SUMMER TRAINING REPORT

ON

FOR BHEL, HARDWAR

Submitted in partial fulfillment for the requirement for award of the degree of

Master of Business Administration (2008-10)

Submitted To: Mrs. Santosh Anand Accounts Officer HEEP, Hardwar.

Submitted By: Charu Lamba MBA- III Sem. MMIM, MULLANA

MAHARISHI MARKANDESHWAR UNIVERSITY MULLANA CONTENTS

BHEL Profile Historical Profile

Introduction Of HEEP

Key Competitors Major Milestone

Total Quality Focus Policy And Strategy

Excellence Initiative Customer Focus Overview Of Finance Function

Financial Analysis And EVA An Introduction Financial Analysis of HEEP.

Liquidity Ratios Turnover Ratios Leverage Ratios Profitability Ratios Other Ratios

Limitation of Study.

SWOT Analysis Conclusion And Suggestion

ACKNOWLEDGEMENT
I express my sincere thanks to the Management of HEEP(Heavy Electrical Equipment Plant) of BHEL, Ranipur, Haridwar Unit for giving me an opportunity to gain exposure on matter related to Project under the esteem guidance of Mrs. Santosh Anand (Accounts Officer). I hereby take this opportunity to put on records my sincere thanks to Mr. Mitra under the light of whose able guidance I could complete this project in an effective and successful manner. I am also indebted to Mr. Subodh Gupta (Finance Manager) and Mr.Vivek Goyal (Sr.Accounts officer Books&budget), for their valuable information and inputs, which added dimensions and meaning to my project. I am also thankful to the rest of the staff of the SALES section and BOOK section for their valuable suggestion and cooperation to achieve the task.

With sincere thanks Charu Lamba MBA- III Sem. MMIM, MUlLANA

DECLARATION
I hereby declare that the study entitled Ratio Analysis in the context of H.E.E.P. BHEL being submitted by me in the partial fulfillment of the requirement for the award of Master of Business Administration by DMS; Ajmer is a record of my own work. The study was conducted at finance department, H.E.E.P. BHEL. The matter embodied in this project report has not been submitted to any other university or institution for the award of degree.

(CHARU LAMBA)

PREFACE
As a part of my MBA programme, I was asked to undergo 42 working days summer training in any organization, to give the exposure to practical management and to get familiar with the various activities taking place in the organization. I got an opportunity to undergo my summer training in the reputed organization BHEL Hardwar where I was allowed to work on the project titled Financial Analysis at H.E.E.P. Hardwar BHEL. In this project, an attempt has been made to study the performance of BHEL Hardwar. The salient feature of this report is the comprehensive coverage and latest information about the topic of the study. Financial data of last 7 years have been taken.

B.H.E.L. A CORPORATE GIANT

Established in the late 50's BHARAT HEAVY ELECTRICALS LIMITED (BHEL) is a name which is recognized across the industrial world. It is one of the largest engineering and manufacturing enterprises in INDIA and is one of the leading international companies in the power field. BHEL offers a wide spectrum of products and services for core sectors like power transmission, industrial transportation, oil and gas, telecommunication etc. Besides supply of non-conventional energy systems. It has also embarked into other areas including defence and civil aviation. A dynamic 63000 strong team embodies the BHEL philosophy excellence through continuous striving for state of the art technology. With corporate headquarters in NEW DELHI, fourteen manufacturing units, a wide spread regional services network and projects sites all over India and even abroad, BHEL is India's industrial ambassador to the world with export presence in more than 50 countries. BHEL's range of services extent from project feasibility studies to after sales services, successfully meeting diverse needs through turnkey capability. BHEL has had a consistent track record of growth, performance and profitability. The World Bank in its report on the Indian Public Sectors, has described BHEL as one of the most efficient enterprises in the industrial sector, at par with international standards of efficiency". BHEL has acquired ISO 9000 certificate for most of its operations and has taken up Total Quality Management (TQM). All the major units/divisions of BHEL have been upgraded to the latest ISO-9001: 2000 version quality standard certification for quality management. All the major units/divisions of BHEL have been awarded ISO-14001 certification for environmental management systems and OHSAS-18001 certification for occupational health and safety management systems. BHEL occupies an all-important niche as evident by its ranking by CII amongst top eight PSUs based on financial performance. Recently in survey conducted by business India, BHEL has been rated as seventh Best Employer in India.

International Business:BHEL has, over the years, established its references in over 60 countries of the world. These references encompass almost the entire range of BHEL products and services, covering Thermal, Hydro and Gas based turnkey power projects, substation projects, and rehabilitation projects; besides a wide variety of products like: Transformers, Compressors, Valves and Oil field equipment, Electrostatic Precipitators, Insulators, Heat Exchangers, Switchgears, Castings and Forgings etc. Some of the major successes achieved by BHEL have been in Gas-based power projects in Oman, Libya, Malaysia, Saudi Arabia, Iraq, Bangladesh, Sri Lanka, China, Kazakhstan; Thermal Power Projects in Cyprus, Malta, Libya, Egypt, Indonesia, Thailand, Malaysia; Hydro power plants in New Zealand, Malaysia, Azerbaijan, Bhutan, Nepal, Taiwan and Substation projects & equipment in various countries. Execution of these overseas projects has also provided BHEL the experience of working with worldrenowned Consulting Organizations and Inspection Agencies. The Company has been successful in meeting demanding requirements International markets, in terms of complexity of the works as well as technological, quality and other requirements viz. HSE requirement, financing package, associated O&M services to name a few. BHEL has proved its capability to undertake projects on fast-track basis. BHEL has also established its versatility to successfully meet the other varying needs of various sectors, be it captive power, utility power generation or for the oil flexibility to exhibited adaptability by manufacturing and supplying intermediate products.

B.H.E.L. IN INDIA
# REGIONAL OFFICES (POWER SECTORS) *********************************** 1. 2. 3. 4. NEW DELHI (NORTHERN REGION) CALCUTTA (EASTERN REGION) NAGPUR (WESTERN REGION) CHENNAI (SOUTHERN REGION)

# BUSSINESS OFFICES ******************* 1. 2. 3. 4. 5. 6. 7. 8. 9.

10. 11. 12. 13.

BANGLORE BARODA BHUBANESHWAR MUMBAI CALCUTTA CHANDIGARH GUWAHATI JABALPUR JAIPUR LUCKNOW CHENNAI NEW DELHI PATNA

# MANUFACTURING UNITS 1. 2. 3. 4. 5. 6. 7. 8. 9. BANGALORE BHOPAL GOINDWAL HARIDWAR HYDERABAD JAGDISHPUR JHANSI RUDRAPUR RANIPET

10. TIRUCHIRAPALLY # SERVICE CENTRES 1. 2. 3. 4. 5. 6. 7. 8.

9.

BANGLORE BARODA CALCUTTA CHANDIGARH SECUNDRABAD NEW DELHI NAGPUR PATNA VARANASI

COMPANY PROFILE

BHEL is India's largest engineering company and one of its kind in this part of the hemisphere. It manufactures a wide range of state of the art power generation equipment and systems besides equipment for industry, transmission, defence, telecommunication and oil business. The first plant of BHEL was set up in Bhopal in 1956, which signaled the dawn of the heavy electrical industry in India. In the early 60's three more major plants were set up in Haridwar, Hyderabad and Tiruchirapalli. The company now has 14 manufacturing divisions, 10 services centers and power sectors regional centers besides project sites spread all over India and also abroad to provide prompt and effective service to customers. BHEL's business broadly covers conversions, transmission, utilizations and

conservation of energy in core sectors of economy that fulfill vital infrastructure needs of the country. Its product have established an enviable reputation of high quality and reliability, which is largely due to emphasizes placed all along on contemporary some of the best technologies of the world from the leading companies in U.S.A., EUROPE, and JAPAN together with technologies from its own R&D centers technologies B.H.E.L. has consistently upgraded its design and manufacturing facilities to international standards by acquiring and assimilating.

VISION

A WORLD-CLASS, INNOVATIVE, COMPETITIVE AND PROFITABLE ENGINEERING ENTERPRISE PROVIDING TOTAL BUSINESS SOLUTIONS.

MISSION
TO BE THE LEADING INDIAN ENGINEERING ENTERPRISE PROVIDING QUALITY PRODUCTS AREAS. SYSTEM AND SERVICES IN THE FIELDS OF ENERGY, TRANSPORTATION, INDUSTRY, INFRASTRUCTURE AND OTHER POTENTIAL

VALUES

MEETING COMMITMENTS MADE TO EXTERNAL AND INTERNAL CUSTOMERS. FOSTER LEARNING, CREATIVITY AND SPEED OF RESPONSE. RESPECT FOR DIGNITY AND POTENTAIL OF INDIVIDUALS. LOYALTY AND PRIDE IN THE COMPANY. TEAM PLAYING. . INTEGRITY AND FAIRNESS IN ALL MATTERS. .

BUSINESS MISSION
To maintain a leading position as suppliers of quality equipment, systems and services in the field of conversion of energy, for application in the areas of electric power transportation, oil and gas exploration and industries. Utilize company's capabilities and resources to expand business into allied areas and other priority sectors of the economy like defence, telecommunications and electronics.

BUSINESS OBJECTIVES GROWTH: To ensure a steady growth by enhancing the competitive edge of BHEL defence, telecommunication and electronics in existing business, new areas and international operations 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 productivity and generate adequate internal resources to finance the company's growth.

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

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 their needs. continuously and be alive to

TECHNOLOGY: Achieve technological excellence in operations by development of indigenous technologies and efficient absorption and adaptations of imported technologies to suit business need and priorities and provide the competitive advantage to the company.

IMAGE: To fulfill the expectations which stakeholders like government as owner, employees, customers and the country at large have from BHEL.

CONTRIBUTION OF BHEL IN VARIOUS CORE SECTORS BUSINESS SECTORS: BHEL's operations are organized around three business sectors, mainly power, industry and international operations. This enables BHEL to have a strong customers orientation, to be sensitive to his needs and respond quickly to the changes in the market.

POWER SECTORS: Power is the core sector of BHEL and comprises of thermal, nuclear gas, diesel and hydro business. Today BHEL supplied sets, accounts for nearly 66 % of the total installed capacity in the country as against nil till 1969-70. BHEL manufactures boilers auxiliaries, TG sets and associate controls, piping and station C & I up to 500 MW rating with technology and capability to go up to 1000 MW range. The auxiliary products high value capital equipment like bowl and tube mills, pumps and heaters, electrostatic precipitators, gravimetric feeders, fans, valves etc. BHEL has contracted so far around 240 thermal sets of various ratings, which includes 14 power plants set up on turnkey basis. Nearly 85 % of World Bank tenders for thermal sets floated in India have been won by the company against international competition. BHEL has adopted the technology to the needs of the country and local conditions. This has led to the development of several technologies in house. The fluidized bed boiler that uses low graded high-ash abrasive Indian coal is an outcome of such an effort. With large-scale availability of natural gas and the sudden increase in demand, BHEL began to manufacture gas turbines and now possesses two streams of gas turbine technology. It has the capability to manufacture gas turbines up to 200 MW rating and custom built combined cycle power plants. Nuclear steams generators, turbine generators, sets and related equipment of 235 MW rating have been supplied to most of the nuclear power

plants in India. Production of 500 MW nuclear sets, for which orders have been received. BHEL has developed expertise in renovation and maintenance of power plant equipment besides specialized know how of residual life assessment, health diagnostic and life extensions of plants. The four power sectors regional centers at New Delhi, Chennai, Kolkata and Nagpur will play a major role in giving a thrust to this business and focus BHEL's efforts in this area.

INDUSTRY SECTORS:BHEL is a major producer of large size thyristor devices. The products include centrifugal compressors, high speed industrial drive turbines, industrial boilers and auxiliaries, waste heat recovery boilers, gas turbines, electric motors, drives, and control equipments, high voltage transformers, switch gears and heavy castings and forgings.

Company in India with the capability to make simulators for power plants, defence industrial process plants and other applications. An entry has been made in aviation industry for which BHEL has set up facilities and is now producing two seater aircraft.

TRANSMISSION:A wide range of transmission products and systems are produced by BHEL to meet the needs of power transmission and distribution sector. These include: Dry Type Transformers SF6 Switch Gears 400 KW Transmission Equipment High Voltage Direct Current System Series and Shunt Compensation Systems

In anticipation of the need for improved substations, a 33 KV gas insulated sub station with micro processors base control and protection system has been done.

TRANSPORTATION:65 % of trains in Indian Railways are equipped with BHEL's traction and traction control equipment. These include: Broad Gauge 3900 HP AC / DC locomotives Diesel Shunting Locomotives up to 2600 HP 5000 HP AC Loco with thyristor control Battery Powered Road Vehicles and Locomotives

RESEARCH AND DEVELOPMENT:BHEL has a corporate R & D center supported by R & D groups at each of the manufacturing divisions. The dedicated effort of BHEL's R & D engineers have produced several new products like automated storage retrieval system automated guide vehicles for material transportation etc. Establishment of Asia's largest fuel evaluation test facility at Tiruchi was high light of the year. This facility will enable evaluation of combustion, heat transfer and pollution parameters in boilers. Major R & D achievement include: Design manufacture and supply of countries first 17.2 MW industrial steam turbines. Development of 4700 HP AC / DC loco for Indian Railways. Development of largest capacitor voltage transformers of 8800 PF 400 KV rating. Development and application low cost ROBOTS for job loading/unloading.

According to ex- CMD Mr. R.K.D. Shah, "BHEL is spending Rs. 60 Crores on Research and Development. Earning from product which has been commercialized has gone up 26 % to Rs. 760 Crores."

Human Resource Development Institute:BHEL has envisioned becoming "A World Class Engineering Enterprise committed to enhancing stakeholder value". Force behind realization of this vision and the source of our competitive advantage is the energy and ideas of our 44,000 strong highly skilled and motivated people. The Human Resource Development Institute situated in NOIDA, a corner-stone of BHEL learning infrastructure, along with Advanced Technical Education Center (ATEC) in Hyderabad and the Human Resource Development Center at the manufacturing Units, through various organizational developmental efforts ensure that the prime resource of the organization the Human Capital is Always in a state of Readiness, to meet the dynamic challenges posed by a fast changing environment. It is their constant endeavor to take the HRD activities to the strategic level of becoming active partner to the (organizational) pursuits of achieving the organizational goals.

TECHNICAL COLLABORATIONS PRODUCT

# Thermal Sets, Hydro Sets, Motors & Control Gears. # Bypass & Pressure Reducing Systems

COLLABORATIONS
Prommashexport RUSSIA Sulzer Brother Ltd. SWITZERLAND

# Electronic Automation System for Steam Turbine & Generators # Francis Type Hydro Turbines

Siemens AG. GERMANY General Electric CANADA

# Moisture Separator Reheaters

Baloke Duerr GERMANY

# Christmas Trees & Conventional Well

National Oil Well Head Assemblies, USA

# Steam Turbines , Generators and Axial Condensers # Cam Shaft Controllers and Tractions Current Control Units

Siemens AG. GERMANY Siemens AG. GERMANY

DIVISIONS OF BHEL
There are 20 Divisions of BHEL, they are as follows: 1. 2. 3. 4. 5. 6. 7. 8. 9.
10. 11. 12. 13. 14. 15.

HEEP, Haridwar HPEP, Hyderabad HPBP, Tiruchi SSTP & MHD, Tiruchi CFFP, Haridwar BHEL, Jhansi BHEL, Bhopal EPD, Bangalore ISG, Bangalore ED, Bangalore BAP, Ranipet IP, Jagdishpur IOD, New Delhi 14. COTT, Hyderabad IS, New Delhi

16. CFP, Rudrapur 17. HERP, Varanasi 18. Regional Operations Division ARP, New Delhi 19. TPG, Bhopal
20.

Power Group (Four Regions and PEM)

MAJOR COMPETITORS OF BHEL

1. 2. 3. 4. 5. 6. 7. 8. 9.
10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21.

Ansaldo Asea Brown Boueri Beehtel Block & Neatch CNMI & EC Costain Electrim Energostio Electro Consult Franco Tosi Fuji GEC Alsthom General Electric Hitachi LMZ Mitsubishi Mitsui NEI Raytheon Rolls Royce Sanghai Electric Co.

Italy Switzerland USA USA China U.K. Poland Russia Italy France Japan U.K. USA Japan Russia Japan Japan U.K. USA Germany China

RECENT ACHIEVEMENTS OF BHEL

1.

BHEL's R&D ops contribute Rs 1,151 cr to turnover in 2005-06 [May 19 2006] BHEL to manufacture 800 mw thermal sets [Apr 14 2006] BHEL inks agreement with IIT Madras for new courses [Apr 25 2006] BHEL secures Rs. 80 cr. export order from EETC [May 10 2006] Workers participation in management yields savings at BHEL, Haridwar , Nov 16. Management Board and will ensure an increased output of the generating units by as much as twenty per cent. Earlier, one unit each of the above machines was renovated and updated by the BHEL resulting in a similar output increase for these machines. More than a hundred sets of different capacities supplied by BHEL, Haridwar, are commissioned at various power stations all over the country. The hydro sets are tailor-made to suit varying hydroelectric parameters. Mr. Dhar said that at the Haridwar Plant, excellent engineering and manufacturing facilities are available to supply kaplan, francis, pelton and reversible hydro turbines along with matching generators and associated equipment. (UNI)

2. 3. 4.

BHEL net profit up 62 pc(the tribune,3 June 2006)

5.

6.

The Heavy Electrical Equipment Plant (HEEP) located in Haridwar, is one of the major manufacturing plants of BHEL. The core business of HEEP includes design and manufacture of large steam and gas turbines, turbo generators, hydro turbines and generators, hydro turbines and generators, large AC/DC motors and so on. Heavy Electrical Equipment Plant, Haridwar of this Multi-unit corporation with 7467 strong highly skilled technicians, engineers, specialists and professional experts is the symbol of Indo Soviet and Indo German Collaboration. It is one of the four major manufacturing units of the BHEL. With turnover of 164059 lacs and PBT of Rs.32489 lacs HEEP added 3000 MW of power to the National grid during 2005-06. HEEP is engaged in the manufacture of Thermal and Nuclear Sets up to 1000MW, Hydro Sets up to HT Runner dia 6300mm, associated Apparatus Control gears, AC& DC Electrical machines and large size Gas Turbine of 60-200 MW. HEEP Haridwar contributes about 44% of Indias total installed capacity for power generation with total capacity of Thermal, Nuclear & Hydro Sets of over 45000MW currently working at a Plant Load Factor of 76% and Operational Availability of 86%. Inspite of acute recession in economy, BHEL Haridwar received recent orders for Mejia-5&6, Sipat, Bhatinda, Chandrapura, Bakreshwar, Santaldih, Bhilai, and Dholpur.

HISTORICAL PROFILE:The construction of heavy electrical equipment Plant commenced in Oct.1963after indo- soviet technical co-operation agreement in Sept.1959The first product to roll out from the plant was an electric motor in January 1967.This was followed by first 100 MW Steam Turbine in Dec.1969and first 100MW Turbo Generator in August 1971.The plants break even was achieved in March 1974.BHEL went in for technical collaboration with M/s Siemens, Germany to undertake design and manufacture to large size thermal sets upto a unit rating of 1000 MW in the year 1976.First 200 MWTG set was commissioned at Obra in 1977.The continuum of technological advancement subsequently saw the commissioning of 500 MW TG Set in 1984 .The technical cooperation of Gas Turbine manufacture was also signed with M/s Siemens Germany. First 150 MW ISO rating gas Turbine was exported to Germany in Feb1995.Our 250 MW thermal set up at Dahanu Plant of BSES made a history by continuous operation for over 150 days and notching up a record plant load factor greater than 100%.

KEY COMPETITORS:Power Sector Giant of the World viz. Siemens Germany, ABB, General electric of USA etc. are the major competitors of HEEP. All these are the MNCs and enjoy huge financial and R&D backup.

CORPORATE CITIZEN:HEEP Haridwars Strategic plans and its policy & strategy are commensurate with BHEL Corporate / strategic Plan . As first PSU to adopt Corporate Planning as a process . Board meetings for long range development , BHEL has always guided other PSUs in their Corporate planning process .Board meeting , monthly Management Committee meetings, Annual Revenue Budget exercise , Mid term reviews , Apex TQ council reviews, Personnel Heads Meet, Quality Heads Meet , Technology Meets , Product committees meetings, Inter-Unit Quality Circle Meets etc. are the some of crore strengths of BHEL Corporations vast network.

KEY CUSTOMERS AND SUPPLIERS:HEEPs customer profile ranges from State Electricity Boards,Government Power utilities like NTPC, NPC, NHPC to IPPs like Reliance Energy. HEEP has also supplied Gas Turbine sets to overseas customers in Libya & Iraq. Power Sector Regions of BHEL are its key internal customers. In view of expected market scenario,BHEL has strategically decided that HEEP will concentrate on coal based Higher Rating Thermal Sets for domestic market to fulfil the countrys vision of adding 107,000 MW capacity to achieve Power on Demand by 2012. Our key customer, NTPC has drawn up plan for capacity addition of 20,000MW by 2012. HEEP has planned for execution of 34,619MW by 2012.

FAVOURABLE BUSINESS ENVIRONMENT:Power Sector has to grow over 10% annually to reach the 7% GDP level. Thus, the demand for thermal sets will remain high. Central Electricity Authority (CEA) is the guiding authority for Power Sector strategies in our country. BHEL representatives, along with representatives from various domestic customers, are an integral part of various committees formed by CEA. This enables us to guide and understand the market requirements and future challenges. To meet the 11th Five Year Plan target of adding 61,000MW, CEA has planned addition of 23 nos. standardized 500MW sets for faster project execution and cost reduction. BHEL, including HEEP, is a part of this process. CEA has standardized for the next capacity of 800MW sets and has asked BHEL to prepare itself for manufacturing and supply in the 11th Five Year Plan. BHEL has tied up with Siemens for upgradation of technology. Further CEAs stress on R&M of ageing Power Plants is also providing business opportunity to unit.

MAJOR CHALLENGES:The favorable business scenario has given the unit a major challenge of establishing Power Infrastructure of the country in close co-ordination with its key customers. HEEP has committed itself to meet the countrys requirements. To cater to the needs of higher rating sets of 800MW, HEEP has collaboration with Siemens.

STRATEGIC CHALLENGES: Key Business Cycle time reduction State of the art technology Cost reduction Operational Timely delivery Material cost reduction Productivity improvement Effective utilization of machines Human Resource Motivation of employees Skill & Knowledge management

MAJOR MILE STONES:1975 1978 1982 1993 1995 1997 1997 1998 1998 1999 1999 1999 1999 1999 1999 2000 2001 2001 2001 Job Redesign concept launched for FIRST time in India. well documented Suggestion Scheme launched. Launched Productivity Movement & Quality Circle. Concept of ISO 9001 quality System. Adopted EFQM model of TQM for achieving Business Excellence. BHEL one of the 9 PSEs declared Navratna by Govt. of India . National Productivity Award for HEEP by the President of India. Certificate of Merit by National Productivity Council for Outstanding Performance for 2nd consecutive year. Accreditation of U stamp. Accreditation of Stamp from National Board of Boiler and Pressure Vessel Inspector, USA . AD-Merkblatt HPO Recertification by RWTUV for Gas Turbine Combustion Chambers INSAAN Award for Excellence in Suggestion for 9th consecutive year Launching of 5s concept PCRI recognized as Environmental Lab by Haryana State Board for Prevention and Control of Pollution Accreditation of ISO 14001-Enviornment management system CII Site Visit for CII-EXIM Business Excellence Award-2000 Top Management TQM Workshop at Rishikesh and HRDC INSAAN Award for excellence in Suggestion for 11th consecutive year Launching of QTM & RCA at HEEP Haridwar by CMD Launching of delivery Index, Turnover Index and Manufacturing Index 2002JBE Workshop of Apex TQM Group at Theri to evolve Business policy 2002

2003 2004

Commendation for Strong Commitment to Excel in CII-EXIM Bank Award Commendation for Significant Achievement in CIIEXIM Bank Award.

2005

Award given by Institute of Cost and Works Accountants of India for "Excellent Work in the field of Management Accounting and Cost Concepts".

2006

BHEL celebrated its 50 years in August 2006.

OVERVIEW OF FINANCE FUNCTIONS Role of finance function

Finance function is the backbone of any organization. The finance function plays a very critical role in the maximization of shareholders who provide the funds to the company. This objective is being achieved by the finance department, which provides the carious information on the financial parameters such as cash flows, profitability, cost and margin, assets, working capital and shareholder value for the purpose of efficient utilization of resources resulting in better profitability of the company. The importance of the finance functions cannot be undetermined in any organization as many companies have perished not due to bad production management but due to poor financial management function acts like radar of the ship, which guides the direction of the ship and saves it from the perils of the sea. In the same way finance department provides timely and relevant information to various levels of management for the purpose of decision-making. The various activities undertaken by the finance department achieve the aforesaid objectives, may be summarized as follows Maintenance of account books, cost records. Preparation of salary bills and other related payment to employees: PP, bonus, TA, departmental advances of PF accounts etc. Preparation of Profit & Loss a/c and Balance Sheet. Generation of various MIRs for management use: MIRs relating to turnover, profitability, cash requirements, inventory. Coordination with company auditors, Govt. auditors, cost auditors and tax auditors. Decisions relating to purchase and sales. Investment decisions: capital investment decisions and working capital management decisions.

Financing decisions: decisions relating to financing-mix or capital structure or leverage. Dividend policy decisions.

COST SECTION
Cost- section of the company is divided into following two sections viz, PRODUCT COST & CENTRAL COST and these deals with the following functions: (i) (ii) (iii) (iv) (v) (vi) (vii) Determination of periodic profits including inventory valuation. Determination of pricing policy of the company. Work related to capital expenditures of the company. Developing variance Management Information report for different parts of management for purpose of cost control and reduction. Valuation of work in progress and finished goods. Interaction with management of top management link for achieving cost control and cost reduction and thereby improving bottom line of the company. Preparation of cost sheet of different product and their analysis for future planning.

BOOKS AND BUDGET SECTION

This section deals mainly with the following:(i) (ii) (iii) (iv) (v) (vi) Preparation of operating budget for the company as a whole. Co-ordination with various functions of organization with regard to generation and submission of important MIR's to corporate office. Preparation of annual accounts of the company. Coordination with company auditors with regard to company accounts. Maintenance and accounting of fixed assets accounts. Preparation of long term profit plans based on broad objectives of the company.

ADMINISTRATION SECTION:

The is the general administration section of the company which administrates the whole department and keep on viewing the troubles of the department and tales the measures to get rid of the problem.

CASH SECTION:
This section helps the company in maintaining the cash and bank receipt, to make the requisitions for receipt of funds whenever required to the corporate and to make payments. It records the daily receipt and release of the funds. The banks by which the transactions are made are SBI, HSBC, PNB, HDFC and others.

SALES SECTION
Sales accounts section will deal mainly with the following items :(i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) Scrutiny and vetting of estimates / quotation for sale of products / services, wherever financial concurrence is required. Scrutiny and vetting of agreements for sales of products and services Invoicing for sale / advance or progressive payment / erection income and other. Maintenance of subsidiary records like sales journals / sales daybook, sundry debtors ledgers, advances from customer ledger etc. Payments, recovery and accounting of sales tax, excise duty. Accounting of claims on carriers/ insurance companies for missing items / damages on outward consignments. Scrutiny, payments and accounting of bills of carriers and insurers and other miscellaneous claims relating to the outwards consignments. Calculation and scrutiny of data for payments of royalties to the collaborators. Review and reconciliation as well as follow up of recovery of outstanding dues from the customers in coordination with the commercial department.

STORES SECTION
For the convenience of performance of various function it is divided in to further three sections which are as follows: a) Stores bills. b) Stores review. c) Foreign payment. They deal mainly with the following items of works: (i) (ii) (iii) (iv) (v) Payment of suppliers bills including bills for advances -indigenous and foreign. Pricing of stores receipt vouchers including fixed assets vouchers and fixed assets receipt vouchers. Maintenance of accounts of advances to suppliers, claims recoverable, claims for short suppliers, rejections and rectifications of materials and sundry creditors. Opening of letter of credit and arranging payments to foreign suppliers under foreign credit / differed payment agreements. Payment of bills for ocean freight, port trust dues, custom duty, local agents commission and clearing agents bills, transit insurance bills, bills of contractors for transport /handling etc. and accounting of such payments are made at regional offices. (vi) (vii) Maintenance of accounts of material issued on loan and materials issued to subcontractors. Keeping account of earnest money and security deposits received from tender and suppliers. (viii) Adjustment of stores in transit to be made at the close of the year.

PAYROLL SECTION
This section deals mainly with the following functions: (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) Preparation of monthly wage bills. All account work related to personal payments and disclose profit and loss account of the company. Dealing with income tax authority with regard to personal taxation of employee. Dealing with other statutory authority such as P.F. Commissioner, ESI (employee state insurance). To ensure correct payment of salary and wages and other benefits to employees in, telephone and miscellaneous payments. Preparation of monthly wage bills. All account work related to personal payments and disclose profit and loss account of the company. Dealing with income tax authority with regard to personal taxation of employee. Dealing with other statutory authority such as P.F. Commissioner, ESI (employee state insurance).

WORKS SECTION
Works section of the company is dealing with the following functions: (i) (ii) (iii) (iv) Payments of contractors bills including bills for advance. Maintenance of accounts of contractors with regard to security deposits, earnest money, progressive payments. 215 maintenance of accounts of materials issued on loans to contractors. All accounting work related to capital expenditure in progress on erection of plant & machinery and building.

(v)

All other miscellaneous work relating to hiring of various facilities.

INTERNAL AUDIT SECTION:

The company has its own internal audit section which facilitates the company in making the accounts relating to every thing of the company. The accounts which are prepared by internal audit section are 1. 2. P & L A/C Cash flow statement

PRICE STORE HEDGER SECTION

The main purpose of PSH section is to keep the records of inventory both in the terms of quantity and value. The pricing of issues is calculated on monthly average basis. The terms which are recorded in the reference of inventory are : 1. 2. 3. 4. Opening Stock Receipt Issue Closing Stoke.

Hierarchy of fi in B.

FINANCIAL ANALYSIS AND EVA ANALYSIS. I discussed the project with my instructor and coordinator Mrs. SANTOSH ANAND (Sr.A/0) at H.E.E.P., BHEL, Haridwar. She approved the project. After that, a simple course of action has been followed for working on this project. Entire information and data were gathered from the respective annual report of BHEL, Haridwar. All the figures are taken from their Balance Sheet of the respective years and the other internal documents, which were personally shown by the members of company in our interest.

FINANCIAL ANALYSIS
Financial analysis is the process of determining the operating and financial characteristics of a firm from accounting data and financial statement. The goal of such analysis is to determine efficiency and performance of the firm management, as reflected in the financial records and reports. Its main aim is to measure the firm's liquidity, profitability and other indications that business is conducted in a rational and orderly way. Here ratio analysis is taken as the primary tool for examining the firm's financial position and EVA for performance of BHEL Haridwar. There are two views points in receiving and evaluating financial data:
1.

External Analysis :-

This is performed by outsiders to the firm such as creditors, stock holders, or investments analysis. It makes use of existing financial statements and involves a limited access to confidential information on a firm. 2. Internal Analysis :This is performed by the corporate finance and accounting departments and is more detailed than external analysis. These departments have available more details and current information than is available to outsiders. They are able to prepare Performa, or future statements and are able to produce a more accurate and timely analysis of the firm's strength and weaknesses. Financial statement contain a wealth of information which, if properly analysed and interpreted, can provide valuable insights in to firms performance and position. Financial statement analysis may be done for a variety of purpose, which may range from simple analysis of the short term liquidity position of the firm to comprehensive assessment of the strengths and weaknesses of the firm in various areas. The principle tool for financial statement analysis is Financial Ratio Analysis. A ratio is an arithmetical relationship between two figures. Financial ratio analysis is a study of ratios between various items or groups of items. Financial ratio have been classified as follows: -

TYPES OF FINANCIAL RATIOS

LIQUIDITY RATIOS ACTIVITY RATIOS LEVERAGE RATIOS PROFITABILITY RATIOS OTHER RATIOS

LIQUIDITY RATIOS: - Liquidity refers to the ability of the firm to meet its obligations
in the short run, usually one year. Liquidity ratios are generally based on the relationship between current assets and current liabilities (the sources for meeting short-term obligations).

LEVERAGE RATIOS: - Financial leverage refers to the use of debt finance. While
debt capital is a cheaper source of finance, it is also a riskier source of finance. Leverage ratios helps in assessing the risk arising from the use of debt capital.

ACTIVITY RATIOS : - They are also called Turnover ratios or Asset management
ratios. They measures how efficiently the assets are employed by the firm. These ratios are based on the relationship between the level of activity and the level of various assets.

PROFITABILITY RATIOS: - Profitability reflects the final result of business

operations. There are two types of profitability ratio. Profit margin ratios and rate of return ratios. A profit margin ratio shows the relationships between profit and sales. Rate of return reflects the relationship between profit and investment.

OTHER RATIOS: - In this project we have analysed some other ratios of BHEL.
Such as EPS, PER, Personal payment per employee, Turnover per employee, Overtime per employee etc.

ADVANTAGES OF RATIOS: The ratio analysis is one of the most powerful tools of financial analysis. It is use as a device to analysis and interpret the financial health of enterprise. Just like a doctor examines his patient by recording his body temperature, blood pressure etc. Before making his conclusion regarding the illness and before giving his treatment, a financial analyst analyses the financial statement with various tools of analysis before commenting upon the financial health or weaknesses of an enterprise. 'A ratio is known as a symptom like blood pressure, the pulse rate or the temperature of the individual.' It is with help of ratios that the financial statements can be analysed and decision made from such analysis.
1.

HELPS IN DECISION-MAKING: Financial statements are prepared primarily

for decision making. But the information provided in financial statements is not an end in itself and no meaningful conclusions can be drawn from these statements alone. Ratio Analysis helps in making decisions from the information provided in these financial statements.

2.

HELPS IN FINANCIAL FORECASTING AND PLANNING: Ratio analysis

is of much help in financial forecasting and planning. Planning is looking ahead and the ratios calculated for a number of year's work as a guide for the future. Meaningful conclusions can be drawn for future from these ratios. Thus, ratio analysis helps in forecasting and planning.

3.

HELPS IN COMMUNICATING: The financial strength and weaknesses of a

firm are communicated in a more easy and understandable manner by the use of ratios the information contained in a financial statement is conveyed in a meaningful manner to the one for whom it is meant. Thus, ratios help in communication and enhance the value of financial statements.

4.

HELPS IN CO-ORDINATION: Ratios even helps in coordination, which is

utmost importance in effective business management. Better communication of efficiency and weakness of an enterprise results in better co-ordination in the enterprise.

5.

HELPS IN CONTROL: Ratio analysis even helps in making effective control of

the business. Standard ratios can be based upon Performa financial statements and variance or deviations, if any, can be found by comparing the actual with the standards so as to take corrective action at the right time. The weaknesses or otherwise, if any, come to the knowledge of the management which helps in effective control of the business.

USES OF FINANCIAL STATEMENTS TO DIFFERENT PARTIES

The analysis and interpretation of financial statements is an important accounting activity. The end users of business statements are interested in these statements primarily as an aid to determine the financial position and the results of the operations. There are different parties interested in the financial analysis of their statements and their aims and their objectives also differ significantly. The following are the use of statement analysis to different parties:

TO THE FINANCIAL EXECUTIVES : - The first party interested in the

financial statement analysis is the finance department of the business concern itself to the financial managers such analysis provides a deep insight into the financial condition of the enterprises and the view of the past performance which helps in future decision making. The financial statements give vital information concerning the position of the enterprise as well the result of the operations.

TO THE TOP MANAGEMENT : - The top management of the concern is also

increased in the analysis of these statements because it helps them reaching conclusions regarding: Performance appraisal of overall business activities. Enquiry about current financial position and long term strategic planning. Queries concerning the relationships of earnings to trends in sales etc. Queries concerning the relationships of earnings to investment.

TO THE CREDITORS:- The analysis of these statements is very essential to the

creditors. Also some aspects of enterprise operations are of interest to creditors in regard to liquidity of funds, soundness of financial structure, profitability of the operations, effectiveness of working capital management etc.

TO THE INVESTORS AND OTHERS :-

Investors presents as well as prospects are also interested in the measurement of earning capacity of the securities. Investors have been increasingly concerned with the cash generation capability of an enterprise, primarily in terms of the flexibility available to such enterprises to acquire other business and new assets on an advantage basis for this purpose.

PROBLEMS OF FINANCIAL STATEMENTS

There are certain problems and issues encountered in financial analysis which call for care, circumspection and judgement in such exercise.

DEVELOPMENT OF BENCHMARKS:- given the diversity of BHEL product

lines, it is difficult to find suitable benchmarks for evaluating its financial performance and conditions. Hence even for such firm, the financial analyst may run into difficulty. If information is available only about industry average or some other standard and not about the entire dispersion of ratios for various firms in the industry, it may not be possible to draw meaningful inferences.

WINDOW DRESSING:-

firm may resort to window dressing to project a favorable financial picture. When window dressing is suspected, the financial analyst should look at the average data available as per resource.

PRICE LEVEL CHANGES:-

In India financial accounting takes into consideration price level changes. As a result, balance sheet figures are distorted and profits are misreported. Hence financial statement analysis can be vitiated.

VARIATIONS IN ACCOUNTING POLICIES :- Business firms have some

latitudes in accounting treatment like depreciation, valuation of stocks research and development expenses, foreign exchange transactions, installment sales, preliminary and preoperative expenses, provision of reserve and revaluation of assets. Due to diversity of accounting practices found in practice, comparative financial statement analysis may be vitiated.

LIQUIDITY RATIOS Current Ratio (CR)

This ratio indicates the extent of the soundness of the current financial position of an undertaking and the degree of safety provided to the creditors. It is a measure of firms short term solvency. It indicates the availability of current assets in rupees for every one rupee of current liability. The higher the current ratio, the larger is the amount of rupee available per rupee of current liability, the more is the firms ability to meet current obligations and greater is the safety of funds of short term creditors. A ratio of greater than one means that the firm has more current assets than current claims against them. Current Ratio = Current Assets/Current Liabilities The current ratios for last 7 years for HEEP, Hardwar have been calculated as under. (Figures of CA and CL in Rs/ Lacs) Year Current assets Current liabilities Current Ratio 2001-02 100962 71641 1.41 2002-03 80044 61375 1.30 2003-04 100608 82133 1.22 2004-05 112836 99390 1.13 2005-06 139668 110923 1.25 2006-07 139029 123322 1.127 2007-08 150562 149892 1.004

RATIO

YEARS

INFERENCE: From the above ratios it can be seen that Current Ratio for year 200708 has dropped by approx. 11 % from the previous year which indicates that short term solvency of the firm has gone down. But the current ratios of last seven years are greater than one and on an average it is 1.206:1. This means for every one Re. of current liabilities there is Rs. 1.206 of current assets available to meet the short term obligation. So this indicates that the short-term liquidity position of the company is very good and short-term conditions are safe as far as payment is concerned, although, as a conventional rule, a current ratio of 2 to 1 is considered far better.

Quick Ratio (QR)

Quick ratio is a more refined tool to measure the liquidity of an organization. It establishes relationship between quick, or liquid, assets and current liabilities. An asset is liquid if it can be converted into cash immediately or reasonably soon without a loss of value. Quick Ratio is a better test of financial strength than the current ratio, because it excludes very slow moving inventories and the items of current assets, which cannot be converted into cash easily. This ratio shows the extent of cushion of protection provided from the Quick assets to the current creditors. A Quick ratio of 1:1 is usually considered satisfactory. Quick Ratio = Quick Assets / Current Liabilities (Quick Assets = Current Assets Inventories) The Quick Ratios for last 7 years for HEEP, Hardwar have been calculated as under. (Figures are in Rs/ Lacs) Year Quick assets Current liabilities Quick Ratio 2001-02 57501 71641 0.80 2002-03 47674 61375 0.78 2003-04 61457 82196 0.75 2004-05 53860 99390 0.54 2005-06 69870 110923 0.63 2006-07 100334 150056 0.67 2007-08 82739 149892 0.55

RATIO

YEARS INFERENCE: The liquid ratio of 1:1 is considered to be satisfactory in case of any
organization whereas in case of BHEL Hardwar Liquidity Ratio is not even approaching one, hence there is liquidity problem in payment in time. Here payments to creditors are not made in time due to lack of cash/liquid fund.

ACTIVITY RATIOS Inventory Turnover Ratio (ITR)

A considerable amount of a companys capital may be tied up in the raw material, workin-progress and finished goods. It is important to ensure that the level of stock is kept as low as possible, consistent with the need to fulfill customer order in time. Inventory Turnover Ratio indicates the efficiency of the firm in producing and selling its product. It shows how rapidly the inventory is turning into receivables through sales. Generally, a high inventory turnover is indicative of good inventory management. A low inventory turnover implies excessive inventory levels than warranted by production and sales activities, or a slow moving or obsolete inventory. Stock turnover Ratio = Cost of Goods Sold / Avg. Inventory (Average Inventory is the average of opening and closing balances of inventory for each year) The Inventory Turnover Ratios for last 7 years for HEEP, Hardwar have been calculated as under. (Figures are in Rs/ Lacs) Year COGS Avg. inventory ITR 2001-02 108811 45414 2.40 2002-03 101336 37915 2.67 2003-04 97432 35792 2.72 2004-05 140697 49095 2.87 2005-06 164059 64387 2.55 2006-07 210494 62023 3.39 2007-08 235940 67725 3.48

RATIO

YEARS

INFERENCE: Inventory turnover ratio indicates that how quick inventories are converted
into sales. It gives the position of the inventory management of the company. The average of this ratio for past 7 years comes out to be 2.86 which show that for every Re 1 of average inventory there is Rs2.86 of net sales. The efficiency of HEEP, Hardwar in turning its inventory for year 07-08 has improved from the last year which indicates that there has been better management of inventory in the plant. The average figure is also satisfactory.

Debtors Turnover Ratio (DTR)

Debtor Turnover Ratio measures whether the amount of resources tied up in debtors is reasonable and whether the company has been efficient in converting debtors into cash. It indicates the number of times debtors turnover each year. Generally, the higher the value of debtors turnover, the more efficient is the management of credit. Debtors Turnover Ratio = Credit Sales/Average Debtors (Average Debtors is the average of opening and closing balances of debtors for each year) The Debtors Turnover Ratio for last 7 years for HEEP, Hardwar have been calculated as under.

(Figures are in Rs/ Lacs) Year Credit sales Avg. debtors Ratio 2001-02 119298 52490 2.27 2002-03 115596 46161 2.50 2003-04 114608 48642 2.35 2004-05 166598 52209 3.19 2005-06 199388 56630 3.52 2006-07 258690 73981 3.49 2007-08 286264 83607 3.42

RATIO

YEARS

INFERENCE: This ratio indicates that how quick debtors are collected and higher
ratio shows better position of the company. Here from the graph and the ratio of the last 7 years it is clear that the debtors are collected quickly and efficiently as the Debtor Turnover Ratio is increasing year by year from 2.27 times in year 2001-02 to 3.52 times in year 2005-06. This indicates that average collection period is short and so there are less or say no bad debts for the company. Although, this ratio is on a slight declining trend for past 2 years, the average of 7 years comes out to be 2.9. Since the liquidity position of the firm depends on the quality of debtors to a great extent therefore an average of 2.9 shows that the liquidity position of the firm is good.

Fixed Assets Turnover Ratio

Fixed assets are used in the business for producing goods to be sold. The effective utilization of fixed assets will result in increased production and reduced cost. It also ensures whether investment in the assets have been judicious or not. Fixed Assets Turnover Ratio = Sales / Fixed Assets The Fixed Assets Turnover Ratio for last 7 years for HEEP, Hardwar have been calculated as follows.

(Figures are in Rs/ Lacs) Year Sales Fixed Assets Ratio 2001-02 119298 43644 2.73 2002-03 115596 52619 2.19 2003-04 114608 54668 2.09 2004-05 166598 59170 2.81 2005-06 199388 60233 3.31 2006-07 258690 67225 3.84 2007-08 286264 86904 3.29

RATIO

YEARS INFERENCE: The graph above shows that the fixed assets turnover ratio was on an
increasing trend for past 3 years until 2007-08 where it faced a decline. The reason that could be attributed to such a decline is that the utilization of funds in the form of fixed assets has been significantly higher for the year 2007-08. as compared to previous years. Moreover, this hike is not in proportion to the increase in net sales. Thus, efficiency of the firm in utilizing its fixed assets has fall down from last year but an average figure of 2.89 indicates that the firm has been utilizing its fixed assets efficiently with respect to net sales.

Total Assets Turnover Ratio

This ratio shows the relationship between sales and total assets of the company and also compares total sales with total assets. It shows the firms ability in generating sales from all financial resources committed to total assets. Total assets turn over ratio= Net Sale/ Total Assets Lower Total Assets Turnover Ratio indicates lack of proper utilization of invested assets and if it is higher then it means that company is utilizing its invested properties in an impressive manner. The Total Assets Turnover Ratio for last 7 years for HEEP, Hardwar have been calculated as under. (Figures are in Rs/ Lacs) Year Net sale Total assets Ratio 2001-02 119298 108243 1.10 2002-03 115596 94678 1.22 2003-04 114608 114753 0.99 2004-05 166598 129401 1.28 2005-06 199388 153564 1.29 2006-07 258690 184819 1.39 2007-08 286264 179861 1.59

RATIO

YEARS

INFERENCE: The total assets turn over ratio is the relationship between total assets
and sales. As can be seen from the above graph, the Total Assets Turnover Ratio at HEEP Hardwar is on an increasing trend for last 7 years except for the year 2003-04 where it faced a downfall of 0.23 points, although it was well sufficient for the company. The average of TAT Ratio for last 7 years comes out to be 1.26 which implies that, on an average, HEEP Hardwar generates a sale of Rs.1.26 for one rupee investment in fixed and current assets together.

LEVERAGE RATIOS Debt Ratio

Several Debt Ratios may be used to analyze the long term solvency of the firm. It would be of relevance to know the proportion of the interest-bearing debt (also called funded debt) in the capital structure of the firm. Thus, debt ratio can be computed by dividing total debt by capital employed or net assets. Total debt includes short and long term borrowings from financial institutions, debentures/bonds, deferred payment arrangements for buying capital equipments, bank borrowings, public deposits and any other interest bearing loan. Debt Ratio = Total Debt/Capital Employed The Debt Ratio for last 7 years for HEEP, Hardwar have been calculated as under. (Figures are in Rs/ Lacs)

Year T otal Deb t Cap i tal E mp l oyed Rati o

2001-02 238 36601 0.0065

2002-03 308 33302 0.0092

2003-04 447 32557 0.0137

2004-05 364 30011 0.0121

2005- 06 499 42641 0.0117

2006- 07 899 34763 0.0258

2007-08 1291 29969 0.0430

YEARS INFERENCE: From the above graph, it can be seen that the debt ratio of HEEP,
Hardwar has steep inclination right from 2001-02 to 2007-08. The trend in middle years is rather fluctuating. A higher debt ratio implies that claims of creditors on the company are greater than those of owners. Moreover, all debt that has been raised by HEEP is in the form of unsecured loan. This tends to introduce inflexibility in the firms operations due to increasing interferences and pressures from creditors. However, besides facing a steep incline, this ratio is still very small which supports greater claim of owners than creditors. An average of 0.017 for past 7 years implies that out of the total capital employed in the firm 1.7% has been employed through the route of debt and rest is still in the hands of equity holders i.e. owners.

Debt Equity Ratio (DER)

This ratio indicates the relationship between loan fund and net worth of the company, which is known as gearing. If the proportion of debt to equity is low a company is said to be low-geared and vice versa. A debt equity ratio of 2:1 is the norm accepted by financial institutions for financing projects. The higher the gearing, more volatile is the return to the shareholders.

Debt Equity Ratio = Total Debt/Net Worth The Debt Equity Ratio for last 7 years for HEEP, Hardwar has been calculated as under. (Figures are in Rs/ Lacs) Year Total debt Net Worth Ratio 2001-02 238 53697 0.0044 2002-03 308 62410 0.005 2003-04 447 67756 0.0065 2004-05 364 82644 0.0044 2005-06 499 102423 0.0048 2006-07 899 130005 0.0069 2007-08 1291 160836 0.0080

RATIO

YEARS

INFERENCE: The Debt Equity Ratio describes the lenders contribution for each
rupee of owners contribution. The Debt Equity Ratio of HEEP Hardwar for last 7 years forms a fluctuating trend with 0.44% in the year 2001-02 to 0.80% in year 2007-08. An average DE Ratio of these 7 years is 0.005 which implies that lenders have contributed Rs. 0.005 for each rupee contributed by owners. This generates a greater claim of owners than creditors which is a satisfactory situation from creditors point of view, since, a high proportion of equity provides greater margin of safety for them.

Proprietor Ratio Or (Share Holder Equity Ratio)

It is assumed that larger the proportion of the shareholders equity, the stronger is the financial position of the firm. This ratio will supplement the debt-equity ratio. In this ratio a relationship established between the shareholders fund and the total assets. A reduction in shareholders equity signally the over dependence on outside source for long term financial needs and this carries the risk of higher level of gearing. This ratio indicates the degree to which unsecured creditors are protected against loss in the event of liquidation. Prop Ratio =Net Worth / Total Assets The Proprietor Ratio for last 7 years for HEEP, Hardwar has been calculated as under. (Figures are in Rs/ Lacs) Year 2001-02 Net Worth 53697 Total Assets 108243 Ratio 0.49 2002-03 62410 94678 0.65 2003-04 67756 114753 0.59 2004-05 82644 129401 0.63 2005-06 102423 153564 0.66 2006-07 130005 184819 0.70 2007-08 160836 179861 0.89

RATIO

YEARS

INFERENCE:
There is increase in shareholders fund but there is no fresh investment in FA is made and this may affect future profitability of the company.

Total Liabilities to Total Assets Ratio

Current liabilities (non- interest bearing current obligations) are generally excluded from the computation of leverage ratios. One may like to include them on the ground that they are important determinants of the firms financial risk since they represent obligations and exert pressure on the firm and restrict its activities. Thus, to assess the proportion of total funds short and long-term provided by outsiders to finance total assets, the following ratio may be calculated: TL to TA Ratio = Total Liabilities /Total Assets The TA to TL Ratio for last 7 years for HEEP, Hardwar has been calculated as under. (Figures are in Rs/ Lacs) Year Total Liabilities Total Assets Ratio 2001-02 71945 108243 0.66 2002-03 61683 94678 0.65 2003-04 82643 114753 0.72 2004-05 99754 129401 0.77 2005-06 111422 153564 0.725 2006-07 150955 184819 0.81 2007-08 151183 179861 0.84

RATIO

YEARS

INFERENCE: Here from the data and the ratio of last 7 years it is clear that the companys financial position is sound and is capable of meeting its liabilities out of its total assets. From the last five years data we see that the solvency ratio is increasing slowly and it has increased from 0.66 in 2001-02 to 0.84 in 2007-08. But it indicating a sound financial position of the company.

Fixed Assets to Net Worth Ratio

This ratio shows that how efficiently the fixed assets are utilized by the company. This also shows that what portion of net worth is invested in the fixed assets. Fixed Assets to Net Worth Ratio = Fixed Assets / Net Worth The FA To NW Ratio for last 7 years for HEEP, Hardwar have been calculated as under. (Figures are in Rs/ Lacs) Year Fixed 200102 7281 2002-03 14634 2003-04 14082 2004-05 16565 2005-06 13896 2006-07 16858 2007-08 29299

Assets Proprietor Funds Ratio

53697 0.13

62410 0.23

67756 0.20

82644 0.20

102423 0.13

130005 0.12

160836 0.18

RATIO

YEARS INFERENCE: Here this ratio is going on decreasing and the average comes out to
be 0.18 which means for every Re. 1 of Proprietor Fund there are Rs. 0.18 of Fixed Assets indicating that Fixed Assets are utilized properly but there are no fresh investments made in Fixed Assets which may effect the future profitability of the company.

Fixed Assets Ratio

This ratio indicates the proportion of long funds deployed in fixed assets. Fixed assets minus depreciation provided on this till the date of calculation. The higher the ratio indicates the safer the funds available in case of liquidation. It also indicates the portion of long-term fund that is invested in the working capital. Fixed Assets Ratio = Capital Employed / Net Fixed Assets The Fixed Assets Ratio for last 7 years for HEEP, Hardwar have been calculated as under. (Figures are in Rs/ Lacs) Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

Capital Employed Net Fixed Assets Ratio

36601 7281 5.02

33302 14634 2.27

32557 14082 2.31

30011 16565 1.81

42641 13896 3.06

34763 16858 2.06

29969 29299 1.02

RATIO

YEARS INFERENCE: This ratio indicates that proportion of long funds deployed in fixed
assets here the fixed assets ratio is increasing. But from the data we found that there are no fresh investments made in Fixed Assets. But there is continuous decrease in long-term funds, which may affect the future profitability of the company.

Interest Coverage Ratio

This ratio shows how many times the profit covers the interest. It shows the margin of cover to lenders of the company. It is always desirable to have profit more than the interest payable. In case profit is either equal or lesser than the interest, the position will be unsafe and it will show that there is nothing left for the shareholder and the position of lender is also unsafe. The net income of the company should be ideally 6 or 7 times of the fixed interest charges. Interest Coverage Ratio = Profit before interest and tax / Interest The Interest Coverage Ratio for last 7 years for HEEP, Hardwar have been calculated as under. (Figures

are in Rs/ Lacs) Year PBIT Interest Ratio 2001-02 7205 632 11.4 2002-03 2003-04 11083 12324 -622 -474 -17.8 -26 2004-05 22338 -623 -35.8 2005-06 31552 -937 -33.67 2006-07 42957 -390 -110.15 2007-08 50324 -410 -122.74

RATIO

YEARS

INFERENCE: Interest Coverage Ratio had increased in 2001-02 while after that it is
decreasing year by year as it shows negative. It is clear that there is no risk for lenders and share holders

PROFITABILITY RATIOS
Gross Profit Ratio (GPR)
This ratio measures the gross profit margin on the total net sales made by the company. The ratio measures the efficiency of the companys operation and this can also be compared with the previous years results to ascertain the efficiency partners with respect to the previous year. When every thing is normal the gross profit margin should remain unchanged, irrespective of the level of production and sales, since it is based on the assumption that all costs deducted when computing gross profit, which are directly variable with sales. A stable gross profit margin is therefore the norm. Gross Profit Ratio =Gross Profit / Net Sales The Gross Profit Ratio for last 7 years for HEEP, Hardwar have been calculated as under. (Figures are in Rs/ Lacs) Year 2001-02 2002-03 2003-04 14260 115596 0.1233 17176 114608 0.1498 2004-05 25901 166598 0.1554 2005-06 35329 199388 0.1771 2006-07 2007-08 48196 258690 0.1863 50324 286264 0.1757

Gross Profit 10487 Net Sales 119298 Ratio 0.0879

RATIO

YEARS INFERENCE: Gross Profit Ratio is increasing year by year. It has come to 17.57% in 200607 from 8.7% in 2001-02. For improving the more profitability of the company, company should take in plans relating to cost reduction and cost control. Efforts should also be made to take up contracts having greater margins such as renovation / retrofitting etc. In addition to regular contracts which has very less margin.

Net Profit Margin

This ratio established relationship between net profit and net sales. Net profit ratio shows the operational efficiency of the managerial inefficiency and excessive selling and distribution expenses. In the same way, increase shows better performance. Increase or decrease in the ratio is determined in comparison to pervious years performance. Net Profit Margin = Profit After Tax / Net Sales 100 The Net Profit Margin for last 7 years for HEEP, Hardwar have been calculated as under. (Figures are in Rs/ Lacs) Year PAT Net Sales Ratio 2001-02 4354 119298 4 2002-03 7078 115596 7 2003-04 2004-05 7248 13726 114608 166598 7.4 10.3 2005-06 21553 199388 13.1 2006-07 2007-08 26400 30933 258690 286264 12.54 10.8

RATIO

YEARS INFERENCE: Net profit of last six years is continuously increasing indicating a good
operating efficiency of the company. The average of net profit ratio comes out to be 9.07% which means that for every Ra 100 of net sales profit margin is of Rs 9.07 and this is a satisfactory position for the company and also indicates that Managerial skills are efficient. The companys performance is good.

Net Profit To Fixed Assets Ratio

This ratio shows relationship of net profit to fixed assets and also indicates, whether fixed assets are being properly used or not. It will be in the favor of the business, if this ratio higher. Net Profit to Fixed Assets Ratio = Net Profit / Fixed Assets The Net Profit to Fixed Assets Ratio for last 7 years for HEEP, Hardwar have been calculated as under. (Figures are in Rs/ Lacs) Year Net Profit Fixed Assets Ratio 2001-02 4354 7281 0.87 2002-03 2003-04 7078 7248 14634 14082 0.57 0.65 2004-05 14553 16565 0.87 2005-06 21553 13896 1.45 2006-07 26400 26858 0.98 2007-08 30933 29299 1.05

RATIO

YEARS INFERENCE: Here this ratio is going on increasing however in 2002-03 to 2005-06. it
increased from 0.57 in year 2002-03 to 1.45 in year 2005-06, indicating that the fixed assets of the company is being used effectively. But there is no fresh investment made in Fixed Assets during these years and can affect future profitability of the company. The earning capacity of the company from utilization of Fixed Assets is improving year by year.

Return On Investment (ROI)

Return on investment ratio measures, how effectively the capital employed in the business is used. It shows the earning capacity of the net assets of the business. The ratio judges the performance of the business. It can be used for comparing the performance of even dissimilar business or different department of the same business. Return on Investment = Profit After Tax/Share Holder Funds 100 The Return on Investment for last 7 years for HEEP, Hardwar have been calculated as under.

(Figures are in Rs/ Lacs) Year Profit After Tax Share Holder Funds Ratio 2001-02 4354 53697 8.10 2002-03 2003-04 2004-05 7078 7248 14523 62410 11.34 67756 10.69 82644 17.57 2005-06 21553 102423 21.04 2006-07 26400 130005 20.30 2007-08 30933 160836 19.23

RATIO

YEARS INFERENCE: Return on investment is increasing year by year that is 8.11 in year
2001-02 and it increased to 20.25 in year 2006-07. it is indicating that the capital employed in the business is used effectively and the performance of the company is increasing hence, company should not invest in the fixed assets and R & D expenditures.

Return On Equity
Return on equity is a measure of great interest to equity share holders. Return on equity is defined as equity earning / avg. equity. The numerator of this ratio is equal to PAT and the denominator includes all contribution made by equity share holders (Paid-up + reserve & surplus). Return on equity measures the profitability of equity funds invested in the firm. it is regarded as a very important measures as it reflects the productivity of the ownership capital employed in the firm. Return On Equity = PAT / Average Equity

The Return On Equity for last 7 years for HEEP, Hardwar have been calculated as under.

(Figures are in Rs/ Lacs) Year PAT AVG. EQUITY RATIO 2001-02 4354 4570 0.95 2002-03 2003-04 2004-05 7078 7248 14523 4570 1.54 4570 1.58 4570 3.17 2005-06 21553 4570 4.71 2006-07 26400 4570 5.73 2007-08 30933 4570 6.76

RATIO

YEARS INFERENCE: From the above graph we can see, return on equity is increasing by
leaps& bounds. As in 2001-02 it was 0.95 & in 2007-08 it has increased up to 6.76, so it is indicating good financial position of the company

OTHER RATIOS

Turnover Per Employee

This ratio is calculated by dividing turnover of the company by the number of employees working in the company. This indicating how efficiently manpower is used to generate turnover. Turnover Per Employee (TPE). = Turnover / No. of Employees The TPE for last 7 years for HEEP, Hardwar have been calculated as under. (Figures are in Rs/ Lacs) Year Turnover No. of Emp. Ratio 2001-02 108811 7463 14.58 2002-03 2003-04 101336 97432 7222 6811 14.03 14.30 2004-05 140697 6434 21.86 2005-06 164059 6195 26.48 2006-07 2007-08 210494 235940 6577 6800 32.00 34.70

RATIO

YEARS

INFERENCE: As this ratio is increasing continuously year by year this indicates that
the Human Resources of the company is utilized effectively and are generating high turnover which is good for the company. Hence companys performance is good.

Collectable Debts As A Percentage Of Turnover

This ratio indicates how effectively debtors are collected out of turnover.

Collectable Debts As a Percentage of Turnover = Collectable debts/Turnover 100 The Ratio for last 7 years for HEEP, Hardwar have been calculated as under. (Figures are in Rs/ Lacs) Year Collectable debts Turnover Ratio 2001-02 26745 108811 25 2002-03 2003-04 21373 39335 101336 22.3 97432 40 2004-05 29938 140697 21.28 2005-06 37566 164059 22.89 2006-07 2007-08 44743 48590 210494 21.26 235940 20.59

RATIO

YEARS INFERENCE:
The above graph shows fluctuating ratio year by year. Hence, efforts should be made that goods are dispatched to only customers who are making timely payments.

LIMITATIONS OF STUDY

It took a lot of time in collection of data as the data available in BHEL Hardwar is so wide and covers great deal of extensive information. No printed data was available for the current year as the annual report for 200607 is still in the process. All the data collected was from the secondary sources and I had to rely on the data collected by them. The conclusion given regarding BHEL is based on the present economic condition.

CONCLUSIONS AND SUGGESTIONS

During my Summer Training at BHEL, Hardwar on the project Financial Analysis and EVA, I have observed some weak and strong points of the company, which are following: As it is not only the analysis which makes the decision, furthermore good judgments and interpretation depends upon the intelligence and ability of the analyst. On seeing the liquidity position of BHEL. I conclude that it is not very good as the current assets are in the form of inventories and debtors. The debt collection period is high and inventories are least liquid current assets. So maintaining the inventories are relatively costly affair for the company and the management must have to investigate properly. It is very necessary so that fund should not be blocked unreasonably. Efficient inventory management is required in BHEL. On seeing the leverage position of the BHEL, I conclude that it is very good as the stake of owners in company is continuously increasing and its long term debt continuously decreasing it means that company is paying its debt promptly and creditors will not face any risk in investing in BHEL as also BHEL is giving assured ROI. On seeing turnover, fixed assets and current assets turnover of company goes on increasing which is a good indicator as it brings commensurate gain and also the average collection goes on decreasing but management should take more efficient steps to reduce it. On seeing the profitability of the BHEL its overall performance is very good. A continuous increase in the values of EPS and DPS results, investors feel safe to invest money in BHEL. On seeing the performance over EVA it can be said that company is doing good in their core field. And growth of the EVA shows the units strong position in their business. This growth is also shows a good sign from shareholders point of view.

STRENGTH (S): Low cost producer of quality equipment due to cheap labour and fully depreciated plants. Flexible manufacturing set up. Entry barrier due to high replacement cost of its manufacturing facilities.

WEAKNESSES (W): High working capital requirement due to its exposure to cash starved SEBs (State electricity boards) and High WIP. Inability to provide project financing.

OPPORTUNITIES (O):

High-expected growth in power sectors (7000 MW/p.a. needs to be added)

High growth forecast in Indias index of industrial production would increase demand for industrial equipment such as motors and compressors.

THREATS (T): Technical suppliers are becoming competitors with the opening up of the Indian economy.

Fall in global power equipment prices can effect profitability.

BIBLIOGRAPHY
To complete this summer training project report the following sources were referred:

Books and budget manual www.google.com www.bhel.com

www.indiatimes.com