CHAPTER -1

INTRODUCTION

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INTRODUCTION:-
Finance is defined as a provision of money. Every enterprise needs finance needs
funds for two purposes, at first for its establishment and secondly to carry out its day-to-day
operations. Long term funds are required to create production facilities through purpose of
fixed assets such as plant, machinery, land, building and furniture etc; investment in these
assets represent that part of firm’s capital which is blocked in a permanent basis and is
called fixed capital. Funds are also needed for short-term purpose such as purpose of raw
material, payment of wages and other day –to-day expenses. These funds are known as
working capital of a business undertaking. In other word, Working capital denotes that part of
firm’s capital is required for financing short term or current assets such as cash, marketable
securities, debtor and inventories. Funds thus invest in current assets keep revolving fast
and are being constantly converted into cash and this cash flow out again in exchanges for
other current assets. Hence, it is also known as revolving or circulating capital or short-term

capital.

OVERALL MANAGEMENT OF THE COMPANY:-

In our country next to agriculture, companies are occupying the second top
position consisting largest number of employees. So under the endless stream of
competition and problems in the day to day environment which is arise of continuous
inflation, energy crises, high taxes, government regulation, shortage of capital,
workers dissatisfaction, declining productivity and foreign competition. It is not
possible to establish an organization without perfect utilization of administrative and
managerial ability.

A company’s management involves several management functions so as to

utilize all available resources and achieve the ultimate target of wealth maximization.
In an organization the chief executive represent the top management and
departmental heads for men and supervisors etc, are supposed to be middle and
lower level management.

The decisions regarding the progress of the company are to taken by the top
manager and its execution requires the managerial skill, ability and also proper
coordination from the lower level employees. Success and failure of a business
depends on the management while success of a business is most desirable. Its
failure causes in convenience to people depend directly it for support of substance,
failure of a business depends on the management while success of a business is
most desirable. Its failure causes in convenience to people depend directly it for

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support of substance; failure also means wastage of many valuable and scarce
resources and some enterprises fails because its management fails. So far as the
performance of the company or organization concern it largely depends on
performance of each and every unit related to the organization and ultimately the
management’s job is to accumulate or coordinate all the activities so as to achieve
the goal of the firm.

The amount of capital required for the purpose should be properly estimated
and the exact amount should be raised to avoid both excess shortage of fund. Both
are avoidable evils which should be prevented if the organization is to run
successfully. Companies finance may be raised in various ways and by different
means. To begin with finance can be raised internally that cash realized through the
sale of goods and money raised supplemented by borrowings from several sources if
more funds are required.

As started earlier is the responsibility of the management to observe whether

the available resources used by the firm in the proper manner and to get optimum
utilization of resources. The available resources should be effectively used in order
to ensure financial co-ordination in order to make proper decision regarding the
future progress of the concern. Not only the management, but also outsides such as
creditors, share holder& other investors also interested in analyzing the financial
position if the company which provide them suitable information regarding the firms
past and future performance and helps them to make decisions regarding the future
performance.

RELEVANCE OF THE STUDY:-

Working capital plays a vital role in gearing up capital structure of an
organization. For this purpose I have undertaken a study relevant to the working
capital management of “Odisha Power Transmission corporation Limited”
(OPTCL). OPTCL has undertaken the function of transmission of electricity in the
state of Orissa and has been declared as the state Transmission Utility. Proper
working capital management is highly essential in OPTCL, unless the entire
organization will be no more. Hence the study has been taken for the purpose to
know about the working capital structure of OPTCL.

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OBJECTIVE OF THE STUDY:-

The objective of the study is:

 To get an overall idea about the organization.

 To know the working capital requirement of OPTCL.
 To understand the inventory management system of OPTCL.
 To understand the cash management system of OPTCL.

IMPORTANCE OF THE STUDY:

There are five major factors seen in an industrial organization. They are
describing as 5”M”S. They are material, money, machines managements and
man. Among these five “M” money is most important factor, which is treated a
backbone of the company. I learn lot about theoretical aspect of finance. In order
to achieve some practical knowledge. I have analyzed the financial statement of
OPTCL.

METHOD OF THE STUDY:

Information iscollected during my four weeks of study program at OPTCL from
official document, various sections of the organization & disquisition with the
officers of various departments. Some information’s are collected directly through
meet some information available in official document such as: Newspaper,
Annual report, Newsletter and any other references.

COLLECTION OF DATA:

The data for purpose of the study are collected only from the secondary sources
of information. The information, which is available on various publications like books,
journal’s annual general reports, financial statement, records etc., is taken for the
purpose of the study.

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LIMITATION OF THE STUDY:

 More dependency on published data.

 Major activities like procurement of capital items, “A class inventory” are
controlled by senior officers.
 Insufficient time for data collection.
 Government officials are confidential in nature and they don’t want to share
more time.
 Senior executives don’t have much time to give all minute details about
OPTCL.

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 CHAPTER 2
ORGANIZATION PROFILE

COMPANY PROFILE:-
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ODISHA POWER TRANSMISSION CORPORATION LIMITED (OPTCL), one of the
largest Transmission Utility in the country was incorporated in March 2004 under the
Companies Act, 1956 as a company wholly owned by the Government of Odisha to
undertake the business of transmission and wheeling of electricity in the State.

 Started commercial operation from 01.04.2005 only as a Transmission

Licensee. (a deemed Transmission Licensee under Section 14 of Electricity
Act, 2003)
 Notified as the State Transmission Utility (STU) by the State Govt. and
discharges the State Load Dispatch functions.

The registered office of the Company is situated at Bhubaneswar, the capital of the
State of Odisha. Its projects and field units are spread all over the State.
OPTCL became fully operational with effect from 9th June 2005 consequent upon
issue of Odisha Electricity Reform (Transfer of Transmission and Related Activities)
Scheme, 2005 under the provisions of Electricity Act, 2003 and the Odisha Reforms
Act, 1995 by the State Government for transfer and vesting of transmission related
activities of GRIDCO with OPTCL. The Company has been designated as the State
Transmission Utility in terms of Section 39 of the Electricity Act, 2003. Presently the
Company is carrying on intra state transmission and wheeling of electricity under a
license issued by the Odisha Electricity Regulatory Commission. The Company is
also discharging the functions of State Load Dispatch Centre. The Company owns
Extra High Voltage Transmission system and operates about 11,704.479 cktkms of
transmission lines at 400 kV, 220 kV, 132 kV levels and 109 nos. of substations with
transformation capacity of 13,057 MVA having 273 no’s of transformers. The day-to-
day affairs of the Company are managed by the Managing Director assisted by
whole-time Functional Directors as per the advice of the Board of Directors
constituted. They are in turn assisted by a team of dedicated and experienced
professionals in the various fields.

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VISION:-

OPTCL ranks one among the leading Transmission Utilities in India, transmitting
quality, reliable and SECURED power with minimum transmission loss at a
competitive price.

MISSION:-

1. Transmission of power in large quantity with affordable price as per the

expectation of customers, Government of Orissa and OERC.

2. Increase transmission network need based to meet demand of the State in 2025.

3. Develop a portfolio of Intra State and some Inter State transmission assets in
national market including business expansion for evacuation of power outside the
state in collaboration with PGCIL and others.

4. Adoption of best Construction and O&M practices supported by system driven

processes enabled by cutting age IT solutions.

5. Building Research and Development wing for adoption of new technology.

OBJECTIVES OF OPTCL:-
To effectively operate Transmission lines and Sub- Stations in the State for
evacuation of power from the state generating stations feed power to state
distribution companies, wheeling of power to other states, maintenance of the
existing lines and sub-stations for power transmission and to undertake power
system improvement by renovation, up-gradation and modernization of the
transmission network.

OPTCL being a State Transmission Utility Public Authority has set the following
objectives:-

Undertake transmission and wheeling of electricity through intra-State Transmission

system

1) Discharge all functions of planning and coordination relating to Intra State,

inter State transmission system with central Transmission Utility, State Govt.
Generating Companies, Regional Power Board authority, Licensees or other
person notified by State Govt. in this behalf.

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 2) Ensure development of an efficient and economical system of intra state and
interstate transmission lines for smooth flow of electricity from generating
stations to the load centers.

3) Provide non-discriminatory open access to its transmission system for use by

any licensee or generating company or any consumer as and when such
open access is provided by the State Commission on payment of
transmission charges/surcharge as may be specified by the State
Commission.

4) Exercise supervision and control over the intra-state transmission system,

efficient operation and maintenance of transmission lines and substations and
operate State Load Dispatch Centers to ensure optimum scheduling and
dispatch of electricity and to ensure integrated operation of power systems in
the state.

5) Restore power at the earliest possible time through deployment of emergency

Restoration system in the event of any Natural Disasters like super cyclone,
flood etc.

POWER SECTOR REFORMS IN ODISHA:-

Odisha State Electricity Board (OSEB) was carrying out the integrated task of
generation, transmission, distribution as well as supply of electricity in Orissa till
1996 when Orissa Electricity Reform Act, 1995 came into force primarily for
structural, institutional and regulatory reorganization of the electricity industry and
also to make avenues for participation of Private Sector Entrepreneurs in the
electricity sector. In the process of unbundling of electricity sector in the State, Grid
Corporation of Orissa Ltd. (GRIDCO), now called GRIDCO Limited, incorporated
under the Companies Act, 1956 was vested with the transmission, distribution and
retail supply business with effect from 01.04.1996.The hydro generation was
assigned to Orissa Hydro Power Corporation (OHPC) and the only thermal plant at
IBM, remained with Orissa Power Generation Corporation (OPGC).

Further restructuring was made by reorganization of the Distribution and Retail

Supply Business of GRIDCO during 1996-97 with the creation of four Strategic
Business Units (SBU) or zones. To facilitate the process of privatization, the four
distribution zones were converted into four companies i.e. CESCO, WESCO,
NESCO and SOUTHCO which were incorporated on 19.11.1997 under the

58
Companies Act, 1956 as wholly owned subsidiaries of GRIDCO. GRIDCO through a
process of International Competitive Bidding disinvested 51% equity holding in
NESCO, WESCO and SOUTHCO on 01.04.1999 and also disinvested 51% equity in
CESCO on 01.09.1999, thus privatizing the entire Distribution and Retail Supply
business in Orissa.

Subsequently with the enactment of the Electricity Act, 2003, the Government of
Orissa through notification of a Transfer Scheme transferred the transmission
business of GRIDCO and vested the same with Odisha Power Transmission
Corporation Limited (OPTCL) with effect from 01.04.2005. OPTCL, registered on
29th March 2004 under the Companies Act, 1956, is a wholly owned Government
Company. Under the Transfer Scheme, OPTCL has been notified as the State
Transmission Utility (STU) and is also mandated to discharge the State Load
Dispatch functions. Under the provisions of the Electricity Act, 2003, OPTCL is a
deemed transmission licensee. It undertakes the activities of transmission of
electricity in the State of Orissa under regulatory control of Orissa Electricity
Regulatory Commission (OERC) and also in compliance of the provision of the
Orissa Electricity Reform Act, 1995 and Electricity Act, 2003. OPTCL commenced its
commercial operation from the FY 2005-06.

Role of OPTCL and Distribution companies

After Odisha Power Transmission Corporation Ltd (OPTCL) takes birth as a separate
transmission company, leaving the parent company dealing exclusively with bulk supply and
training .Prior to this GRIDCO owns and maintains the extra high voltage transmission
system and is responsible system corporation in an efficient manner.

 Planning and co-ordination in regard to transmission.

 Transmission, procurement and bulk supply of electric energy.

MAJOR CCP

NAME OF CCP INSTALLED CAPACITY IN MW TOTAL(MW)

1. NALCO,ANUGL 8*120 960

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2. RPS,ROURKELA 2*60+5*25+1*3 248

3. ICCL,CHAUDWAR 2*54 108

4. HINDALCO,HIRAKUD 1*67.5+1*100 167.5

5. M/S BHUBAN STEEL 1*63 63

POWER POTENTIAL IN ODISHA

Thermal generation

 45000 MT power grade coal deposits in Mahanadi coal field and

Talcher coal area.

 Can sustain 75000 MW of power for 100 years.

Location identified for Thermal power plant

1. NARAJ 2*250=500MW CUTTACK DIST

2. HIRMA 8*660=5280MW SAMBALPUR DIST

3. GOPALPUR 6*500=3000 MW SUNDARGARH DIST

4. RENGALI 4*250=1000 MW SAMBALPUR DIST

5. LAPANGA 2*250=500 MW SAMBALPUR DIST

6. BONAI 2*250=500 MW SAMBALPUR DIST

7. KAMALANGA 2*250=500 MW DHENKANAL DIST

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 Structure of Electricity Sector in Odisha

Board of Directors:-

1. Sri Hemant Sharma, IAS Chairman-cum-Managing Director,

2. SrI Rajesh verma Principal Secretary to Govt.,
3.Sri vijay Arora
4. Sri Debendra Kumar Jena
5. Sri. Dhirendra Kumar Roy
6. Sri Shital Kumar Jena
7. Sri Sunil Kumar Das
8. Prof. (Dr.) MuktiKanta Mishra
9. Dr .Meera viswavandya
OPTCL
Department of Energy, Govt. of Odisha
Principal Secretary to Govt.,
Department of Public Enterprises,
Govt. of Odisha.
Additional Secretary to Govt.,
Finance Department, Govt of Odisha
Former Chairman, OERC, Bhubaneswar
Former Member, OERC, Bhubaneswar
M/s. Sunil Das & Associates,
Chartered Accountants, Cuttack
President, Centurion University,
Bhubaneswar
Reader qet bbsr

58
10.Sri Hara Prasad Nayak,IRAS  Director (Finance), OPTCL
SENIOR EXECUTIVES:-
NAME & DESIGNATION ( HEAD QUARTERS )
SRI HEMANT SHARMA, IAS
SRI Ramesh Chandra misher
SRI BIBHU PRASAD MOHAPATRA
SRI MANGALGIRI ANANTA RAO
SRI B.B Ssahoo
SRI PRAFULLA CHANDRA TRIPATHY
SRI R.R.Panda
SRI Niranjan Sahoo
SRI PRASANTA KUMAR DAS
CHAIRMAN CUM MANAGING DIRECTOR
CGM
CGM (FIN)
CHIEF GENERAL MANAGER (IT)
C.F.O
CHIEF GENERAL MANAGER (O&M)
WITH ADDL. CHARGE OF SR.G.M(CPC)
CHIEF GENERAL MANAGER (CONSTRUCTION)
SENIOR GENERAL MANAGER (FINANCE)
CROPORATE ACCOUNTS
COMPANY SECRETARY
58
CHAPTER -3
WORKING CAPITAL
MANAGEMENT

58
WORKING CAPITAL MANAGEMENT

Meaning:
A firm’s profitability is determined in part by the way its working capital is managed.
Working capital has a very close relationship with the current day to day operations
of a business. Every business needs funds for its operation. So, without funds the
firm can’t exit. Every business needs funds for two purposes-

(1)For the establishment of the firm.

(2) To carry out its day-to-day operation.

The capital that is used to establish the business in the way of purchasing fixed assets for the
business is known as fixed capital. The management of current asset is similar to that of fixed asset
in the sense to that in both cases a firm analyses their Effect on its return and risk. But the funds are
also needed for short term purposes, like payment of wages and other day to day expenses. These
are known as working Capital.
"Working capital is the difference between current assets and current liabilities”. In the Other words,
it is the net cash inflow. It can be defined as the excess of current asset over current liabilities and
provisions.

In simple words working capital refers to that part of firm’s capital which is required
for financing short-term or current assets such as cash, marketable securities,
debtors and inventories. The working capital is otherwise known as circulating
capital.

Following are the sum of definitions of working capital given by various authors-

According to James Shubin, "Working capital management is the amount of funds

necessary to cover the cost of operating the enterprise."
According to Steven, Domes and satire “working capital management is the excess of
current assets over current liabilities.”
According to Genestenberg,” circulating capital means current assets of a company that are
changed in the ordinary course of business from one form to another.”
Management of working capital therefore is concerned with the problems that arise In attempting to
manage the current asset, the current liabilities, and the inter relationship that exist between them.
The basic goal of working capital management is to manage the current assets and current
liabilities of a firm in such a way that a satisfactory level of working capital is maintained, i.e. it is

58
neither inadequate nor excessive working capital positions are bad for any business. Inadequate of
working capital may lead to the firm to insolvency and excessive working capital implies idle funds
that earn no profit for the business.
CONCEPT OF WORKING CAPITAL
There are two concept of working capital:
(A) Balance sheet concept.
(B) Operating cycle or Circular Flow cycle.
(A) Balance sheet Concept:- There are two interpretations of working capital under the
balance sheet concept:
i) Gross Working capital
ii) Net Working capital
i) Gross working capital: In the board of sense, term of working capital refers to the
gross working capital and represents the amount of fund invested in current assets.
Thus, the gross working capital is the capital invested in total current assets of the
enterprise. Current assets are those assets, which in the ordinary course of business
can be converted into cash within a short period of normally one accounting year.
Examples of current assets are:

CONSTITUENTS OF CURRENT ASSETS

1. Cash in hand and bank balance.

2. Bills receivable.

3. Sundry debtors or accounts receivable.

4. Short-term loans and advances.

5. Inventories such as:

(a) Raw material.

(b) Work-in-progress.
(c) Finished goods.
(d) Store and spares.
6. Temporary investments.
7. Prepaid expenses.
8. Accrued incomes.

ii)Net working capital: In narrow sense, the term working capital refers to the net working capital .Net
working capital is the excess of current assets over current liabilities, or say:

58
Net working capital may be positive or negative. When the current assets exceed the current liabilities
the working capital is positive and the negative working capital result when the current liabilities are
more than the current assets. Current liabilities are those liabilities, which are indented to be paid in
the ordinary course of business within a short period of normally one accounting year out of the
current assets or the income of the business. Examples of liabilities are:

CONSTITUENTS OF CURRENT LIABILITIES

1. Bills payable

2. Sundry creditors or accounts payable

3. Accrued or outstanding expenses

4. Short-term loans, advances and deposits

5. Dividends payable

6. Bank overdraft

7. Provision for taxation

Net working capital = Current assets - Current liabilities
8. Provision for bad and doubtful debts

OPERATING CYCLE:-

It is the time duration required to convert sales, after the conversion of

resources into inventories into cash. The operating cycle refers to different
stages involved from the investment in raw material to realization of cash
from the sale of finished products.

The stages in the operating cycle of a manufacturing company as

given below.

1. Conversion of cash into raw material

2. Conversion of raw material into work-in-progress

(Raw Material Conversion Period)

3. Conversion of work-in-progress into finished goods

(Work-In-Progress Conversion Period)

4. Conversion of finished goods into debtors through sales

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 (Finished Goods Conversion Period)

5. Conversion of debtor into cash

(Debtor Conversion Period)

6. Direct accumulation of cash through cash sales

Working-in- Progress Finished Goods Sales

Raw Material Debtor

Cash

Cash
Cash

Working capital Cycle:

Working capital cycle is the amount of time it takes to turn the

net current liabilities into cash. The longer cycle liabilities are, the longer a
business is typing up capital without earning a return on it. Therefore,
companies strive to reduce their working capital cycle by collecting receivables
quicker or sometimes stretching accounts payable. The capital measures the
time between paying for goods supplied to you and the final receipt of cash to
you from the sale. It increases the effectiveness of working capital. The
working capital cycle is made up of four core components:

i. Cash (funds available)

ii. Creditors (accounts payable)

iii. Inventory (stock on hand)

iv. Debtors (accounts receivable)

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 Fig: 1

Fig: 2

(Working capital cycle)

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Classification or kinds of working capital:
Working capital may be classified in two ways:

1) On the basis of concept.

2) On the basis time.

Working Capital

On the basis of On the basis of

concept time

Gross Net Working Permanent or Temporary or

Working Capital fixed Working variable
Capital Capital Working
Capital

Regular Reserve Seasonal Special

working capital working capital working capital workingcapital

1) On the basis of concept: On the basis of concept, working capital is classified as

a gross capital and net working capital. This classification is important from the point
of view of the financing manager.

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 i) Gross working capital: The term working capital
refers to the gross working capital and represents the
amount of funds invested in current assets

ii) Net working capital: The term working capital refers

to the net working capital. Net working capital is the
excess of the current assets over current liabilities.

2) On The basis of time: On the basis of the time, working capital may be classified
as permanent of fixed working capital, temporary or variable working capital.

i) Permanent or Fixed working capital: Permanente of fixed on working capital is

the minimum amount which is required to ensure effective utilization of fixed facilities
and for maintaining the circulation of current assets. The permeate working can
further be classified as regular working capital and reserve working capital required
insuring circulation of current assets from cash inventory, from inventories to
receivables and from receivable to cash and so on.

a) Regular working capital: This is the amount of working capital required for the
continuous operation of an enterprise. It refers to the excess of current assets over
current liabilities .Any organization has to maintain a minimum stock of materials,
finished goods and cash insure its smooth working and to meet its immediate
obligations.

b) Reserve working capital: Reserve working capital is the excess amount over the
requirement for regular working capital which may be provided for contingencies that
may arise at unstated period such as strikes, rise in price, depression, etc.

ii) Temporary or variable working capital

Temporary or variable working capital is the amount of working capital which is

required to meet the seasonal demands and some special exigencies. Variable
working capital can further be classified as seasonal working capital and special
working capital.

(a)Seasonal working capital:-The capital required to meet the seasonal need of the
enterprise such as, a textile dealer would require large amount of fund a few month
before Diwali.

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(b)Special working capital: - Special working capital is that part of working capital
which is required to meet special exigencies such as launching of extensive
marketing for conducting research, etc.

Most of the enterprises have to provide additional working capital to meet the
seasonal and special needs.

Temporary working capital differs from permanent working capital in the sense that is
required for short periods and cannot be permanently employed gainfully in the
business.

The following diagrams would show the different between permeate and
temporary working capital. Figure (a) presents constant permanent capital
and Figure (b) present an increasing permanent capital .The first is the case
of a static company and that of a growing one

NEED FOR WORKING CAPITAL:-

working capital is required starting from purchase of raw material to the sale of finished
goods. Hence working capital is required also for the following purposes working capital is
needed.

 For purchasing of raw material

 For payment of production expenses such as- wages & salaries

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  For payment of other operating expenses

 For payment of selling & distribution expenses.

 For making credit sales of finished products

 For maintaining closing stock of raw material work-in-progress & finished goods

BALANCED POSITION IN WORKING CAPITAL: -

A balanced or sound position of working capital; must should be maintained by a

firm. Adequate working capital is required to run the business operations efficiently.
Both excessive and inadequate working capital positions are dangerous from the
firm’s point of view. Excessive working capital means holding costs and the idle
funds which earn no profits for the firm. Imbalanced working capital not only impairs
the firm’s profitability but also results in production, interruptions and inefficiencies
and sales disruptions.

Excess or inadequate working capital

Every business concern should have adequate working capital to run its business
operations. it should have neither redundant or excess working capital nor
inadequate or shortage of working capital. Both excess as well as short working
capital position are bad for any business. However, it is the inadequacy of working
capital which is more dangerous from the point of view in the firm.

Disadvantages of Redundant or excessive working capital

 It causes purchase of excess raw materials, which may be redundant for the
firm.

 It leads to accumulation of inventories and blockage of capital as a result

chances of inventory mishandling, waste, theft and losses increase.

 It reduces the profitability of the firm, so the business cannot get adequate
return on its investment.

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  Low rate of return on investment causes fall in share value.

 The balance between liquidity and profitability is distributed because of

excessive working capital.

 Excessive working capital makes management complacent which

degenerates into managerial efficiency.

 The tendency of accumulating inventories tend to make speculative profit

grows. This may tend to make dividend policy liberal and difficult to cope with
in future when the firm is unable to make speculative profits.

Disadvantages or Dangers of inadequate working capital

 It is difficult to pay the day-to-day operating expenses of the business due to

inadequate working capital.

 Even the market condition is good the firm cannot exploit the opportunity due
to shortage of working capital.

 Fixed assets the not efficiently utilized due to lack of working capital which
result inefficiency & poor profitability.

 It leads to inability to pay the short-term debts in time, which seriously affects
the good will as well as the reputation of the firm.

 It cannot manipulate to enjoy the better discount offers due to lack of working
capital.

 The low liquidity position is & threat on the slovenly position of the firm, which
may lead to its liquidation.

DETERMINANTS OF WORKING CAPITAL:-

A variety of factors are responsible to determine the working capital requirements of

the firm, which are discussed below:-

1) Nature of business:
Working capital varies with the nature of the business for example-

 Trading & financing firms have a very small investment in fixed assets but
require a large sum of money to be invested in working capital.

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 Manufacturing and construction firms require huge investment in working
capital & a nominal amount in fixed assets.

 Public utilities such as – electricity, railway & water supply require very limited
working capital because they offer cash sales only and they supply services
not products.

2) Size of business:- It is an another important factor for determining the

working capital requirements size for business means scale of operation if
the operation is on a large scale, it will need more working capital then a firm
that has a small scale of operation.

3) Manufacturing policy:-In certain industries of seasonal products , demands

fluctuates, widely over the period, under this situation management follow
uniform production policy and accumulate inventories in slack period with a
view to meet his demand in peak period

4) Production cycle:-If the production cycle in lengthy, it results in higher

requirement of working capital the longer the production process the raw
material & other materials have to be carried for a longer period in
processing & as a result the working capital need will be high. Hence
companies adopt process with shortest production period to minimize the
working capital needs

5) Sound technology:-Now-a-days firms adopting modern & latest technology

in their business operation to reduce their working capital needs, the
technology short-terms the production & manufacturing cycle is accepted due
to less requirement of working capital.

6) Credit policy:-The credit policy of a firm affects the working capital by

influencing the level of debtors. A liberal credit policy & credit terms without
judging the credit worthiness of a customer are detrimental for the firm. This
will result a lengthy collection period, which naturally increase working capital
need of the firm. The firm should adopt stringent policy & rigid credit terms, in
order to avoid unnecessary funds associated with the debtor,

7) Economic condition:-Economic conditions prevailing at a particular time

period is very important to assess the working capital requirement. Situation
like inflationary trend the working capital need is higher.

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 8) Price level changes:-Generally rising price level will require a firm to
maintain higher amount of working capital, same level of current assets will
need increased investment when prices are increasing.

9) Business cycle:-Every business has different phases in its life like

expansion contraction etc. when there is an upswing of business cycle, then
sales increment, expansion of existing business & rise in price results higher
working capital needs similarly when there is a downswing of business cycle
there is contraction, sales decline and other problems result. In this period
the working capital is less.

10)Dividend policy:-The dividend policy may be uniform on uninformed, higher

retention or higher payout, cash dividend or stock dividend and so on a firm
which allows high rate of cash dividend requires more working capital then a
firm which does not pay such high rate or pays stock dividend instead of
cash dividend.

11)Operating efficiency:-This refers to the optimum utilization of resources at

the minimum possible cost. This results lower requirement of working capital
of the firm. Better utilization of resources ensures profitability.

SIGNIFICANCE OR IMPORTANCE OF WORKING CAPITAL:-

Working capital management is a significant face of financial
management. Financial managers spend a great deal of time on working
capital management. Working capital policy is concerned with two important
factors, viz., the level of Current asset to be held and the type of assets and
the method by which these assets are financed. This takes much of the
financial manager's time in making decisions. A company’s profitability is in
one way determined by the management of its working capital. When there is
a variation of working capital to sales without a corresponding change in its
production, the profits are affected. When the flow of funds caused by the
charges in working capital generated by various processes in the business is
interrupted, the working capital turnover decreases as well as the return on
Investment.

The significance of working capital is as follows. –

58
 Easy loans: -A concern, having adequate working capital, high solvency
and good credit Standing can arrange loans from banks and other sources easy
favorable terms.
 Regular supply of raw material: -Sufficient working capital ensures
regular supply of raw materials and continuous production.
 Exploitation of favorable market condition: -Only concern with
adequate working capital can exploit favorable Market conditions such as
purchasing its requirement in bulk when the prices are lower and by
holding its inventories for higher prices.
 Goodwill: -Sufficient working capital enables a business concern to make
prompt Payment and hence, helps in creating and maintaining goodwill.
 Solvency of the business:-Adequate working capital helps in
maintaining solvency of the business by providing uninterrupted flow of production.
 Cash discounts:- Adequate working capital also enables a concern to
avail cash discount on the purchases and hence it reduces costs.
 Quick and regular return on investment: -Every investor wants a quick
and regular return on his investments. Sufficiency of working capital
enables a concern to pay quick and regular dividends to its investors as
there may not be much pressure to plough back profits. This gains the
confidence of its investors and creates a favorable market to raise
additional funds in the future.
 Ability to face crisis: - Adequate working capital enables a concern to
face business crisis in Emergencies such as depression because during
such periods, generally, there is much pressure on working capital.

 High morale:- Adequate of working capital creates an environment of

security, confidence And high morale and creates overall efficiency in a
business . Regular payment of salaries, wages and other day to day.
 commitments :-A company which has ample working capital can make
regular payment of salaries, wages and other day to day commitments
which raises the morale of Its employees, increases their efficiency,
reduces wastages and costs and enhances production and profits.

58
 PRINCIPLES OF WORKING CAPITAL MANAGEMENT POLICY:-

The following are the general principles of a sound working capital

Management policy.

PRINCIPLES OF WORKING
CAPITAL MANAGEMENT


Principles of risk Principles of cost Principles of Principles of

variation of capital Equity position maturity of
payment

1) Principles of risk variation:-

Risk here refers to the inability of a firm to meet its obligations
as when they become due for payment. Larger investment in current asset with
less dependence on short term borrowings increases liquidity, reduces
dependence on short term borrowings increases liquidity, reduces risk and there
by decreases the opportunity for gain or loss. On the Other hand, less investment
in current assets with greater dependence on Short term borrowing increases risk
reduces liquidity and increases profitability.
2) Principles of cost of capital: -
The various sources of raising working capital finance have
different cost of capital and the degree of risk involved. Generally, higher the risk
lower is the cost and lower the risk higher the cost. A sound working capital

management should always try to achieve a proper Balance between these two.

3) Principles of Equity position: -

58
 This principle is concerned with planning the total Investment
In current assets. According to this principle, the amount of Working capital
invested in each component should be adequately justified By a firm's equity
position. Every rupee invested in the current assets should contribute to the net
worth of a firm.

4) Principle of maturity of payment:-

This principle is concerned with planning the sources of
Finance for working capital. According to this principle, a firm should make every
report to relate maturities of payment to its flow of internally generated funds.
Maturity pattern of various current obligations is an important factor in risk
assumptions and risk assessments. To sum up, working capital management
should be considered as an Integral part of overall corporate management. To
achieve the above-mentioned objective of working capital funds, how to use them
and how to Measure, plan and control them.

APPROACHES OF WORKING CAPITAL FINANCE:-

Approaches to
finance

Hedging/Matching Conservative Aggressive

Approach Approach Approach

(A)The Hedging/Matching Approach: Hedging/

The hedging refers to, selling transactions of
simultaneous but opposite nature which counter
Matchingbalance the effect of each other. The term
hedging refers to the process of matching maturities of debt with the maturities of financial
Approach
needs. According to this approach the maturity of sources of funds should match nature of
Asset to be financed. Conservative
Approach

Aggressive 58
Approach
 Approach

(B) The conservative approach: The approach suggests that entire estimated investment
in Current Asset should be financed from long term sources and short term sources should
be used only for emergency requirement.

(C)The Aggressive Approach: This approach suggests that the entire estimated
requirement of current asset should be financed from short-term sources. This approach
makes finance mix more risky, less costly and more profitable.

MEASUREMENT OF WORKING CAPITAL:-

No business can run successfully without an adequate amount of working capital.

The concept of working capital has its own importance in a going concern. A going concern
usually has a positive balanced working capital, i.e. the excess of current assets over current
liabilities, but sometimes the uses of working capital may be more than the sources resulting
into a negative value of working capital. A study of changes in the uses and sources of
working capital is necessary to evaluate the efficiency with which the working capital is
employed in a business.

This analysis of working capital can be conducted through a number of devices; such as –

1. RATIO ANALYSIS

2. FUNDS FLOW ANALYSIS

3. BUDGETING

1. RATIO ANALYSIS:

A ratio is simple arithmetic expression of the relationship of one number to another.

Ratio analysis is a technique of analysis and interpretation of financial statements. It is the
process of express of establishing and interpreting various ratios for helping in making
certain decisions. It is only means of better understanding of financial weakness and
strength of a firm. There are number of ratios which can be calculated from the information
given in the financial statement.

The following are the four steps involved in the ratio analysis:

1. Selection of relevant data from the financial statements depending upon the objective
of analysis.

2. Calculation of appropriate ratios from the above data.

3. Comparison of the ratios with the ratios of same firm in the past data.

4. Interpretation of the ratios.

58
Classification of Ratios:-
The ratios are classified into four major functional areas such as liquidity, solvency,
profitability and activity. The various ratios under each functional group are indicated
below.

RATIO

Test of liquidity Activity or Test of overall

turnover profitability
ratio

Test of
Test of long-term
solvency & leverage profitability
ratio

Current Ratio Stock Turnover Ratio

Return on Investment
Liquid or Quick
Debenture Turnover
Ratio Return On Equity
Ratio
Capital
Absolute liquid ratio
Creditor Turnover Ratio Earning Per Share
Debt equity Ratio W.C. Turnover Price earning Ratio
Proprietary Ratio Ratio Dividend Payout Ratio
Fixed Asset
Gross Profit Turnover
Ratio
Interest Coverage Ratio Price Earning Ratio
Ratio Net Profit Ratio

Operating Profit
Ratio

Operating Ratio

Expenses Ratio

58
2) FUNDS FLOW ANALYSIS:-
Funds flow analysis is a technical device designated to the sources from which additional
funds are derived and the use to which these sources were put. It is an effective
management tool to study changes in the financial position of a business enterprise between
beginning and ending financial statements dates. The funds flow analysis consists of:

 Preparing schedule of changes in working capital.

 Statement of sources and application of funds.

3) WORKING CAPITAL BUDGETING:-

A budget is a financial and quantitative expression of business plans and policies to be

pursued in the future period of time. Working capital budget, as a Part of total budgeting
process of a business, is prepared estimating future long-term and short-term working
capital needs and the sources to financed them, and then comparing the budgeted figures
with the actual performance for calculating variances, if any so that corrective actions may
be taken in the future. The objective of a working capital budget is to ensure availability of
funds as and when needed, and to ensure effective utilization of these resources.

ROLE OF RATIO ANALYSIS:-

Ratio analysis is one of the best possible techniques available to management to impart the
basic functions like planning and control. As future is closely related to the immediately past,
ratio calculated on the basis historical financial data may be of good assistance to predict the
future. E.g. On the basis of inventory turnover ratio or debtor’s turnover ratio in the past, the
level of inventory and debtors can be easily ascertained for any given amount of sales.
Similarly, the ratio analysis may be able to locate the point out the various areas which need
the management attention in order to improve the situation. E.g. Current ratio which shows a
constant decline trend may be indicate the need for further introduction of long term finance
in order to increase the liquidity position. As the ratio analysis is concerned with all the
aspect of the firm’s financial analysis liquidity, solvency, activity, profitability and overall
performance, it enables the interested persons to know the financial and operational
characteristics of an organization and take suitable decisions.

58
LIQUIDITY RATIOS:-

Liquidity refers to the ability of a firm to meet its current obligations as and when
these become due. The short-term obligations are met by realizing amounts from
current, floating or circulating assets. The current assets either be liquid or near
about liquidity. These should be convertible in cash for paying obligations of short-
term nature. To measure the liquidity of a firm, the following ratios can be calculated:

A) Current Ratio:

Current assets include cash and those assets which can be converted in to
cash within a year, such marketable securities, debtors and inventories. All
obligations within a year are include in current liabilities. Current liabilities
include creditors, bills payable accrued expenses, short term bank loan
income tax liabilities and long term debt maturing in the current year. Current
ratio indicates the availability of current assets in rupees for every rupee of
current liability.

CURRENT RATIO = CURRENT ASSET / CURRENT LIABILITIES

B) Quick Ratio or Acid Test:

Quick ratios establish the relationship between quick or liquid assets and
liabilities. An asset is liquid if it can be converting into cash immediately or
reasonably soon without a loss of value. Cash is the most liquid asset, other
assets which are considered to be relatively liquid and include in quick assets
are debtors and bills receivable and marketable securities. Inventories are
considered as less liquid. Inventory normally required some time for realizing
into cash. Their value also is tendency to fluctuate. The quick ratio is found
out by dividing quick assets by current liabilities.

QUICK RATIO = TOTAL LIQUID ASSET/TOTAL CURRENT LIABILITIES

58
 C) Absolute Liquid Ratio:

Even though debtors and bills receivables are considered as more liquid then
inventories, it cannot be converted into cash immediately or in time. Therefore
while calculation of absolute liquid ratio only the absolute liquid assets as like
cash in hand, cash at bank, short term marketable securities are taken into
consideration to measure the ability of the company in meeting short term
financial obligation. It calculates by absolute assets dividing by current
liabilities.

ABSOLUTE LIQUID RATIO = ABSOLUTE LIQUID ASSET / TOTAL

CURRENT LIABILITIES

MANAGEMENT OF WORKING CAPITAL:-

Management of Working
Capital

Cash Receivable Inventory

Management Management Management

58
CASH MANAGEMENT:

Cash is the important current asset for the operation of the business. Cash is the
basic input needed to keep the business running in the continuous basis, it is also
the ultimate output expected to be realized by selling or product manufactured by the
firm. The firm should keep sufficient cash neither more nor less. Cash shortage will
disrupt the firm’s manufacturing operations while excessive cash will simply remain
ideal without contributing anything towards the firm’s profitability. Thus a major
function of the financial manager is to maintain a sound cash position. The term
cash includes coins, currency and cheques held by the firm and balances in its bank
account. Sometimes near cash items such as marketing securities or bank term
deposits are also included in cash. Generally when a firm has excess cash, it invests
it is marketable securities. This kind of investment contributes some profit to firm.

Sources of Cash:
Sources of additional working capital include the following:

 Existing cash reserves

 Profits (when you secure it as cash!)
 Payables (credit from suppliers)
 New equity or loans from shareholders
 Bank overdrafts or lines of credit.
 Long-term loans
If you have insufficient working capital and try to increase sales, you can easily over-
stretch the financial resources of the business.

RECEIVABLE MANAGEMENT:-
Receivable represent amount owed to the firms a result of sale of goods & services
in the ordinary course of business. These claims of the firm against customers and
firms part of its current receivables, trade receivables or book debts.

On the other hand receivable management is the process of making decisions

relation to investment in trade debtors.

Cost of maintaining Receivables:

58
1. Cost of financing receivables:

When products are provided on credit then concerns capital allowed to be use
by the customers. The receivables are financer from the funds supplied by
shareholders for ling term financing and through retained earnings.

2. Cost of collection:

A proper collection of receivables is essential for receivables management.

The customers who delays in payment are sent reminders, some persons may have
to be sent for collecting these amounts. Sometimes legal action also taken includes
cost of the concern.

3. Bad-debts:

The amount, which the customers fail to pay, is known as debts. Though a
concern may be able to reduce bad debts through efficient collection machinery but
one cannot altogether rule out this cost.

Factors influencing the size of receivables:-

The various factors as follows-

 Size of credit sale

 Credit policy

 Terms of trade

 Expansion plans

INVENTORY MANAGEMENT:-

INVENTORIES:

Inventories constitute the most important part of the current assets of large majority
of companies. On an average the inventories are approximately 60% of the current
assets in public limited companies in India. Because of the large size of inventories
maintained by the firms, a considerable amount of funds is committed to them. It is

58
therefore, imperative to manage the inventories efficiently and effectively in order to
avoid unnecessary investment.

Nature of Inventories:

Inventories are stock of the product of the company is manufacturing for sale
and components make up of the product. The various forms of the inventories in the
manufacturing companies are:

 Raw Material: It is the basic input that is converted into the finished
product through the manufacturing process. Raw materials are those units
which have been purchased and stored for future production.

 Work-in-progress: Inventories are semi-manufactured products. They

represent product that need more work they become finished products for
sale.

 Finished Goods: Inventories are those completely manufactured products

which are ready for sale. Stocks of raw materials and work-in-progress
facilitate production, while stock of finished goods is required for smooth
marketing operations. Thus, inventories serve as a link between the
production and consumption of goods.

Objectives of Inventory Management:-

The main objectives of inventory management are operational and financial. The
operational mean that means that the materials and spares should be available in
sufficient quantity so that work is not disrupted for want of inventory. The financial
objective means that investments in inventories should not remain ideal and
minimum working capital should be locked in it.

The following are the objectives of inventory management:-

 To ensure continuous supply of materials, spares and finished goods.

 To avoid both over-stocking of inventory. 

 To maintain investments in inventories at the optimum level as required by the

operational and sale activities. 

58
 To keep material cost under control so that they contribute in reducing cost of
production and overall purchases.

 To eliminate duplication in ordering or replenishing stocks. This is possible

with the help of centralizing purchases.

 To minimize losses through deterioration, pilferage, wastages and damages.

 To design proper organization for inventory control so that management.

Clear cut account ability should be fixed at various levels of the organization.
 To ensure perpetual inventory control so that materials shown in stock ledgers
should be actually lying in the stores.
 To ensure right quality of goods at reasonable prices.

 To facilitate furnishing of data for short-term and long term planning and
control of inventory

USES OF WORKING CAPITAL:-

 Adjusted net loss from operations

 Purchase of non-current assets

 Purchase of long-term investments like shares, bonds or debentures etc.

 Purchase of tangible fixed assets like land, building, plant, machinery or

equipments etc.

 Purchase of intangible fixed assets like goodwill, patent or copyright etc.

 Repayment of long-term debt(debenture or bonds) and short-term debt(bank

borrowings)

 Redemption of redeemable preference shares

 Payment of cash dividend

58
 CHAPTER- 4

DATA COLLECTION AND

REPRESENTATION

58
A) BALANCE SHEET OF OPTCL
( ₹ In core)
Particulars
Note As at As at
no: 31.03.2014 31.03.2013

(A) EQUITY AND LIABILITIES

1 Shareholder’s fund
 Share capital 1 303.07 253.07
 Reserve and surplus 2 840.15 740.50
1,143.
22 993.56
2 Non-current liabilities
 Long -term borrowing 3
 Other long term liabilities 4 724.82 699
5 879.43 .06
 Long term provisions
378.34 422.
28
3 Current liabilities 6 438.
 Trade payables 7 78
 Other current liabilities 8 1,982.59 1,560.12
 Short-term provisions

51.15 32.25
78.10 96.90
153.47 168.57
2,622.76 297.72

TOTAL 3,431.52 2,851

.40

(b)

ASSETS

1- Non-current assets
9 2,149
(a) Fixed assets .06
 Tangible assets 9.1 1,551.31
 Capital work-in- 1,486.
progress 9.2 0.31 46
 Intangible assets
under 9.3 817.4 661.
development 1 37
1.23
10 1.2
(b) Non-current investment 11 3
(c) Long term loans and 12 35.41 270.85
advances 121.0
(d) Other non-current assets 6 2,5
224.09 69.31
2,750.82 130.

58
 13 18
14 7.31 221
2 - Current assets 15 140.39 .69
(a) Current investment 16 57.12
(b) Inventories 17 389.59
(c) Trade receivables 18
(d) Cash and cash equivalents 75.40
10.89
(e) Short-term loans
680.70 2,52
(f) Other current assets
6.69

140.95

63.70

60.61

14.39

1.96
301.53 282.
09
TOTAL 3,431.52 2,851.40

58
BALANCE SHEET OF OPTCL
Particular As at 31.03.2008 As at 31.03.2009 As at 31.03.2010 As at 31.03.2011
I. Sources of funds        
1.Shareholders fund        
600,700,0 831,255,0 881,255,00
Share capital 00 00 0 1,600,700,000
5,368,362,5 5,531,676,82 6,824,666,95
Reserves & surplus 57 6 0 7,074,504,648
5,969,062,6 6,362,931,82 7,705,921,95
Sub Total 57 6 0 8,675,204,648
2.Loan Funds        
5,094,601,2 4,034,967,57 2,970,843,09
Secured loans 56 3 9 1,882,808,719
9,058,314,7 9,081,629,63 7,338,214,99
Unsecured loans 52 4 1 7,305,769,031
14,152,916,0 13,116,597,2 10,309,058,09
Sub Total 08 07 0 9,188,577,750
3.Other Funds        
Consumer's 83,3 83,3 455,33 7,868,75
Security Deposit 34 34 4 6
20,122,061,9 19,479,612,3 18,015,435,37
Total 99 67 4 17,871,651,154
II. Application of
Funds        
1.Fixed Assets        
22,725,369,6 24,152,614,5 26,037,473,41
Gross Block 86 71 5 27,935,440,372
Less Accumulated        
10,340,108,6 11,437,546,5 12,519,750,13
Depreciation 68 44 8 13,758,811,668
12,385,261,0 12,715,068,0 13,517,723,27
Net Capital 18 27 7 14,176,628,704
Capital Work in        
7,221,440,4 6,711,033,01 5,760,703,81
Progress 74 9 7 5,562,515,095
270,550,0 270,550,0 270,550,00
2.Investments 00 00 0 270,550,000
3. Current Assets,
Loan & Advance        
766,865,2 808,519,2 969,056,46
Stores & Spares 62 78 0 1,144,269,951
1,052,749,9 1,055,097,47 1,055,631,69
Sundry Debtors 82 3 8 1,558,735,700
Cash & Bank        
490,881,1 907,019,7 727,106,12
Balances 83 50 9 579,433,119
652,553,3 738,951,1 744,894,75
Other Current Assets 04 77 8 751,333,069
143,339,5 2,786,157,42 1,582,686,33
Loan and Advances 72 0 3 404,766,300
Total 3,106,119,303 6,295,745,098 5,079,375,378 44,385,238,139

58
Less        
Current Liabilities 2,055,168,764 2,476,486,046 2,517,996,799 2,793,521,599
Provisions 1,304,517,744 4,817,002,603 5,695,667,475 5,629,960,268
Total 3,359,686,508 7,293,488,649 8,213,664,274 8,423,481,867
Net Current
Asset/Net
Working
Capital.(C.A.L.C) (253,567,205) (997,743,553) (3,134,288,896) (3,984,943,728)
4.Miscellaneous        
Expenditure to        
the Extent not        
written off or 6,052,846 3,026,423 - -
adjusted 492,324,866 777,678,451 1,600,747,175 1,846,901,083
Profit and Loss A/c 20,122,061,999 19,479,612,367 18,015,435,374 17,871,651,154

B) PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31st MARCH
Income 2008 2009 2010 2011
Revenue from
Transmission        
of power 3,997,558,798 6,789,295,427 3,051,627,568 4,051,914,743
Other Income 282,103,171 368,447,083 1,366,218,959 255,068,122
Total 4,279,661,969 7,157,742,510 4,417,846,527 4,306,982,865
Expenditure        
Administration,General&        
other Expenses 2,399,988,627 5,277,666,633 3,498,456,298 2,721,385,964
Depreciation 1,085,485,700 1,098,241,352 1,080,334,520 1,223,379,955
Total 3,485,474,327 6,375,907,985 4,578,790,818 3,944,765,919
Profit/Loss before
Interest        

& Financial Charges 794,187,642 781,834,525 (160,944,291) 362,216,946

Interest & Finance Charges (1,106,554,318) (972,454,617) (541,601,198) 424,377,484

Net Prior period Income 275,867,293 7,590,209 (11,172,155) (65,152,447)

Profit/Loss before        

Taxation & Contingency (36,499,383) (183,029,883) (713,717,644) (127,312,985)

Provision for taxation        
Current Year - - - -

Findge Benefit Tax (2,113,256) (2,396,915)    

Profit After Tax (38,612,639) (185,426,799) (713,717,644) (127,312,985)

Reserve Appropriation        
Appropriation to        

Contingency Reserve (113,626,849) (99,926,786) 109,351,080 118,840,923

Profit/Loss After Taxation
&        

Contingency Reserve (152,239,488) (285,353,585) (823,068,724) (246,153,908)

Balance of P&L a/c brought        

forward from last year (340,085,378) (492,324,866) (777,678,451) (1,600,747,175)

Balance Carried over to        

Balance Sheet (492,324,866) (777,678,451) (1,600,747,175) (1,846,901,083)

58
 C)SCHEDULE OF CHANGES IN WORKING CAPITAL
Changes in working capital
Particular 2009-2010 2010-2011
Increase in W.C. Decrease in W.C.

Current Assets        

Stores and Spares 969,056,460 1,144,269,951 175,213,491  

Sundry Debtors 1,055,631,698 1,558,735,700 503,104,002  

Cash and Bank   579,433,119   147,673,010

Other Current Assets 727,106,129 751,333,069 6,438,311  

Loans and Advances 744,894,758 404,766,300   1,177,920,033

  1,582,686,333      

Current liabilities        

and Provisions        

         

Current Liabilities   2,793,521,599   275,524,800

Provisions 2,517,996,799 5,629,960,268 65,707,207  

  5,695,667,475      

      750,463,011 1,601,117,843

Net decrease in        

Working Capital        

      850,654,832  

D)SCHEDULE OF CHANGES IN WORKING CAPITAL

Changes in working capital
Particular 2008-2009 2009-2010
Increase in W.C. Decrease in W.C.

Current Assets        

Stores and Spares 808,519,278 969,056,460 160,537,182  

Sundry Debtors 1,055,097,473 1,055,631,698 534,225  

Cash and Bank 907,019,750 727,106,129   179,913,621

Other Current Assets 738,951,177 744,894,758 5,943,581  

Loans and Advances 2,786,157,420 1,582,686,333   1,203,471,087

         

58
Current liabilities        

and Provisions        

         

Current Liabilities 2,476,486,046 2,517,996,799   41,510,753

Provisions 4,817,002,603 5,695,667,475   878,664,872

         

      167,014,988 2,303,560,333

Net decrease in        

Working Capital        

      2,136,545,345  

E) YEAR WISE CURRENT ASSETS:-

YEAR AMOUNT
2007-08 3,106,119,303
2008-09 6,295,745,098
2009-10 5,079,375,378
2010-11 4,438,538,139

58
 F) COMPOSITION OF CURRENT ASSETS:-

Amount
Current Assets
2007-08 2008-09 2009-10 2010-11
Stores and Spares 766,865,262 808,519,278 969,056,460 1,144,269,951
Sundry Debtors 1,052,749,982 1,055,097,473 1,055,631,698 1,558,735,700
Cash and Bank 490,881,183 907,019,750 727,106,129 579,433,119
Other Current
Assets 652,553,304 738,951,177 744,894,758 751,333,069
Loans and
Advances 143,339,572 2,786,157,420 1,582,686,333 404,766,300

58
G) COMPOSITION OF CURRENT LIABILITIES:-

Current Amount
liabilities and 2007-08 2008-09 2009-10 2010-11
provisions
Current liabilities 2,055,168,764 2,476,486,046 2,517,996,799 2,793,521,599
Provisions 1,304,517,744 4,827,570,826 5,695,667,475 5,629,960,268

58
 H)PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31st MARCH 2011-12

(₹ in core) (₹ in core)
PARTICULARS Refers For the year For the year
no. ended ended
31.03.2012 31.03.2011

570.54 538.08
A) Revenue from operations
Income recoverable on regulatory 19
- (132.89)

58
 Asset

NETREVENUE FROM 570.54 (405.19)

OPERATATION
21.44 25.51
Other income 20
B) 591.98 430.70
Total Revenue (A+B)
C) 271.08 210.00
Expenses: 57.83 42.43
Employee Expense
D) Finance cost 21 125.68 122.34
Depreciation & amortization 22
Expenses 128.75 62.14
Other expenses (18.99) 6.52
Net prior period items (Net) 23
24

Total expenses 564.34 443.43

E) Profit before tax 27.64 (12.73)

F) Tax expenses - -

Profit (loss) for the period(E-F) 27.64 (12.73)

G)
Earnings per equity share:
H) (1) Basic Rupee 166.78 Rupee(122.42)
(2) Diluted Rupee 166.78 Rupee(122.42)

I) PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31st MARCH 2012-13

PARTICULARS Note no For the year For the year

ended ended
31.03.2013 31.03.2012

58
A) 18 549.73 570.54
Revenue from operations
29.26
B) Other income 19 21.44

C) 578.99
Total Revenue (A+B) 591.98
D)
Expenses

Employee benefits expenses 20 271.26 271.08

Finance cost 21 46.78 50.39
Depreciation & amortization expenses 9.1 157.03 125.68
Other expenses 22 90.75 136.18
23 (15.90) (18.99)
Net prior period expenditure/(income)

Total expenses 549.92 564.34

E)
Profit before tax (C+D)
29.07 27.64
F)
Tax expenses

Current year 2.76

Previous year 5.53 8.29
G) Profit (loss) for the period (E+F) 20.78 27.64
H) Earnings per equity share:

(1) Basic Rs82.10 Rs 166.78

(2) Diluted
Rs82.10
Rs 166.78

58
IMPLEMENTATION OF CASH MANAGEMENT AT OPTCL:

1. In order to effectively manage its cash so as to sustain liquidity and

profitability, OPTCL has chosen to go for a centralized cash
management.
2. The centralized cash management system means the cash of OPTCL is
basically managed from the head office situated at Jan path, BBSR,
Odisha.
3. For smooth management of cash, OPTCL takes the services of UBI, SBI,
ANDHRA bank, IDBI, bank and SYNDICATE bank.
4. It has got the main account with the UBI and with the other banks; it has
got the current account.
5. It has 62 branches all over Odisha. All the cash transaction of these
regional offices is controlled from the head office.
6. The branch offices around the state are given a budgeted figure of
money to be spent by the head office. If they have any expenditure
exceeding the limit then they have to justify it.

The decentralized cash collection system of OPTCL also helps to check the idle
cash, which would otherwise have blocked in other branches. Though this system,
the cash is not allowed to remain idle at various branches and is used by the public
giant to pay its short term liabilities.

FUNDS MANAGEMENT AT OPTCL:

OPTCL is basically a trading organization and therefore it requires maintaining

sufficient current assets to meet its working capital needs because in order to pay its
obligation at the time as and when they are due. So in OPTCL the management of
funds basically caters the needs of working capital through its funds management
policy. To ensure smooth flow of funds, in order to carry out business smoothly.

For the better understanding of working capital management at OPTCL, one

has to thoroughly go through the sources & application of funds. For the purpose of
monitoring working capital requirement, daily cash register is maintained. The receipt
of funds at each of the centers of OPTCL is transferred to corporate office,
Bhubaneswar.

58
WORKING CAPITAL MANAGEMENT OF OPTCL:

OPTCL being a public sector undertaking fully owned by Govt. of Odisha and its
power sector has got a very wide network not confident with in state of Odisha but
also it supplied power to other state such as Bihar, Chhattisgarh, Madhya Pradesh,
West Bengal and other states to fulfill their power requirement. It has got 62
maintenance centers throughout Odisha which are otherwise called as accounting
centers.

The maintenance of centers has to report to the head office for their weekly
funds requirement on a weekly basis because the funds are allocated from the head
office. SBI also play a very vital role in maintaining of fund position of OPTCL on
daily basic.

58
 CHAPTER – 5

ANALYSIS AND
INTERPRETATION

58
Comparative Balance Sheet Analysis

LIABILITIES

a) Share holders fund:

i) Share Capital:

From the above mentioned comparative balance sheet of OPTCL from the
year 2008-2009 to 2010-2011, the authorized share capital of OPTCL as on
1st April 2008 was Rs. 3,000,000,000.00/-(3,000,000 equity share of Rs.
1000/- each) Out of which 6,00,700 equity share of Rs. 1000/- each were
issued, subscribed and paid up. Then the issued, subscribed and paid up
share gradually increased from 2010-2011.

ii) Reserve and Surplus:

From the year 2008-09 the reserve and surplus increased gradually. The
reserve and surplus consists of capital reserve, service line contribution
received under the electricity supply act 1948, subsidies towards the cost of
capital assets, contingency reserve, welfare fund and other reserves.

b) Loan funds:

i) Secured loans:

The secured loan represents the loan from commercial banks & financial
institutions (secured by floating charges on tangible and movable fixed assets
and which is gradually decreased from the year 2008-09 to 2010-11.)

ii) Unsecured loans:

Unsecured loans contains from central govt., interest accrued and due, loans
from state govt.,IBRD loans,PFC,REC,Public bonds, bonds of govt. of Orissa,
bonds of pension trust and loan from other. The unsecured loans are
gradually settled (repayment made by OPTCL)

c) Other funds:

58
 Other funds represent consumer’s security deposits, which is transferred from
GRIDCO from the period of separation of OPTCL and this amount remains
constant from the year 2008-09 to 2009-10 and then increased.

Current Liabilities:

Current liabilities contains sundry creditors, deposits and retention from

suppliers/contractors, interest accrued but not due on loans, liability for wealth
tax, electricity duty payable, liability for fringe benefits tax & other liabilities.
Current liabilities are increased from year to year because sundry creditors are
increased liabilities for wealth tax, liabilities for fringe benefit, and other liabilities
are also increased at an increasing rate.

Provisions:

Provision contains pension and gratuity and others. The amount of pension &
gratuity increased and the others remains constant.

ASSETS:-

a) Fixed Assets:

Fixed asset consist of Land and land rights, buildings, other civil works, Plant and
machinery, Lines, cable networks etc., vehicle, furniture and fixtures, Office
equipments etc. The fixed assets are stated at cost less depreciation. Pre
operational expenses like interest on borrowing and financing cost during the
period of construction is added to the cost of the assets. Consumer contributions,
grants and subsidies received towards cost of capital assets have not been
reduced from the cost of fixed assets but have been credited to capital reserve
account in accordance with the electricity supply annual accounts, rule 1985 as
saved by electricity act, 2003.

The depreciation is provided on straight line methods at the rates specified in

schedule XIV to the companies act,1956.The depreciation/amortization of the
cost after providing leasehold land have not been provided. The fixed assets of
OPTCL are purchased by cash as a result of which, its working capital position
are deteriorated. So the management should try to purchase fixed assets by
issuing shares or from long term sources.

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 Capital work in progress:

Capital work in progress consists of Work-in-progress of different continuing

projects like EHT projects, other T & J projects; special projects of REC, power
evacuation projects, civil works scheme, REC Transmission support scheme,
etc., the capital works in progress of OPTCL are decreased due to completion of
project works in time

b) Investment:

The Investment of OPTCL at cost containing contingency reserve investment

(Orissa Govt. Securities) and is remaining same previous year. That means no
Investment is made on other companies or Government securities.

c) Stores and spares:

Stores & spares contains capital stores and spares, O&M stores and spares,
capital stores and spares at site,O&M stores and spares at site, other materials,
materials stock shortage/excess pending investigation etc.

Each year provision for loss/theft of materials, provisions for obsolete stock-
stores etc are deducted from store and spares in order to show true and fair view
of inventory hold by the company. The store and spares are also purchased
every year and the figures are gradually increased, as a result of which the
current asset of the company increased and so that the ability of company also
increased to pay off its current obligations in time as and when they are due.

d) Sundry Debtors:

Sundry debtors include debts outstanding for a period exceeding 6 months and
debt outstanding for a period less than 6 months which consists of unsecured
and secured debts. Unsecured debt contains good and bad. Each and every year
this company deducts provision for bad and doubtful debts. From previous years
this company faces great difficulties in collection of debt and maximum amount of
debt becomes bad due to inefficient debt collection policy of management.

e) Cash and bank balances:

Cash and balance gradually increased from the year 2008-09 to 2009-10.But
decreased in the year from 2009-10 to 2010-11.Cash and bank balance contains

58
 cash-in-hand, stamps in hand balances with scheduled banks (Including cheque
in hand). The bank balance contains the amount of deposited current account,
fixed deposits, flexi deposits etc. and remittance in transit. In each and every year
provision is deducted from remittance in transit.

f) Other Current Assets:

Other Current Asset contains prepaid expenses, capital subsidy/grant receivable

and sundry receivables. Each and every year provisions are deducted from
receivable. Other current assets are gradually increased from 2008-09 to 2010-
11.

g) Loans and Advances:

It contains advances to suppliers, loans and advances to staffs and other

advances to GRIDCO, sundry receivables, amount recovered from employees
and /ex-employees, other receivables, deposits etc. This amount decreased
because of efficient management of sundry receivable loans and deposits.

h) Miscellaneous expenditure to the extend not written off or

adjusted:

It contains preliminary expenses. In each and every year a proportional

amount is deducted from this expense regularly to decrease the preliminary
expenses.

PRACTICAL FRAMEWORK OF RATIO ANALYSIS

A.LIQUIDITY RATIOS:

These ratios are used to indicate the OPTCL’s ability to meet its current obligation
from holding of its current assets, which are readily convertible to cash. This ratio is
used to interpret the liquidity position of OPTCL. This ratio is again divided into
following types:

 Current Ratio

 Liquid Ratio

 Absolute Liquid Ratio

58
CURRENT RATIO:-
Current ratio is ratio of current asset & current liabilities. This ratio is used to indicate
OPTCL’s ability to meet its current obligations as and when due out of its current
assets.

CURRENT RATIO = CURRENT ASSET / CURRENT LIABILITIES

Year 2008-09 2009-10 2010-11

Current Ratio 0.86 0.61 0.52

Interpretation:
The above table showing that the current ratio of OPTCL for 3 years from 2008-09 to
2010-11 is not satisfactory and not in a good financial position to pay its current
obligation as and when they due. According to the thumb rule, the current ratio
should be 2:1 but there is no such year in which the current ratio of OPTCL is nearer
to two or more than two. So the effort must be made by the management to make it
more than two or nearer to two by increasing the current assets.

58
LIQUID RATIO / ACID TEST / QUICK RATIO:
Liquid assets consist of current asset except closing stock (inventories) and prepaid
expenses. It tells about actual possible return ability of OPTCL.

Year 2008-09 2009-10 2010-11

Liquid Ratio 0.75 0.50 0.40

Interpretation:
The thumb rule of this is 1:1 and the above table showing that the liquid ratio of
OPTCL for 3 years from 2008-09 to 2010-11 and it is good for the company to pay
short term obligation without depending upon stock. Though the trend is irregular,
but sometimes nearer to 1, we can safely rely on the company’s ability.

58
ABSOUTE LIQUID RATIO:
This is the ratio of absolute liquid asset which consist of cash plus marketable
securities and Current Liabilities.

Year 2008-09 2009-10 2010-11

Absolute Liquid ratio 0.12 0.09 0.07

Interpretation:
The thumb rule of this ratio is 1:2 and the above table showing that the cash ratio of
OPTCL for 3 year is not quite satisfactory. There is no marketable security at all, only
cash and bank balance is not sufficient enough to meet its current obligation and
also the ratio is very less as compared to the thumb rule. So we cannot safely rely on
the company’s ability to pay short-term obligation by cash with in a very short period
of time.

58
Cash flow statement:-

(For the year ended 31 march 2012-13)

CURRENT YEAR PREVIOUS YEAR

PARTICULARS (2012-13) ( 2011-12)
Amount in (Rs) Amount in (Rs)

Profit/loss before tax& extraordinary items 20.78 27.64

Adjustment for

Appropriation to reserve and surplus

2.11 1.57
Depreciation
143.75 99.97
Excess Provision written back
(15.26)
Provision/write off against theft materials
- 62.72
OPERATING PROFIT BEFORE WORKING CAPITAL CHANGE
(A)
151.38 191.90
WORKING CAPITAL CHANGE

Stores and spares

(10.54) (15.98)
Sundry debtors
14.34 (27.69)
Other current assets
1.27 (1.46)
Loan and advances
(0.04) (11.81)
Current liabilities
25.18 0.40
Short term provisions
23.31 (83.33)
NET WORKING CAPITAL CHANGE (B)
53.52 (139.87)
DECREASE IN LONG TERM LIABILITIES (C)
12.58 68.86
CASH GENERATED FROM OPERATION (A+B+C)
217.48 120.88
CASH FLOW FROM INVESTING ACTIVITES:

Capital expenditure (Net of deposit work)

(191.75) (176.61)
Purchase of investment
(10.01) 11.34

58
CASH GENERATED FROM INVESTING ACTIVITIES (D)
(201.76) (165.27)
CASH FLOW FROM FINANCING ACTIVITIES:

Repayment of secured loan (37.24) (2.97)

Repayment of unsecured loan

(12.03) (17.27)
Subsidy received 5.58
2.27
Proceeds from shares capital
50.00 43.00
Cash flow from financing activities (E)
6.31 25.03
NET CASH GENERATED From all activities (A+B+C+D+E)
22.03 (19.36)
Cash and equivalent at the beginning of the year
38.58 57.94
Cash and equivalent at the end of the year
60.61 38.58

58
 CURRENT YEAR PREVIOUS YEAR
(2011-12) ( 2010-11)
PARTICULARS Amount in (Rs) Amount in (Rs)
Profit/loss before tax& extraordinary items
276,390,386 (127,312,985)
Adjustment for
Appropriation to reserve and surplus
15,745,838 20,836,286
Depreciation
999,653,929 1,239,063,901
Provision for wealth tax 47,481

Provision/write off against theft materials

627,198,931
OPERATING PROFIT BEFORE WORKING CAPITAL
CHANGE (A)
1,918,989,084 1,132,634,683
WORKING CAPITAL CHANGE

Stores & spares

(159,780,751) (175,213,491)
Sundry debtors
(276,921,381) (421,898,654)
Other current assets
(6,438,311)
(14,643,989)
Loan and advances
(118,127,468) 1,177,920,033
Current liabilities
4,023,237 272,722,589
Provisions
(833,278,170) (65,707,207)

NET WORKING CAPITAL CHANGE (B) (1,398,728,522) 781,384,959

CASH GENERATED FROM OPERATIONS (A+B) 520,260,562

1,914,019,641
CASH FLOW FROM INVESTING ACTIVITIES:

Capital expenditure(Net deposit work)

(1,766,131,772) (1,647,982,119)
Redemption of investment
113,400,000

CASH GENERATED FROM INVESTING ACTIVITIES (1,652,731,772) (1,647,982,119)

(C)
CASH FIOW FROM FINANCING ACTIVITIES:

Repayment of secured loan

(29,706,175) (1,088,034,380)

58
Repayment of unsecured loan
(172,720,000) (45,121,152)
Grant against cyclone repair works 22,784,844 -

Increase in long term other liabilities

688,552,379 -
Proceeds from share capital
430,000,000 719,445,000

CASH FLOW FROM FINANCING ACTIVITIES (D)

938,875,048 (413,710,532)
NET CASH GENERETED From all Activities (A+B+C) (193,596,162)
(147,673,010)
Cash and cash equivalent at the beginning of the
year 579,433,199 727,106,129
Cash and equivalent at the end of the year
385,836,955 579,433,119

(For the year ended 31st march 2011)

PARTICULARS CURRENT PREVIOUS

YEAR(2010-11) YEAR(2009-10)
AMOUNT IN (Rs) AMOUNT In (Rs)
Profit/Loss before tax & extra ordinary items (127,312,985) (713,717,644)

Adjustment for:    

Appropriation to reserve and surplus 130,996,775 1,183,639,044

Interest and finance charges 424,377,484 541,601,198

Depreciation 1,239,063,901 1,082,203,592

Preliminary expenses W/O - 3,026,423

Excess Provision Written back - (1,040,087,510)

Interest income (42,844,898) (45,513,310)

Provision for wealth tax 47,481 27,846

Provision/Write off against theft materials 1,159,214 1,522,603

Provision for obsolete stock-stores etc. - -

Bad & doubtful debt 81,205,348 44,768,652

Provision for fringe benefit tax - -

Operating profit before working capital 1,706,692,319 1,057,470,893

change(A)
     

58
Working capital change:    

Stores and spares (176,372,705) (162,059,785)

Sundry debtors (503,104,002) (45,302,877)

Other current assets (6,438,311) (5,943,581)

Loans and Advances 1,177,920,033 1,203,471,087

Current Liabilities 272,722,589 49,359,037

Provisions (65,707,207) 1,918,752,382

Net working capital changes (B) 699,020,397 2,958,276,263

Cash generated from operations (A)+(B) 2,405,712,716 4,015,747,156

     

Cash flow from investing activities:    

Capital expenditure(CAPEX) (1,773,572,529) (934,157,641)

Interest received Revenue 42,844,893 45,513,310

Cash Generated from investing Activities( C ) (1,730,727,631) (888,644,331)

     

Cash flow from financing activities:    

Proceeds from secured loan (1,088,034,380) (1,064,124,474)

Proceeds from unsecured loan 2,034,878,848 323,910,165

Interest paid (2,488,947,563) (2,616,802,137)

Proceeds from share capital 719,445,000 50,000,000

Cash flow from financing activities (D) (822,658,095) (3,307,016,446)

     
Net cash generated from all activities
(A)+(B)+( C )+(D) (147,673,010) (179,913,621)
Cash & Cash equivalent at the beginning of the
year 727,106,129 907,019,750

Cash & Cash equivalent at the end of the year 579,433,119 727,106,129

CASH FLOW STATEMENT:-

58
(For the year ended 31st March 2010)

CURRENT PREVIOUS
PARTICULARS
YEAR(2009-10) YEAR(2008-09)
Profit/Loss before tax & extraordinary items (713,717,644) (183,029,883)

Adjustment for:    

Appropriation to reserve and surplus 1,183,639,044 63,387,383

Interest and finance charges 541,601,198 972,454,617

Depreciation 1,082,203,592 1,097,437,879

Preliminary expenses W/O 3,026,423 3,026,423

Excess Provision Written back (1,040,087,510) (47,574)

Interest income (45,513,310) (69,009,008)

Provision for wealth tax 27,846 46,318

Provision/Write off against theft materials 1,522,603 2,950,312

Provision for obsolete stock-stores etc. - -

Bad & doubtful debt 44,768,652 1,163,525

Provision for fringe benefit tax - 2,396,915

Operating profit before working capital change
1,057,470,893 1,885,983,078
(A)
     

Working capital change:    

Stores and spares (162,059,785) (44,604,328)

Sundry debtors (45,302,877) 3,781,016

Other current assets (5,943,581) (14,398,325)

Loans and Advances 1,203,471,087 (2,725,385,618)

Current Liabilities 49,359,037 428,803,928

Provisions 1,918,752,382 3,523,100,656

Net working capital charges (B) 2,958,276,263 1,163,735,296

Cash generated from operation (A)+(B) 4,015,747,156 3,049,718,374

     

Cash flow from investing activities:    

58
Capital expenditures(CAPEX) (934,157,641) (916,837,432)

Interest received : Revenue 45,513,310 69,009,008

Cash Generated from investing Activities ( C ) (888,644,331) (847,828,424)

   

Cash flow from financing activities:    

Proceeds from secured loan (1,064,124,474) (1,059,633,683)

Proceeds from unsecured loan 323,910,165 (69,582,948)

Interest paid (2,616,802,137) (887,089,752)

Proceeds from share capital 50,000,000 230,555,000

Cash flow from financing activities (D) (3,307,016,446) (1,785,751,383)

     
Net cash generated from all activities
(179,913,621) 416,138,567
(A)+(B)+( C )+(D)
Cash & Cash equivalent at the beginning of the year 907,019,750 490,881,183

Cash & Cash equivalent at the end of the year 727,106,129 907,019,750

The cash flow statement shows that the company is having unfavorable cash balance in the
year 2009-10 and 2010-11 as per net cash generated from different sources such as cash
flow from operating activity & investing activity, but in the year 2008-09 the company is
having a favorable balance from the same activity. This is only due to the bad investment
policy of the management which has affected the total current asset of the organization as a
whole and the management must have to look forward to it.

58
 CHAPTER – 6
FINDING, SUGGESTION & CONCLUSION

58
 FINDINGS

 From the last few years the tariff on electricity has not increased. It’s due to
the factors like socio-economic factors, political factors etc. But except this the
price of all most all the items is increasing day to day. As govt. has decided
that the tariff cannot be increased, it is only due to the presence of some
excellent mind and hard working personals in the management that the
company is running smoothly for the past few years and is also meeting its
dues in time.
 Reserve and surplus of the organization has increased. As OPTCL has more
reserves and surplus, it can meet the uncertain situations as and when
required.
 The company has got huge amount of fixed asset, which is a good sign.
 The company has not defaulted in repayment of dues to various institutions.
 The working capital position of the company is not satisfactory. Especially in
the year 2009-10 net working capital is very low.
 The company is showing aggressive approach in collecting debts.
 The sales and cost of sales are also increasing at a constant rate in the last 4
year of the study.
 Net current asset position is not good as compared to other assets and
especially current liability.
 The profitability position of the organization is not good.
 The company is maintaining its inventory properly.
SUGGESTION

OPTCL is the soul of Odissa’s power transmission and is playing a pivotal role in
making surplus power consumption state through efficiently administering the system
58
of transmission. For improvement of organization’s profitability, much emphasis is
needed to improve the better working capital management by decreasing the current
liabilities through reducing of unplanned overhead expenses. In such process,
current assets position will be improved through collection of revenue from power
transmission as well as recovery of past dues from consumers, Govt. and other
agencies etc. The company should give more attention on increasing its collection of
revenue from wheeling of power and should give more emphasis to curtail
unplanned expenses to decreases the loss. Further, the management should focus
on shortening its average collection period by changing its credit terms and
conditions.

 The company should invest more in current assets instead of gross block. If
the company will give emphasis on investment in current assets then it will
increase the liquidity position of the company.
 The proportion of the current assets to total assets is very low, so the
company should have to take some adequate measures to increase it.
 The management should generate a systematic financial plan. It should get
detailed view of the operations; find out the financial requirement on accounts
of operation by understanding the different financial statements.
 There must be a systematic plan to collect the payments from the distribution
companies.
 The management should more concentrate on management of current assets
& minimize current liabilities.
 There should be more capital infusion in this company by the govt. of Orissa,
Ministry of Power because it will increase the working capital and also the
capital in OPTCL .As in this stage it needs more capital for its day to day
operation.
 In order to increase the profitability of this concern if govt. increases the tariff
rate, then this company as well as other power sector companies will get
more profit in the future. So that they can meet with the demand side.

58
  The management should concentrate more on if there is any misuse of
working capital in current asset than fixed asset.
 The management should try to purchase its fixed assets from long term
sources not from current assets.

CONCLUSION
After examining the various financial aspects relating Working Capital Management
includes cases on financial forecasting, working capital and bank finance and
management of current assets such as cash, inventories and debtors. It covers
almost all the area of company like production, finance and marketing and also
personnel. Due to efficient of working capital management, it is noticed that
companies should maintained this position. Now the topic working capital financing
has acquired special importance in the power sector.

As this is a service oriented sector, the main motive is to provide service to all at a
very cheap cost it means which is easily affordable by all the consumers in the
society. Whatever may be the ratios indicated towards the power industry regarding
its efficiency to collect the payments, to provide the facility etc, but the main thing is
without the power industry no industry can work for a while. So in the service
industry the main purpose is to provide the service and those services which must be
avail by all the consumers in the society; if the firm manages their working capital in
more efficient ways. Management of working capital means “management of current
assets and current liabilities, and financing these current assets”. If these firms
properly manage their cash, accounts receivables and inventories in a proper way,
this will ultimately increase profitability of these companies. There is much to be
done about working capital in OPTCL in future.

58
 BIBLIOGRAPHY

To give a complete shape of the project report, the analysis has referred the
following Books, Articles & Websites.

TEXT BOOKS

1.Maheswari Dr S.N “Financial Management” ,Ninth edition,2006 Sultan Chand

&Sons, New Delhi

2. Pandey I.M., ”Financial Management”, Vikas Publishing House Pvt. Ltd. 8 th Edition
1999.

3. Prasanna Chandra, “Financial Management”, Fourth edition 1999, Tata Mc.graw

hill publishing company ltd, New Delhi.

4. Gupta, Sashi.,“Financial Management”, 4 th edition,2007, KalyaniPublisher, New

Delhi

ARTICLES:

58
An overview of working capital management and corporate financing

Working capital management

Annual Report from 2008 to 2013(Publisher OPTCL

WEBSITE:

www.optcl.co.in

www.google.com

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