Working Capital On BEML

BEML
SUGGESTIONS & CONCLUSIONS
INDUSTRIAL BACKGROUND
Industries are the guiding stars and backbone of an economy . The development of a country depends upon Industrialization of economy. After independence India through its 5 year planning programmes has given much importance to the growth of industries. Government has taken a leading march in enhancing increasing industrialization. In almost all the spheres the government has started industries. If industrialization has to take place good infrastructure facilities should be provided like roads, tunnels, dams etc., for the movement of goods transportation is a must with good road facilities. Thus there were greater improvements in the infrastructure facilities all over the country. The infrastructure facilities can be developed manually or mechanically. It is of the tremendous changes that take place in science, technology, which gave rise to mechanization in every field. However, if work is carried out manually there will not be greater efficiency or in other words productivity is less and it even consume more time. To increase efficiency and productivity and speed,
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mechanical equipments came in to existence. And thus there is an increase in demand for such products. After independence defence industries were given much importance. Government itself started all the defence industries. India felt the need of having strong defence to be secure and capable of defending its borders from its neighbourers. Keeping that in mind BEML was started under ministry of defence. It was mainly started to produce defence equipments and heavy capital equipments like Railway Coaches, Earthmovers, Machineries etc., Two wars with Pakistan and China aggressive made to the defence ministry to start one more unit of BEML. It was started in Kolar Gold Fields in the year 1964. It is one of the biggest in Asia. Unit of KGF, BEML is an ISO 9000 company engaged in manufacture of diverse equipments for core stores like mining, agriculture, earth moving equipments etc., It has sales turnover of Rs. 1347 crores. It is one of the biggest industries in Asia in the field of Earth moving equipments. This unit directly comes under ministry of defence. It produces defence equipments and earthmovers. Which are very much, portent for mining, road constructions etc., Its Research and Development
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Department is unique and one of the best in the country. R D department has contributed much to the growth of BEML industry. Its designed equipments were successfully used on various constructive processes. BEML has number of branch it has various units in different parts of the country have immensely contributed to the growth of the economy. It not only provides employment but also it has successfully achieved the advantages of economies of scale. Ancillary and Small industries were started around its vicinity. BEML has supplied various capital equipments leading to capital formation form its inception. It is one of the profit making public sector. It also earns foreign exchange to the country. The Europeans and African countries purchased earthmovers equipments produced by company. It is helping the economys growth both directly and indirectly.
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SUBJECT BACKGROUND:Working capital in general practice refers to the excess of current assets over current liabilities. Management of working capital therefore, is concerned with the problems that arise in attempting to manage the current assets and current liabilities and the interrelationship that exists between them. In other words it refers to all aspects of administration of both current assets and current liabilities. The basic goal of working capital management is to manage the current assets and current liabilities of a firm in such away that a satisfactory level of working capital is maintained i.e., it is neither in adequate nor excessive. This is so because both in adequate as well as excessive working capital positions are bad for any business. In adequate of working capital may lead the firm to insolvency and excessive working capital implies idle funds, which earn no profits for the business. The term current assets refers to those assets which in the ordinary course of business can be, or will be in turned into cash with in one year without disrupting the operations of the firm. The major current assets are cash marketable securities, accounts receivables and inventory.
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Current liabilities are these liabilities, which are intended at their inception to be paid in the ordinary course of the business with in a year, out of current assets or earnings of the concern, the basic current liabilities are accounts payable, bills payables bank overdrafts out standing expenses. The importance of working capital manager is reflected in the fact that financial managers spend a great deal of time in:1. Managing current assets and current liabilities.
2. Arranging short term financing.
3. Negotiating favourable credit term. 4. Controlling the movement of cash. 5. Administrating accounts receivables and 6. Maintaining the investment in inventories consume a great deal of time of financial manager.
Meaning of Working Capital:Working capital may be regarded as life blood of business, its effective provision can do much to ensure the success of business while its inefficient can lead not only to loss or profits but also the ultimate down fall of what otherwise might be considered as a promising concern.
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Working capital means that part of capital which is required for day to day maintenance of the business, it is known as current capital because the amount is invested in current assets, it is knows as revolving capital or circulating capital because cash revolves and becomes cash again in the working capital cycle. In the words of Shubin Working capital is the amount of funds necessary to cover the cost of operating the enterprise. According to Genesteberg, Circulating capital means current assets of company that are charged in the ordinary course of business from one firm to another, for example from cash to inventories, inventories to receivables into cash.
Concepts of Working Capital:These are two concepts of working capital Gross working capital Net working capital The term working capital to gross working capital and represent the amount of funds invested in current assets. Thus, the gross working capital is the capital invested in total current assets of the enterprise. Current assets are those assets, which in the ordinary
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course of business can be converted into cash within a short period of the normally one accounting year. Examples: Constituents of current assets Cash in hand and bank balances Bills receivable Sundry debtors (less provision for bad debts) Inventories of stocks such as: Raw materials Work in progress Stores and spares Finished goods Temporary investment of surplus funds Prepaid expenses Advance payment of tax Accrued or outstanding incomes. In narrow senses, the term working capital refers to the net working capital. Net working capital is the excess of current assets over current liabilities or say
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Net working capital = current assets current liabilities. Net working capital may be negative or positive, when current assets exceeds 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 intended to be paid in the ordinary course of business with in a short period of time normally are continuous year out of current assets or the income of a business.
Constituents of Current Liabilities:a. Bills Payable b. Sundry Creditors or accounts payable c. Accrued or outstanding expenses d. Short-term loans, advances and deposits e. Dividend payable f. Bank overdraft g. Provision for taxation, if it does not amount to appropriation of profits The gross concept is sometimes preferred to the net concept of working capital for the following reasons:-
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a. It enables the enterprise to provide correct amount of working capital at the right time. b. Every management is more interested in the total current assets with which it has to operate them the sources from where it is made available. c. The gross concept of working capital is more useful determining the rate of return on investments in working capital The net working capital concept, however, it is also important for the following reasons: 1) It is qualitative concepts, which indicates the firms ability to meet its operating expenses and short term liabilities. 2) It indicates the margin of protection available to the short-term creditors, i.e., excess of current assets over current liabilities. 3) It is an indicator of the financial soundness of an enterprise.
Importance of adequate Working capital:Working capital is the life blood and nerve center of a business. Just as circulating of blood is essential in the human body for
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maintaining life, working capital is very essential; to maintain the smooth running of business in the following ways:-
Solvency of the business:Adequate working capital helps in maintaining solvency of the business by providing uninterrupted flow of production.
Goodwill:Sufficient working capital enables a business concern makes prompt payments and hence helps in creating and maintaining goodwill.
Easy loans:A concern having adequate working capital high solvency and good credit stand up can arrange loans form banks and others on easy a favourable terms.
Cash discount:Adequate working capital also enables a concern to avail cash discounts on the purchase and hence it reduces costs.
Regular supply of raw materials:Sufficient working capital ensures regular supply of raw materials and continuous production.
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Regular payment of salaries, wages and other day-to-day commitments:A company which has ample working capital, can make regular payments of salaries, wages and other day-to-day commitments which arises the morale of its employees, increase their efficiency, reduced wastages and cases and enhance production and profits.
High Morale:Adequacy of working capital creates an environment of security, confidence and high morale and creates overall efficiency in a business.
Ability of face crisis:Adequate working capital enables a concern to face business crisis in emergencies such as depression because such generally, there is much pressure on working capital.
Quick and regular return on investment:Sufficient of working capital enables a concern to pay quick and regular dividends to its investors as there may not be much pressure on working capital.
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Exploitation of favourable market conditions:Adequate working capital enables a concern to take advantage of the favourable market condition and also an edge over the competitors.
Excess or in adequate working capital:Every business concern should have adequate working capital to run its business operations. It should have neither redundant or excess working capital nor inadequate nor shortage of working capital. Excess is well, as short working capital positions are bad for may business.
Disadvantage of Redundant or Excessive working capital:i. Excessive working capital means idle funds which earn no profits for the business and hence the business cannot earn a proper rate return on its investments. ii. Redundant working capital lead to unnecessary purchasing and accumulation of inventories causing more chances of theft, waste and losses. iii. Excessive, working capital excessive debtors and defective credit policy, which may cause high incidence of bad debts.
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iv. v.
It may result into overall inefficient in the organisation. When there is excessive working capital, relations with banks and other financial institutions may not be maintained.
vi.
Due to low rate of return on investments, the value of shares may also fall.
vii.
The
redundant
working
capital
gives
to
speculative
transactions.
Disadvantages of inadequate working capital:a. A concern, which has inadequate working capital, pays its short term liabilities in time. b. It cannot buy its requirements in bulk and cannot avail of discounts. c. It becomes difficult for the firm to exploit favorable market conditions and undertake profit projects due to lack of working capital. d. The firm cannot pay day-to-day expenses of its operations and it creates inefficiencies, increases casts and reduces the profit of the business. e. It becomes impossible to utilize efficiently the fixed due to non-availability of the liquid funds.
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f. The rate of return on investment also falls with the shortage of working capital.
Determinants of Factors affecting working capital:In order to determine the proper amount of working capital of a concern, the following factors should be considered. Factors determining working capital requirements: Nature or character of business. Size of business.
Manufacturing cycle.
Production policy Volume of sales. Terms of purchases and sales. Business cycle fluctuation. Fluctuations in the supply of raw materials. Price level changes. Operating efficiency. Profit margin.
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Need of working capital:The need for working capital cannot be over emphasized every business needs amount of working capital. The need for working capital arises due to the time gap between production and realization of cash from sales. Thus, working capital is needed for the following purposes. 1) For the purchase of raw materials, components and spares. 2) To pay wages and salaries.
3) To incur day-to-day expenses and overhead costs such as fuel
power and office expenses etc., 4) To meet the selling costs as packing advertising etc., 5) To provide credit facilities to the customers. 6) To maintain the inventories of raw materials work-in-process, store and spares and finished stock.
Kind of working capital:Working capital may be classified in two ways. I. On the basis of Concept II. On the basis of time.
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Fixed working capital:This is the minimum which is required ensure effective utilization of fixed facilities and for maintaining the circulation of current asset. There is always a minimum level of current assets, which is continuously required by the enterprise to carryout its normal operations. For example, every firm has to maintain a minimum level of raw materials, work in progress, finished goods and cash balance. This minimum level of current asset is called permanent or fixed working capital. This working capital can further be classified as regular working capital. Reserve working capital is the excess amount over the requirement for regular working capital, which may be, provided for contingencies that may arises at unstated periods such as strike, risk in prices, depression etc. The characteristics of permanent working capital are that: The amount of permanent working capital remains in the business in one form or another.
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It also grows with the size of the business. i.e, greater the size of the business, greater by the amount of working capital and vice versa.
Variable Working Capital:This is the amount of working capital, which is required to meet the seasonal demands and some special exigencies. Variable working capital can be further classified as seasonal working capital and special working capital. Seasonal working capital is the amount of capital required to meet the seasonal needs of the enterprise. Special working capital is that part of working capital which is required to meet special exigencies such as launching of extensive marketing campaigns for conducting research.
Illustration:Illustration the total financial needs of a typical firm both for fixed assets and working capital. The fixed asset and permanent working capital are upward sloping, indicating that investment in such assets tends to increase over time with the growth of the firm. The variable working capital curve varies form period to period.
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Operating cycle:The duration of the time required complete the sequence of events right from purchase of raw materials or goods for cash to the realization of sales. In cash is called the operating cycle, working capital cycle or cash cycle. This cycle can be said to be at the heart of the need for working capital. The operating cycle refers to the length of the time necessary to complete the following cycle of events. i. ii. iii. iv. v. Conversion of cash into raw materials Conversion of raw materials into work-in-progress Conversion of work-in-progress into finished goods Conversion of finished goods into debtors Conversion of debtors into cash. The cycle will repeat again and again over the period depending upon the nature of the business and type of the product.
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The operating cycle shown in the figure relates to a manufacturing firm where cash is needed to purchase raw materials and converts raw materials into work-in-progress and then, work-inprogress is converted into finished goods. Finished goods will be sold for cash on credit and ultimately debtors will be realized.
Cyclical flow of working capital:The quantum or magnitude of various components of current assets and current liabilities may under go changes at any point of time. The net stream of increase or decrease in working capital position always flows in and out in cycles order. The cyclical flow of working capital is shown in the figure. When a companys operation continues the components of current assets and current liabilities convert into one form or another. The working capital may be expanded or contracted by the influence of other financial or operating transactions, which cuts cyclical flow as shown above. This cyclical flow is also known as working capital turnover. The cash money available at any point of time is termed as funds available i.e., the working capital availability at any point of time.
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Sources of working capital:Variable Shares Commercial banks Debentures Indigenous bankers Public deposits Trade creditors Ploughing back of profits Installment credit Loans from financial institution Advances Accounts receivables factoring Accrued expenses Commercial papers Deferred incomes Fixed
credit
Financial of fixed working capital:There are five important sources of permanent working capital:-
Shares:Issue of shares is the most important sources for raising the permanent or long term capital. A company can issue various types of shares as equity shares preference shares and deferred shares. According to the companies act, 1956, however, public company cannot issued deferred shares.
Debentures:A debenture is an installment issued by the company acknowledging its debts to its holder. The debenture holders are the
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creditors of the company. A fixed rate of interest is paid on debenture. The interest on debentures is a change against profit and loss account.
Public Deposit:Public deposit is the fixed deposits accepted by a business enterprise directly from the public. Now the business house accepts days public deposits for 5 to 7 years.
Ploughing back of profits:It means the reinvestment by a concern of its surplus earnings in its business. It is an internal source of finance and is most suitable for an established firm its expansion, modernization and replacement.
Loans from financial institution:Financial institutions such as commercial banks, life insurance corporations, industrial finance corporation of India, state financial corporations, state industrial development corporations, industrial development bank of India and many others provide long term loans and also provide short term and medium term loans.
Financing of variable working capital:The main sources of variable working capital are as followsIndigenous banks:Adarsha College of Mgt & Science 21
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Now a days business house have to upend on indigenous bankers for obtaining loan to meet their working capital requirements. Trade credit:It represents the credit extended by the suppliers of goods and services. It is spontaneous source of finance, provided the firm is considered creditworthy by its suppliers and represents 25to 50 percent of short term financing. The confidence of suppliers is the key to scrutiny trade credit. Installment credit:This is another method of which assets are purchased and the payment is made in installment over predetermined period of time. This method provides funds for some times and is used in course of short term working capital by many business houses, which have different fund position.
Advances:-
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Some business house get advances from their customers and agents against orders and the sources are short-term sources of finance for them. Factoring receivable credit:A commercial bank may provide finance by discounting the bills or invoices of are customers. Thus a firm gets immediate payment for sales made on credit. A factor is a financial institution which offers services relating to management and financing of debts arising out of credit sales which is also short-term financing. Accrued expenses:These are the expenses which has been incurred but not yet due and hence not yet paid also. So they can be used for short-term financing since there is no interest payable for the delay payment. Examples of these accrued expenses are salaries, wages and taxes. Deferred incomes:These are incomes receivable in advance before supplying goods or services. These funds increase the liquidity of a firm and constitute important sources of short-term finance.
Commercial papers:-
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Commercial papers represents unsecured, promissory notes issued by firms to raise short-term funds. It is an important money market instrument, which was introduced by the reserve bank of India in this country. But only large companies enjoying high credit ranking and financial health can issue rating and financial health can issue commercial papers to raise short-term funds.
Working capital finance by commercial banks:Commercial banks are the bank most important sources of short-term capital. The major portion of working capital loans is provided commercial banks.
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Title of the project:ANALYSIS OF WORKING CAPITAL MANAGEMENT OF BHARAT EARTH MOVERS LIMITED.
Statement of the problem:Working capital management is the heart and life of any business. It is the study of current assets and current liabilities. This is a day to day activity and occupies most of the manager; also faulty working capital management is immediately refuted through low solvency, to much diversion of long term funds into working capital and finally industrial sickness or loss of reputation.
Purpose of the study:Working capital importance to any company, including service companies, importance of working capital arises due to following reasons. Working capital proportional to sales, it is impossible to increase sales without increasing working capital. Working capital management is a day-to-day activity unlike long term of the manager. Faulty working capital results in either over or under liquidity of capital including solvency and reputation.
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One of the most major and common reasons for industrial sickness is faulty working capital management. Hence this study is understood working capital management policies, practices and systems of the company.
Objectives of the study:The specific objectives of the study are:1. To identify the need of working capital. 2. To analyze changes in working capital. 3. To analyze inflow and outflow of funds. 4. To evaluate the efficiency of management of working capital. 5. Analysis the components of working capital. 6. Growth of income and growth to net working capital. 7. Analysis of net working capital and its projections. 8. To conduct a ratio analysis of the over all financial performance. 9. To analysis the various internal and external factors affecting working capital.
PROFILE OF BHARAT EARTH MOVERS LIMITED:1. Name of the company: BHARAT EARTH MOVERS LID.,
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2. Registered office: -
BEML SOUDHA Corporate office No. 23/1, IV Main, S.R. Nagar BANGALORE- 560 027.
3. Group: 4. Activity: -
Public sector under taking Manufacture of Earth Moving Equipments, Rail coaches, Defence Equipments.
5. Date of establishment: 6. Bankers: -
January 1, 1965 STATE BANK OF INDIA CANARA BANK STATE BANK OF MYSORE PUNJAB NATIONAL BANK STATE BANK OF PATIALA BANK OF INDIA STATE BANK OF BIKANED AND JAIPUR CENTRAL BANK OF INDIA BANK OF BARODA UNION BANK OF INDIA
BEML has three production units and they are situated at the following address:Adarsha College of Mgt & Science 27
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UNIT NO: 1 Bangalore complex P.B. No. 7501 New Thippasandra post BANGALORE- 560 075 UNIT NO: 2 K.G.F. Complex BEML Nagar KOLAR GOLD FIELDS- 583 115. UNIT NO: 3 Mysore complex Belavadi post, MYSORE- 571 186.
BOARD OF DIRECTORS AS ON 18.06.2003

1. Chair man and M.D
V.R.S. Natarajan
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B.V. Raman V.S. Venkatanathan R.C. Suthar P. Mazumdar K.A. Nagaraja
3. Director (R&D) 4. Director (Production)

5. Director (Financial) 6. Director (Marketing)
BRIEF HISTORY OF BEML:BEML is a public sector undertaking under the effective administration of ministry of defence. (Department of defence supply) The organisation was set up in the late forties as a part of Hindustan Aircrafts Limited now Known as HINDUSTAN AEONAUTICS LIMITED to manufacture Railway coaches. It gradually diversified into earth moving equipment in 1964. After 1-year i.e., 1965 the organisation has its own entity i.e., BEML. The company was incorporated in the first 5 years plan when India was very weak in its economy. The main purpose for setting up this organisation was to manufacture heavy earth moving equipments, rail coaches, Heavy duty trucks, truck laying equipments etc., Later in few years the organisation had a tremendous grow and they were strong enough to diversify to sectors such as coal, mining,
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steel cement, power, irrigation, defence, construction of roads, building. In the last few decades it has further brought new technical high quality inventions like hydraulics, heavy-duty diesel engines, welding robots and undertaking of heavy fabrication jobs. Over the year the growth of the company has been phenomenal. The company has the distinction of making profits right from its inception. Commencing its operations with a turnover of around Rs. 5 crores in 1964-1965, the company has achieved a turnover of around Rs. 1421 crores for the year 2001-2002. The product range has also under gone drastic changes in terms of numbers and technology. Also the customer profile has undergone significant changes whitest in the companys. Defence and railways constituted the major market for BEMLs product over the years the position has been taken over by mining sector particularly M/s coal India LTD (CIL).
Rail coaches:-
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Rail coach division BEML is one such undertaking, which is making significant contribution to the transport requirement of the country. The unit has since passed through many phases of rail coach building industry. The first all metal III class tier coach was built on standard 1 Rs. Under frame in 1948. The 1958 the first all steel integral type III class coach was delivered to railway. In 1965 the rail coach division was separated from HAL and made the nucleus of a new public sector company the earth mover division of BEML, raised from rail coach division and subsequently located at BEML Nagar near Kolar Gold Fields (K.G.F.) and my sore manufactures a wide range of earth moving equipment. BEML started in 1964 with railway equipment division at Bangalore. The first rail coach factory in the Indian sub-content, this unit has consolidated its, status as a major supplier of integral rail coaches, meeting about 25% of the countrys demand it has a production capacity of over 800 coaches p.a.
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The Bangalore unit also manufactures heavy-duty trucks and trailer and also defenses aggregates to meet the needs of the armed forces. A number of variants such as crash fore tenders, recovery vehicles, Missile transported have been developed on the heavy-duty truck. BEML offers application of engineering service and under takes preparation of pre-feasibility of project reports and equipments selection studies. Recommendation of user proper studies (RUP) is done at customer sites to improve productivity and to reduce cost. The unit has taken up production of direct electrical multiple unit (DCEMV) and Rail bus and alternate current electrical multiple units (ACEMV) Manufacturing units: BEML is the second largest earth moving manufacture in Asia. It has 3 production units with hi-tech facilities. a. BANGALORE b. KOLAR GOLD FIELD c. MYSORE
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These units have high forced technology manufacturing facilities. Steel Foundry at Tarikere is meeting the requirement of quality steel costing of the company, various units. Its Rs. 300 millions composite research and development centre at KGF has laboratories in fluid power engineering material science, structural engineering and power line testing with state of the art facilities. the companys division continues to make significant strides not only is the indigenization of collaborates products faster but also in the design and development of high technology, sophisticated new products and aggregates. Workers:Manpower is the main sources for a successful industrial empire. There are about 13800 employees working round the clock for the betterment of BEML Marketing:A nation wide network of 10 regional office and 15 district offices provide customers with immediate access to the companies wide range of products and services. Marketing activities include field operations and intensive training of customer personnel in operations
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and maintenance of equipment additionally, BEML offers application engineering services and fleet optimization solution.
Customer services:BEML service centers and spare parts depots provide total equipment care and rehabilitation services. Towards achieving maximum customer satisfaction, the company has established BEML net a satyam net work-with a view to streamline spares supplies. In taking service to the doorsteps of customers, BEML site engineers insure higher availability of machines through prompt after sales service. BEML also undertakes to service machine all its lifetime. Research and development:R &D made rich contribution over the years by designing developing and productionising a number of high technology products and aggregates for the core sector such as contribution to mining defense and rail. Development of high technology products likes power transmission, planetary axles calipers, and disk brakes and computerized transmissions control system.
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R&D have also carried out detailed studies for the introduction products catering to the requirement of mining, railway and defence sector. The studies include assessment of existing indigenous technological base, introduction of new products, like road headers, side discharge later, wheeled loader etc., in the product range and also the feasibility of manufacturing a number of products like field services equipment for defence sector. Benefits:Rail bus and spoil disposal units has been successfully developed and productions. BEML & ISO 9001 All the production divisions of Beml have been credited with ISO 9001 and ISO 9002 certification. Bemls Bangalore complex has been awarded the ISO 9001 certificate on the 26th January 1994 by the Bureau Verities Qualities International (BVI)
PRODUCT PROFILE:
BEML produced durable international standard equipments and system designed to with stand tough working environment under varied climatic condition.
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Company products are of wide range, which help to the growth of the economy such as: a. Railway products b. Defence products
c. Spares and other
Railway products:
ACEMU- Alternate Current Electrical Multiple Units.
DCEMU- Direct Current Electrical Multiple Units.
RAIL BUS. Defence products: i. ii.

iii.
TATRA TRUCKS and its variants IGMP-Integrated Guided Missile Project HRV and ARV- Heavy Recovery Vehicle. And Armed Recovery Vehicle.
iv. v. vi.
50 ton trailers Ejector and Air-cleaner assembly Mail-rail and mil-wagons
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PRODUCT RANGE:
BEML manufactures a wide range of products to meet the needs of construction, mining, power, irrigation, fertilizer, cement, steel, defence and railway sectors. MINING & CONSTRUCTION: CRAWLER EQUIPMENT:
Hydraulics Excavator Bulldozers Pipe Layer Electric Rope Shovel Walking Drag Lines Road Header Long wall Mining Equipment Telescope Excavator Bucket Wheel Excavator
Stacks and Reclaimer
Slide Discharge Loader
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WHEEL EQUIPMENT: Wheel Loader Wheel Dozers Motor Grades Rear Dumpers Bottom Dumpers Water Sprinklers Tyre Handlers DEFENCE PRODUCTION: BEML TATRA Heavy Duty Trucks Heavy Duty Trailers Transmissions, Ejectors and Air cleaners and Final Drivers for Defence Vehicles Armoured Defence Vehicles Snow Plough and Snow Cutter Aircraft Moving Tractor
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RAILWAY CONSTRUCTION: i. ii. iii. iv. v. vi. Integral Rail Coaches of Various Models Overhead Equipment Inspection Car Track Laying Equipment Electrical Multiple Units Rail Bus Muck Wagons
HEAVY FABRICATION & MACHINERY ENERGY: Diesel Engines Diesel Generator Sets ROBOTICS & AUTOMATION: Industrial Welding Robots Machine Tending Robots STEEL PLANT EQUIPMENT: a. Continuous Casting Equipment b. Ladle Turret c. Strand Guide
ENERGY:
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a. Diesel engines b. Diesel generator sets HYADAULIC AGGREGATES a. Gear pumps/plunger pumps b. Cylinder/suspensions c. Control values d. Long wall mining equipment e. Telescope excavator f. Bucket wheel excavator g. Stacker and reclaimer
h. Side discharge loader
BEML manufacturing Units:1. Bangalore 2. Mysore 3. KGF BEML Subsidiary Units: Vignyan Industries Terikere in Chick Mangalore BEML EXPORTS:-
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Beml exports to 30 countries, across Europe, Africa, Asia and America etc. The company achieved all time high Export turnover of Rs.7, 189 lakhs as against Rs.6, 224 lakhs of the previous year. BEML REGIONAL OFFICES:a. New Delhi b. Kolkatta c. Mumbai d. Nagpur e. Ranchi f. Bilaspur g. Hyderabad h. Bangalore i. Sambalpur j. Siliguri LOCATION OF BEML OFFICE DISTRICT OFFICES Ahmedabad Bhuvaneshwar Bhopal Bilaspur Chandigarh
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Chennai Ernakulam Goa Gauhauti Jammu Kattur Patna Raniganj Rourkela Udaipur Vishakapatnam COMPETITORS:The following are major competitors for Beml: Rail Coaches: a. Integral Coach Factory Perambur Tamil Nadu b. Rail Coach Factory Kapurtala Punjab Earth Moving Equipments: i. ii. iii. Hindustan motors Larsen and Turbo Telco
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Small Loader: JCB Escorts Larsen and Turbo Hindustan Motors COLLABORATION: BEML has established extensive collaboration with many companies around the world some of the collaboration are enumerated below: Name of the Company Komastu Komastu Dressers Omnipol General Electric Bumar IGM Indresco Mitsui Mike Ural mash Alpine Country Japan U.S.A Czechoslovakia U.S.A Poland Australia U.S.A Japan RussiaVoest Australia
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Waspo
U.S.A
CUSTOMER PROFILE: All the major and state governmental projects including Irrigation, Power Sector, National Hydro-Power Corporation, NTPC, State Electricity Board, ISRO, ONGC, Railways etc from the customer base.
1. Coal Sector: Coal India Limited and its subsidiary Companys. 2. Defence
Requirement: Defence services, Boarder Road
Organisation, Air Force, ordinance Factories.

3. Port Trust: Mumbai, Calcutta, Chennai for meeting their
loading and handling requirements.

4. Private sectors: Almost all Steel, Cement and mining
companies a few of them CC, TISCO, Larsen and Turbo, Gujarat, Ambiya Cements, Raymonds Cement, Keloram Cement and J.K. Cement.
5. Mining and Steel Sector:
National Mineral Development Corporation Hindustan Zinc Limited
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Hindustan Copper Limited Kudremukh Iron Ore Limited SAIL Bharath Aluminum Corporation Limited Indian Iron and Steel Corporation Limited BEML bagged the Number of Awards:In pursuit of excellence, BEML is recipient of Corporate Excellence Award from the Government of India apart from recognition on Safety, Quality and Import Substitution. 1. Export Performance Award for achieving highest performance in export 2. National Award for being the outstanding employer of the Physically Handicapped. 3. Safety Awards
a. Bangalore Complex b. Mysore c. Engine Division
14th time 6th time 1st time
4. And employees received number of suggestions award. BEML Future Plans:-
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During coming year BEML is planning for diversify activities in the allied and non allied areas of present line business.
In this connection effort have been made to introduce hydraulic components and aggregates, rail vehicles and special machinery for railways in a phased manner. Depending upon the secretarial needs and demand for earth moving equipment is scheduled to grow. This will benefit the company in the year to come. The policies are being preserved by the government and also help the growth of the company. The order book position of earth moving equipment segments in encouraging and keeping in future prospects. The company is introducing new products. The company is also increasing its market share of market to the defence sector.
GOALS OF BEML:i. To achieve and retain dominant position in earth moving and heavy construction industry by establishing high standards of quality, capability and reliability
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ii.
To pursue state of art and environmental friendly technologies as well as to develop cost effective and value added products.
iii.
To be competitive, responsive and to continuously improve service so as to achieve customer satisfaction
iv.
To grow into a global company and a keen sense of vision and business ethics as well as to earn maximum profits.
v.
To conserve resources and eliminate waste through optimum utilization of men, money, materials and machinery
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Research Design:According to Daire and others A research design is the arrangement of conditions for collection and analysis of data in a manner that aims to combine relevance to the research purpose with economy in procedure. The research design is the conceptual structure with in which research is conducted. Methodology:This project is an analytical research where in the research has to use the available facts as information and analyse these to make a critical evaluation of the materials this is also an applied research with an aim to find a solution for an immediate problems facing by industry or business organisation. The control aim of applied research is to discover a solution for some processing problem. This involves the following steps:
BEML
Type of research Analytical Tool working capital and financial statements, like comparative, common size and fund flow. Collected data company annual reports and e-mail at
www.beml.india.com Method of analysis analysis of ratios and fund flows and working capital statements.
Data collection:
The required data was collected from the annual report of the company and direct person interview with the office of the company and also through company website. Reference period: The period in this case study is for five financial years that is for 1997-1998 to 2001-2002. Sampling scheme: No specific sampling methodology was involves. The latest 6 years data and annual reports were considered in other words it was convenience sampling.
Definition of concepts:
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For the purpose of this study, following concepts were funds relevant and are defined under: Solvency = Reflected through current ratios
Total current assets in Rupees Current ratio = Total current liabilities in Rupees Current assets = those that cab be converted into cash with in one year or less. Current liabilities= those which have to be settled in one year or less. Net working capital= total current assets less current liabilities. Gross working capital= equals to total amount of current assets. Long term source= are shares and debentures reserves. Short term source= are trade credit, commercial papers fixed deposits from public inter corporate deposits etc., Short term investments= are raw materials, labour short term advances. Long term investments= are buildings, vehicles, plant and machinery and office equipment etc., Liquidity= it is used in a limited sense in the study to means short term debt repaying capacity of the enterprise and can be issued by
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investing money short term securities including short term fixed deposits which banks. Profitability= this means ability of the company in marketing profits in relation to capital employed and sales.
Over view of chapter scheme:General back ground of the study introduction of the problem: This chapter will cover title of the project, statement of the problem, purpose of the study, objectives of the study, scope for study.
Company profile:The details about the company form its arising in this chapter, complete, information about the BEML from its history to present days status will be given.
Methodology:This chapter derails with the research design, methodology, data collection, reference period, sampling scheme, definition of concepts, over view of chapter scheme.
Data Analysis and interpretation:This is the important part of this project and involves analysis of data, calculation of ratios interpretation.
Findings:Adarsha College of Mgt & Science 51
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This chapter deals with the summary of the findings.
Limitation:This chapter deals with instructions given at last.
Suggestion & Conclusions:This is concluding chapter and contains salient conclusions and recommendation. This is followed by Bibliography and annexure fund flow statement, profit and loss account, balance sheet for the last five years.
Limitation of the study:The study only one company and for a period of 5 terms that is from 1997-98 to 2001-02. Expensive (in terms transport costs)
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INTRODUTION:Financial statements are prepared primarily for decision making. They play dominate role in setting the frame work of management decisions. But the information provided in the financial statements is not an end, it itself as no meaningful conclusions can be drawn from these statements alone. However the information provided in the financial statements is of immense use in making decisions through analysis and the interpretation of financial statements. Financial analysis is the process of identification the financial strengths and weaknesses of the firm by properly established relationship between the items of the balance sheet and profit and loss account. MEANING:In the words of METCALF ANDTITARD financial analysis is a process of evaluating the understanding of the firms position and
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performance. In the words of MYERS, financial statement analysis is largely a study of relationship among the various financial factors in a business as disclosed by a single set of statements, and a study of the trend of these factors. The analysis of financial statement is an important aid to overall financial analysis.
TYPES OF FINANCIAL ANALYSIS:i. ii. iii. iv. External analysis Internal analysis Vertical analysis Horizontal analysis
External analysis:This is analysis done by external parties that is outside of the business. They include shareholders, tenders, inventories, creditors etc. They have no access to the books of accounts and the internal records of the concern. Internal analysis:This is analysis done by internal parties they include persons who have access to the books of accounts and internal records of the concern. Executives and employees of the concern also do it, officers
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appointed for the purpose by the government, personnel of the finance and accounting departments of the concern.
Vertical or structural analysis:It is a type of analysis used study through ratios, the quantitative relationship of items in the financial statements on a particular date or for accounting year. Horizontal or trend analysis:It is a type of analysis in which there is a comparison of the trend of each item in the financial statements over a number of years. STEPS INVOLVED IN THE ANALYSIS OR FINANCIAL STATEMENTS:Analysis of financial statements involves three steps. 1. Analysis 2. Comparison 3. Interpretation Analysis:This means methodical classification of data given in financial statement into homogeneous and comparable parts that is inter related parts. In short re-classification and re-arrangement of the data found
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in the financial statement into groups of a few principal elements accounting to their resemblances and close connections and presenting them in the form most convenient for interpretation. Comparison:Mere splitting up or re-grouping of the figures found in the financial statements into the desired component parts is not sufficient for judging the profitability and financial status of an enterprise. After the figures contained in the financial statements are dissected or split into the required comparable component parts, the comparable component part (the interconnected figures) must be compared with each other and their relative magnitudes (their relationship) must be measured. Interpretation:After the financial statements are analyzed or dissected into comparable component parts and the relative magnitudes of the comparable components parts is measured through comparison, the results must be interpreted. TECHNIQUES OF FINANCIAL ANALYSIS:a. Comparative statements b. Trend analysis c. Common-size statements
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d. Fund flow statements e. Cash flow statements f. Ratio analysis Comparative statements:The comparative financial statements are statements of the financial statements, at different periods of time, the elements of the financial position are shown in comparative form so as to give an idea of financial position of two or more periods. A comparative statement of BEML financial statements i.e., balance sheet and profit and loss account for the period of five years from 1997-1998 to2001-2002. Trend analysis:The financial statement may be analyzed by computing trend of series of information. This method determines the direction up words of down words and involves the computation of the percentage relationship that each statement item bears to the same item in basis years.
Common-size statement:The common-size statement balance sheet and income statement are shown in analytical percentages. The figures are shown in percentages of total assets, total liabilities and total sales.
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Fund flow statement:Fund flow statement is a statement of sources and uses of fund of net wording capital. In other words it is a statement which shows how the net working fund or technical device designed to high light the changes in the financial condition of a business enterprise between tow balance sheet dates. The fund flow statement and statement of changes in working capital of BEML for the period of five years from 1997-1998 to 2001-2002. Cash flow statement:Cash flow statement is prepared by acquiring cash from different sources and the application of the same for different payments throughout the year. It is prepared from the analysis of cash transaction. It shows the changes in cash both at the beginning and 1st the end of a period. Ratio analysis:A ratio is a simple arithmetical expression of the relationship of one number to another. It may be defined as the indicated quotient of
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two mathematical expressions. Ratio analysis is a process of establishing and interpreting various ratios for helping in making certain decisions. It is used as an index for evaluating financial position and performance of the firm. LIMITATIONS OF FINANCIAL ANALYSIS:i. ii. It is only a study of interim reports. Financial analysis is based upon only monitory information and non monitory factors are ignored.
iii.
It does not consider changes in price levels. As the financial statements are prepared on the basis of ongoing concern which does not give exact position.
iv.
v.
Changes in accounting procedure by the firm may often make financial analysis misleading.
vi.
Analysis is the only means and not an end in itself.
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ANALYSIS AND INTERPRETATION OF RATIOS
Ratios: A ratio is a simple arithmetical expression of the relationship of one number to another. It may be defined as the indicated quotient of two mathematical expressions. According to accountants Handbook by Wixan, Kell and Bedford, A ratio is an expression of the quantitative relationship between two numbers.
Types of ratios:They are mainly classified into 5 types viz, 1. Profitability ratios 2. Coverage ratios 3. Turn over ratios 4. Financial ratios 5. Leverage ratios 1. Profitability ratios:This ratios measure the results of business operations or over all performance and effectiveness of the firm.
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2. Coverage ratios:These ratios show the safety of the fixed interest bearing security holders. Like debenture holders preference holders. 3. Turn over ratios:These will indicate the companys assets i.e., usage of resources at its disposal, greater the ratio more will be efficiency of assets usages and overall efficiency of the management. 4. Financial ratios:Financial ratio is mainly two kinds they are;
A. Liquidity ratios B. Stability ratios
A. Liquidity ratios:Ascertained to measure the liquidity position as solvency position towards the payment of short term obligations. B. Stability ratios:Ascertained to measure the long term solvency.
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Current ratio:It is a ratio which express the relationship between total current assets to total current liabilities. It is a measurement of firms short term solvency. It indicates the availability of current assets in rupees for every one rupee of current liability. Current assets Current ratio: Current liabilities Table No.1 Year Current assets Current liability % of current ratio 1997-98 152653.64 46143.46 3.31 1998-99 164745.70 56090.75 2.94 1999-2k 139782.12 52943.68 2.64 2000-01 147890.12 80377.69 1.84 2001-02 157416.31 88226.44 1.78 Interpretation:The normal current ratio is considered as 2:1. The company has maintained the current ratio favourable for the year 1997-98 to 19992k but has dropped to 1.84 in the year 2000-01 and further reduced to 1.78 the year 2001-02.
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Current Ratio
3.5 3 2.5 2 1.5 1 0.5 0 1.84 3.31 2.94 2.64
1.78
1997-1998
1998-1999
1999-2000
2000-2001
2001-2002
Quick ratio:-
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Quick ratio also known as Acid Test or liquid ratio. This ratio expresses the relationship between liquid assets and liquid liabilities. It reveals the firms position to meet the current liability through quick assets Quick assets we have considered as sundry debtors, cash and bank balances, other current assets and loans and advances. Quick assets Quick ratio: Current liabilities Table No.2 Year Quick assets Current liabilities % of quick ratio 1997-98 86921.28 46143.36 1.88 1998-99 96784.32 56090.75 1.73 1999-2k 78705.76 52943.68 1.49 2000-01 84021.80 80377.69 1.05 2001-02 93530.06 88226.44 1.06 Interpretation:The normal quick ratio is considered as 1:1. The company has maintained the quick ratio favourable for the past five years even though it is declining from 1.88 in the year 1997-98 to 1.06 in the year 2001-02.
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Quick Assets
2 1.8 1.6 1.4 1.2
Times
1 0.8 0.6 0.4 0.2 0

1997-1998 1998-1999 1999-2000 2000-2001 2001-2002
Years
Debt-equity ratio:The debt-equity ratio expresses the relationship between total debt and net worth or equity of the company or the relationship
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between borrowed capital & owners capital. The ratio of debt varies according to the nature of the business and availability of cash flows. Long term debts we have calculated as secured loans and un secured loans. Share holders funds we have to considered as share capital & reserves and surplus. Long term debt Debt equity ratio= Share holders funds Table No.3 Year Long term debts Share holders funds D.E.R % 1997-98 129802.48 56564.18 2.22 1998-99 130320.54 58423.93 2.22 1999-2k 107576.23 59184.30 1.82 2000-01 89135.02 59376.28 1.50 2001-02 89697.91 59664.84 1.50 Interpretation:The normal debt equity ratio is considered as 2:1. The company has maintained the debt equity ratio favorable for the year 1997-98 and 1998-99 but has dropped to 1.82 in the year 1999-2k and further reduced to 1.50 for the year 2000-01 and 2001-02.
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Debt Equity Ratio

2.5 2.22 2 1.82 1.5 1.5 1.5 2.22
0.5
0
1997-1998 1998-1999 1999-2000 2000-2001 2001-2002
Years
Net profit ratio:-
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This ratio indicates net margin earned on sales, it help to know the operational efficiency of the business. It indicates the amount of sales left for share holder after all costs and expenses have been met. Net operating profit Net profit ratio= Net sales Table No.4 Year Net operating profit Net sales Net profit ratio 1997-98 1626.93 115335.00 1.41 1998-99 371.47 113181.00 0.33 1999-2k 2481.69 124212.00 2.00 2000-01 1031.09 125132.00 0.82 2001-02 1284.51 133245.00 0.96 Interpretation:The ratio show that the company has very low profit in the year 1998-99 has improved over the year from 371.47 lakhs to 1284.51 in the year 2001-02. The company has to further strive towards achieving the high net profit ratio.
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Net profit Ratio
2001-2002
0.96 0.82 2 0.33 1.41

0 1 2 3
2000-2001
1999-2000
1998-1999
1997-1998
Return on total assets:-
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This profitability ratio is measured in terms of relationship between profit and total assets. It also indicates whether the total assets of the business have been properly used or not PBIT Return on total assets= Total assets Table No.5 Year 1997-98 1998-99 1999-2K 2000-01 2001-02 Interpretation:The ratio shows that the company has very low return on total asset in the year 1998-99 and has improved over the years it indicates that the total assets of the business have not been properly utilized. PBIT 1605.09 271.66 2359.75 1064.71 1301.00 Total assets Ratio 174033.58 0.92 185276.89 0.15 158847.45 1.49 165077.68 0.64 172702.19 0.75 x 100
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Return on Total Assets

1.6
1.4
1.2
0.8
0.6
0.4
0.2
0
1997-1998 1998-1999 1999-2000 2000-2001 2001-2002
Inventory turn over ratio:The inventory turn over ratio indicates the number of times of the inventory of a company rotates with an accounting cycle. It
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indicates the number of times the average stock is turned during a year. The stock turnover ratio depends upon the type of the company or type of industry. The formula for ascertaining this ratio is Cost of goods sold Inventory turn over ratio:Inventory Where the figure as cost of goods sold is not available in the published annual statements, this formula may be used. Sales Inventory Turnover Ratio = Inventory
Table No.6 Year 1997-98 1998-99 1999-2k Sales Inventory I.T.R 125971.14 65732.36 1.92 121261.90 67961.38 1.78 13170.84 61076.36 2.16
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2000-01 2001-02
134740.03 142414.89
63868.32 63886.25
2.11 2.23
Interpretation:It can be seen that from the year 1998-1999 the turnover ratio has been improved from 1.78 to 2.23 times in the year 2001-2002. while the normal of this ratio may be taken as 5 to 6 times, considering the types of goods as capital goods the normal may be considered as 3 to 4 times. Hence the company may strive towards achieving better utilization of inventory and reducing the inventory holding.
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Inventory Turnover Ratio

2.5
1.5
0.5
0
1997-1998 1998-1999 1999-2000 2000-2001 2001-2002
Years
Debtors Turnover ratio: Debtors turnover ratio indicates the numbers of times the detours turnover every year generally the higher the value of debtors
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turnover the more efficient is the management of credit Debtors turnover ratio can be calculated by dividing the total sales by the debtors outstanding Sales Debtors turnover ratio= Debtors Particulars Sales Debtors DTR 1997-98 61881.99 2.04 1998-99 60664.54 2.00 1999-2000 52016.17 2.53 2000-01 52066.62 2.59 2001-02 142414.89 56729.55 2.51
125971.14 121261.90
131708.84 134740.03
Interpretation :
The debtors turnover ratio is improved in the period of five years from 2.04 in the year 1997-98 to 2.51 in 2001-02. Considering the nature market of the company which is of capital equipments the efficiency of credit management is good.
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Debtors Turnover ratio

120000 100000 80000 60000 40000 20000 0
1997-98 1998 99 1999 2000 2000 2001 20012002
Percentage of cash to current liabilities Current liabilities Cash & Bank balance
Debits collection period: The collection period measures quality of debtors as it indicates the speed of collection of approximate numbers of days taken by the company to collect the debtors after making sales.
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Higher the turnover ratio, shorter the debits collection period & better the credit management, better the liquidity of debtors and vice Versa. Collection period sales Sales Collection period = Debtors Rs in lakhs Particulars No. of days DTR DCP Interpretation: 1997-98 365 2.04 179 1998-99 1999-2000 365 2.00 183 365 2.53 144 2000-01 365 2.59 141 2001-02 365 2.51 145 x 365
The company's debits collection period is favourable & showing improvements over the period of time since the company is decling with capital goods the debits collection period is considered to be good.
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Debits collecton period

400 350 300 250 200 150 100 50 0 199798 199899 19992000 200001 200102 Numbers of days Debtors turnover ratio Debits collection period
Working capital turnover ratio: This ratio states whether investments in net current assets as been properly utilized, it determines how efficient the company is a converting raw materials to finished the products. The working capital is taken as: Current assets Current liabilities
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Sales Working capital turnover ratio = Working Capital Working capitals turnover ratio: Year 1997-1998 1998-1999 1999-2000 2000-2001 2001-2002 Net sales 115335.00 113181.00 124212.00 125132.00 133245.00 Working capital 106510.18 108654.95 86838.44 67512.43 69189.87 WCTR 1.08 1.04 1.43 1.85 1.93
Interpretation: The working capital turnover ratio is improving over the year. The non being the 5 6 times considering the nature of product as capital items. The none can be taken as 3 4 times, the company as to still improve the working turnover ratio.
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Working capitals turnover ratio

140000
120000
100000 Net sales 80000 Working capital 60000 Working capital turnover ratio
40000
20000
0 19971998 19981999 19992000 20002001 20012002
Cash ratio: It is the ratio cash & Cash equivalent balance, to current liability it can be calculated as follows
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Cash Cash ratio = Current Liabilities
Particulars Cash & Bank bal Current liabilities % of cash to C.L
1997-98 16017.33 46143.36 0.35
1998 - 99 25456.03 56090.75 0.45
1999 - 00 11505.39 52943.68 0.22
2000 - 01
2001-02
18839.21 25895.64 80377.69 88226.44 0.23 0.29
Interpretation: The cash ratio in the year 1998-99 is high & the company as maintained the cash ratio around 25% for the past three years which is good sign.
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Cash ratio
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 199798 1998 - 1999 - 2000 99 2000 2001 20012002 Percentage of cash to current liabilities Current liabilities Cash & Bank balance
Current liabilities to working capital: Current Liabilities Current liabilities to working capital = Working Capital
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Year 1997-1998 1998-1999 1999-2000 2000-2001 2001-2002
Current liabilities 46143.36 56090.75 52943.68 80377.69 88226.44
Working capital 106510.18 108654.95 86838.44 67512.43 69189.87
CL / WC 0.43 0.52 0.61 1.28 1.28
Interpretation: The ratio show that the company as very low current liabilities to working capital in the years 1998 0.43 as increased in the year 2001-2001 at 1.28.
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Current liabilities to working capital

120000 100000 80000 Current liabilities 60000 40000 20000 0 19971998 19981999 19992000 20002001 20012002 Working capital Current liablities / Working capital
Share holders fund to working capital: SHF Share holder fund to working liabilities = Working Capital
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Year 1997-1998 1998-1999 1999-2000 2000-2001 2001-2002
Share holder fund 585,64,18 586,23,93 591,84,30 593,76,28 596,64,84
Working capital 106510.18 108654.95 86838.44 67512.43 69189.87
SHF / WC 0.55 0.54 0.68 0.88 0.86
Interpretation: The ratio show that the company as low share holder fund to working capital in the year 1998 at 0.55 & 1999 they have decreased 0.54 in 2000 they have improved to 0.68 & 2001-2002 in 0.86.
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Share holders fund to working capital

120000 100000 80000 60000 40000 20000 0 19971998 19981999 19992000 20002001 20012002
Working capital Share holder fund / Working capital
Current assets to fixed assets: Current Assets Current assets to fixed assets = Fixed Assets Year Current assets Fixed assets CA / FA
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1997-1998 1998-1999 1999-2000 2000-2001 2001-2002 Interpretation:
1,56,653,64 1,64,745,70 1,39,782,12 1,47,890,12 1,57,416,31
21,650,50 20,79,384 19,32,798 17,94,598 16,07,030
7.24 7.92 7.23 8.24 9.80
The ratio show that the company as higher current assets to fixed assets in the year 7.24 & improved in the year 2001 2002 at 9.80.
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Current assets to fixed assets 12 10 8 6 4 2 0 Current assets / Fixed assets 1997-1998 1,56,653,64 21,650,50 1999-2000 1,39,782,12 19,32,798 2001-2002 1,57,416,31 16,07,030 1998-1999 1,64,745,70 20,79,384 2000-2001 1,47,890,12 17,94,598 7.24 7.92 7.23 9.8 8.24
Fixed Assets to Working Capital: Fixed Assets Fixed Assets to Working Capital = Working Capital
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Year 1997-1998 1998-1999 1999-2000 2000-2001 2001-2002 Interpretation:
Fixed assets 21650,50 20793,84 19327,98 17945,98 1607030
Working capital 106510,18 108654,95 86838,44 67512,43 69189,87
FA / WC 0.20 0.19 0.22 0.27 0.23
The ratio show that the company as low fixed assets to working capital in the year 1998 at 0.20 & 1999 they have decreased 0.19 2000 they have improved to 0.22 & 2001 0.27 again in 2002 have decreased 0.23.
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Fixed Assets to Working Capital

0.3 0.27 0.25 0.22 0.2 0.15 0.1 0.05 0 1 1997-1998 21650,50 106510,18 1999-2000 19327,98 86838,44 2001-2002 1607030 69189,87 1998-1999 20793,84 108654,95 2000-2001 17945,98 67512,43 0.2 0.19 0.23
Current assets to Working capital: Current Assets Current assets to Working Capital = Working capital
BEML
Year 1997-1998 1998-1999 1999-2000 2000-2001 2001-2002 Interpretation:
Current assets 1,56,653,64 1,64745,70 1,39,782,12 1,47,890,12 1,57,416,31
Working capital 106510,18 108654,95 86838,44 67512,43 69189,87
CA/WC 1.47 1.52 1.61 2.19 2.28
The ratio show that the company has low current assets to working capital
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Current assets to Working capital

2.5
1.5
2.19 1 1.52 1.61
2.28
1.47 0.5
0 1997-1998 1998-1999 1999-2000 2000-2001 2001-2002
a. BEML is a defence oriented undertaking enjoying monopolistic market in earth moving heavy equipments over a period of time
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.The present market for earth moving equipment is becoming increasingly competitive. The number of manufacturers with in the country is increasing. The company is also facing competitions from abroad due to globalization. b. The prolonged economic slow down in the country adversely affected the entire earth moving equipment as also rail way segment resulting in a sharp drop in demand for the products. This had a telling effect on the operation of the company which is visible in the profitability position. c. While the sales to defence segment is showing considerable increase the sales in rail coaches segment has dropped sharply. This is due to lack of orders for rail coaches from railway board. d. The current ratio of the company is very high during the year 1997-98, 1998-99and 1999-2000.Even though the companys liquidity or short term solvency position is good. Due to high current ratio, the high current ratio is not desirable. Since it results in less efficient use of funds or lucking up of funds in current assets. This will result in considerably lowering down the profitability.
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e. The net profit ratio is very low especially in the year 1998-99. The company has almost a nil profit when compared to the turnover and the indication also shows no improvement over the years. The profitability ratio show that shows no improvement over the years. The profitability ratio show that the company is unable to make sufficient profit. The company is experiencing the problem of reduced order position and under utilization of manpower unlike other major companies. f. The turnover to working capital ratio reveals that the company is able to make only 1.08 times of turnover to working capital in the year 1997-98 and improved to 1.93 times in the year 2000-01. This is a steady improvement even though not up to the required level when compared to other major companies. g. The activity ratio shows that the company is not utilizing the fixed assets at optimum level. h. The earnings per share is very low, it was Rs. 0.17 in the year 1998-99 and Rs.1.45 in the year 2001-02. i. The sales have been heavily affected during the last few years necessitating the company to maintain high level of FGI/WIP affecting the financial position of the company.
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i.
The time allowed by the collection of the information is very less. I could not gather full and genuine information about the
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topic because of limited time allowed to do the project. The time allowed by the collage was also limited. ii. As the industry is very large-scale, the officers are very busy with their working schedules. So it was very difficult to have direct interaction with the company officers for the collection of the information. iii. Lot of time is required to collect the right information from the right person. iv. The study is completely based on the information given by the personnel and also the information collected from companys documents. v. From this study generalization can not be drawn.
SUGGESTIONS:-
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i.
Over all, the financial position of the company is satisfactory. The long term solvency of the company and its liquidity position is good. The company has to improve net profit ratio by increasing sales and concentrating on more profitable products.
ii.
Reducing cost of raw materials, effective utilization of labour, cut in administrative expenditure and increase in sales, should increase the over all profitability.
iii.
The company shout utilize the available large marketing network and improve the customer relation through the constant customer support and after sales services.
iv.
The current and quick ratios are almost up to the standard requirement for the past two years. The working capital of the company is satisfactory and has to be maintained further.
v.
The company should focus on cost control measures for ensuring competitive pricing of the equipment.
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vi.
The inventory turnover ratio is very less when compared to standard for 5 to 6 times. The company is holding the inventory for almost 170 days for the past three years. This can be brought down to 75 to 90 days by better management of inventory.
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CONCLUSIONS:In a competitive environment we cannot demand a price what we want. What the customer can afford can afford can only be determined as a sale price. If the cost is taken as a sale price to capture the market, if the profitability on the product is the sale concentration, which can be achieved by, cost reduction. To conclude, the main objective is to have a balance liquidity position and track off between risk and profitability. The greater, the amount of working capital level maintained, the less risk of running out of cash but profitability will be less. The lower, the level of working capital, the profitability will be greater but the more will be risk of running out of capital to meet day-to-day requirements. The firm is in highly liquidity position because the optimum level of current ratio is 2:1. This shows the efficient liquidity position of the company. The financial position for running day-to-day business is sound.
99
BEML Particulars SOURCES OF FUNDS 1. PROFIT OF TAX 2. DEPRECIATION 3. INCREASE IN SHARE CAPITAL 4. SHARE PREMIUM 5. INCREASE IN BORROWINGS 6. DECREASE IN W.CAPITAL 7. OTHERS TOTAL UTILISATION OF FUNDS 1. FIXED ASSETS 2. DECREASE IN BORROWINGS 3. INCREASE IN W.CAPITAL 4. DIVIDENDS AND TAXES 5. INVESTMENTS 6. OTHERS TOTAL
SUGGESTIONS & CONCLUSIONS 1997-98 1065.00 2346.00 0.00 6.00 0.00 788.00 0.00 4205.00 2634.00 0.00 621.00 811.00 0.00 139.00 4205.00 1998-99 62.00 2445.00 0.00 1.00 459.00 0.00 774.00 3741.00 1596.00 2145.00 0.00 0.00 0.00 0.00 3741.00
1999-2000 2000-2001 2001-20 1460.00 2451.00 0.00 0.00 0.00 22103.00 0.00 26014.00 986.00 0.00 23305.00 897.00 287.00 539.00 26014.00 600.00 2296.00 0.00 0.00 0.00 19039.00 0.00 21935.00 419.00 0.00 18634.00 405.00 210.00 2267.00 21935.00
535. 1843. 0. 0. 274. 0. 0.
2652.
-58. 1677. 0. 441. 26. 566.
2652.
STATEMENT OF CHANGES IN WORKING CAPITAL Particulars CURRENT ASSETS 1. INVENTORIES 2. SUNDRY DEBTORS 3. CASH & BANK BALANCE 4. OTHER CURRENT ASSETS 5. LOAN & ADVANCES TOTAL CURRENT LIABILITIES CURRENT LIABILITIES NET WORKING CAPITAL 657.32 618.82 160.17 9.33 80.89 1526.53 461.43 1065.10 679.61 606.65 254.56 4.22 102.41 1647.45 560.91 1086.54 610.76 520.16 115.05 2.46 149.39 1397.82 529.44 868.38 638.68 520.66 188.39 4.12 127.04 1478.89 803.77 675.12 1997-98 1998-99
1999-2000 2000-2001 2001-20
638. 567. 258. 4. 104.
1574.
882. 691.
BEML
SUGGESTIONS & CONCLUSIONS TABLE SHOWING THE WORKING RESULTS OF THE COMPANY FOR THE PERIOD OF FIVE YEARS
SL. PARTICULARS NO. 1 Turnover 2 3 4 5 6 7 8 9 10 Excise Duty Net Sales Other income Prior period Adjustment profit before tax Tax provisions Profit after tax Proposed Dividend Net Sales Profit
1997-98 1259.71 106.36 1153.35 21.02 0.22 16.05 5.40 10.65 08.11 1626.93
1998-99 1212.62 80.81 1131.81 28.28 0.99 2.72 2.10 0.62 Nil 371.47
1999-00 1317.09 74.97 1242.12 31.06 1.22 23.60 9.00 14.60 8.97 2481.69
2000-01 2001-02 1347.40 96.08 1251.32 25.25 -0.34 10.65 4.65 6.00 4.05 1284.51 1424.15 91.70 1332.45 16.81 -0.16 13.01 7.66 5.35 Nil 1031.09
BEML
BIBLIOGRAPHY
Bussiness Finance Financial Management Management of Working Capital Financial Management & Policy Managerial Accounting Annual Report Web Site Cost Accounts Manual Material Accounts Manual
Reedy & Appanaiah Shashi, K, Gupta & Kappor
Praveen Kumar Jain
Prasanna Chandra
B.S Raman Printed annual reports of the company for the year 1997 98 to 2001-02 WWW. Bemlindia.com BEML BEML
BEML
UTILIZATION OF FUNDS
1.FIXED ASSETS 2.DECREASED IN BORROWINGS 3.INCREASING W. CAPITAL 4.DIVIDENDS AND TAXES 5.INVESTMENTS 6.OTHERS
2634.00 0.00 621.00 811.00 0.00 139.00 4205. 00
1596.00 2145.00 0.00 0.00 0.00 0.00
986.00 0.00 23305.00 897.00 287.00 539.00
419.00 0.00 18634.00 405.00 210.00 2267.00
-58.00 1677.00 0.00 441.00 26.00 566.00
TOTAL
3741.00
26014.00
219935.00
2652.00

Working Capital On BEML

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SUGGESTIONS & CONCLUSIONS

Adarsha College of Mgt & Science

SUGGESTIONS & CONCLUSIONS

Adarsha College of Mgt & Science

SUGGESTIONS & CONCLUSIONS

Adarsha College of Mgt & Science

SUGGESTIONS & CONCLUSIONS

Adarsha College of Mgt & Science

SUGGESTIONS & CONCLUSIONS

Adarsha College of Mgt & Science

SUGGESTIONS & CONCLUSIONS

Adarsha College of Mgt & Science

SUGGESTIONS & CONCLUSIONS

Adarsha College of Mgt & Science

SUGGESTIONS & CONCLUSIONS

Adarsha College of Mgt & Science

SUGGESTIONS & CONCLUSIONS

Adarsha College of Mgt & Science

SUGGESTIONS & CONCLUSIONS

Adarsha College of Mgt & Science

SUGGESTIONS & CONCLUSIONS

Adarsha College of Mgt & Science

SUGGESTIONS & CONCLUSIONS

SUGGESTIONS & CONCLUSIONS

Adarsha College of Mgt & Science

SUGGESTIONS & CONCLUSIONS

Adarsha College of Mgt & Science

SUGGESTIONS & CONCLUSIONS

Adarsha College of Mgt & Science

SUGGESTIONS & CONCLUSIONS

SUGGESTIONS & CONCLUSIONS

Adarsha College of Mgt & Science

SUGGESTIONS & CONCLUSIONS

Adarsha College of Mgt & Science

SUGGESTIONS & CONCLUSIONS

Adarsha College of Mgt & Science

SUGGESTIONS & CONCLUSIONS

Adarsha College of Mgt & Science

SUGGESTIONS & CONCLUSIONS

SUGGESTIONS & CONCLUSIONS

Adarsha College of Mgt & Science

SUGGESTIONS & CONCLUSIONS

Adarsha College of Mgt & Science

SUGGESTIONS & CONCLUSIONS

Adarsha College of Mgt & Science

SUGGESTIONS & CONCLUSIONS

Adarsha College of Mgt & Science

SUGGESTIONS & CONCLUSIONS

Adarsha College of Mgt & Science

SUGGESTIONS & CONCLUSIONS

5. Date of establishment: 6. Bankers: -

SUGGESTIONS & CONCLUSIONS

BOARD OF DIRECTORS AS ON 18.06.2003

Adarsha College of Mgt & Science

BEML 2. Director (HRD)

SUGGESTIONS & CONCLUSIONS

B.V. Raman V.S. Venkatanathan R.C. Suthar P. Mazumdar K.A. Nagaraja

3. Director (R&D) 4. Director (Production)

Adarsha College of Mgt & Science

SUGGESTIONS & CONCLUSIONS

Adarsha College of Mgt & Science

SUGGESTIONS & CONCLUSIONS