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PROJECT REPORT

ON

COMARATIVE STUDY OF WORKING CAPITAL MANAGEMENT

OF

NHPC & NTPC

Submitted in the partial fulfillment of the requirement of the

Degree in

Master of Business Administration

(SESSION: 2008-2010)

SUBMITTED TO SUBMITTED BY

Controller of Examination

KAJAL RANI AGRWAL

M. D. University MBA 4th SEMESTER

Rohtak ROLL NO: 08/MBA/12

B. S. ANANGPURIA INSTITUTE OF TECHNOLOGY &

MANAGEMENT

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PREFACE

The concept of preparing a project is one of the essential features ofMASTERS

PROGRAMME IN BUSINESS ADMINISTRATION organized by M.D. University apply

its mind, time and energy for going deep into the functioning of the finance department of an

organisation.

Accordingly, I was assigned a project titled Comparative study of Working Capital

Management of NHPC & NTPC Ltd.

The project provided me excellent opportunity to correlate my theoretical learning with the

ground realities of the industries.

Kajal Rani Agrwal

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TABLE OF CONTENTS

PARTICULARS PAGE NO.

Chapter One

INRODUCTION OF THE PROJECT

Chapter Two

OBJECTIVES OF STUDY SCOPE OF STUDY LIMITATIONS OF STUDY

Chapter Three

RESEARCH METHODOLOGY

INTRODUCTION TYPES OF RESEARCH RESEARCH DESIGN SAMPLE SIZE DATA COLLECTION METHODS

Chapter Four

DATA ANALYSIS AND INTERPRETATIONChapter Five

FINDINGS OF THE STUDYChapter Six

CONCLUSION4


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SUGGESTIONANNEXURE

QUESTIONNAIRE

BIBLIOGRAPHY

CHAPTER ONE

INTRODUCTION

OF THE

PROJECT

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WORKING CAPITAL MANAGEMENT

Working Capital Management is the management of assets that are current in nature. Working

capital management is the process of planning and controlling the level and mix of the current

assets of the firm as well as financing these assets.Management of working capital is concerned

with the problems that arise in attempting to manage current assets, current liabilities & inter-relationship that exists between them.

Specifically, working capital management requires deciding what quantities of cash, other liquid

assets and account receivables, payables and inventories, the firm will hold at any point of time.

In managing working capital, every firm faces two questions:

1) Given the level of sales and relevant cost consideration, what is the optimal amount of

current assets, account receivables and inventories that firm should choose to maintain?

2) Given this optimal amount, what is the most economical way to finance this working

capital?

WORKING CAPITAL MANAGEMENT A FINANCIAL DILEMMA

The financial management of business firms includes:

Management of long term assets

Management of long term capital

Management of short term assets & liabilities

The first is the Capital Budgeting. The second is the management ofCapital Structure. The

third is the Working Capital Management. The management of working capital is concerned

with the management of assets such as cash, marketable securities, account receivables etc. &

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management of current liabilities such as accounts payables, accruals etc. The finance manager

has to analyze questions such as how much inventories should a firm keep? How a firm should

manage its cash? To whom should a firm grant credit? What should be the composition of the

firms current debt? etc. it recommends the most advantageous ways to dressing the problems in

the management of working capital.

WORKING CAPITAL refers to that part of a firms capital which is required for financing

short term or current assets such as cash, marketable securities, debtors and inventories.

GROSS WORKING CAPITAL

Gross Working Capital refers to the firms investment in current

assets. Current assets are the assets which can be converted into cash within an accounting year

and includes cash, short term securities, debtors, bills receivable and stock (inventories).

Gross working capital focuses attention on two aspects of current assets management:

7

TYPES OF WORKING

CAPITAL

ON THE BASIS

OF CONCEPT

ON THE BASIS

OF TIME

TEMPORARY

WORKING

CAPITAL

PERMANENT

WORKING

CAPITAL

NET

WORKING

CAPITAL

GROSS

WORKING

CAPITAL


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Optimum investment in current assets

Financing of current assets

The consideration of the level of investment in current assets should avoid two danger points

excessive and inadequate investment in current assets. Investment in current assets should be just

adequate, Not more Not less, to the needs of the business firm. Excessive investment in current

assets should be avoided because it impairs the firms profitability, as idle investment earns

nothing. On the other hand, inadequate amount of working capital can threaten solvency of the

firm because of its inability to meets its current obligation. It should be realized that the working

capital need of the firm may be fluctuating with changing business activity. This may causes

excess or shortage of working capital frequently. The management should be prompt to initiate

an action & correct imbalances.

Another aspect of the gross working capitals points to the needs of arranging funds to the

finances current assets. Whenever a need for working capitals fund arises due to the increasinglevel of business activity or for any other reason, financing arrangement should be made quickly,

similarly, if suddenly, some surplus funds arise they should not be allowed to remain idle, but

should be invested in short-term securities.

NET WORKING CAPITAL

Net Working Capital refers to the difference between current assets

and current liabilities. Net working capital can be positive as well as negative. Positive working

capital refers to the situation where current assets exceed current liabilities. Negative working

capital refers to the situation where current liabilities exceed current assets.

Net working capital is a qualitative concept. It indicates the liquidity position of the firm and

suggests the extent to which working capital needs may be financed by permanent sources of

funds. It is a conventional rule to maintain the level of current assets twice the level of the

current liabilities. However, quality of quality of current assets should be considered in

determining the level of current assets vis-a vis current liabilities. A weak liquidity position

poses a threat to the solvency of the company makes it unsafe and unsound. A negative working

capital means negative liquidity, and may prove to be harmful for the companys reputation.

Excessive liquidity is also bad, it may be due to mismanagement of current assets. Thereforeprompt and timely action plan should be taken to improve the liquidity position of the firm.

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CURRENT ASSETS CURRENT LIABILITIES

1. Cash in hand & at bank

2. Bills Receivables

3. Sundry Debtors

4. Short term loans & advances5. Inventories

6. Prepaid Expenses

7. Accrued Income

Total current assets

1. Bills payable

2. Sundry creditors

3. Accrued expenses

4. Bank overdraft5. Dividends payable

6. Provision for taxation

7. Short term loans

Total current liabilities

In summary it may be emphasized that both gross and net concepts of working capital are

equally important for the efficient management of working capital. There is no precise way

to determine the exact amount of gross and net working capital for any firm. The data problem of

each company current asset should be financed; it is not feasible in practice to finance current

assets by short terms sources only. Keeping in view the constraints of the individual company, a

judicious mix of long and short term finances should be invested in current assets. Since current

assets involves costs of funds. They should be put to productive use.

PERMANENT WORKING CAPITAL

Permanent Working Capital is the minimum amount

which is required to ensure effective utilization of fixed facilities and for maintaining the

circulation of current assets. There is always a minimum level of current assets which is

continuously required by the enterprise to carry out its normal business operations. For example,

a firm has to maintain a minimum level of raw material, work in process, finished goods and

cash balance. As the business grows, the requirement of permanent working capital alsoincreases due to increase in current assets.

Permanent working capital is of two types:

Regular Working Capital

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Reserve Working Capital

TEMPORARY WORKING CAPITAL

Temporary working capital is the amount of workingcapital which is required to meet the seasonal demands and some special exigencies. Due to

seasonal changes level of business activities is higher than normal and therefore, additional

working capital is required along with the permanent working capital

Temporary working capital is of two types:

Seasonal Working Capital

Special Working Capital

NEEDFOR WORKING CAPITAL

Working capital is needed for running day-to-day business activities. When a business is started,

working capital is needed for purchasing raw material. The raw material is then converted into

finished goods by incurring some additional costs on it. Now goods are sold. Sale is not

converted into cash instantly because there is invariably some credit sales. Thus there exists a

time lag between sale of goods and receipt of cash. During this period expenses are to be

incurred for continuing the business operations. For this, working capital is needed. Therefore

sufficient working capital is needed from purchase of raw material to realization of cash.

OPEARATING CYCLE

Working capital refers to that part of firms capital which is required for financing current assets.

The funds, thus, invested in current assets keep revolving fast and are being constantly converted

into cash and this cash flows out again in exchange for other current assets. Hence, it is also

known as circulating capital.

Operating cycle of a manufacturing firm involves five phases:

Conversion of cash into raw material

Conversion of cash into work in process

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Conversion of work in process into finished goods

Conversion of finished goods into debtors by credit sales

Conversion of debtors into cash by realizing cash from them

Thus, the operating cycle start from cash, finishes at cash and then again restarts from cash. Need

for working capital depends upon period of operating cycle. Greater the period more will bethe need for working capital.

Period of operating cycle in a manufacturing concern is greater than period of operating cycle in

a trading concern because in trading units cash is directly converted into finished goods and vice-

versa.

Because of time involved in operating cycle, there is a need of working capital in the form of

current assets. Firms have to keep adequate stock of raw materials to avoid risk of non-

availability of raw materials.

Similarly, concerns must have adequate stock of finished goods to meet the demand in market oncontinuous basis and avoid being out of stock.

Concerns also have to sell finished goods on credit due to competition which necessitates the

money tied up in debtors and bills receivables.

In addition to all these, concerns have to necessarily keep cash to pay the manufacturing

expenses etc. and to meet the contingencies.

Diagram: Operating Cycle

DETERMINANTS OF WORKING CAPITAL

NATURE OF BUSINESS:

Working capital requirements of an enterprise are largely influenced by the nature of its

business. Public utilities have the lowest requirements for the current assets partly because of

cash nature of their business and partly because of cash nature of their business and partly of

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their selling a service instead of a commodity and there is no need of maintaining big investors.

On the contrary, trading concerns have to invest proportionately high amount in current assets, as

they have to carry stock in trade account receivable and liquid cash. Generally speaking, trading

and financial firms require relatively large amount of working capital, public utilities

comparatively small amounts where as manufacturing concerns stands between these two

extremes, their needs depending upon the character of the industry to which they are a part.

SIZE OF BUSINESS:

Greater the size of a business unit, generally larger will be the requirements of working

capital. However, in some cases even a smaller concern may need more working capital due

to high overhead charges, inefficient use of available resources and other economic

disadvantages of small size.

PRODUCTION CYCLE:

Production cycle means the time-span between the purchase of raw material and its conversion

into finished goods. The longer the production cycle, the larger will be the need for working

capital because the funds will be tied up for a longer period in work-in-progress. If the

production cycle is small the need for working capital will also be small.

MANUFACTURING PROCESS:

If the manufacturing process in an industry entails a longer period because of its complex

character more working capital is required to finance that process. The longer it takes to makes

an approach and the greater its cost, the larger the inventory tied up its manufacture and therefore

higher the amount of working capital.

GROWTH AND EXPANSION:

As a business enterprise grows, it is logical to expect that a larger amount of working capital will

be required. Growing industries requires more working capitals than those that are static do.

BUSINESS FLUCTUATIONS:

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Business fluctuations may be in the direction of boom and depression. During boom period the

firm will have to operate at full capacity to meet the increased demand which in turn, leads to

increase in the level of inventories and book debts. Hence, the need for working capital in boom

conditions is bound to increase. The depression phase of business fluctuations has exactly an

opposite effect on the level of working capital requirement.

CREDIT POLICY RELATING TO SALES:

If a firm adopts liberal credit policy in respect of sales, the amount tied up in debtors will also be

higher. Obviously, higher book debts mean more working capitals. On the other hand if the firm

follows tight credit policy, the magnitude of working capital will decrease.

CREDIT POLICY RELATING TO PURCHASE:

If a firm purchases more goods on credit, the requirement for working capital will be less. In

other words, if liberal credit terms are available from the supplier of the goods (i.e. creditors) the

requirement of the working capital will be reduced and vice- versa.

AVAILABILITY OF RAW MATERIAL:

If the raw material required by the firm is available easily on a continuous basis, there no one

will keep large inventory of such raw material and hence the requirement of working capital will

be less and vice-versa.

PRICE LEVEL CHANGES

Changes in price level also affect the working capital requirements. Generally, rising prices

will require the firm to maintain larger amount of working capital as more funds will be

required to maintain the same current assets. The effect of rising prices may be different for

different firms. Some firms may be affecting much while some others may not be at all by

rise in prices.

IMPORTANCE OF WORKING CAPITAL MANAGEMENT

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Management of working capital is very much important for the success of the business. It hasbeen emphasized that a business should maintain sound working capital position and also thatthere should not be excessive level of investment in the working capital components.

The basic goal of working capital management is to manage current assets and current liabilitiesof a firm in such a way that a satisfactory level of working capital is maintained i.e., it is neitherinadequate nor excessive. This is so because both inadequate as well as excessive workingcapital are bad for any business. Inadequacy of working capital may lead the firm to insolvency& excessive working capital implies idle funds which earns no profits for business.

Working capital management policies of a firm have a great effect on its profitability, liquidityand structural health of the organization.

Working capital management is three dimensional in nature:

Dimension I is concerned with formulation of policies with regard to profitability, risk &liquidity.

Dimension II is concerned with the decisions about the composition and level of current assets.

Dimension III is concerned with decisions about the composition and level of current liabilities.

Profitability & risk

DIM I & liquidity

Composition and level Composition &level

Of current assets of current liabilities

DIM II DIM III

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WORKING CAPITAL MANAGEMENT INVOLVES:

Cash management

Receivables management

Inventory management

MANAGEMENT OF CASH

Cash is the important current asset for the business. Cash is needed at all times to keep the

business going. A business concern should always keep sufficient cash for meeting its

obligations. Any shortage of cash will hamper the operations of a concern and any excess of it

will be unproductive. It is also the ultimate output expected to be realized by selling the service

or product manufactured by the firm. Thus a major function of the financial manager is to

maintain a sound cash position. The basic characteristic of near cash assets are that they can

readily be converted into cash.

Cashmanagement is concerned with managing of:

i) Cash inflows and outflows of the firm

ii) Cash flows within the firm

iii) Cash balances held by the firm at a point of time by financing deficit or inverting surplus

cash.

Sales generate cash which has to be disbursed out. The surplus cash has to be invested while

deficit cash has to be borrowed. Cash management seeks to accomplish this cycle at a minimumcost. At the same time it also seeks to achieve liquidity and control. Cash is the most liquid of all

the current assets. Higher cash and bank balance indicate high liquidity position in lower

profitability, as ideal cash fetches no return. Therefore the aim of cash management is to

maintain adequate control over cash position to keep firm sufficiently liquid and to use

excess cash in some profitable way.

OBJECTIVEOF CASH MANAGEMENT

1) To meet day to day business requirements.

2) To provide for schedule major payment i.e. Capital expenditure.

3) To face unexpected cash drain.

4) To maintain image of credit worthiness.

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Efficient cash management function calls for cash planning, evaluation of cash benefits and cost

of policies, sound procedures and practices and synchronization of cash inflows and outflows.

Thus for achieving goals and objectives of cash management, finance manager has to plan cash

needs of the firm followed by cash flow management, determination of optimum level of cashand finally investment of surplus.

MANAGEMENT OF RECEIVABLES

Receivables represent the amount owed to the firm as a result of sale of goods or services in the

ordinary course of business. Receivables result from credit sales. A concern is required to allow

credit sales in order to expand its sales volume. It is not always possible to sell goods on cash

basis only. The increase in sales volume is also essential to increase profitability. After a certain

level of sales the increase in sales will not proportionately increase production costs. Theincrease in sales will bring in more profits. Thus, receivables constitute a significant portion of

current assets of a firm. But for investment in receivable a firm has to incur certain cost such as

cost of collection, financing & bad debt. it is therefore very necessary to have proper control &

management of receivables.

Receivable Management is the process of making decisions relating to investment in trade

debtors.

Objectives Of Receivables Management

To promote sales and profit.

To take a sound decision as regards investment in debtors.

Dimensions Of Receivable Management

1. Forming of credit policy For efficient management of receivables, a concern may adopt

a credit policy. A credit policy is related to decisions such as credit standards (volume of

sales), length of credit period (period allowed to the customers for making payment) &

cash discount and discount period.

2. Executing the credit policy After formulating the credit policy, its proper execution is

important. The evaluation of applications and finding out the credit worthiness of

customers should be undertaken.3. Formulating and executing collection policy The collection of amounts due to the

customers is very important. Collection policy may be strict and lenient. A strict

collection policy enable early collection of dues & will reduce bad debt losses. A lenient

collection policy may increase debt collection period and more bad debts losses.

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MANAGEMENT OF INVENTORY

Every enterprise needs inventory for smooth running of its activities. It serves as a link between

production and distribution processes. The investment in inventories constitutes the most

significant part of working capital in most of the undertakings. Thus, it is very essential to have

proper control and management of inventories. The purpose of inventory management is to

ensure availability of materials in sufficient quantity as and when required and also to

minimize investment in inventories.

INVENTORY is stock of goods. It includes:

Raw material

Work in progress

Consumables

Finished goods

Spares

Objectives of Inventory Management

To ensure continuous supply of materials

To avoid both over-stocking and under-stocking of inventory

To maintain investments in inventories at optimum level

To minimize losses through deterioration and wastages

To keep material cost under control To ensure right quality of goods at reasonable prices

To design proper organization for inventory management

To eliminate duplication in ordering

BENEFITS/PURPOSES OF HOLDING INVENTORIES

1.T

RANSACTION

MOTIVE

which facilitates continuous production and timely execution ofsales orders.

2. PRECAUTIONARYMOTIVE which necessitates the holding of inventories for meeting the

unpredictable changes in demand and supply of raw materials.

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3. SPECULATIVEMOTIVE which induces to keep inventories for taking advantage of price

fluctuations.

WORKING CAPITAL FORECASTING TECHNIQUES

Operating cycle method

Forecasting of current assets and current liabilities

Cash forecasting method

Percentage of sales method

Projected balance sheet method

OPERATING CYCLEMETHOD

It is the time span the firm requires in purchase of raw material, conversion of raw material intowork in progress and finished goods and conversion of finished goods into sales and in collecting

cash from debtors. Larger the period of operating cycle, larger the investment in current assets.

Hence time period of each stage of operating cycle is estimated and then working capital needed

in each stage is computed.

FORECASTINGOFCURRENTASSETSANDCURRENTLIABILITIESMETHOD

According to this method, an estimate is made of forthcoming periods current assets and

liabilities on the basis factors like past experience, credit policy, stock policy and payment

policies of the previous years.

CASHFORECASTINGMETHOD

Under this method, an estimate is made of cash receipts and payments for the next period.

Estimated cash receipts are added to the amount of working capital which exists at the beginning

of the year and estimated cash payments are deducted from this amount. The difference will be

the amount of working capital.

PERCENTAGEOFSALESMETHOD

Under this method, certain key ratios on past years information are determined. These ratios can

be ratio of sales to raw material, to semi-finished stock, to debtors, to cash balance etc. and afterthis sales for the next year is estimated and requirement of working capital will be determined on

the basis of these ratios.

PROJECTEDBALANCESHEETMETHOD

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Under this method, an estimate is made of current assets and liabilities for a future date and

projected balance sheet is prepared for that future date. The difference between current assets

and current liabilities shown in projected balance sheet will be the amount of working capital.

ADVANTAGES OF ADEQUATE WORKING CAPITAL

1.SOLVENCYOFBUSINESS

Adequate working capital helps in maintaining solvency of business by providing uninterrupted

flow of production.

2.GOODWILL

Sufficient working capital enables the firm to make prompt payments and hence helps in creatingand maintaining goodwill.

3.REGULARSUPPLYOFRAWMATERIALS

Sufficient working capital ensures regular supply of raw materials and continuous production.

4.CASHDISCOUNTS

Adequate working capital enables a firm to avail cash discounts on the purchases and hence it

reduces costs.

5.FULLUTILIZATIONOFFIXEDASSETS

Adequacy of working capital makes it possible for a firm to utilize its fixed assets fully and

continuously.

6.EASYLOANS

A concern having adequate working capital, high solvency, good credit standing can arrange

loans from banks and others on easy and favourable terms.

7.QUICKANDREGULARRETURNSONINVESTMENTS

Sufficiency of working capital enables a concern to pay quick and regular dividends to its

investors.

8.ABILITYTOFACECRISIS

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Adequate working capital enables a firm to face business crisis in contingencies such as

depression.

DISADVANTAGES OF EXCESSIVE WORKING CAPITAL

1.EXCESSIVEINVENTORY

Excessive working capital results in unnecessary accumulation of large inventory which

increases the chances of misuse, waste etc.

2.EXCESSIVEDEBTORS

Excessive working capital will result in liberal credit policy which inturn result in higher amount

tied up in debtors.

3.INEFFICIENCYOFMANAGEMENT

Management becomes careless due to excessive resources at their command. It results in laxity

of control on expenses and cash resources.

4.IRREGULARRETURNONINVESTMENTS

Excessive working capital means idle funds which earns no profits and hence the business

cannot earn a proper rate of return on its investments.

DISADVANTAGES OF INADEQUATE WORKING CAPITAL

1.DIFFICULTYINAVAILABILITYOFRAWMATERIAL

Inadequacy of working capital results in non-payment of creditors on time. As a result the credit

purchase of goods on favorable terms becomes difficult.

2.FULLUTILIZATIONOFFIXEDASSETSISNOTPOSSIBLE

Due to frequent interruption in the supply of raw materials and paucity of stock, the firm cannot

fully utilize its fixed assets.

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3.DECREASEINCREDITRATING

Because of inadequacy of working capital firm is unable to pay its short term obligations on

time. It decays firms relations with the bankers and it becomes difficult for the firm to borrow.

4.DIFFICULTYINTHEDISTRIBUTIONOFDIVIDENDS

Due to inadequacy of working capital firm will not able to pay the dividend to its

shareholders.

.

ABOUT THE COMPANY

NHPC Limited (Formerly known as National Hydroelectric Power Corporation), A Govt.

of India Enterprise, was incorporated in the year 1975 with an authorized capital of Rs. 2000

Million and with an objective to plan, promote and organize an integrated and efficient

development of hydroelectric power in all aspects. Later on NHPC Limited expanded its objectsto include development of power in all aspects through conventional & non-conventional sources

in India and abroad.

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At present, NHPC is a Mini Ratna Category-I Enterprise of the Govt. of India with an authorized

share capital of Rs. 1,50,000 million. With an investment base of over Rs. 2,54,000 million

approx., NHPC Limited is among the TOP TEN companies in the country in terms of

investment.

Initially, on incorporation, NHPC Limited took over the execution of Salal Stage-I, Bairasiul andLoktak Hydroelectric Projects from Central Hydroelectric Project Construction and Control

Board. Since then, it has executed 13 projects with an installed capacity of 5175 MW on

ownership basis including projects taken up in joint venture. NHPC Limited has also executed 5

projects with an installed capacity of 89.35 MW on turnkey basis. Two of these projects have

been commissioned in neighboring countries i.e. Nepal and Bhutan.

During the financial year 2007-08 , NHPC Limited Power Stations achieved the highest ever

generation of 14811.35 MU.

VISION OF NHPC

A world class, diversified, transnational organization for sustainable development of

hydropower and water resources with strong environment conscience. Hydroelectric

projects are recognized as the most economic and preferred source of electricity, share of

hydropower in the total installed capacity in India has been declining steadily since 1963.

The hydro share has declined from 44% in 1970 to 24% in 1999. The ideal hydrothermal

mix should be in the ratio of 40:60 and present imbalance is largely responsible for system

instability. In order to reverse the trend and given the renewed thrust on hydropower by

the Govt., NHPC Limited has drawn up a massive capacity additional plan in hydro sector

up to 2017.

MISSION OF NHPC

To achieve international standards of excellence in all aspects of hydropower and

diversified business.

To execute and operate projects in a cost effective, environment friendly & socio-

economically responsive manner.

To foster competent trained and multi-disciplinary human capital.

To continually develop state-of-art technologies through innovative R&D and adopt best

practices.

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To adopt the best practices of corporate governance institutionalize value based

management for a strong corporate identity.

To maximize creation of wealth through generation of internal funds and effective

management of resources.

OBJECTIVES OF NHPC

Development of vast hydro potential at faster pace and optimum cost eliminating time &

cost over-run.

Completion of all on-going projects within stipulated time frame.

Ensure maximum utilization of installed capacity & help in better system stability.

Generation of sufficient internal resources for expansion & setting up new projects.

Corporate development alongwith Human Resource development.

SCHEDULE OF CHANGE IN WORKING CAPITAL OF NHPC

PARTICULARS

CURRENT ASSETS

INVESTMENTS

INVENTORIES

AS ON

MARCH08

(IN

CRORES)

1553.90

739.63

AS ON

MARCHO9

(IN

CRORES)

1659.16

56.71

INCREASE IN

WORKING

CAPITAL

105.26

DECREASE

IN

WORKING

CAPITAL

682.92

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DEBTORS

CASH &BANK

BALANCE

LOANS & ADVANCES

TOTAL C.A. (A)

CURRENT LIABILITIES

LIABILITIES

PROVISIONS

TOTAL C.L. (B)

WORKING CAPITAL

348.06

287.37

1586.11

4515.07

3165.92

1939.38

1226.54

3288.53

294.66

240.79

2167.95

4419.27

3479.72

1663.26

5042.98

-623.71

313.80

2816.54

53.40

46.58

581.84

95.80

276.12

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TOTAL CURRENT ASSETS & INVENTORY TREND

TOTAL CURRENT ASSETS & DEBTOR TREND

25

2007-08 2008-09

TOTAL CURRENT ASSETS

4515.07 4419.27

INVENTORY 739.63 56.71


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TOTAL CURRENT ASSETS AND CASH TREND

2007-08 2008-09


4515.07 4419.27

CASH 287.37 640.79

TOTAL CURRENT ASSETS & TOTAL CURRENT LIABILITIES TREND

2007-08 2008-09TOTAL CURRENT ASSETS

4515.07 4419.27

26

2007-08 2008-09

TOTAL CURRENT

ASSETS

4515.07 4419.27

DEBTOR 348.06 294.66


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TOTAL CURRENT

LIABILITIS1226.54 5042.98

ABOUT THE COMPANY

Indias largest power company, NTPC was set up in 1975 to accelerate power development in

India. NTPC is emerging as a diversified power major with presence in the entire value chain ofthe power generation business. Apart from power generation, which is the mainstay of the

company, NTPC has already ventured into consultancy, power trading, ash utilization and coal

mining. NTPC ranked 317th in the 2009, Forbes Global 2000 ranking of the Worlds

biggest companies.

The total installed capacity of the company is 31,134 MW (including JVs) with 15 coal based

and 7 gas based stations, located across the country. In addition under JVs, 3 stations are coal

based & another station uses naptha/LNG as fuel. By 2017, the power generation portfolio is

expected to have a diversified fuel mix with coal based capacity of around 53000 MW,

10000 MW through gas, 9000 MW through Hydro generation, about 2000 MW fromnuclear sources and around 1000 MW from Renewable Energy Sources (RES).

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NTPC has adopted a multi-pronged growth strategy which includes capacity addition through

green field projects, expansion of existing stations, joint ventures, subsidiaries and takeover of

stations.

NTPC has been operating its plants at high efficiency levels. Although the company has

18.79% of the total national capacity it contributes 28.60% of total power generation dueto its focus on high efficiency. In October 2004, NTPC launched its Initial Public Offering

(IPO) consisting of 5.25% as fresh issue and 5.25% as offer for sale by Government of India.

NTPC thus became a listed company in November 2004 with the government holding 89.5% of

the equity share capital. The rest is held by Institutional Investors and the Public.

VISION OF NTPC

A world class integrated power major, powering Indias growth, with increasing

global presence.

MISSION OF NTPC

Develop and provide reliable power, related products and services at competitive

prices, integrating multiple energy sources with innovative and eco-friendly

technologies and contribute to society.

CORE VALUES OF NTPC

BUSINESS ETHICS CUSTOMER FOCUS ORGANISATIONAL & PROFESSIONAL PRIDE

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MUTUAL RESPECT & TRUST INNOVATION & SPEED TOTAL QUALITY FOR EXCELLENCE

SCHEDULE OF CHANGE IN WORKING CAPITAL OF NT PC

PARTICULARS

CURRENT ASSETS

INVESTMENTS

INVENTORIES

DEBTORS

AS ON

MARCH08

(IN

CRORES)

14460

2675.70

2982.70

AS ON

MARCHO9

(IN

CRORES)

15999.80

3243.40

3584.20

INCREASE IN

WORKING

CAPITAL

1539.80

260.70

601.5

DECREASE

IN

WORKING

CAPITAL

201.2

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CASH &BANK

BALANCE

LOANS & ADVANCES

TOTAL C.A. (A)

CURRENT LIABILITIES

LIABILITIES

PROVISIONS

TOTAL C.L. (B)

WORKING CAPITAL

473.00

9936.20

30527.80

5548.40

7360.60

12909.00

17618.80

271.80

7826.10

30925.30

7439.20

3249.50

10688.70

20236.60

397.5

1890.80

2220.30

2110.10

4111.10

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TOTAL CURRENT ASSETS & INVENTORY TREND

TOTAL CURRENT ASSETS & DEBTOR TREND

31

2007-08 2008-09


30527.80 30925.30

INVENTORY 2675.70 3243.40

2007-08 2008-09

TOTAL CURRENT

ASSETS

30527.80 30925.30

DEBTOR 2982.70 3584.20


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TOTAL CURRENT ASSETS AND CASH TREND

2007-08 2008-09


30527.80 30925.30

CASH 473.00 271.80

TOTAL CURRENT ASSETS & TOTAL CURRENT LIABILITIES TREND

2007-08 2008-09TOTAL CURRENT ASSETS

30527.80 30925.30

TOTAL CURRENT

LIABILITIS12909.00 10688.70

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CHAPTER TWO

OBJECTIVE,

SCOPE &

LIMITATIONS OF

STUDY

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OBJECTIVES OF THE STUDY

To analyze which company is having better position of working capital. To study which company is having effective inventory management. To analyze the liquidity positions of the companies. To study about the short-term sources of the companies. To know which company has optimal size of current assets.

SCOPE OF THE STUDY

Everybody is well aware that economic environment has changed and is likely to change in

future. This project deals with the analysis of working capital management of nhpc and ntpc.

The project of short term financial performance has been done to see and analyze the short termprofitability, liquidity and soundness of business as well as working capital is required for

effective and efficient use of fixed assets and overall performance of the financial resources.

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LIMITATIONS OF THE STUDY

It is important to critically evaluate the results and whole study. The present study has certain

limitations that need to be taken into account when considering the study and its contributions.

Executives are not ready to give or share the information beyond a certain limit.

Have to rely upon the data supplied.

Time constraint was the major problem.

Some figures have not disclosed by the companies on confidential grounds.

Details about capital employed, EPS & DPS are not available in finance department.

.

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CHAPTER THREE

RESEARCH

METHODOLOGY

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RESEARCH METHODOLOGY

INTRODUCTION

Research methodology is a way to systemically solve the research problem. Research is simply a

search for knowledge. One can also define research as a scientific and systematic search for

pertinent information on a specific topic. Infact, research is an art of scientific investigation.

Some people consider research as a movement from known to un known. It is actually a voyage

of discovery.

According to Clifford Woody, research comprises defining and redefining problems,

formulating hypothesis or suggested solutions, collecting, organizing and evaluating data.

According to Redman & Mory, research refers to systematic efforts to gain new knowledge.

Thus, research is an original contribution to the existing stock of knowledge making for its

advancement. The search for knowledge through objective and systematic method of finding

solution to a problem is a research.

OBJECTIVES OF RESEARCH

To gain familiarity with the phenomenon or to achieve new insights into it.

To portray the characteristics of particular individual, situation or group.

To test the hypothesis of a casual relationship between the variables.

To determine the frequency with which something occurs.

TYPES OF RESEARCH

1.DESCRIPTIVE RESEARCH

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Descriptive research includes survey and fact finding enquiries of different kinds. The major

purpose of descriptive research is description of the state of affairs as it exists at present. The

main characteristic of this research is that the researcher has no control over the variables; he can

report what has happened.

2.ANALYTICAL RESEARCH

In analytical research, the researcher has to use facts or information already available and

analyze these to make critical evaluation of the material.

3.APPLIED RESEA R CH

Applied research aims at finding a solution for an immediate problem facing a society. Applied

research is to identify social, economic or political trends that may affect a particular institution.

4.FUNDAMENTAL RESEARCH

Fundamental research is mainly concerned with generalization and with the formulation of

theory. Research concerning some natural phenomenon or relating to pure mathematics.

5.CONCEPTUAL RESEARCH

Conceptual research is related to some ideas or theory. It is generally used by philosophers and

thinkers to develop new concepts or to reinterpret existing ones.

6.EMPIRICAL RESEARCH

Empirical research relies on experience or observation. It is data based research coming up with

conclusions which are capable of being verified by observation or experiment.

7.QUANTITATIVE RESEARCH

Quantitative research is based on measurement of quantity.

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8.QUALITATIVE RESEARCH

. Qualitative research is concerned with qualitative phenomena.

SIGNIFICANCE OF RESEARCH

Research inculcates scientific and inductive thinking.

Research promotes development of logical habits of thinking.

Research helps to solve various planning and operational problems.

RESEARCH DESIGN

A research design is the detailed blue print used to guide a research study towards its objectives.

A research design provides a framework to be used as a guide in collecting and analyzing data.

The research design focuses attention on the following:

Formulating the objective of study

Designing the methods of data collection

Selecting the sample

Collecting the data

Analyzing the data

Reporting the findings

SAMPLING DESIGN

It refers to the procedure the researcher would adopt in selecting items for the sample. Sample

design may well lay down the number of items to be included in the sample.

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Sample size refers to the number of items to be selected from a universe to constitute a sample.

This is a major problem for the researcher. The size of the sample should not be too large or too

small. It should be optimum. An optimal sample is that fulfills the requirement of efficiency,

reliability and flexibility.

DATA COLLECTION

INTRODUCTION

The task of data collection begins when a research problem has been defined and research design

chalked out. While deciding the method of data collection the researcher should keep into mind

two types:

PRIMARY DATA COLLECTION

The primary data are those which are collected for the first time and thus happen to be original in

character.

It includes:

OBSERVATION METHOD

INTERVIEW METHOD

QUESTIONNAIRES etc.

SECONDARY DATA COLLECTION

Secondary data are those which have already been collected by someone else.

It includes:

BOOKS

MAGAZINES

REPORTS AND JOURNALS etc.

In this project report:

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Primary data is collected through direct interaction with the companys finance and accounts

department.

If needed schedule/questionnaires would be devised to get the information on all the relevant

areas of the study such as receivable management, inventory management, management of

cash etc.

Secondary data is collected from companys annual reports i.e. balance sheet etc.

RESEARCH METHODOLOGY USED IN THIS PROJECT

RESEARCH TYPE ANALYTICAL

RESEARCH DESIGN FLEXIBLE

DATA COLLECTION METHODS

PRIMARY SOURCES DIRECT INTRACTION

SCHEDULES

QUESTIONNAIRE

SECONDARY SOURCES ANNUAL REPORTS

BOOKS OF ACCOUNTS

ACCESS TO INTERNET SITES

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CHAPTER FOUR

DATA ANALYSIS

AND

INTERPRETATION

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DATA ANALYSIS

Data analysis may involve a charting of sequential relationships between the stages and principal

methods, a description of each method and its formula and sorting of the result produced to bring

into light on the quantitative meaning of the data.

Various internal and external parties analyze working capital position of an enterprise. External

parties include bankers, creditors, financial institutions, debenture holders and the present share

holders. The objective of these parties is to assess the liquidity of the business, i.e. to know

whether the firm will have sufficient current assets and cash to pay their debt when they fall due

and to know whether the working capital is adequate or inadequate and it is being used in an

efficient manner or not.

METHODS TO ANALYZE THE WORKING CAPITAL ARE:-

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SCHEDULE OF CHANGE IN CAPITAL :

With the help of this schedule increase or decrease in various current assets and current liabilities

can be ascertained.

RATIO ANALYSIS: A ratio is simply one number express in term of another. It is found by

dividing one number into the other. While calculating a ratio, it should be understand that it is

desirable to divide the more favorable figure by the less favorable figure.

Working capital can be analysis with the help of various ratios mentioned below:

LIQUIDITY RATIOS: Liquidity refers to the ability of the firm to meet its current liabilities.

These are the ratios which measure the short term solvency of a firm.

To measure the liquidity of a firm, the following ratios can be calculated:

1.CURRENT RATIO: Current ratio may be defined as the relationship between current assets

current liabilities.

CURRENT RATIO = CURRENT ASSETS

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CURRENT LIABILITIES

2.QUICK RATIO : Quick ratio indicates whether a firm is in a position to pay its current

liabilities.

QUICK RATIO = LIQUID ASSETS

CURRENT LIABILITIES

3.CASH RATIO : Cash ratio is calculated to find out the absolute liquid assets. Absolute liquid

assets includes cash in hand and at bank and marketable securities.

CASH RATIO = ABSOLUTE LIQUID ASSETS

CURRENT LIABILITIES

ACTIVITY RATIOS: Activity ratios measure the efficiency with which a firm manages its

assets. These ratios are also called turnover ratios because they indicate the speed with which

assets are converted.

1.INVENTORY TURNOVER RATIO : It is also known as stock turnover ratio. It indicates

whether inventory has been efficiently used or not.

INVENTORY TURNOVER RATIO = COST OF GOODS SOLD

AVERAGE STOCK

INVENTORY HOLDING PERIOD = DAYS IN A YEAR

INVENTORY TURNOVER RATIO

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2.DEBTOR TURNOVER RATIO : It indicates the number of times average debtors are turned

over during a year.

DEBTOR TURNOVER RATIO = NET CREDIT SALES

AVERAGE DEBTORS

AVERAGE COLLECTION PERIOD = DAYS IN A YEAR

DEBTOR TURNOVER RATIO

3.CURRENT ASSETS TURNOVER RATIO : It shows the ratio between cost of sales and

current assets.

CURRENT ASSETS TURNOVERRATIO = COST OF GOODS SOLD

CURRENT ASSETS

PROFITABILITY RATIOS: Profit is the engine that drives the business enterprise. These ratiosmeasure overall performance of the firm.

1.OPERATING PROFIT RATIO : It establishes a relationship between operating profit & net

sales.

OPERATING PROFIT RATIO = OPERATING PROFIT

NET SALES

2.NET PROFIT RATIO : It establishes a relationship between net profit & net sales.

NET PROFIT RATIO = NET PROFIT

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NET SALES

FUND FLOW STATEMENT: This statement reveals the sources from which the funds areobtained and the uses to which funds were applied. With the help of this statement the basis

reasons for increase or decrease in working capital can be analyzed.

CASH FLOW STATEMENT : This statement shows inflow of cash during a particular period.

With the help of this statement the reason for change in balance of cash between the two balance

sheet dates can be analyzed.

DATA INTERPRETATION

Data interpretation is an integral part of the Quantitative Reasoning section.

In order to reach a conclusion, interpretation of results is very important.

For interpreting data following charts or graphs are used:

Column

Pie

Doughnut

For interpreting the results:

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Various ratios are calculated & ratio analysis is done.

Trend analysis is done.

SCHEDULE OF CHANGE IN WORKING CAPITAL OF NTPC

PARTICULARS

CURRENT ASSETS

INVESTMENTS

AS ON

MARCH08

(IN

CRORES)

14460

AS ON

MARCHO9

(IN

CRORES)

15999.80

INCREASE IN

WORKING

CAPITAL

1539.80

DECREASEI

N

WORKING

CAPITAL

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INVENTORIES

DEBTORS

CASH &BANK

BALANCE

LOANS & ADVANCES

TOTAL C.A. (A)

CURRENT LIABILITIES

LIABILITIES

PROVISIONS

TOTAL C.L. (B)

WORKING CAPITAL

2675.70

2982.70

473.00

9936.20

30527.80

5548.40

7360.60

12909.00

17618.80

3243.40

3584.20

271.80

7826.10

30925.30

7439.20

3249.50

10688.70

20236.60

260.70

601.5

397.5

1890.80

2220.30

201.2

2110.10

4111.10

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SCHEDULE OF CHANGE IN WORKING CAPITAL OF NHPC

PARTICULARS

CURRENT ASSETS

INVESTMENTS

INVENTORIES

DEBTORS

AS ON

MARCH08

(IN

CRORES)

1553.90

739.63

348.06

AS ON

MARCHO9

(IN

CRORES)

1659.16

56.71

294.66

INCREASE IN

WORKING

CAPITAL

105.26

DECREASE

IN

WORKING

CAPITAL

682.92

53.40

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CASH &BANK

BALANCE

LOANS & ADVANCES

TOTAL C.A. (A)

CURRENT LIABILITIES

LIABILITIES

PROVISIONS

TOTAL C.L. (B)

WORKING CAPITAL

287.37

1586.11

4515.07

3165.92

1939.38

1226.54

3288.53

240.79

2167.95

4419.27

3479.72

1663.26

5042.98

-623.71

313.80

2816.54

46.58

581.84

95.80

276.12

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COMPARISON OF WORKING CAPITAL OF NHPC & NTPC

PARTICULARS

CURRENT ASSETS

INVESTMENTS

INVENTORIES

DEBTORS

NHPC

AS ON

MARCH08

(IN

CRORES)

1553.90

739.63

348.06

287.37

AS ON

MARCHO9

(IN

CRORES)

1659.16

56.71

294.66

240.79

NTPC

AS ON

MARCH08

(IN

CRORES)

14460

2675.70

2982.70

473.00

AS ON

MARCH08

(IN

CRORES)

15999.80

3243.40

3584.20

271.80

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CASH &BANK

BALANCE

LOANS & ADVANCES

TOTAL C.A. (A)

CURRENT LIABILITIES

LIABILITIES

PROVISIONS

TOTAL C.L. (B)

WORKING CAPITAL

1586.11

4515.07

3165.92

1939.38

1226.54

3288.53

2167.95

4419.27

3479.72

1663.26

5042.98

-623.71

9936.20

30527.80

5548.70

7360.60

12909.00

17618.70

7826.10

30925.30

7439.20

3249.50

10688.70

20236.60

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RATIOANALYSIS

(2008-09)

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1. Which company is having better Current Ratio?

Current ratio = Current Assets/Current Liabilities

(Amount in Rs. Cr)

NHPC Ltd. = 4419.27/5142.98

=0.85

NTPC Ltd. = 30925.30/10688.70

=2.89

COMPANY CURRENT RATIO

NHPC Ltd. 0.85

NTPC Ltd. 2.89

CONCLUSION : The current ratio should be 2:1. In 2009, NHPC is having the current

ratio 0.85:1 and NTPC is having current ratio of 2.89:1. NTPC is

having better current ratio and have strong position to match out its

current liabilities.

2. Which company is having better Quick Ratio?

Quick ratio = Liquid Assets/Current Liabilities

(Amount in Rs. Cr)

NHPC Ltd. = 3805.8/5142.98

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=0.74

NTPC Ltd. = 30925.30/10688.70

=2.59

COMPANY QUICK RATIO

NHPC Ltd. 0.74

NTPC Ltd. 2.59

CONCLUSION : Quick ratio should be 1:1 which means that current assets should be

equal to current liabilities. NHPC is having 0.74:1 & NTPC is having

2.59:1 quick ratio. So, NTPC is having better quick ratio.

3. Which company is having better Cash Ratio?

Cash ratio = Absolute Liquid Assets/Current Liabilities

(Amount in Rs. Cr)

NHPC Ltd. = 240.79/5142.98

=0.04

NTPC Ltd. = 271.80/10688.70

=0.025


NHPC Ltd. 0.04

NTPC Ltd. 0.025

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CONCLUSION : Cash ratio indicates how much cash organization is able to generate

immediately. In 2009, NHPC is having 0.046 crore & NTPC is having

0.025 crore cash ratio. So, NHPC is having better cash ratio.

4. Which company is having better Debtor Turnover Ratio?

Debtor turnover ratio = Net Credit Sales/Average Debtors

(Amount in Rs. Cr)

NHPC Ltd. = 2495.77/294.66

= 8.47

NTPC Ltd. = 45806.08/3584.2

= 12.78


NHPC Ltd. 8.47

NTPC Ltd. 12.78

CONCLUSION : Higher the debtor turnover ratio better it is as indicates more speed of

collection from debtors. In 2009, NHPC is having 8.47 times & NTPC is

having 12.78 times debtor turnover ratio. So, NHPC is having better

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debtor turnover ratio.

5. Which company is having better Average Collection Period?

Average Collection Period = 365 Days/Debtor Turnover Ratio

(In days )

NHPC Ltd. = 365/8.47

= 43.09

NTPC Ltd. = 365/12.78

= 28

COMPANY AVERAGE COLLECTION

PERIOD

NHPC Ltd. 43.09

NTPC Ltd. 28

CONCLUSION : Average collection period indicates that in how much time the company is

is able to recover from its debtors. In 2009, NHPC is having 43.09 days &

NTPC is having 28 days average collection period. So, NTPC is having

better average collection period.

6. Which company is having better Inventory Turnover Ratio?

Inventory Turnover Ratio = Cost Of Goods Sold/Average Stock

NHPC Ltd. = 4589.54/56.71

= 80.93 times

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NTPC Ltd. = 91496/3243.4

= 28.21 times

COMPANY INVENTORY TURNOVER

RATIO

NHPC Ltd. 80.93

NTPC Ltd. 28.21

CONCLUSION : Higher the inventory turnover ratio the better it is as it indicates that

stock is sold out quickly. In 2009, NHPC is having 80.93 times & NTPC

is having 28.21 times inventory turnover ratio. So, NHPC is having better

inventory turnover ratio.

7. Which company is having better Inventory Holding Period?

Inventory Holding Period = 365/Inventory Turnover Ratio

( In days)

NHPC Ltd. = 365/80.93

= 4.5

NTPC Ltd. = 365/28.21

= 13

COMPANY INVENTORY HOLDING PERIOD

NHPC Ltd. 4.5

NTPC Ltd. 13

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CONCLUSION : Lower the inventory holding period better it is. In 2009, NHPC is having

4.5 days & NTPC is having 13 days inventory holding period. So, NHPC

is having better inventory holding period.

8. Which company is having better Working Capital Turnover Ratio?

Working Capital Turnover Ratio = Cost of Goods Sold/Working Capital

NHPC Ltd. = 4589.54/623.71

= 6.34 times

NTPC Ltd. = 91496/20236.6

= 4.52 times

COMPANY WORKING CAPITAL

TURNOVER RATIO

NHPC Ltd. 6.34

NTPC Ltd. 4.52

CONCLUSION : Higher working capital turnover ratio is harmful as it indicates over

trading & lower working capital ratio indicates under trading .

In 2009, NHPC is having -6.34 times and NTPC is having 4.52 times

working capital turnover ratio. So, NTPC is in position of over

trading & NHPC is in position of under trading.

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9. Which company is having better Current Asset Turnover Ratio?

Current Asset Turnover Ratio = Cost of Goods Sold/Current Assets

NHPC Ltd. = 4589.54/4419.27

= 1.03 times

NTPC Ltd. = 91496/30925.30

= 2.95 times

COMPANY CURRENT ASSET

TURNOVER RATIO

NHPC Ltd. 1.03

NTPC Ltd. 2.95

CONCLUSION : In 2009, NHPC is having 1.03 times and NTPC is having 2.95 times

current asset turnover ratio. Higher the ratio better it is. So, NTPC is

having better current asset turnover ratio.

10.Which company is having better Operating Profit Ratio?

Operating Profit Ratio = Operating Profit*100/Net Sales

(In %)

NHPC Ltd. = 1776.69*100/2720.82

= 65.30

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NTPC Ltd. = 10539.97*100/41975.20

= 25.11

COMPANY OPERATING PROFIT

RATIO

NHPC Ltd. 65.30

NTPC Ltd. 25.11

CONCLUSION: The lower the operating profit ratio the better it be as lower operating

ratio indicate that margin of profit to sales is increasing. In 2009, NHPC

is having 65.30% & NTPC is having 25.11% operating profit ratio.

So, NTPC is having better operating profit ratio.

11.Which company is having better Net Profit Ratio?

Net Profit Ratio = Net Profit*100/Net Sales

(In %)

NHPC Ltd. = 882.08*100/2720.82

= 32.42

NTPC Ltd. = 7601.70*100/41975.20

= 18.11

COMPANY NET PROFIT RATIO

NHPC Ltd. 32.42

NTPC Ltd. 18.11

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CONCLUSION : Higher the net profit ratio the better it is because it indicates that

Company is having more profit margin & it is earning more. In 2009,

NHPC is having 32.42% & NTPC is having 18.11% net profit ratio.

So, NHPC is having better net profit margin over sales.

TRENDANALYSIS

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CURRENT RATIO AND QUICK RATIO TEREND

(2008-09) NHPC NTPC

CURRENT RATIO

( in Rs. Cr)

0.85 2.89

QUICK RATIO

( in Rs. Cr)

O.74 2.59

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QUICK RATIO AND CASH RATIO TREND

(2008-09) NHPC NTPC

QUICK RATIO

( in Rs. Cr)

0.74 2.59

CASH RATIO

( in Rs. Cr)

0.04 0.025

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CURRENT RATIO AND CSSH RATIO TEREND

(2008-09) NHPC NTPC

CURRENT RATIO

( in Rs. Cr)

0.85 2.89

CASH RATIO

( in Rs. Cr)

O.04 0.025

DEBTOR TUROVER RATIO & TNVENTORY TURNOVER RATIO TREND

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(2008-09) NHPC NTPC

DEBTOR TURNOVER

RATIO

8.47 times 12.78 times

INVENTORY

TURNOVER RATIO


AVERAGE COLLECTION PERIOD & INVENTORY HOLDING PERIOD

TREND

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(2008-09) NHPC NTPC

AVERAGE CLLECTION

PERIOD

(in days)

43.09 28

INVENTORY HOLDING

PERIOD

(in days)

4.5 13

OPRATING PROFIT RATIO & NET PROFIT RATIO TREND

(2008-09) NHPC NTPC

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OPERATING PROFIT

RATIO

( in %)

65.30 25.11

NET PROFIT RATIO

( in %)

32.42 18.11

WORKING CAPITAL TURNOVER RATIO AND CURRENT

ASSET TURNOVER RATIO TREND

(2008-09) NHPC NTPC

WORKING CAPITAL

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TURNOVER RATIO 6.34 times 4.52 times

CURRENT ASSETTURNOVER RATIO


WORKING CAPITAL TURNOVER RATIO AND INVENTORY

TURNOVER RATIO TREND

(2008-09) NHPC NTPC

WORKING CAPITAL

TURNOVER RATIO


INVENTORY

TURNOVER RATIO


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DEBTOR TURNOVER RATIO AND WORKING

CAPITAL TURNOVER RATIO TREND

(2008-09) NHPC NTPC

DEBTOR TURNOVER

RATIO


WORKING CAPITAL

TURNOVER RATIO


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CHAPTER F IVE

FINDINGS

OF THESTUDY

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FINDINGS OF THE STUDY

The major findings are as follows:

NTPC is having better current ratio as compared to NHPC.

NTPC is having better quick ratio as compared to NHPC.

NHPC is having better cash ratio as compared to NTPC.

NHPC is having better debtor turnover ratio as compared to NTPC.

NTPC is having better average collection period as compared to NHPC.

NHPC is having better inventory turnover ratio as compared to NTPC.

NHPC is having better inventory holding period as compared to NTPC.

NTPC is having better working capital turnover ratio as compared to NHPC.

NTPC is having better current asset turnover ratio as compared to NHPC.

NTPC is having better operating profit ratio as compared to NHPC.

NHPC is having better net profit ratio as compared to NTPC.

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C HAPTER SIX

CONCLUSION&

SUGGESTIONS

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CONCLUSION

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CONCLUSION

The purpose of this project report is to provide an analytical overview of Working Capital

Management of NHPC & NTPC.

After studying components of working capital of NHPC & NTPC it is found that the NTPC has

good liquidity position but the net profit is low and NHPC has not good liquidity position as

compared to NTPC but the net profit is high.

Short term liquidity of NTPC & NHPC is unsatisfactory on basis of quick ratio because

companies could not satisfy the ideal quick ratio i.e. 1:1.

On the debtors turnover ratio , it may be say that NTPC adopted very liberal policy for its debtors

during the year which reflects the inefficient credit collection performance of the company and

NHPC adopted strict policy for its debtors during the year which reflects the efficient credit

collection performance of the company .

Working capital turnover ratio of NTPC indicates that it is in the position of over trading and

working capital turnover ratio of NHPC indicates that it is in the position of under trading which

shows that neither company has ideal working capital position.

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SUGGESTIONS

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ANNEXURE

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QUESTIONNAIRE

1. Which company has better current ratio?

2. Which company has better quick ratio?

3. Which company has better cash ratio?

4. Which company has better debtor turnover ratio?

5. Which company has better average collection period?

6. Which company has better inventory turnover ratio ?

7. Which company has better average inventory holding period?

8. Which company has better working capital turnover ratio?

9. Which company has better current asset turnover ratio?

10. Which company has better operating profit ratio?

11. Which company has better net profit ratio?

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BIBLIOGRAPHY

1. I.M. Pandey, Financial Management, New Delhi, vikas publishing house,1999

2. Sashi K. Gupta, Financial Management, New Delhi, kalyani publications,1999

3. www.ntpc.co.in

4. www.nhpcindia.com

5. www.google.com

6. Annual report of NHPC

7. Annual report of NTPC

83
http://www.ntpc.co.in/http://www.nhpcindia.com/http://www.google.com/http://www.nhpcindia.com/http://www.google.com/http://www.ntpc.co.in/


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