BHEL FINAL Project

WORKING CAPITAL MANAGEMENT
CHAPTER - I
INTRODUCTION
S.D.G.S COLLEGE HINDUPUR Page 1

PROFILE OF THE ORGANISTION
BHARTH HEAVY ELECTRICAL S LIMITED
BHEL is one of the pioneers in engineering industries in the world. The vital
Role played by the BHEL today in the country is the mark of its continuous
efforts to improve the service in the nation by consultancy, manufacturing and
offering services in power sector.
This success story of BHEL however goes back to 1956 when its fist plant
was setup in BHOPAL. Three more major plants in HARDWAR,
HYDERABAD AND THRICHIRAPALLI followed this. These plants have
been the core of BHEL’S efforts to grow and diversify and become one of the
most integrated power and industrial equipment manufactures in the world.
The company now has 14 manufacturing units, 8 service centres and 4 power
sector regional centres, besides project sites spread allover India and abroad.
BHEL manufactures over 180 products under 30 major product group and
meets the needs of core sector like power, industry , transmission, defence,
telecommunication, oil business etc. Its products have established an enviable
reputation for high quality and reliability. This is due to the emphasis placed
all along on design, engineering and manufacturing to international standards
by acquiring and adopting some of the best technologies developed in its own
R&D centers . BHEL has acquired ISO 9000 certification for quality
management and ISO 14001 certification for environment management.
SECTORS:
Power is the core sector of BHEL and comprises of thermal nuclear, gas,
diesel and hydro business. BHEEL has taken India from a position of total
dependence on over seas sources to complete self-reliance in power sector.
BHEL NOW has the capability to set up

power plants from the concept to commissioning . Today BHEL sets account for
nearly 65% of the total installed capacity in the country.
BHEL possesses the technology and capability to produce thermal sets with
super critical parameters up to 1000 MW unit rating and gas turbine generator sets up
to 240 MW rating. Co generation and combined cycle plants have been introduced to
achieve higher plant efficiencies.
BHEL manufactures 235 MW nuclear turbine –generator sets and has
commenced production of 500MW nuclear turbine generator sets.
INDUSTRY SECTOR:
BHEL contributes major capital equipment and systems like captive power
plants centrifugal compressors, drive turbines, heavy casting and forging etc. To the
core industries viz. Cement, Metallurgical, Mining, Refineries, Petro-chemicals etc.
BHEL has also emerged as a major supplier of controls and instrumentation system
for process industries and simulators for power plants and defense.
TRANSMISSION SECTOR:
Equipment for high voltage direct current system is being supplied for economic
transmission of bulk power over long distances. Series and shunts compensation
systems arte also manufactured to minimize transmission losses. BHEL also produces
high voltage transformers and SF6 switch gears up to 400 KV. India’s first indigenous
145 KV gas insulated switchgear was developed and commercialized by BHEL.
OIL SECTOR:
BHEL has been supplying onshore drilling rigs, X_MAS tree valves and
wellheads up to rating of 1000PSI to ONGC and OIL India. It can also supply sub sea
wellheads, super deep drilling rigs, desert rigs and heli rigs.
TRANSPORTATION SECTOR:
Most of the trains in the Indian railways are equipped with BHEL ‘s traction and
traction control equipment. India’s first under ground metro at Calcutta runs on
drives and controls supplied by BHEL . The company also manufactures electric
locomotives up to 5000 HP, diesel electric locomotive from 350HP . BHEL is geared
up to turkey execution of electric trolley bus system, light rail systems etc.

TELECOMMUNICATION:
BHEL also manufactures MAX-L, MAX-XL system days drawn C dot
technology and has plans to make other ranges of telecommunication equipment as
well.
NCES:
Technologies have been developed and commercialized for exploiting non-
conventional and renewable sources of energy to serve remote and rural areas . These
include photo voltaic cell , solar power based pumps , lighting and heating system .
BHEL has also emerged as a major manufacturer of wind electric generators up to
250 KW .
INTERANATIONAL OPERATIONS:
BHEL has exported its equipment and services to over 50 countries. In
Malaysia, BHEL has supplied 80% of the boiler besides several hydro sets and gas
turbines. BHEL equipments are in operation in Malta, Cyprus, Saudi Arabia , Oman,
Egypt, Cyprus, Libya, Greece, Bangladesh, Sri Lanka, Iraq, and Australia etc. BHEL
exports turkey power projects of thermal , hydro, abd gas based types, substations
projects, rehabilitation projects besides a wide variety of products like insulators,
transformers, valves, motors generators and services for renovation and
modernization and operation power station.
RESERCH AND DEVELOPMENT
The corporate R&D center at Hyderabad leads BHEL’s R&D efforts and the
unit R&d groups at the manufacturing divisions ably support it. B.H.E.L’s
Technology policy, which is based on the national technology policy, advocates a
judicious mix of indigenous efforts supported by selective collaborations in essential
areas. The company is thus able to continuously upgrade its technology and product
design to contemporary standards.
BHEL is one of the few companies worldwide involved in development of

Integrated Gasification Combined Cycle (IGCC) technology which would usher in
clan coal technology BHEL R&D efforts have produced several new products Some
of the recent successful R&D products are automated storage retrieval systems

HUMAN RESOURCES DEVELOPMENT

The greatest strength of B.H.E.L is its highly skilled and committed people
Every employee is given equal opportunity to develop himself and improve his
position continuous training and retraining a positive work culture and participative
style of management have led to the development of a motivated work force and
enhanced productivity and quality
GROWTH OF B.H.E.L HYDERABAD:

Situated thirty kilometers away from Hyderabad city the sprawling B.H.E.L complex
at R.C. puram came into existence in 1963 this plant was originally setup to
manufacture 1.5 to 30,60,110M.W Turbo sets for Thermal projects
Later on the unit has diversified in the fields of manufacturing Compressors for
Fertilizers, Petrochem &oil Refineries During 1980s plants has diversified on the field
of manufacturing oilrigs, Bowl Mills and heaters for oil sector and power plants.
In the later part of 1980’s with the technology from GE [U.S.A], the plant has
acquired the technology of manufacturing gas based Turbines which are lesser in cost
and faster in commissioning Manufacturing of gas Turbines was given more thrust in
1990’s because of lesser plan allocation for the thermal power plants of NTPC&SEB
Already the unit has supplied more than 60 Gas Turbines of different capacities
including exports to Malaysia Oman, Bangladesh and Sri Lanka etc Due to the quick
absorption of technology the product has emerged as a prime production as the unit
is concerned In the short time span BHEL Hyderabad While playing an active role in
the power sector has become an integral part of the industrial scene in India
BHEL has been completing in global tenders for number of multilaterally aided
power projects since 1977. over the years B.H.E.L success rate has been as high as
85%to 90%in such tenders

COMPANY VISION, MISSION AND OBJECTIVES
VISION:
A World class innovative competitive and profitable engineering enterprise
providing total business solutions
MISSION:
To be the leading engineering enterprise providing quality products systems
and services in the field of energy ,transportation, industry, infrastructure and other
potential areas
VALUES :
 Meeting commitments made to external & internal customers

 Foster learning , creativity & Speed of response.
 Respect for dignity &potential of individuals
 Loyalty and pride in the company.
 Team playing.
 Zeal to excel.
 Integrity and fairness in all matters.

OBJECTIVES
GROWTH:
To ensure a steady growth by enhancing the competitive edge of BHEL in
existing business , new areas and international operation so as to fulfill expectations
from BHEL
PROFITABILITY:
To provide a reasonable and adequate return on capital employed ,primarily

through improvements in operational efficiency, capacity utilization and productivity
and generate adequate internal resources to finance the companies growth.
CUSTOMER FOCUS:
To build a high degree of customer confidence by providing increased value

for this money through international standards of product quality, performance and
superior customer service.
PEOPLE ORIENTATION:
To enable each employee to achieve his potential, improve his capabilities,

perceive his role and responsibilities and participate and contribute positively to the
growth and success of the company.
To invest in human resources continuously and be alive to there needs.
TECHNOLOGY:
To achieve technology excellence in operations by development of indigenous

technologies to and efficient absorption and adaptation of imported technologies to
suit business needs and priorities and provide a competitive of the company

IMAGE:
To fulfill the expectations which stockholders like government as owner

employees customers an the country at large have from BHEL.
OBJECTIVES OF B.H.E.:
To Achieve and maintain a leading position as supplies of quality equipments system

and services to serve the national & International markets in the field of energy the
areas of interest would be conversion , Transmission, and Utilization& Market
leadership.

CHAPTER - II
Design OF THE STUDY

Need for the study
A number of industries for the past few years have been finding it difficult to
solve the increasing problems of adopting seriously the management of working
capital. Business concerns intent on developing their business have to use to the
utmost, their available resources for the improvement and development of the
business, there by enabling them profits.
OBJECTIVES OF THE STUDY
The main objective of the study is to focus on the working capital

management of BHEL with a view to find out the effective utilization of working
capital components in the organization. The study is more specifically aimed:-
1. To study the existing system of working capital management in BHEL.
2. To examine the feasibility of present system of managing cash, debtors and
inventory in BHEL
3. Suggesting a better way if any for improving management of working capital.
4. To analyze the financial performance of the company with reference to its
working capital components.

SOURCES OF DATA
The data is collected from the following sources.
1 Five years annual reports of BHEL from 2008to2013.
2 Interaction with the related finance departments.
3 Ten years financial data of BHEL and consolidation statements.
4 Past five years profit and loss A/C and Balance sheet of BHEL.
METHODOLOGY AND TECHNIQUES
1 The working capital management mechanism is studied in detail.
2 The various factors of working capital management are studied in detail.
3 The existing scenario of debtors management, collection period , cash

system , inventory policies were studied in familiarize with the company
policies.
4 Sales system, inventory procurement system was studied to correlate with the
working capital management components.
5 Activities regional operating divisions as well as power sector , Industrial

sector and international operational divisions were studied in depth to analyze
the bills receivable system ,sales and debtors.

DESIGN OF STUDY
Working capital management is of vital importance to an

organization like BHEL which deals customers like state electricity boards
private industries and public sectors. Even though its internal resources for
diversification and for expansion projects supported most of its working
capital requirement they have designed working capital management by
keeping the nature of the industry and its product life cycle.
The design of study is as follows:
1. Streamlining of cash inputs.
2. Forecasting of material requirements.
3. Keeping the tracks of system of centralize cash collections.
4. Computerized bill passing system and customer payment schedules.
5. Existing inventory procurement system for both indigenous nature

and
import consignment.

SCOPE OF THE STUDY
The scope and period of study is restricted to the following.
1. The scope is limited to the operations of BHEL.
2. The information obtained form the primary and secondary sources

were limited to BHEL.
3. The profit and loss A/C, the balance sheets were of last five years.
4. Comparison analysis was done in comparison of its sister units.

CHAPTER - III
THEORITICAL FRAMEWORK


Working capital management is an integral part of overall corporate management . To
a financial manager, a working capital spare throws a welcome challenge and
opportunity . Working capital management the twin objectives of working capital
management are profitability and liquidity. Investment in current as well as long term
assets have to be undertaken so as to offer the most satisfactory return to share
holders. The goal of liquidity is to ensure that a company satisfies financial
obligations and continues as going concern. Profitability and liquidity frequently
conflict with each other. Attempts to produce the maximum profitability out of
various elements of working capital do create severe liquidity problems. At the same
time , over – concentration on liquidity does dilute profits. Working capital
management establishes the best possible trade – off between the profitability of net
current assets employed and the ability to pay current liabilities as they fall due. This
implies a clearly designed risk policy to determine the required liquidity level.
C0NCEPTS OF WORKING CAPITAL
There are two concepts of working capital
(i) Gross working capital

(ii) Net working capital.
In the broad sense , the term working capital refers to the Gross working capital and
represents the amount of funds invested in current assets. 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.
In a narrow sense , the term working capital refers to the net working capital. Net
working capital is the excess of current assets over current liabilities.
WORKING CAPITAL = CURRENT ASSETS - CURRENT LIABILITIES

Net working capital may be positive or negative. When the current assets
exceed the current liabilities the working capital is positive and negative working
capital results when the current liabilities are more than the current assets. Current
liabilities are those liabilities which are intend to be paid in the ordinary course of
business within a short period or normally one accounting year out of the current
assets or the income of the business.
The gross working capital concept is financial or going concern concept

whereas net working capital is an accounting concept of working capital. These two
concepts of working capital are not exclusive; rather both have their own merits.
Gross concept is very suitable to the company form of organization where the is a
divorce between ownership, management and control. The net concept of working
capital may be suitable only for proprietary form of organizations such as sole – trader
or partnership firms. However , it may be made clear that as per the general practice
net working capital is referred to simply as working capital.
KINDS OF WORKING CAPITAL:
Working capital may be classified into two ways.
(a) On the basis of concept

(b) On the basis of time.
On the basis of concept , working capital is classified as
1) Gross working capital

2) Net working capital .
On the basis of time, working capital is classified as
1) Permanent or Fixed working capital

2) Temporary or Variable working capital.

Permanent 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. There is always a minimum level of current assets , which is
continuously required by the enterprise to carry out its normal business operation. For
example , every firm has to maintain a minimum level of raw materials , work-in -
process , finished goods and cash balance . The minimum level of current assets is
called fixed working capital.
Temporary working capital:
Any amount over and above the permanent level of working capital is temporary ,
fluctuating or variable working capital . This portion of the required working capital
is needed to meet fluctuations in demand consequent upon changes in production and
sales as a result of seasonal changes .
ADVANTAGES OF ADEQUATE WORKING CAPITAL
Working capital is the lifeblood and nerve center of business . Just as a 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. The main advantages of
maintaining adequate amount of working capital are as follows.
a. Solvency of the business : Adequate working capital helps in maintaining

solvency of the business by a providing uninterrupted flow of production.
b. Goodwill: Sufficient working capital enables a business concern to make

prompt payments and hence helps in creating and maintaining goodwill.
c. Easy loans: A concern hacking adequate working capital, high solvency and
good credit standing can arranged loans from banks and others on easy and
favorable terms.
d. Cash Discounts: Adequate working capital also enables a concern to avail cash
discounts on the purchases and hence it reduces costs.

e. 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, increase their efficiency, reduces the wastages and costs and
enhances production and profits.
f. Regular supply of raw materials: Sufficient working capital ensures regular

supply of raw materials and continues the production.
g. 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.
h. Quick and Regular return on Investments: Every investor wants to pick and
regular return on investments. Sufficient 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 .
i. High morale: Adequacy of working capital creates an environment of security ,

confidence and high morale and creates overall efficiency in a business
DISADVANTAGES OF EXCESSIVE WORKING CAPITAL
Every business concern should have adequate working capital to run its business
operations. It should have neither redundant or excessive working capital nor
inadequate nor shortage of working capital. Both excessive as well as short working
capital positions are bad for any business.
1. Excessive working capital means idle funds which earn no profits for the
business and hence the business cannot earn a proper rate of return on its
investments.
2. When there is redundant working capital, it may lead to unnecessary purchasing

and accumulation of inventories causing more chances of theft, waste and
losses.

3. Excessive working capital implies excessive debtors and defective credit policy
which may cause higher incidence of bad debts.
4. It may result into overall inefficiency in the organization.
5. When there is an excessive working capital relation with the banks and other
financial institutions may not be maintained.
6. Due to low rate of return on investments the value of shares may also fall.
DISADVANTAGES OF INADEQUATE WORKING CAPITAL
1. A concern , which has inadequate working capital , cannot pay its short- term
liabilities in time. Thus it will loose its reputation and shall not be able
to get good credit facilities.
2. It cannot buy its requirements in bulk and cannot avail of discounts, etc.
3. It becomes difficult for the firm to exploit favorable market conditions and
undertake profitable projects due to lack of working capital.
4. The firm cannot pay day – to – day expenses of its operations and it creates
inefficiencies costs and reduces the profits of the business.
5. It becomes impossible to utilize efficiently the fixed assets due to non –

availability of liquid funds.
6. The rate of return on investments also falls with the shortage of working capital.
FACTORS DETERMINING WORKING CAPITAL REQUIREMENTS

1. Natures or Character of Business
2. Size of business / Scale of Operations
3. Production Policy
4. Manufacturing Process
5. Working Capital Cycle
6. Rate of Stock turnover
7. Credit Policy
8. Rate of Growth of Business

9. Earning Capacity and Dividend Policy

10. Price Level Changes.
MANAGEMENT OF CASH
Cash Management is one of the key areas of working capital management .

Cash, the most liquid asset is of vital importance to the daily operation of business
firms. Crucial for the solvency of the business it is referred to as the ”life blood of
business” Firm needs cash to meet the needs of daily transactions, to take advantages
of unexpected investment opportunities . While cash serves these functions , it is an
idle resource with an opportunity cost. The liquidity provide by the holding cash is at
the expense of profits that could accrue form alternative investment opportunities.
Hence , the firm should plan and control cash carefully.
OBJECTIVES:
 Bringing the company’s cash resources within control as quickly and efficiently
as possible.
 Achieving the optimum conservation and utilization of the funds.
Accomplishing the first goal requires , establishing accurate, timely forecasting and
reporting system, improving cash collections and disbursements and decreasing the
cost of moving funds among affiliates. Minimizing the required level of cash
balances, making money available when and where it is needed and increasing the
risk – adjusted return on those funds that can be invested achieve the second
objective.
Cash management deals with the following.
1. Cash inflows and outflows
2. Cash flows within the firm
3. Cash balance held by the firm at a point of time.
Cash Management needs strategies to deal with following various facets of cash:

CASH PLANNING: It is a technique to plan and control the use of cash. A

projected cash flow statement may be prepared, based on the present business
operations and anticipated future activities. The cash inflows from various sources
may be anticipated and cash outflows will determine the possible uses of cash.
CASH FORECASTS & BUDGETING: A cash budget is the mist important device
for the control of receipts and payment of cash. A cash budget is an estimate of cash
receipts and disbursements during a future period of time. It is a forecast of expected
cash intake and outlay.
Normally a cash budget consists of
1. Cash collections
2. Cash payments
3. Cash balances
OPTIMUM CASH BALANCE: A firm has to maintain a minimum amount of cash

for settling the dues in time. By preparing cash budget we determine the optimum
cash balance. If a firm maintains less cash balance then its liquidity position will be
weak. If a higher cash balance is maintained then an opportunity to earn is lost.
Investment of Surplus Funds: There are , sometimes surplus funds with the
companies , which are required after sometime. These funds can be employed in
liquid and risk free securities to earn some income. There are number of avenues
where these funds can be invested.
 Unit 164 Scheme
 Ready forwards
 Investment in Marketable Securities
 Badla Financing
 Negotiable Certificate of Deposit

CASH MANGEMENT OF BHEL,
BHEL follows a centralized cash management system. Cash collected in the form of
cheques, DD’s made by the various agencies are deposited in the nearest bank and
transmitted to corporate office at Delhi through banks.
The Head office allocates the funds to the various units to the various units depending
upon the requirement. Cash budgets are prepared weekly and monthly.
Weekly forecasts are made regarding cash inflows, which include the cash form
customers export incentives etc, and cash outflow, which includes materials, excise
duty, sales taxes and personal payment.
According to latest estimates 14 banks, 9 nationalized and 5 company’s banks are

holding the accounts of BHEL.
DEPARTMENT: The cash / bank section shall be under the charge of an official of
finance and accounts department not below the rank of accounts officer for the
purpose of control and supervisors of the section activities.
RECORDS MAINTAINED IN CASH SECITON :
1. CHEQUE DRAWN REGISTER (FORM CBM 4) :- for accounting the

payment made by the cheques.
2. PAYMENT BANK BOOK (FORM CBM 5) : - for accounting the payment

the debits made through the bank account.
3. RECEIPT BANK BOOK (FORM CBM 6) :- recording all deposits made

into the bank account and all credited directly made by bank.
4. PAYMENT CASH BOOK ( FORM CBM 7) :- to record payment made by

way of cash

5. RECIPT CASH BOOK (FORM CBM 8) :- all money received by cheques

or DD over the cash counter and cheques drawn in favor of authorized
cashier / officer for payment of bills are all accounted for in this bank.
OPENING OF BANK ACCOUNT :-
Current and cash credit accounts in the name of BHEL may be opened by with the
SBI or subsidiaries or any nationalized banks or any other bank approved by the
government with the approval of BOD finance.
BANK ACCOUNT IN FOREIGN COUNTRIES ;-
1. In local currency at the place of location of the site or hand.
2. In US $ or Pound sterling etc., either in the foreign countries or at some other

place in any country.
MANAGEMENT OF ACCOUNTS RECEIVABLES
Accounts receivables represent an extension of credit to customers, allowing them a

reasonable period of time, in which to pay for the goods / services which they have
received. The receivables represent an important component of the current assets of a
firm. Firms grant trade credit to customers, because they expect the investment in
receivables to be profitable, either by expanding sales volume or by retaining sales
that otherwise would be lost to competitors.
A planned credit – policy can assist in increasing corporate profitability. When

considering relaxing credit terms, management must weigh up the profits of increased
sales with the cost of additional investment in debtors.
OBJECTIVE:
The objective of receivables management is to promote sales and profits until that
point is reached where the return on investment in further funding of receivables is
less than the cost of funds raised to finance that additional credit.
The specific costs and benefits, which are relevant to the determination of the
objective of receivable management , are :

COSTS:
The major categories are costs associated with the extension of credit and accounts
receivables are :
1. COLLECTION COST:
These costs are administration costs incurred in collecting the receivables form the
customers to whom credit sales have been made.
2. CAPITAL COST:
The increased level of accounts receivable is an investment in assets. They have to be

financed thereby involving a cost. The cost on the use of additional capital to support.
Credit sales, which apparently could be profitably employed else where, are therefore
a part of the cost of extending credit or receivables.
3.DELINQUENCY COST:
This is the cost, which arises out of the failure of the customer to meet their
obligations when payment on credit sales becomes due after the expiry of the period
of credit.
4.DEFAULT COST : Sometimes the firm may not be in a position to recover the
dues because of the inability of the customers, such debts are treated as bad debts and
are written off as they cannot be realized, such costs are known as default costs
associated with credit sales and accounts receivables.
CREDIT POLICIES :
The credit policy of a firm providing the framework to determine:
 Whether or not to extend credit to a customer and
 How much credit to extend.
The credit policy decision of a firm has two broad dimensions :
1. Credit standards and

2. Credit analysis.
A firm has to establish and use standards in making credit decisions, develop
appropriate sources of credit information and methods of credit analysis.
CREDIT TERMS :
The second decision area in accounts receivables management is the credit terms. The
speculations under which goods are sold on credit are referred to as credit terms.
Credit terms has three components :
A. CREDIT PERIOD : Time duration for which trade credit is extended.
B. CASH DISCOUNT : The amount which a customer can take advantage of .
C. CASH DISCOUNT PERIOD : It refers to the duration during which the

discount can be availed of.
COLLECTION POLICIES :
The third area in the accounts receivables management is collection policies. These
policies cover two aspects:
1. Degree of effect to collect over dues
2. Type of collection effects.
The collection policy should aim at accelerating collections form slow payees and
reducing bad debt losses.
RECEIVABLES MANAGEMENT OF BHEL
There are totally 40 regional operating divisions present at various places which are
authorized by BHEL to collect the credit amount from customers and deposit the
same in the bank.
The ROD, which is nearest to the customer , will go and collect the amount from the
customer. The total debtors are classified into collectable debtors and deferred

debtors collectable debts are further classified into collectable as verified under
verified, old and withheld collectable debts.
The collectable and deferred debts are reviewed periodically, may be fortnightly or
monthly. Such review will be done at the meeting where all the department heads are
present.
During such meeting the concerned head of finance of head of commercial

department discuss the necessary steps to be taken to collect cash and reduce
constraints. The actual cash collected is compared with the budgeted and outstanding
balance.
MANAGEMENT OF INVENTORY
Inventory is the third major component of current assets. Inventories are stock of
product a company is manufacturing for sale and components that make up the
product. Every enterprise needs inventory for smooth running of its activities. It
serves as a link between production and distribution process. The various forms in
which inventories exist in a manufacturing company are raw materials, work – in –
progress and finished goods.
RAW MATERIALS:
Raw materials inventories are those units, which have been purchased for converting
into finished product through the manufacturing process.
WORK – IN – PROGRESS :
They are semi – manufactured products. They represent products that need more work
before they become finished product for sale. It includes raw materials,
subcontracting costs and various manufacturing costs.
FINISHED GOODS:
They are those inventories , which are completely manufactured products, ready for
sale.

OBJECTIVES:
The main objectives of the inventory management are operational and financial. The
operational objectives means that the materials and spares should be available in
sufficient quantity so that work is not interrupted for want of inventory. The financial
objectives means that investments in inventories should not remain idle and minimum
working capital should be locked in it.
The following are the objectives of the inventory management :
1. To ensure continuous supply of materials, spares and finished goods.
2. To avoid both overstocking and under stocking of inventory.
3. To maintain investments in inventories at the optimum level as required by the

operational and sales activities.
4. To keep materials cost under control.
5. To eliminates duplication in ordering and replenishing stocks.
6. To design proper organization for inventory management.
7. To minimize losses through deterioration, pilferage, wastages and damages
8. To ensure right quality goods at reasonable prices.
9. To ensure perpetual inventory control so that materials shown in stock ledgers

should be actually lining the stocks.
10. To facilitate furnishing of data for short – term and long – term planning and
control of inventory.
INVENTORY MANAGEMENT OF BHEL
The BHEL management both at the unit and corporate level every month reviews
inventory. All the functional heads are called for minutes and the inventory holdings
are discussed in detail at the meeting every month. BHEL purchases the material

when the customer places the order, since the products of BHEL are tailor – made to
the customer’s requirements. After purchasing the raw materials, which is mostly,
steel will be stocked at one place and all others procured against production orders are
stored. Depending upon the requirement in various production departments the raw
materials is sent to the respective departments or production shops.
When the order is placed for raw material certain raw material is in transit, such raw
material is called s raw material - in – transit. E.g.: raw material on overseas.
The raw material can be transferred from one unit to another unit or form one
department to another is called transfer - in – transit . It is nothing but the transfer of
raw material among the intra – firm units of BHEL.
The raw material , which is in production process, is called work - in – process. The
work – in- process becomes finished goods inventory. The finished goods should not
be kept for a longer time. They should be sold off to clear off the entire inventory.
However, FG inventory is not there for BHEL, since production is mainly done on
customers order and specifications. The raw material is purchased and the whole
process is repeated again which we call it as Inventory Cycle.

CHAPTER - IV
DATA ANALYSIS
AND
INTERPRETATION

CURRENT RATIO
CURRENT RATIO= CURRENT ASSETS

CURRENT LIABILITIES
YEAR CURRENT ASSETS CURRENT CURRENT

LIABILITIES RATIO
2009-2010 60282 40897 1.47
2010-2011 65385 44368 1.47
2011-2012 70024 45745 1.53
2012-2013 73069 41630 1.75
2013-2014 80538 47159 1.7
Chart Title
100000
CURRENT ASSETS 80538
80000
CURRENT LIABILITIES 47159
60000
Axis Title 40000
CURRENT RATIO 1.7
20000
0 CURRENT LIABILITIES
2009- 2010-
2010 2011 2011- 2012- 2013-
2012 2013
2014
INTERPRETATION:
In BHEL there has been study increase in the current ratio during the past five years up to the year
2012-2013 and in the year 2014it has decreased slightly. The increase in the current ratio represents an
improvement in the liquidity position of BHEL, that it has the ability to meet its current obligations in
time as and when they become due .A ratio equal or near to the rule of thumb 2:1 i.e current asset

double the current liabilities is considered to be satisfactory. Thus the liquidity position of BHEL is
satisfactory.
QUICK RATIO
QUICK RATIO= QUICK ASSETS

CURRENT LIABILITIES
YEAR QUICK CURRENT QUICK

ASSETS LIABILITIES RATIO
2009-2010 43149 40897 1.05
2010-2011 47197 44368 1.06
2011-2012 52361 45745 1.14
2012-2013 55415 41630 1.33
2013-2014 60516 47159 1.28
QUICK RATIO
120000
QUICK RATIO 1.28
100000
80000 CURRENT LIABILITIES 47159
60000
Axis Title
40000
QUICK ASSETS 60516
20000
0
2009- 2010- 2011- 2012- 2013-
2010 2011 2012 2013 2014
Axis Title
INTERPRETATION:
In BHNL at the corporate level the quick ratio increasing the trend during years up to the year 201-
2014 and in the year 2014 it has decreased slightly. The increase in the current ratio represents an
improvement in the liquidity position of BHEL, that it has the ability to meet its current obligations in
time as and when they become due .A ratio equal or near to the rule of thumb 1:1 i.e current asset
double the current liabilities is considered to be satisfactory. Thus the liquidity position of BHEL, as

inventories are not absolutely liquid. Thus corporate management of BHEL is able to meet its
current obligations.
DEBTORS TURNOVER RATIO
DEBTORS TURNOVER RATIO= NET SALES

AVERAGE DEBTORS
YEAR NET SALES AVERAGE DEBTORS

DEBTORS TURNOVER
RATIO
2009-2010 64713 31851 2.03
2010-2011 67946 32840 2.07
2011-2012 66340 37371 1.77
2012-2013 63478 41058 1.56
2013-2014 72866 43792 1.66
Chart Title
NET SALES
AVERAGE DEBTORS DEBTORS TURNOVER RATIO
72866
64713 67946 66340 63478
41058 43792
37371
31851 32840
1 2.03 2 2.07 3 1.77 4 1.56 5 1.66
2009-2010 2010-2011 2011-2012 2012-2013 2013-2014
INTERPRETATION:
In BHEL, the debtors turnover ratio decreased in the year
2013 when compare to the year 2012. The increasing value of debtors turnover ratio
implies, the more efficient is the management of debtors/sales or more liquid are the
debtors. Similarly, low ratio implies inefficient management of debtors or sales and
less liquid debtors.

AVERAGE COLLECTION PERIOD
AVERAGE COLLECTION PERIOD = 365 DAYS

YEAR DAYS DEBTORS TURNOVER AVERAGE

RATIO COLLECTION PERIOD
2009-2010
365 2.03 179
2010-2011
365 2.07 176
2011-2012
365 1.77 206
2012-2013
365 1.56 233
2013-2014
365 1.66 215
NET SALES
74000
72000
70000
68000
66000
64000
62000
60000
58000
2009-2010 2010-2011 2011-2012 2012-2013 2013-2014
NET SALES
INTERPRETATION:
The average collection period of BHEL has increased from the year
2010-2011 and decreased in the year2014.The average collection period indicates the
time taken to collect the money from debtors. If the average collection period is more
than the credit period granted to the debtors, it indicates liberal policy and the firm is
inefficient in collecting the dues .If the period is short, it means recoveries are made

promptly. BHEL at corporate level has to try to raise its debtor’s turnover ratio and
lower its collection period.
RAW MATERIAL INVENTORY RATIO
RAW MATERIAL INVENTORY RATIO = RAW MATERIAL CONSUMED

RAWMATERIAL
INVENTORY
YEAR RAW MATERIAL RAW MATERIAL RAW MATERIAL

CONSUMED INVENTORY INVENTORY
RATIO
2009-2010 261315 46437 5.62
2010-2011 281797 48657 5.79
2011-2012 262081 45089 5.81
2012-2013 285662 48133 5.93
2013-2014 307048 47088 6.52
NET SALES
74000
72000
70000
68000 NET SALES
66000
64000
62000
60000
58000
2009- 2010- 2011- 2012- 2013-
2010 2011 2012 2013 2014
INTERPRETATION:
Raw material inventory turnover ratio is considered good if
the ratio is higher which indicates increasing utilization of raw material. From the

above ratio it is clear that RMITR is high comparing to the last years i.e 5.62 to 6.52
as there is a proper utilization of raw materials.
RAW MATERIAL HOLDING PERIOD
RAW MATERIAL HOLDING PERIOD = RAW MATERIAL INVENTORY

RAW MATERIAL CONSUMPTION PER DAY

INVENTORY CONSUMPTION PER HOLDING
DAY PERIOD
2009-2010 46437 715.9 64
2010-2011 48657 772 63
2011-2012 45089 718 62
2012-2013 48133 782.6 61
2013-2014 47088 841.2 56
NET SALES
74000
72000
70000
68000 NET SALES
66000
64000
62000
60000
58000
2009- 2010- 2011- 2012- 2013-
2010 2011 2012 2013 2014
INTERPRETATION:
Raw material holding period shows that the holding period is
reduced from 64 days in 2009-2010 to 2013-2014, Which is shows that the raw
materials are efficiently utilized. The lower holding period it is good for the company.

WORK IN PROGRESS INVENTORY RATIO
WORK IN PROGRESS INVENTORY RATIO=COST OF PRODUCTION

WIP INVENTORY
YEAR COST OF WIP INVENTORY WIP INVENTORY

PRODUCTION RATIO
2009-2010 549054 79569 6.9
2010-2011 603766 78468 7.6
2011-2012 576431 84620 6.8
2012-2013 590802 108144 5.5
2013-2014 639760 107414 6
NET SALES
74000
72000
70000
68000 NET SALES
66000
64000
62000
60000
58000
2009- 2010- 2011- 2012- 2013-
2010 2011 2012 2013 2014
INTERPRETATION:
Work in process inventory turnover ratio of 2009-2010 is 6.9
is decreased to 6.0 in 2013-2014. But when compared to last year it has increased
from 5.5 to 6.0. The higher the ratio is better for the company.

WORK IN PROGRESS CONVERSION PERIOD
WORK IN PROGRESS CONVERSION PERIOD= WIP INVENTORY

COP PER DAY
YEAR WIP INVENTORY COST OF WIP CONVERSION

PRODUCTION PER PERIOD
DAY
2009-2010 79569 1504.2 52
2010-2011 78468 1654.1 47
2011-2012 84620 1579.2 53
2012-2013 108144 1618.6 66
2013-2014 107414 1752.7 61
NET SALES
74000
72000
70000
68000 NET SALES
66000
64000
62000
60000
58000
2009- 2010- 2011- 2012- 2013-
2010 2011 2012 2013 2014
INTERPRETATION:
Work in process conversion period is decreased from 52 days
in 2009-2010 to 47 days in 2010-2011. But the conversion period has increased in the

continuing year. When compared to 2012-2013 has decreased to 61 days in the year
2013-2014.
FINISHED GOODS INVENTORY RATIO
FINISHED GOODS CONVERSION PERIOD = FINISHED GOODS INVENTORY

COST OF GOODS PER DAY
YEAR FINISHED GOODS COST OF GOODS CONVERSION

INVENTORY SOLD PER DAY PERIOD
2009-2010 18428 1493 12
2010-2011 27772 1606 17
2011-2012 19430 1580 12.3
2012-2013 20898 1658 12.6
2013-2014 18562 1814 10
NET SALES
74000
72000
70000
68000 NET SALES
66000
64000
62000
60000
58000
2009- 2010- 2011- 2012- 2013-
2010 2011 2012 2013 2014
INTERPRETATION:
The finished goods conversion period has decreased from 12
days during the year 2010 to 10 days in the year 2014. The lower conversion period it
is good for the company.

CREDITORS TURNOVER RATIO
CREDITORS TURNOVER RATIO = PURCHASES

AVERAGE CREDITORS
YEAR PURCHASES AVERAGE CREDITORS

2009-2010 26131 6887 3.79
2010-2011 28180 9772 2.88
2011-2012 26208 13671 1.92
2012-2013 28566 15380 1.86
2013-2014 31330 17394 1.8
NET SALES
74000
72000
70000
68000 NET SALES
66000
64000
62000
60000
58000
2009- 2010- 2011- 2012- 2013-
2010 2011 2012 2013 2014
INTER PRETATION:

The creditors turnover ratio of BHEL has been continuously

decreasing from the year 2010-2014. Hence, it is a positive sign to the company. The
management should try to reduce this by adopting proper payment policies.
DEBTORS TURNOVER RATIO= NET SALES

AVERAGE DEBTORS
YEAR NET SALES AVERAGE DEBTORS DEBTORS

TURNOVER
RATIO
2009-2010 148090 63264 2.34
2010-2011 128866 71736 1.79
2011-2012 132265 84558 1.56
2012-2013 131957 84719 1.55
2013-2014 153200 84940 1.8
NET SALES
74000
72000
70000
68000 NET SALES
66000
64000
62000
60000
58000
2009- 2010- 2011- 2012- 2013-
2010 2011 2012 2013 2014
INTERPRETATION:

This ratio has shows a continuous decrease from the year

2010-2012 and there is a slight increase in the year 2014. The decrease in the ratio
implies inefficient management of debtors or sales and less liquid debtors. Similarly,
the increasing value of debtors turnover ratio implies the more efficient in the
management of debtors or sales or more liquid are the debtors.
AVERAGE COLLECTION PERIOD
AVERAGE COLLECTION PERIOD = 365 DAYS

YEAR DAYS DEBTORS AVERAGE

TURNOVER RATIO COLLECTION
PERIOD
2009-2010 365 2.34 156
2010-2011 365 1.79 204
2011-2012 365 1.56 234
2012-2013 365 1.55 235
2013-2014 365 1.8 203
NET SALES
74000
72000
70000
68000 NET SALES
66000
64000
62000
60000
58000
2009- 2010- 2011- 2012- 2013-
2010 2011 2012 2013 2014
INTERPRETATION:

The average collection period has increased from the year

2010-2013 and it has decreased in the year 2014. The debtors’ turnover ratio of BHEL
(Hyderabad) has been decreasing over the years in the year 2010 it has slightly
increased. Hence, the BHEL (Hyderabad) should try to raise its turnover ratio and
lower its collection period.
INVENTORY TURNOVER RATIO
INVENTORY TURNOVER RATIO = COST OF GOODS SOLD

AVERAGE INVENTORY
YEAR COST OF GOODS AVERAGE INVENTORY

SOLD INVENTORY TURNOVER
RATIO
2009-2010 117647 46511 2.53
2010-2011 103340 41237 2.5
2011-2012 110815 41807 2.65
2012-2013 124808 50175 2.49
2013-2014 139702 57368 2.43
NET SALES
74000
72000
70000
68000 NET SALES
66000
64000
62000
60000
58000
2009- 2010- 2011- 2012- 2013-
2010 2011 2012 2013 2014
INTERPRETATION:
The ratio indicates an increase and decrease from the year
2010-2014. The increase in the ratio indicates efficient management of inventories

while decrease in the ratio implies inefficient management of inventories. Hence the
inventory level of BHEL (Hyderabad) is moderate.
RAW MATERIAL HOLDING PERIOD

RAW MATERIAL HOLDING PERIOD = RAW MATERIAL INVENTORY
RAW MATERIAL CONSUMPTION PER DAY

INVENTORY CONSUMPTION PER HOLDING
DAY PERIOD
2009-2010 10135 207.78 49
2010-2011 9229 155.21 59
2011-2012 8461 189.31 45
2012-2013 9446 228.18 41
2013-2014 12060 229.76 42
NET SALES
74000
72000
70000
68000 NET SALES
66000
64000
62000
60000
58000
2009- 2010- 2011- 2012- 2013-
2010 2011 2012 2013 2014
INTERPRETATION:

Raw material holding period shows that the holding period is

reduced from 49 days in 2009-2010 to 42 days in 2013-2014, which shows that the
raw materials are efficiently utilized. The lower the holding period it is good for the
company.
WORKIN PROGRESS INVENTORY RATIO

WORKIN PROGRESS INVENTORY RATIO = COST OF PRODUCTION
WIP INVENTORY
YEAR COST OF WIP WIP
PRODUCTIO INVENTORY INVENTORYRATIO
N
2009-2010 118618 22115 5.36
2010-2011 105205 16624 6.32
2011-2012 111657 19565 5.71
2012-2013 123209 28015 4.39
2013-2014 138088 29563 4.67
NET SALES
74000
72000
70000
68000 NET SALES
66000
64000
62000
60000
58000
2009- 2010- 2011- 2012- 2013-
2010 2011 2012 2013 2014
ITERPRETATION:

Work in process inventory turnover ratio of 2009-2010 is 5.36

is decreased to 4.67 in 2013-2014. But compared to last year it has increased from
4.39 to 4.67.
WORKIN PROGRESS CONVERSION PERIOD
WORKIN PROGRESS CONVERSION PERIOD= WIP INVENTORY

COP PER DAY
YEAR WIP INVENTORY COST OF WIP

PRODUCTION PER INVENTORYRATIO
DAY
2009-2010 22115 324.98 68
2010-2011 16624 288.23 58
2011-2012 19565 305.9 64
2012-2013 28015 337.55 83
2013-2014 29563 378.32 78
NET SALES
74000
72000
70000
68000 NET SALES
66000
64000
62000
60000
58000
2009- 2010- 2011- 2012- 2013-
2010 2011 2012 2013 2014
INTERPRETATION:

Work in process conversion period is decreased from 83 days

in 2012-2013 to78 days in 2013-2014.
FINISHED GOODS INVENTORY RATIO
FINISHED GOODS INVENTORY RATIO= COST OF GOODS SOLD

FINISHED GOODS INVENTORY
YEAR COST OF FINISHED GOODS FINISHED GOODS

GOODS SOLD INVENTORY INVENTORY RATIO
2009-2010 117647 2338 50.24
2010-2011 103340 7408 13.71
2011-2012 110815 6195 18.02
2012-2013 124808 9048 13.98
2013-2014 139702 4669 30.57
NET SALES
74000
72000
70000
68000 NET SALES
66000
64000
62000
60000
58000
2009- 2010- 2011- 2012- 2013-
2010 2011 2012 2013 2014

INTERPRETATION:
The finished goods inventory ratio has decreased from 2010-
2014. But when compared to 2013 the ratio has increased in the year 2014.
CREDITORS TURNOVER RATIO= PURCHASES

AVERAGE CREDITORS
YEAR PURCHASES AVERAGE CREDITORS

CREDITORS TURNOVER
RATIO
2009-2010 7021 1369 5.13
2010-2011 5169 1383 3.74
2011-2012 6250 1668 3.74
2012-2013 7789 2101 3.71
2013-2014 7629 2614 2.92
NET SALES
74000
72000
70000
68000 NET SALES
66000
64000
62000
60000
58000
2009- 2010- 2011- 2012- 2013-
2010 2011 2012 2013 2014

INTER PRETATION:
The creditors turnover ratio of Hyderabad (BHEL) has been
continuously decreased from the year 2010-2014. Hence it is a good sign for the
company. The companies try to reduce this by adopting proper payment policies.
AVERAGE PAYMENT PERIOD

AVERAGE PAYMENT PERIOD = 365
YEAR DAYS CREDITORS AVERAGE PAYMENT

TURNOVER RATIO PERIOD
2009-2010 365 5.13 71
2010-2011 365 3.74 97
2011-2012 365 3.74 97
2012-2013 365 3.71 98
2013-2014 365 2.92 125
NET SALES
74000
72000
70000
68000 NET SALES
66000
64000
62000
60000
58000
2009- 2010- 2011- 2012- 2013-
2010 2011 2012 2013 2014
INTERPRETATION:

For BHEL (Hyderabad) creditors turnover ratio is increasing

from 2010-2014 and it is constant in the year2011-2014. It is highest in the year 2014.
Hence management should try to reduce this by adopting proper payment policies.
WORKING CAPITAL TURNOVER RATIO

WORKING CAPITAL TURNOVER RATIO= COST OF GOODS SOLD
WORKING CAPITAL
COST OF GOODS WORKING WORKING CAPITAL

YEAR SOLD CAPITAL TURNOVER RATIO
2009-2010 117647 54981 2.14
2010-2011 103340 68668 1.5
2011-2012 110815 79696 1.39
2012-2013 124808 91011 1.37
2013-2014 139702 82664 1.67
NET SALES
74000
72000
70000
68000 NET SALES
66000
64000
62000
60000
58000
2009- 2010- 2011- 2012- 2013-
2010 2011 2012 2013 2014
INTER PRETATION:

The working capital turnover ratio shows a continuous

decrease in the year 2010-2012. The decrease in the ratio implies that the efficiency
with which working capital is being used in BHEL, Hyderabad, has been on a
decreasing trend.
CHAPTER - V
FINDINGS
&
SUGGESTIONS

.FINDINGS AND SUGGESTIONS
1. The net working capital of BHEL is good. But the company’s working capital
turnover ratio shows the utilization of working capital is not satisfactory. It is
suggested that the company should concentrate on the management of current
assets and current liabilities more effectively.
2. By observing the material inventory, there has been a considerable increase in

the raw materials and the components. The inventory should be reduced to the
maximum possible extent by following procedures like “just in time”, import
substitution. As for as possible the raw material should be bought as and when
necessary.
3. BHEL is using the moving average method in valuing the stock. Apart from
this the LIFO and FIFO methods can be used for the purpose of stock
valuation.
4. Steps should also be taken to reduce the scrap, which has been increasing over
the years. Necessary measures should be taken for the disposal of the scrap as
soon as possible.
5. The debtors constitute nearly 50% of the total current assets. To the company
this is difficult to manage the accounts receivables. Company should collect
the debts as quickly as possible.

6. Company’s average collection period of debtors is satisfactory when compare

to the previous years. But the company should strive to minimize the period
future.
7. Majority of the sundry debtors constitute state electricity boards and public
sector undertakings. Some contracts should be entered with electricity boards
such that the necessary power will be the supplied by them for producing the
goods necessary with regards to the other public sector undertakings also
mutual exchange of services can be done whenever possible.
8. There has been reduction the work in progress inventory also which is mainly
due to the decrease in the manufacture cycle time. Thus, it can be
recommended to reduce the cycle time to possible extent.
9. It can be observed that there has been a substantial increase in the stores in
transit inventory. Taking precautions to cut short the delivery lead – time can
reduce this. In other to reduce the delivery lead time an attempt should be
made that “inspection of materials” does not take a very long time and the
procedure of receiving goods at the factory doesn’t necessary delay in
reaching of materials to stores.
10. The liquidity position of the company is satisfactory. Even though the
company’s current ration does not equal the standard norm, if the sales orders
increases the liquidity position of the company also improve.
11. From the statements of inventories it can be observed that there has been
increase in the material inventory and a decrease in the production inventory
for the year 2012 -06 . The decrease in the production inventory is mainly due
to the reduction in the finished goods have not been stocked for much time
before the delivery. This is a progressive change and thus it can be
recommended to the company.

12. It should also be appealed to the government that some aid is granted directly
to BHEL with regard to electricity boards and other public sector units so that
the previous debts can be cleared off.
13. The investment in loans and advances should be minimized to the possible
extent. Regarding the and bank balances of the current assets it can be
observed that an optimum level of cash has never been maintained. The trends
in the cash balances have been fluctuating invariably. Hence it can be
suggested that an optimum level of cash should be maintained so that the firm
has an optimum liquidity.
14. The investment in inventories produced good results. The inventory has turned
over than three times to 2013. If BHEL revise its manufacturing cycle period,
i.e, form the purchase of raw materials to the dispatch of the finished goods,
the inventory will turnover further.
15. There should be revision of credit policy on sales and liquidity to reduce the
debtors there by increase the efficiency in collection performance.
16. BHEL, follows, a centralized cash system it has some disadvantages. It is

imperative to have perfect condition between the regional operating divisions
and the commercial departments of BHEL.
17. To enhance efficiency in cash management, collection and disbursement must

be properly maintained. It is essential to have frequent reports on cash
balances, cash disbursed and the changes in the position of cash flows.
18. It would be useful to the company, if the liquidity measures takes in to account
“Reserve borrowing power” as firms debt paying ability depends not only on
cash resources available with it but also on its capacity to borrow from the
market at short notices.
19. BHEL is using the ABC analysis partly in their inventory control. Apart from
this it should use other techniques like VED (Vital Essential Desirable), Slow
Normal Moving, HML (High Medium Low cost ). SDE (Scarce Difficult
Easily Available).

20. Making use of systems for the information flow will help in reducing the time
lag for the flow of information. The flow of information should be to the
central database within and outside the organization vice – versa. This will
help in having an easy accessibility to the data so that the manager can retrieve
the necessary data at the required time.
21. The turnover has been increased 16% more compared to the previous year. It
shows the operating efficiency of the company. There is a great demand for
the company’s products connecting with customers all over the world
thorough systems will help in effective order processing and proper debtors
and credit management.
ANNEXURE

BIBLIOGRAPHY
Financial Management I.M. Ponday
Financial Management M.Y.Khan & P.K. Jain
Financial Management Prasanna Chandra
Financial Management Dr. Varma & Agarwal
Financial Analysis N and Kishore Sharma
WEBSITES:
www.google.com
www.bhel.com


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WORKING CAPITAL MANAGEMENT

S.D.G.S COLLEGE HINDUPUR Page 1

PROFILE OF THE ORGANISTION

BHARTH HEAVY ELECTRICAL S LIMITED

S.D.G.S COLLEGE HINDUPUR Page 2

S.D.G.S COLLEGE HINDUPUR Page 3

BHEL is one of the few companies worldwide involved in development of

S.D.G.S COLLEGE HINDUPUR Page 4

HUMAN RESOURCES DEVELOPMENT

GROWTH OF B.H.E.L HYDERABAD:

S.D.G.S COLLEGE HINDUPUR Page 5

COMPANY VISION, MISSION AND OBJECTIVES

 Meeting commitments made to external & internal customers

S.D.G.S COLLEGE HINDUPUR Page 6

To provide a reasonable and adequate return on capital employed ,primarily

To build a high degree of customer confidence by providing increased value

To enable each employee to achieve his potential, improve his capabilities,

To achieve technology excellence in operations by development of indigenous

S.D.G.S COLLEGE HINDUPUR Page 7

To fulfill the expectations which stockholders like government as owner

To Achieve and maintain a leading position as supplies of quality equipments system

S.D.G.S COLLEGE HINDUPUR Page 8

Design OF THE STUDY

S.D.G.S COLLEGE HINDUPUR Page 9

Need for the study

solve the increasing problems of adopting seriously the management of working

business, there by enabling them profits.

OBJECTIVES OF THE STUDY

The main objective of the study is to focus on the working capital

1. To study the existing system of working capital management in BHEL.

2. To examine the feasibility of present system of managing cash, debtors and

3. Suggesting a better way if any for improving management of working capital.

4. To analyze the financial performance of the company with reference to its

working capital components.

S.D.G.S COLLEGE HINDUPUR Page 10

The data is collected from the following sources.

1 Five years annual reports of BHEL from 2008to2013.

2 Interaction with the related finance departments.

3 Ten years financial data of BHEL and consolidation statements.

METHODOLOGY AND TECHNIQUES

1 The working capital management mechanism is studied in detail.

2 The various factors of working capital management are studied in detail.

3 The existing scenario of debtors management, collection period , cash

5 Activities regional operating divisions as well as power sector , Industrial

S.D.G.S COLLEGE HINDUPUR Page 11

Working capital management is of vital importance to an

The design of study is as follows:

1. Streamlining of cash inputs.

2. Forecasting of material requirements.

3. Keeping the tracks of system of centralize cash collections.

4. Computerized bill passing system and customer payment schedules.

5. Existing inventory procurement system for both indigenous nature

S.D.G.S COLLEGE HINDUPUR Page 12

SCOPE OF THE STUDY

The scope and period of study is restricted to the following.

1. The scope is limited to the operations of BHEL.

2. The information obtained form the primary and secondary sources

4. Comparison analysis was done in comparison of its sister units.

S.D.G.S COLLEGE HINDUPUR Page 13

S.D.G.S COLLEGE HINDUPUR Page 14

WORKING CAPITAL MANAGEMENT

C0NCEPTS OF WORKING CAPITAL

There are two concepts of working capital

(i) Gross working capital