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SUMMER TRAINING REPORT
ON
Performance Evaluation of Working Capital
OF
BSNL
PROJECT GUIDE: MR. HIRALAL, SENIOR ACCOUNTS OFFICER (TRA),
MORADABAD.
JAIPURIA INSTITUTE OF MANAGEMENT, LUCKNOW
SUBMITTED BY: DIVYANK GUPTA
COURSE : PGDM
ROLL NO : PGDM-09-051
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ACKNOWLEDGEMENTACKNOWLEDGEMENT
I want to place on record my gratitude to the organization and
its people whose generous
help and support enabled me to complete this project within the
stipulated time period.
My special thanks to my project guide, Mr. Hiralal, Senior
Accounts Officer (TRA),
BSNL, Moradabad for his active help, guidance and support in
accomplishment of the
report.
I am greatly indebted to all those people who have helped me in
some way or other in the
completion of the project. I am also grateful to the management
and the staff members of
BSNL for their support and co-operation during the course of my
summer training.
The Faculty of my institute deserves the praise for their role
in shaping this summer
training project.
A special thanks to my parents who encourage me a lot during my
project session.
I once again thanks to all those who extended their support and
co-operation in bringing
out this project work successfully.
DIVYANK GUPTA
CONTENTS PAGE NO.
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CHAP 1:- INTRODUCTION
1-A:-OVER VIEW OF COMPANY 4
1-B:-MEANING OF WORKING CAPITAL 28
1-C:-WORKING CAPITAL IN BSNL 38
CHAP 2:-OBJECTIVE OF STUDY 45
CHAP 3:-ANALYSIS AND FINDINGS
3-A:-CASH MANAGEMENT 46
3-B:-DEBTOR MANAGEMENT 49
3-C:- INVENTORY MANAGEMENT 51
3-D:-SWOT ANALYSIS 53
CHAP 4:-CONCLUSION 56
BIBLOGRAPHY 58
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CHAPTER I
INTRODUCTION
(I-A) Overview of the Company
Bharat Sanchar Nigam Ltd. formed in October, 2000, is World's
7th largest
Telecommunications Company providing comprehensive range of
telecom services in
India: Wireline, CDMA mobile, GSM Mobile, Internet, Broadband,
Carrier service,
MPLS-VPN, VSAT, VoIP services, IN Services etc. Presently it is
one of the largest &
leading public sector unit in India.
BSNL has installed Quality Telecom Network in the country and
now focusing on
improving it, expanding the network, introducing new telecom
services with ICT
applications in villages and wining customer's confidence.
Today, it has about 46 million
line basic telephone capacity, 8 million WLL capacity, 52
Million GSM Capacity, more
than 38302 fixed exchanges, 46565 BTS, 3895 Node B ( 3G BTS),
287 Satellite
Stations, 614755 Rkm of OFC Cable, 50430 Rkm of Microwave
Network connecting
602 Districts, 7330 cities/towns and 5.6 Lakhs villages.
BSNL is the only service provider, making focused efforts and
planned initiatives to
bridge the Rural-Urban Digital Divide ICT sector. In fact there
is no telecom operator in
the country to beat its reach with its wide network giving
services in every nook &
corner of country and operates across India except Delhi &
Mumbai. Whether it is
inaccessible areas of Siachen glacier and North-eastern region
of the country. BSNL
serves its customers with its wide bouquet of telecom
services.
BSNL is numero-uno operator of India in all services in its
license area. The company
offers vide ranging & most transparent tariff schemes
designed to suite every customer.
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BSNL cellular service, CellOne, has 55,140,282 2G cellular
customers and 88,493
3Gcustomers as on 30.11.2009. In basic services, BSNL is miles
ahead of its rivals,
with 35.1 million Basic Phone subscribers i.e. 85 per cent share
of the subscriber base
and 92 percent share in revenue terms.
BSNL has more than 2.5 million WLL subscribers and 2.5 million
Internet Customers
who access Internet through various modes viz. Dial-up, Leased
Line, DIAS, Account
Less Internet (CLI). BSNL has been adjudged as the NUMBER ONE
ISP in the country.
BSNL has set up a world class multi-gigabit, multi-protocol
convergent IP infrastructure
that provides convergent services like voice, data and video
through the same Backbone
and Broadband Access Network. At present there are 0.6 million
DataOne broadband
customers.
The company has vast experience in Planning, Installation,
network integration and
Maintenance of Switching & Transmission Networks and also
has a world class ISO
9000 certified Telecom Training Institute.
Scaling new heights of success, the present turnover of BSNL is
more than Rs.351,820
million (US $ 8 billion) with net profit to the tune of
Rs.99,390 million (US $ 2.26
billion) for last financial year. The infrastructure asset on
telephone alone is worth about
Rs.630,000 million (US $ 14.37 billion).
The turnover, nationwide coverage, reach, comprehensive range of
telecom services and
the desire to excel has made BSNL the No. 1 Telecom Company of
India.
BSNL Registered Office
Bharat Sanchar BhavanHarish Chandra Mathur LaneJanpath, New
Delhi-110 001
BSNL Corporate Office Bharat Sanchar BhavanHarish Chandra Mathur
LaneJanpath, New Delhi-110 001
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Board of Directors
Designation Name
Phone
Fax No Email(Office)CMD KULDEEP GOYAL 23372424 23372444
[email protected]
Director(Enterprise) RAJENDRA SINGH 23734064 23734166
[email protected]
Director(Finance) GOPAL DAS 23714141 23314141
[email protected]
Director(Human Resource) GOPAL DAS 23734070 23734072
[email protected]
Director(Consumer Fixed Access) Rajesh Wadhwa 23037142 23738999
23734242 [email protected]
Director(Consumer Mobility) R.K.Aggarwal 23734073 23734075
[email protected]
Company Secretary & GM(Legal) H.C.PANT 23353395 23353389
[email protected]
ASPIRATION OF THE COMPANY
Be the leading Telecom Service Provider in India with global
presence.
Create a customer focused organization with excellence in sales,
marketing and customer care.
Leverage technology to provide affordable and innovative
products/services across customer segments.
Provide a conducive work environment with strong focus on
performance.
Establish efficient business processes enabled by IT.
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mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]
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MAIN SERVICES PROVIDED BY BSNL
BSNL provides almost every telecom service, however following
are the main Telecom
Services being provided by BSNL in India:-
1) BSNL Landline
BSNL is the largest telecom operator in India and is known to
everybody for Basic
Telephony Services for over 100 years. Presently the Plain old,
Countrywide telephone
service is being provided through 32,000 electronic exchanges,
326 Digital Trunk
Automatic Exchanges(TAX), Digitalized Public Switched Telephone
Network (PSTN)
all interlinked by over 2.4 lakh km of Optical Fiber Cable, with
a host of Phone Plus
value additions to our valued Customers. BSNL's telephony
network expands throughout
the vast expanses of the country reaching to the remotest part
of the country.
2) BSNL Mobile
India's fastest growing cellular service, along with postpaid
and prepaid services brings
cellular telephony to the masses, through innovative technology
and strategic
pricing. This ambitious service uses state-of-the-art GSM
technology to attain global
excellence and leadership in business. Our entry into this
sector has brought GSM
cellular service at an affordable cost to the common man. All
serving a single
objective, to provide better communication to millions across
India. Customers have
reposed tremendous faith in BSNL and it has enrolled over 30
Lakh Cellular customers
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within ten months of launch of Cellular service, an
unprecedented mark in Indian
Cellular Market.
3) BSNL WLL-M
BSNL WLL-M is a communication system that connects customers to
the The BSNL
Landline network using radio frequency signals instead of
conventional copper wires, for
the full or part connection between the subscriber and the
exchange This comes with
superior voice quality and high speed data capabilities. CDMA is
popular with more than
100 million subscribers worldwide, and the number keeps on
increasing exponentially.
4) Internet Services
BSNL is India's no. 1 Internet service provider with more than
17 lakh
subscribers, providing Internet service throughout the entire
country (except in New
Delhi and Mumbai) under the brand name of "Sancharnet".
Sancharnet provides free all
India roaming and enables it's users to access their accounts,
using the same access code
(172233) and user ID from any where in the Country. In order to
make Internet available
through out the length and breadth of the Country Internet
Dhabas are being
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http://www.sancharnet.in/
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commissioned at all the Block Headquarters. BSNL has also
started DIAS and Account
free internet access (CLI based) facility on few select cities
recently.
5) BSNL Broadband
BSNL is in the process of commissioning of a world class,
multi-gigabit, multi-protocol,
convergent IP infrastructure through National Internet
Backbone-II (NIB-II), that will
provide convergent services through the same backbone and
broadband access network.
The Broadband service will be available on DSL technology (on
the same copper cable
that is used for connecting telephone), on a countrywide basis
spanning 198 cities. In
terms of infrastructure for broadband services NIB-II would put
India at par with more
advanced nations. The services that would be supported includes
always-on broadband
access to the Internet for residential and business customers,
Content based services,
Video multicasting, Video-on-demand and Interactive gaming,
Audio and Video
conferencing, IP Telephony, Distance learning, Messaging: plain
and feature rich, Multi-
site MPLS VPNs with Quality of Service (QoS) guarantees. The
subscribe will be able to
access the above services through Subscriber Service Selection
System (SSSS) portal.
6) Intelligent Network (IN): BSNL is providing IN services like
tele-voting, toll free
calling, premium calling etc.
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http://www.bsnl.co.in/service/internet_typeofaccess.htm#clihttp://www.bsnl.co.in/service/internet_typeofaccess.htm#clihttp://www.bsnl.co.in/service/internet_tariff_dias.htm
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Products
BSNL LANDLINE
BSNL MOBILE
- POSTPAID
- PREPAID
- UNIFIED MESSAGING
- SMS & BULK SMS
BSNL WLL
INTERNET SERVICES
- NETWORK
- BROADBAND
- TYPES OF ACCESS
- WI-FI
- CO-LOCATION SERVICE
- BSNL WEB HOSTING
- INTERNET TARIFF
- DIAL UP INTERNET
BSNL BROADBAND
BSNL MANAGED NETWORK SERVICES
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BSNL MPLS-VPN
ISDN
LEASED LINE
INTELLIGENT NETWORK
- FREE PHONE SERVICE
- PREMIUM RATE SERVICE
- INDIA TELEPHONE CARD
- VIRTUAL PRIVATE NETWORK (VPN)
- VOICE VPN
- UNIVERSAL NUMBER
- UNIVERSAL PERSONAL NUMBER
- TELE VOTING
VIDEO CONFERENCING
AUDIO CONFERENCING
I NET
TELEX/ TELEGRAPH
EPABX
- EPABX
- CENTREX
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HVNET
TRANSPONDER
Challenges
During Financial Year 2007-2008 (From April 01, 2006 to March
31, 2007) BSNL has
added 9.6 million new customers in various telephone services
taking its customer base
to 64.8 million. BSNL's nearest competitor Bharti Airtel is
standing at a customer base
of 39 million. However, despite impressive growth shown by BSNL
in recent times, the
Fixed line customer base of BSNL is declining. In order to woo
back its fixed-line
customers BSNL has brought down long distance calling rate under
OneIndia plan,
however, the success of the scheme is not known. However, BSNL
faces bleak fiscal
2006-2007 as users flee, which has been accepted by the CMD
BSNL. Presently there is
an intense competition in Indian Telecom sector and various
Telcos are rolling out
attractive schemes and are providing good customer services.
However, BSNL being
legacy operator and its conversion from a Government Department
earns lot of criticism
for its poor customer service.
Although in recent past there have been tremendous improvement
in working of BSNL
but still it is much below the Industry's Expectations. A large
aging (average age 49
years (appx)) workforce (300,000 strong), which is mostly
semi-illiterate or illiterate is
the main reason for the poor customer service. Further, the Top
management of BSNL is
still working in BSNL on deputation basis holding Government
employee status thus
having little commitment to the organization. Although in coming
years the retirement
profile of the workforce is very fast and around 25% of existing
workforce will retire by
2010, however, still the workforce will be quite large by the
industry standards. Quality
of the workforce will also remain an issue.
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Opportunities and Growth plans
BSNL has continued its growth story ever since its formation
& has reached a customer
base of 81.49 million as on 31 st March,2009 from 28.11 million
as on 31 st
March,2001. BSNL further plans to increase its customer base to
160 Million by March,
2014.
New Services introduced/planned by BSNL
3G Services: BSNL has started 3G services in 290 cities and
acquired more than 6lakh
customers. It has planned to roll out 3G services in 760 cities
across the country in 2010-
11.
Broadband services: The shift in demand from voice to data has
revolutionized the very
nature of the network. BSNL is poised to cash on this
opportunity and has planned for
extensive expansion of the Broadband services. The Broadband
customer base of 3.56
Million customers in March'2009 is planned to be increased to
16.00 million by March
2014.
BSNL is also offering prepaid Broadband services. The customers
availing prepaid
broadband have many advantages over post paid broadband like
control on usage,
Mobility etc.
In addition to wire line broadband services, BSNL is also in the
process of rolling out its
Wi-MAX network in rural areas to take an initial lead and
provide wireless broadband
services in all rural blocks in the country during 2010-11. The
Urban Wi-Max is also
being deployed in Kerala & Punjab Circles and shall cover
all the major cities in these
circles.
Wi-Max services are also being provided through a Franchisee
agent with M/s SOMA in
three states of Gujrat, AP and Maharashtra.
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Value Added Services : BSNL is focusing on provision of value
added services/features
to attract high end customers and to double its revenues from
VAS
Fibre to Home(FTTH) : To meet the demand for high bandwidth
services, BSNL is
rolling out FTTH services (GPON & GE-PON) for the first time
in the country, which is
likely to generate substantial revenue in coming years. Services
are likely to start by
March 2010.
Mobility in WLL: BSNL is planning to provide full mobility on
its WLL network from
March 2010.
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BSNL Network
TELEPHONE
Basic Telephone (Bfone)
Total Number of connectionsas on 30.09.08
3,01,22,269
WLL (Tarang)
Total Number of connections as on 30.09.08
46,96,641
Village Public Telephones
Total Number of Telephonesas on 31.07.09
5,54,928
Public Telephones (Local, STD and Highway)
Total Number of Public Telephones as on 30.09.08
19,31,182
STD Stations
Number of STD Stationsas on 30.09.08
33,206
Transmission Systems as on 30.09.08
Transmission Systems
Digital(Route kms) (Route kms)
Coaxial 6,024
Microwave 50,430
UHF 45,130
Optical Fiber 5,60,086
Satellite Based Services (as on 30.09.08)
MCPC-VSATs 82
IDR Systems (2 Mb/ 8 Mb) 99/38
TELEGRAPH
Departmental Telegraph Offices 961
Telecom Centers 716
Combined Offices 44,754
Bureau-Fax Centers 1427 MOBILE SERVICES
(As on 28.2.2010)
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Total number of 2G connections - 59945215 Total number of 3G
connections - 973378
District Headquarters covered -618(All
covered)
Total number of villages covered -362117 Total number of
Town/cities covered -24769 National Highway covered (Km) -56705
(OUT
OF 62373) State Highway covered (Km) -85772(OUT
OF 130007) Railway route covered (Km) -43950(OUT
OF 53522)
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INTERNET SERVICES
(As on 30.10.2006)
SN Name of the Telecom Circle No. of nodes No. of Working
connections
1 ANDAMAN & NICOBAR 1 2851
2 ANDHRA PRADESH 23 173105
3 ASSAM 15 17005
4 BIHAR 15 16064
5 CHHATTISGARH 8 19990
6 GUJARAT 22 146658
7 HARYANA 16 63702
8 HIMACHAL PRADESH 6 17758
9 JAMMU & KASHMIR 2 27342
10 JHARKHAND 7 18964
11 KARNATAKA 27 162722
12 KERALA 15 260799
13 MADHYA PRADESH 43 71198
14 MAHARASHTRA 36 211950
15 NORTH EAST-I 5 9750
16 NORTH EAST-II 5 11958
17 ORISSA 13 33629
18 PUNJAB 19 122120
19 RAJASTHAN 32 96362
20 TAMILNADU 31 298509
21 UTTRANCHAL 10 26381
22 UTTAR PRADESH (EAST) 39 67081
23 UTTAR PRADESH (WEST) 20 67883
24 WEST BENGAL 12 36932
25 WESTERN TELECOM REGION 1 291
26 KOLKATA TELECOM DISTRICT 1 219202
27 CHENNAI TELECOM DISTRICT 1 119714
28 NORTHERN TELECOM REGION 1 1129
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TOTAL 427 2747624
Consumer Grievances Redressal Mechanism in BSNL
Consumer Grievances Redressal Mechanism (Public Grievance
Redressal
Mechanism)
BSNL has a well structured and multilayered Public Grievances
Redressal Mechanism
including Dispute Resolution Mechanism. The Public Redressal
setup in BSNL has
been introduced right from the Corporate Office to SSA(Secondary
Switching Area)
levels. Subscribers having complaints or grievances can interact
with the organization
through the following for Public Grievance / Dispute
settlements: -
(i) Complaints are being booked on "198". This Toll Free Service
of booking complaints
are available in every telephone system. Grievances can be
booked on "12727"(for Circle
Office) or "1095" (for District Office). This special Toll Free
Service has been introduced
by BSNL for booking public grievances.
(ii) In every office 'visiting hours' are prescribed where the
subscribers having complaints
or grievances can approach the officers of BSNL at various
levels,
(iii) Public Grievance Officers are available right from
Corporate Office to SSA
(Secondary Switching Area) level. The complainant can approach
these officers in
person or through written complaints or communicate through
e-mail or contact on
telephones,
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(iv) Special attention is being given to holding meetings with
consumer organizations.
(v) Telephones Advisory Committees have been constituted,
(vi) Senior Officers are available for public without prior
appointment during specified
hours on working days.
(vii Customer Service Centers have been opened for IMPCS.
II Open House Session:
Complaints/suggestions of general nature as regard to improving
the telecom services
in the area are discussed in the Open House Sessions. The basic
idea of conducting
such Open House Sessions is to establish direct channels of
communications with our
customers and also to enable the telecom staff to appreciate and
evaluate the customers
difficulties and complaints from their point of view. A press
notification is issued
in leading newspaper to hold the Open House Session for inviting
customers to attend
and submit their suggestions/grievances. Subscribers are invited
in a public hall. The
session is presided over by Senior Officers i.e. Area GM/Area
Manager. Customers are
requested to place general grievances which are recorded.
Replies are given on the spot.
In few cases, which cannot be settled on the spot a time frame
is given. Efforts are made
to settle the case within the given time frame. Written reply is
sent to the customers.
III. Telephone Adalats:
Subscribers whose grievances remained unsettled are invited to
make petitions for
redressal of their grievances in Telephone Adalats.
SSA(Secondary Switching Area)
Level Telephone Adalats are being conducted on bimonthly
periodicity and Circle level
Telephone Adalats are being conducted once in three months.
Customers are asked to give their grievances in writing with all
supporting documents
within stipulated period to District Complaint Officer (DCO).
The concerned office to
whom the case relates examines the case received by DCO and
settles the case. A
speaking order settling the case is communicated to the
customers. For unsettled cases, a
date is fixed for holding the Telephone Adalat. The customers
are invited to attend the
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Telephone Adalat. The Adalat is presided over by General Manager
of the area. The
concerned officers of the Department are also called to be
present in the Adalat. The full
details of the case is presented to the presiding officer. The
order of the presiding
officer is communicated in the Adalat after hearing the
arguments from both the parties.
Appellate Jurisdiction of Telephone Adalats:
Circle level adalats headed by CGMs can consider the cases of
the appeals against the
decisions of the adalats chaired by SSA Heads. Adalats headed by
SSA Heads can
consider cases of excess billing which have been rejected by
them as administrative heads
of SSAs.
IV. Telecom consumers Protection and Regulation of
Grievances
[TRAI Regulation, 2007(3 of 2007)]
BSNL ensures prompt rectification of any fault or complaint
booked through its extensive
grass root level online fault restoration system (FRS). However,
in case you still have
your problem unsolved timely, BSNL has implemented a three tier
consumer grievance
redressal mechanism comprising of call centres for various
services, nodal officers at
SSA and Circle level and an appellate authority for deciding
cases that the consumers
may wish to appeal against. As a first step, you may contact our
Call Centre on toll free
helpline numbers given below.
For basic services including broadband services:1500 (toll free
number)
For GSM Mobile services: 9400024365 (toll free number).
For Broadband &Internet services:1800-424-1600 (toll free
number).
For MPLS & Other Data services: 1800-425-1957 (toll free
number).
1. Procedure for handling grievances by Call Centers.
The Call Centers, immediately on receipt of your complaint:
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(a) Shall register such complaint by allotting a unique
identification number to be called
the docket number;
(b) Communicate, at the time of lodging the complaint, the
unique identification number
to be called docket number, date and time of registration of the
complaint, to you;
(c) Record details in respect of such complaint;
(d) Intimate you
(i) Through telephone or other electronic means or any other
means; and
(ii) Within the time limit specified the action taken on your
complaint; and
(e) give you contact details of the Nodal Officer (including his
name, telephone number
and address) in case you are not satisfied with the redressal of
your grievance or when
requested by you.
1.1 Time limit for redressal of grievance of consumers by Call
Centres.
(1) Unless specified elsewhere, all complaints relating to fault
or disruption of service or
disconnection of service shall be redressed within three days
from the date of registration
of complaint;
(2) Unless specified elsewhere, all other complaints shall be
redressed within seven days
from the date of registration of complaint;
(3) where lesser time limit has been specified by any other law
for the time being in force
or other regulations of TRAI or DOT or by BSNL for redressal of
grievance, the Call
Centres shall redress the grievances of the consumer within such
specified time.
In case you are not satisfied with the redressal of your
grievance at the Call Centre level
or in case the Call Centre within the above time limit does not
attend to the complaint,
you may approach the Nodal Officer for redressal of your
grievance.
2. Redressal of Consumer Grievances by Nodal Officers.
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You may approach, by a letter in writing, or through telephone,
or web based online filing
of complaints or through short message service or through other
electronic means and any
other means, the Nodal Officer of the concerned SSA of the
Circle/District for redressal
of your grievance.
In emergent situation, one can approach at the first instance
itself a Nodal Officer instead
of a Call Centre and the Nodal Officer shall redress the
grievance.
2.1 Handling of grievances of consumers by Nodal Officers.
The Nodal Officer shall be accessible to the consumers at the
address made available by
the public notice and telephone bills, as referred to above
register every complaint lodged
by the consumers;
1. Communicate, within three days from date of the receipt of
the complaint, the
unique complaint number to the consumer;
2. After taking the remedial measure for redressal of the
grievance or decision thereon,
intimate, within the time limit specified as below the remedial
measure or decision taken,
to the consumer.
2.2 Time limit for redressal of complaints by Nodal Officer.
The Nodal Officer shall redress the complaints of the consumer
within ten days of the
registration of the complaint, provided that complaints relating
to fault or disruption of
service or disconnection of service shall be redressed within
three days from the date of
registration of complaint.
In case the consumer is still not satisfied with the redressal
of his grievance by the Nodal
Officer or in case his complaint is not redressed by the Nodal
Officer within the time
limit specified or no reply is received regarding resolution of
the complaint from Nodal
Officer, he may appeal to the appellate authority for redressal
of his grievance.
Accounting Policies
Basis of Preparation of Financial Statements
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The financial statements of Bharat Sanchar Nigam Limited (the
Company or BSNL)
are prepared under the historical cost convention adopting the
accrual method of
accounting in accordance with Indian Generally Accepted
Accounting Principles and in
accordance with the provisions of the Companies Act, 1956 (the
Act).
Revenue Recognition
Income from services is accounted for on accrual basis and in
conformity with
Accounting Standard 9 of ICAI. Accordingly,
a) Revenue for all services is recognized when earned and are
realizable at the time of
billing. Unbilled revenues from the billing date to the end of
the year are recorded as
accrued revenue during the period in which the services are
provided. Provision is made
in respect of bills considered to be disputed (by the
management), debts outstanding for
more than two years and for debts due for less than 2 years, to
the extent considered
necessary by the management.
b) Installation Charges recovered from subscribers at the time
of new telephone
connections are recognized as income in the first year of the
billing.
c) In terms of the arrangement between Department of
Telecommunications (DoT) and
the Company, the charges for telecommunication services and
other infrastructural
services provided by BSNL to DoT are neither being billed nor
provided for.
d) Sale proceeds of scrap arising from maintenance and project
works are taken into
miscellaneous income in the year of sale.
e) Income from SIMs, recharge coupons of Mobile, Prepaid Calling
Cards, and Prepaid
internet connection cards are treated as income of the year in
which the payment is
received since the extent of use of these cards within the
financial year could not be
ascertained.
f) Wherever there is uncertainty in realization of income, such
as liquidated damages,
claims on Government Departments & local authorities etc.,
these are recognized on
collection basis.
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g) The claims on account of reimbursement for provision of
infrastructure, operation and
maintenance of Village Public Telephones (VPTs) and Rural
Household Connections
(RDELs) receivable from U.S.O. fund are accounted for as revenue
on account of the fact
that the claim for infrastructure cannot be credited to the
concerned asset account since
the claim amount could not be segregated asset wise.
h) Other income by way of interest on loans to employees,
security deposit with
Government Departments and local authorities, being not
material, are accounted for on
collection.
Fixed Assets
a) Fixed assets are carried at cost less depreciation. Cost
includes directly related
establishment and other expenses including employee remuneration
and benefits, directly
identifiable to the construction or creation of the assets.
b) Expenditure on replacement of assets, equipments, instruments
and rehabilitation
works is capitalized if, in the opinion of the management, it
results in enhancement of
revenue generating capacity.
c) Assets are capitalized to the extent completion certificates
have been obtained,
wherever applicable.
d) The cost of stores and materials at the time of issue to a
project, is debited to CWIP.
e) Apparatus and plants principally consisting of telephone
exchanges, transmission
equipments and air conditioning plants etc. are capitalized as
and when an exchange is
commissioned and put to use.
f) Cables are capitalized as and when ready for connection to
the main system.
g) Intangible assets are stated at cost of acquiring the same
less accumulated
depreciation / amortization.
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Depreciation/Amortization
Depreciation is provided based on the Written down Value method
at the rates prescribed
in Schedule XIV to the Companies Act, 1956 except for Subscriber
Installation. The
Subscriber Installation is depreciated over the useful life of 5
years on Written Down
Value method.
Assets costing up to Rs. 5,000 are depreciated fully in the year
of purchase. Similarly,
partition works costing up to Rs. 2,00,000 are depreciated fully
in the year of
construction.
The depreciation on machinery & tools used both for project
and maintenance work is
charged to profit and loss account instead of capitalization.
All telephone exchange
buildings, administrative offices and captive consumption
assembling
premises/workshops are considered as normal building and not as
factory building.
Accordingly depreciation is charged uniformly.
Intangible assets such as Entry License Fee for Telecom Service
operations are amortized
over the license period (i.e. 20 years) and standalone computer
software applications are
amortized over the license period subject to maximum of 10 years
as per straight line
method.
Impairment of Assets
Assets, which are impaired by disuse or obsolescence, are
segregated from the concerned
assets category and shown as Decommissioned Assets and provision
made for the loss,
if any, due to the difference between their net carrying cost
and the net realizable value.
Investments
Long-term investments are carried at cost, after providing for
any diminution in value, if
such diminution is of a permanent nature.
Foreign Currency Transactions
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a) Transactions in foreign currency are recorded at the exchange
rate prevailing on the
date of the transaction i.e. on the date of payment or receipt
as the case may be.
b) All Foreign Currency Liabilities and monetary assets are
stated at the exchange rate
prevailing as at the date of Balance Sheet and the difference
taken to Profit and Loss
Accounts as Exchange Fluctuation Loss or Gain.
Extraordinary Items
Extra-ordinary items of income and expenditure, as covered by AS
5, are disclosed
separately.
Manufacturing Expenses
Expenses incurred at Factory units are allocated to the cost of
the manufactured products.
Prior Period Items
Items of Income/expenditure exceeding Rs. 5 lakh are only
considered for being treated as
'prior period items'.
Taxes on Income
Taxes on Income for the current period are determined on the
basis of taxable income and
tax credits computed in accordance with the provisions of the
Income Tax Act, 1961.
In accordance with the AS-22, Deferred Tax Liability is
recognized on the timing
differences between accounting income and the taxable income for
the period taking into
consideration the contents of Accounting Standard
Interpretations 3 and quantified using
the tax rates in force or substantively enacted as on the
Balance Sheet date. Deferred Tax
Assets are recognized and carried forward to the extent there is
a virtual certainty that
such deferred tax assets can be realized.
Provisions
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Provisions are recognized when the Company has a present
obligation as a result of past
events; it is more likely than not that an outflow of resources
will be required to settle the
obligation; and the amount has been reliably estimated.
Contingent Liabilities
Liabilities, though contingent, are provided for if there are
reasonable chances of
maturing such liabilities as per management. Other contingent
liabilities, barring frivolous
claims, not acknowledged as debts, are disclosed by way of
notes.
Segment Reporting
The primary segment consists of basic and cellular services
provided. The
manufacturing activities have not been treated as a separate
segment since such activities
are essentially carried on as support service to other
segments.
The following specific accounting policies have been followed
for segment reporting:
Segment Revenue includes service income and other income
directly identifiable
with/allocable to the segment.
Income/expense, which relates to the Company, as a whole and not
allocable to individual
business segment is included in Un-allocable Corporate
Income/expense respectively.
Expenses that are directly identifiable with/allocable to
segments are considered for
determining Segment Results.
Segment Assets and Liabilities include those directly
identifiable with the respective
segments. Un-allocable corporate assets and liabilities
represent the assets and liabilities
that relate to the Company as a whole and not allocable to any
segment
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(I-B) MEANING OF WORKING CAPITAL Working Capital is commonly
defined as the difference between current assets
and Current liabilities. Efficient working capital management
requires that firms should
Operate with some amount of working capital, the exact amount
varying from firm
To firm and depending, among other things on the nature of
industry. Capital
required for a business can be classified in two main categories
viz.
1) Fixed capital, and
2) Working capital.
Every business needs funds for two purposes-for establishment
and to carry out its day-
to-day operations. Long term funds are required to create
production facilities.
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Through purchase of fixed assets such as plants and machinery,
land, building, furniture,
etc. An investment in these assets represents that part of firms
capital which is blocked
on permanent or fixed basis and is called fixed capital. Funds
are also needed for short-
term purpose for the purchase of raw material, payment of wages
and other day-to-day
expenses, etc. These funds are known working Capital. In simple
words, working
capital refers to that part of the firms capital, which is
required for financing short-
term or current assets such as cash, marketable securities,
debtors and inventories.
Funds thus invested in current assets keep revolving fast and
are being constantly
converted into cash and these cash flows out again in exchange
for other current assets.
Hence, it is also known as revolving or circulating capital or
short-term capital.
CLASSIFICATION OF WORKING CAPITAL
Working Capital may be classified on two bases:-
On the basis of Concept:-On the basis of concept, working
capital can be classified as,
Gross Working Capital
Net Working Capital
On the basis of Time:-On the basis of time, working capital can
be classified as,
Permanent or Fixed Working Capital
Temporary or Variable Working Capital
Gross Working Capital:-
The Gross Working Capital is the Capital invested in the total
current assets of the
enterprises. Current assets are those assets, which can be
converted into cash within a
short period, normally an accounting year.
Gross Working Capital = Total Current Assets
Net Working Capital:-
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The term Net Working Capital refers to the excess of current
assets over current
liabilities, or say,
Net Working Capital= Current Assets Current Liabilities
Net Working Capital can be positive or negative. When the
current asset exceeds the
current liabilities the working capital is positive and the
negative working capital results
when the current liabilities are more than the current assets.
Current liabilities are those
liabilities, which are intended to be paid in the ordinary
course of business within a short
period of normally one accounting year out of the current assets
of the income of the
business. The gross working capital concept is financial or
going concern concept
whereas net working capital is an accounting concept of working
capital. Both the
concepts have their own merits.
The gross concept is sometime preferred to the concept of
working capital for the
following reasons:-
# It enables the enterprise to provide correct amount of working
capital at correct time.
# Every management is more interested in total current assets
with which it has to operate
then the sources from where it is made available.
# It takes into consideration of the fact every increase in the
funds of the enterprise would
increase its working capital.
# The concept is also useful in determining the rate of return
on investments in working
capital.
The net working capital concept, however, is also important for
the following
reasons:-
# It is a qualitative concept, which indicates the firms ability
to meet its operating
expenses the short term liabilities.
# It indicates the margin of protection available to short term
creditors.
# It is an indicator of financial soundness of enterprise.
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# It suggest the need of financing a part of working capital
requirement out of the
permanent sources of funds.
Permanent or Fixed Working Capital
Permanent or fixed capital is the minimum amount, which is
required to ensure effective
utilization of fixed facilities and for maintaining the
circulation of current assets. Every
firm has to maintain a minimum level of current assets is called
permanent or fixed
working capital as this part of working capital is permanently
blocked in current assets.
As the business grow the requirement of working capital also
increases due to increase in
current assets.
Temporary or Variable Working Capital
Temporary or variable working capital is the amount of working
capital, which is
required to meet the seasonal demands and some special
exigencies. Variable working
capital can further be classified as seasonal working capital
and special working
capital. The capital required to meet the seasonal need of the
enterprise is called the
seasonal working capital. Special working capital is that part
of working capital which is
required to meet special exigencies such as launching of
extensive marketing campaign
for conducting research etc.
Temporary working capital differs from permanent working capital
in the sense
that it is required for short periods and cannot be permanently
employed gainfully
in business.
NEEDS AND OBJECTIVES FOR WORKING CAPITAL
Every business needs some amount of working capital. The needs
for working capital,
arises due to time gap between production and realization of
cash from sales. There is an
operating cycle involved in sales and realization of cash. There
are time gaps in purchase
of raw material and production, production and sales, and
realization of cash.
Thus working capital is needed for the following purposes:-
For the purchase of raw material, component and spares.
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To pay wages and salaries.
To incur day- to- day expenses and overhead costs such as fuel,
power and office
expenses etc.
To meet the selling costs such as packing, advertising etc.
To provide credit facilities to the customers.
To maintain the inventories of raw material, work in progress,
store and spares
and finished stock.
For studying the need of working capital in a business, one has
to study the business
under varying circumstances such as new concern, as a growing
and one, which has
attained maturity. A new concern requires a lot of funds to
meets its initial requirement
such as promotion and formation etc. These expenses are called
preliminary expenses and
are capitalized. The amount needed for working capital depends
upon the size of the
company and the ambition of its promoters. Greater the size of
the business unit generally
will be the requirement of the working capital. The requirement
of the working capital
goes on increasing with the growth and expansion of the business
till its gains maturity.
At maturity the amount of working capital required is called
normal working capital.
FACTORS DETERMINING THE WORKING CAPITAL REQUIREMENT
NATURE OF BUSINESS
The requirement of working capital is very limited in public
utility undertaking such as
Electricity, Water Supply and Railways because they offer cash
sales only and supply
services not products and no funds are tied up in inventories
and receivables. On the other
hand the trading and financial firm requires less investment in
fixed assets but have to
invest large amounts in current assets. The manufacturing
undertakings requires sizable
amount of working capital along with fixed investments.
PRODUCTION POLICY
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The determination of working capital needs depends upon the
production policy of the
business. The demand for certain products is seasonal i.e., such
products are purchased in
certain months of a year. For such industries two types of
production policy can be
followed. Firstly they can produce the goods in the months of
demand or secondly, they
produce for the whole year. If the second alternative is
followed, it would mean that till
the time of demand finishes, product will have to be kept in
stock. It would require
additional working capital.
LENGTH OF PRODUCTION CYCLE
The longer the manufacturing time, the raw material and other
supplies have to be carried
for a longer time in the process with progressive increment of
labor and service costs
before the final product is obtained. So working capital is
directly proportional to the
length of the manufacturing process.
RATE OF STOCK TURNOVER
There is an inverse co-relationship between the quantum of
working capital and the
velocity or speed with which the sales are affected. A firm
having a higher rate of stock
turnover will need lower amount of working capital as compared
to a firm having a low
rate of turnover.
CREDIT POLICY
Credit policy affects the working capital requirements in two
ways:
Terms of credit allowed by customer to the firm,
Terms of credit available to the firm.
A concern that purchases its requirements on credit and sells
its product/services on cash
requires lesser amount of working capital and vice-versa.
WORKING CAPITAL CYCLE
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The speed with which the working cycle completes one cycle
determines the
requirements of working capital. Longer the cycle larger is the
requirement of working
capital.
DEBTORS
CASH FINISHED GOODS
RAW MATERIALS WORK IN PROGRESS
RATE OF GROWTH AND EXPANSION OF BUSINESS
The larger size businesses require more permanent and variable
working capital in
comparison to small business. If a company is growing, its
working capital requirements
will also go on increasing. Thus, the growing concerns require
more working capital as
compared to the stable industries.
SEASONAL VARIATION
Generally, during the busy season, a firm requires larger
working capital than in the slack
season.
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BUSINESS FLUCTUATION
In period of boom, when the business is prosperous, there is a
need for larger amount of
working capital due to rise in sales, rise in prices, optimistic
expansion of business etc.
On the contrary in time of depression, the business contracts,
sales decline, difficulties are
faced in collection from debtors and the firm may have a large
amount of working capital
idle.
EARNING CAPACITY AND DIVIDEND POLICY
Some firms have more earning capacity than other due to quality
of their products,
monopoly conditions, etc. Such firms may generate cash profits
from operations and
contribute to their working capital. The dividend policy also
effects the requirement of
working capital. A firm maintaining a steady high rate of cash
dividend irrespective of its
profit needs more working capital than the firm that retains
larger part of its profits and
does not pay so high rate of cash dividend.
PRICE LEVEL CHANGES
Price level changes also affect working capital needs. If the
prices of different goods
increase, to maintain same level of production, more working
capital is needed.
AVAILABITY OF RAW MATERIAL
Availability of raw material on the continuous basis affects the
requirement of working
capital. There are certain types of raw materials which are not
available regularly. In such
a situation firm requires greater working capital to meet the
requirements of production.
Some raw materials are available in particular.
CASH REQUIRED FOR WORKING CAPITAL
For estimating the actual cash requirement you may follow the
following two-step
procedure:
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1. Estimate the cash cost of various current assets requirement:
The cash cost of a current
asset is:
Value of current asset
(-) Profit element, if any, included in the value.
(-) Non-cash charges like depreciation, if any, included in the
value.
2. Deduct the spontaneous current liabilities from the cash cost
of current assets: A
portion of the cash cost of current assets is supported by trade
credit and accruals of
wages on expense, which may be referred to as spontaneous
current liabilities. The
balance left after such deduction has to be arranged from other
sources
In 1997, the RBI permitted banks to evolve their own norms for
assessment of the
Working Capital requirements of their clients.
CASH FLOW BASED COMPUTATION OF WORKING CAPITAL
_ Drawing up cash flow statements (monthly or quarterly) for the
past few years clearly
indicate the seasonal and secular trend in utilization of
working capital.
_ The projections drawn up by the entrepreneur may then be
jointly discussed with the
banker as modified in light of the past performance and the
bankers opinions.
_ The peak cash deficit is ascertained from the cash
budgets.
_ The promoters share for such requirement maybe mutually
arrived at by the banker
and the borrower with the balance requirement forming the Bank
financed part of
Working Capital.
Cash flow based computation of working capital requirement has
been recommended by
the RBI for assessment of working capital requirement permitting
the banks to evolve
their own norms for such assessment However the reluctance to
provide the cash budgets
thereby revealing additional information to the banks, has led
to even larger companies
shying away from Cash Budget method of assessing Working
Capital. Consequently
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Cash Budget method is currently prevalent mainly in case of
seasonal industries,
construction sector as well as other entities whose operations
are linked to projects.
NEED OF CASH
i. Transaction motive: firm needs cash for transaction
purpose.
ii. Precautionary motive: The magnitude and time of cash inflows
and outflows is always
uncertain and hence the firms need to have some cash balances as
a buffer.
iii. Speculative motive: All firms want to make profits from
fluctuations in commodity
prices, security prices, interest rates and foreign exchange
rates .A cash rich firm is in a
better position to exploit such bargains. Hence, the firm with
such speculative leanings
may carry additional liquidity. The firm must decide the quantum
of transactions and
precautionary balances to be held, which depends upon the
following factors:
_ The expected cash inflows and outflows based on the cash
budget and forecasts,
encompassing long/short range cash needs of the firm.
_ The degree of deviation between the expected and actual net
cash flow.
_ The maturity structure of the firms liabilities.
_ The firms ability to borrow at a short notice, in case of
emergency.
_ The philosophy of management regarding liquidity and risk of
insolvency.
_ The efficient planning and control of cash.
OPTIMAL CASH BALANCE
Cash balance is maintained for transaction purposes and an
additional amount may be
maintained as a buffer or safety stock. It involves a trade off
between the costs and the
risk.
If a firm maintains a small cash balance, it has to sell its
marketable securities and
probably buy them later more often, than if it holds a large
cash balance. More the
number of transactions more will be the trading cost and
vice-versa; also, lesser the cash
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balance, less will be the number of transaction and vice-versa.
However the opportunity
cost of maintaining the cash rises, as the cash balance
increases.
KEY OF WORKING CAPITAL
On the basis of Concept
There are two concept of working capital
(i) Balance sheet Concept
(ii) Operating Cycle
(i) Balance Concept
There are two interpretation of working capital under the
balance sheet concept.
(a) Gross Working Capital
(b) Net Working Capital
(ii) Operating cycle Concept
The gross operating cycle of a firm is equal to the length of
the inventories and
receivables conversion period.
(c) Gross Operating Cycle: = RMCP + WIPCP+ FGCP+ RCP
Where RMCP = Raw material conversion period
WIPC = work in -progress conversion period
FGCP = Finished Goods conversion period
RCP = Receivables conversion period
RMCP = Avg. stock of RM / RM Consumption per day
WIPC = Avg. Stock of WIP / Total cost of production per day
FGCP = Avg. Stock of finished Goods / total cost of sales per
day
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RCP = Avg. Account Receivables / Net Credit sales per day
(d) Net Operating Cycle : Gross operating Cycle Period Payables
Deferral period
Payable Deferral Period =Avg. payables / Net credit purchases
per day
(I-C) WORKING CAPITAL MANAGEMENT IN BSNL
To maintain the optimum level of working capital in such a big
organization is really a
challenging task. The three basic components that determine the
level of working capital
in any organization are:-
Cash
Debtors\ B/R
Inventory.
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But before looking into these factors the finance policies and
revenue strategies must be
given due importance. These are as follows:-
Finance Policy of BSNL
Standards of Financial Proprieties
Ever officer incurring or authorizing expenditure from public
funds should be guided by
high standards of financial propriety. Every officer should also
enforce financial order and
strict economy at every step and see that all relevant financial
rules and regulations are
observed, by his own officer and by subordinates disbursing
officers.
Among the principles on which emphasis is generally laid are the
following:
1. Every officer is expected to exercise the same vigilance in
respect of expenditure
incurred from public moneys as a person of ordinary prudence
would exercise in respect
of expenditure of his own money.
2. The expenditure should be prima-facie more that the occasion
demands.
3. No authority should exercise its powers of sanctioning
expenditure to pass an order
which be directly or indirectly to its own advantages.
4. Expenditure from pubic moneys should not be incurred for
benefit of a person or
section of the people unless. a claim for the amount could be
enforce in a Court of Law,
or b. the expenditure is in pursuance of a recognized policy or
custom.
5. The amount of allowances granted to meet expenditure of a
particular type should be so
regulated that the allowances are not on the whole a source of
profit to the recipients.
6. The responsibility and accountability of every authority
delegated with financial
powers to procure any item or service on Government account is
total and indivisible.
Government expects that the authority a concerned will have the
public interest
uppermost in its mind while making a procurement decision. The
responsibility is not
discharged merely by the selection of the cheapest offer.
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7. Whenever called for, the concerned authority must place on
record in precise terms, the
considerations which weighed with it while talking the
procurement decision.
Revenues Strategies
The telecom sector is the most competitive sector post
liberalization. This has resulted in
a movement from growth based business model that emphasized
growth in numbers to
profit-based model where the success is measured by margins.
BSNL as part of the
transition has to adopt both cost reduction and revenue
enhancement measures, which
would directly impact profitability.
It is evident that there is a declining trend in basic services
and there is stagnation in
cellular revenues. Revenue maximization strategies will have two
components, one
internal to the organization and the other external. The
internal aspect would involve an
initiative for change of process, technology, organizational
structure etc. In this context,
revenue assurance is the key to improving the bottom line for
BSNL. This is proactive
strategy to capture all revenues due for the services provided.
Presently, BSNL generates
bills through different softwares across the zones of operation,
which are disintegrated
and provide only basic solutions. The industry standard for
revenue leakage is about 3 to
7% percent of revenue, which in money terms translates to about
Rs.2100 crores for
BSNL. Therefore plugging revenue leakages is just the first and
most obvious part of a
Revenue Assurance initiative. The key concerns for BSNL for
effective revenue
realization are
_ The delay in customer billing after activation
_ Time lag between calls generated and billed
_ Scope of fraud
_ Non-availability of uniform database.
Therefore the focus should be on immediate implementation of CDR
based billing. This
would require huge investment but the return would more than
commensurate. The
software should be scalable and be able to incorporate all the
next generation value
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added services. The implementation of CDR based system will also
generate the
following benefits:
_ Plugging of leakage of revenue.
_ Formulation of appropriate marketing strategies.
On the basis of our research in the BSNL, Cash, Debtors,
Inventories are managed
in the organisation, in the under mentioned manner.
CASH AND BANK BALANCES MANAGEMENT
The unit is dependent on the Corporate Office for the
procurement of the cash. The
Corporate Office fulfills all the cash requirements of the unit.
The unit prepares cash
budget for the whole year. A copy of the cash budget is sent to
the Corporate Office. The
Corporate Office examines the cash budget and sanctions the
funds accordingly. The
current position of the company is as follows.
Bank reconciliation statements in respect of six collection
accounts of units under four
circles have not been prepared. In fourteen circles, it has been
noticed that cheques
deposited with the bank & TT sent, have not been credited in
the relevant bank accounts
of the company amounting to Rs. 8,596 lakh (P.Y. Rs. 4,012 lakh)
as on 31.03.2009. The
management has taken up the case with the concerned banks for
early crediting of the
amount in the respective account.
In sixteen circles (P.Y. eleven circles), unlinked credit items
amounting to Rs. 1,677 lakh
(P.Y. Rs. 2,160 lakh) and in thirteen circles (P.Y. nine
circles) unlinked debit items
amounting to Rs. 1,446 lakh (P.Y. Rs. 907 lakh) are appearing in
the bank reconciliation
statement as at 31.03.2009. The management is in the process of
reconciling all such
items at the earliest possible.
Bank balances in one circle include cheques in hand pending to
be deposited in to bank
on 31.03.2009. Amount has not been quantified. In three circles
cash/cheque/DD
amounting to Rs. 46 lakh (P.Y. not ascertained) has been
received but remains pending
to be accounted in the books as on 31.03.2009.
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DEBTORS MANAGEMENT
According to the extent of security deposits held by the
company, thecclassification of
the sundry debtors as secured unsecured/considered good and
considered doubtful, to the
extent available as per sub ledger is as follows:
Rs. In lakhs
PARTICULARS AS AT 31ST MAR. 2009 AS AT 31ST MAR. 2008
Considered good & secured 127592 179713
Considered good but
unsecured
122543 145959
Doubtful Debts 399731 422609
Total 649866 748281
In twenty eight circles, the difference in the closing balance
of subsidiary ledger and the
sundry debtor figure of the General Ledger has been noticed the
General Ledger balance
which are considered for preparation of financial statement,
being more by Rs. 8,788
lakh (P.Y. Rs. 13,887 lakh - GL excess) to the extent
identified. The management is in
the process of reconciling these differences; pending
reconciliation no adjustment has
been made. The provision for doubtful debts is made on the basis
of information
available in the subsidiary records.
The requirement of Schedule VI of the Companies Act, 1956 has
been complied with
respect to classification of Sundry Debtors as Secured,
Unsecured & Doubtful and with
respect to age wise analysis as Debtors exceeding six months and
other debts as per sub
ledger.
INVENTORY MANAGEMENT
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Inventories, in BSNL, are valued at cost or net realizable value
as the case may be cost
ascertained generally on weighted average method; obsolete/non
moving inventories are
valued at net realizable value. The position of inventories as
on 31st march 2009 is as
follows.
Physical inventory taken is being reconciled with the detailed
inventory records and the
same will be further reconciled with the balance as per the
financial books. Prices for the
transfer of stock from Telecom Factories to circles for
self-consumption are
predetermined. The predetermined rates include direct cost
including overhead allocation
at a fixed rate. This practice has resulted in internal profit
of Rs. 1,404 lakh (P.Y. Rs.
1,546 lakh) for the year ended 31st March 2009 arising out of
such transfer. The said
amount has been netted off against the administrative expenses
in the profit and loss
statement for the year since it is not possible to identify the
individual items of stores,
which have been capitalized or expensed off.
In certain cases, the Company has placed orders for procuring
inventory at provisional
prices say 80-90% of the previous purchase price. Final purchase
price in such cases is
determined at a later date. Price difference in such cases is
adjusted on the total material
available in stock at the time of finalization of purchase
price. The proportionate price
differential on the already consumed material is adjusted on the
existing stock.
In all circles, the non-moving, slow moving and obsolete
inventories are in the process of
identification. Pending finalization of the process, no
provision if any, that may be
required, has been made.
At several locations physical verification of stock has been
conducted by the
management during the year. Physical inventory taken is being
reconciled with the
detailed inventory records and the same will be further
reconciled with the balance as per
the financial books. In all circles, the difference between the
Store Ledger and the
General Ledger to the extent identified amounting to Rs. 575
lakh (net) has been noticed
and is under reconciliation. The consequential adjustment will
be made after the process
of reconciliation is over.
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CHAPTER II
OBJECTIVE OF THE STUDY
The basic objective of the report is to evaluate the Performance
of Working Capital in
BSNL regards to all factors includes Liquidity, Cash, Debtor and
Inventory so as to
optimize the resources of Working Capital.
In nutshell the project seeks the position of Working Capital in
BSNL.
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CHAPTER III
ANALYSIS AND FINDINGS
(3-A) Cash Management
DIFFERENT SOLUTION FOR CASH MANAGEMENT
SOLUTION OF THE PROBLEM OF CASH MANAGEMENT WITH THE HELP OF
CERTAIN RATIOS
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CURRENT RATIO
It is the best ratio to find relationship between the current
assets and current liabilities of
BSNL. We can easily calculate the current ratio with the help of
the following formula.
Current ratio = current assets/current liabilities
Interpretation: -
As we know that the current ratio of any company may be 2:1 but
according to the U.S.A.
Accounting standard a company should maintain a ratio of
1.33:1.
From the above table we can analyze that the current ratio of
BSNL in 2005 is 2.6:1
which has risen to 3.07:1 in 2006, which shows an increase in
current assets greater than
the increase in current liabilities. In 2007 the ratio has
increased to 3.22:1, in 2008 it has
risen upto 3.33:1, which shows that the increase in current
assets is more than current
Years Calculations Ratio
2004-2005
2005-2006
3847879/1461541
4953909/1612334
2.6:1
3.07:1
2006-2007 5374788/1667919 3.22:1
2007-2008 5805843/1739788 3.33:1
2008-2009 5774861/2072702 2.78:1
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liabilities consistently for three years. In 2009 the ratio has
decline to 2.78, which shows
that the increase in current liabilities is more than current
assets in this year.
LIQUIDITY RATIO:-
This ratio establishes a relationship between quick assets and
current liabilities.
The major objective to compute this ratio is to measure the
ability of the firm to meet its
short-term obligations as and when due without relying upon the
realization stock.
We can easily calculate this ratio with the help of the
following formula:
Liquidity ratio= liquid assets/current liabilities
Interpretation
Liquid ratio indicates that what amounts of liquid assets are
available for each rupee of
current liability. We know that the liquid ratio of any company
may be 1:1, is considered
to be satisfactory. Now comparing the companys position
according to the liquid ratio.
In 2007-08 the ratio is 2.59:1 which the best liquidity position
years were for the
company.But it followed a downward trend in 2008-09 i.e. to
2.10. Otherwise in 2004-
05, 2005-06, 2006-07, the ratios are 1.66:1, 2.10:1, 2.45:1
respectively.
Years Calculations Ratio
2004-2005
2005-2006
2432016/1461541
3400497/1612334
1.66:1
2.10:1
2006-2007 4102291/1667919 2.45:1
2007-2008 4514851/1739788 2.59:1
2008-2009 4357927/2072702 2.10:1
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It means that the liquidity position of the company is
constantly increasing (upto 2008) it
is because of large amount of liquid assets as compared to
current liabilities. Also the
numbers of debtors of the company are increasing. This is not
better from managements
point of view. As more of amount is blocked in the debts and
chances of bad debt will
increase.
(3-B) Debtors Management
SOLUTION FOR DEBTOR MANAGEMENT PROBLEMS
Analysis of debtor management with the help of following
ratio
DEBTORS TURN OVER RATIO
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Debtors turn over ratio establishes a relationship between net
credit sales and average
trade debtors. The major objective to calculate ratio is to
determine the efficiency with
which the trade debtors are managed. We can easily calculate
this ratio with the help of
the following formula:
Debtors turn over ratio =Net credit sales / average debtor
YEAR 2004-05
ACTUAL
2005-06
ACTUAL
2006-07
ACTUAL
2007-08
ACTUAL
2008-09
ACTUAL
Turnover 3345004 3613894 3461621 3235953 3026857
AVERAGE Debtors
663703 646954 594135 552308 509302
Ratio 5.03:1 5.58:1 5.82:1 5.85:1 5.94:1
INTERPRETATION:
It indicates the speed with which the debtors turnover an
average each year. In general a
high ratio indicates the shorter collection period which implies
prompt payments by
debtors and a low ratio indicates a long collection period which
implies delayed payment
by debtors. So we can see from the above table that in the last
five years the company is
trying to improve the debtors turnover ratio.
In 2004-05 it is the least i.e. 5.03:1 but it again started
improving in 2005-06 5.58:1, in
2006-07 5.82:1, in 2007-08 5.85:1 in 2008-09 5.94:1. It depicts
that how efficiently
debtors are collected.
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AVERAGE COLLECTION PERIOD
AVERAGE COLLECTION PERIOD = 365/ Debtors Turnover
YEAR 2004-05
ACTUAL
2005-06
ACTUAL
2006-07
ACTUAL
2007-08
ACTUAL
2008-09
ACTUAL
Turnover 3345004 3613894 3461621 3235953 3026857
AVERAGE Debtors
663703 646954 594135 552308 509302
Ratio
Days of inventory
5.03:1
73
5.58:1
65
5.82:1
63
5.85:1
62
5.94:1
61
Interpretation
We can check the managerial efficiency with the help of this
ratio by the comparison of
average collection period and credit policy of the company. From
the table we can
analyze that in the year 2004-05 it was 73 days , but in year
2005-06 & 2006-07 there
was a decrease and it falls down to 65 & 63 respectively
.
This indicates that the company was following a liberal policy,
comparatively, in 2004-05
but it improved in the succeeding years. If the days are
increasing it indicates that the bad
debts are also increasing but the case is just reverse in BSNL.
It is difficult to lay down a
standard collection period; it depends upon the nature of the
business. As a general rule
the receivables should not exceed 4 to 5 months of credit
sales.
(3-C) Inventory Management
SOLUTION FOR INVENTORY MANAGEMENT PROBLEMS
Analysis of inventory management with the help of following
ratio
INVENTORY TURN OVER RATIO
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Inventory turn over ratio establishes a relationship between net
credit sales and average
inventory. The major objective to calculate ratio is to
determine the efficiency with which
inventories are managed. We can easily calculate this ratio with
the help of the following
formula:
Inventory turn over ratio =Net credit sales / average
inventory
Days of Inventory Holding =365 / inventory Turnover Ratio
YEAR 2004-05
ACTUAL
2005-06
ACTUAL
2006-07
ACTUAL
2007-08
ACTUAL
2008-09
ACTUAL
Turnover 3345004 3613894 3461621 3235953 3026857
AVERAGE Inventory
184480 186250 188333 188664 188404
Ratio
Days of Holding
18.13:1
20
19.4:1
19
18.38:1
20
17.15:1
21
16.06:1
23
INTERPRETRATION
If we see from the above table that the days of inventory
holding in the year 2005-06 has
come down to 19 days from 20 days in the previous year. In spite
of increase in turnover
i.e. 3613894 in 2005-06 from 3345004 in the year 2004-05, the
days of inventory holding
decreases. This indicates that the company is using effective
strategy to bring down its
inventory level. This makes very less investment in inventory.
But from 2007 the case is
just reverse. The inventory holding period has increased
consistently.
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(3-D) SWOT Analys is
STRENGTHS
Pan-India reach.
Experienced telecom service provider.
Total telecom service provider.
Huge Resources (financial & technical pool).
Huge customer base.
Most trusted telecom brand.
Transparency in billing.
Easy deployment of new services.
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Huge Optical Fibre network and associated bandwidth.
WEAKNESSES
Non-optimization of network capabilities.
Poor marketing strategy.
Bureaucratic organizational set up.
Inflexibility in mindset.
Limited number of value added services.
Poor franchisee network.
Legacy of poor service image.
Huge and aged manpower.
Procedural delays.
Lack of strategic alliances.
Problems associated with incumbency like unproductive rural
assets, social obligations.
Poor IT penetration within organization.
Poor knowledge Management.
OPPORTUNITIES
Tremendous market growing at 20 lac customers per month.
Untapped broadband services.
Untouched international market.
Can capitalize on public sector image to grab governments ICT
initiatives.
ITEB service markets.
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Diversification of business to turn-key projects.
Leveraging the brand image to source funds.
Almost un-invaded VSAT market.
Fuller utilization of slack resources.
Can make a kill through deep penetration and low cost
advantage.
Broaden market expected from convergence of broadcasting,
telecom and
entertainment industry.
THREATS
Competition from private operators.
Keeping pace with fast technological changes.
Market maturity in basic telephone segment.
Manpower churning.
Multinational eyeing Indian telecom market.
Private operators demand for sharing last mile.
Decreasing per line revenues due to competitive pricing.
Private operators demand to do away with ADC can seriously
affect revenues.
Populist policies of government like OneIndia rates.
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CHAPTER- IV
CONCLUSION
In short time I have done vocational training in BSNL. It is
very difficult to elaborate all
the work of working capital management. But I have tried my
level best to cover all the
work done by it.
This project was undertaken in order to know the effectiveness
of working capital section
of finance department of the company. I would like to conclude
my project with these
points:
The company is able to reduce its working capital from, 1647722
lacks to
3208281 lacks in a span of five years without affecting the
sales of the company
which means that company is sincerely utilizing its funds and
has reduced the
locking of funds.
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The current liabilities of the company have increased which
means that company
has adopted a good realization policy.
The increased current liability is about 460378 lacks in just a
span of five years.
The current ratio of the company in last five years has
increased from 2.6 to 2.78
which revels that company is moving from conservative working
capital strategy
to aggressive working capital strategy.
The quick ratio of the company has inclined from 1.66 to 2.10 in
the span of five
years.
The latest working capital ratio indicates the efficiency of
utilization of net
working capital is increased from 2.427 to 6.891 in a span of
five years.
The current assets turnover ratio has increased from .63 to 1.18
in a span of six
years which indicates that current assets are efficiently
turning into sales.
The debtors turnover ratio has gone up from 5.03 to 5.94 which
show that the
company is collecting its debtors efficiently.
The debtors collection period has decreased from 73 days to 61
days which
shows that the company is collecting its debts speedily.
The inventory holding period has increased from 20 to 23 days
which shows that
inventory is not turning into finished goods very quickly and
the company has not
been able to reduce the locking of funds in inventories.
So at last I can say it was a good experience. I learnt a lot
from there and I
am sure that this knowledge will help me forever. I can never
forget these 45 days of
internship in BSNL.
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BIBLIOGRAPHY
To complete this summer training project report the following
sources were
referred:
www.bsnl.co.in
FINANCIAL MANAGEMENT - I.M. PANDAY
MANAGEMENT OF WORKING CAPITAL S.P.GUPTA
FINANCIAL ACCOUNTING- R. NARAYANASWAMY
BSNL- BALANCE SHEET
BSNL- ANNUAL REPORT
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59
(I-B) MEANING OF WORKING CAPITALDEBTORS TURN OVER RATIO
Debtors turn over ratio =Net credit sales / average
debtorINVENTORY TURN OVER RATIO
Inventory turn over ratio =Net credit sales / average
inventory
