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,
Adarsha College of Mgt & Science 1
BEML SUGGESTIONS & CONCLUSIONS
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
Adarsha College of Mgt & Science 2
BEML SUGGESTIONS & CONCLUSIONS
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 economy’s growth both directly and
indirectly.
Adarsha College of Mgt & Science 3
BEML SUGGESTIONS & CONCLUSIONS
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 inter-
relationship 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.
Adarsha College of Mgt & Science 4
BEML SUGGESTIONS & CONCLUSIONS
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 account’s 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.
Adarsha College of Mgt & Science 5
BEML SUGGESTIONS & CONCLUSIONS
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
Adarsha College of Mgt & Science 6
BEML SUGGESTIONS & CONCLUSIONS
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
Net working capital = current assets – current liabilities.
Adarsha College of Mgt & Science 7
BEML SUGGESTIONS & CONCLUSIONS
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:-
a. It enables the enterprise to provide correct amount of working
capital at the right time.
Adarsha College of Mgt & Science 8
BEML SUGGESTIONS & CONCLUSIONS
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 firm’s
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
maintaining life, working capital is very essential; to maintain the
smooth running of business in the following ways:-
Adarsha College of Mgt & Science 9
BEML SUGGESTIONS & CONCLUSIONS
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.
Adarsha College of Mgt & Science 10
BEML SUGGESTIONS & CONCLUSIONS
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
wastage’s 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.
Adarsha College of Mgt & Science 11
BEML SUGGESTIONS & CONCLUSIONS
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.
iv. It may result into overall inefficient in the organisation.
Adarsha College of Mgt & Science 12
BEML SUGGESTIONS & CONCLUSIONS
v. 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.
Adarsha College of Mgt & Science 13
BEML SUGGESTIONS & CONCLUSIONS
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.
Adarsha College of Mgt & Science 14
BEML SUGGESTIONS & CONCLUSIONS
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.
Adarsha College of Mgt & Science 15
BEML SUGGESTIONS & CONCLUSIONS
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.
Adarsha College of Mgt & Science 16
BEML SUGGESTIONS & CONCLUSIONS
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.
Adarsha College of Mgt & Science 17
BEML SUGGESTIONS & CONCLUSIONS
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. Conversion of cash into raw materials
ii. Conversion of raw materials into work-in-progress
iii. Conversion of work-in-progress into finished goods
iv. Conversion of finished goods into debtors
v. 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.
Adarsha College of Mgt & Science 18
BEML SUGGESTIONS & CONCLUSIONS
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-in-
progress 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 company’s 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.
Adarsha College of Mgt & Science 19
BEML SUGGESTIONS & CONCLUSIONS
Sources of working capital:-
Fixed Variable
Shares Commercial banks
Debentures Indigenous bankers
Public deposits Trade creditors
Ploughing back of profits Installment credit
Loans from financial institution Advances
Accounts receivables credit / factoringAccrued expenses
Commercial papers
Deferred incomes
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.
Adarsha College of Mgt & Science 20
BEML SUGGESTIONS & CONCLUSIONS
Debentures:-
A debenture is an installment issued by the company
acknowledging its debts to its holder. The debenture holders are the
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
day’s 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.
Adarsha College of Mgt & Science 21
BEML SUGGESTIONS & CONCLUSIONS
Financing of variable working capital:-
The main sources of variable working capital are as follows-
Indigenous banks:-
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.
Adarsha College of Mgt & Science 22
BEML SUGGESTIONS & CONCLUSIONS
Advances:-
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.
Adarsha College of Mgt & Science 23
BEML SUGGESTIONS & CONCLUSIONS
Commercial papers:-
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.
Adarsha College of Mgt & Science 24
BEML SUGGESTIONS & CONCLUSIONS
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.
Adarsha College of Mgt & Science 25
BEML SUGGESTIONS & CONCLUSIONS
Faulty working capital results in either over or under liquidity
of capital including solvency and reputation.
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.
Adarsha College of Mgt & Science 26
BEML SUGGESTIONS & CONCLUSIONS
PROFILE OF BHARAT EARTH MOVERS LIMITED:-
1. Name of the company: - BHARAT EARTH MOVERS LID.,
2. Registered office: - “BEML SOUDHA”
Corporate office
No. 23/1, IV Main, S.R. Nagar
BANGALORE- 560 027.
3. Group: - Public sector under taking
4. Activity: - Manufacture of Earth Moving
Equipment’s, Rail coaches,
Defence Equipment’s.
5. Date of establishment: - January 1, 1965
6. Bankers: - 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
Adarsha College of Mgt & Science 27
BEML SUGGESTIONS & CONCLUSIONS
BEML has three production units and they are situated at the
following address:-
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.
Adarsha College of Mgt & Science 28
BEML SUGGESTIONS & CONCLUSIONS
BOARD OF DIRECTORS AS ON 18.06.2003
1. Chair man and M.D V.R.S. Natarajan
2. Director (HRD) B.V. Raman
3. Director (R&D) V.S. Venkatanathan
4. Director (Production) R.C. Suthar
5. Director (Financial) P. Mazumdar
6. Director (Marketing) K.A. Nagaraja
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
Aircraft’s 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.,
Adarsha College of Mgt & Science 29
BEML SUGGESTIONS & CONCLUSIONS
Later in few years the organisation had a tremendous grow and
they were strong enough to diversify to sectors such as coal, mining,
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
company’s. Defence and railways constituted the major market for
BEML’s product over the years the position has been taken over by
mining sector particularly M/s coal India LTD (CIL).
Adarsha College of Mgt & Science 30
BEML SUGGESTIONS & CONCLUSIONS
Rail coaches:-
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 country’s demand it has a
production capacity of over 800 coaches p.a.
Adarsha College of Mgt & Science 31
BEML SUGGESTIONS & CONCLUSIONS
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
Adarsha College of Mgt & Science 32
BEML SUGGESTIONS & CONCLUSIONS
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 company’s 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
Adarsha College of Mgt & Science 33
BEML SUGGESTIONS & CONCLUSIONS
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.
Adarsha College of Mgt & Science 34
BEML SUGGESTIONS & CONCLUSIONS
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. Beml’s 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.
Adarsha College of Mgt & Science 35
BEML SUGGESTIONS & CONCLUSIONS
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. TATRA TRUCKS and its variants
ii. IGMP-Integrated Guided Missile Project
iii. HRV and ARV- Heavy Recovery Vehicle. And Armed
Recovery Vehicle.
iv. 50 ton trailers
v. Ejector and Air-cleaner assembly
vi. Mail-rail and mil-wagons
Adarsha College of Mgt & Science 36
BEML SUGGESTIONS & CONCLUSIONS
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
Adarsha College of Mgt & Science 37
BEML SUGGESTIONS & CONCLUSIONS
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
Adarsha College of Mgt & Science 38
BEML SUGGESTIONS & CONCLUSIONS
RAILWAY CONSTRUCTION:
i. Integral Rail Coaches of Various Models
ii. Overhead Equipment Inspection Car
iii. Track Laying Equipment
iv. Electrical Multiple Units
v. Rail Bus
vi. 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:
a. Diesel engines
b. Diesel generator sets
Adarsha College of Mgt & Science 39
BEML SUGGESTIONS & CONCLUSIONS
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:-
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.
Adarsha College of Mgt & Science 40
BEML SUGGESTIONS & CONCLUSIONS
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
Chennai
Ernakulam
Goa
Adarsha College of Mgt & Science 41
BEML SUGGESTIONS & CONCLUSIONS
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. Hindustan motors
ii. Larsen and Turbo
iii. Telco
Small Loader:
JCB
Escorts
Adarsha College of Mgt & Science 42
BEML SUGGESTIONS & CONCLUSIONS
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 Country
Komastu Japan
Komastu Dressers U.S.A
Omnipol Czechoslovakia
General Electric U.S.A
Bumar Poland
IGM Australia
Indresco U.S.A
Mitsui Mike Japan
Ural mash RussiaVoest
Alpine Australia
Waspo U.S.A
Adarsha College of Mgt & Science 43
BEML SUGGESTIONS & CONCLUSIONS
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 Company’s.
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, Raymond’s Cement, Keloram
Cement and J.K. Cement.
5. Mining and Steel Sector:
National Mineral Development Corporation
Hindustan Zinc Limited
Hindustan Copper Limited
Kudremukh Iron Ore Limited
SAIL
Adarsha College of Mgt & Science 44
BEML SUGGESTIONS & CONCLUSIONS
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 14th time
b. Mysore 6th time
c. Engine Division 1st time
4. And employees received number of suggestions award.
BEML Future Plans:-
During coming year BEML is planning for diversify activities
in the allied and non allied areas of present line business.
Adarsha College of Mgt & Science 45
BEML SUGGESTIONS & CONCLUSIONS
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
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
Adarsha College of Mgt & Science 46
BEML SUGGESTIONS & CONCLUSIONS
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
Adarsha College of Mgt & Science 47
BEML SUGGESTIONS & CONCLUSIONS
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:
Type of research – Analytical
Tool – working capital and financial statements, like comparative,
common size and fund flow.
Adarsha College of Mgt & Science 48
BEML SUGGESTIONS & CONCLUSIONS
Collected data – company annual reports and e-mail at
www.beml.india.com
Method of analysis – analysis of ratio’s 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:
For the purpose of this study, following concepts were funds
relevant and are defined under:
Solvency = Reflected through current ratio’s
Adarsha College of Mgt & Science 49
BEML SUGGESTIONS & CONCLUSIONS
Total current assets in RupeesCurrent 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
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.
Adarsha College of Mgt & Science 50
BEML SUGGESTIONS & CONCLUSIONS
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 it’s 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 ratio’s interpretation.
Findings:-
This chapter deals with the summary of the findings.
Limitation:-
This chapter deals with instructions given at last.
Adarsha College of Mgt & Science 51
BEML SUGGESTIONS & CONCLUSIONS
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)
Adarsha College of Mgt & Science 52
BEML SUGGESTIONS & CONCLUSIONS
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
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
Adarsha College of Mgt & Science 53
BEML SUGGESTIONS & CONCLUSIONS
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. External analysis
ii. Internal analysis
iii. Vertical analysis
iv. 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
appointed for the purpose by the government, personnel of the finance
and accounting departments of the concern.
Adarsha College of Mgt & Science 54
BEML SUGGESTIONS & CONCLUSIONS
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
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.
Adarsha College of Mgt & Science 55
BEML SUGGESTIONS & CONCLUSIONS
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
d. Fund flow statements
e. Cash flow statements
f. Ratio analysis
Adarsha College of Mgt & Science 56
BEML SUGGESTIONS & CONCLUSIONS
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.
Adarsha College of Mgt & Science 57
BEML SUGGESTIONS & CONCLUSIONS
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
two mathematical expressions. Ratio analysis is a process of
establishing and interpreting various ratios for helping in making
Adarsha College of Mgt & Science 58
BEML SUGGESTIONS & CONCLUSIONS
certain decisions. It is used as an index for evaluating financial
position and performance of the firm.
LIMITATIONS OF FINANCIAL ANALYSIS:-
i. It is only a study of interim reports.
ii. Financial analysis is based upon only monitory information and
non monitory factors are ignored.
iii. It does not consider changes in price levels.
iv. As the financial statements are prepared on the basis of ongoing
concern which does not give exact position.
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.
Adarsha College of Mgt & Science 59
BEML SUGGESTIONS & CONCLUSIONS
“ANALYSIS AND INTERPRETATION OF RATIO’S”
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 accountant’s Handbook by Wixan, Kell and
Bedford, A ratio “is an expression of the quantitative relationship
between two numbers”.
Type’s 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.
Adarsha College of Mgt & Science 60
BEML SUGGESTIONS & CONCLUSIONS
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 company’s 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.
Adarsha College of Mgt & Science 61
BEML SUGGESTIONS & CONCLUSIONS
Current ratio:-
It is a ratio which express the relationship between total current
assets to total current liabilities. It is a measurement of firm’s short
term solvency. It indicates the availability of current assets in rupees
for every one rupee of current liability.
Current assetsCurrent 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 1999-
2k but has dropped to 1.84 in the year 2000-01 and further reduced to
1.78 the year 2001-02.
Adarsha College of Mgt & Science 62
BEML SUGGESTIONS & CONCLUSIONS
Quick ratio:-
Adarsha College of Mgt & Science 63
BEML SUGGESTIONS & CONCLUSIONS
Quick ratio also known as Acid Test or liquid ratio. This ratio
expresses the relationship between liquid assets and liquid liabilities.
It reveals the firm’s 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 assetsQuick ratio: Current liabilitiesTable No.2Year 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.
Adarsha College of Mgt & Science 64
BEML SUGGESTIONS & CONCLUSIONS
Debt-equity ratio:-
Adarsha College of Mgt & Science 65
BEML SUGGESTIONS & CONCLUSIONS
The debt-equity ratio expresses the relationship between total
debt and net worth or equity of the company or the relationship
between borrowed capital & owner’s 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 debtDebt equity ratio= Share holders fundsTable 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.
Adarsha College of Mgt & Science 66
BEML SUGGESTIONS & CONCLUSIONS
Net profit ratio:-
Adarsha College of Mgt & Science 67
BEML SUGGESTIONS & CONCLUSIONS
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 profitNet 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.
Adarsha College of Mgt & Science 68
BEML SUGGESTIONS & CONCLUSIONS
Return on total assets:-
Adarsha College of Mgt & Science 69
BEML SUGGESTIONS & CONCLUSIONS
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
PBITReturn on total assets= x 100 Total assets
Table No.5
Year PBIT Total assets Ratio
1997-98 1605.09 174033.58 0.92
1998-99 271.66 185276.89 0.15
1999-2K 2359.75 158847.45 1.49
2000-01 1064.71 165077.68 0.64
2001-02 1301.00 172702.19 0.75
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.
Adarsha College of Mgt & Science 70
BEML SUGGESTIONS & CONCLUSIONS
Inventory turn over ratio:-
Adarsha College of Mgt & Science 71
BEML SUGGESTIONS & CONCLUSIONS
The inventory turn over ratio indicates the number of times of
the inventory of a company rotates with an accounting cycle. It
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 soldInventory 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.
SalesInventory Turnover Ratio =
Inventory
Table No.6
Adarsha College of Mgt & Science 72
BEML SUGGESTIONS & CONCLUSIONS
Year Sales Inventory I.T.R
1997-98 125971.14 65732.36 1.92
1998-99 121261.90 67961.38 1.78
1999-2k 13170.84 61076.36 2.16
2000-01 134740.03 63868.32 2.11
2001-02 142414.89 63886.25 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.
Adarsha College of Mgt & Science 73
BEML SUGGESTIONS & CONCLUSIONS
Debtors Turnover ratio:
Adarsha College of Mgt & Science 74
BEML SUGGESTIONS & CONCLUSIONS
Debtors turnover ratio indicates the numbers of times the
detours turnover every year generally the higher the value of debtors
turnover the more efficient is the management of credit Debtors
turnover ratio can be calculated by dividing the total sales by the
debtors outstanding
Debtors turnover ratio=
Particulars 1997-98 1998-99 1999-2000 2000-01 2001-02
Sales 125971.14 121261.90 131708.84 134740.03 142414.89
Debtors 61881.99 60664.54 52016.17 52066.62 56729.55
DTR 2.04 2.00 2.53 2.59 2.51
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.
Adarsha College of Mgt & Science 75
Sales Debtors
BEML SUGGESTIONS & CONCLUSIONS
Debits collection period:
Adarsha College of Mgt & Science 76
BEML SUGGESTIONS & CONCLUSIONS
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.
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 = x 365
DebtorsRs in lakhs
Particulars 1997-98 1998-99 1999-2000 2000-01 2001-02
No. of days 365 365 365 365 365
DTR 2.04 2.00 2.53 2.59 2.51
DCP 179 183 144 141 145
Interpretation:
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.
Adarsha College of Mgt & Science 77
BEML SUGGESTIONS & CONCLUSIONS
Adarsha College of Mgt & Science 78
BEML SUGGESTIONS & CONCLUSIONS
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
SalesWorking capital turnover ratio =
Working Capital
Working capitals turnover ratio:
Year Net sales Working capital WCTR
1997-1998 115335.00 106510.18 1.08
1998-1999 113181.00 108654.95 1.04
1999-2000 124212.00 86838.44 1.43
2000-2001 125132.00 67512.43 1.85
2001-2002 133245.00 69189.87 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.
Adarsha College of Mgt & Science 79
BEML SUGGESTIONS & CONCLUSIONS
Cash ratio:
Adarsha College of Mgt & Science 80
BEML SUGGESTIONS & CONCLUSIONS
It is the ratio cash & Cash equivalent balance, to current
liability it can be calculated as follows
Cash Cash ratio =
Current Liabilities
Particulars 1997-98 1998 - 99 1999 - 00 2000 - 01 2001-02
Cash & Bank bal
16017.33 25456.03 11505.39 18839.21 25895.64
Current liabilities
46143.36 56090.75 52943.68 80377.69 88226.44
% of cash to C.L 0.35 0.45 0.22 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.
Adarsha College of Mgt & Science 81
BEML SUGGESTIONS & CONCLUSIONS
Current liabilities to working capital:
Adarsha College of Mgt & Science 82
BEML SUGGESTIONS & CONCLUSIONS
Current LiabilitiesCurrent liabilities to working capital =
Working Capital
Year Current liabilities Working capital CL / WC
1997-1998 46143.36 106510.18 0.43
1998-1999 56090.75 108654.95 0.52
1999-2000 52943.68 86838.44 0.61
2000-2001 80377.69 67512.43 1.28
2001-2002 88226.44 69189.87 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.
Adarsha College of Mgt & Science 83
BEML SUGGESTIONS & CONCLUSIONS
Share holders fund to working capital:
SHF
Adarsha College of Mgt & Science 84
BEML SUGGESTIONS & CONCLUSIONS
Share holder fund to working liabilities = Working Capital
Year Share holder fund Working capital SHF / WC
1997-1998 585,64,18 106510.18 0.55
1998-1999 586,23,93 108654.95 0.54
1999-2000 591,84,30 86838.44 0.68
2000-2001 593,76,28 67512.43 0.88
2001-2002 596,64,84 69189.87 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.
Adarsha College of Mgt & Science 85
BEML SUGGESTIONS & CONCLUSIONS
Current assets to fixed assets:
Current Assets
Adarsha College of Mgt & Science 86
BEML SUGGESTIONS & CONCLUSIONS
Current assets to fixed assets = Fixed Assets
Year Current assets Fixed assets CA / FA
1997-1998 1,56,653,64 21,650,50 7.24
1998-1999 1,64,745,70 20,79,384 7.92
1999-2000 1,39,782,12 19,32,798 7.23
2000-2001 1,47,890,12 17,94,598 8.24
2001-2002 1,57,416,31 16,07,030 9.80
Interpretation:
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.
Adarsha College of Mgt & Science 87
BEML SUGGESTIONS & CONCLUSIONS
Fixed Assets to Working Capital:
Adarsha College of Mgt & Science 88
BEML SUGGESTIONS & CONCLUSIONS
Fixed AssetsFixed Assets to Working Capital =
Working Capital
Year Fixed assets Working capital FA / WC
1997-1998 21650,50 106510,18 0.20
1998-1999 20793,84 108654,95 0.19
1999-2000 19327,98 86838,44 0.22
2000-2001 17945,98 67512,43 0.27
2001-2002 1607030 69189,87 0.23
Interpretation:
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.
Adarsha College of Mgt & Science 89
BEML SUGGESTIONS & CONCLUSIONS
Current assets to Working capital:
Adarsha College of Mgt & Science 90
BEML SUGGESTIONS & CONCLUSIONS
Current AssetsCurrent assets to Working Capital =
Working capital
Year Current assets Working capital C A / W C
1997-1998 1,56,653,64 106510,18 1.47
1998-1999 1,64745,70 108654,95 1.52
1999-2000 1,39,782,12 86838,44 1.61
2000-2001 1,47,890,12 67512,43 2.19
2001-2002 1,57,416,31 69189,87 2.28
Interpretation:
The ratio show that the company has low current assets to
working capital
Adarsha College of Mgt & Science 91
BEML SUGGESTIONS & CONCLUSIONS
Adarsha College of Mgt & Science 92
BEML SUGGESTIONS & CONCLUSIONS
a. BEML is a defence oriented undertaking enjoying monopolistic
market in earth moving heavy equipments over a period of time
.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 company’s
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
Adarsha College of Mgt & Science 93
BEML SUGGESTIONS & CONCLUSIONS
current assets. This will result in considerably lowering down
the profitability.
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.
Adarsha College of Mgt & Science 94
BEML SUGGESTIONS & CONCLUSIONS
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.
Adarsha College of Mgt & Science 95
BEML SUGGESTIONS & CONCLUSIONS
i. The time allowed by the collection of the information is very
less. I could not gather full and genuine information about the
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 company’s
documents.
v. From this study generalization can not be drawn.
Adarsha College of Mgt & Science 96
BEML SUGGESTIONS & CONCLUSIONS
SUGGESTIONS:-
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.
Adarsha College of Mgt & Science 97
BEML SUGGESTIONS & CONCLUSIONS
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.
Adarsha College of Mgt & Science 98
BEML SUGGESTIONS & CONCLUSIONS
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.
Adarsha College of Mgt & Science 99
BEML SUGGESTIONS & CONCLUSIONS
Particulars 1997-98 1998-99 1999-2000 2000-2001 2001-2002SOURCES OF FUNDS1. PROFIT OF TAX2. DEPRECIATION3. INCREASE IN SHARE CAPITAL4. SHARE PREMIUM5. INCREASE IN BORROWINGS6. DECREASE IN W.CAPITAL7. OTHERS
1065.002346.00
0.006.000.00
788.000.00
62.002445.00
0.001.00
459.000.00
774.00
1460.002451.00
0.000.000.00
22103.000.00
600.002296.00
0.000.000.00
19039.000.00
535.001843.00
0.000.00
274.000.000.00
TOTAL 4205.00 3741.00 26014.00 21935.00 2652.00UTILISATION OF FUNDS 1. FIXED ASSETS2. DECREASE IN BORROWINGS3. INCREASE IN W.CAPITAL4. DIVIDENDS AND TAXES5. INVESTMENTS6. OTHERS
2634.000.00
621.00811.00
0.00139.00
1596.002145.00
0.000.000.000.00
986.000.00
23305.00897.00287.00539.00
419.000.00
18634.00405.00210.00
2267.00
-58.001677.00
0.00441.0026.00
566.00
TOTAL 4205.00 3741.00 26014.00 21935.00 2652.00
STATEMENT OF CHANGES IN WORKING CAPITAL
Particulars 1997-98 1998-99 1999-2000 2000-2001 2001-2002
CURRENT ASSETS
1. INVENTORIES2. SUNDRY DEBTORS3. CASH & BANK BALANCE4. OTHER CURRENT ASSETS5. LOAN & ADVANCES
657.32618.82160.17
9.3380.89
679.61606.65254.56
4.22102.41
610.76520.16115.05
2.46149.39
638.68520.66188.39
4.12127.04
638.86567.29258.96
4.41104.64
TOTAL 1526.53 1647.45 1397.82 1478.89 1574.16CURRENT LIABILITIESCURRENT LIABILITIES 461.43 560.91 529.44 803.77 882.26NET WORKING CAPITAL 1065.10 1086.54 868.38 675.12 691.90
Adarsha College of Mgt & Science 100
BEML SUGGESTIONS & CONCLUSIONS
TABLE SHOWING THE WORKING RESULTS OF THE
COMPANY FOR THE PERIOD OF FIVE YEARS
SL.NO.
PARTICULARS 1997-98 1998-99 1999-00 2000-01 2001-02
1
2
3
4
5
6
7
8
9
10
Turnover
Excise Duty
Net Sales
Other income
Prior period
Adjustment
profit before tax
Tax provisions
Profit after tax
Proposed Dividend
Net Sales Profit
1259.71
106.36
1153.35
21.02
0.22
16.05
5.40
10.65
08.11
1626.93
1212.62
80.81
1131.81
28.28
0.99
2.72
2.10
0.62
Nil
371.47
1317.09
74.97
1242.12
31.06
1.22
23.60
9.00
14.60
8.97
2481.69
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
Adarsha College of Mgt & Science 101
BEML SUGGESTIONS & CONCLUSIONS
BIBLIOGRAPHY
Bussiness Finance Reedy & Appanaiah
Financial Management Shashi, K, Gupta & Kappor
Management of Working Capital
Praveen Kumar Jain
Financial Management & Policy
Prasanna Chandra
Managerial Accounting B.S Raman
Annual ReportPrinted annual reports of the company for the year 1997 –98 to 2001-02
Web Site WWW. Bemlindia.com
Cost Accounts Manual B E M L
Material Accounts Manual B E M L
Adarsha College of Mgt & Science 102
BEML SUGGESTIONS & CONCLUSIONS
UTILIZATION OF FUNDS
1.FIXED ASSETS 2.DECREASED IN BORROWINGS3.INCREASING W. CAPITAL 4.DIVIDENDS AND TAXES 5.INVESTMENTS 6.OTHERS
2634.000.00
621.00811.00
0.00139.00
1596.002145.00
0.000.000.000.00
986.000.00
23305.00897.00287.00539.00
419.000.00
18634.00405.00210.002267.00
-58.001677.00
0.00441.0026.00566.00
TOTAL 4205.00
3741.00 26014.00 219935.00 2652.00
Adarsha College of Mgt & Science 103