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Working capital and ratio analysis: BHEL Hyderabad

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  1. Company profile.
    1. Mission.
    2. Vision.
    3. Value.
    4. Objectives.
    5. SWOT analysis.
  2. Product profile.
  3. Working capital theory.
    1. Reasons for using working capital.
    2. Issues in working capital.
    3. Risk return trade off.
    4. Cash management.
  4. Working capital tables.
    1. Profit and loss statement.
    2. Balance sheet.
    3. Operating result.
    4. Operating cycle.
    5. Working capital.
  5. Ratio analysis.
    1. Liquidity ratios.
    2. Activity ratios.
  6. Suggestions.
  7. Bibliography.

GROWTH : To ensure a steady growth by enhancing the competitive edge of BHEL in existing business, new areas and international operation so as to fulfill national expectations from BHEL.

PROFITABILITY: To provide a reasonable and adequate return on capital employed, primarily through improvements in operational efficiency, capacity utilization and productivity and generate adequate internal resources to finance the companies growth.

CUSTOMER FOCUS: To build a high degree of customer confidence by providing increased value for this money through international standards of product quality, performance and superior customer service.

PEOPLE ORIENTATION: To enable each employee to achieve his potential, improve his capabilities, perceive his role and responsibilities and participate and contribute positively to the growth and success of the company. To invest in human resources continuously and be alive to there needs.

OBJECTIVES OF BHEL: To achieve and maintain a leading position as supplies of Quality Equipment, Systems and Services to serve the National and International Markets in the field of energy. The areas of interest would be Conversion, Transmission and Utilization and Market Leadership.

[...] in Million) EARNINGS customers erection & services contract use divisions Total : OUTGOINGS divisions & Benefits Total : forward from last year LESS: to unit Reserve Reserve to Balance Sheet 5 YEAR WORKING CAPITAL OF BHEL HYDERABAD DIVISION (Rs. in Million) CURRENT ASSETS BALANCE CURRENT LIABILITIES CUSTOMERS RATIO ANALYSIS Ratio Analysis is the technique of interpretation of financial statements with the help of various meaningful ratios. Ratios do not add to any information that is already available, but they show the relationship between two items in a more meaningful way which helps us to draw certain conclusions. [...]

[...] Sales and demand conditions: The working capital needs of a firm are related to its sales. It is difficult to precisely determine the relationship between volume of sales and working capital needs. In practice current assets will have to be employed before growth takes place. It is therefore necessary to make advance planning of working capital for a growing firm on a continuous basis. Sales depend on demand conditions. Most firms experience seasonal and cyclical fluctuations in the demand for their products and services. [...]

[...] The three basic measures of a firm's overall liquidity are: Current ratio Acid-test ratio Net working capital Although net working capital is not a ratio it is frequently employed as a measure of a company's liquidity position. An enterprise should have sufficient net working capital in order to be able to meet the claim of the creditors and meeting the day-to-day needs of the business. The greater the amount of net working capital the greater the liquidity of the first sign of the financial problem for a firm. [...]

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