Professional Documents
Culture Documents
UTTARAKHAND TECHNICAL
UNIVERSITY, DEHRADUN
I have the pleasure in certifying that Ms Charu Kejriwal is a bonafide student of 4 th Semester
of Institute of management studies, Dehradun University Roll no………………
I certify that this is her original effort. It has not been copied from any other source. This
project has not been submitted in any other university for the purpose of award of any degree.
This project fulfills the requirement of the curriculum prescribed by UK. TECH. University,
for the said course. I recommend this project work for evaluation and consideration for the
award of degree to the student.
ACKNOWLEDGEMENT
Indebted to many people who helped throughout the project work and in the preparation of
this report. First of all I would like to offer my sincere gratitude to Mr. Sanjeev Sehgal,
project director and Deputy finance manager of BHARTI TELETECH LTD and IMS for
giving me the opportunity to undertake this project.
I would also wish to special thank my project guide Mr. Sandeep Jain, project guide in
BHARTI TELETECH LTD for his valuable guidance during the course of the project.
I owe special debt to Fellow professionals at BHARTI TELETECH LTD, Mr. Apoorv
Kumar, Mr. Amarender Jena and Mr. Rajeev Guha for having shared the knowledge for
providing me the constant support and valuable suggestions through the project.
My thanks are also to Dr. Pradeep Suri who has helped in organizing this project.
I am also thankful to all my friends for providing me the much needed the moral support
during the course of this project.
The present study was undertaken as a part of the organizational training (1) Component of
the MBA course of masters in business studies in financial management.
The object of this training was to develop information search skills into students. This enables
them to gather information on a given subject in a systematic and consciously planned
manner.
The study was done as the project for BEETEL Ltd, New Delhi. BEETEL is engaged in
production of range of basic and cordless phones and is also National distributor of Motorola
handsets in India.
The study was carried out during the months of February-March’07. The objective was to
study the concept of Working Capital Management in detail in BEETEL and make
suggestions about the study.
CONTENTS
Certificate
Acknowledgement
Preface
1. Executive summary
2. Introduction
3. Company Profile
- BHARTI
- BEETEL
4. Review of Literature
- Components of Working Capital
- Working Capital Cycle
- Financing Working Capital
- Financial Ratios
5. Objective of the study
6. Research Methodology
7. Findings & Analysis in BHARTI TELETECH LTD.
- Evaluation of various components of Working Capital
- Working Capital Ratios
- Turnover Ratios
- Working Capital and Capital Employed
- Profit After Sales as a % to sales
India in a large and growing economy with rapidly expanding financial service sector.
Managing working capital is a matter of balance. A company must have sufficient cash on
hand to meet its immediate needs while ensuring that idle cash is invested to the
organization’s best possible advantage. To avoid tipping the scale, it is necessary to have clear
and accurate reports on each of the components of working capital and awareness of the
potential impact of outside influences.
In the analysis for Bharti Teletech Limited, a Bharti Group Company it was found that the
working capital has increased which could be mainly due to increased sales. The Gross
Operating Cycle declined significantly but the reduction was nullified due to the reduction in
inventory conversion period. This is why we see that Net operating Cycle for last two years is
almost identical. The main areas of emphasis were work in progress conversion period and
creditors conversion period. Debtors conversion period reduced but work in progress and
creditors conversion period increased. Few suggestions that are recommended for better
management of working capital are reducing inter-corporate deposits and loans, reducing
finished goods inventory, increment in creditors payment period etc.
The company uses Operating Cycle Method to calculate its Working Capital method.
Thus, good management of working capital is part of good financial management. Effective
use of working capital will contribute to the operational efficiency of a company, optimum
use will help to generate maximum returns.
INTRODUCTION
WORKING CAPTAL MANAGEMENT
Every business needs investment to procure fixed assets, which remain in use for a long
period. Money invested in these assets is called ‘Long term Funds’ or ‘Fixed Capital’.
Business also needs funds for short-term purposes to finance current operations. Investment in
short term assets like cash, inventories, debtors etc., is called ‘Short-term Funds’ or ‘Working
Capital’.
The ‘Working Capital’ can be categorized, as funds needed for carrying out day-to-day
operations of the business smoothly.
The management of the working capital is equally important as the management of long-term
financial investment. The goal of Working capital management is to ensure that the firm is
able to continue its operations and that it has sufficient cash flow to satisfy both maturing
short-term debt and upcoming operational expenses.
Every running business needs working capital. Even a business which is fully equipped with
all types of fixed assets required, is bound to collapse without
(i) adequate supply of raw materials for processing;
(ii)cash to pay for wages, power and other costs;
(iii)creating a stock of finished goods to feed the market demand regularly; and,
(iv)the ability to grant credit to its customers.
All these require working capital. Working capital is thus like the lifeblood of a business. The
business will not be able to carry on day-to-day activities without the availability of adequate
working capital.
Company Profile
-
BHARTI
BHARTI ENTERPRISE
Bharti Enterprises has successfully focused its strategy on telecom while straddling diverse
fields of business. From the creation of 'Airtel', one of India's finest brands, to becoming the
largest manufacturer and exporter of world class telecom terminals under its 'Beetel' brand,
Bharti has created a significant position for itself in the global telecommunications
sector. Bharti Airtel Limited is today acknowledged as one of India's finest companies, and its
flagship brand 'Airtel', has over 40 million customers across the length and breadth of India.
While a joint venture with TeleTech Inc., USA marked Bharti’s successful foray into the
Customer Management Services business, Bharti Enterprises’ dynamic diversification has
continued with the company venturing into telecom software development. Recently, Bharti
has successfully launched an international venture with EL Rothschild Group owned ELRO
Holdings India Ltd., to export fresh Agri products exclusively to markets in Europe and USA.
Bharti also has a joint venture - ‘Bharti AXA Life Insurance Company Ltd.’ - with AXA,
world leader in financial protection and wealth management. Bharti has recently forayed into
retail business under a company called Bharti Retail Pvt. Ltd. It also has a MoU with Wal-
Mart for the cash & carry business.
Group Structure
Highlights
PROFILE
Today Bharti Teletech has two ISO 9000 certified plants with an annual capacity
of 5 million units p.a.
4 BTTL is the first Indian company to manufacture 20 million phones. Today, one out of
every three phones in India is a Beetel. With rapid growth over the years, Bharti Teletech
today is the largest manufacturer of phones in the Globe outside China. Bharti Teletech
commands a lion's share of over 90%, in the extremely competitive BSNL/ MTNL
segment.
5 Bharti became the first company to export phones to Sprint Inc. USA - recognition of
our world class quality. Today, BTTL is present in 30 countries across 5 continents
Exports are a huge thrust area for Bharti. In 1991, Bharti became the first company to
export phones to Sprint Inc. USA – recognition of our world class quality. The export
operations have been highly successful over the years. In 2003-04, exports crossed the
half million mark - a quantum jump since we started. Today, we are present in 30
countries across 5 continents despite intense competition from the strongest brands in the
world. Brand building initiatives have also taken fruit in the global arena. The Beetel
brand is present in Vietnam, Iran, Chile, Oman, Bangladesh, Mauritius and Sri Lanka.
This list continues to grow with each passing month and it is a matter of time before
Beetel becomes a truly global brand.
Bharti Teletech Team is upbeat to create History by crossing a Sales Turnover beyond 2000 cores in FY
2006-07 against the last year's 543 crores.
ACHIEVEMENTS
Trend has won GOLDEN PEACOCK AWARD as the only phone with SIM
card reader. The model Millennium Clip Max (A high end Caller ID and Two
way speaker phone) recently launched in the market WON a GOLDEN
PEACOCK AWARD for INNOVATIVE DESIGN.
Beetel has a range of over 35 models across basic, feature and cordless segments
and continues to add a new model every month. With a current market share of
over 40%, Beetel is the first choice of the Indian consumer. In the growing
private service provider segment, Bharti Teletech commands a lion’s share of
over 90%. In the extremely competitive BSNL/ MTNL segment, we have crossed
a market share of 50%. BTTL has successfully met the challenge of providing
quality products at competitive prices.
Following are the new products recently introduced in the open market:-
Following are the new products recently introduced for the DOT market as per
new TEC specifications (GTEL-02/04); all these models are GSM interference
free.
• IRIS 2K3
• GARNET
• PERIDOT (A CLI PHONE)
Beside this company has maintained its leadership in all chosen markets like PSP, DOT,
OPEN MARKET & EXPORT (exporting to 30 countries across five continents world
wide.
DOMESTIC
Beetel has also pioneered SMS phones, the first in India. With this landmark
development, India now has the pride of joining the select set of countries that
offer SMS on and from fixed-line telephony service platform worldwide. For the
consumer in India, Beetel is truly ringing in the future. Indian PTT has accepted
Beetel instruments whole heartedly and the brand has a 60% share in this market.
The private service providers have shown great faith in Beetel's products and
appreciate the company's ability to customize the phones to their specifications.
Beetel has garnered over 95% of this market.
Beetel has remained the No. 1 brand in the Indian retail market, with a market
share of over 50 %.
The company's marketing network encompasses over 580 distributors and over
30,000 dealers, taking Beetel phones to every corner of one of the biggest
markets in the world.
INTERNATIONAL
The company exemplifies a marketing success story that writes new chapters of
achievement with each passing year.
VISION
To be a leader in Telecom and allied products
in chosen global market.
VALUES
Customer
People
Learning
We will continuously improve our products and
services-innovatively and expeditiously
QUALITY POLICY
At Bharti Teletech quality has always been among the top priority .
QUALITY OBJECTIVES
QUALITY CULTURE
QUALITY ACHIEVEMENTS
Awards
BEETEL’S GROWTH
Beetel has established itself as a leader in "Modems". Beetel has also entered the "Set
Top Box" market and is on foray in this segment.
Bharti Teletech has joined hands with world leaders in their categories for manufacturing
and Distribution of their products through its Channel.
In addition to being manufactures and Distributors of "GE Phones" in India and select
SAARC countries, today BTTL are National Distributors for-
When considering these techniques and strategies, companies need to recognize that
each department has a unique mix of working capital components. The emphasis that
needs to be placed on each component varies according to the companies. For
example, some companies have significant inventory levels; others have little if any
inventory.
Furthermore, working capital management is not an end in itself. It is an integral part
of the company’s overall management. The needs of efficient working capital
management must be considered in relation to other aspects of the company’s
financial and non-financial performance.
COMPONENTS
The term working capital refers to the amount of capital which is readily available to an
organization. That is, working capital is the difference between resources in cash or
readily convertible into cash (Current Assets) and organizational commitments for which
cash will soon be required (Current Liabilities).
Current Assets are resources which are in cash or will soon be converted into cash in "the
ordinary course of business".
Current Liabilities are commitments which will soon require cash settlement in "the
ordinary course of business".
Current Assets
Current Liabilities
• Bank Overdraft
• Creditors and Payables
• Other Short Term Liabilities
Component of Working Basis of Valuation
Capital
i. Stock of raw material Purchase cost of raw
Materials
Cash flows in a cycle into, around and out of a business. It is the business's life blood and
every manager's primary task is to help keep it flowing and to use the cash flow to
generate profits. If a business is operating profitably, then it should, in theory, generate
cash surpluses. If it doesn't generate surpluses, the business will eventually run out of
cash and expire.
The faster a business expands the more cash it will need for working capital and
investment. The cheapest and best sources of cash exist as working capital right within
business. Good management of working capital will generate cash will help improve
profits and reduce risks. The cost of providing credit to customers and holding stocks can
represent a substantial proportion of a firm's total profits.
The usage of fixed assets result in value additions, the raw materials get converted into
work in process and then into finished goods. When sold on credit, the finished goods
assume the form of debtors who give the business cash on due date. Thus ‘cash’ assumes
its original form again at the end of one such working capital cycle but in the course it
passes through various other forms of current assets too. This is how various components
of current assets keep on changing their forms due to value addition. As a result, they
rotate and business operations continue. Thus, the working capital cycle involves rotation
of various constituents of the working capital. While managing the working capital, two
characteristics of current assets should be kept in mind viz.
(i) short life span, and
(ii) Swift transformation into other form of current asset.
Each constituent of current asset has comparatively very short life span. Investment
remains in a particular form of current asset for a short period. The life span of current
assets depends upon the time required in the activities of procurement; production, sales
and collection and degree of synchronization among them. A very short life span of
current assets results into swift transformation into other form of current assets for a
running business. These characteristics have certain implications:
i Decision regarding management of the working capital has to be taken
frequently and on a repeat basis.
ii. The various components of the working capital are closely related and
mismanagement of any one
component adversely affects the other components too.
iii. The difference between the present value and the book value of profit is not
significant.
If money moves faster around the cycle (e.g. collect monies due from debtors more
quickly) or the amount of money tied up is reduced (e.g. reduce inventory levels relative
to sales), the business will generate more cash or it will need to borrow less money to
fund working capital. As a consequence, the cost of bank interest can be reduced or
additional free money will be available to support additional sales growth or investment.
Similarly, if improved terms with suppliers are negotiated e.g. longer credit or an
increased credit limit, then free finance to help fund future sales can be effectively
created.
Thus….
Inventory Management
Inventory includes all types of stocks. For effective working capital management,
inventory needs to be managed effectively. The level of inventory should be such that the
total cost of ordering and holding inventory is the least. Simultaneously, stock out costs
should be minimized. Business, therefore, should fix the minimum safety stock level, re-
order level and ordering quantity so that the inventory cost is reduced and its
management becomes efficient.
Average stock-holding periods will be influenced by the nature of the business. For
example, a fresh vegetable shop might turn over its entire stock every few days while a
motor factor would be much slower as it may carry a wide range of rarely-used spare
parts in case somebody needs them.
many large manufacturers operate on a just-in-time (JIT) basis whereby all the
components to be assembled on a particular today, arrive at the factory early that
morning, no earlier - no later. This helps to minimize manufacturing costs as JIT stocks
take up little space, minimize stock-holding and virtually eliminate the risks of obsolete
or damaged stock. Because JIT manufacturers hold stock for a very short time, they are
able to conserve substantial cash. JIT is a good model to strive for as it embraces all the
principles of prudent stock management.
Factors to be considered when determining optimum stock levels include:
Debtors Management
The objective of any management policy pertaining to debtors would be to ensure that the
benefits arising due to the debtors are more than the cost incurred for debtors and the gap
between benefits and cost increases profits. An effective control of receivables helps a
great deal in property managing it. Each business should, therefore, try to find out
average credit extended to its client using the below given formula
Creditors Management
Creditors are a vital part of effective cash management and should be managed carefully
to enhance the cash position. Purchasing initiates cash outflows and an over-zealous
purchasing function can create liquidity problems.
Cash Management
Cash is the most liquid current asset. It is of vital importance to the daily operations of
business. While the proportion of assets held in the form of cash is very small, its
efficient management is crucial to the solvency of the business. Therefore, planning cash
and controlling its use are very important tasks.
Cash budgeting is a useful device for this purpose.
Introduction
Financial ratio analysis calculates and compares various ratios of amounts and balances
taken from the financial statements.
Three key points need to be taken into account when analyzing financial ratios:
Current Ratio
The working capital ratio (or current ratio) attempts to measure the level of liquidity, that
is, the level of safety provided by the excess of current assets over current liabilities.
Quick Ratio
This is another measure of liquidity. It looks at the number of days that liquid assets (for
example, inventory) could service daily operating expenses (including salaries).
This ratio applies only to finished goods. It indicates the speed with which inventory is
sold-or, to look at it from the other angle, how long inventory items remain on the
shelves. It can be used for the inventory balance as a whole, for classes of inventory, or
for individual inventory items.
Debtor Turnover Ratio
There is a close relationship between debtors and credit sales to third parties (that is, sales
other than to the Crown). If sales increase, debtors will increase, and conversely, if sales
decrease debtors will decrease.
The debtor ratio does not solve the collection problem, but it acts as an indicator that an
adverse trend is developing. Remedial action can then be instigated.
It expresses the relationship between credit purchases and the liability to creditors. It can
be stated as the number of days that credit purchases are carried on the books.
Thus…
Se. Ratio Formulae Result Interpretation
No.
Stock Average Stock = x days On average, the value of the
Turnover * 365/ entire stock is turned every x
(in days) Cost of Goods days. There may be a need to
Sold break this down into product
groups for effective stock
management.
Obsolete stock, slow moving
(i) lines will extend overall stock
turnover days.
Faster production, fewer product
lines, just in time ordering will
reduce average days.
To study the method which BEETEL is using to ascertain its working capital
requirement.
To learn about the sources from which BEETEL is procuring funds to fulfill its
To study whether the company is running effectively with as little money tied up
operates.
RESEARCH
METHEDOLOGY
METHODOLOGY
RESEARCH
The research work is restricted only to the BEETEL DISTRIBUTION SYSTEM. The
study is based on the outcomes of personal interviews and documentary observation. But
the extreme care has been taken to involve the constructive suggestion from the
executives. The success of research basically depends upon the method, which is adopted
to solve the research problem i.e.
After the problem formulation the objectives should be clear through which specific type
of information can be collected. The objective of this is to study about the management of
Working Capital for day to day business transactions.
The third step includes the collection of data, which is from the source i.e. primary
secondary data. After the collection of data, it should be organized and analyzed to check
whether the objectives are fulfilled or not.
After analyzing the data investigation of research had worked out with the help of
following steps:
• Research design
• Tools & techniques
RESEARCH DESIGN:
COLLECTION OF DATA
Primary data: are those that are collected for the first time by the investigator and the
primary data used ad collected for this study are:-
FINDINGS
&
ANALYSIS
ASSUMPTIONS
• All calculations have been done taking 365 days in a year.
• All sales are credit sales.
• All purchases are credit purchases.
• For all the years, opening & closing figures have been taken to calculate average
debtors, creditors, etc.
• Wages and salaries are paid at a lag of 1month.
(Rs ‘000)
Inventories -
217.67%
Debtors -
51.60%
Cash & Bank -
21.45%
Loans & Advances -
24.36%
Total Current Assets -
315.20%
Liabilities -
238.47%
Provisions - 6.95%
Total Current Liabilities -
245.42%
The Current Ratio is decreasing over the period i.e for 2005 it was 5.48:1, it went down
to 1.82:1 in 2006 and has now come down to 1.28:1 in 2007 which is very close to the
ideal ratio of 1.33:1. This indicates that there is a perfect balance between current assets
& current liabilities that the company owns. The major reasons for improvement in
current ratio are:
(i) The total % of debtors in the Current assets of 2007 has decreased to 16.37% from
17.96% in 2005.
(ii) Moreover, the percentage of money blocked in cash & bank balance has got
reduced from 14.07% in 2006 to 6.80% in 2007.
(iii) The liabilities in 2007 have increased as compared to liabilities in 2006 & 2005.
This means that the company is now trading at creditors worth.
Working Capital Ratios
5 5.48
4
3 4.04
2 1.82
1 1.28
The quick ratio showed a drastic improvement in 2006 as compared to 2005, but it went
below the ideal quick ratio of 1:1 and in 2007 it went further down to 0.39:1. The major
reasons for changes in Quick ratio are:
(i) The company is blocking huge amount of money in maintaining their inventories i.e
69% of their total investment in current assets.
(ii) Provisions have decreased from 4.9% in 2006 to 2.8% in 2007.
10
9 9.14
8
7 6.87
6
Times
5
4 4.85
3
2
1
0
2004 2005 2006 2007 2008
Year
Stock Turnover Ratio had changed drastically from 9.14 times in 2005 to 4.85 times in
2006, but still it was way below the ideal of 6 to 7 times, which it achieved in 2007 by
coming at 6.87 times.
The major reason for improvement in Stock Turnover Ratio is that the sales have
increased because of the trading business as the company has entered in the fields of
MOTOROLA, XBOX, GE, BLACKBERRY.
30
28.34
25
20
Times
15
13.82
10
11.15
0
2004 2005 2006 2007 2008
Year
The Debtors Turnover Ratio has increased drastically from 13.82 times in 2006 to 28.34
times in 2007.
The major reason for change in Debtors Turnover Ratio is that the company has
entered into the trading business of MOTOROLA products and accessories. As the
company is purchasing the products from the MOTOROLA company in cash and
distributing the same, with the help of their TD’s, by providing a credit of 30 days.
Creditors Turnover Ratio
8 7.59
Times
6 6.83
0
2004 2005 2006 2007 2008
Year
The creditors Turnover Ratio has decreased drastically from 11.4 times in 2005 to 6.83
times in 2006. This shows that the company has been paying off its debts earlier than
before. The ratio has increased to 7.59 times in 2007.
The major reason for change in Creditors Turnover Ratio is that the MOTOROLA
company is not providing any kind o credit to BEETEL for distributing the MOTOROLA
handsets.
Working Capital as a % of Capital Employed
70.00%
69.78%
68.00%
Percent
66.00%
64.00%
63.98%
62.00%
60.00%
58.96%
58.00%
2004 2005 2006 2007 2008
Year
PAT as a % to Sales
8.00%
7.00% 6.89%
6.00% 6.42%
5.00%
Percent
4.00%
3.00%
2.00%
1.00% 1.19%
0.00%
2004 2005 2006 2007 2008
Year
Profit After Tax as a % to sales increased from 6.42% in 2005 to 6.89% in 2006. But it
showed a drastic fall in 2007 and came down to 1.19%.
The major reason for change in PAT as % of sales is that the sales of basic and
cordless sets, manufactured by BEETEL has not increased but the balance sheet of the
company shows an increment of 96.45% on expenditure over raw materials.
LOAN FUNDS
Secured Loan 3 560,099,122
Unsecured Loan 4 8,350,486 568,449,608
APPLICATION OF FUNDS
FIXED ASSETS 5
Gross Block 513,406,244
Less : Depreciation/Amortisation 231,900,454
Net Block 281,505,790
Capital Work in Process 140,591,016
INVESTMENTS 6 245,221,290
PARTICULARS Sch- As at
dule 31.03.2007 (Rs.)
INCOME
Gross Sales 24,572,389,810
Less :Excise Duty 238,438,125
Net Sales 24,333,951,685
Other Income 10 166,738,699
24,500,690,384
EXPENDITURE
Cost of Materials 11 22,719,069,689
Manufacturing Expenses 12 34,601,721
Personnel,Administration & Selling Expenses 13 1,189,899,894
23,943,571,304
PROFIT BEFORE FINANCIAL EXPS,
DEPRECIATION & AMORTISATION 557,119,079
Financial Expenses 14 68,326,817
PROFIT BEFORE DEPRECIATION &
AMORTISATION 488,792,262
Less : Depreciation/Amortisation 38,897,795
APPROPRIATIONS 1,115,770,702
Proposed Dividend -
Provision for Dividend Tax -
Dividend Tax for Earlier Years -
Transfer to General Reserve -
Profit Carried Forward 1,115,770,702
1,115,770,702
PARTICULARS Sch- As at
dule 31.03.2007 (Rs.)
SHARE CAPITAL 1
Authorised
55,00,000 Equity Shares (Previous Year 55,00,000) of Rs. 10
each 55,000,000
GENERAL RESERVE
97,971,85
As per last Balance Sheet 9
Add: Transferred from Profit & Loss Account - 97,971,859
1,746,223,282
SECURED LOANS 3
From Banks #
Cash Credit & Foreign Currency Working Capital Loan 560,099,122
UNSECURED LOANS 4
Short Term Loans and Advances
7,250,00
From Holding Company 0
1,100,48
Interest accured and due thereon 6 8,350,486
Footnote: # Secured against the hypothecation of Stocks & Bookdebts of the company and First
charge on the all the Fixed Assets of the company except Land and Building at Gurgaon & the
related fixed assets.
BHARTI TELETECH LIMITED
SCHEDULES TO ACCOUNTS
PARTICULARS Sch- As at
dule 31.03.2007 (Rs.)
INVESTMENTS AT COST 6
LONG TERM INVESTMENTS
In Shares of companies (Fully Paid Up)
TRADE UNQUOTED
b) In Other Company
Nil Equity Shares (Previous Year 16,528,404 Equity Shares) of
Teletech
Services (India) Limited of Rs. 10/- each -
22,820,693
CURRENT INVESTMENTS
(Refer Note No. 7 of Schedule 16 &Note No. 10 of Schedule
17)
245,221,29
0
SUNDRY DEBTORS
Debts outstanding for a period exceeding Six Months :
3,258,95
Considered Good 0
25,610,83
Considered Doubtful 1
28,869,78
1
Less : Provision for Doubtful Debts ,610,831
3,258,95
0
Others Debts :
1,217,188,44
Considered Good 0
12,684,85
Considered Doubtful 8
1,229,873,29
8
12,684,85
Less : Provision for Doubtful Debts 8 1,220,447,390
Security Deposits:
10,845,59
Considered Good 9
180,00
Considered Doubtful 0
11,025,59
9
180,00
Less Provision For Doubtful Deposits 0 10,845,599
PROVISIONS
Proposed Dividend -
Dividend Tax -
Retirement Benefits 24,477,266
Warranty 31,018,204
Sales Tax/Excise /Service Tax 23,441,527
Sales Incentive 4,615,680
Others 46,457,437
Provision for Income Tax* 34,398,820 164,408,934
* Net of Advance Tax Rs. 388,084 thousand (Previous Year
ended Rs Nil)
MISCELLANEOUS EXPENDITURE 9
(To the extent Not written off or adjusted)
Voluntary Seperation Scheme
Opening Balance 3,159,858
Less : Charged during the year 2,673,129 486,729
b) OTHER INCOME 10
Interest (Gross) 35,672,671
(Tax deducted at source Rs. 7,994 thousand (Previous Year
6,293 thousand)
Profit on Sale of Investments:
Other than Trade - Current Investments 46,861,764
Miscellaneous Income 23,125,245
(Tax deducted at source Rs. 73 thousand (Previous Year 238
thousand)
Exchange Rate Difference 4,874,040
Dividend Received (Gross) (Current Investment - Other than
Trade) 6,798,910
Liabilities/Provisions Written Back 10,789,530
Rent Received 38,616,540
(Tax deducted at source Rs. 8,666 thousand (Previous Year
5,308 thousand)) 166,738,699
PARTICULARS Sch- As at
dule 31.03.2007 (Rs.)
COST OF MATERIALS 11
Raw Material Consumed
Opening Stock 44,687,988
Add. Purchases 1,228,695,852
1,273,383,840
Less Closing Stock 63,032,800 1,210,351,040
Trading
Purchase of Trading Goods 25,170,393,280
Decrease/(Increase) in Work-in-progress
and Finished goods
Opening Stock
Work-in-Progress 12,121,848
Finished Goods 1,394,350,632
1,406,472,480
Manufacturing Expenses 12
Power & Fuel 13,597,049
Consumption of Stores and Spares 5,468,171
Electric Repairs 354,250
Testing Fees 254,663
Job Charges Paid 12,090,996
Machinery Repair 2,836,592 34,601,721
Personnel Expenses
Salaries, Wages & Bonus 245,210,028
Contribution to Provident & Other Funds 22,002,529
Workman & Staff Welfare Expenses 9,882,792
Recruitment Expenses 12,623,766 289,719,115
Administration Expenses
Rent 12,149,283
Rates & Taxes 14,106,609
Insurance Charges 30,118,281
Travelling & Conveyance 65,975,682
Postage,Telephone & Telex 19,313,585
Repair & Maintenance:
a) Building 1,802,664
b) Others 17,709,267
Amount/Debtors Written Off 30,159,901
Miscellaneous Expenses 39,319,917
Auditors Remuneration 3,131,425
Loss on Sale of Fixed Assets # 1,271,828
Loss on Sale/Redemption of Investments (Current- other
than Trade) 8,549,643
Diminution in Value of Investment (Current- Other than
Trade) 8,669,949
Provision for Obsolete Stock -
Electricity & Water Charges 4,149,601
Board Meeting Fees & Expenses 306,702
Provision for Doubtful Debts, Advances & Claims ## 72,936,740
Research & Development 2,307,277
Exchange Rate Fluctuations - 331,978,354
Selling Expenses
Freight & Cartage 114,989,395
Advertisement & Publicity 210,024,534
Business Promotion 27,720,508
Rebate & Discount 120,660,004
Commission 5,461,866
Service Charges C & F 12,897,251
Warranty Cost 45,267,244
Spares Consumed 31,181,623 568,202,424
1,189,899,894
Less: Share of Centrailsed Expenses to Subsidiary
Company -
Less: Share of Centrailsed Expenses to Associate
Companies -
-
1,189,899,894
Footnote: # Net of Profit on Sale of Fixed Assets Rs. 329 thousand (previous year 172
thousand).
## Net of Provision of Doubtful Debts & Advances Written Back amounting to Rs.
327 thousand (previous year Rs. 1,623 thousand).
BHARTI TELETECH LIMITED
SCHEDULE TO ACCOUNTS
PARTICULARS Sch- As at
dule 31.03.2007 (Rs.)
FINANCIAL EXPENSES 14
Interest :
- On Fixed Loan 1,562,050
- Others 42,524,081 44,086,131
Other Finance Charges 24,240,686
68,326,817
CASE
STUDY
50
40 C r e d it o r s C o n v e r s io n
P e r io d
30 N e t O p e r a t in g C y c le
20
C a s h C o n v e r s io n C y c le
10
0
2005 2006 2007
Year
Additional information is as follows:
7. Time taken by BEETEL for depositing the 0, max 1,1,1 0, max 1,1,1 0, max 1,1,1
cheques received from debtors in the
bank
8. Credit period allowed by the suppliers for 19 days 16 days 14 days
the material purchased
9. Cash and trade discounts given to the customers and received by the customers
depends upon the amount of the customers.
10. The company has adopted decentralization method for receiving cheques from
its debtors.
11. The company shifted from assembly line to manufacturing some components in
the year 2005-2006 due to which the number of processes increased from 3 to 8.
Analysis of the above situation and the reasons for the
same
SUGGESTIONS
&
RECOMMENDATIONS
Recommendations
The management of the working capital is equally important as the management of long-
term financial investment. The goal of Working capital management is to ensure that the
firm is able to continue its operations and that it has sufficient cash flow to satisfy both
maturing short-term debt and upcoming operational expenses.
The various possible steps that BEETEL may take to improve its working capital
management are as follows:
• The company should look indigenous suppliers for its raw material and spare
parts requirements and reduce its lead time.
• The company is increasing its installed capacity and its production too each
year but the increase in production is not in proportion to installed capacity.
Thus, the two must be matched.
• Reduction in loans and inter-corporate deposits and utilizing the money to pay
off debts and loans taken by the company.
• Given the working loan of Rs. 56,84,50,000 and interest thereon is Rs.
4,40,80,000 in 2007 which is almost 7.75%. So, the company might consider
some other sources of cheaper loans.
• The company can maintain separate books of accounts for their manufacturing
and trading businesses for more clarity and transparency in operations.
Bibliography
I.M. Pandey, Financial Management, 8th Edition
www.bharti-teletech.com
www.treasury.govt.nz/publicsector/workingcapital/further.asp
www.planware.org/workingcapital.htm
www.wikipedia.org