Académique Documents
Professionnel Documents
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ON
UNITED INSTITUTE OF
MANAGEMENT
INSTITUTE CERTIFICATE
(ALLAHABAD)
Date ------------------
This is to certify that Miss RUCHI PANDEY student of MBA course ( 2014 – 2016) at United
Institute of Management Naini with dual specialization in Finance & Human Resource Management
SINGRAULI , SONEBHADRA ( U.P ) – 231223 . This study is done under the guidance of the
It has been an honor for me to have my SUMMER TRAINING in NTPC SINGRAULI For the same. I would like to
express my sincere thanks to Mr. Prabhakar Ghosh ( Officer - Fin).
I sincerely thank Mr. Milan Kumar ( DGM - HR - EDC ) for providing me the opportunity to do my summer
training in NTPC LTD.
I would like to specially thank to Mr. Dheeraj Kumar Gupta ( Sr. Officer –HR ) & Dr. Maheshwari Sharan ( Dy.
Manager – PR Cell ) who as my project guide, helped me through their vision and valuable guidance. Without their
valuable efforts, it could not have been possible for me to complete my project.
I sincerely acknowledge the co-operation from all the Executives, of NTPC SINGRAULI who had shown their
interest and tendered their valuable opinion and suggestions.
I also thanks to the entire staff members and teachers of my Institute UNITED INSTITUE OF MANAGEMENT
NAINI (ALLAHBAD) specially Mr. K. K. MALVIYA (PRINCIPAL), UIM for his constant guidance, help and
encouragement during the preparation of this project.
RUCHI PANDEY
Roll No.1401170074
PREFACE
It’s a matter of honor for me to place before you my best possible efforts in the form of Training report
on “WORKING CAPITAL MANAGEMENT” in NTPC - SINGRAULI
This project has been very inspiring and educative for me in gaining insight of FINANCE Deptt. in an
organization , which is known for achieving excellence in every field around the world.
In November 1975 National Thermal Power Corporation ( NTPC ) was established under the Electricity
( Supply ) Act , 1948.
NTPC Ltd., one of the “ MAHARATNAS ” in Public Sector, the largest Power Utility in country
contributing ¼ of the total power generation.
NTPC Ltd. has over a period of 31 years created various records on Operational Excellence and added to
an excellent organization development.
This project has been undertaken as a part of my “SUMMER TRAINING” for the partial fulfillment of
MBA ( HR ). I wish this would highlight the level of satisfaction among executives regarding to their
related job and performance feedback.
DECLARATION
RUCHI PANDEY
ROLL
NO-1401170074
CONTENTS
Topic Pg. No.
1. Acknowledgement
2. Preface 1
3. Declaration 2
4. Objective of the study 3
5. Review of Literatures
6. Company profile 5-12
7. Introduction Of working Capital Management
8. Inventory management
9. Conversion periods
10. Cash management
11. Receivable management
12. Managing paybless
13. Working capital and short term financing
14. Scope of the study
15. SWOT Analysis
16. Research methodology
17. Hypothesis
The objectives of this project were mainly to study the inventory, cash and receivable at NTPC Ltd., but
The project undertaken is on “WORKING CAPITAL MANAGEMENT IN NTPC”. It describes about how
the company manages its working capital and the various steps that are required in the management of
working capital.
Cash is the lifeline of a company. If this lifeline deteriorates, so does the company's ability to fund operations,
reinvest and meet capital requirements and payments. Understanding a company's cash flow health is essential
to making investment decisions. A good way to judge a company's cash flow prospects is to look at its
Working capital refers to the cash a business requires for day-to-day operations or, more specifically, for
financing the conversion of raw materials into finished goods, which the company sells for payment. Among
the most important items of working capital are levels of inventory, accounts receivable, and accounts
payable. Analysts look at these items for signs of a company's efficiency and financial strength.
The working capital is an important yardstick to measure the company’s operational and financial efficiency.
Any company should have a right amount of cash and lines of credit for its business needs at all times.
This project describes how the management of working capital takes place at NTPC .
COMPANY PROFILE
NTPC Limited is the largest thermal power generating company of India. A public sector company, it was
incorporated in the year 1975 to accelerate power development in the country as a wholly owned company of
the Government of India. At present, Government of India holds 89.5% of the total equity shares of the
company and the balance 10.5% is held by FIIs, Domestic Banks, Public and others. Within a span of 31
years, NTPC has emerged as a truly national power company, with power generating facilities in all the major
National Thermal Power Corporation is the largest power generation company in India. The Forbes Global
2000 ranking for 2005 ranks it as the 5th leading company in India and the 486th leading company in the
world. It is a public listed (Bombay Stock Exchange) Indian public sector company, with majority shares
owned by the Government of India. At present, Government of India holds 89.5% of the total equity shares of
the company and the balance 10.5% is held by FIIs, Domestic Banks, Public and others. NTPC ranks amongst
NTPC's core business is engineering, construction and operation of power generating plants and also
providing consultancy to power utilities in India and abroad. As on date the installed capacity of NTPC
is 26, 404 MW through its 14 coal based (21,395 MW), 7 gas based (3,955 MW) and 4 Joint Venture
country, like above graph is dictating that the intensive and remarkable growth covered by NTPC was
started in year 1986-87 from 3000MW with 20000BU and goes to inconsistent growth in year 2006-07
by 30000MW with 200000BU. This shows the effective installed capacity is leading a terrific generation
of power.
NTPC’s core business is engineering, construction and operation of power generating plants. It also
provides consultancy in the area of power plant constructions and power generation to companies in
India and abroad. As on date the installed capacity of NTPC is 27,904 MW through its 15 coal based
(22,895 MW), 7 gas based (3,955 MW) and 4 Joint Venture Projects (1,054 MW). NTPC acquired 50%
equity of the SAIL Power Supply Corporation Ltd. (SPSCL). This JV company operates the captive
power plants of Durgapur (120 MW), Rourkela (120 MW) and Bhilai (74 MW). NTPC also has 28.33%
stake in Ratnagiri Gas & Power Private Limited (RGPPL) a joint venture company between NTPC,
GAIL, Indian Financial Institutions and Maharashtra SEB Holding Co. Ltd. The present capacity of
RGPPL is 850MW.
NTPC’s share on 31 Mar 2007 in the total installed capacity of the country was 20.18% and it
contributed 28.50% of the total power generation of the country during 2006-07.
NTPC has set new benchmarks for the power industry both in the area of power plant construction and
operations. It is providing power at the cheapest average tariff in the country. With its experience and
expertise in the power sector, NTPC is extending consultancy services to various organisations in the
power business.
NTPC is committed to the environment, generating power at minimal environmental cost and preserving
the ecology in the vicinity of the plants. NTPC has undertaken massive afforestation in the vicinity of its
plants. Plantations have increased forest area and reduced barren land. The massive afforestation by
NTPC in and around its Ramagundam Power station (2600 MW) have contributed reducing the
temperature in the areas by about 3°c. NTPC has also taken proactive steps for ash utilisation. In 1991, it
set up Ash Utilisation Division to manage efficient use of the ash produced at its coal stations. This
quality of ash produced is ideal for use in cement, concrete, cellular concrete, building material.
A "Center for Power Efficiency and Environment Protection (CENPEEP)" has been established in
NTPC with the assistance of United States Agency for International Development. (USAID). Cenpeep is
efficiency oriented, eco-friendly and eco-nurturing initiative - a symbol of NTPC's concern towards
As a responsible corporate citizen, NTPC is making constant efforts to improve the socio-economic
status of the people affected by the projects. Through its Rehabilitation and Resettlement programmes,
the company endeavors to improve the overall socio-economic status of Project Affected Persons.
NTPC was among the first Public Sector Enterprises to enter into a Memorandum of Understanding
(MOU) with the Government in 1987-88. NTPC has been Placed under the 'Excellent category' (the best
Recognising its excellent performance and vast potential, Government of the India has identified NTPC
as one of the jewels of Public Sector ‘Navratnas’- a potential global giant. Inspired by its glorious past
and vibrant present, NTPC is well on its way to realise its vision of being “A world class integrated
MISSION
MAKE AVAILABLE RELIABLE, QUALITY POWER IN INCREASINGLY LARGE QUALITIES AT
REALISATION OF REVENUES.
TECHNOLOGIES .
STANDARDS.
UTILISATION .
CORE VALUES
(COMIT)
CUSTOMER FOCUS
ORGANISATIONAL PRIDE
TOTAL QUALITY
Corporate objectives
To operate and maintain power stations at high availability ensuring minimum cost Of generation.
Minimum receivables.
The corporation will strive to utilize the ash produced at its stations to the
Maximum extent possible through production of ash bricks building materials etc.
To introduce, assimilate and attain self sufficiency in technology, acquire expertise in utility
To develop research & development (R&D) for achieving improved plant Reliability.
The working capital management precisely refers to management of current assets. A firm’s working capital
consists of its investment in current assets, which include short-term assets such as:
Inventories,
Marketable securities.
Working capital is commonly defined as the difference between current assets and current
liabilities.
It refers to firm's investment in current assets. Current assets are the assets, which can be converted into
cash with in a financial year. The gross working capital points to the need of arranging funds to finance
current assets.
It refers to the difference between current assets and current liabilities. Net working capital can be positive or
negative. A positive net working capital will arise when current assets exceed current liabilities. And vice-
versa for negative net working capital. 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. Net working capital also covers the question of judicious mix of long-term and short-term
For one thing, the current assets of a typical manufacturing firm account for half of its total assets. For a
Working capital requires continuous day to day supervision. Working capital has the effect on
There is an inevitable relationship between sales growth and the level of current assets. The target sales
level can be achieved only if supported by adequate working capital Inefficient working capital
management may lead to insolvency of the firm if it is not in a position to meet its liabilities and
commitments.
Liquidity Vs Profitability: Risk - Return trade off
Another important aspect of a working capital policy is to maintain and provide sufficient liquidity to
the firm. Like the most corporate financial decisions, the decision on how much working capital be
maintained involves a trade off- having a large net working capital may reduce the liquidity risk faced
by a firm, but it can have a negative effect on the cash flows. Therefore, the net effect on the value of
the firm should be used to determine the optimal amount of working capital.
Sound working capital involves two fundamental decisions for the firm. They are the determination of:
The appropriate mix of short-term and long-term financing used to support this investment
in current assets, a firm should decide whether or not it should use short-term financing. If short-term
financing has to be used, the firm must determine its portion in total financing. Short-term financing
Flexibility
But short-term financing is more risky than long-term financing. Following table will summarize our
18
Maintaining a policy of short term financing for short term or temporary assets needs (Box 1) and long-
term financing for long term or permanent assets needs (Box 3) would comprise a set of moderate risk
–profitability strategies. But what one gains by following alternative strategies (like by box 2 or box 4)
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CLASSIFICATION OF WORKING CAPITAL
20
On the basis of concept
21
Types of Working Capital Needs
Another important aspect of working capital management is to analyze the total working capital needs
of the firm in order to find out the permanent and temporary working capital. Working capital is
required because of existence of operating cycle. The lengthier the operating cycle, greater would be
the need for working capital. The operating cycle is a continuous process and therefore, the working
capital is needed constantly and regularly. However, the magnitude and quantum of working capital
required will not be same all the times, rather it will fluctuate.
The need for current assets tends to shift over time. Some of these changes reflect permanent changes
in the firm as is the case when the inventory and receivables increases as the firm grows and the sales
become higher and higher. Other changes are seasonal, as is the case with increased inventory required
for a particular festival season. Still others are random reflecting the uncertainty associated with
There is always a minimum level of working capital, which is continuously required by a firm in order
to maintain its activities. Every firm must have a minimum of cash, stock and other current assets, this
minimum level of current assets, which must be maintained by any firm all the times, is known as
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permanent working capital for that firm. This amount of working capital is constantly and regularly
required in the same way as fixed assets are required. So, it may also be called fixed working capital.
Any amount over and above the permanent level of working capital is temporary, fluctuating or
variable working capital. The position of the required working capital is needed to meet fluctuations in
demand consequent upon changes in production and sales as a result of seasonal changes.
The permanent level is constant while the temporary working capital is fluctuating increasing and
In the case of an expanding firm, the permanent working capital line may not be horizontal. This is
because the demand for permanent current assets might be increasing (or decreasing) to support a
23
24
FINANCING OF WORKING CAPITAL
There are two types of working capital requirements as discussed above. They are:
Therefore, to finance either of these two working capital requirements, we have long-term as well as
short-term sources.
25
FACTORS DETERMINING WORKING CAPITAL REQUIREMENTS
There are many factors that determine working capital needs of an enterprise. Some of these factors
service firm, like an electricity undertaking or a transport corporation, which has a short
operating cycle and which sells predominantly on cash basis, has a modest working capital
requirement. Oh the other hand, a manufacturing concern like a machine tools unit, which has a
long operating cycle and which sells largely on credit, has a very substantial working capital
requirement.
NTPC carry on activities related to Sugar systems. Though they are primarily an assembling firm
they also have manufacturing facilities in Chennai and Pondicherry. This requires them to keep a
have increased their share in the consumer segment notably in the last four years. This they have
achieved through retail expansion. The scale of operations and the size it holds in the Indian IT
market makes it a must for them to hold their inventory and current asset at a huge level.
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Rate of Growth of Business.
The rate of growth of sales indicates a need for increase in the working capital requirements of
the firm. As the firm is projected to increase their sales by 80% from what it was in 2006, it is
required to guard them against the increasing requirements of the net current asset by way of
efficient working capital management. The sales and projected sales level determine the
from Operations
margins in the price of the raw materials that had prompted them to go for bulk purchases thus
making on additions to their net current assets. They might have gone for this large-scale
procurement for availing discounts and anticipating a rise in prices, which would have meant that
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WORKING CAPITAL CYCLE
The upper portion of the diagram above shows in a simplified form the chain of events in a
manufacturing firm. Each of the boxes in the upper part of the diagram can be seen as a tank through
which funds flow. These tanks, which are concerned with day-to-day activities, have funds constantly
The chain starts with the firm buying raw materials on credit.
In due course this stock will be used in production, work will be carried out on the stock, and
Work will continue on the WIP until it eventually emerges as the finished product.
When the finished goods are sold on credit, debtors are increased.
They will eventually pay, so that cash will be injected into the firm.
Each of the areas- Stock (raw materials, WIP, and finished goods), trade debtors, cash (positive or
negative) and trade creditors – can be viewed as tanks into and from which funds flow.
Working capital is clearly not the only aspect of a business that affects the amount of cash.
Shareholders (existing or new) may provide new funds in the form of cash
28
Some shares may be redeemed for cash
Long-term loan creditors (existing or new) may provide loan finance, loans will need to
Unlike, movements in the working capital items, most of these ‘non-working capital’ cash transactions
are not every day events. Some of them are annual events (e.g. tax payments, lease payments, dividends,
interest and, possibly, fixed asset purchases and sales). Others (e.g. new equity and loan finance and
redemption of old equity and loan finance) would typically be rarer events.
29
NTPC has the following sources available for the fulfillment of its working capital requirements in
Banks:
These include the following banks –
State Bank of India
Canara Bank
HDFC Bank Ltd.
ICICI Bank Ltd.
Societe Generale
Standard Chartered Bank
State Bank of Patiala
State Bank of Saurashtra
Commercial Papers:
Commercial Papers have become an important tool for financing working capital requirements of a
company.
Commercial Paper is an unsecured promissory note issued by the company to raise short-term
funds. The buyers of the commercial paper include banks, insurance companies, unit trusts, and
companies with surplus funds to invest for a short period with minimum risk.
NTPC issues Commercial Papers and had 4000 commercial papers in the year 2006.
30
INVENTORY MANAGEMENT
Inventories
Inventories constitute the most important part of the current assets of large majority of companies. On
an average the inventories are approximately 60% of the current assets in public limited companies in
India. Because of the large size of inventories maintained by the firms, a considerable amount of funds
is committed to them. It is therefore, imperative to manage the inventories efficiently and effectively in
Nature of Inventories
Inventories are stock of the product of the company is manufacturing for sale and components make up
of the product. The various forms of the inventories in the manufacturing companies are:
Raw Material: It is the basic input that is converted into the finished product through the
manufacturing process. Raw materials are those units which have been purchased and stored for
future production.
Work-in-progress: Inventories are semi-manufactured products. They represent product
that need more work they become finished products for sale.
Finished Goods: Inventories are those completely manufactured products which are
ready for sale. Stocks of raw materials and work-in-progress facilitate production, while stock of
finished goods is required for smooth marketing operations. Thus, inventories serve as a link
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In managing inventories, the firm’s objective should be to be in consonance with the shareholder wealth
maximization principle. To achieve this, the firm should determine the optimum level of inventory.
Efficiently controlled inventories make the firm flexible. Inefficient inventory control results in
unbalanced inventory and inflexibility-the firm may sometimes run out of stock and sometimes pile up
unnecessary stocks.
Economic Order Quantity (EOQ): The major problem to be resolved is how much the
inventory should be added when inventory is replenished. If the firm is buying raw materials, it has
to decide lots in which it has to purchase on replenishment. If the firm is planning a production
run, the issue is how much production to schedule. These problems are called order quantity
problems, and the task of the firm is to determine the optimum or economic lot size. Determine an
acquiring raw material. They include the costs incurred in the following activities:
Requisition
Purchase Ordering
Transporting
Receiving
Inspecting
Storing
Ordering cost increase with the number of orders placed; thus the more frequently inventory is acquired,
the higher the firm’s ordering costs. On the other hand, if the firm maintains large inventory’s level,
there will be few orders placed and ordering costs will be relatively small. Thus, ordering costs decrease
32
Carrying Costs: Costs are incurred for maintaining a given level of inventory are called
Carrying costs are varying with inventory size. This behavior is contrary to that of ordering
costs which decline with increase in inventory size. The economic size of inventory would
n 3
Raw 6349 774 6127
33
Material 9
Stores and 3713 298 2622
Spares 7
Finished 1337 724 6506
Goods 4 5
Work-in- 595 784 871
progress
The increasing component of raw materials in inventory is due to the fact that the company has gone for
bulk purchases and has increased consumption due to a fall in prices and reduced margins for the year.
Another reason might be the increasing sales, which might have induced them to purchase more in
anticipation of a further increase in demand of the product. And the low composition of work-in-
progress is understandable as because of the nature of the business firm is involved in.
To the question as to whether the increasing costs in inventory are justified by the returns from it the
answer could be found in the NTPC retail expansion. NTPC caters to the need of the two separate
segments:
They are more into retail than earlier and at present more than 650 retail outlets branded with NTPC
The company in order to meet its raw materials requirements could have gone for frequent purchases,
which would have resulted in lesser cash flows for the firm rather than the high expenditure involved
when procuring in at bulk. The reason why the firm has gone for these bulk purchases because of the
lower margins and the discounts it availed because of procuring in bulk quantities.
34
A negative growth in WIP could be because:
a) The time taken to convert raw materials to finished goods is very minimal
b) This is also due to capacity being not utilized at the optimum.
ABC System:
ABC system of inventory keeping is followed in the factories. Various items are categorized into
three different levels in the order of their importance. For e.g. items such as memory,
high capacity processors and royalty are placed in the ‘A’ category. Large number of firms has to
maintain several types of inventories. It is not desirable the same degree of control all the items.
The firm should pay maximum attention to those items whose value is highest. The firm should
therefore, classify inventories to identify which items should receive the most effort in controlling.
The firm should be selective in approach to control investment in various types of inventories. This
analytical approach is called “ABC Analysis”. The high-value items are classified as “A items” and
would be under tightest control. “C items” represent relatively least value and would require
simple control. “ B items” fall in between the two categories and require reasonable attention of
management.
JIT: The relevance of JIT in NTPC Info system can be questioned. This is because they procure
materials on the basis of projections made at least two or three months before. Even at the time of
procurement they ensure that they procure much more than what actually is required by the firm
35
that is they hold significant amount of inventory as safety stock. This is done to counter the threat
involved in default and accidental breakdowns. The levels of safety stock usually vary according to
the usage.
Conversion Periods
Raw Material
Consumption 7
Raw Material 332 268.41 158.28
Consumption/da
y
Raw Material 7072 6960.275 4364.735
Inventory
Raw Material 21 25.93 27.57
Holding Days
The raw material conversion period or the raw material holding cost has reduced from 26 to 21. This is
despite an increase in its consumption. This indicates that the firm is able to convert the raw material at
its disposal to the work-in-progress at a lesser time as compared to the last year. It would be to the
benefit of the firm to reduce the production process and increase the conversion rate still as the firm is
36
Work-in-progress
Production 9
Cost of 525.78 437.4 310.95
Production/da
y
Work in 689.5 827.52 679.455
progress
inventory
WIP Holding 1.31 1.89 2.19
days
The work-in-progress holding time is important for a firm in the sense that it determines the rate of time
at which the production process will be complete or the finished goods will be ready for disposal by the
firm. The firm as it is in the process of assembling should take the least possible time in conversion to
finished goods unlike a hard core manufacturing firm, as any firm would like to have its inventory in the
work-in-progress at the minimum. There would also be less of stock out costs as due to better
conversion rates the firm is able to meet the rise in demand situations. More the time it spends lesser its
efficiency would be in the market. Here the firm has been able to bring down its WIP conversion
periods.
37
Finished Goods
s
Cost of 22817 178438.8 124768.92
goods sold 7 5
Cost of 625 488.87 341.832
goods
sold/day
Finished 10310 6875.725 5026.505
goods
inventory
Finished 16 14.06 14.8
goods
inventory
Holding
days
The time taken for the firm to realize its finished goods as sales has increased as compared to last year.
This growth in sales could be traced back to the growing domestic IT market for the commercial as
consumer segment in India. NTPC has around 15% of the market in desktop and it is the market leader
in this segment. So it is only natural that they are able to better their conversion rate of finished goods to
sales.
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Operating Cycle
2 3
Inventory 38 42 45
conversion period
Average collection 70 63 66
period
Gross operating 108 105 111
cycle
Average payment 22 23 17
period
Operating cycle 86 82 94
The operating cycle of the firm reveals the days within which the inventory procured gets converted to
sales or revenue for the firm. This time period is of importance to the firm as a lag here could
significantly affect the profitability, liquidity, credit terms, and the policies of the firm. All the firms
would like to reduce it to such extend that their cash inflows are timely enough to meet their
obligations and support the operations. That the firm has been able to reduce the ratio is in itself an
achievement as they were having huge stocks of inventory. But the reduction in the cycle could also be
attributed to the boom in the market and the growth it is expected to reach. This boom automatically
ensures the demand for the finished goods and thus helping in it to garner sales for the firm.
s
Imported 9200 70784.2 42129.63
39
7 7
Indigenous 2907 27187.0 15645.51
0 4
% Imports 75.99 72.25 72.92
A major chunk of the imports come from Korea and Taiwan and is purchased in US$. The value of
imported and indigenous raw material consumed give a clear picture that if there is a change in the
EXIM policy of the government it is bound to affect the company adversely as more than 70% of their
consumption is from imports. But this is the scenario witnessed in the industry as a whole and though
NTPC is into expanding its operation to Uttaranchal it in the present state is would be affected by a
A major chunk of their current assets are in the form of inventory and the change in technology will
invariably be a threat faced by the firm. The question of technology applying here like says a certain
device going say out of fashion or outdated. For e.g. TFT monitors being in demand more than CRT.
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CASH MANAGEMENT
Sources of Cash:
If you have insufficient working capital and try to increase sales, you can easily over-stretch the
Exceptional cash generating activities e.g. offering high discounts for early cash payment
Frequent short-term emergency requests to the bank (to help pay wages, pending receipt of a
cheque).
41
The cash management system followed by the NTPC is mainly lock box system.
1. The branch offices of the company at various locations hold the collection of cheques of
the customers.
2. Those cheques are either handed over to the CMS agencies or bank of the particular
realization/cheque bounced.
5. The central hub passes on the realized funds to the company as per the agreed
agreements.
6. The CMS agencies or concerned bank provides the necessary MIS to the company as per
requirement.
In cash management the collect float taken for the cheques to be realized into cash is irrelevant and non-
interfering because banks such as Standard Chartered, HDFC and CitiBank who give credit on the basis
of these cheques after charging a very small amount. These credits are given to immediately and the
maximum time taken might be just a day. The amount they charge is very low and this might cover the
threat of the cheque sent in by two or three customers bouncing. Even otherwise the time taken for the
Cash-Current Liability
The absolute liquid ratio is the best for three years and the cash balances as to the current liability has
improved for the firm. Firm has large resources in cash and bank balances. While large resources in cash
42
and bank balances may seem to affect the revenue the firm could have earned by investing it elsewhere
as maintenance of current assets as cash and in near cash assets and marketable securities may increase
the liquidity position but not the revenue or profit earning capacity of the firm.
Dividend Policy-Cash
43
The other notable feature in NTPC statements has been the growing dividend policy of the firm. The
payment of dividend means a cash outflow. Thus cash position is an important criterion at the time of
paying dividends. There is a theory that greater the cash position and ability to pay dividends. The firm
44
has adopted a policy of disbursing the revenue earned as profits to the shareholders as dividends as
3
Equity Dividend% 400 310 210
This could mean two things for the firm the amount of cash retained in the business for capital
expenditure purposes are minimal or nil. But rather than investing more in plant and machine which
they can at any point in time by adding on a additional line if need they would like to optimize their
utilization in fixed assets at present. This also means that the percentage of cash in hand maintained by
the firm as a source of liquidity could be reduced, i.e. the amount of idle cash in the business could be
The firm feels that they should retain cash and it would be in the interest of the firm as well as the
shareholders. This would automatically mean as decrease in Earning/share (EPS)(Basic EPS declined
from 8 in 2005 to 6.74 in 2006). It would prompt more of investors being interested in the shares of the
company, which would boost the purchase of the securities and increase the market price/share thus
Cash Flows
45
The firm has disposed of investments worth around 655 Crores to meet its growing needs. The other
notable feature is decline is the firm’s inflows from operations primarily due to the reason that the cash
generated from the operations is the lowest in three years. And the firm’s growing dividend policy has
The cash from the operation has been subject to considerable change due to the changes that could be
adjusted towards trade receivables and trade payables. The outflows in inventory have become as low as
37% of what it was last year despite an increase in the inventory consumption by 16.64%. The resulting
reduction in the cash outflows might be because of the inventories being procured more on credit. That
the cash from operations has declined has affected the current liability index of the firm.
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Cash Flow in Investing Activities
Investment
The investments have reduced from the last year due to the redemption of investments taken place to
meet various needs such as increasing demand in stock or inventory and to ensure better credit and
receivables policy. We can see that the firm has in these three years increased their cash inflow from the
investing activities by way of disposal of investments when in need. That is the firm has redeemed to
realize cash as to meet its expanding operations, fund the inventory procurement and meet the
obligations.
The investments in mutual funds are beneficial to the firm in the context that they contain interest
bearing securities which add up as a source of revenue for the firm unlike cash which remains idle and
unproductive when not in use. This reduction of dividend could be attributed to disposal of investments
in mutual funds and subsidiary. This disposal creates a fund, which can be used by the company as and
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Cash vs. Marketable Securities
The investment in marketable securities rather than having large cash balances in something that has
been given thought for by the firm. This is because while a firm gets revenue in the form of interests by
investments, it actually has to pays certain amount money to the banks for maintaining current accounts
and fixed deposits usually have a longer maturity period. That is, the problem with high investments is
that the opportunity to earn is lost, thus a firm has to maintain an optimal cash balance. But the
investment in mutual funds or other marketable securities might create a problem of investment, as they
might not be readily realizable as say liquid cash or the amount deposited in the current account. The
investments in say fixed assets say may earn a fixed rate of interest but they have a maturity period
attached to them.
In NTPC, Standard Chartered is the concentration bank in which all the inflows from the deposit banks
are concentrated and passed on to the disbursement banks for further disbursement.
48
Liquid Cash Balance
The liquid cash maintained in the business is only that much as is required to satisfy the daily
requirements of the firm and not more. The rest of the cash is invested into mutual funds and also held
Instruments Used
The instrument used here are primarily cheques comprising of around 97% of what is used in. The rest
Thus working capital is the lifeline for every business. The main advantages of sufficient working
capital are:
49
RECEIVABLES MANAGEMENT
Cash flow can be significantly enhanced if the amounts owing to a business are collected faster. Every
business needs to know.... who owes them money.... how much is owed.... how long it is owing.... for
what it is owed.
Slow payment has a crippling effect on business; in particular on small businesses whom can least
afford it. If you don't manage debtors, they will begin to manage your business as you will gradually
lose control due to reduced cash flow and, of course, you could experience an increased incidence of
bad debt.
1. Have the right mental attitude to the control of credit and make sure that it gets the
priority it deserves.
3. Make sure that these practices are clearly understood by staff, suppliers and customers.
5. Check out each customer thoroughly before you offer credit. Use credit agencies, bank
7. Continuously review these limits when you suspect tough times are coming or if
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11.Consider accepting credit /debit cards as a payment option.
12.Monitor your debtor balances and aging schedules, and don't let any debts get too old.
Recognize that the longer someone owes you, the greater the chance you will never get paid. If the
average age of your debtors is getting longer, or is already very long, you may need to look for the
Customer dissatisfaction.
Debtors due over 90 days (unless within agreed credit terms) should generally demand immediate
attention. Look for the warning signs of a future bad debt. For example…..
1. Longer credit terms taken with approval, particularly for smaller orders.
2. Use of post-dated checks by debtors who normally settle within agreed terms.
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Profits only come from paid sales.
The act of collecting money is one, which most people dislike for many reasons and therefore put on
the long finger because they convince themselves that there is something more urgent or important that
demand their attention now. There is nothing more important than getting paid for your product or
Don’t feel guilty asking for money .. its yours and you are entitled to it.
Make that call now. And keep asking until you get some satisfaction.
In difficult circumstances, take what you can now and agree terms for the remainder, it
When asking for your money, be hard on the issue – but soft on the person. Don’t give
Make that your objective is to get the money, not to score points or get even.
52
RECEIVABLES MANAGEMENT IN NTPC :
A better turnover ratio implies for the firm, more efficiency in converting the accounts receivable to
cash. A firm with very high turnover ratio can take the freedom of holding very little balances in cash, as
their debtors are easily realizable. In case of NTPC, the collection period for the firm is 70 days.
The debts doubtful have doubled but their percentage on the debts has almost become half. This implies
a sales and collection policy that get along with the receivables management of the firm.
COLLECTION POLICIES:
53
It refers to the collection procedures such as letters, phone calls and other follow up mechanism to
recover the amount due from the customers. It is obvious that costs are incurred towards the collection
efforts, but bad debts as well as average collection period would decrease. Further, a strict collection policy
of the firm is expensive for the firm because of the high cost is required to be incurred by the firm and it
may also result in loss of goodwill. But at the same time it minimizes the loss on account of bad debts.
Therefore, a firm has to strike a balance between the cost and benefits associated with collection
policies.
Real Time Gross Settlement as such is a concept new in nature and though the firm uses the system with
all the members of the consortium, it is still in its primal stage and will take time before all of the clients
of the firm are willing to accept it. The firm has made a proposal to the consortium of the banks during
appraisal for faster implementation of internet based banking facility by all the banks and adoption of
The debtor’s turnover ratio is completely dependent upon the credit policy followed by the firm. The
credit policy followed by the firm should be such that the threat of bad debts and the default rate
54
TURNOVER
RATIO
PAYMENT 22 23 17 16
PERIOD
That the creditors turnover ratio has declined and payment period has increased indicate that the
company has got a leeway in making the payment to the creditors by way of increased time.
With creditors they are having pre-agreements and have undertaken arrangements with them, which
they believe to be the best in the business and these are fixed.
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MANAGING PAYABLES (Creditors)
Creditors are a vital part of effective cash management and should be managed carefully to
Purchasing initiates cash outflows and an over-zealous purchasing function can create liquidity
problems.
Do you use order quantities, which take account of stock holding and purchasing costs?
Do you have alternative sources of supply? If not, get quotes from major suppliers and
shop around for the best discounts, credit terms as it reduces dependence on a single supplier.
Are you in a position to pass on cost increases quickly through price increases to your
customers?
If a supplier of goods or services lets you down can you charge back the cost of the
delay?
Can you arrange (with confidence!) to have delivery of supplies staggered or on a just-
in-time basis?
There is an old adage in business that "if you can buy well then you can sell well". Management of
your creditors and suppliers is just as important as the management of your debtors. It is important to
56
look after your creditors- slow payment by you may create ill feeling and can signal that your
Remember that a good supplier is someone who will work with you to enhance the future viability
The firm has to decide about the sources of funds, which can be availed to make investment in current
assets.
It includes ordinary share capital, preference share capital, debentures, long term borrowings from
It is for a period less than one year and includes working capital funds from banks, public deposits,
Spontaneous financing:
It refers to automatic sources of short-term funds arising in normal course of business. There is no
explicit cost associated with it. For example, Trade Credit and Outstanding Expenses etc.
57
Depending on the mix of short and long term financing, the company can follow any of the
following approaches.
Matching Approach
In this, the firm follows a financial plan, which matches the expected life of assets with the expected
life of source of funds raised to finance assets. When the firm follows this approach, long term
financing will be used to finance fixed assets and permanent current assets and short term financing to
Conservative Approach
In this, the firm finances its permanent assets and also a part of temporary current assets with long term
financing. In the periods when the firm has no need for temporary current assets, the long-term funds
can be invested in tradable securities to conserve liquidity. In this the firm has less risk of facing the
Aggressive Approach
In this, the firm uses more short term financing than warranted by the matching plan. Under an
aggressive plan, the firm finances a part of its current assets with short term financing.
Relatively more use of short term financing makes the firm more risky.
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Current asset to fixed asset ratio:
The financial manager should determine the optimum level of current assets so that the wealth of
shareholders is maximized. A firm needs fixed and current assets to support a particular level of
output.
The level of current assets can be measured by relating current assets. Dividing current assets by fixed
assets gives CA/FA ratio. Assuming a constant level of fixed assets, a higher CA/FA ratio indicates a
conservative current assets policy and a lower CA/FA ratio means an aggressive current assets policy
assuming other factors to be constant. A conservative policy i.e. higher CA/FA ratio implies greater
liquidity and lower risk; while an aggressive policy i.e. lower CA/FA ratio indicates higher risk and
poor liquidity. The current assets policy of the most firms may fall between these two extreme policies.
The alternative current assets policies may be shown with the help of the following figure.
59
In this figure the most conservative policy is indicated by alternative A, where as CA/FA ratio is
greatest at every level of output. Alternative C is the most aggressive policy, as CA/FA ratio is
lowest at all levels of output. Alternative B lies between the conservative and aggressive policies
60
WORKING CAPITAL & SHORT-TERM FINANCING
BASED
STATE BANK OF INDIA 3600 46000
ICICI BANK 1282 19000
HDFC BANK 1200 10000
STANDARD 1200 19000
CHARTERED BANK
STATE BANK OF 715 7500
SAURASHTRA
STATE BANK OF 1300 7700
PATIALA
CANARA BANK 1203 6000
SOCIETE GENERALE 1000 4000
HSBC BANK 1000 18300
TOTAL 12500 137500
In order to finance the working capital needs of the firm in the form of Working Capital Demand Loan,
there is a consortium of nine banks. The consortium if banks provide a fund based limit of 125 Crores
which comprises of cash credit and working capital demand loans and non-fund based limits which has
bank gurantee and letter of credit subject to a limit of 1375 Crores. The Lead Bank in this consortium
of banks is State Bank of India and the second lead bank is ICICI. It is SBI, which fixes the limit on
the basis of consortium. They, in consultation of the company decide the allocation of limit to various
member banks. The allocation cannot be higher than the limits fixed by it. SBI is the biggest
contributor in the consortium for both fund and non-fund based limits with about
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31.30 in funds and 34.02 in non-fund limits. The ratio of both limits for the year 2006 is 0.23:0.77
It is on the basis of the accounts receivable that the banks come to an agreement with regards to the
limits imposed. Though it is the fund based limits that finance the working capital requirements, the
non-fund based limits are important for the management of the working capital as there might be clients
who are not willing to sell on open credit and might be demanding letters of credit before any advances.
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RENEWAL OF LIMITS
BASED
NON 48500 38500 28500
FUND
BASED
TOTAL 60000 50000 40000
All banks sanction the limits for a period of one year. Thereafter it is to be renewed every year. SBI
appraises the limit on the basis of consortium. The individual banks appraise for their own individual
limit. The non fund based limits of the firm in consortium financing has been subjected to change for the
past two years as per the requirements of the firm and the consent of the lead bank to its proposal. It was
around 385 Crores in 2005 and had been risen to around 485 Crores in 2006.
A proposal has been made by the firm to further appraise the limits by 100 Crores to 585 Crores in
view of the growing operations of the firm with full interchangeability between letter of credit and bank
guarantee limits for operational flexibility. Allocation of the fund based and non based limits among the
banks based on operational convenience rather than allocating the fund based and non fund based on the
The company needs to provide the following information to bank for appraisals:
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Write Up on company
Share holding pattern
List of the directors
CONSORTIUM MEETING :
All the members of the consortium are required to meet to discuss various issues relating to the working
facilities. As per RBI guidelines, the lead bank, i.e., SBI should ensure that one consortium meeting is
There are various documents that need to be signed at the time of renewal or inducting any bank to the
Loan agreement
Hypothecation agreement for movable machinery
Hypothecation agreement for movables and book debts
Counter Indemnity
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The above are the standard agreements asked for by the banks. The common seal has to be witnessed by
As of 2005, no additions or deletions were made to the consortium of the banks. But over the years the
number of banks in the consortium have been reduced. Indian Banks and State Bank of Hyderabad are
Joint Documentation is executed between the company and the consortium of banks for the working
capital facilities extended by the consortium to the company. The joint documentation is valid for three
SBI appraises the limit on behalf of the consortium. It in consultation with the company decided the
allocation of the limit to various member banks. The allocation of any member bank cannot be higher
than the limit sanctioned by it. The drawing power for it fund based limits out of the consortium are
determined on the basis of the stock statement submitted by the company. NTPC is required to submit
the stock statement to all member banks in consortium for every month.
Every quarterly and half quarterly intervals, the firm submits Financial Follow Up Reports I and II. FFR
I is an extract of the balance sheet. In this report, the company is required to submit the details of sales,
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current assets and current liabilities for the quarter and the estimates for the current year. FFR II – the
company is required to prepare P&L, B/S and Cash Flow in a different format. The information is to be
provided for the last year (actual), current year half yearly results (actual) and the estimates for the next
year.
Other than the investment in current assets, the firm also has to be concerned with short-term to long-term debt as
this plays a very important role in determining the amount of risk undertaken by the firm. That is , the firm not only
has to be concerned about current assets but also the sources through which they are financed. A firm before
financing in either of the two, has to take into consideration various aspects. While short term might seem the ideal
way to finance your assets than the long term due to shorter maturity period and also less of costs are involved,
there is an inherent risk in short term financing due to fluctuating interest rates and due to the reason that the firm
LOANS
SHORT TERM 3849 4991.28 6903.7 4987.52
LONG TERM 0 530.07 0 3461.36
TOTAL 3849 5521.35 6903.7 8448.88
%SHORT TERM 100 90.4 100 59.03
Under secured loan cash credit, along with non fund based facilities, foreign currency term loan from banks are
secured by way of hypothecation of stock-in-trade, book debts as first charge and by way of second chanrge on
all the immovable and movable assets of the parent company. Term loan in Indian rupees from a bank is subject
to a prior charge in favour of company’s bankers on book debts and stock in trade for working capital facilities.
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UNSECURED LOANS 2014 2013 2012 2011
SHORT TERM 15104 2593.39 63.94 76.84
LONG TERM 11 17 169.51 3261.42
TOTAL 15115 2610.39 233.45 3338.26
% SHORT TERM 99.93 99.348 27.38 2.3
Here NTPC has a major portion of their financing done through short term financing than long term
financing. The preference of short term financing to long term as such is not the part of any policy
employed by the firm but it was due to the reason that the interest rates in short term were more investor
friendly and the cost involved in them were also low. At present, we can see that the firm is moving
more towards long term financing as the interest terms in the long term has reduced compared to the
short term.
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YEAR- END COMMERCIAL PAPERS
PAPERS
The credit rating by ICRA continued at ‘A1+’indicating highest safety to company’s commercial paper
program of Rs. 75 Crores. It acts as an effective tool in reducing the interst cost and is used for financing
inventories and other receivables. As and when the firm issues commercial papers, it sends a letter to the
leader of the consortium, i.e., SBI to reduce from the fund based limits the amount it has issued in the
form of the commercial papers. Suppose the firm issues 30 Crores as commercial papers and the fund
based limits are say 115 Crores. Then firm sends a letter to SBI to reduce the existing fund based limits
In terms of desirability, the commercial papers are cheaper and advantageous to the firm compared to
the consortium financing. The main advantage being the interest rate which is lower than the bank rates
existing under consortium financing. But the firm depends on both and for working capital financing, it
is dependent on the banks for funds sich as working capital demand loans and cash credits. There is no
point in the firm not making use of the fund based limits in the consortium banking as their commercial
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It is an alternative source of raising short-term finance, and proves to be handy during
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STRENGTH OF NTPC:
• The company has kept with itself sufficient liquid funds to meet any kind of cash requirement.
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• Efficient working capacity of plants.
• Highly motivated and dedicated workers and officers- no industrial relations problem.
• Excellent growth prospects with significant additions, modifications and Replacement Efficient and
timely completion of projects. A minimum risk factor. Best-integrated project management systems.
•Company with an excellent record and high profits.An early starter-more than 30 years experience in
power sector.
•Highly motivated and dedicated workers and officers- no industrial relations problem.
WEAKNESSES OF NTPC:
OPPURTUNITIES:
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•Upcoming hydro and nuclear sector.
THREATS:-
•Huge competition from SEB’s, Reliance Energy, Tata power and other Private Development.
•Huge competition from SEB’s, Reliance Energy, Tata power and other Private Development.
•Huge Capital requirement for expansion, diversification, horizontal & vertical integration and R & M.
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This project will be a learning device for the finance student.
Through this project I would study the various methods of the working capital
management.
The project would also be an effective tool for credit policies of the companies.
This will show different methods of holding inventory and dealing with cash and
receivables.
This will show the liquidity position of the company and also how do they maintain a
73
RESEARCH METHODOLOGY
capital, how it is managed in NTPC , what are the different ways in which the
receivable and payable and cash. Therefore one also needs to have a sound
management.
Then comes the financing of working capital requirement, i.e. how the working
capital is financed, what are the various sources through which it is done.
And, in the end, suggestions and recommendations on ways for better
Pl an of Study:
A proper and systematic approach is essential in any project work. Proper planning should be done for
conducting the data collection, completion and presentation of the project. Each and every step must be
so planned that it leads to the next step automatically. This systematic approach is a blend of planning
and organization and major emphasis is given to interdependence of various steps. The plan of this study
is as follows: Research Purpose
The purpose of the research was to know the criteria on which investment of the company is raised
every year and a favorable rate of return is arrived at, increasing the net result of the company as per
their budget.
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Research Objective:
The main objective of the research is:
To know the investment decisions.
To analyze the investment depending on internal rate of return.
Classification of Data
The data used for this study is Primary data and Secondary data.
Primary data:
This includes the information collected mainly from the office. This has served as primary
source of data for this study.
Secondary data:
This includes the information gathered from various websites.
Sample size:
The sample size selected is of 5 years.
Sampling Technique:
The sampling procedure employed for this project is judgmental sampling, a convenience
sampling technique in which elements are based on the judgment of researcher.
Statistical Analysis:
Information collected was classified and tabulated for further analysis.
Calculations were done for the interpretation of the data e.g. Discount factor, Averages, etc.
The report is covered with various data and tables on which the project has been carried out.
Software tools used for the data analysis:
The software tool used for data analysis is MS WORD & MS EXCEL.
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A hypothesis of the study is the statement created by the trainee when they speculate upon the outcome
of a project or experiment.
3) The current liabilities are increasing than current assets year by year.
DATA SOURCES:
The following sources have been sought for the prep of this report:
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Primary sources such as business magazines, current annual reports, book on
Financial Management by various authors and internet websites the imp amongst
required.
This data was gathered through the company’s websites, its corporate intranet,
through direct interaction with the employees and by timely studying the
Jain, Prasanna Chandra and I.M.Pandey were consulted to equip ourselves with
the topic.
LIMITATION
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Price level changes are not considered.
No comparison made with other firm’s ratio while during the study period and
The readjusted and regroup figure slightly affects the ratio figures.
The data is used in the project have been taken from annual report only. Hence,
grouping and sub grouping and annuliasation of data may slightly affect the results.
ANALYSIS
DATA ANALYSIS
CURRENT RATIO
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Inference:
The above diagram shows that in the year 2015 is 1.43%, in year 2014 is 1.69 and in
year 2013 is 1.83, in year 2012 is 1.97 & in year 2011 is 2.13. These ratios of liquidity indicate the
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QUICK RATIO
Inference:
The above data shows the quick ratio of the company in year 2011, 2012,2013,2014 &
2015 is 1.93, 1.8, 1.68, 1.51 & 1.23 respectfully. The ratios show the company enjoys the high
liquidity position; it is good however too much liquidity is not beneficial for the company
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DEBT EQUITY RATIO
Inference:
In the above data it shows that the Debt equity ratio of company is in 2011, 2012 ,2013,2014
& 2015 is 0.59, 0.63, 0.66, 0.73 & 0.96 respectfully .It is below the standard and it is not good for
company.
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Inventory Turnover Ratio
Inference:
In the above data it shows that the Inventory turnover ratio of company is in
2011,2012,2013,2014 & 2015 is 15.13,16.76,16.19,13.4 & 9.92 respectfully. Ratio shows the
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DEBTORS TURNOVER RATIO
Inferences:
In the above graph it shows that the Debtors turnover ratio of company is in
2011,2012,2013,2014 & 2015 is 13.62, 17.08, 11.73, 13.61 & 11.42 respectfully .It shows that the
performance of business is better and all the available resources are well utilized.
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INVESTMENT TURNOVER RATIO
Inferences:
In the above graph it shows that the investment turnover ratio of company is in 2011, 2012,
2013, 2014 & 2015 is 15.13, 16.76, 16.19, 13.4 & 9.92respectfully .It shows the better utilization of
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FIXED ASSETS TURNOVER
Inferences:
In the above graph it shows that the Fixed Assets turnover of company is in 2011, 2012,
2013, 2014 & 2015 is 0.76, 0.76, 0.64, 0.62 & 0.57 times respectfully .It shows the better utilization
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TOTAL ASSETS TURNOVER RATIO
Inferences:
In the above graph it shows that the Total Assets Turnover of company is in 2011, 2012,
2013, 2014 & 2015 is 0.51, 0.52, 0.49, 0.49 & 0.46 times respectfully. It shows that the collection
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DIVIDEND PAYOUT RATIO NET PROFIT
Interfaces:
In the above graph it shows that the Gross Profit ratio of company is in 2011, 2012, 2013,
2014 & 2015 is 34.42, 35.76, 37.57, 43.2 & 20.03 respectfully.
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DIVIDEND PAYOUT RATIO CASH PROFIT
Inferences:
In the above graph it shows that the Dividend payout ratio cash profit of company is in
2011, 2012, 2013, 2014 & 2015 is 27.03, 27.44, 29.6, 31.36 & 13.53 respectfully. It shows good sign,
which is in increasing trend, which shows that the company enjoys good credit in market.
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EARNING RETENTION RATIO
Inferences:
In the above graph it shows that the Earning Retention ratio of company is in 2011, 2012,
2013, 2014 & 2015 is 58.03, 62.99, 56.53, 56.85 & 79.3 respectfully .It is the increasing in trend the
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CASH EARNING RETENTION RATIO
Inferences:
In the above graph it shows that the Cash Earning Retention ratio of company is in 2011,
2012, 2013, 2014 & 2015 is 68.51, 71.82, 66.86, 68.67 & 86.14 respectfully .It is the increasing in
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FINDINGS
2. Positive working capital indicates that company has the ability of payments of short terms liabilities.
3. Working capital decreased because of increment in the current assets is more than increase in the
current liabilities. It indicates that company increasing their control over WC.
4. Company’s current assets were always more than the requirement it affect on profitability of the
company.
5. Current assets are more than current liabilities indicate that company used long term funds for short
term requirement, where long term funds are most costly then short term funds.
6. Current assets components, cash and bank are near about 42% of total CA, It shows that management
of cash is not up-to mark.
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RECOMMENDATIONS S UG G E S T I O N
Although NTPC, SINGRAULI has satisfied the ratios. The following are the suggestion being made
Company should increase its sales of all the production units with increase in the sales of the
Company should decrease the operating expenses to increase its operating profit.
Maintain the amount of current sales level and try to increase it.
Reduce the current assets and quick assets ratio to maintain the standard ratio.
Try to start those companies, which are closed due to non-availability of funds.
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Try to maintain the standard ratio in the financial ratios.
C O N C LU S I O N
If these ratios are properly followed the capital investment in the current assets is above the standard
ratio and the cash position of the company would substantially improve.
The Turnover Ratio give good sign of the success but in the debtor’s turnover ratio shows that
company provided more credit period of payment to its customer, which is not beneficial for it.
The Profitability Ratio all indicates good sign but increase in the operating and financial expenses of
the company, which is not good sign for the company future.
Return on Investment ratio is satisfactory, it indicate the overall performance of the company is good
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BIBLOGRAPHY
www.ntpc.com
www.ntpc.in
www.google.com
94
ANNEXURE
is still in-line with the IT Services industry's norm. Additionally, even though there are not enough liquid
assets to satisfy current obligations, Operating Profits are more than adequate to service the debt.
Accounts Receivable are among the industry's worst with 28.44 days worth of sales outstanding. This
implies that revenues are not being collected in an efficient manner. Last, inventories seem to be well
managed as the Inventory Processing Period is typical for the industry, at 21.29 days.
Sources Of Funds
Total Share Capital 8,245.46 8,245.46 8,245.46 8,245.46 8,245.46
Equity Share Capital 8,245.46 8,245.46 8,245.46 8,245.46 8,245.46
Share Application
0.00 0.00 0.00 0.00 0.00
Money
Preference Share
0.00 0.00 0.00 0.00 0.00
Capital
Reserves 73,411.89 77,569.86 72,142.05 65,045.71 59,646.79
Networth 81,657.35 85,815.32 80,387.51 73,291.17 67,892.25
Secured Loans 23,017.83 12,311.00 9,404.05 9,156.30 30,558.47
Unsecured Loans 55,514.50 50,094.75 43,849.61 36,751.97 9,177.21
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Total Debt 78,532.33 62,405.75 53,253.66 45,908.27 39,735.68
Total Liabilities 160,189.68 148,221.07 133,641.17 119,199.44 107,627.93
Mar '15 Mar '14 Mar '13 Mar '12 Mar '11
Application Of Funds
Gross Block 128,323.66 116,855.56 103,124.82 81,723.48 72,665.61
Less: Revaluation
0.00 0.00 0.00 0.00 0.00
Reserves
Less: Accum.
49,474.59 44,744.73 40,188.72 36,465.12 33,429.65
Depreciation
Net Block 78,849.07 72,110.83 62,936.10 45,258.36 39,235.96
Capital Work in
56,493.49 44,888.67 37,109.42 41,827.86 35,495.33
Progress
Investments 9,032.13 9,757.86 10,760.10 11,206.38 12,344.84
Inventories 7,453.00 5,373.35 4,057.19 3,702.85 3,639.12
Sundry Debtors 7,604.37 5,220.08 5,365.49 5,832.51 1,434.96
Cash and Bank Balance 12,878.81 15,311.37 16,867.70 16,146.11 16,185.26
Total Current Assets 27,936.18 25,904.80 26,290.38 25,681.47 21,259.34
Loans and Advances 24,773.85 26,892.02 24,020.46 16,863.73 17,403.41
Fixed Deposits 0.00 0.00 0.00 0.00 0.00
Total CA, Loans &
52,710.03 52,796.82 50,310.84 42,545.20 38,662.75
Advances
Deferred Credit 0.00 0.00 0.00 0.00 0.00
Current Liabilities 28,020.58 23,151.15 19,730.83 17,819.04 15,358.52
Provisions 8,874.46 8,181.96 7,744.46 3,819.32 2,752.43
Total CL & Provisions 36,895.04 31,333.11 27,475.29 21,638.36 18,110.95
Net Current Assets 15,814.99 21,463.71 22,835.55 20,906.84 20,551.80
Miscellaneous
0.00 0.00 0.00 0.00 0.00
Expenses
Total Assets 160,189.68 148,221.07 133,641.17 119,199.44 107,627.93
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FINANCIAL STATEMENTS FOR NTPC LTD.
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FINANCIAL STATEMENTS FOR NTPC LTD.
Income
Sales Turnover 73,915.69 72,018.93 65,673.93 62,052.23 55,062.65
Excise Duty 669.64 0.00 0.00 0.00 0.00
Net Sales 73,246.05 72,018.93 65,673.93 62,052.23 55,062.65
Other Income 2,116.32 2,688.89 4,785.69 2,778.42 2,344.65
Stock Adjustments 0.00 0.00 0.00 0.00 0.00
Total Income 75,362.37 74,707.82 70,459.62 64,830.65 57,407.30
Expenditure
Raw Materials 48.34 47.60 46.35 45.24 31.33
Power & Fuel Cost 49,500.86 46,510.29 41,661.34 42,171.65 35,796.37
Employee Cost 3,669.78 3,867.99 3,360.12 3,090.48 2,789.71
Other Manufacturing
0.00 0.00 0.00 0.00 0.00
Expenses
Selling and Admin Expenses 0.00 0.00 0.00 0.00 0.00
Miscellaneous Expenses 4,275.30 3,815.67 3,521.78 3,007.36 4,472.36
Preoperative Exp Capitalised 0.00 0.00 0.00 0.00 0.00
Total Expenses 57,494.28 54,241.55 48,589.59 48,314.73 43,089.77
Mar '15 Mar '14 Mar '13 Mar '12 Mar '11
98
Profit Before Tax 10,212.82 13,917.49 16,548.91 12,012.58 10,410.88
Extra-ordinary items 333.83 -12.84 29.72 313.58 1,638.72
PBT (Post Extra-ord Items) 10,546.65 13,904.65 16,578.63 12,326.16 12,049.60
Tax 255.79 2,929.91 3,959.24 3,102.43 2,947.01
Reported Net Profit 10,290.86 10,974.74 12,619.39 9,223.73 9,102.59
Total Value Addition 57,445.94 54,193.95 48,543.24 48,269.49 43,058.44
Preference Dividend 0.00 0.00 0.00 0.00 0.00
Equity Dividend 2,061.38 4,741.15 4,741.16 3,298.19 3,133.26
Corporate Dividend Tax 417.40 804.74 781.87 527.92 514.77
Per share data (annualised)
Shares in issue (lakhs) 82,454.64 82,454.64 82,454.64 82,454.64 82,454.64
Earning Per Share (Rs) 12.48 13.31 15.30 11.19 11.04
Equity Dividend (%) 25.00 57.50 57.50 40.00 38.00
Book Value (Rs) 99.03 104.08 97.49 88.89 82.34
99
Last 5 year FINANCIAL RATIO
Mar '15 Mar '14 Mar '13 Mar '12 Mar '11
100
Return on Assets Excluding
99.03 104.08 97.49 88.89 82.34
Revaluations
Return on Assets Including
99.03 104.08 97.49 88.89 82.34
Revaluations
Return on Long Term Funds(%) 8.08 11.01 12.56 11.51 10.99
Liquidity And Solvency Ratios
Current Ratio 1.43 1.69 1.83 1.97 2.13
Quick Ratio 1.23 1.51 1.68 1.80 1.93
Debt Equity Ratio 0.96 0.73 0.66 0.63 0.59
Long Term Debt Equity Ratio 0.96 0.73 0.66 0.63 0.59
Debt Coverage Ratios
Interest Cover 4.72 6.78 8.72 8.02 8.33
Total Debt to Owners Fund 0.96 0.73 0.66 0.63 0.59
Financial Charges Coverage Ratio 6.51 8.50 10.49 9.65 10.08
Financial Charges Coverage Ratio
6.54 7.28 9.32 8.02 9.16
Post Tax
Management Efficiency Ratios
Inventory Turnover Ratio 9.92 13.40 16.19 16.76 15.13
Debtors Turnover Ratio 11.42 13.61 11.73 17.08 13.62
Investments Turnover Ratio 9.92 13.40 16.19 16.76 15.13
Fixed Assets Turnover Ratio 0.57 0.62 0.64 0.76 0.76
Total Assets Turnover Ratio 0.46 0.49 0.49 0.52 0.51
Asset Turnover Ratio 0.47 0.51 0.52 0.55 0.53
101
Sales
Cash Flow Indicator Ratios
Dividend Payout Ratio Net Profit 20.03 43.20 37.57 35.75 34.42
Dividend Payout Ratio Cash Profit 13.55 31.36 29.60 27.44 27.03
Earning Retention Ratio 79.30 56.85 56.53 62.99 58.03
Cash Earning Retention Ratio 86.14 68.67 66.86 71.82 68.51
AdjustedCash Flow Times 5.28 4.12 3.72 3.92 3.99
Mar '15 Mar '14 Mar '13 Mar '12 Mar '11
102