HAL

ACKNOWLEDGEMENT

The report entitled “WORKING CAPITAL MANAGEMENT” a study in Hindustan Aeronautic Limited represents the guidance and co-operation of a few individuals, to whom I would like to express my deep sense of gratitude.

I wish to express my sincere thanks to Mr. Suresh Jain (Chairman), Mr. Manish Jain (Vice Chairman), Dr. A. K. Garg (Executive Director), M.P. Singh (HOD), Dr. Sonia Gupta (Course coordinator & project in charge, MBA), and other faculty members for their consistent advice, encouragement and inspiration throughout the project. I would also like to thank Miss Kanika Jain (internal guide) for helping me in completing this project report.

I also express my sense of gratitude to Mr. Arun Narula, Manager (Budget), HAL, Accessories Division, Lucknow. I thank him for his constructive help & valuable suggestions.

At last but not the least I would like to thank my family members and my friends for their help in completing this project.

AKSHAY SRIVASTAVA

Working Capital Management

EXECUTIVES SUMMARY

Finance as a subject of study, has received wide-spread support from both academic and business segment people.

The topic “WORKING CAPITAL MANAGEMENT” in HAL was selected as to understand the financial need and importance with special reference to HAL, Accessories Division, Lucknow.

As the working capital refers to the administration of all the analysis of working capital, ratios and sources and application of funds and the company by studying, interpreting various financial statements using various techniques such as comparative statements analysis, funds flow statement analysis etc.

Even efforts have been made to collect the relevant information about the topic. The present study about WORKING CAPITAL MANAGEMENT in HAL Accessories Division, Lucknow it based on my six week project study in FINANCE AND ACCOUNT DEPARTMENT in HAL.

This training gives me an opportunity to make a study and analysis the system adopted by the organization. It enables me to build the practical knowledge acquired during the class study with practical training received during my project.


Table of Contents

a) Introduction of topic.

b) Objective of the study.

c) Scope & importance.

d) Company profile.

e) Literature review.

f) Research Methodology.

g) Data Analysis & Interpretation.

h) Findings.

i) Suggestions.

j) Limitations.

k) Conclusions.

l) Bibliography.

m) Annexure.


Introduction of topic

This project has given me the opportunity to get aware with the HAL, its environment and functioning of the Finance & Accounts Department. This project report is divided into three different parts.

First part of the includes information about the organization like vision and mission of HAL, its values, financial position, achievements, product line etc is given.

The second part of the report focused on the whole Finance & Accounts Department. This includes objectives & functioning of the various sections of Finance & Accounts Department of the Accessories Division of HAL

Last part of the report focuses on the budgetary system. This includes detailed analysis of working capital, ratios and sources and application of funds and the company by studying, interpreting various financial statements using various techniques such as comparative statements analysis, funds flow statement analysis etc.


OBJECTIVE OF THE STUDY

This training as per scheduled under syllabi has been emphasis on getting aware with the practical environment of an organization and specifically with the concerned department related to the specialization. There are certain objectives stated as under:

1. To get aware with the procedure of financial department.

2. To know how the functions passes through other departments in relation to financial departments.

3. To become familiar with the formats of different documents and their meaning.

4. To know each departments decision effect on finance department and vice-versa.

5. To know organizational structure and specifically financial department.


SCOPE & IMPORTANCE

Keeping the magnitude of the work in mind the scope of the study has

been determined. It covers the outset, a description of the role played by the

corporation in improving financial strength of organization. The study has

emphasized working capital and its application in different enterprises.

To study the components, determinants of working capital. To study how to keep the capital that is tied up in the working capital

cycle at a minimum and maximizing profit. To study how HAL finances working capital requirements of the firms. Interpreting, analyzing based on the various ratios, the liquidity position

of HAL. To ascertain the amount of working capital.



2.1 GENERAL PROFILE

Hindustan Aeronautics Limited (HAL) based in Bangalore, India, is one of Asia's largest aerospace companies. Under the management of the Indian Ministry of Defence, this public sector company is mainly involved in aerospace industry, which includes manufacturing and assembling aircraft, navigation and related communication equipment, as well as operating airports. HAL built the first military aircraft in South Asia and is currently involved in the design, fabrication and assembly of aircraft, jet engines, helicopters and their components and spares. It has several facilities throughout India including Nasik, Korwa, Kanpur, Koraput, Lucknow, and Hyderabad. The German engineer Kurt Tank designed the HF-24 Marut fighter-bomber, the first fighter aircraft made in India.

2.2 HISTORY OF THE COMPANY

Hindustan Aeronautics has a long history of collaboration with several other international and domestic aerospace agencies such as the Airbus Industries, Boeing, Sukhoi Aviation Corporation, Israel Aircraft Industries, RSK MiG, BAE Systems, Rolls-Royce plc, Dassault Aviation, Dornier Flugzeugwerke, Aeronautical Development Agency and Indian Space Research Organization.

HAL was established as Hindustan Aircraft in Bangalore in 1940 by Walchand Hirachand to produce military aircraft for the Royal Indian Air Force. The initiative was actively encouraged by the Kingdom of Mysore, especially by the Diwan, Sir Mirza Ismail. The British Government bought a one-third stake in the company by April 1941 as it believed this to be a strategic imperative. Later in April 1942, it bought out the stakes of Walchand Hirachand himself and other promoters so that it can act freely. The decision by United Kingdom was primarily motivated to boost British military hardware supplies in Asia to counter the increasing threat posed by Imperial Japan during Second World War. However, the Mysore Kingdom refused to sell its stake in the company but yielded the management control over to the British Government. Thus, within 2 years of establishment, it was nationalized.


http://en.wikipedia.org/wiki/Mirza_Ismail

http://en.wikipedia.org/wiki/Kingdom_of_Mysore

http://en.wikipedia.org/wiki/Royal_Indian_Air_Force

http://en.wikipedia.org/wiki/Walchand_Hirachand

http://en.wikipedia.org/wiki/Indian_Space_Research_Organisation

http://en.wikipedia.org/wiki/Aeronautical_Development_Agency

http://en.wikipedia.org/wiki/Dornier_Flugzeugwerke

http://en.wikipedia.org/wiki/Dassault_Aviation

http://en.wikipedia.org/wiki/Rolls-Royce_plc

http://en.wikipedia.org/wiki/BAE_Systems

http://en.wikipedia.org/wiki/Mikoyan

http://en.wikipedia.org/wiki/Boeing

http://en.wikipedia.org/wiki/Kurt_Tank

http://en.wikipedia.org/wiki/Germany

http://en.wikipedia.org/wiki/Hyderabad,_India

http://en.wikipedia.org/wiki/Lucknow

http://en.wikipedia.org/wiki/Koraput

http://en.wikipedia.org/wiki/Kanpur

http://en.wikipedia.org/wiki/Korwa

http://en.wikipedia.org/wiki/Helicopter

http://en.wikipedia.org/wiki/Aircraft

http://en.wikipedia.org/wiki/South_Asia

http://en.wikipedia.org/wiki/Government-owned_corporation

http://en.wikipedia.org/wiki/Ministry_of_Defence_(India)

http://en.wikipedia.org/wiki/Aerospace

http://en.wikipedia.org/wiki/Asia

http://en.wikipedia.org/wiki/India

http://en.wikipedia.org/wiki/Bangalore

Hindustan Aeronautics Limited (HAL) came into existence on 1st October 1964. HAL was set up as a amalgamation of Hindustan Aircraft Limited along with Aeronautics India Limited and Aircraft Manufacturing Depot located in

Kanpur, India. Hindustan Aeronautics Limited has it headquarter located at Bangalore, India. HAL is one of the largest aerospace company which is run by the Ministry of Defense. The principal activities of HAL involve manufacturing aircraft, aerospace, navigation, and instruments for communication purposes. Apart from these, few other activities performed by HAL are

designing, manufacturing, and collecting aircraft, jet engines, helicopters, along with their elements and spares. Hindustan Aircraft Limited which located at Bangalore was incorporated by the industrialist the late Seth Walchand Hirachand in December 1940. The Government of India became a stakeholder of the company in 1941 and seized the management department in 1942. HAL has 19 Production Units and 9 Research and Design Centers in 7 locations in India. The Company has an impressive product track record - 12 types of aircraft manufactured with in-house R & D and 14 types produced under license. HAL has manufactured over 3550 aircraft, 3600 engines and overhauled over 8150 aircraft and 27300 engines. HAL has been successful in numerous R & D programs developed for both Defense and Civil Aviation sectors. HAL has made substantial progress in its current projects:

Dhruv, which is Advanced Light Helicopter (ALH) Tejas - Light Combat Aircraft (LCA) Intermediate Jet Trainer (IJT) Various military and civil upgrades.

Dhruv was delivered to the Indian Army, Navy, Air Force and the Coast Guard in March 2002, in the very first year of its production, a unique achievement.

HAL has played a significant role for India's space programs by participating in the manufacture of structures for Satellite Launch Vehicles like

PSLV (Polar Satellite Launch Vehicle) GSLV (Geo-synchronous Satellite Launch Vehicle) IRS (Indian Remote Satellite)I NSAT (Indian National Satellite)


HAL has formed the following Joint Ventures (JVs) :

BAeHAL Software Limited Indo-Russian Aviation Limited (IRAL) Snecma HAL Aerospace Pvt. Ltd. SAMTEL HAL Display System Limited HALBIT Avionics Pvt. Ltd. HAL-Edgewood Technologies Pvt. Ltd. NFOTECH HAL Ltd

Apart from these seven, other major diversification projects are Industrial Marine Gas Turbine and Airport Services. Several Co-production and Joint Ventures with international participation are under consideration.

HAL's supplies / services are mainly to Indian Defence Services, Coast Guards and Border Security Forces. Transport Aircraft and Helicopters have also been supplied to Airlines as well as State Governments of India. The Company has also achieved a foothold in export in more than 30 countries, having demonstrated its quality and price competitiveness.

HAL has won several International & National Awards for achievements in R&D, Technology, Managerial Performance, Exports, Energy Conservation, Quality and Fulfillment of Social Responsibilities.

HAL was awarded the “INTERNATIONAL GOLD MEDAL AWARD” for Corporate Achievement in Quality and Efficiency at the International Summit (Global Rating Leaders 2003), London, UK by M/s Global Rating, UK in conjunction with the International Information and Marketing Centre (IIMC).

HAL was presented the International - “ARCH OF EUROPE” Award in Gold Category in recognition for its commitment to Quality, Leadership, Technology and Innovation.

At the National level, HAL won the "GOLD TROPHY" for excellence in Public Sector Management, instituted by the Standing Conference of Public Enterprises (SCOPE).

2.3 PRODUCTS OF HAL


PRODUCTS IN CURRENT MANUFACTURING RANGE

Su 30 MKI

Twin-seater, Multi-role, Long range Fighter / Bomber / Air Superiority Aircraft.

MiG-27 MSingle-seater Tactical Fighter / Bomber with variable sweep wings.


http://www.hal-india.com/AircraftNasik/products.asp

http://www.hal-india.com/AircraftBangalore/products.asp

http://www.hal-india.com/helicopter/products.asp

http://www.hal-india.com/AvionicsHyd/products.asp

http://www.hal-india.com/AvionicsKorwa/products.asp

http://www.hal-india.com/Accessories/products.asp

http://www.hal-india.com/Aerospace/products.asp

http://www.hal-india.com/EngineKoraput/products.asp

http://www.hal-india.com/Enginebangalore/products.asp

MiG-21 VARIANTSSingle-seater Front line Tactical Interceptor/ Fighter Aircraft.

METALLIC DROP TANKS

The Division manufactures different types of metallic drop (Jettisonable) tanks with capacity of 490 and 800 litres

UNDERCARRIAGE The Division has facilities and expertise in the manufacture and overhaul of Undercarriages of both MiG-27M and MiG-21 variants. The landing gears are of a conventional tricycle type and consist of one steerable Nose wheel leg and two Main

wheel legs to roll the aircraft in motion, on the ground, during take-off run and landing run. The Landing Gear legs have Pneumatic shock absorbers.

EJECTION-SEATThe Ejection Seat is installed to provide safe escape to the Pilot from the Aircraft while catapuling is effected with the help of a combined Ejection Gun. The Division has the facilities and expertise in the manufacture and overhaul of ejection seats for both MiG-27M and

MiG-21 variants.

FLEXIBLE RUBBER FUEL TANKSThe Division manufactures and supplies all types of Rubber Fuel Tanks required for MiG-21 Variants. The Rubber Fuel Tanks are provided with special protection coating against Ozone/heat and adverse climatic conditions. The Division has exported a large number of Rubber

Fuel Tanks.


CANOPYThe Division manufactures and overhauls canopies of MiG-21 variants and MiG-27M Aircraft.

AEROSPACE FASTENERS

The Division has a separate complex for manufacturing of Aerospace Fasteners, approximately 7000 types under 400 different standards. Some of the typical items are nuts, bolts, screws, washers, and rivets of various configurations, studs, dowels, pins, plugs, JO Bolts, pipe connections and springs.

AIRCRAFT WESTERN ORIGIN

JAGUAR INTERNATIONAL

HAL commenced production of Jaguar International - deep penetration strike and battlefield tactical Support Aircraft in 1979 under license from British Aerospace, including the engine, accessories and avionics. Jaguar aircraft is designed with 7 hard points ( 4 under wing, 2 over wing and 1 under fuselage) capable of carrying a huge load of various of weapons in different combinations to meet the Customers needs.

DHRUV (ADVANCED LIGHT HELICOPTER)

With a proven track record and established technology for manufacture of helicopters and its components, the Helicopter Division commenced series production of Dhruv (Advanced Light Helicopter) in 2000 - 2001. The ALH is a multi-role, multi-mission helicopter in 5.5 ton class, fully designed and developed by HAL. Built to FAR 29 specifications, Dhruv is designed to meet the requirement of both military and civil operators.

CHETAK

The Helicopter Division manufactures the versatile


and multi-purpose Chetek Helicopters for Civil and Military applications both for Domestic and International customers.

CHEETAH

The Helicopter Division manufactures the versatile and multi-purpose Cheetah Helicopters for Civil and Military applications both for Domestic and International customers.

LANCER

The Lancer Helicopter is a light attack helicopter developed by Hindustan Aeronautics Limited as a cost-effective airmobile area weapon system. The basic structure of the Lancer is derived from the reliable and proven Cheetah Helicopter.

2.4 OBJECTIVES OF HAL

To ensure availability of Total Quality People to meet the Organizational Goals and Objectives

To have a continuous improvement in Knowledge, Skill and Competence (Managerial, Behavioral and Technical)

To promote a Culture of Achievement and Excellence with emphasis on Integrity, Credibility and Quality

To maintain a motivated workforce through empowerment of Individual and Team- building

To enhance Organizational Learning

To play a pivotal role directly and significantly to enhance Productivity, Profitability and improve the Quality of Work Life


2.5 STRATEGY OF HAL

To be in total alignment with Corporate Strategy. Maintain Human Resource at optimum level to meet the objectives

and goals of the Company. Be competent in Mapping, Analysis and Upgradation of Knowledge

and Skills including Training, Re-training, Multi-skilling etc. Cultivate Leadership with Shared Vision at various levels in the

Organization. Focus on Development of Core Competence in High-Tech areas. Build Cross-functional Teams. Create awareness of Mission, Values and Organizational Goals

through out the Company. Introduce / Implement personnel policies based on performance that

would ensure growth, Rewards, Recognition and Motivation.

2.6 VISION

"To make HAL a dynamic, vibrant, value-based learning organisation with human resources exceptionally skilled, highly motivated and committed to meet the current and future challenges. This will be driven by core values of the Company fully embedded in the culture of the Organization".

2.6.1 MISSION

Enable all those working for HAL to give their best to ensure their all-round growth as well as that of the organization. To become a globally competitive aerospace industry while working as an instrument for achieving self-reliance in design, manufacture and maintenance of aerospace defense equipment and diversifying to related areas, managing the business on commercial lines in a climate of growing professional competence.

"To become a globally competitive aerospace industry while working as an instrument for achieving self-reliance in design, manufacture and maintenance of aerospace defense equipment and diversifying to related areas, managing the business on commercial lines in a climate of growing professional competence."


2.6.2 VALUES

CUSTOMER SATISFACTION

We are dedicated to building a relationship with our customers where we become partners in fulfilling their mission. We strive to understand our customers ' needs and to deliver products and services that fulfill and exceed all their requirements.

COMMITMENT TO TOTAL QUALITY

We are committed to continuous improvement of all our activities. We will supply products and services that conform to highest standards of design, manufacture, reliability, maintainability and fitness for use as desired by our customers.

COST AND TIME CONSCIOUSNESS

We believe that our success depends on our ability to continually reduce the cost and shorten the delivery period of our products and services. We will achieve this by eliminating waste in all activities and continuously improving all processes in every area of our work.

INNOVATION AND CREATIVITY

We believe in striving for improvement in every activity involved in our business by pursuing and encouraging risk-taking, experimentation and learning at all levels within the company with a view to achieving excellence and competitiveness.

TRUST AND TEAM SPIRIT

We believe in achieving harmony in work life through mutual trust, transparency, co-operation, and a sense of belonging. We will strive for


building empowered teams to work towards achieving organisational goals.

RESPECT FOR THE INDIVIDUAL

We value our people. We will treat each other with dignity and respect and strive for individual growth and realization of everyone's full potential.

INTEGRITY

We believe in a commitment to be honest, trustworthy, and fair in all our dealings. We commit to be loyal and devoted to our organization. We will practice self discipline and own responsibility for our actions. We will comply with all requirements so as to ensure that our organization is always worthy of trust.

2.7 INTERNATIONAL AND DOMESTIC DEALS

(I) INTERNATIONAL DEALS

The US$10 billion fifth-generation fighter jet program with the Sukhoi

Corporation of Russia.

US$1 billion contract to manufacture aircraft parts for Boeing.

Multi-role transport aircraft project with Ilyushin of Russia worth

US$600 million.

120 RD-33MK turbofan engines to be manufactured for MiG-29K by

HAL for US$250 million.

Contract to manufacture 1,000 TPE331 aircraft engines for Honeywell

worth US$200,000 each (estimates put total value of deal at US$200

million).


http://en.wikipedia.org/wiki/Honeywell

http://en.wikipedia.org/wiki/Ilyushin

http://en.wikipedia.org/wiki/Boeing

http://en.wikipedia.org/wiki/Sukhoi/HAL_FGFA

US$120 million deal to manufacture Dornier 228 for RUAG of

Switzerland.

Manufacture of aircraft parts for Airbus Industries worth US$150

million.

US$100 million contract to export composite materials to Israel

Aircraft Industries.

US$65 million joint-research facility with Honeywell and planned

production of Garrett TPE331 engines.

US$50.7 million contract to supply Advanced Light Helicopter to

Ecuadorian Air Force.[11] HAL will also open a maintenance base in

the country.

US$30 million contract to supply avionics for Malaysian Su-30MKM.

US$20 million contract to supply ambulance version of HAL Dhruv to

Peru.

Contract of 3 HAL Dhruv helicopters to Turkey in a deal worth

US$20 million.

Supply of HAL Dhruv helicopters to Mauritius' National Police in a

deal worth US$7 million.

Unmanned helicopter development project with Israel Aircraft

Industries.

(II) DOMESTIC DEALS


http://en.wikipedia.org/wiki/Mauritius

http://en.wikipedia.org/wiki/Turkey

http://en.wikipedia.org/wiki/Peru

http://en.wikipedia.org/wiki/HAL_Dhruv

http://en.wikipedia.org/wiki/Malaysia

http://en.wikipedia.org/wiki/Ecuadorian_Air_Force

http://en.wikipedia.org/wiki/Garrett_TPE331

http://en.wikipedia.org/wiki/Honeywell

http://en.wikipedia.org/wiki/Switzerland

http://en.wikipedia.org/wiki/RUAG

180 Sukhoi Su-30MKI being manufactured at HAL's facilities in

Nasik and Bangalore. The total contract, which also involves Russia's

Sukhoi Aerospace, is worth US$3.2 billion.

200 HAL Light Combat Helicopters for Indian Air Force and 500

HAL Dhruv helicopters worth US$5.83 billion.

US$900 million aerospace hub in Andhra Pradesh.

US$57 million upgrade of SEPECAT Jaguar fleet of the Indian Air

Force.

US$55 million fighter training school in Bangalore in collaboration

with Canada's CAE.

64 MiG-29s to be upgraded by HAL and Russia's MiG Corporation in

a program worth US$960 million. Licensed production of 82 BAe

Hawk 132.

Domestic Customers


2.8 CUSTOMERS

http://en.wikipedia.org/wiki/Canada

http://en.wikipedia.org/wiki/SEPECAT_Jaguar

http://en.wikipedia.org/wiki/Andhra_Pradesh


http://en.wikipedia.org/wiki/HAL_Light_Combat_Helicopter

http://en.wikipedia.org/wiki/Sukhoi_Su-30MKI

International Customers

Airbus Industrie, France APPH Bolton, UK BAE Systems, UK Chelton, UK Coast Guard, Mauritius Corporate Air, Philippines Cosmic Air, Nepal Dassault Aviation, France Dowty Aerospace Hydraulics, UK EADS, France ELTA, Israel Gorkha Airlines, Nepal Hampson, UK Honeywell International, USA Island Aviation Services,

Maldives Israel Aircraft Industries, Israel Messier Dowty Ltd., UK Mistubishi Heavy Industries,

Japan MOOG, USA Namibian Air Force, Namibia Peruvian Air Force , Peru Rolls Royce Plc, UK Royal Air Force, Oman Royal Malaysian Air Force,

Malaysia Royal Nepal Army, Nepal Royal Thai Air Force, Thailand Smiths Industries, UK Snecma, France Strongfield Technologies, UK The Boeing Aircraft Company,

USA Transworld Aviation, UAE Vietnam Air Force, Vietnam

Air India Air Sahara Airports Authority of India Bharat Electronics Border Security Force Coal India Defence Research & Development

Organisation Govt. of Andhra Pradesh Govt. of Jammu & Kashmir Govt. of Karnataka Govt. of Maharashtra Govt. of Rajasthan Govt. of Uttar Pradesh Govt. of West Bengal Indian Airforce Indian Airlines Indian Army Indian Coast Guard Indian Navy Indian Space Research Organisation Jet Airways Kudremukh Iron ore Company ltd. NALCO Oil & Natural Gas Corporation Ltd. Ordnance Factories Reliance Industries United Breweries

2.9 OTHER HINDUSTAN AERONAUTICS LIMITED PROGRAMS


http://en.wikipedia.org/wiki/Hindustan_Aeronautics_Limited

Apart from the aforementioned upgrades, DRDO has also assisted Hindustan Aeronautics with its programs. These include the HAL Dhruv helicopter and the HAL HJT-36. Over a hundred LRU (Line Replaceable Unit)'s in the HJT-36 have come directly from the LCA program. Other duties have included assisting the Indian Air Force with indigenization of spares and equipment. These include both mandatory as well as other items.

2.10 EVOLUTION AND GROWTH OF THE COMPANY

The Company's steady organisational growth over the years with consolidation and enlargement of its operational base by creating sophisticated facilities for manufacture of aircraft / helicopters, aeroengines, accessories and avionics is illustrated below.

2.11 SERVICES


http://en.wikipedia.org/wiki/HAL_HJT-36


2.12 DIVISIONS OF HAL


http://www.hal-india.com/accessoriesdivision.asp

http://www.hal-india.com/aerospacedivision.asp

http://www.hal-india.com/aircraftdivisionnasik.asp

http://www.hal-india.com/aircraftdivisionbangalore.asp

http://www.hal-india.com/avionicsdivisionhyderabad.asp

http://www.hal-india.com/avionicsdivisionkorwa.asp

http://www.hal-india.com/enginedivisionbangalore.asp

2.13 EXPORTS OF HAL


http://www.hal-india.com/enginedivisionkoraput.asp

http://www.hal-india.com/foundryandforgedivision.asp

http://www.hal-india.com/helicopterdivision.asp

http://www.hal-india.com/imgtdivision.asp

http://www.hal-india.com/overhauldivision.asp

http://www.hal-india.com/transairdivision.asp

2.14 FINANCIAL HIGHLIGHTS OF HINDUSTAN AERONAUTICS LTD.

Hindustan Aeronautics Limited (HAL) has achieved sales turnover of Rs.11,457

crores during the Financial Year 2009-10. The profit of the Company (Profit

Before Tax) soared to Rs.2,688 crores.

The highlights are given below: Rupees in Crores


Particulars 2008-09 2009-10Growth over

Previous Year

Sales 10373 11457 10.45%

VOP 11811 13490 14.22%

Profit before tax 2335 2688 15.12%

Profit after tax 1740 1967 13.05%

Gross Block 2638 2934 11.22%

ACCESSORIES DIVISION LUCKNOW

Accessories Division of HAL was established in

1970 with the primary objective of manufacturing

systems and accessories for various aircraft and

engines and attains self sufficiency in this area. Its

facilities are spread over 94,000 sqm of built area set

in sylvan surroundings. At present it is turning out

over 1100 different types of accessories. The

Division started with manufacturing various Systems

and Accessories viz, Hydraulics, Engine Fuel System, Air-conditioning and Pressurization, Gyro &

Barometric Instruments, Electrical System items, Undercarriages, Electronic items all under one roof

to meet the requirements of the aircraft, helicopters and engines being produced by HAL. This was

followed up with manufacturing the same range of accessories for MiG series of aircraft, International

Jaguar and repair / overhaul of Mirage-2000 & Sea-Harrier accessories. In addition the Division

manufactures systems for Civil Aircraft i.e. Avro, Dornier and AN-32 & cheetah, chetak & Advanced

Light Helicopters.

The Division, right from the beginning, laid a lot of emphasis on developing indigenous capability for

Design and Development of various System and Accessories. This capability has culminated in

indigenous design and development of a variety of systems and accessories for the Light Combat

Aircraft (LCA) and Advanced Light Helicopter (all versions i.e. Army, Airforce, Navy & Civil) - two

prestigious aircraft programs in the country and IJT (Intermediate Jet Trainer). The Division has also

developed and has made successful strides into the area of Microprocessor based control systems for

the LCA Engine as well as other systems.


The Division diversified not only in other defense

applications like tanks and armored vehicles for Army, it l

oks commercial applications of hydraulic items. Gyroscopic

Equipment, Special Purpose Test Equipment & Group

Support Equipment and successfully supplied in the market.

The Division has been in the forefront of accessories

development and supply not only to Indian Force but to

Army, Navy and various Defense Laboratories as well as for Space applications.


PRODUCTS

PRODUCTS IN MANUFACTURING RANGE

INSTRUMENTS, SENSORS, GYROS Flight instruments, Electrical Indicators, Fuel Gauging Probes, Gyros, Sensors and Switches

ELECTRICAL POWER GENERATION AND CONTROL AC/DC Generator, Control and Protection Units, Inverters, Transformer Rectifier Unit, AC/DC Electrical Systems, Actuators

LAND NAVIGATION SYSTEM MICROPROCESSOR CONTROLLER UNDERCARRIAGE, WHEELS AND BRAKES HYDRAULIC SYSTEM AND POWER CONTROL

Pumps, Accumulators, Actuators, Electro-selectors, Bootstrap Reservoirs and various types of valves

ENVIRONMENTAL CONTROL SYSTEM Pneumatics and Oxygen System, Cold Air Unit, Water Extractors, Valve - various types

EJECTION SYSTEM Ejection Seats, Release Units etc.

ENGINE FUEL CONTROL SYSTEM Booster Pumps, Main and Reheat Fuel Systems, Nozzle Actuators

GROUND SUPPORT EQUIPMENT AND TEST RIGS Ground Power Unit, Hydraulic Trolley and {Power Packs, Dedicated Test Rigs, custom-built Fuel/Hydraulic Test Rigs

EXPORT PRODUCTS

Supply of Rotables and Spares of Jaguar International and Cheetah (Lama) / Chetak

(Alouette) Helicopters

Repair / Overhaul of aircraft accessories of MiG series Aircraft, Jaguar International Aircraft,

Cheetah (Lama) / Chetak (Alouette) Helicopters and Dornier Multi-role Aircraft


Supply of Ground Support Equipment for Aircraft such as MiG-23 / 27 / 29, Mirage-2000,

Jaguar, Light Combat Aircraft (LCA) Su-30 MKI, Sea Harrier, Dornier DO-228, Avro HS-

748 (Specific Version), Cheetah (Lama) / Chetak (Alouette lll), Ml - 17, Advanced Light

Helicopter (ALH).

SERVICES

REPAIRS, MAJOR SERVICING AND SUPPLY OF SPARES

The Division carries out Repair and Overhaul of Accessories, with minimum turn-around-time.

Site Repair facilities are offered by the Division by deputing team of expert Engineers /

Technicians.

Services provided for

Military Aircraft

MiG Series

Jaguar

Mirage-2000

Sea - Harrier

AN-32

Kiran MK- I / MK- II

HPT - 32

SU-30 MKI

Civil Aircraft

Dornier-22B

AVRO HS-748

Helicopters


Chetak (Alouette)

Cheetah (Lama)

ALH (IAF / NAVY / COAST GUARD / CIVIL)

Sub-contract Capabilities

The Division has comprehensive manufacturing capabilities for various Hi-tech components,

Equipment and Systems to customer's specifications and ensures

high quality, reliability and cost effectiveness.

The Division has over 25 years of experience in producing aeronautical accessories making it

an ideal partner for the International Aero Engineering Industry.

The Division also manufactures and supplies complete range of components of Cheetah (Lama) &

Chetak (Alouette) Helicopters, Jaguar and MiG series Aircraft to Domestic and International

Customers to support their fleet.

FUTURE PLANS


HAL have perspective plan to have minimum growth of 400% (in respect of

turnover , PBT, value added and other financial parameters) up to 2016-2017

over current year and minimum turnover from non-defense customers is to

be 40%of total turnover(currently 4.43%) by 2016-2017.

In addition to the participation is almost all the aircraft manufacturing /

servicing programs at sister divisions ADL is also providing after sales

service for supporting the maintenance activities of IAF, Army, Navy, Coast

Guard by supplying various accessories against RMSOs and undertaking

repair and overhaul of rotables against R/OH task directly for these

customers. The quantum of such work is of the order of Rs. 100 crore / year

of repair / overhaul and Rs. 32 crore / year for spare supplies, which is likely

to grow to twice this level by the end of the plan period i.e. 2016-2017.


HAL – FINANCIAL PERSPECTIVE

HAL is manufacturing organization and its main customer is Indian Air Force,

which HAL various orders for manufacturing, repairs and overhauls, design and

development etc and provides 90% amount of ordering in advance and rest 10%

after receiving the complete order. So in this way HAL realizes 90% ordering

amount before start of the order and only 10% of the amount is blocked.

Therefore need of working capital in case of HAL is not much high in respect to

the other manufacturing organization. The organization has its corporate office

in Bangalore; all the financial activities are controlled from the head office.

Since it is a major manufacturing company of the government therefore no

investment policy is being followed by its Lucknow Division. The head office

controls all the financial policies of different divisions.


FINANCE

&

ACCOUNTS

DEPARTMENT

FINANCE AND ACCOUNT DEPARTMENT


The finance and accounts department occupies a very important position in any organization

as it has a role to play in almost the activities right from conceptualization of a project till its

successful implementation for smooth running and thereafter.

FUNCTIONS & RESPONSIBILITIES:-

The Department is entrusted with the following functions and responsibilities:

To ensure financial discipline as per guidelines of company.

To advise management for all matters having financial implications including

financial co-ordination before commitments are made.

Regulation of Payments for supply and services including Salaries, Wages and other

payments required for furthering legitimate objectives of the company.

Compilation of Accounts and getting the same audited by statutory and Govt.

Auditors.

Compilation and co-ordination of Fixed Price Quotation for sale of company’s

product and services as per the norms of the company.

Collecting dues on behalf of the company from the customers as well as other

agencies.

Financial Appraisal of the projects.

To prepare Budgets and to exercise budgetary control for the utilization of available

resources in the best possible manner.

Interaction with various operating levels in the Division.

Co-ordination and interaction with the Managing Director and Corporate office.

To have an effective M.I.S. for prompt reporting to the higher management for

decision making.

SECTIONS IN THE DEPARTMENT


Bills Payable

- Inland Bills

- Foreign Bills

- Services And Civil Works

Finance

Payroll

Cash Office

Bills Receivable

Cost Accounts

Material Accounts

Book Keeping

Budget & M.I.S.

Time Office

Provident Fund


BILLS PAYABLE

OBJECTIVES

To regulate the payments to suppliers and service providers as per the terms and

conditions of the Purchase order/Agreement.

To ensure that he payment to different parties are made promptly so that supplies and

services to the divisions maintained uninterruptedly in furthering the objects of the

Organization.

To ensure that proper accounting is done as per the requirement of statute/standing

instructions from the H .O.

To ensure that all statutory deductions e.g. T.D.S. etc, are made from the Bills of

suppliers / services providers and Deposited timely with the appropriate authority.


BILLS PAYABLE (INLAND)

FUNCTIONS

The following are the functions of Bills Payable (Inland) sections:

Payment of Advance to suppliers as stipulated in the Purchase order.

Payment of Final Bills.

Bank dealings with relation to suppliers e.g. Opening of Letter of Credit, Bank

Guarantee and payment to bank on the due dates.

Accounting and pricing of R.D.R.(Receiving cum discrepancy report).

Maintenance of Commitment Register for Budgetary purpose.

Payment of Misc. Advances / imprest approved by the competent authority.

FLOW OF WORK

1. All the purchase received is first entered in P.O. register before putting the same in

separate file.

2. If the P.O. stipulate for payment of Advance to vendor , an Advance payment is given

3. .After receipt of the goods, suppliers invoice duly linked with relevant R.D.R. are

received from the Purchase Department which are scrutinized with reference to

relevant Purchase order and then passed for payment after making adjustments for

Advance Payments already made. Remittance vouchers are prepared based on the

passed invoices and are forwarded to cash section for issuance of cheque.

4. In respect of P.O. where payment is stipulated as “Through Bank” the BPI section,

after intimation from the bank through Purchase Department, makes entry in the

purchase department, makes entry in the Register and after checking the documents

with the P.O. passes the invoice and sends the remittance voucher to the cash section

to arrange payment and collection of document from the bank by the Purchase

Department.


5. In respect of local purchases made on “cheque against delivery basis” the performs

invoice is linked with the relevant Purchase Order and the payment is authorized and

Remittance voucher is sent to the cash section for making payment.

6. Pending the receipt of R.D.R. from the transit in respect of material received but not

taken on charge due to delay in inspection / commissioning / rejections the payment

made to suppliers as advance on receipt of goods through Bank Documents / cheque

against delivery basis are put in G.I.T. i.e. goods in Transit Account at the year end.

7. In respect to that P.O. where material has been received but the payment has not been

released, the appropriate liability is provided for at the year end so as to account for

all expenses.

8. Follow up with I.M.M. department for release of R.D.R. in respect of those P.O’s.

where advance payment has been made so as to clear advances.

9. In respect of rejected materials, follow-up is to be made with I.M.M. department to

get those rejected materials replaced from the vendor so as to clear G.I.T.


BILLS PAYABLE (FOREIGN)

FUNCTIONS

Payment and accounting of:

- Advances to suppliers as per the terms & conditions of purchase order.

- License fees, Royalty etc as per the License agreement with the foreign

collaborators.

- Customs duty, Freight bills

- Final bills

Opening of Letter of Credit on the advice of I.M.M. department and liaisoning with

Bank for Foreign Exchange release and payment on maturity date.

Maintenance of commitment registers for budgetary purpose.

Maintenance of Deferred liabilities accounts.

Pricing of R.D.R. with P.O. rates and loading of customs duty, Freight and insurance

charges.

Priced R.D.R. is sent to Material Accounts Section / E.D.P. for punching in batch

mode for processing of Material Ledger.

FLOW OF WORK

1. All Purchase orders / contracts received are entered in the registers before opening of

separate file for each P.O.

2. All the L.C. opened in favour of Foreign Suppliers as per the terms of Purchase Order

are entered in Register to record the particulars about their extension, revalidation and

utilization. On maturity of L.C. the Bank advice and sent to cash section for

adjustment. Particulars of payments are also noted in the relevant P.O.

3. Where purchase terms provide for “documents through Bank” the Bills Payable

section after checking the documents with the purchase order passes the invoice and

issues Letter Authority to the Bank for arranging payment.


4. All the Contractual payments in respect of royalty, license fee and technical assistance

fees area made as per the license / collaboration agreement after obtaining Foreign

Exchange release from the Ministry, R.B.I. and producing N.O.C. from the Income

Tax Department.

5. Bills of entry received from the I.M.M. department are entered in the register to

record value of goods assessed, amount duly paid to ensure that the duty levied is

correct and the amount of duty paid is loaded to the inventory accounts correctly. A

copy of B/B is sent to the bank for forwarding the same to R.B.I.

6. After receipt of goods the Stores Department sends the RDR to the Foreign Bills

pricing and making necessary accounting.

7. Pending the pricing of RDR, the payments made to the foreign vendors through L.C. /

sight drafts are put temporarily in Goods in Transit Accounts.

8. In respect to Material dispatched by the vendor against P.O. raised by us, the liability

is provided in our books of accounts if payments have not been made for such

supplies.

9. Follow-up with I.M.M. Department for timely release of RDR so as to clear the G.I.T.

10. Co-ordination with the I.M.M. for the replacement of rejected materials so as to clear

G.I.T.


BILLS PAYABLE (SERVICES)

FUNCTIONS

Payment and accounting of advances.

Payment and accounting of running bills of the contractors.

Payment and accounting of final bills.

Adjustment and recovery of advances.

Accounting and adjustment of earnest money and security deposits.

Capitalization of buildings.

Payment of all services bills e.g. Telephone, Electricity, Water, Canteen,

Transportation and sanitation etc.

Payment of all consultants e.g. Architects, Advocates, Part Time Doctors etc.

Payment of Misc. Advances / Imprest approved by the competent financial authority

and their adjustments.

Payment of all casual employees.

FLOW OF WORK

1. Advances to contractors are given as per the acceptance letter given to the contractors

which are recovered with the interest by way of deduction from on account payment

bills in suitable percentage in relation to the progress of work so as to recover all sums

advanced by the time 80% of the contract is completed.

2. Material advances to the extent of 75% of the value of materials bought by the

contractors and lying at the site are given on certification of the Engineer in charge

and are recovered from running / final bills.

3. in respect of running bills the works accounts section links the bill, submitted by

contractor duly certified by Engineers-In-charge, with the contract / acceptance letter /

work order etc. and arranges payment after deducting Income Tax., balance security

deposit and other advances if any and retaining the prescribed percentage of the bill


towards the retention money. However, where the contractor has given bank

guarantee towards retention money no deduction is to be made on this account.

4. Similarly, the final bill submitted by the contractor is checked with the measurement

book and the gross amount payable is determined. The amount settled against running

bills, advances if any, penalty for delay in completion of work, recovery towards

consumption of material, T.D.S. etc is deducted from the gross amount payable. One

half of the security deposit refundable to he contractor is retained as Defect liability

deposit.

5. Capitalization the building and other capital works done on receipt of the completion

certificate and final bills and the classification of the building is done in accordance

with the rules in force.

6. Payment of bills for services e.g. Electricity, Telephone, Water etc. received from the

plant maintenance department/ concerned users duly verified by them and approved

by the competent authority are made.

7. Payment in respect of other services received by the company is made after it is duly

approved by the competent authority.


FINANCE SECTION

OBJECTIVES

To ensure that the financial discipline is maintained in the division.

To ensure that all expenditure is incurred with due regard to principles of financial

propriety.

To ensure that financial proposals are routed to the competent authority as per

delegation / sub-delegation of powers so as to ensure compliance of the provisions of

the Companies Act, the Memorandum and Articles of Association of the company

and the relevant rules and regulations of the company and the guidelines issued by the

company.

To ensure that the funds are available in the approved Capital & Performance Budget

so as to cover the relevant proposals.

To submit MIS reports to Corporate Office monthly.

FUNCTIONS

To scrutinize and give financial concurrence as per delegation of power for each

proposal involving :

- Capital expenditure

- Revenue expenditure

- Purchase of materials/ stores / tools and other services

- Manpower requirement

- Waiver of dues / write off of losses

- Cases involving relaxation of rules etc.as per delegation of powers.

- Sale, lease, alienation or disposal of company’s asset.

- Contracts entered into with suppliers / collaborators / sub-contractors.

- Award of contract in respect of civil / electrical works / other works / plant

orders.

- Project Reports.

Certification for availability of funds with reference to Capital & Performance

Budgets and appropriation of funds.


PAYROLL SECTION

OBJECTIVES

To regulate salaries and wages of all employees as per terms of employment.

To regulate payment of welfare facilities extended by the management e.g. Medical,

Interest subsidy, school fee etc.

Payment and recovery of various natures of advances such as Travel advances, LTC

advance, conveyance advance and timely adjustment thereof.

To ensure timely remittance of amounts recovered from employees to various

agencies like LIC, UPICA, HDFC, etc.

To ensure that all-statutory deductions e.g., PF etc are made from the salaries of the

employees and deposited timely with the appropriate authority.

To ensure proper accounting is done as per the requirement of the statue and

corporate office guidelines.

To adhere to the provisions laid down in the Personnel Manual relevant to the above

functions.

FUNCTIONS

Based on the appointment / transfer notification from Personnel department,

individual files are opened in the payroll section to record the particulars of the

employees such as grade / group date of appointment / transfer, department code, P.B.

No. , scale of pay, quarter details.

The payroll record is updated from time to time entering therein increment drawn,

promotion, transfers etc.

The master data in regard to all officers / employee is sent to the computer department

in respect of basic pay, DA, HRA, CCA etc. and this data is updated every month

depending upon the changes.

The deductions to be made are fed to the computer department by means of deduction

statement. Computer department in turn prints out the deduction statement in the form

of check list by the 25th of every month. Payroll section corrects the same with


reference to the various documents and recovery register and sends it back to the

computer department for the final adoption by 26th/27th of the month.

The computer department prints the payroll in the duplication in which one copy is

maintained in the payroll section for the record purpose and the original is distributed

to the employee concerned.

Disbursement of salary & wages

Payment of salary of officers is made through Bank based on the payroll received

from the computer department. In case of non-supervisory personnel the payment is

made by cash by various groups except few cases where the payment is made through

P.N.B. H.A.L. Branch. Cash is drawn two days in advance i.e. last day of the month

and filled in the employee and these employees are kept in the safe custody in cash

office for disbursement on 1st of next month.

Remittance of Recoveries

Various recoveries made from employees in respect of LIC premium, HDFC loan,

Income Tax etc are remitted to the various agencies within the stipulated date by

means of cheque.

Payment of advances and adjustment thereof and reimbursement of expenses

Various types of advances such as Car / Scooter advance, contingency advance,

TA/DA etc are paid and adjusted/ recovered as per the rules of the company. Also

reimbursement of expenses like medical, school fee, conveyance, etc is made as per

the rules of the company.

Accounting procedures

Monthly payroll journal entry is made both for supervisory and non-supervisory

personnel and sent to the book keeping section for adoption.

For payment made to persons from other divisions, proper accounting is done to

ensure that necessary advice is raised to the concerned division.


CASH SECTION

OBJECTIVES

To ensure timely and accurate receipts and payments of cash and cheques.

To ensure accounting of cash/ bank transactions is done as per the statute/ corporate

office guidelines.

To ensure safe custody of cash, cheque books, bank guarantees, deposit receipts etc.

To ensure timely drawls of cash from bank to cater to the daily needs of the payments

of cash vouchers.

FUNCTIONS

All amounts collected by different sections either from employees or from external

agencies is sent to the Cash Office through Cash Credit Vouchers.

Cash received in excess of the requirement, cheques, bank drafts, postal orders are

deposited into the company’s Bank account the same day for realization

.Payment to the employees such as medical reimbursement, TA / DA advance, Misc.

advance etc. are made through payment vouchers which are punched into the

computer through online system. The cash office in turn after proper identification

makes the payment through cash teller.

For payment to outside parties cheques are made on the basis of remittance voucher

sent by different section. These cheques are handed over to the Purchase department

for taking necessary action / sent to central registry for dispatch to the concerned

party.

Entries are made every day on the basis of Cash Credit vouchers and remittance

voucher and the cash balance is arrived at which is certified by the In-charge of cash

office.

Based on the analysis of the payment and receipt transactions computerized monthly

Journal Voucher is prepared and send to the Book Keeping section for the adoption.

Preparation of the monthly Bank Reconciliation statements and the liaisoning with the

bank authorities to check any discrepancy.


Periodical physical verification of cash is done by systems audit representatives and

by the internal auditors on the last day of the financial year.

BILLS RECEIVABLE SECTION

OBJECTIVES

To ensure that dues from the customers in respect of Goods supplied and services

rendered are recovered timely as per the Fixed Price Quotation / Price Catalogue

approved by the Ministry in accordance with the Government letter issued by the

Ministry of defense dated 24th Aug., 1995.

To ensure that invoices in respect of advances, stage payment, final deliveries are

raised timely in order to have smooth cash flow position.

To ensure that proper accounting is done as per the requirement of statute and

accounting instructions laid down by the corporate office.

To ensure that all statutory payments e.g. Sales Tax, Excise Duty, Custom duty is

received from the customer and is deposited timely with the appropriate authority.

FUNCTIONS

The following are the functions of the Bills Receivable section;

Preparation and rendering of the invoices to I.A.F. in respect of the following

activities in accordance with the guidelines laid down in the Government letter dated

30th Sept., 1997.

-Manufacturing activities

- Repair and overhaul

-Supply of the spares against R.M.S.

-Deferred revenue expenditure

The following documents shall be produced in support of the invoices rendered:

* Initial advances are recovered on the basis of Customer order:


i. Firm / forecast task given by the Air Force ;

ii. C.R.I. coordinated I.D.T.O. for the divisional task;

iii. R.M.S. order

*Subsequent stages / final payment are claimed on the basis of the milestones

achieved, dispatch advices, acknowledgement received from the Air Force in the

form Q423, Inspection Note certified by the C.R.I. about the progress of the work

done in respect of the repairs and overhaul work the payment is strictly regulated

based on the nature of work carried out e.g. Functional Test, Defect Investigation,

and Zero Hour Servicing, Repaired, Overhauled.

To prepare and render invoices to Non-IAF customers in respect of the following

activities :

- Sales for Customer Financed Projected

- Development Supplies and services rendered to civil customers

- Supplies against R.M.S. orders from the Army, Navy.

To raise the debit on the other divisions as S.I.T. in respect of parts/ accessories

supplied for the fulfillment in Engines/ Aircraft/ Helicopters manufactured by them

for supply to customers.

To claim payment from AO (DAD) on the basis of fitment details received from the

user divisions.

To submit invoices for reimbursement of royalty from Air Force and setup Sales for

these claims and create claims receivable.

To follow up with AO (DAD) and other customers for collecting the payment against

the invoice raised.

To provide details to the budget section for compliance of sales budget on the basis of

the sales order, firm / forecast task, I.D.T.O. for the Budget estimates, Revised

estimates, F.C.

To collect Sales Tax from the customers and deposit the same.

To compile Sales Tax returns and submit the same to the IMM department for

onwards submission to Sales tax authorities for Assessment.

COST ACCOUNTS SECTION


OBJECTIVES

To establish a costing system in line with the activities and product range of the

division.

To determine the price releasable from the customer for the products manufactured /

repaired / overhauled / serviced / supplied by the division.

FUNCTIONS

To determine the rate of absorption / recovery of the labour and other overheads for

recovering labour cost on the different jobs undertaken i.e. Man-Hour rate

computation.

To accumulate the labour and overheads content of each activity Project-wise based

on the evaluated L.T.B. generated by E.D.P. from the Work Orders / Time Dockets.

To keep track of different jobs completed and jobs lying incompetent in different

stages over a reasonable period of time and to co-ordinate with the concerned

Production Controllers for justification for jobs lying unfinished beyond a reasonable

period of time and to ensure their early disposition

To review work orders on which no material / labour cost has been recorded and

finding out the reasons for the same.

To get the W.I.P. statement as on 31st March from E.D.P. for all manufacturing

components , sub-assembly W.I.P., assembly W.I.P. for physical verification by the

concerned production shops.

To ensure that the valuation of W.I.P. has been done correctly keeping in view the

percentage of completion of the job.

To keep track of S.I.T. transactions with the different divisions.

To keep record of all I.D.T.O. received and issued.

To send debit advices to other divisions for the items dispatched against I.D.T.O.

received from them.

To accept the debit raised by other divisions for items received by division in respect

of requirement raised by H.A.L. through I.D.T.O.

To evaluate P.C. Memo for S.I.T. Issues, Russian consumption for overhaul and

amortization of D.R.E.


To work out the cost of sales and to reconcile the same with the Design Department

for various Customer Financed Projects.

To work out the royalty payable to different Licensors as per the License Agreement.

The Liaise with AO (DAD) for verification of claims in respect of lobour booking on

production and D.R.E. items and other issues like wage arrears, idle hours atc.

To prepare Fixed Price Quotation / Price Catalogue for the different items

manufactured / repaired / overhauled / serviced / supplied by the division and to get

the same approved by the AHQ.

To submit quotation in respect of enquiries received from Non-IAF and Civil

customers.


MATERIAL ACCOUNTS SECTION

OBJECTIVES

To ensure that all the receipts and issues of materials from stores are recorded and

accounted for properly.

To ensure that all non-moving / slow moving materials are identified as “surplus” by

the I.M.M. and a suitable redundancy provision is made against them and are disposed

off.

To ensure that Bin Card balances are reconciled with the Material Ledger balances in

co-ordination with I.M.M. and the balances of material ledger tallies with the General

Ledger.

FUNCTIONS

To send the priced R.D.R. received from the Bills Payable section to E.D.P. for

punching in the Batch Mode and thus all the receipts are recorded and control is

exercised over all the purchase value-wise.

To generate exception list the missing R.D.R. and getting it resolved with Bills

Payable section.

All the materials drawn excess when returned are credited to stores through Stores

Returned voucher.

The E.D.P. after processing of all M.R. / Issue Voucher prints the material Issue

analysis statements monthly indicated :-

- The cost of material drawn against various job Orders, Expense accounts;

- The cost of material issued to contractors and others;

- The cost of tools issued to various tool cribs from Main Tool Stores;

Based on the above statements accounting for issue of materials is done by debit

to Work-in-progress / expense / contractors account and credit to relevant

inventory account.


On the basis of list of materials / transfers reclassification indicating the material code

NO. / Quantity and value, necessary Journal entries are passed by debit / credit to

relevant inventory account.

On the basis of stock verification sheet indicating stock verification no. material code

no. , shortages / overages , necessary Journal entries are passed after obtaining

clarification from stores department by debit / credit to stock adjustment account and

credit / debit to relevant inventory account after taking approval of C.F.A. wherever

required for adjustment / write-off of stores.

A list of material not moved for over 5 years is given by E.D.P. which is received by

stores / concerned programming department materials not required for production or

for other purposes are identified and suitable section is taken by I.M.M. for finding

their usage in other divisions or is auctioned.

Redundancy provisions is made in he books of accounts at the rate of 100% for non

moving inventory and for closed projects as special provisions on th basis of list given

by E.D.P. Further a normal provision at 1.5% is made on the balance inventory.


BOOK KEEPING SECTION

OBJECTIVES

To compile the accounts of the company are prepared as per the requirement of the

statute / corporate office guidelines.

To assess the performance of the company in the financial terms such as sales,

debtors, profit, value of production, value-added etc.

To furnish data/ information in respect of Income Tax Assessment done at corporate

office.

To get the accounts of the company audited by the internal, statutory and government

auditors as prescribed by law.

FUNCTIONS

Journal entries originated by the various sections of the Finance and Account

Department are sent to the book keeping section. These entries are serially numbered

and punched into the computer and thereby posted to the general ledger.

Preparation of the trial Balance, Profit & Loss account and Balance Sheet. Accounts

are computerized and are drawn for every quarter as on 30 th June, 30th Sept, 31st

December, and final accounts as on 31st March of each financial year.

Maintenance of Fixed Asset register and depreciation schedule.

i. For all capital items purchases, RDR are furnished by the bills payable section like

details of assets like building etc capitalized are also furnished by civil works

section to the book keeping section. The maintenance of Asset Ledger is

computerized in which the details like date of purchase, nature of items, P.O. no.

location of asset etc are recorded.

ii. Depreciation on capital asset in calculated as per the policy of the company and is

reckoned accordingly as an operating expense of the division.

Inter Divisional Transaction are accounted through control account adjustment

advices which are reconciled twice in a year at the clearing house.

Physical verification of fixed asset is done as per the guidelines of the corporate

office.


To provide support to other sections of accounts in their reconciliation and control

function.

BUDGET SECTION

OBJECTIVES

To layout a comprehensive plan of action expressed in financial and physical terms

and to achieve the targets of the company against the available resources.

It is a tool in the hands of the management to establish goals, objectives, and targets

of the company and measures the performance against the above targets.

To ensure the overall control over expenditure, it is necessary that all expenditures

(except that of contingent nature) are authorized.

FUNCTION

To ensure that capital facility is made available in time to meet the production

requirement. The proposal are classified under three categories i.e. plant and

machinery, civil works and others.

Presenting estimates and expenditure in terms of function, programs activities and

project with their financial and physical aspects closely interwoven.

The targets set are critically reviewed from the point of view of availability of

resources and their optimal utilization and to achieve cost reduction.

Analysis of variance and to find out the reasons of such variances and take suitable

remedial measures.

All the important budgets like production, sales, profit and loss, working capital etc

after the approval of the Board are broken into the monthly budgets to ensure uniform

production from month to month.


TIME OFFICE SECTION

OBJECTIVES

Maintenance of leave records and feeding of attendance records to computer

department.

Maintenance of attendance record of Casual Mails, Project Engineer and Contract

Diploma Technicians.

Receipt of approved leave application.

To provide data for the vacation leave provisions to be made in the books of Account.

FUNCTIONS

To issue the leave cards for the Calendar Year to all the employees / officers of the

division.

To maintain the leave ledger PB No. wise for all the personnel. Credit is given to each

account according to his entitlement as per the guidelines laid down by the corporate

office and the posting is done simultaneously from the attendance reports received

from the concerned department.

To verify the applications of V.L. encashment and advice accordingly to payroll

section.

To make calculations for payment of attendance bonus to Group A to Group D

employees.

To make the calculations for provisions of vacation leave to be accounted for in final

accounts.

To verify the applications for advanced vacation leave approved through P/A

Department and making adjustment thereof in subsequent time period.

To maintain night duty roaster of officers deputed on night duty and to ensure that

time off claimed in lieu of such duty is not availed beyond 90 days.

To verify the time off claimed in the lieu of extra work done/ Sunday / sports duty /

scout duty etc.

To advice the payroll section for payment of ex-gratia in accident cases.


To provide data to payroll section for payment of single wages in lieu of work done

on general holidays and double wages in lieu of work done on National holidays.

To provide data for gratuity payment in case of final settlement.

To provide data to payroll section for deduction of time losson the basis of late arrival

report received from security department.


PROVIDENT FUND SECTION

OBJECTIVES

To ensure timely collection of Provident fund money recovered from members every

month by the employer.

To invest the provident fund accumulations improved securities as stipulated by

statute.

To make payment of loans to members as per the rules/ guidelines/ bye-laws.

To prepare Income and Expenditure account and Balance Sheet of the Fund and

getting the same duly audited and approved by Trustees.

To file the returns of Provident fund to RPFC.

FUNCTIONS

The PF subscription of members is deducted monthly from salary. The amount so

deducted (which is 12% of Basic pay and DA) along with Company’s contribution is

collected from the Payroll section before 10th of each month and credited to Fund’s

account.

Payment of loans (Refundable and Non-Refundable) to members as per the rules of

the company, subject to availability of funds.

The investment of Provident Find money is made in the approved securities and

details of investment is approved by the Board of trustees.

To watch timely recovery of interest ad keep watch on securities.

Interest is credited to the account of each member at such rate as may be determined

by the Board of Trustees, taking into account the income of the Trust during ach

Financial Year.

To maintain Family Pension Account of each member and remittance to RPFC at the

stipulated dates and file monthly and yearly returns.

To remit the amount of PF deductions for contractual / casual workers by cheque to

RPFC and file the return in respect of the same.

To distribute the annual statement of Pf to all the members in the format prescribed by

RPFC.


To make final payment of Pf due to a member on his retirement/resignation or to the

nominee in the case of death of a member as per rules.

To maintain accounts of Provident Fund Transactions and get audited by the statutory

auditors of the company and approved by the Board of Trustees.

To file the monthly returns in the prescribed formats and submit to RPFC by 25th of

each month in respect of Provident Fund and Family Pension Fund.

To forward insurance claims to LIC Bangalore in respect of deceased member.


FLOW OF WORK IN

FINANCE & ACCOUNTS DEPARTMENT

Functioning of the Finance & Account Department is divided into two parts:-

1. Personal Section

2. Official Section

PERSONAL

TIME SECTION

PAYROLL SECTION

CASH OFFICE

In Personal Section there are three departments Time Office, Payroll Section, Cash Office.

Functioning of Personal Section starts with the Time Office. This section is responsible for

calculating the attendance of employee and maintains records of it. Payroll section is

concerned with salary, wages, and incentives correspondence with the Time Office. In Cash

Office LTC reimbursement, encashment of leaves, medical payment is done by cash and

cheque. During the service period certain amount is deducted from the salary of the employee

for the future security of employee known as Provident Fund and Pension Fund.


OFFICIAL

FINANCE & BUDGET

(File Approval)

IMM

(Commercial Deptt.)

PURCHASE DEPTT.

(Purchase Order)

BILLS PAYABLE

(Payment)

COSTING & MATERIAL A/C

(Accounting Process)

BOOK KEEPING

(Book Entry)

BILLS RECEIVABLE

(Sales)


In Official section there are eight departments. First of all in Budget Department budget is

made for different Projects according to the order received. After that in Finance Section

scrutinizing function is performed this has a major role to play in capital and revenue

expenditure decision in regard to purchase of material / stores / tools and other services. Then

IMM gives the final approval and issues the purchase order. On the basis of this purchase

order Bills Payment department do the payment to the suppliers of raw material, machinery

and tools etc. when the raw material is transformed into the finished goods then the Costing

& Material account do the costing of it to find the final cost of the finished product. This data

is stored in the Book Keeping Section to know the financial position of the organization.

When these finished products are sold to the customers Bills Receivable section receive the

amount from customers. At last on the basis of outflows and inflows financial position of the

organization, profit and Loss of the organization is counted.



3.1 INTRODUCTION

Cash is the lifeline of a company. If this lifeline deteriorates, so does the company's ability to fund operations, reinvest and meet capital requirements and payments. Understanding a company's cash flow health is essential to making investment decisions. A good way to judge a company's cash flow prospects is to look at its working capital management (WCM).

Working capital, also known as net working capital, is a financial metric which represents operating liquidity available to a business. Along with fixed assets such as plant and equipment, working capital is considered a part of operating capital. It is calculated as current assets minus current liabilities. If current assets are less than current liabilities, an entity has a working capital deficiency, also called a working capital deficit.

A managerial accounting strategy focusing on maintaining efficient levels of both components of working capital, current assets and current liabilities, in respect to each other. Working capital management ensures a company has sufficient cash flow in order to meet its short-term debt obligations and operating expenses.

A company can be endowed with assets and profitability but short of liquidity if its assets cannot readily be converted into cash. Positive working capital is required to ensure that a firm is able to continue its operations and that it has sufficient funds to satisfy both maturing short-term debt and upcoming operational expenses. The management of working capital involves managing inventories, accounts receivable and payable and cash.

3.2NATURE AND TYPES OF WORKING CAPITAL

The term working capital refers to current assets which may be defined as (i) those which are convertible into cash or equivalents within a period of one year and (ii) those which are required to meet day to day operations. The fixed asset as well as the current assets, both requires investment of funds. The very basics of fixed assets decision process (i.e. the capital budgeting) & the working capital decision processes are different. The fixed assets involve long period perspective & therefore, the concept of time value of money is applied in order to discount the future cash flows: whereas in working capital considered. The fixed assets affect the long-term profitability of the firm while the current assets


http://en.wikipedia.org/wiki/Liquidity

http://en.wikipedia.org/wiki/Profit_(accounting)

http://en.wikipedia.org/wiki/Assets

http://en.wikipedia.org/wiki/Current_liabilities

http://en.wikipedia.org/wiki/Current_assets

http://en.wikipedia.org/wiki/Accounting_liquidity

http://www.investopedia.com/terms/c/cashflow.asp

affect the short-term liquidity position. So in the working capital management there are some decisions to be taken, as

1. What should be the total investments in working capital of the firm?

2. What should be the level of individual current assets?

3. What should be the relative proportion of different sources to finance the working capital requirements?

Thus, the working capital management may be defined as the management of firm’s sources and uses of working capital in order to maximize the wealth of the shareholders. The proper working capital requires both the medium term planning and also the immediate adaptations to changes arising due to fluctuations in operating levels of the firm. The term working capital may be used in two different ways,

Gross working capital (or Total working capital):

The gross working capital refers to the firm’s investment in all the current assets taken together. The total of investments in all the individual current assets is the gross working capital.

Net working capital:


The term net working capital may be defined as the excess of current assets over total current liabilities. It may be noted that to those liabilities which are payable within a period of one year. The extent, to which the payments to these current liabilities are delayed, the firm gets the availability of funds for that period. So a part of the funds required to maintain current assets is provided by the current liabilities & the firm will be required to invest the funds in only those current assets which are not financed by the current liabilities. In the broad sense, the term working capital refers to the gross working capital and represents the amount of funds invested in current assets. In narrow sense the term working capital refers to the net working capital. Net working capital is the excess of current assets over current liabilities i.e.;

NET WORKING CAPITAL = CURRENT ASSETS – CURRENT LIABILITIES.

Net working capital may be positive or negative, when the current assets exceed the current liabilities the working capital is positive or the negative working capital results when the current liabilities are more than 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 or the income of the business.

CURRENT ASSETS1) Cash in hand and bank balance2) Bills receivable3) Sundry debtors4) Short term loans and advances5) Inventories of stocks as:

Raw material Work-in-progress Stores and spares Finished good

6) Temporary investment of surplus funds.7) Prepaid Expenses8) Accrued incomes

CURRENT LIABILITIES1) Bills payable2) Sundry creditors or Account payable3) Accrued or Outstanding Expenses4) Short term loans, advances and deposits 5) Dividends payable6) Bank Overdraft7) Provision for taxation if it does not amount to appropriation of profits.


Thus both concepts of working capital i.e. the gross working capital & the net working capital have their own relevance & a Financial Manager should give due attention to both of these. The cash inflows & outflows for any firm are seldom synchronized and so, some working capital is necessary. The cash outflows occurring from the existence of the current liabilities are more easily & correctly predictable but the cash flows from current assets are difficult to be accurately predicted. The more predictable, these cash flows are, the less the net working capital required by the firm. The firm with more & more uncertain cash inflows must maintain higher &higher level of current assets adequate to cover the current liabilities.

Before analyzing working capital management, one needs to know what working capital is.

Working capital is simply the difference between current assets and current liabilities.

For example, if current assets = $1,000 and if current liabilities = $400, then working capital is equal to $600.

Working capital is an indicator of a firm's ability to take advantage of opportunities.

TYPES OF WORKING CAPITAL Working capital Can be divided into two categories on the basis of time: -

PERMANENT WORKING CAPITAL:-


This refers to that minimum amount of investment in all current assets which is required at all times to carry out minimum level of business activities. It represents the current assets required on a continuing basis over the entire year. Permanent working capital is permanently needed for the business and therefore it should be financed out of long-term funds.This is the reason why the current ratio has to be substantially more than ‘1’

TEMPORARY OR VARIABLE WORKING CAPITAL:-

The amount of such working capital keeps on fluctuating from time to time on the basis of business activities.

In other words, it represents additional current assets required at different times during the operating year.

Amount of working

Temporary

Capital (Rs.)

permanent

Time

(D#2 Source: Dr. S N Maheshwari, Financial Management.)

Temporary

Amount of working permanent

Capital (Rs.)

Time

(D#3 Source: Dr. S N Maheshwari, Financial Management.)

3.3 MANAGEMENT OF WORKING CAPITAL


Guided by the above criteria, management will use a combination of policies and techniques for the management of working capital. These policies aim at managing the current assets (generally cash and cash equivalents, inventories and debtors) and the short term financing, such that cash flows and returns are acceptable.

Cash management. Identify the cash balance which allows for the business to meet day to day expenses, but reduces cash holding costs.

Inventory management. Identify the level of inventory which allows for uninterrupted production but reduces the investment in raw materials - and minimizes reordering costs - and hence increases cash flow; see Supply chain management; Just In Time (JIT); Economic order quantity (EOQ); Economic production quantity

Debtors’ management. Identify the appropriate credit policy, i.e. credit terms which will attract customers, such that any impact on cash flows and the cash conversion cycle will be offset by increased revenue and hence Return on Capital (or vice versa); see Discounts and allowances.

Short term financing. Identify the appropriate source of financing, given the cash conversion cycle: the inventory is ideally financed by credit granted by the supplier; however, it may be necessary to utilize a bank loan (or overdraft), or to "convert debtors to cash" through "factoring".

3.3.1 ESTIMATING WORKING CAPITAL REQUIREMENTS

In order to determine the amount of working capital needed by a firm, a number of factors viz. production policies, nature of business, length of manufacturing process, rapidity of turnover, seasonal fluctuations, etc. are to be considered by the finance manager.

3.3.2 TECHNIQUES FOR ASSESSMENT OF WORKING CAPITAL REQUIREMENTS

ESTIMATION OF COMPONENTS OF WORKING CAPITAL METHODSince working capital is the excess of current assets over current

liabilities, an assessment of the working capital requirements can be made by estimating the amounts of different constituents of working capital e.g., inventories, accounts receivable, cash, accounts payable, etc.

PERCENT OF SALES APPROACH


http://en.wikipedia.org/wiki/Factoring_(finance)

http://en.wikipedia.org/wiki/Loan

http://en.wikipedia.org/wiki/Discounts_and_allowances

http://en.wikipedia.org/wiki/Credit_(finance)

http://en.wikipedia.org/wiki/Economic_production_quantity

http://en.wikipedia.org/wiki/Economic_order_quantity

http://en.wikipedia.org/wiki/Economic_order_quantity

http://en.wikipedia.org/wiki/Supply_chain_management

http://en.wikipedia.org/wiki/Cash_management

http://en.wikipedia.org/wiki/Debtor

http://en.wikipedia.org/wiki/Inventory

http://en.wikipedia.org/wiki/Cash_and_cash_equivalents

http://en.wikipedia.org/wiki/Cash

http://en.wikipedia.org/wiki/Asset#Current_assets

This is a traditional and simple method of estimating working capital requirements.

According to this method, on the basis of past experience between sales and working capital requirements, a ratio can be determined for estimating the working capital requirements in future.

WORKING CAPITAL CYCLE

Cash flows in a cycle into, around and out of a business. It is the business's life blood and every manager's primary task is to help keep it flowing and to use the cash flow to generate profits. If a business is operating profitably, then it should, in theory, generate cash surpluses. If it doesn't generate surpluses, the business will eventually run out of cash and expire. The faster a business expands the more cash it will need for working capital and investment. The cheapest and best sources of cash exist as working capital right within business. Good management of working capital will generate cash will help improve profits and reduce risks. Bear in mind that the cost of providing credit to customers and holding stocks can represent a substantial proportion of a firm's total profits.

There are two elements in the business cycle that absorb cash - Inventory (stocks and work-in-progress) and Receivables (debtors owing you money). The main sources of cash are Payables (your creditors) and Equity and Loans.

Each component of working capital (namely inventory, receivables and payables) has two dimensions ........TIME ......... and MONEY. When it comes to managing working capital - TIME IS MONEY. If you can get money to move faster around the cycle (e.g. collect monies due from debtors more quickly) or reduce the amount of money tied up (e.g. reduce inventory levels relative to sales), the business will generate more cash or it will need to


borrow less money to fund working capital. As a consequence, you could reduce the cost of bank interest or you'll have additional free money available to support additional sales growth or investment. Similarly, if you can negotiate improved terms with suppliers e.g. get longer credit or an increased credit limit; you effectively create free finance to help fund future sales. Symbolically the duration of the working capital cycle can be put as follows:

O = R + W + F + D – C

Where,

O=Duration of operating cycle;

R=Raw materials and stores storage period;

W=Work-in-progress period;

F=Finished stock storage period;

D=Debtors collection period;

C=Creditors payment period.

Each of the components of the operating cycle can be calculated as follows:-

Average stock of raw materials and stores

Average raw materials and stores consumptions per day

Average work-in-progress inventory

Average cost of production per day

Average book debts

Average credit sales per day

Average trade creditors

Average credit purchases per day

After computing the period of one operating cycle, the total number of operating cycles that can be computed during a year can be computed by


R=

W=

D=

C=

dividing 365 days with number of operating days in a cycle. The total expenditure in the year when year when divided by the number of operating cycles in a year will give the average amount of the working capital requirement.

3.4 REASONS FOR ADEQUATE WORKING CAPITAL

A firm must have adequate working capital, i.e., as much as needed by the firm. It should neither have excessive nor inadequate. Both situations are dangerous. Excessive working capital means the firm has idle funds, which earn no profit for the firm. Inadequate working capital means the firm does not have sufficient funds for running its operations, which ultimately results in production interruptions, and lowering down the profitability.It will be interesting to understand the relation between working capital, risk and return. In a manufacturing concern, it is generally accepted that higher levels of working capital decrease the risk and decrease the profitability too.

While lower levels of working capital increase the risk but have the potentiality of increasing the profitability also.

This principle is based on the following assumptions: -

There is direct relationship between risk and profitability --- higher is the risk, higher is the profitability, while lower is the risk, lower is the profitability. Current assets are less profitable than fixed assets. Short-term funds are less expensive than long-term funds.

3.5 OBJECTS OF WORKING CAPITAL MANAGEMENT

The need for working capital cannot be over emphasized. Every business needs some amount of working capital. So management of working capital is necessary. Working capital is needed for the following purpose:

For the purchase of raw materials, components and spares To pay wages and salaries To inure day-to-day expenses and overhead costs such as fuel power

and office expenses etc. To meet the selling costs as packing, advertising etc. To provide credit facilities to the customers


To maintain the inventories of raw materials, work-in-progress, spares and finished stock.

A finance manager should therefore, chalk out appropriate working capital management policies in respect of each of the components of working capital so as to ensure higher profitability, proper liquidity and sound structural health of the organization.In order to achieve this objective the finance manager has to perform basically following two functions: -

Estimating the amount of working capital. Sources from which these funds have to be raised.

3.6 SOURCES OF WORKING CAPITAL

The working capital requirements should be met both from short-term as well long-term sources of funds. It will be appropriate to meet at least 2/3 rd (if not the whole) of the permanent working capital requirements from long-term sources and only for the period needed.

The financing of working capital through short-term sources of funds has the benefits of lower cost and establishing close relationship with the banks.

Financing of working capital from long-term resources provides the following benefits:

It reduces risk, since the need to repay loans at frequent intervals is eliminated.

It increases liquidity since the firm has not to worry about the payment of these funds in the near future.


RESEARCH METHODOLOGY

The purpose of methodology is to describe the process involved is the research

work. This includes the overall research design, the data collection method

sampling procedure, and the field survey method & analysis procedures.

Meaning of Research:-

According to Redman & Mory:

“Research as a systematized effort to gains new knowledge”.

PLACE OF THE RESERCH:-

The research was conducted in Finance departments in HAL Accessories

Division Lucknow.

RESEARCH DESIGN:-

Research Design is a conceptual structure with research conducted.

There is no unique method, which can entirely eliminate the elements of under

taking. But Research methodology more than any other procedure can minimize

the degree of uncertainty, Thus it reduces the profit ability of making a wrong

choice amongst alternative causes of actions.

This is particularly significant in the light of increasing competitions & growing

size, which makes the task of choosing the best course of action difficult for any

business enterprise. It is imperative that any type of organization in the present

information coupled with tools of analysis for making sound decisions which

involved minimum risk.

The present study is based upon primary and secondary data. The

sources of primary data are the official records and discussion with the officers


in the finance dept. of the organization. The secondary sources of the data

include various publications of the organization and annual reports and audited

financial statements. The data, which are presented in this report, have been

taken from secondary sources. The data of Hindustan Aeronautics Limited,

Accessories Division, Lucknow, for the year 2008-09 and 2009-10 used in these

report have been taken from financial statements i.e., the Profit & Loss

Account, Balance Sheet for the relevant years.

TECHNIQUES OF DATA COLLECTION

Working capital management policy has a great effect on firm’s profitability, liquidity and its structural health.

For analyzing the performance of working capital management, simple

mathematical tools like Percentages, Averages, and Ratios have been used in

this project work. To know the financial performances of this division,

calculation of Operation Cycle, Earning before Interest & Taxes have been

calculated.

Primary data: Was collected through the discussion with the concerned

executives.

Secondary data: Was collected through the official records, various

publications of the organization, annual report and audited financial

statements.


DATA ANALYSIS AND INTERPRETETION

TABLE- 1

CALCULATION OF PERCENTAGE OF CASH AND BANK BALANCE TO THE CURRENT ASSETS (IN LAKHS)

PARTICULAR 2008-2009 2009-2010

A. Cash and bank balance (Rs)

19.98 11.95

B. Current Assets (Rs) 152518.97 260862.93

C. % of Cash and Bank

Balance to Current Assets (A/B*100)

0.013 0.004

CASH AND BANK BALANCE TO THE CURRENT ASSETS

2008-09 2009-100

0.0020.0040.0060.0080.010.0120.014

0.013

0.004

PERCENTAGES

INTERPRETATION

By analyzing the statements, it is observed that 0.013, 0.004 of current assets were held as cash in hand and cash at bank during the years 2008-2009 2009-2010 respectively. The cash management in HAL is centralized and managed by the corporate office.

On the basis of yearly budgets and performance of the division, the corporate office has fixed certain measures for smooth running of the business. They are:

Fixing the drawl limits: After analysis of budget and forecast given by the division, the corporate office has fixed drawl limit not exceeding 12 crores


per month. This ceiling does not include drawing the salaries and wage of the staff

Fixing the letter of credit: the limit for opening the fore cast irrevocable letter of credit is up to Rs 12 crores. If any urgency arises prior approval of the corporate office it may go beyond the limit.

By fixing these types of limits, the corporate office is in position to monitor its divisions, fund requirements and collections. By this process divisions are not in a position to withhold/block cash at their disposal because the net balance has to be transferred to the central account at the corporate office at daily basis. Even though we extract the information that will not signify the real norms.

ACCOUNTS RECEIVABLE:

Account Receivable of HAL, Koraput Division consists of sales to India air force (IAF) and very minor amount of foreign parties in real sense there is no such credit sales to Indian air force. The debts are pending for collecting due to want of clarification/ documentation or some other reason. The arrangement between India Air Force and HAL regarding payment based on the Fixed Price Quotation (FPQ). Initially the IAF & HAL have entered into an agreement for payment like Advance Payment depending on progress of the work & balance amount is to be paid after completion of work.

TABLE – 2CALCULATION OF PERCENTAGE OF ACCOUNTS RECEIVABLE TO THE CURRENT ASSETS (IN LAKHS)

PARTICULARS 2008-09 2009-10

A. Account receivable 5883.47 14655.86

B. Current assets 152518.97 260862.93

C.% of accounts receivable to current assets (A/B*100)

3.85 5.61


ACCOUNTS RECEIVABLE TO THE CURRENT ASSETS

2008-09 2009-100

1

2

3

4

5

6

3.85

5.61

PERCENTAGES

INTERPRETATION The above comparison shares that: The investment in Accounts receivables

is more during 2009-2010. By increasing more credit the sales have increased proportion. If more & more block of working capital. The increase in ratio indicates that the management wants to push off the accumulated stocks & go for fresh production. However the resultant credit period extended to the customer is to be received.

It had a sudden decrease in 2008-09 due to a sudden increase in current assets.

The percentages of accounts receivable to current assets has been 3.85% and 5.61% respectively.

TABLE – 3

CALCULATION OF AVERAGE COLLECTION PERIOD (IN LAKHS)

PARTICULAR 2008-09 2009-10

A. Debtors 5883.47 14655.86

B. Sales 140816.78 140991.83

C. Average collection period (A/B*360 days)

16 days 38 days

AVERAGE COLLECTION PERIOD


2008-09 2009-100

10

20

30

40

16

38

days

INTERPRETATION

From the above table we can analyze that:

The Average Collection Period (ACP) for the year 2008-09 & 2009-10 are 16 days and 38 days.

Normally 50-60 days is the lead-time for realizing the debtors for the enterprise like HAL.

The Average Collection Period for these years is much than required. The Average Collection Period shows the extent of time period & the

efficiency in the Collection of debtors. Thus to improve the efficiency of HAL unit at Lucknow has to shorten the

Average Collection Period. Thus reduce the liberal term to the debtors. Average Collection Period below would be better for HAL. As more than

95% of Collections are from Government there is no risk of bad debts.

INVENTORY MANAGEMENT IN HAL

There is a centralized stores department functioning in this division in co-ordination with stores department, purchase department & material control department. The responsibilities of each department have been laid down clearly by the management.

TABLE – 4


CALCULATION OF PERCENTAGE OF INVENTORY TO CURRENT ASSETS (IN LAKHS)


A. Inventories 94998.36 153860.31

B. Current Assets 152518.97 260862.93

C. Percentage of Inventory to Current Assets

(A/B*100)

62.28 58.98

PERCENTAGE OF INVENTORY TO CURRENT ASSETS

2008-09 2009-1057585960616263

62.28

58.98

percentage

INTERPRETATION

The holding of inventory is 13-62% of current assets. This percentage has been substantially increased from 2008-09 onwards but decreased in 2009-10. The main cause for the accumulation of inventory is to maintain sufficient space/raw materials to meet the emergency like war. Maximum material of HAL, Lucknow Division is imported from Russia, there for it is possible to decrease cost of transportation & also large-scale order will enable HAL to bargain for cost. The main cause for the accumulation of inventory is to maintain sufficient space/raw materials to meet the emergency like war to safeguard the system & depositing/utilizing the non-moving/slow moving items.

The percentages of inventory to the current assets are 62.28 and 58.98 in the year 2008-09 and 2009-10 respectively.

In 2008-09 the percentages of 62.28% of current assets were occupied by inventory where as the percentage has gone down.


The present system of procurement by HAL in just-in –time & no enterprise is willing to block its funds in terms of inventory as it is a sleeping investment.

At present the inventory held is huge as compared to the standard norms.

INVENTORY ANALYSIS & SELECTIVE CONTROLS:

If inventory analysis HAL, Lucknow Division follows ABC,VED,ADF & HMI Analysis then the inventory management of the organization functioning smoothly. Among all the analysis, ABC analysis is widely used in this Division. The procedures & categorization of this analysis followed by this Division are as follows:

The annual usage in units is to be calculated for each item based on forecast estimates.

The annual usage in units is to be multiplied with the unit cost to get the annual usage in rupees of each item.

The items are to be ranked from the highest annual rupee usage in the descending order to the lowest annual rupee usage an assign category.

CATAGORISATION OF ITEMS IN THE HAL, LUCKNOW DIVISIONITEM OF VALUE % OF ITEMS % OF AGE OF USAGE

A 05-10 70-80

B 15-20 15-20

C 70-80 05-10

TABLE – 5


CALCULATION OF RAW MATERIAL CONVERSION PERIOD (IN LAKHS)


A. Closing Raw Material 46818.85 77615.98

B. Raw material consumed 64227 123733.45

C. Raw material conversion period (A/B*360 Days)

263 days 226 days

RAW MATERIAL CONVERSION PERIOD

2008-09 2009-10200

220

240

260

280

263226

days

INTERPRETATION:

There is significance increases in raw material conversion period. The reason is most of the raw materials are produced from Russia. They are ordered in bulk and hence at the closing of the period stock of raw material more. As bulk orders will reduce the most of procuring division orders large amounts at a time. Increase in raw materials does not affect the raw material conversion period seriously.

Raw material conversion period is263 days in 2008-09, 226 days in 2009-10.

The raw material conversion period is very high during 2008-09 as compared to 2009-10.

Therefore, from the above discussion it is cleared that the raw material level does not affect the raw material conversion period.

The raw material conversion period for the year 2008-09 is 263 days. This was so high because of manufacturing of a new product the Engine SU – 30.

TABLE – 6


CALCULATION OF WORK IN PROGRESS CONVERSION PERIOD (IN LAKHS)

PARTICULARS 2008-09 2009-10A. Closing WIP (Rs.) 35794.14 72537.85B. Cost of production (Rs.) 145324.85 177735.54C. WIP Conversion period (A/B*360)

89 days 147 days

WORK IN PROGRESS CONVERSION PERIOD

2008-09 2009-100

40

80

120

160

89

147

days

NOTE: Cost of production = Sales +Closing balance of WIP–Opening balance of WIP +Closing balance of SIT–Opening balance of SIT.Where,WIP - Work in ProgressSIT - Stock in Trade

INTERPRETATION

WIP conversion period are 89 days and 147 days in 2008-09 and 2009-10 respectively.

The company has shown an efficient management labour force & efficient utilization of materials by maintaining a less work in progress conversion period in year 2008-09 as compared to2009-10.

Further to improve , it has to reduce the work in progress conversion period though aviation industry requires much time in work in progress, still constant vigil over reducing work in progress is appreciable.

Due to manufacturing of the new product SU – 30 the work in progress conversion has consumed more time in the 2009-10 i.e.147 days as compared to 2008-09.

TABLE – 7


CALCULATION OF FINISHED GOODS CONVERSION PERIOD (IN LAKHS)PARTICULARS 2008-09 2009-10A. Closing Finished Goods.

108719 116322.85

B. Cost of Goods Sold. 127809 128945.87

C. Finished Goods Conversion period (A/B*360 Days)

307 days 325days

FINISHED GOODS CONVERSION PERIOD

2008-09 2009-10295

300

305

310

315

320

325

330

307

325

days

NOTE: Cost of Goods Sold = Sales – Profit

INTERPRETATION:

Finished goods conversion period is 307 days and 325 days in 2008-09 and 2009-10 respectively.

The time period consumed by the company to the convert the finished in goods in to sales is very long.

TABLE – 8

CALCULATION PAYABLE DEFERRAL PERIOD (IN LAKHS)


PARTICULARS 2008-09 2009-10A. Creditors 23474.48 25846.90

B. Credit Purchase 132207.91 207532.20

C. Payable Deferral period (A/B*360 Days)

64 days 45 days

PAYABLE DEFERRAL PERIOD

2008-09 2009-10020406080

6445

days

INTERPRETATION

From the above table it is seen that:

The payable deferral period i.e. the credit period allowed by the creditors during the years 2008-09 and 2009-10 is 64 days and 45 days respectively.

This means that the amount payable to creditors was paid after a long period of credit purchase.

Where as in 2009-10, the payable deferral period was the shortest i.e. only 45 days, which means that creditors were paid within a very short span of time as compare to 2008-09.

The payable procedure in HAL is though banks or the letter of Credit. But in some cases, the payment was made after receipt & acceptance of

goods.

TABLE – 9

SUMMARY OF OPERATING CYCLE CALCULATION (IN LAKHS)



A. Inventory conversion period

i. Raw Material Conversion period

ii. WIP Conversion Period

iii. Finished goods Conversion period

263 days

89 days

307 days

226 days

147 days

325 days

Total 659 days 698 days

B. Debtors Conversion Period

16 days 38 days

C. Gross operating Cycle (A+B)

675 days 736 days

D. Payment Deferral Period 64 days 45 days

E. Net Operating Cycle (C-D)

611 days 691 days

INTERPRETATION

During last two years the Gross operating cycle varies from 675 days to 736 days.

There is no specific rule or formula to know the optimum period of operating cycle.

Usually the period is of one year. It depends upon the time gap between two consecutive procurements. Due to the manufacturing of the new product the Engine SU – 30, the gross

operating cycle in the year 2008-09 onwards it is going higher.

TABLE – 10


CALCULATION OF AMOUNT OF WORKING CAPITAL (IN LAKHS)

PARTICULARS 2008-09 2009-10A. Current Assets (Gross) 152518.97 260862.93

B. Fixed Assets

(Less :Depreciation)

26612.87 36578.15

C. Total Assets (A+B) 179131.84 297441.08

D. Current Liabilities 405550.85 433890.42

E. Sales 140816.78 140991.83

F. EBIT 12630.29 12045.96

G. Rate of return (F/C*100) 7.05 4.04

H. Net working capital (A-D) -253031.88 -173027.49

I. Current Ratio (A/D) 0.37 0.60

WORKING CAPITAL

2008-09 2009-100

0.10.20.30.40.50.60.7

0.370.6

RATIO

INTERPRETATION

From the above table it is observed that:

There was gradually increase in current assets from 2008-09 to 2009-10. The net working capital, shows the liquidity position of the company, the

position is negative in all the years. The negative amount of net working capital i.e. if the current liabilities are

more than current assets, it does not means that the bad profitability


position of the company it happens sometimes that the net working capital may be negative.

The EBIT shows the profitability position of the year 2008-09 and 2009-10. The profitability position had a gradual decrease from 12630.29 lakhs to 12045.96 lakhs.

FINDINGS


SUGGESTIONS

Organization must take necessary steps to raise the interest on loans and advances in order to increase the revenue sources of HAL.

To maintain a good current ratio, it must try to increase the amount of current assets.

As the analysis reveals, the division is facing a problem of liquidity due to the reason that the payment to be received from the debtors is not realized in the time.


The sales of HAL Accessories Division, Lucknow are increasing year by year, which is a positive indication of growth of the organization.

Working capital is always shows negative, because the duration of the project of developing any aircraft engine at least for 15 years. In this period company only take advance from customers (i.e 40% of total amount) which are debited to share capital, so company cannot make profit as well as the current assets are always less than the current liabilities during this time.

HAL should indigenously get the raw material and develop spare parts without depending on Russian to avoid unnecessary delays.

Company is very strict to their customers. It is founded that 40% to 50% of the current asset is occupied by industry. Company got advance from the Government of India, which resulted in

an increase in cash/bank balance. Company annual sales turnover of Rs.11,457 crores during the Financial

Year 2009-10 and to see it reach enviable heights in the future. This is a defense related organization, so production is made on contract

basis.

That is the collection period is more than the required. So, the HAL Accessories Division, Lucknow has to be strict to its debtors

by reducing the credit period allowed, so as to improve its efficiency in managing work.

LIMITATION

The study of the solely depends upon reliability of the data and information collected from the secondary sources, it is not possible to collect information on all activities taken over the years, thus the study incorporates on limitation that are inherent in the available publish information.

As usual Most of the information is collected from the secondary sources.


There is a gap between the theoretical analysis & its practical and real life application. The data available is limited to the Accessories Division, Lucknow. The overall data of HAL is not available.

Even if all the factors are taken in consideration, factors like motivation are not considered.

As HAL comes under Defense sector of central govt. there are some limitations upon getting the data.

The analysis is purely mathematical in nature and ignores management factors like motivation.

The overall performance is taken into consideration without taking into account the individual values.

The study is purely based on the data in the form of annual reports and appraisal reports.



CONCLUSION

Cash is the life-blood of any business, no matter how large or small. If a business has no cash and no way of getting any cash, it will have to close down.

Cash flows in a cycle into, around and out of a business. It is the business's life blood and every manager's primary task is to help keep it flowing and to use the cash flow to generate profits. If a business is operating profitably, then it should, in theory, generate cash surpluses. If it doesn't generate surpluses, the business will eventually run out of cash and expire.

Cash is king, especially at a time when fund raising is harder than ever. Letting it slip away is an oversight that investors should not forgive. Analyzing a company's working capital can provide excellent insight into how well a company handles its cash, and whether it is likely to have any on hand to fund growth and contribute to shareholder value.

Working capital of a business reflects the short-term use of funds these are cash short-term securities, amount receivable and inventories of raw materials, work in progress and finished goods.

It is also referred as to the funds required for operations of the business. It follows a cycle process of conversion of cash into inventory, inventory to receivable and receivable into cash.

The determination of working capital are nature of business manufacturing cycles, credit policies, availability of raw materials, availability of credits, growth and expansion activities and other factors.

The working in an organization mainly depends on the analysis of the management of receivable, cash and inventories and finally the organization profit and loss account, balance sheet highlights the working capital status whether it is healthy or not.

BIBILOGRAPHY

REFERENCE BOOKS

MANAGEMENT ACCOUNTING – S.P.JAIN & K.L.NARANGFINANCIAL MANAGEMENT- R.P.RUSTAGIFINANCIAL MANAGEMENT - DR. S N MAHESHWARI

REPORTS

BALANCE SHEET OF HALPROFIT AND LOSS ACCOUNT OF HALANNUAL BOOK REPORT OF HAL

WEBSITES

www.google.comwww.hal-india.com


http://www.hal-india.com/

http://WWW.GOOGLE.COM/


HINDUSTAN AERONAUTICS LIMITEDDIVISION:

PROFIT AND LOSS ACCOUNTFor the year ended 31st March 2009 (Rs. in Lakhs)INCOMEGross Sales 140991.83

Less Excise DutyNet Sales 140991.83Transfer to inter divisional units 754.03Changes in WIP/SIT/Scrap 36766.73Other Income 4748.82Chances received on iter divisional transfers 75.4

Transfer from R&D reserves183336.81

EXPENDITUREConsumption of Raw Material, Components, etc 123733.45Amortization &Other charges 15214.51Salaries and Wages 21104.93Other Expenses 8412.15Charges paid on its divisional Transfer 3.3Interest 1.41Depreciation 3659.52Provisions 9218.99Inter services/common services 1585.9Transfer of IDT 182934.16Deduct :Expenditure relating to 11643.31Capital & Other Accounts Net Expenditure 171290.85

Profit for the Year 12045.96

Less :Provision For Taxation (Net) Provision For Fringe Benefit Tax Provision For Deferred Taxation (Net) Profit After Tax 12045.96Profit Available For Appropriations APPROPRIATIONSInterim Dividend Proposed Final Dividend Debenture redemption reserveGeneral Reserve Balance carried to balance sheetTotal of Appropriations 12045.96


HINDUSTAN AERONAUTICS LIMITEDDIVISION:KORAPUT

BALANCE SHEET (Rs in Lakhs)As at 31st March 2009 31st March 2009SOURCES OF FUNDSShareholders' FundsHead office control account 4712.43Reserves and Surplus 12045.96

16758.39Loan Funds Secured Loans 259.75Unsecured Loans 0

259.75Deferred Liabilities (Net) 0.44Deferred Tax Liabilities (Net)

17018.58APPLICATION OF FUNDSFixed AssetsGross block 60053.35Less : Depreciation 23475.2Less :impairment loss Net Block 36578.15Capital Work-in-progress 7522.95

44101.1Special Tools and Equipments 113380.82InvestmentsDeffered tax assetsCURRENT ASSETS, LOANS & ADVANCESInventories 153860.31Sundry debtors 14655.86Cash & Bank balance 11.95Loans & advances 92334.81

260862.93Less: current liabilities & provisionsLiabilities 411352.28Provisions 22538.14

433890.42Net current assets -173027.49INTANGIBLE ASSETSGross carrying amount 44467.53Less: cumulative amortization & impairment loss 11903.38NET CARRYING AMOUNT 32564.15

17018.58

BALANCE SHEET (Rs in Lakhs) DIVISION:LUCKNO


W

As at 31st March 200831st March 2008

SOURCES OF FUNDSShareholders' FundsHead office control account -89880.19Reserves and Surplus 12630.29

-77249.9Loan Funds Secured Loans 468.56

Unsecured Loans 468.56

Deferred Liabilities (Net) 0.74Deferred Tax Liabilities (Net)

-76780.6APPLICATION OF FUNDSFixed AssetsGross block 46430.09Less : Depreciation 19817.22Less :impairment loss Net Block 26612.87

Capital Work-in-progress 9145.97

35758.84Special Tools and Equipments 110774.82InvestmentsDeffered tax assetsCurrent Assets, Loans & AdvancesInventories 94998.36Sundry debtors 5883.47Cash & Bank balance 19.98Loans & advances 51617.16

152518.97Less: current liabilities & provisionsLiabilities 387792.34Provisions 17758.51

405550.85Net current assets -253031.88Intangible assetsGross carrying amount 38257.78Less: cumulative amortization & impairment loss 8540.16Net carrying amount 29717.62

-76780.6



HINDUSTAN AERONAUTICS LIMITED

DIVISION:LUCKNOW

PROFIT AND LOSS ACCOUNTFor the year ended 31st March 2008 (Rs. in Lakhs)INCOMEGross Sales 140816.78Less Excise DutyNet Sales 140816.78Transfer to inter divisional units 312.82Changes in WIP/SIT/Scrap -9121.13Other Income 2406.65Chances received on iter divisional transfers 31.28

Transfer from R&D reserves134446.4

EXPENDITUREConsumption of Raw Material, Components, etc 64227.08Amortization &Other charges 11164.18Salaries and Wages 7697.32Other Expenses 8412.15Charges paid on its divisional Transfer 2.04Interest 4.06Depreciation 2369.55Provisions 1116.81

Inter services/common services16110.35

Transfer of IDT 128246.37Deduct :Expenditure relating to 6430.26Capital & Other Accounts Net Expenditure 121816.11

Profit for the Year 12630.29

Less :Provision For Taxation (Net) Provision For Fringe Benefit Tax Provision For Deferred Taxation (Net) Profit After Tax 12630.29Profit Available For Appropriations APPROPRIATIONSInterim Dividend Proposed Final Dividend Debenture redemption reserveGeneral Reserve

Balance carried to balance sheetTotal of Appropriations 12630.29