATION:
 The current assets turnover ratio is decreasing every year. From 2013 current assets
investments fell down to 0.50 in 2017. But it is good that even in decreasing trend of
revenue BSNL is able to cover its current assets investments from the revenue generated.

WORKING CAPITAL TURNOVER RATIO:

This indicates the extent in which current assets (or working capital gap)relate to sales calculated
by:

WORKING CAPITAL TURNOVER RATIO= SALES/WORKING CAPITAL

CALCULATION OF WORKING CAPITAL TURNOVER RATIO OF BSNL:

YEAR NET WORKING SALES WCTR
CAPITAL
2012-13 (288803) 2712789 (9.39)
2013-14 127999 2799635 21.8
2014-15 (555110) 2864520 (5.16)
2015-16 116582 3291870 28.23
2016-17 (348220) 3153344 (9.055)
SOURCES: computed on the basis of the information given in the annual reports of BSNL.

WORKING CAPITAL TURNOVER RATIO

35
30 28.23

25 21.8
20
15
10 Series 1
5
0
2012-13 2013-14 2014-15 2015-16 2016-17
-5
-5.16
-10
-9.39 -9.055
-15

INTERPRETATION:
 Working capital is fluctuating from every year, it is not constant in its progress.
 Working capital measures how well a company is utilizing its capital support a given
level of sales.

TREND ANALYSES

(Taking base as 2013 year)

SHARE CAPITAL:
YEAR SHARE CAPITAL TREND %
2012-13 1250000 100
2013-14 1250000 100
2014-15 1250000 100
2015-16 1250000 100
2016-17 1250000 100

TREND ANALYSIS
120
100 100 100 100 100
100

80

60
Series 1
40

20

0
2012-13 2013-14 2014-15 2015-16 2016-17

INTERPRETATION:
The chart of share capital shows that it remain same in all five years from 2013 to 2017.i.e 1,250,000

LONG TERM BORROWINGS:

YEAR LONG TERM BORROWINGS TREND %
2012-13 170318 100
2013-14 72000 42.27
2014-15 5619 3.29
2015-16 498974 292.96
2016-17 1062657 623.92

LONG TERM BORROWINGS

700
623.92
600

500

400
292.96 Series 1
300

200
100
100
42.27
3.29
0
2012-13 2013-14 2014-15 2015-16 2016-17

INTERPRETATION: The above chart shows that long term borrowings are constantly increasing from 2012-13 to
2016-17 to 623.92%. which means the company is running in losses and to overcome the operating expenses.This
we should not think for expansion purpose.

LONG TERM PROVISIONS:

YEAR LONG TERM PROVISIONS TREND %
2012-13 687008 100
2013-14 783606 114.06
2014-15 28438 4.13
2015-16 79754 11.60
2016-17 95099 13.84
 LONG TERM PROVISIONS
120 114.06

100
100

80

60
Series 1

40

20 11.6 13.84
4.13
0
2012-13 2013-14 2014-15 2015-16 2016-17

INTERPRETATION: The above chart shows that long term provisions are very widely decreasing from 2012-13
to 2016-17 i.e, 13.84%. As company is running in losses and bearing risk factor is high.
SHORT TERM BORROWINGS:
YEAR SHORT TERM BORROWINGS TREND %
2012-13 256114 100
2013-14 373853 28.83
2014-15 632871 247.10
2015-16 283672 110.76
2016-17 59613 23.27
 SHORT TERM BORROWINGS
300

247.1
250

200

150
Series 1
110.76
100
100

50 28.83 23.27

0
2012-13 2013-14 2014-15 2015-16 2016-17

INTERPRETATION: The above chart shows that short term borrowings are slightly increasing from 2013 to 2015
i.e247.10%, and then decreasing to 23.27% in 2017 ,As the company is running in losses and the risk factor is very
high. But the BSNL is a able to pay revenue recurring expenses like salaries ,rent etc.

TRADE PAYABLES:
YEAR TRADE PAYABLES TREND %
2012-13 950092 100
2013-14 870657 91.63
2014-15 828914 87.24
2015-16 682370 71.82
2016-17 592993 62.41
 TRADE PAYABLES
120

100
100 91.63
87.24

80 71.82
62.41
60
Series 1

40

20

0
2012-13 2013-14 2014-15 2015-16 2016-17

INTERPRETATION:The above chart shows that trade payables are decreasing from 2012-13 to 2016-17
i.e,62.41%.At current scenario it is beneficial to company as liability is decreasing.

FIXED ASSETS:
YEAR FIXED ASSETS TREND %
2012-13 6455700 100
2013-14 5449945 84.42
2014-15 4713414 73.01
2015-16 4250701 65.84
2016-17 11419935 176.89
 FIXED ASSETS
200
176.89
180
160
140
120
100
100 84.42 Series 1
80 73.01
65.84
60
40
20
0
2012-13 2013-14 2014-15 2015-16 2016-17

INTERPRETATION:As fixed assets is increasing from 2013 to 2017 i.e,176.89%. As per the above analyses the
company utilized long term borrowings into fixed asset investments.
DEFERRED TAX ASSETS:
YEAR DEFERRED TAX ASSETS TREND %
2012-13 13330 100
2013-14 23773 178.34
2014-15 84706 635.45
2015-16 113645 852.55
2016-17 - 0
 DEFERRED TAX ASSETS
900 852.55

800

700 635.45
600

500

400 Series 1

300
178.34
200
100
100
0
0
2012-13 2013-14 2014-15 2015-16 2016-17

INTERPRETATION: The above chart shows that deffered tax assets has been increasing from 2013 to 2016.

INVESTMENTS:
YEAR TREND %
2012-13 100
2013-14 100
2014-15 100
2015-16 100
2016-17 100
 INVESTMENTS
120

100 100 100 100 100

100

80

60
Series 1

40

20

0
2012-13 2013-14 2014-15 2015-16 2016-17

INTERPRETATION:
The above chart shows that the investments of the company remain same in all the five years. There is no change in
the investments of the company.

CURRENT ASSETS:
YEAR CURRENT ASSETS TREND %
2012-13 1655204 100
2013-14 2122331 128.22
2014-15 1705246 103.02
2015-16 1968889 118.95
2016-17 1588828 95.98
 CURRENT ASSETS
140
128.22
118.95
120
100 103.02
100 95.98

80

Series 1
60

40

20

0
2012-13 2013-14 2014-15 2015-16 2016-17

INTERPRETATION:The above chart shows that current assests are slightly decreasing and then increasing
scenario and is at i.e 95.98% in 2017.
TRADE RECEIVABLES:
YEAR TRADE RECEIVABLES TREND %
2012-13 295339 100
2013-14 276258 93.53
2014-15 232660 78.77
2015-16 261515 88.54
2016-17 309881 104.92
 TRADE RECEIVBLES
120
104.92
100
100 93.53
88.54
78.77
80

60
Series 1

40

20

0
2012-13 2013-14 2014-15 2015-16 2016-17

INTERPRETATION: The above charts shows that trade receivables are decreasing upto 2016 and then increasing
in 2017,i.e,104.92% .As it is a short term assets and can be liquidated easily whenever required.
FINDINGS
Following are the findings that I have made from this study:

 BSNL is making losses continuously for the past five years from 2013 to 2017 in the year
2017 the loss for the BSNL company is 479321 /-
 The root cause for such a situation is loss in operating revenue and other incomes.i.e.,in
the year 2015-2016 is 4469.28 crores while it is 3129.71crores in the year 2016-17.
 Depreciation is a significant charge against operating revenue i.e.,in the year 2015-16 it is
7135.11crores while it is 6330.42crores in the year 2016-2017.
 Looking into the total revenue from 2011-12 it is constantly increasing i.e.,27934crores
to 31533crores in 2016-17. In percentage terms it is 12.88% as total expenditure also
increasing continuously it is not fruitful.
 The general trend in BSNL’s business profile shows that revenue is falling down while
expenses are increasing every year.
 Keeping the same phase soon the BSNL will result in operating loss.
 From this study I came to know that each company is differentiating from its competitors
by using new techniques.
 Long term liabilities or borrowings have been increased from 2015-2017 i.e., as at 1-04-
2015 it is 755619lacs,while as at 31-3-2017 it is 10,62,657lacs.
 As a conventional rule a current ratio of 2:1 or more is considered satisfactory BSNL has
a current ratio in the financial year 2012-13 gone up to 0.85 times and it gradually
increasing to 1.06 times in year 2015-16 and then decreasing to 0.82 times in the year
2016-17.
 QUICK RATIO of BSNL is below acceptable norms 2:1 comparing to 2013 and 2017
quick ratio has been constatntly decreasing it shows that the absolute liquid assets of
BSNL are not sufficient to meet the current liabilities and is question against liability the
trend shows that falling down and is necessary to take preventive measures. They should
give more emphasis for debt collection and generating more cash through operating
activities.
 NET PROFIT RATIO, BSNL has net loss of 29.06% in the year 2012-13 then after it was
increasing to 25.07%,now it is at a loss of 15.20% i.e, in the year 2016-17.whichmeans
overall financial position is not good, it will not meet future requirements also.
 The operating profit ratio indicates that in 2012-13 BSNL have (29.32)% after four years
it has been increased to (15.20)% i.e,in 2016-17.because operating expenses are more
.higher operating profit ratio enables the firm to meet interest , income tax dividends and
retained profits for expansion.
 The debt equity ratio: lower the debt equity ratio ,the higher the degree of protection
enjoyed by the creditors. It has been increasing from 2012-13 to 2015-16 i.e,0.09 % to
0.189% and then decreasing to 0.09% in 2016-17.
 The working capital of the company is not up to the mark i.e,in 2012-13 (288803)while
in the year 2016-17 (348220) in percentage terms it is reduced by 20.58% while
comparing with 2012-13.
 BSNL company had more expenses due to which it is facing losses continuously for the
last five years.
 Financial position of BSNL for the last five years is not good.
 The total current liabilities are more than the current assets.
 Return on investment of BSNL have (12.38)%in the year 012-13 after 4 years it has been
increased to (3.65)% .
SUGGESTIONS

 Maximum reserves should be maintained by the organization

 It is high time for BSNL to improve their operating efficiency. They should concentrate
on increasing both their operating revenues as well as other revenues.
 Depreciation is a significant charge against their operating profit.so that the company
should take utmost good care in maintaining their fixed assets.
 BSNL should develop their customer base of mobile as well as broadband users as they
are two major source of income.They should also try to improve revenue from other
operators .
 BSNL should conduct a brand revitalization campaign which can attract more new users
as well as maintain existing customers.
 They should concentrate on quality oriented mobile internet business as the era is shifting
towards mobile computing and smart devices. They should optimize new investments and
utilize their existing infrastructure maximum.
 BSNL need to be more competitive in terms of their services offered.
 They should make effective utilization of the large reserves available .
 BSNL can explore other areas to improve the revenue generation.
 Debt financing also will help the company to attain financial leverage as the financial
expenses are reducing .
 They can consider for public issue and issue debt securities.
 The root cause for existing financial crisis is the unproductive investments.
 CONCLUSION

The sugar industry is an agro-based industry. Its financial performance not only depends
on its financial activity but also on climatic condition and yield of sugarcane. The liquidity,
working capital turnover efficiency and solvency position of the bharath sanchar nigam limited
is moderate when compared when compared with international sugar industry. This is due to
sugar companies do not have efficiency control over the cost incurred during the production
and low recovery of sugar from the sugarcane crushed. In order to have a better control over
the cost new techniques like activity based costing etc., to be followed. Recovery of sugar can
be improved by using modern machineries. Hence it will improved the productivity and
increase the profitability. The responsibility of nature and strengthen the industry back to
health squarely rests with the government. Hence, the government will have to formulate a
suitable long term policy for the industry that takes into account the interest of formers,
consumers and companies for making india a major sugar exporter in the years to come.
Therefore, it required an all-rounds and valiant efforts of all the people involved in it managers,
employees and other stakeholders.