CHAPTER-I

INTRODUCTION AND DESIGN OF THE STUDY

INTRODUCTION

FINANCIAL STATEMENT ANALYSIS

Financial statement is an organized collection of data according to logical

and consisted accounting procedures. Its purpose is to convey an understanding of

some financial aspects of a business form. It may reveal a series of activities over

a given period of time, as in the case of an income statement.

The focus of the financial analysis is on key figures in the financial

statements and the significant relationships the exists between them. The analysis

of financial statements is a process of evaluating relationships between component

parts of financial statements to obtain a better understanding of the firm’s position

and performance.

Financial Analysis:

Financial analysis is the process of identifying the financial strengths and

weakness of the firm by property establishing relationships between the item of

the balance sheet and the profit and loss account. Financial analysis can be

undertaken by management of the firm, or by parts outside the firm.

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USERS OF FINANCIAL ANALYSIS:

 Management

 Trade creditors

 Investors

 Government

 Others

Management:

Management of the firm would be interested in every aspect of the financial

analysis. It is their overall responsibility to see that the resources of the firm are

used most effectively and efficiently and that the firm’s condition is sound.

Trade Creditors:

The trade creditors are to be paid in a short term solvency of the concern. The

current ratio and acid test ratio will enable the creditors to assets the short term

solvency position of the concern.

Investors:

The Investors are interested their money in the firms shares, are not

concerned about the firms earnings. They restore more confidence in those firms

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that show steady growth in earnings. As such, they concentrate on the analysis of

the firms present and future profitability. They are also interested in the firm’s

financial structure to the extent it influences the firms earning ability and risk.

Government:

The financial statements are used to asses tax liability of business

enterprise. These statements enable the government to find out whether the

business is following various regulations or not.

Others:

Trade associations, stock exchange and public at may also analyze the

financial statements to judge the financial position of different concerns.

Definition

According to Myres “Financial statement analysis is largely is a study of

the Relationship among the various financial factors in a business as disclose by a

single set of statement and a study of the trend of these factors as show in a series

of statements.

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Financial statements are indicators of the two significant factors:

1. Profitability

2. Financial Soundness

Analysis and interpretation of financial statements therefore refers to such a

treatment of the information contained in the income statement and the balance

sheet so as to afford full diagnosis of the profitability and financial soundness of

the business.

The term “analysis” means methodical classification of the data given in the

financial statements. The term “interpretation” means “ explaining the meaning

and significance of the data so simplified.

Types of financial Analysis

Financial analysis can be classified in to different categories depending

upon.

(a) The material used

(b) The modus operand of analysis

On the basis of materials used. According to this basis financial analysis can be of

two types.

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a) External Analysis

Those who are outsider for the business do this analysis. The outsiders

include investors, credit agencies. government agencies and other creditors who

have no access to the internal records of the company. These persons mainly

depends upon, the published financial statements. Their analysis serves only a

limited purpose. The position of this analysis has improved in recent times on

account of increased governmental control over companies and governmental

regulations regulations requiring more detailed disclosures of information by the

companies in their financial statements.

b) Internal analysis:

This analysis is done by persons who have access to the books of account

and other information to the books of accounts related to the business., Executives

and employees of the organization or by officers appointed for this purpose by the

government or the court under powers vested in them can therefore do such an

analysis. The analysis in done depending upon the objective to be active

depending upon the objective to be achieved through this analysis.

On the basis of modus operandi according to this, financial analysis can

also be two types.

a) Horizontal Analysis

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 In case of this type of analysis financial statements for a number of years

are reviewed and analyzed. The current year’s figures are compared with the

standard or base year. The analysis statement usually contains figures for too or

more years and the changes are shown regarding each item from the base year

usually in the form of percentages. such as analysis given the management

considerable insight into levels and areas of strength and weakness. Since this

type of analysis is based on the date from year to year rather than on one date, it is

also termed as ‘Dynamic Analysis?

b) Vertical Analysis:

In case of this type of analysis a study is made of the quantitative

relationship of the various items in the financial statements on a particular type,

such an analysis is useful in comparing the performance of servral companies in

the same group, or divisions or departments in the same company. Since this

analysis depends on the data for one period, is nor very conductive financial

position. It is also called ‘Static Analysis’ as it frequently used to ratios developed

on one date or for one accounting period. Tools or Techniques used for Analysis:

1. Ratio Analysis

2. Method of least Squares (Trend Values)

3. Comparative statement Analysis.

These are explained in bring as follows.

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1. Ratio Analysis:

Ratio Analysis is widely used tool of financial analysis. It is defined as the

systematic use of ratio to interpret the financial statements so that the strength and

weakness of a firm as well as its historical performance and current financial

condition can be determined. The term ratio refers to the numerical or quantitative

relationship between two items/ Variable. This relation can be expressed as.

a. Percentages

b. Fractions

c. Proportion of numbers.

Accounting ratios showed the relationship in mathematical terms between

two interrelated accounting figures. This is the most important tool available to

financial analysis for their work.

Ratio analysis is a process of identifying the financial strengths and

weakness of the firm. This may be accomplished either through a trend analysis of

the firm’s ratios over a period of time or through a comparison of the firm’s ratios

with its nearest competitors and with the industry averages. The four most

important financial dimensions which a firm would like to analyze are: liquidity,

Leverage, Activity and Profitability.

Nature of Ratio Analysis:

A Financial ratio is a relationship between tow accounting numbers. ratios

help to make a qualitative judgment about the firm’s financial performance.

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Financial Ratio:

Financial Ratio is a relationship between two financial variables. It helps to

ascertain the financial condition of a firm.

Types of financial Ratios:

 Liquidity ratios

 Leverages ratios

 Activity ratios

 Profitability ratios

Liquidity Ratio:

Liquidity Ratio measure the firm’s ability to meet current obligations, and

are calculated by establishing relationships between current assets and current

liabilities.

Leverage ratio:

Leverage ratios measures the proportion of outsider’s capital in financing

the firm’s assets, and is calculated by establishing relationships between borrowed

capital and equity capital.

Activity Ratio:

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 Activity ratio reflects the firms efficiency in utilizing its assets in

generating sales and is calculated by establishing relationships between sales and

assets.

Profitability Ratio:

Profitability ratios measure the overall performance of the firm by deterring

the effectiveness of the firm ingenerating profit, and are calculated by establishing

relationships between profit figures on the one hard, and sales and assets on the

other.

Utility of Ratio Analysis

Assessment of the firm’s financial conditions and capabilities.

 Diagnosis of the fir’s problems, weakness and strengths.

 Credit analysis

 Comparative analysis

 Time series analysis

Cautions in using ratio analysis

 Standards of comparisons

 Company differences

 Prices level

 Different definition

 Changing situations

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 Past data

Standard of Comparison:

 Time series analysis

 Inter-firm analysis

 Industry analysis

 Preformed financial statement analysis

Advantages of Ratio Analysis:

1. It helps in analysis of the situation i.e. analysis on the financial situation and

performance.

2. Inter-firm and Inra-firm comparison is both possible on the basis of accounting

ratio

3. Accounting Ratio not only indicates the present position but they also indicate

the cause leading up to the position of a large extent

4. It helps in obtaining best result when ratios for a number of years are put in

tabular form so that the figure for one year can be easily compoared with those

of other year

5. It indicates the trend of the change, which helps in preparation of estimates for

the future.

6. They provide simplicity to the complex accounting information presented by

the financial statements

7. They are very helpful to outsiders as well as for internal management

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8. It is very helpful to internal managements, discharge of the basic managerial

functions.

9. It also helps in planning, policy making & controlling the activities.

10. They are helpful in establishing the standard casting system.

Limitations of ratio analysis

1. Ratio provides only guidelines to the management they are only the means.

However They scratch surfaces and raise question. The limitation of the ratio

may force the management to have detailed investigation of the situation under

question.

2. single accounting ratio is not useful at all unless it is studied with other

accounting ratios

3. They are based only on the quantitative information. Hence, qualitative

information puts limit on the ratios

4. Ratios are subject to arithmetical accuracy of the financial statements.

Moreover financial statement also include estimated date like provision for

depreciation, bad and doubtful debts etc. hence, result revealed by ratios are

subject to such estimates.

5. Ratios are computed on the basis of financial statements which are historical in

nature.

6. Knowledge of ratios only is meaningless unless it is also found how it is made

up.

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7. Lack of homogeneity of data, personal judgment lack of consistency etc. is the

factors which limit the conclusion to be derived on the basis of accounting

ratios.

2. METHODS OF LEAST SQUARES (TREND VALUES)

By the method of lease square, a straight line trend can be fitted to the

given time series of data. It is a mathematical, as well as, analytical method. With

its help, economic and business time series data can be fitted and this helps in

forecasting and predicting. The trend line is called the line of best fit. The sum of

deviations of the actual values of Y and the trend value (Yc) is 0 and sum of

square of deviations of the actual value and the trend value is the least.

(Y-Yc) = 0 and (Y- Yc) = least. So this method is called the least squares method

or the line of best fit.

The method of least squares cab be used to explain the linear and non

linear trend i.e. a straight line trend or parabolic trend.

The straight line trend or the first degree parabola is represented by the

mathematical equation.

Yc = a + bx

Yc = require trend value

X = unit of time

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Here a and b are constants or unknowns.

In the equation for the first – degree parabola Yc = a + bx, the values of the

unknown or constants can be calculated by the following two normal equations.

Y = Na +bx

xY = ax +bX2

N = the numbers or months for which data are given

When x = 0, the equation will take the form of

Y = Na

bx = 0

xY = bx2

bx2 = 0

by these equation we can know the values of a and b i.e

a = Y/N and

b = xY / x2

a = the mean value of Y values

b = rate of change

3.COMPARATIVE STATEMENT ANALYSIS :

Comparative statement is those statements, which have designed in a way,

so as to provide time perspective to the consideration of the various elements of

financial position embodied in such statements. In such statements figures for

two or more periods are placed side by side to facilitate comparison. The two

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statements are proposed for comparison. They are comparative income statement

and comparative Balance Sheet.

STATEMENT OF THE PROBLEM

Nowadays due to the policy of the changing government and also due to the

competition in the globalize era, the financial performance of the BHEL is not

appreciable. Though the company developed well, it could not earn much profit as

like the other private sectors company involved in similar business. There is no

proper instruction from the authorities and from the ministry. Further there is

considerable delay in implementing the new system because of more formalities to

change the existing system. The financial performance of the BHEL should be

analyzed well increase the profit and make the company to compete with others

doing similar business.

SIGNIFICANCE OF THE STUDY:

 Every company must consider their liquidity position, profitability and

solvency position and also the main attention should be on smooth working

capital position.

 For this analysis the ratios, working capital requirements for the next five

years period to enables meaningful planning for the future.

 Researcher worked and applied various tables in relevant ratio from the

data collection in Bharat Heavy Electricals Limited. Researcher giving

more suitable idea to the management and developed the company in

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 various way. Researcher analysis some table in statistical approaches of

trend line.

OBJECTIVES OF THE STUDY:

The study has the following objectives.

 To provide a strong theoretical framework for analyzing financial

statements.

 To study the growth profile of the company during the study period.

 To study the financial position of the company and operation of Bharat

Heavy Electricals Limited

 To appraise financial soundness of the company.

 To offer suggestions for improvement in the company.

SCOPE OF STUDY:

The study mainly attempts to analyze the financial performance of the

company selected for the study. The financial authorities can use this for

evaluating their performance in future, which will help to analyze financial

statements and help to apply the resources of the company properly for the

development of the company and IT employees to bring overall growth.The

present study attempt to develop a trend analysis model for Sales and Working

Capital and Profit and Loss Accounts. There can be forecasting to evaluate the

overall performance of the Bharat Heavy Electricals Limited in future.

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LIMITATION OF STUDY

1. The Secondary data like annual reports of BHARAT HEAVY

ELECTRICAL LIMITED is collected from BHEL Trichy, hints the

accuracy of the result of the study will depends upon the accuracy of

data provided by the company.

2. The study covers only the period of 5 (2006 to 2011)

3. Various techniques, ratio statistical tools used in this study will have its

own limitation.

RESEARCH METHODOLGY

Methods of data collection;-

Secondary data

The secondary data is derived from the annual reports, Business line and

finance newspapers websites and the internal auditing books of BHEL

PERIOD OF THE STUDY:

The study covers the time period of 5 years from the financial year 2006-07

and 2010-11.

TOOLS AND TECHNIQUES USED:

To analyze and interpret the financial statements of the study unit the

following tools are used in the study.

1. Ratio Analysis.

2. Trend Analysis. (Least square Method)

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 3. Comparative statement Analysis

The interpretations are also printed graphically using trend line graphs and

sub-dividing bar diagram.

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 CHAPTER-II

REVIEW OF LITERATURE

Financial Statement Analysis

The Hershey Company engages in the manufacture, marketing, distribution,

and sale of various types of chocolate and confectionery, refreshment and snack

products, and food and beverage enhancers in the United States and

internationally. The Hershey Company sells its products through sales

representatives and food brokers, primarily to wholesale distributors, chain

grocery stores, mass merchandisers, chain drug stores, vending companies,

wholesale clubs, convenience stores, dollar stores, concessionaires, department

stores, and natural food stores. The company was founded in 1894 and is based in

Hershey, Pennsylvania. The Hershey Company went public on the New York

Stock Exchange (NYSE) in 1922 (http://finance.yahoo.com/q/pr?s=HSY).

Tootsie Roll Industries, Inc., through its subsidiaries, engages in the manufacture

and sale of confectionery products. The company sells its products under the

registered trademarks. It distributes its products through candy and grocery

brokers to wholesale distributors of candy and groceries, supermarkets, variety

stores, dollar stores, chain grocers, drug chains, discount chains, cooperative

grocery associations, warehouse and membership club stores, vending machine

operators, the U.S. military, and fund-raising charitable organizations.

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 Tootsie Roll Industries operates in the United States, Canada, and Mexico.

The company was founded in 1896 and is based in Chicago, Illinois. The Tootsie

Roll Industries, Inc. went public on the NYSE in 1927 (http:// finance. yahoo.

com/q/pr?s=TR).

The Hershey Company and the Tootsie Roll Company both are companies in

confection industry; they specialize in a wide variety of chocolate candy products.

I compared both companies for the years 2002, 2003, and 2004 against each other

and against the industry averages in order to make a decision about which

company investors would choose to invest in. The comparisons I used to make this

decision were ratios for liquidity, solvency, and profitability.

Review Of Financial Statements

It is said that companies will come and go, and those that survive and left

standing will teach other companies, how their survived. We will take two

companies; UPS and Ebay, Inc break them down and show you how they got their

start. In our paper, it will also be discussed and show a review of their financial

statements from each one. The point is to get a better picture of where a company

started, the competition it endured, and the money that was possibility projected

for the start. This paper will also show how auditors are essential to the running

of any company.

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Review of Financial Statements Brief overview UPS, a delivery service, has been

around for about 100 years.

James E. Casey started the company on $100 borrowed from a friend of his.

Casey, who was 19 years old when he started UPS, had worked for delivery

services before and wanted to start a better delivery system of his own.

The American Messenger company, what UPS was previously called,

started in Seattle, Washington and had many competitors in the beginning. His

business not only survived among them, but thrived (UPS, n.d.). Today the

company serves over 200 countries delivering “goods, funds, and information”

(UPS, n.d., 1). UPS has several stores located in these countries, including the

United States, where people can not only have their packages sent, but they can

also buy delivery products from them as well.

On September 5, 1995, Piere Omidyar founded eBay sitting in his living room.

eBay got it first start with a lie stating “that it was founded to help Omidyars

finacee trade Pez candy dispensers and that lie was back by a public relations

manager in 1997. (eBay, n.d., 2) In 1997 Jeffery Skoll became the first president

of eBay. eBay original name was Auction Web Omidyar did not like that name so

he changed it to Echo Bay.com but that name was taken so he change it to

Ebay.com and on September 21,1989 Omidrar and Skoll went public and became

billionaires.

Author Name Tootsie Roll And Hershey

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 CHAPTER-III

COMPANY PROFILE

BHEL was established in 1964 ushering in the indigenous Heavy Electrical

Equipment industry in India. Heavy Electricals (India) Limited was merged with

BHEL in 1974. In 1991, BHEL was converted into a public limited company.

BHEL is the largest engineering and manufacturing enterprise in India in the

energy related/infrastructure sector. BHEL was established more than four

decades age ushering in the indigenous Heavy Electrical Equipment ushering in

the indigenous Heavy Electrical Equipment industry in India. BHEL has built

over the years, a robust domestic market position by becoming the largest supplier

of power plant equipment in India, and by developing strong market presence in

select segments of industrial sector and the Railways. Currently, 80% of the

Nuclear power generated in the country is through BHEL sets.

BHEL caters to core sectors of the Indian Economy viz., Power Generation

and Transmission. Industry, Transportation, Renewable Energy, Defence, etc.

The wide network of BHEL’s 17 manufacturing divisions, 15 power sector

regional centres, 8 service centres, 4 regional offices, 8 overseas offices, 2 repair

units, 7 Joint Ventures and a large number of Project Sites spread all over India

and large number of Project Sites spread all over India and abroad enables the

Company to promptly serve its customers and provide them with suitable

products, systems and services – efficiently and at competitive prices.

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 BHEL, where Quality Systems as per ISO-9000 have taken deep roots, has

now made significant achievements in Total Quality Management by adopting the

CII/EFQM model for Business Excellence. BHEL became the first Public Sector

Company in the country to win the coveted “PRIZE” through Haridwar unit under

the CII Exim Award Scheme. BHEL’s Bhopal & Jhansi Units and Power Sector

Northern and Eastern Regions have also won the Commendations for Significant

achievement/Strong commitment to TOM during 2008-09. Also BHEL’s insulator

plant at Jagdishur won the commendation by R K Bajaj Quality award. BHEL

shares the growing global concern on issues related to Environment and

Occupational Health and Safety. Major Units of BHEL have been accredited to

ISO-14001 Environmental Management Systems and to OHSAS-18001 for

Occupational Health and Safety Systems.

For the third consecutive year, BHEL’s performance was recognized by the

prestigious publication ‘Forbes Asia’, which featured BHEL in its fourth annual

‘Forbes 50’ list of the best of Asia-Pacific’s publicly-traded companies with

revenues or market capitalization of at least US$ 5 billion, having highest long-

term profitability and sales & earnings growth. Significantly, BHEL is the only

India PSU to figure on the elite list, since the list was conceived. BHEL is the

only Indian PSU to figure on the elite list, since the list was conceived. BHEL and

its 4 units were awarded “ICWAI Awards for Excellence in Cost Management”

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for 2008 – the highest among both public and private sector companies. BHEL

won EEPC‘s top Export Award for the eighteenth year in succession.

BHEL has retained its market leadership position during 2015-16 with 74%

market share in the Power Sector. An improved focus on project execution

enabled BHEL record its highest ever commissioning/synchronization of 15059

MW of power plants in domestic and international markets in 2015-16, marking a

59% increase over 2014-15. With the all-time high commissioning of 15000 MW

in a single year FY2015-16, BHEL has exceeded 170 GW installed base of power

generating equipments

It also has been exporting its power and industry segment products and services

for over 40 years. BHEL's global references are spread across over 76 countries

across all the six continents of the world. The cumulative overseas installed

capacity of BHEL manufactured power plants exceeds 9,000 MW across 21

countries including Malaysia, Oman, Iraq, UAE, Bhutan, Egypt and New Zealand.

Their physical exports range from turnkey projects to after sales services

POWER GENERATION

BHEL manufactures a wide range of products and systems for thermal,

nuclear, gas and hydro-based utility power plants to meet customer requirements

for power generation. BHEL has proven turnkey capabilities for executing power

projects from Concept to Commissioning. BHEL-built power generating sets

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account for nearly two-third of the overall Installed capacity and around three-

fourth of the power generated in India. BHEL supplies steam turbines, generators,

boilers and matching auxiliaries upto 800 MW ratings including supercritical sets

of 600/800 MW. BHEL has facilities to go up to 1000 MW unit size. BHEL-

make steam turbines are designed to achieve higher efficiencies. To make

efficient use of high ash content coal available in India. BHEL also supplies

circulating fluidized bed combustion (CFBC) boilers for thermal plants. BHEL

manufactures 220/235/500/540 MWe Nuclear turbine-generator sets. BHEL is the

only India company capable of manufacturing large-size gas-based power plant

equipment, comprising advanced-class gas turbines up to 289 MW (ISO)

RATING for open and combined-cycle operations. BHEL engineers and

manufactures custom-built hydro power equipment. Its range covers turbines of

Francis, Pelton and Kaplan type, pump turbines, bulb turbines and mini-micro

hydro plants, with matching generators, for different head-discharge combinations.

The Company has proven expertise in Plant Performance improvement

through Renovation, Modernization and Uprating of variety of power plant

equipment, besides specialized know-how of residual life assessment, health

diagnostics and life extension of plants. It has retained 74% share of R&M market

of Thermal sets in the country in 20015-16.

BHEL built thermal sets consistently exceed the national average efficiency

parameters, and have achieved the highest-ever Plant Load Factor (PLF) of 80.5%

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(overall) during 2008-09, which is 3.5% higher than the national average. Overall

Operating Availability (OA) was also the higher-ever at 88.4%.

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

development of Integrated Gasification Combined Cycle (IGCC) technology

which would user in clean technology.

BHEL offers a large variety of control equipment and solutions, for power

stations ranging from simple control systems to single push-button automation.

Company has expertise of supplying complete Systems for entire power stations

comprising Boiler, Turbine and Balance of Plant (BoP).

INDUSTRIES

BHEL is a leading manufacturer of a variety of electrical, electronic and

mechanical equipment, to meet the demands of a number of industries, like

metallurgical, mining, cement, paper, fertilizers, refineries & petro-chemicals, etc.

other than power utilities. BHEL has supplied systems and individual products

including a large number of co-generation Captive power plants, Centrifugal

compressors, Drive Turbines, Industrial boilers and auxiliaries, Waste heat

recovery boilers, Gas turbines, Pumps, Heat exchangers, Electrical machines,

Valves, Heavy castings and forgings, Electrostatic precipitators, ID/FD fans,

Seamless pipes, etc. to a number of industries other than power utilities. BHEL has

also emerged as a major supplier of controls and instrumentation systems,

especially distributed digital control systems for various power plants and

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industries. BHEL is the leading company in the world having mastered the art of

burning Naptha in Gas turbines. Industry sector is fully geared to execute EPC

contracts for captive power plants from concept of commissioning.

TRANSPORTATION

Today, over 70% of Indian Railways, one of the largest railway networks in

the world is equipped with traction equipment built by BHEL. BHEL’s

involvement in the transportation sector has been marked with rapid growth. Most

of the trains in Indian Railways, whether electric or diesel powered, are equipped

with BHEL’s traction propulsion system and controls. The range includes traction

motors, traction generators/alternators, transformers, substation equipment,

vacuum circuit breakers, locomotive bogies, smoothing reactors, exciters,

converters, inverters, choppers and associated control equipment, viz., master

controllers, chopper controllers, brake and door equipment, electronic controls

including software based controls extending to rolling stock and other transport

applications.

BHEL has manufactured and supplied a large number of 3000 HP electric

locomotives and 4700 HP AC/DC locomotives to Indian Railways and diesel-

electric locomotives ranging from 350 HP to 2600 HP to cement, steel and

fertilizer plants, thermal power stations, coal fields, ports and other medium and

large industries and urban transportation projects. Diesel Multiple Units,

underground Metro-rail system at Kolkata, Electric Multiple Unit (EMU) service

at Mumbai, Kolkata, Chennai and Delhi are all operating on drives and controls

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supplied by BHEL. BHEL has also established itself as a leading supplier of state-

of-the-art propulsion equipment to Indian Railways for 3-phase drive 6000 HP

electric locos, 4000 HP diesel-electric locos, electrical multiple units, etc.

BHEL has also diversified into the area of track maintenance machines and

coach building for Indian railways and undertakes retrofitting and overhauling of

rolling stock.

Development of 3-phase IGBT based propulsion system for AC-EMU and

AC-DEMU is also underway in association with technology partner.

RENEWALBLE ENERGY

BHEL has made rapid strides in this strategically important area of non-

conventional energy, which holds the key to the problem of burgeoning energy

needs, on the one hand and rapidly depleting fossil-based energy sources, on the

other. Range of Renewable Energy product and systems manufactured and

supplied includes a number of solar water heating systems, solar photo-voltaic

(SPV) systems for both Domestic and Industrial application and wind electric

generators all over India. BHEL also has the capability to set up Grid-connected

and Hybrid SPV Power Plants. In addition, BHEL fabricates space-grade solar

panels and space-quality batteries for satellites launched by ISRO. BHEL is also

supplying small hydro power plants (up to 25 MW station capacity) for distributed

power generation.

OIL AND GAS

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 BHEL possesses expertise to design, manufacture and service various types

of onshore rigs to suit the Indian service conditions. The range of equipment

covers onshore deep drilling rigs, super- deep drilling rigs, heli-rigs, work-over

rigs, mobile rigs and desert rigs with matching draw works and hoisting

equipment. The diesel-electric oil rigs for onshore drilling made by BHEL are

suitable for depths up to 9,000 metres.

BHEL is supplying onshore drilling rig equipment viz. Draw works,

Rotary-table, Travelling block, Swivel, Mast and sub structure, Mud systems and

Rig electrics, Well & X-Mas tree valves upto 10,000 psi rating for onshore as well

as offshore application to ONGC, Oil India Ltd. and Private drilling Companies.

BHEL has also supplied casing Support System, Mudline Suspension System and

Block Valves to ONGC for refurbishment and up-gradation of onshore Oil Rigs.

BHEL has supplied GT driven centrifugal compressor packages to GAIL

India Ltd for their gas compressor stations.

TRANSMISSION

BHEL is present in the field of power transmission in India with a wide

range of transmission systems and products. The products manufactured by BHEL

include Power transformers, Instrument transformers, Dry type transformers,

Instrument transformers, Dry type transformers, Shunt reactors, vacuum and SF6

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switchgear, Gas insulated switchgears, Ceramic insulators, Gas insulated

switchgears, Ceramic insulators, etc. Major critical hardware such as capacitor

banks, circuit breakers, control and protection equipment and thyristor valves are

in its manufacturing range.

BHEL has developed and commissioned indigenous 36KV and 145KV Gas

insulated Substation (GIS). HVDC Disc insulators of rating 320kN/420kN base,

the company undertakes turnkey execution of substations up to 400KV and has the

capability to execute 765 KV substations. High voltage Direct Current (HVDC)

systems have been supplied for economic transmission of bulk power over long

distances have been developed and supplied for the first time in the country for use

in _+800KV HVDC application. BHEL has indigenously developed and

commercialized state-of-the-art controlled shunt reactor for reactive power

management of long transmission lines.

With string engineering the Company accepts full project responsibility for

feasibility / system studies, execution and commissioning of fixed Series

Compensation / controlled shunt Reactor schemes. BHEL has a team of experts

with extensive on – the job exposure for design and applications relating to Power

System Studies, Feasibility Studies, Insulation Coordination etc.

INTERNATIONAL BUSINESS

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 BHEL has, over the years, established its references in 70 countries across

the world. These references encompass almost the entire range of BHEL products

and services, covering Thermal, Hydro and gas – based turnkey power projects,

Substation projects, Rehabilitation projects, besides a wide variety of products like

Transformers, Compressors, Valves, Oil field equipment, Electrostatic

Precipitators, Photovoltaic equipment, Insulators, Heat Exchangers, Switchgears,

Castings and Forgings etc.

The company has taken significant steps towards globalisation with successful

forays in new markets and new product areas, apart from firmly establishing the

company’s presence in existing export markets and areas.

Some of the major successes achieved by BHEL have been in Gas-based

power projects in Oman, Libya, Malaysia, UAE, Saudi Arabia, Iraq, Bangladesh,

Sri Lanks, China, Kazakhstan; Thermal power projects in Cyprus, Malta, Libya,

Egypt, Indonesia, Thailand, Malaysia, Sudan, Syria, Ethiopia, Senegal, New

Calendonia ; Hydro power plants in New Zealand, Malaysia, Azerbaijan, Bhutan,

Nepal, Taiwan, Tajikistan, Thailand, Afghanistan, Vietnam, Rwanda;

Compressors in Oman, Iraq, France and Substation projects & equipment in

Philippines, Ghana, Tanzania, Laos, Malaysia, Libya, Zambia, Saudi Arabia, Iraq,

Ethiopia, Nepal, Bangladesh, and Afghanistan, Execution of these overseas

30
projects has also provided BHEL the experience of working with world renowned

consulting organizations and inspection agencies.

The company has been successful in meeting the demanding requirements

of international markets in terms of complexity of work as well as technology,

quality and other requirements viz. HSE requirements, financing packages and

associated O&M services, to name a few. BHEL has proved its capability to

undertake projects on fast- track basis. The company has also established its

versatility to successfully meet the varying needs of different sectors, be it captive

power, utility power generation or the oil sector. Besides undertaking turnkey

projects on its own, BHEL also possesses the requisite flexibility to interface and

complement other international companies for large projects, and has also

exhibited products.

The company is taking a number of strategic business initiatives to fuel

further growth in overseas business. Strategic alliances has been established in

Rwanda-AIL, Ethiopia-OIA. Senegal – Nykomb, Indonesia – MFI, for taking up

EPC on partnership basis. Reference for large Unit size rating has been created by

securing an order for Steam Turbine based Tishreen Thermal Power Plant on EPC

basis from Syria for 2x200MW Units. International visibility is also exhibited by

participating in International exhibitions in Egypt, Vietnam, Syria & South Africa

and wining best exhibitor award.

Technology Up-gradation, Research & Development

31
 To meet the Customers’ expectation of contemporary technologies and

faster deliveries company lays great emphases on the continuous up- gradation of

products & related technologies, and development of new products. The Company

has upgraded its products to contemporary levels through continuous in –house

efforts as well as through acquisition of new technologies from leading

engineering organizations of the world.

The corporate R&D Division at Hyderabad leads BHEL’S research efforts

in a number of areas of importance to BHEL’S product range. Research and

product development centers at each of the manufacturing divisions play a

complementary role. Centres of excellence have been set up for Simulators,

computational Fluid Dynamics, Permanent Magnet Machines and Surface

Engineering. As the fifth in the series, BHEL has established a centre of

Excellence for Intelligent Machines and Robotics (COEIMAR ). Centre of

excellence is being established for Compressors & Pumps.

In addition to the Corporate R&D Division, BHEL has four specialized

institutes, viz., Welding Research Institute at Trichy, ceramic Technological

Institute at Bangalore, Centre for Electric Traction and Hydro lab at Bhopal and

Pollution Control Research Institute at Haridwar.

BHEL has introduced, several state –of –the- art products viz. 60MW

Bubbling Fluidised Bed Combustion Boiler for power generation, 260 MW

32
steam turbine designed to suit combined cycle power plants, Bypass Over Fire Air

(BOFA) system for reduction of NOx from coal based thermal power plants, high-

efficiency Frances and Pelton hydro turbines, new LP turbine variant which can be

retrofitted in old Russian (LMW) 210MW thermal sets, Automatic Storage &

Retrieval system (ASRS) for storage and inventory management system of the

Indian Army, Solar Panels with 5500 watts output consisting of high-efficiency

multi-junction solar cells, satellite batteries for NSAT 4A, Controlled Shunt

Reactor (CSR) for 400KV Transmission lines, Flexible AC Transmission Systems

(FACTS), STATCOM, Phase Shifting Transformer (PST), 145KV Gas Insulated

Switchgear (GIS), Micro controller based flame scanner, a more energy efficient

single cylinder non reheat Steam turbine in 100-140 MW application, single

cylinder reheat Steam turbine in 120-150MW range, Deaerator for 1000 MW

power plants, combined HP-IP module in the output range of 500-650 MW with

subcritical parameters, IGBT based 3-phase drive system for 700HP diesel electric

locomotives, technology for manufacture of 400KV long- rod composite

insulators with improved properties by adding nano materials, performance

Analysis, 320kN/420kN Porcelain insulators, 800KV hollow insulator,

Diagnostics and Optimization (PADO) package for power plants, 91 ton BHEL

280 Bowl Mill, etc. Design has been developed for new module THRI brushless

exciter for adoption of advance feature for 800 MW exciter.

33
 Reinforcing its position as a total solution provider, BHEL has developed

and successfully commissioned a Maintenance Controller (an Integrated Asset

Management and Decision Support System) at the Western Mountain Power

Project, Libya. Based on Power Pac-G, software jointly developed by BHEL and

TCS, this is a system for complete power plant maintenance for Combined Cycle

Power Plant application and takes care of all the maintenance needs of a power

station.

The company is also engaged on research on futuristic areas like fuel cells

for distributed environment-friendly power generation, clean coal technology

applications, standardization of electrode making process, development of process

for addition of Nano/Micro particles for improving material characteristics, super

conductivity applications in transformers, generators/motors etc. With an array of

new technologies at its command, BHEL is confident of meeting the challenges

ahead and fulfilling its responsibilities as the premier engineering and

manufacturing enterprise of India.

Human Resource Development Institute

The Human Resource Development Institute (HRDI) situated in Noida, is

the corner stone of BHEL’S learning Infrastructure, along woth the Advanced

Technical Education Centre (ATEC) at Hyderabad and the Human Resource

Development Centres (HRDCs) at different units. Through various

organizational developmental efforts, these centres ensure that the prime resource

of the organization –the Human Capital – is always in a state of readiness to meet

34
the dynamic challenges posed by the fast changing environment. it is their

constant Endeavour to take the HRD activities to the strategic level of becoming

an active partner in achieving the organizational goals.

Guided by the HRD Mission statement “To promote and inculcate a value-

based culture utilizing the fullest potential of Human Resources for achieving the

BHEL Mission”, the HRDI through a step by step strategic long term training

process and several short term need based programmes based on comprehensive

organizational research, enables the human resources to unearth and polish their

potential. HRDI is spearheading the HRD initiatives in the company and focusing

on competency, commitment and culture building.

Some of the Core programmes, Strategic need based programmes;

Competency based programmes and Functional Programmes like Advanced

Management Programmes, General Management Programmes, Strategic

Management Programmes, Senior Management Programmes, Missle Management

Programmes, and Young Managers Programmes.

In addition, the HRDI provides professional support to Corporate HR and HRDCs

at Units/Divisions. HRDI is also accepting consulting assignments from other

organizations in a selective manner.

Health, Safety and Environment Management

BHEL is an environment friendly company in all its activities, products and

services, providing safe and healthy working environment to all stakeholders, In

35
fact this aspect has become an integral part of the company’s business

performances. Environment improvement Administrative ministry. Some of the

major EIPs at BHEL plants & townships included tree plantation drives,

installation of rain water harvesting plants, Energy and Conservation Projects

utilizing efficient technologies, reduction in noise level, improvement in chemical

storage & handling systems, improvement in fumes extraction systems, Resource

conservation Plants (Lubricants/ Metals/Coolants), utilization of Non-conventional

energy resources etc.

Significantly, BHEL has also taken initiatives on Clean Development

Mechanism (CDM) projects to reduce greenhouse gas emissions in amore focused

way and vigorous efforts are being made to achieve milestones in this area. A

broad reference list of CDM activity projects both of in –house implementation

and joint claim projects with customers has been generated. CDM is a planned

activity for each unit and carbon credit forms part of budgeted activity.

In conformity with BHEL’s concern for society and environment, a mote

energy efficient single cylinder non- reheat steam turbine for 100-140MW

application has been developed, suitable for plants where large amount of waste

heat is available and reheat option is not feasible This is the largest single cylinder

steam turbine engineered so far by BHEL.

All manufacturing Units/Regions of the company are accredited to international

standards viz. ISO-14001 certification for environmental management and

OHSAS-18001 certification for occupational health safety management systems.

36
Corporate Social Responsibility

BHEL has developed a CSR scheme and its mission Statement of CSR is-

“Be a Committed Corporate Citizen, alive towards its Corporate Social

Responsibility”.

Thrust is being given in eight areas-Self employment generation,

Environment protection, Community development, Education, Health

management & medical aids, Orphanages & Old-age Homes, Infrastructural

development and Disaster/ Calamity Management. Quarterly and

Disaster/Calamity Management. Quarterly and annual CSR reports are prepared

containing the activities carried out, benefits accrued to neighboring communities,

the number of people benefited and the amount spent etc.

BHEL adopted 56 villages having nearly 80,000 inhabitants. In addition ,

BHEL provides financial assistance to various NGOs/ Trusts/Social Welfare

Societies that are engaged in social activities throughout the country.

Participation in the UN’s Global Compact Programme

The company reiterate its commitment to United Nation’s Global compact

programme and the set of core values enshrined in its ten principles and the intent

to advance Global Compact principles within the company’s sphere of influence

on human rights, labour standards, environment and anti corruption. As the

world’s largest global compact is the first and the citizenship initiative, the Global

37
Compact is the first and the foremost concern which is exhibiting and building the

social legitimacy of business and markets. BHEL has made these a part of the

strategy, culture and day-to-day operations. As part of this programme, BHEL

continues to play a lead role in the activities of the Global Compact Society in

India, which acts as an apex level nodal agency representing Indian corporate

bodies and institutions / organizations that are committed to UN’s Global Compact

Programmes. Company publicly advocates with its employees and other

stakeholders and regularly incorporates its commitments towards Global compact

programme through its Annual report, press conferences and other public

documents.

BHEL - AN OVERVIEW

BHEL is the largest engineering and manufacturing enterprise in India in

the energy, related/ infrastructure & sector today. BHEL has built over the years,

robust domestic market position by becoming the largest supplier of power plant

equipment in India, and by developing a strong market. Presence in select

segments of the industries sector, and the Railway.

BHEL was established more than 55 years ago whering in the indigenous Heavy

Electrical Equipment industry in India, a dream which has been more that

realized with a well recognized track record of performance. The company has

38
established the capability to deliver 20,000 MW p.a. of power equipment to

address the growing demand for power generation equipment.[4]

BHEL has retained its market leadership position during 2015-16 with 74%

market share in the Power Sector. An improved focus on project execution

enabled BHEL record its highest ever commissioning/synchronization of 15059

MW of power plants in domestic and international markets in 2015-16, marking a

59% increase over 2014-15. With the all-time high commissioning of 15000 MW

in a single year FY2015-16, BHEL has exceeded 170 GW installed base of power

generating equipments.

It also has been exporting its power and industry segment products and services

for over 40 years. BHEL's global references are spread across over 76 countries

across all the six continents of the world. The cumulative overseas installed

capacity of BHEL manufactured power plants exceeds 9,000 MW across 21

countries including Malaysia, Oman, Iraq, UAE, Bhutan, Egypt and New Zealand.

Their physical exports range from turnkey projects to after sales services

During the year 2012-13, the company invested about Rs. 1,252 Crore on R&D

efforts, which corresponds to nearly 2.50% of the turnover of the company,

focusing on new product and system developments and improvements in existing

products. The IPR (Intellectual Property Rights) capital of BHEL grew by 21.5%

in the year, taking the total to 2170.

Global Liknks :-
39
 The achievements have earned an international reputation of BHEL,

Trichy. The plant has so far supplied boilers for around 1350 MW of power

generation capacity to Malaysis, Libya, Iran, Eqypt etc. BHEL’s valves have

been exported to Malts, Cyprus, Malaysia , and Indonesia while pressure part

equipment and spares have been exported to the USA, boiler components have

been supplied to China and secemles steal Tubas have been exported to

Malaysia.

CHAPTER-IV

ANALYSIS AND INTERPRETATION OF DATA

In this chapter an attempt has been made to analysis how efficiently the

analysis of Financial statement is managed in Bharat Heavy Electricals limited.

Financial tools such as schedule of changes in ratio analysis, least squares,

comparative statements have been used for the purpose of analysis.

The financial statement involves recording classifying and summarizing of

various business transactions. It is prepared for the purpose of presenting a

periodical review or report of the progress made by the concern and deals with

the state of the investment, in the business and ‘result achieved’ during the

accounting period. Financial statement, income statement and position statement

are the outcome of accounting process.

40
 Ratio analysis is a technique of analysis and interpretation of financial

statements. It is used as a device to analysis and interpret the financial health of a

firm. Analysis of a financial statement with the aid of ratio helps to arrangements

in decision making control.

1) Current Ratio

Current ratio may be defined as the relationships between current assets and

current liabilities. It is the most common ratio for measuring liquidity. It is

calculated by dividing current assets by current liabilities. Current assets are

those, the amount of which can be realized within a period of one year. Current

liabilities are those amounts which are payable within a period of one year. A

current ratio of 2:1 is considerable ideal.

Current Assets

Current Ratio =

Current liabilities

TABLE – 4.1 Current Ratio

(in crores)

Year Current Assets Current liabilities Current Ratio

2013-2014 67035 37089 1.81

2014-2015 63391 32321 1.96

41
 2015-2016 60218 32855 1.83

2016-2017 56804 28846 1.97

2017-2018 59826 31130 1.92

Source : secondary Data

Interpretation

Current ratio during the year 13-14 is the 1.81. In the year 2016-17 it was

maximum 1.97 and second highest in the year 2014- 15 it was 1.96. Last year

2017--18 the current ratio decreased to 1.92 from 1.97.

The ideal value of current ratio 2:1, but during the period of study, the

current ratio is lesser than the standard. This shows the current ratio to shows a

do down ward which indicates the inefficiency of the company to meet its current

obligations.

CHART NO.1

42
2) Liquid Ratio:-

The teem ‘Liquidity’ refers to the ability of a firm to pay its short – term

obligations as and when they become due. The term quick assets or liquid assets

refers current assets, which can be converted into cash immediately. It comprises

all current assets except stock and prepaid expenses. It is determined by dividing

quick assets by quick liabilities.

Liquid Assets

43
Liquid Ratio =

Liquid Liabilities

TABLE – 4.2 Liquid Ratio

(in crores)

Year Current Assets Current liabilities Current Ratio

2006-2007 10427 8446 1.23

2007-2008 12587 10321 1.21

2008-2009 21021 14420 1.45

2009-2010 27648 19821 1.39

2010-2011 36823 28333 1.29

Source : Secondary Data

Interpretation

Liquid ratio during the year 2008-2009 it attains the maximum value of

5.20. in the above year it was slightly reduced to 2006 – 07 to 1.23. In the next

year, 2007-08 it further decreased to 1.21 and in the next year 2009-10 1.39. in the

last year decreased 2010—2011 to 1.29.

During the period of study, the value of liquid ratio is higher than the ideal

value which indicates the efficiency of the company to meet is immediate

requirements. The overall trend of liquid ratio shows up and down ward trend.

44
CHART NO.2

3) Proprietory Ratio :

Proprietory ratio relates to the proprietors funds to total assets. It revels

the owners’ contribution to the total value of assets. This ratio shows the long –

time solvency of the business. It is calculated by dividing proprietor’s funds by

the total tangible assets.

Proprietor’s Funds

Proprietary Ratio = -------------------------------

Total Tangible Assets

45
 TABLE – 4.3 Proprietory Ratio

(in crores)

Year Proprietary Fund Total Proprietary

Assets Ratio

2006-2007 6027 14483 0.41

2007-2008 7301 17498 0.41

2008-2009 8788 22354 0.39

2009-2010 10774 29344 0.36

2010-2011 12939 39528 0.32

Source : Secondary Data

Interpretation

Proprietory ratio during the year 2006-07 and 2007-08 it attains the

maximum value of 0.41. In the year2006-07 theproprietory ratio was slightly

reduced to 0.39. In the next year, 2009-10 It further reduced to 0.36. During the

year 2010-11 it further decreased to 0.32.

CHART NO.3

46
4) Fixed Assets to Net Worth Ratio:

This ratio shows the relationship between fixed assets and proprietor’s

funds. The purpose of this ratio is to fend out the percentage of the owners fund

invested in fixed assets.

Fixed Assets

Fixed Assets to Net worth Ratio = -------------------------------

47
 Proprietor’s funds

TABLE - 4.4 fixed assets to Net worth Ratio

(in crores)

Year Fixed asset Proprietory Fixed asset to Net

Fund worth ratio

2006-2007 1140 6027 0.18

2007-2008 1167 7301 0.15

2008-2009 1291 8788 0.14

2009-2010 1639 10774 0.15

2010-2011 2627 12939 0.20

Sources : Secondary Data

Interpretation

Fixed asset to Net worth Ratio during the year 2006-07was 0.18. it was

slightly reduced to 0.14 in the 2006-07 year. In the next year 2007-08 and 2009-10

the net worth ratio0.15. The same is increased to a maximumof 0.20 in the year

2010-2011

CHART NO.4

48
5) Net Profit Ratio

Net Profit Ratio establishes a relationship between net profit (after taxes)

and sales. It is determined by dividing the net income after tax to the net sales for

the period and measures the profit per rupees of sales.

Net Profit

49
 Net Profit Ratio = ------------------------------- x 100

Sales

TABLE- 4.5 Net Profit Ratio

(in crores)

Year Net Profit Sales Net Profit

Ratio

2006-2007 953 10336 9.2%

2007-2008 1679 14,525 11.6%

2008-2009 2415 18739 12.9%

2009-2010 2859 21401 13.4%

2010-2011 3138 28033 11.20%

Source : Secondary Data

Interpretation

From the table, it is found that the net profit has been fluctuating during the

study period. In the year 2006-07 the net profit ratio was 9.2%. In the year 2007-

08it was increased to11.6%. In the next year 2008-09it was further

50
increased12.9%. During the year 2009-10 there was a slightincreasesto 13.4%.

During the year 2010-11the net profit ratio was 11.20%.

CHART NO.5

6) Stock Turnover Ratio:

This ratio Indicates whether investment in inventory is efficiently used or

not. It explains whether investment in inventories in within proper limits or not. It

also measures the effectiveness of the firm’s sales efforts. The ratio is calculated

as follows.

51
 Cost of goods sold

Stock Turnover = -------------------------------

Average Stock

Cost of goods sold = Sales- Gross Profit

Average stock =Opening stock + Closing stock

--------------------------------------

TABLE – 4.6STOCK TURNOVER RATIO

(in crores)

Year Cost of goods Average Stock

sold Stock Turnover Ratio

2006-2007 8673 2919 2.97

2007-2008 11902 3653 3.25

2008-2009 14960 4971 3.00

2009-2010 16936 7097 2.38

2010-2011 23153 9350 2.47

Source : Secondary Data

Interpretation

From the table, it is found that the stock Turnover ratio has been fluctuating

during the study period. In the year 2006-07 it was 2.97, It increases during the

year 2007-08 was slightly to 3.25. In the year 2008-09 it was 3.00 and

52
decreasesto 2.38in the year 2009-10 and during the year 2010-2011 it was

increased to2.47.

CHART NO.6

7) Debtors turnover ratio

The purpose of this ratio is to discuss the credit collector power and policy

of the firm. This ratio is established between account receivable and net credit

sales of the period. The debtors turnover ratio is calculated as follows.

53
 Credit Sales

Debtors Turnover Ratio = -------------------------------

Average Account receivables

Average account receivables = Total Debtors and B/R

TABLE No.4.7 Debtor Turn over (Rs in crores)

Year Sales Sundry debtors Debtors turn over ratio

Rs Rs

2006-2007 10336 5972 1.73

2007-2008 14525 7168 2.02

2008-2009 18739 9695 1.93

2009-2010 21401 11975 1.78

2010-2011 28033 15976 1.75

Sources : Secondary Data

Interpretation

From the table, it is found that the Debtor Turnover ratio has been

fluctuating during the study period. In the year 2006-07 it was 1.73, It increases

during the year 2007-08 was slightly to 2.02. In the year 2008-09 it was

decreased to 1.93 and decreases to 1.78 in the year 2009-10 and during the year

2010-2011 it was further decreased to 1.75

CHART NO.7

54
8) Average debt collection period

The average number of days that lapsed between the receipt of the invoice

by customers and the actual payment of the invoice . When measured against the
55
credit terms obtained from suppliers, average the account period shows the

length of time during which the firm is financing the account receivable either

with its own funds or borrowed funds. The radio may be calculated as follows:

Debtors B/R

Average debt collection period = -------------------------------

Net Credit sales

ABLE - 4.8 Debt Collection Period

(in crores)

Year Debtors Credit Sales Debt Collection

Period

2006-2007 5972 10336 210 days

2007-2008 7169 14525 180 days

2008-2009 9695 18739 188 days

2009-2010 11975 21401 204 days

2010-2011 15976 28033 208 days

Source : Secondary Data

Interpretation

56
 Debt Collection period ratio in the year 06-07 was 210 days. In next year

07-08 it further reduced to 180 days. In the next year 08-09 it was 188 days. In

the next year 2009-10 it was 204 days. During the years 2010-11 it was 208 days.

From the above it is inferred that the debt collection period shows a fluting

trend, which indicates quick recovery of money from debtors and also indirectly

shows that the management in highly efficient in collecting debts promptly.

CHART NO.8

57
9) Creditors turnover ratio:

It indicates the number of times on the average that the creditors turnover

each year. Creditors turnover ratio indicates the number of items the accounts

payable rotate in a year. It signifies credit period enjoyed by the firm in paying its

creditors. Account payable include traded creditors and bills payable.

. Credit Purchases

Creditors Turnover Ratio = -------------------------------

Average account payable

TABLE – 4.9 Creditor Turnover Ratio

(in crores)

Year Credit Purchase Average Account Creditor

payable Turnover ratio

2006-2007 4892 2100 2.32

2007-2008 6866 284 24.17

2008-2009 10182 3538 2.87

2009-2010 11821 4424 2.67

2010-2011 17620 5852 3.0

Source : Secondary Data

The creditor Turnover ratio during the year 06-07 was 2.32. In the year 07-

08 it was increased to 24.17. In the year 08-09 creditors turnover ratio slightly

reduced to 2.87. In the year 07-08 it was reduced to 2.67. During the year 2010-

2011 it was increased to 3.0

58
 From the above it in inferred that the creditors turnover ratio shows an

upward trend which indicates that the company is highly efficient in making.

Speedy settlements of debts to its creditors.

CHART NO.9

10) Average Payment period :

59
 The radio gives the average credit period enjoyed by the firm from its

creditors. It can be computed as follows.

Creditors + B/P

Average Payment period = ------------------------------- X 365 (in

days)

Credit Purchase

A Lower Ratio shows that the creditors being paid promptly. The amount

payable depends upon the purchase policy, the quantum of purchase and suppliers

credit policy.

TABLE – 4.10 Average Payment Period

(in crores)

Credit Average Average Payment

Purchase Creditors period

year

2006-2007 4892 2100 156 days

2007-2008 6866 284 15 days

2008-2009 10182 3538 126 days

2009-2010 11821 4424 136 days

2010-2011 17620 5852 121 days

Sources : Secondary Data

60
 The average payment period during the year 2006-07 was 156 days. From

the year 2007-08 it was heavily decreased 15 days. In the year 2008-09 average

payment period was 126 days. In the year 2009-10 it was 136 days. This last year

2010-2011 it was 121 days.

CHART NO.10

11) Fixed assets turnover Ratio:

61
 The ratio indicates that extent to which the investments in Fixed assets

contributes towards sales. If compared with a previous year, it indicates whether

the investment in Fixed assets has been judicious or not. The ratio is calculate as

follows.

Sales

Fixed assets turnover ratio = -------------------------------

Fixed assets

TABLE – 4.11 Fixed asset Turnover ratio

(in crores)

Year Sales Fixed asset Fixed asset

Turnover

2006-2007 10336 1140 9.06

2007-2008 14525 1167 12.44

2008-2009 18739 1291 14.51

2009-2010 21401 1639 13.05

2010-2011 28033 2627 10.67

Source : Secondary Data

Interpretation

62
 The fixed asset turnover ratio during the year 2006-07 was 9.06. It is found

that the fixed asset turnover ration has been fluctuating during the study period. In

the year 07-08 it was 12.44. In the year 08-09 it was 14.51. During the year 2007-

08 the fixed asset turn over ratio was 13.05. This, last year 2010-2011 it was

decreased to 10.67.

CHART NO.11

12) Capital Turnover Radio:

63
 Managerial efficiency is also calculated by establishing the relationship

between cost of sales or sales with the amount of capital invested in the business.

Capital turnover Ratio is calculated with the help of the following formula.

Sales

Capital turnover ratio = --------------------------------------

Net worth (Or) Proprietor’s fund

TABLE – 4.12 Capital Turnover ratio (in

crores)

Year Net worth (or) Sales Capital Turnover

Proprietor’s fund ratio

2006-2007 6027 10336 1.71

2007-2008 7302 14525 1.98

2008-2009 8789 18739 2.13

2009-2010 10775 21401 1.98

2010-2011 12939 28033 2.16

Sources : Secondary Data

Interpretation

It is inferred from the above table the capital turnover ratio for the year 06-

07 was 1.71. In the year 07-08 it was 1.98. where as In the year was 2008-09 it

was increased to 2.13. In the year 2009-10 it was slightly decreased to 1.98. But

during the year 08-09 it was increased further to 2.16.

64
CHART NO.12

13) Return on total assets:

65
 Profitability can be measured in terms of relationship between net profit

and total assets. It measures the profitability of investment. The overall

profitability can be known by applying this ratio.

Net Profit

Return on total Assets = -------------------------- X100

Table assets

TABLE – 4.13 Return on Total assets

Year Net Profit Total asset Return on Total

assets

2006-2007 1582 14482 10.92

2007-2008 2564 17497 14.65

2008-2009 3736 22354 16.71

2009-2010 4430 29344 15.09

2010-2011 4849 39528 12.26

Source : Secondary Data

Interpretation

From, the above table, it was found that the return on total asset has been

fluctuating during the study period. In the year 2006-07 it was 10.92. In the year

2007-08 it was increased to 14.65. In the year 2008-09 was increased further

66
increased to 16.71 and in the year 09-10 it was reduced to 15.09. During the year

2010-11 it was slightly decreased to 12.26.

CHART NO.13

14) Operating Ratio

67
 Operating ratio is an indicative of the proportion that the cost of sales bears

to sales. ‘Cost of sales’ includes direct cost of goods sold as well as other

operating expenses. It is an important ratio that is used to discuss the general

profitability of the concern. It is calculated by dividing the total operating cost by

net sales.

Cost of goods sold + Net operating expenses

Operating ratio = ----------------------------------------------------- X100

Sales

Cost of goods sold = sales = gross profit.

TABLE – 4.14

TABLE – 4.14 Operating ratio

(in crores)

Year Cost of goods Sales Operating ratio

sold + operating

expenses

2006-2007 8673 10336 83.9

2007-2008 11902 14525 81.9

2008-2009 14960 18739 79.8

2009-2010 16936 21401 79.1

2010-2011 23153 28033 82.5

Source : Secondary Data

68
Interpretation

The above table clearly reveals that the Operating ratio for the year 06-07

was 83.9. But in the year 07-08 it was slightly reduced to 81.9 and in the year 08-

09 it was further reduced to 79.8. In the year 09-10 It was 79.1. During the year

last year 2010-2011 it was increased to 82.5.

CHART NO.14

15) Assets Turnover Ratio

69
 This ratio is also called as Investments Turnover Ratio”. It expresses the

relationship between cost of goods sold / net sales and assets/ investments of a

firm. The figure of net sales can be used where information regarding cost of

goods sold is not available. There are many variants of this ratio accordingly as

there are differences in the concept of assets employed.

Total Assets

Assets Turnover Ratio = -------------------------------

Sales

TABLE – 4.15 Asset turnover ratio

(in crores)

Year Fixed Current Total Sales Assets

assets assets assets Turnover

ratio

2006-2007 1139 13343 14481 10336 1.4

2007-2008 1166 16331 17496 14525 1.2

2008-2009 1291 21063 22353 18739 1.1

2009-2010 1639 27705 29343 21401 1.3

2010-2011 2627 36901 39528 28033 1.4

Source : Secondary Data

Interpretation

70
 From the table, it is understood that the Asset turnover ratio for the 2006-

07 was 1.4. In the year 2007-08 it was reduced to 1.2. In the year 2008-09 it was

further reduced to 1.1. In the year 2009-2010 there is slight increase to 1.3.while

in the year 2010-2011 it was slightly increaed to 1.4

CHART NO.15

71
16) Gross Profit Ratio:

Gross Profit ratio measures the relationship of gross profit to net sales and

is usually represented as a percentage. This ratio plays an important role in two

management areas. In the area of financial management, the ratio serves as a

valuable indicator of the firm’s ability to utilize effectively outside sources of

fund. Secondly, this ratio also serves as important tool in shipping the pricing

policy of the firm. This ratio is calculated by dividing gross profit by net sales.

Gross Profit

Gross Profit Ratio = -------------------------- X 100

Net Sales

Table – 4.16 Gross Profit ratio

(in crores)

Year Gross profit Sales Gross Profit

Ratio

2006-2007 1663 10336 16.0%

2007-2008 2623 14525 18.0%

2008-2009 3779 18739 20.1 %

2009-2010 4465 21401 20.8 %

2010-2011 4880 28033 17.4 %

Source : Secondary Data

72
 The above table shaows that the Gross profit Ratio during the year2006-07

was 16.0%. In the year 2007-08 it was increased to 18.0%. In the following year

2008-09 increased to 20.1 %. In the year 2009-10 there was slight increases

to20.8 %. In this last year was 2010-11the gross profit ratio was 17.4 %

CHART NO.16

73
 TABLE – 4.17

Comparative Statement for the year

2006-07 to 2007-08

(in crores)

Particulars 2006-07 2007-08 Absolute % of change

change

Assets:

Fixed Asset 1140 1167 27 2.36

Current asset 13343 16331 2988 22.39

Total 14483 17498 3015 20.81

Liabilities :

Current 7120 8808 1688 23.70

Liabilities

Others 1325 1512 187 14.11

Total 8445 10320 1875 22.20

Sources : Secondary Data

Interpretation

From this table, it is found that the comparative statement for the year has

been fluctuating during the study period. In the year 2006-07 to 2007-08 having

fixed assets was 2.36 & current asset was increased to 22.39. and in the year

74
2006-07 to 2007-08 current liabilities increased 23.70 and other liabilities it was

14.11.

CHART NO.17

75
 TABLE – 4.18

Comparative Statement for the year

2007-08 to 2008-09

(in crores)

Particulars 2007-08 2008-09 Absolute % of change

change

Assets: 1167 1291 124 10.62

Fixed Asset

Current asset 1633 21063 4732 28.97

Total 17498 22354 4856 27.75

Liabilities : 8808 11898 3090 35.08

Current

Liabilities

Others 1512 2522 1010 66.79

Total 10320 14420 4100 39.72

Sources : Secondary Data

Interpretation

From this, table was comparative statement for the year has been

fluctuating during the study period. In the year 2007-08 Fixed assets was

increased by 10.62 . Current assets was 28.97. and the current liabilities was

35.08.

76
CHART NO.18

77
 TABLE – 4.19

Comparative Statement for the year

2008-09 to 2009-10

(in crores)

Particulars 2008-09 2009-10 Absolute % of

change change

Assets: 1291 1639 348 26.95

Fixed Asset

Current asset 21063 27705 6642 31.53

Total 22354 29344 6990 31.26

Liabilities : 11898 16576 4678 39.31

Current Liabilities

Others 2522 3244 722 28.62

Total 14420 19820 5400 37.44

Sources : Secondary Data

Interpretation

In the year comparative statement from the 2008-09 to 2009-10.The fixed

assets was increased by 26.95 while the Current assets was increased by 31.53

and current liabilities by 39.31.

78
CHART NO.20

79
 TABLE – 4.20

Comparative Statement for the year

2009-2010 to 2010-2011

Particulars 2009-10 2010-11 Absolute % of change

change

Assets: 1639 2627 988 60.28

Fixed Asset

Current asset 27705 36901 9196 33.19

Total 29344 39528 10184 34.70

Liabilities : 16576 23357 6781 40.90

Current

Liabilities

Others 3244 4976 1732 53.39

Total 19820 28333 8513 42.95

In the year comparative statement from the 2009-2010 to 2010-

2011.The above table clearly reveals that the was tremendous increase in the fixed

asset to 60.28. In the same year current asset was increased by 33.19 and the

current liabilities was by 40.90.

80
CHART NO.20

81
Method of Least square:

TABLE – 4.21

Fitting the straight Line Trend To sales (Rs. In Crores)

Year Y (Sales) X (year X2 Xy Trent

codes) values Yc

2006-07 4136 -2 4 -8272 953.4

2007-08 5034 -1 1 -5034 3369.9

2008-09 5541 0 0 0 5786.4

2009-10 6471 1 1 6471 8202.9

2010-11 7750 2 4 31000 10619.4

N=S £y=28932 £x=0 £x2=10 £zy= 24165 £yc=28932

Interpretation

The equation of straight Line Trend is

yc = a+ lex

since £ x = 0

a= £Y/N le = £x7/£x2

£y = 28932 £xy=24165 N=5 £x2=10

Substituting the values, we get

A = 28932/5 = 5786.4

D = 24165/10 = 2416.5

82
 The Linear trend for sales by the method of least squares is

For 2009-10 x would be 3

Hence y 2010 = 5786.4 + (2416.5 (3)

= 5786.4 + 7249.5

= 13035.9 (in Crores)

For 2010 – 11 x would be 4

Hence y 2011 = 5786.4 + (2416.5 (4) )

= 5786.4 + 9666

= 15452.4 (in crores)

Forecasted value

Year 2012 2013

Sales 13035.9 15452.4

(In Crores)

83
 CHAPTER-V

FINDINGS, SUGGESTIONS AND CONCLUSION

FINDINGS

Current ratio shows a document trend indicating the company not able to

fulfill current obligations furthers this also indicate that liquidity position of the

company is less satisfactory.

In all the five years the current ratio is less than the ideals of 2. Creditors

term over ratio shows an upward trend and indicates better credit management.

In all the five years the liquid ratio is higher than the ideal ratio of 1

Common size financial statements clearly shoes the firm allocates half of the total

current assets to debtor.

The firm’s debt collection period have more than 180days it increased the

debt collection period year by year. It shows firms liberal debt collection policy.

2. Fixed assets turnover was 11% in the year 2010-11.

3. Capital turnover ratio was 2.16 in the year 2010-11.

4. Return on total assets that decreased from 15.09 in the year 2009-2010 to 12.26

in the 2010-2011.

5. Operating ration has increased from 79.1 in the year 07-08 to 82.5 in the year

2010-11

6. Asset turnover ratio was 1.4 in the year 2010-11.

7. Gross profit ratio has come down from 21% in year 2009-2010 to 17% in

2010-11.

84
8. Sales shows the increasing trend at the rate in every year.

SUGGESTIONS

The current ratio of the company is below the standard ratio in all the 5

years under study , Hence it should be improved at least to the standard.

The debt collection period is more than 180 days which is to be reduced or

the debt collection policy of the company is to be changed.

Suitable training may be imparted to all the executives including labourers

as and when they are recruited.

The gross profit of BHEL has to be increased , this can be done by taking

steps to reduce the cost of sales , which have its own affect over the gross profit.

As the consumption of raw materials holds a wider part in the cost of sales.

Researcher who is in the hands of the company to adopt consistent pricing policy

regarding raw materials which ultimately reduce the cost of sales & which in

tern improves the gross profit in the subsequent years.

The company may take one of the measures for improving more profits,

sale should be enhanced from into end through innovative marketing techniques.

In a competitive business world, unless & other wise aggressive it is very

difficult to achieve its required sales.

The concern must take measures to avoid dead stock – which has an

adverse.

Effect over the liquidity of the concern. The concern is required to

develop an effective inventory management system.

85
 Sales are to be increased to keep with increased in fixed Assets in order

improve its fixed Assets turnover ratio.

CONCLUSION

Bharat Heavy Electricals units bying in India come under the purview of

“NAVARATNA” units. There are 14 more Bharat Heavy Electricals units /

divisions. Of this Bharat Heavy Electricals limited Tiruchirappalli is one the unit

and it earns more profit for every year continuously.

The company has been successful in meeting the demanding requirements

of not only in India but also international markets in terms of complicity of work

as well as Technology etc. BHEL has over the year established its reference in

to700 countries across the world. This unit gives more employment ie to

thousands and thousands of workers. It gives more protection and safety to the

staff working in it besides more concentration to the welfare of the workers.

BHEL is developing corporate social responsibility such as self

Employment generation, Environment protection, Education Health management

and medical aids and so an. It’s focus attention is on 56 adopted villages having

nearly 80000in habitations in addition to financial assistance.

Finally, I pray God requesting to develop the unit more and in day by day.

BHEL should run in successful manner in future also.

86