working capital on beml

BEML SUGGESTIONS & CONCLUSIONS

“INDUSTRIAL BACKGROUND”

Industries are the guiding stars and backbone of an economy.

The development of a country depends upon Industrialization of

economy. After independence India through its 5 year planning

programmes has given much importance to the growth of industries.

Government has taken a leading march in enhancing increasing

industrialization. In almost all the spheres the government has started

industries.

If industrialization has to take place good infrastructure

facilities should be provided like roads, tunnels, dams etc., for the

movement of goods transportation is a must with good road facilities.

Thus there were greater improvements in the infrastructure

facilities all over the country.

The infrastructure facilities can be developed manually or

mechanically. It is of the tremendous changes that take place in

science, technology, which gave rise to mechanization in every field.

However, if work is carried out manually there will not be greater

efficiency or in other words productivity is less and it even consume

more time. To increase efficiency and productivity and speed,

Adarsha College of Mgt & Science 1


mechanical equipments came in to existence. And thus there is an

increase in demand for such products.

After independence defence industries were given much

importance. Government itself started all the defence industries. India

felt the need of having strong defence to be secure and capable of

defending its borders from its neighbourers. Keeping that in mind

BEML was started under ministry of defence. It was mainly started to

produce defence equipments and heavy capital equipments like

Railway Coaches, Earthmovers, Machineries etc.,

Two wars with Pakistan and China aggressive made to the

defence ministry to start one more unit of BEML. It was started in

Kolar Gold Fields in the year 1964. It is one of the biggest in Asia.

Unit of KGF, BEML is an ISO 9000 company engaged in

manufacture of diverse equipments for core stores like mining,

agriculture, earth moving equipments etc., It has sales turnover of Rs.

1347 crores. It is one of the biggest industries in Asia in the field of

Earth moving equipments.

This unit directly comes under ministry of defence. It produces

defence equipments and earthmovers. Which are very much, portent

for mining, road constructions etc., Its Research and Development



Department is unique and one of the best in the country. R D

department has contributed much to the growth of BEML industry. Its

designed equipments were successfully used on various constructive

processes.

BEML has number of branch it has various units in different

parts of the country have immensely contributed to the growth of the

economy. It not only provides employment but also it has successfully

achieved the advantages of economies of scale.

Ancillary and Small industries were started around its vicinity.

BEML has supplied various capital equipments leading to capital

formation form its inception. It is one of the profit making public

sector. It also earns foreign exchange to the country. The Europeans

and African countries purchased earthmovers equipments produced by

company. It is helping the economy’s growth both directly and

indirectly.



SUBJECT BACKGROUND:-

Working capital in general practice refers to the excess of

current assets over current liabilities. Management of working capital

therefore, is concerned with the problems that arise in attempting to

manage the current assets and current liabilities and the inter-

relationship that exists between them. In other words it refers to all

aspects of administration of both current assets and current liabilities.

The basic goal of working capital management is to manage the

current assets and current liabilities of a firm in such away that a

satisfactory level of working capital is maintained i.e., it is neither in

adequate nor excessive. This is so because both in adequate as well as

excessive working capital positions are bad for any business. In

adequate of working capital may lead the firm to insolvency and

excessive working capital implies idle funds, which earn no profits for

the business.

The term current assets refers to those assets which in the

ordinary course of business can be, or will be in turned into cash with

in one year without disrupting the operations of the firm. The major

current assets are cash marketable securities, accounts receivables and

inventory.



Current liabilities are these liabilities, which are intended at

their inception to be paid in the ordinary course of the business with in

a year, out of current assets or earnings of the concern, the basic

current liabilities are account’s payable, bills payables bank overdrafts

out standing expenses.

The importance of working capital manager is reflected in the

fact that financial managers spend a great deal of time in:-

1. Managing current assets and current liabilities.

2. Arranging short term financing.

3. Negotiating favourable credit term.

4. Controlling the movement of cash.

5. Administrating accounts receivables and

6. Maintaining the investment in inventories consume a great deal

of time of financial manager.

Meaning of Working Capital:-

Working capital may be regarded as life blood of business, its

effective provision can do much to ensure the success of business

while its inefficient can lead not only to loss or profits but also the

ultimate down fall of what otherwise might be considered as a

promising concern.



Working capital means that part of capital which is required for

day to day maintenance of the business, it is known as current capital

because the amount is invested in current assets, it is knows as

revolving capital or circulating capital because cash revolves and

becomes cash again in the working capital cycle.

In the words of Shubin “Working capital is the amount of funds

necessary to cover the cost of operating the enterprise.

According to Genesteberg, “Circulating capital means current

assets of company that are charged in the ordinary course of business

from one firm to another, for example from cash to inventories,

inventories to receivables into cash.

Concepts of Working Capital:-

These are two concepts of working capital

Gross working capital

Net working capital

The term working capital to gross working capital and represent

the amount of funds invested in current assets. Thus, the gross

working capital is the capital invested in total current assets of the

enterprise. Current assets are those assets, which in the ordinary



course of business can be converted into cash within a short period of

the normally one accounting year.

Examples:

Constituents of current assets

Cash in hand and bank balances

Bills receivable

Sundry debtors (less provision for bad debts)

Inventories of stocks such as:

Raw materials

Work in progress

Stores and spares

Finished goods

Temporary investment of surplus funds

Prepaid expenses

Advance payment of tax

Accrued or outstanding incomes.

In narrow senses, the term working capital refers to the net

working capital. Net working capital is the excess of current assets

over current liabilities or say

Net working capital = current assets – current liabilities.



Net working capital may be negative or positive, when current

assets exceeds current liabilities the working capital is positive and

negative working capital results when the current liabilities are more

than the current assets. Current liabilities are those liabilities which

are intended to be paid in the ordinary course of business with in a

short period of time normally are continuous year out of current assets

or the income of a business.

Constituents of Current Liabilities:-

a. Bills Payable

b. Sundry Creditors or accounts payable

c. Accrued or outstanding expenses

d. Short-term loans, advances and deposits

e. Dividend payable

f. Bank overdraft

g. Provision for taxation, if it does not amount to appropriation of

profits

The gross concept is sometimes preferred to the net concept of

working capital for the following reasons:-

a. It enables the enterprise to provide correct amount of working

capital at the right time.



b. Every management is more interested in the total current assets

with which it has to operate them the sources from where it is

made available.

c. The gross concept of working capital is more useful

determining the rate of return on investments in working capital

The net working capital concept, however, it is also important

for the following reasons:

1) It is qualitative concepts, which indicates the firm’s

ability to meet its operating expenses and short term

liabilities.

2) It indicates the margin of protection available to the

short-term creditors, i.e., excess of current assets over

current liabilities.

3) It is an indicator of the financial soundness of an

enterprise.

Importance of adequate Working capital:-

Working capital is the life blood and nerve center of a business.

Just as circulating of blood is essential in the human body for

maintaining life, working capital is very essential; to maintain the

smooth running of business in the following ways:-



Solvency of the business:-

Adequate working capital helps in maintaining solvency of the

business by providing uninterrupted flow of production.

Goodwill:-

Sufficient working capital enables a business concern makes

prompt payments and hence helps in creating and maintaining

goodwill.

Easy loans:-

A concern having adequate working capital high solvency and

good credit stand up can arrange loans form banks and others on easy

a favourable terms.

Cash discount:-

Adequate working capital also enables a concern to avail cash

discounts on the purchase and hence it reduces costs.

Regular supply of raw materials:-

Sufficient working capital ensures regular supply of raw

materials and continuous production.



Regular payment of salaries, wages and other day-to-day

commitments:-

A company which has ample working capital, can make regular

payments of salaries, wages and other day-to-day commitments which

arises the morale of its employees, increase their efficiency, reduced

wastage’s and cases and enhance production and profits.

High Morale:-

Adequacy of working capital creates an environment of

security, confidence and high morale and creates overall efficiency in

a business.

Ability of face crisis:-

Adequate working capital enables a concern to face business

crisis in emergencies such as depression because such generally, there

is much pressure on working capital.

Quick and regular return on investment:-

Sufficient of working capital enables a concern to pay quick

and regular dividends to its investors as there may not be much

pressure on working capital.



Exploitation of favourable market conditions:-

Adequate working capital enables a concern to take advantage

of the favourable market condition and also an edge over the

competitors.

Excess or in adequate working capital:-

Every business concern should have adequate working capital

to run its business operations. It should have neither redundant or

excess working capital nor inadequate nor shortage of working

capital. Excess is well, as short working capital positions are bad for

may business.

Disadvantage of Redundant or Excessive working capital:-

i. Excessive working capital means idle funds which earn no

profits for the business and hence the business cannot earn a

proper rate return on its investments.

ii. Redundant working capital lead to unnecessary purchasing and

accumulation of inventories causing more chances of theft,

waste and losses.

iii. Excessive, working capital excessive debtors and defective

credit policy, which may cause high incidence of bad debts.

iv. It may result into overall inefficient in the organisation.



v. When there is excessive working capital, relations with banks

and other financial institutions may not be maintained.

vi. Due to low rate of return on investments, the value of shares

may also fall.

vii. The redundant working capital gives to speculative

transactions.

Disadvantages of inadequate working capital:-

a. A concern, which has inadequate working capital, pays

its short term liabilities in time.

b. It cannot buy its requirements in bulk and cannot avail of

discounts.

c. It becomes difficult for the firm to exploit favorable

market conditions and undertake profit projects due to

lack of working capital.

d. The firm cannot pay day-to-day expenses of its

operations and it creates inefficiencies, increases casts

and reduces the profit of the business.

e. It becomes impossible to utilize efficiently the fixed due

to non-availability of the liquid funds.



f. The rate of return on investment also falls with the

shortage of working capital.

Determinants of Factors affecting working capital:-

In order to determine the proper amount of working capital of a

concern, the following factors should be considered.

Factors determining working capital requirements:-

Nature or character of business.

Size of business.

Manufacturing cycle.

Production policy

Volume of sales.

Terms of purchases and sales.

Business cycle fluctuation.

Fluctuations in the supply of raw materials.

Price level changes.

Operating efficiency.

Profit margin.



Need of working capital:-

The need for working capital cannot be over emphasized every

business needs amount of working capital.

The need for working capital arises due to the time gap between

production and realization of cash from sales. Thus, working capital is

needed for the following purposes.

1) For the purchase of raw materials, components and spares.

2) To pay wages and salaries.

3) To incur day-to-day expenses and overhead costs such as fuel

power and office expenses etc.,

4) To meet the selling costs as packing advertising etc.,

5) To provide credit facilities to the customers.

6) To maintain the inventories of raw materials work-in-process,

store and spares and finished stock.

Kind of working capital:-

Working capital may be classified in two ways.

I. On the basis of Concept

II. On the basis of time.



Fixed working capital:-

This is the minimum which is required ensure effective

utilization of fixed facilities and for maintaining the circulation of

current asset. There is always a minimum level of current assets,

which is continuously required by the enterprise to carryout its normal

operations.

For example, every firm has to maintain a minimum level of

raw materials, work in progress, finished goods and cash balance.

This minimum level of current asset is called permanent or fixed

working capital.

This working capital can further be classified as regular

working capital.

Reserve working capital is the excess amount over the

requirement for regular working capital, which may be, provided for

contingencies that may arises at unstated periods such as strike, risk in

prices, depression etc.

The characteristics of permanent working capital are that:

The amount of permanent working capital remains in the

business in one form or another.



It also grows with the size of the business. i.e, greater the size

of the business, greater by the amount of working capital and

vice versa.

Variable Working Capital:-

This is the amount of working capital, which is required to meet

the seasonal demands and some special exigencies. Variable working

capital can be further classified as seasonal working capital and

special working capital. Seasonal working capital is the amount of

capital required to meet the seasonal needs of the enterprise.

Special working capital is that part of working capital which is

required to meet special exigencies such as launching of extensive

marketing campaigns for conducting research.

Illustration:-

Illustration the total financial needs of a typical firm both for

fixed assets and working capital. The fixed asset and permanent

working capital are upward sloping, indicating that investment in such

assets tends to increase over time with the growth of the firm. The

variable working capital curve varies form period to period.



Operating cycle:-

The duration of the time required complete the sequence of

events right from purchase of raw materials or goods for cash to the

realization of sales.

In cash is called the operating cycle, working capital cycle or

cash cycle. This cycle can be said to be at the heart of the need for

working capital.

The operating cycle refers to the length of the time necessary to

complete the following cycle of events.

i. Conversion of cash into raw materials

ii. Conversion of raw materials into work-in-progress

iii. Conversion of work-in-progress into finished goods

iv. Conversion of finished goods into debtors

v. Conversion of debtors into cash.

The cycle will repeat again and again over the period depending

upon the nature of the business and type of the product.



The operating cycle shown in the figure relates to a

manufacturing firm where cash is needed to purchase raw materials

and converts raw materials into work-in-progress and then, work-in-

progress is converted into finished goods. Finished goods will be sold

for cash on credit and ultimately debtors will be realized.

Cyclical flow of working capital:-

The quantum or magnitude of various components of current

assets and current liabilities may under go changes at any point of

time. The net stream of increase or decrease in working capital

position always flows in and out in cycles order. The cyclical flow of

working capital is shown in the figure.

When a company’s operation continues the components of

current assets and current liabilities convert into one form or another.

The working capital may be expanded or contracted by the influence

of other financial or operating transactions, which cuts cyclical flow

as shown above. This cyclical flow is also known as working capital

turnover. The cash money available at any point of time is termed as

‘funds’ available i.e., the working capital availability at any point of

time.



Sources of working capital:-

Fixed Variable

Shares Commercial banks

Debentures Indigenous bankers

Public deposits Trade creditors

Ploughing back of profits Installment credit

Loans from financial institution Advances

Accounts receivables credit / factoringAccrued expenses

Commercial papers

Deferred incomes

Financial of fixed working capital:-

There are five important sources of permanent working capital:-

Shares:-

Issue of shares is the most important sources for raising the

permanent or long term capital. A company can issue various types of

shares as equity shares preference shares and deferred shares.

According to the companies act, 1956, however, public company

cannot issued deferred shares.



Debentures:-

A debenture is an installment issued by the company

acknowledging its debts to its holder. The debenture holders are the

creditors of the company. A fixed rate of interest is paid on debenture.

The interest on debentures is a change against profit and loss account.

Public Deposit:-

Public deposit is the fixed deposits accepted by a business

enterprise directly from the public. Now the business house accepts

day’s public deposits for 5 to 7 years.

Ploughing back of profits:-

It means the reinvestment by a concern of its surplus earnings

in its business. It is an internal source of finance and is most suitable

for an established firm its expansion, modernization and replacement.

Loans from financial institution:-

Financial institutions such as commercial banks, life insurance

corporations, industrial finance corporation of India, state financial

corporations, state industrial development corporations, industrial

development bank of India and many others provide long term loans

and also provide short term and medium term loans.



Financing of variable working capital:-

The main sources of variable working capital are as follows-

Indigenous banks:-

Now a days business house have to upend on indigenous

bankers for obtaining loan to meet their working capital requirements.

Trade credit:-

It represents the credit extended by the suppliers of goods and

services. It is spontaneous source of finance, provided the firm is

considered creditworthy by its suppliers and represents 25to 50

percent of short term financing. The confidence of suppliers is the key

to scrutiny trade credit.

Installment credit:-

This is another method of which assets are purchased and the

payment is made in installment over predetermined period of time.

This method provides funds for some times and is used in course of

short term working capital by many business houses, which have

different fund position.



Advances:-

Some business house get advances from their customers and

agents against orders and the sources are short-term sources of finance

for them.

Factoring receivable credit:-

A commercial bank may provide finance by discounting the

bills or invoices of are customers. Thus a firm gets immediate

payment for sales made on credit. A factor is a financial institution

which offers services relating to management and financing of debts

arising out of credit sales which is also short-term financing.

Accrued expenses:-

These are the expenses which has been incurred but not yet due

and hence not yet paid also. So they can be used for short-term

financing since there is no interest payable for the delay payment.

Examples of these accrued expenses are salaries, wages and taxes.

Deferred incomes:-

These are incomes receivable in advance before supplying

goods or services. These funds increase the liquidity of a firm and

constitute important sources of short-term finance.



Commercial papers:-

Commercial papers represents unsecured, promissory notes

issued by firms to raise short-term funds. It is an important money

market instrument, which was introduced by the reserve bank of India

in this country. But only large companies enjoying high credit ranking

and financial health can issue rating and financial health can issue

commercial papers to raise short-term funds.

Working capital finance by commercial banks:-

Commercial banks are the bank most important sources of

short-term capital. The major portion of working capital loans is

provided commercial banks.



Title of the project:-

“ANALYSIS OF WORKING CAPITAL MANAGEMENT OF

BHARAT EARTH MOVERS LIMITED.”

Statement of the problem:-

Working capital management is the heart and life of any

business. It is the study of current assets and current liabilities. This is

a day to day activity and occupies most of the manager; also faulty

working capital management is immediately refuted through low

solvency, to much diversion of long term funds into working capital

and finally industrial sickness or loss of reputation.

Purpose of the study:-

Working capital importance to any company, including service

companies, importance of working capital arises due to following

reasons.

Working capital proportional to sales, it is impossible to

increase sales without increasing working capital.

Working capital management is a day-to-day activity unlike

long term of the manager.



Faulty working capital results in either over or under liquidity

of capital including solvency and reputation.

One of the most major and common reasons for industrial

sickness is faulty working capital management.

Hence this study is understood working capital management

policies, practices and systems of the company.

Objectives of the study:-

The specific objectives of the study are:-

1. To identify the need of working capital.

2. To analyze changes in working capital.

3. To analyze inflow and outflow of funds.

4. To evaluate the efficiency of management of working capital.

5. Analysis the components of working capital.

6. Growth of income and growth to net working capital.

7. Analysis of net working capital and its projections.

8. To conduct a ratio analysis of the over all financial

performance.

9. To analysis the various internal and external factors affecting

working capital.



PROFILE OF BHARAT EARTH MOVERS LIMITED:-

1. Name of the company: - BHARAT EARTH MOVERS LID.,

2. Registered office: - “BEML SOUDHA”

Corporate office

No. 23/1, IV Main, S.R. Nagar

BANGALORE- 560 027.

3. Group: - Public sector under taking

4. Activity: - Manufacture of Earth Moving

Equipment’s, Rail coaches,

Defence Equipment’s.

5. Date of establishment: - January 1, 1965

6. Bankers: - STATE BANK OF INDIA CANARA BANK STATE BANK OF MYSORE PUNJAB NATIONAL BANK STATE BANK OF PATIALA BANK OF INDIA STATE BANK OF BIKANED AND JAIPUR CENTRAL BANK OF INDIA BANK OF BARODA UNION BANK OF INDIA



BEML has three production units and they are situated at the

following address:-

UNIT NO: 1

Bangalore complex

P.B. No. 7501

New Thippasandra post

BANGALORE- 560 075

UNIT NO: 2

K.G.F. Complex

BEML Nagar

KOLAR GOLD FIELDS- 583 115.

UNIT NO: 3

Mysore complex

Belavadi post,

MYSORE- 571 186.



BOARD OF DIRECTORS AS ON 18.06.2003

1. Chair man and M.D V.R.S. Natarajan

2. Director (HRD) B.V. Raman

3. Director (R&D) V.S. Venkatanathan

4. Director (Production) R.C. Suthar

5. Director (Financial) P. Mazumdar

6. Director (Marketing) K.A. Nagaraja

BRIEF HISTORY OF BEML:-

BEML is a public sector undertaking under the effective

administration of ministry of defence. (Department of defence supply)

The organisation was set up in the late forties as a part of Hindustan

Aircraft’s Limited now Known as HINDUSTAN AEONAUTICS

LIMITED to manufacture Railway coaches. It gradually diversified

into earth moving equipment in 1964. After 1-year i.e., 1965 the

organisation has its own entity i.e., BEML.

The company was incorporated in the first 5 years plan when

India was very weak in its economy. The main purpose for setting up

this organisation was to manufacture heavy earth moving equipments,

rail coaches, Heavy –duty trucks, truck laying equipments etc.,



Later in few years the organisation had a tremendous grow and

they were strong enough to diversify to sectors such as coal, mining,

steel cement, power, irrigation, defence, construction of roads,

building.

In the last few decades it has further brought new technical high

quality inventions like hydraulics, heavy-duty diesel engines, welding

robots and undertaking of heavy fabrication jobs.

Over the year the growth of the company has been phenomenal.

The company has the distinction of making profits right from its

inception. Commencing its operations with a turnover of around Rs. 5

crores in 1964-1965, the company has achieved a turnover of around

Rs. 1421 crores for the year 2001-2002. The product range has also

under gone drastic changes in terms of numbers and technology. Also

the customer profile has undergone significant changes whitest in the

company’s. Defence and railways constituted the major market for

BEML’s product over the years the position has been taken over by

mining sector particularly M/s coal India LTD (CIL).



Rail coaches:-

Rail coach division BEML is one such undertaking, which is

making significant contribution to the transport requirement of the

country.

The unit has since passed through many phases of rail coach

building industry. The first all metal III class tier coach was built on

standard 1 Rs. Under frame in 1948. The 1958 the first all steel

integral type III class coach was delivered to railway.

In 1965 the rail coach division was separated from HAL and

made the nucleus of a new public sector company the earth mover

division of BEML, raised from rail coach division and subsequently

located at BEML Nagar near Kolar Gold Fields (K.G.F.) and my sore

manufactures a wide range of earth moving equipment.

BEML started in 1964 with railway equipment division at

Bangalore. The first rail coach factory in the Indian sub-content, this

unit has consolidated its, status as a major supplier of integral rail

coaches, meeting about 25% of the country’s demand it has a

production capacity of over 800 coaches p.a.



The Bangalore unit also manufactures heavy-duty trucks and

trailer and also defenses aggregates to meet the needs of the armed

forces. A number of variants such as crash fore tenders, recovery

vehicles, Missile transported have been developed on the heavy-duty

truck.

BEML offers application of engineering service and under

takes preparation of pre-feasibility of project reports and equipments

selection studies. Recommendation of user proper studies (RUP) is

done at customer sites to improve productivity and to reduce cost.

The unit has taken up production of direct electrical multiple

unit (DCEMV) and Rail bus and alternate current electrical multiple

units (ACEMV)

Manufacturing units: -

BEML is the second largest earth moving manufacture in Asia.

It has 3 production units with hi-tech facilities.

a. BANGALORE

b. KOLAR GOLD FIELD

c. MYSORE



These units have high forced technology manufacturing

facilities. Steel Foundry at Tarikere is meeting the requirement of

quality steel costing of the company, various units.

Its Rs. 300 millions composite research and development

centre at KGF has laboratories in fluid power engineering material

science, structural engineering and power line testing with state of the

art facilities. the company’s division continues to make significant

strides not only is the indigenization of collaborates products faster

but also in the design and development of high technology,

sophisticated new products and aggregates.

Workers:-

Manpower is the main sources for a successful industrial

empire. There are about 13800 employees working round the clock

for the betterment of BEML

Marketing:-

A nation wide network of 10 regional office and 15 district

offices provide customers with immediate access to the companies

wide range of products and services. Marketing activities include field

operations and intensive training of customer personnel in operations



and maintenance of equipment additionally, BEML offers application

engineering services and fleet optimization solution.

Customer services:-

BEML service centers and spare parts depots provide total

equipment care and rehabilitation services. Towards achieving

maximum customer satisfaction, the company has established BEML

net a satyam net work-with a view to streamline spares supplies. In

taking service to the doorsteps of customers, BEML site engineers

insure higher availability of machines through prompt after sales

service. BEML also undertakes to service machine all its lifetime.

Research and development:-

R &D made rich contribution over the years by designing

developing and productionising a number of high technology products

and aggregates for the core sector such as contribution to mining

defense and rail. Development of high technology products likes

power transmission, planetary axles calipers, and disk brakes and

computerized transmissions control system.



R&D have also carried out detailed studies for the introduction

products catering to the requirement of mining, railway and defence

sector. The studies include assessment of existing indigenous

technological base, introduction of new products, like road headers,

side discharge later, wheeled loader etc., in the product range and also

the feasibility of manufacturing a number of products like field

services equipment for defence sector.

Benefits:-

Rail bus and spoil disposal units has been successfully

developed and productions.

BEML & ISO 9001

All the production divisions of Beml have been credited with

ISO 9001 and ISO 9002 certification. Beml’s Bangalore complex has

been awarded the ISO 9001 certificate on the 26th January 1994 by the

Bureau Verities Qualities International (BVI)

PRODUCT PROFILE:

BEML produced durable international standard equipments

and system designed to with stand tough working environment under

varied climatic condition.



Company products are of wide range, which help to the growth

of the economy such as:

a. Railway products

b. Defence products

c. Spares and other

Railway products:

ACEMU- Alternate Current Electrical Multiple Units.

DCEMU- Direct Current Electrical Multiple Units.

RAIL BUS.

Defence products:

i. TATRA TRUCKS and its variants

ii. IGMP-Integrated Guided Missile Project

iii. HRV and ARV- Heavy Recovery Vehicle. And Armed

Recovery Vehicle.

iv. 50 ton trailers

v. Ejector and Air-cleaner assembly

vi. Mail-rail and mil-wagons



PRODUCT RANGE:

BEML manufactures a wide range of products to meet the

needs of construction, mining, power, irrigation, fertilizer, cement,

steel, defence and railway sectors.

MINING & CONSTRUCTION:-

CRAWLER EQUIPMENT:

Hydraulics Excavator

Bulldozers

Pipe Layer

Electric Rope Shovel

Walking Drag Lines

Road Header

Long wall Mining Equipment

Telescope Excavator

Bucket Wheel Excavator

Stacks and Reclaimer

Slide Discharge Loader



WHEEL EQUIPMENT:

Wheel Loader

Wheel Dozers

Motor Grades

Rear Dumpers

Bottom Dumpers

Water Sprinklers

Tyre Handlers

DEFENCE PRODUCTION:

BEML – TATRA Heavy Duty Trucks

Heavy Duty Trailers

Transmissions, Ejectors and Air cleaners and Final

Drivers for Defence Vehicles

Armoured Defence Vehicles

Snow Plough and Snow Cutter

Aircraft Moving Tractor



RAILWAY CONSTRUCTION:

i. Integral Rail Coaches of Various Models

ii. Overhead Equipment Inspection Car

iii. Track Laying Equipment

iv. Electrical Multiple Units

v. Rail Bus

vi. Muck Wagons

HEAVY FABRICATION & MACHINERY ENERGY:

Diesel Engines

Diesel Generator Sets

ROBOTICS & AUTOMATION:

Industrial Welding Robots

Machine Tending Robots

STEEL PLANT EQUIPMENT:

a. Continuous Casting Equipment

b. Ladle Turret

c. Strand Guide

ENERGY:

a. Diesel engines

b. Diesel generator sets



HYADAULIC AGGREGATES

a. Gear pumps/plunger pumps

b. Cylinder/suspensions

c. Control values

d. Long wall mining equipment

e. Telescope excavator

f. Bucket wheel excavator

g. Stacker and reclaimer

h. Side discharge loader

BEML manufacturing Units:-

1. Bangalore

2. Mysore

3. KGF

BEML Subsidiary Units:-

Vignyan Industries

Terikere in Chick Mangalore

BEML EXPORTS:-

Beml exports to 30 countries, across Europe, Africa, Asia and

America etc. The company achieved all time high Export turnover of

Rs.7, 189 lakhs as against Rs.6, 224 lakhs of the previous year.



BEML REGIONAL OFFICES:-

a. New Delhi

b. Kolkatta

c. Mumbai

d. Nagpur

e. Ranchi

f. Bilaspur

g. Hyderabad

h. Bangalore

i. Sambalpur

j. Siliguri

LOCATION OF BEML OFFICE – DISTRICT OFFICES

Ahmedabad

Bhuvaneshwar

Bhopal

Bilaspur

Chandigarh

Chennai

Ernakulam

Goa



Gauhauti

Jammu

Kattur

Patna

Raniganj

Rourkela

Udaipur

Vishakapatnam

COMPETITORS:-

The following are major competitors for Beml:

Rail Coaches:

a. Integral Coach Factory – Perambur – Tamil Nadu

b. Rail Coach Factory – Kapurtala – Punjab

Earth Moving Equipments:

i. Hindustan motors

ii. Larsen and Turbo

iii. Telco

Small Loader:

JCB

Escorts



Larsen and Turbo

Hindustan Motors

COLLABORATION:

BEML has established extensive collaboration with many

companies around the world some of the collaboration are enumerated

below:

Name of the Company Country

Komastu Japan

Komastu Dressers U.S.A

Omnipol Czechoslovakia

General Electric U.S.A

Bumar Poland

IGM Australia

Indresco U.S.A

Mitsui Mike Japan

Ural mash RussiaVoest

Alpine Australia

Waspo U.S.A



CUSTOMER PROFILE:

All the major and state governmental projects including

Irrigation, Power Sector, National Hydro-Power Corporation, NTPC,

State Electricity Board, ISRO, ONGC, Railways etc from the

customer base.

1. Coal Sector: Coal India Limited and its subsidiary Company’s.

2. Defence Requirement: Defence services, Boarder Road

Organisation, Air Force, ordinance Factories.

3. Port Trust: Mumbai, Calcutta, Chennai for meeting their

loading and handling requirements.

4. Private sectors: Almost all Steel, Cement and mining

companies a few of them CC, TISCO, Larsen and Turbo,

Gujarat, Ambiya Cements, Raymond’s Cement, Keloram

Cement and J.K. Cement.

5. Mining and Steel Sector:

National Mineral Development Corporation

Hindustan Zinc Limited

Hindustan Copper Limited

Kudremukh Iron Ore Limited

SAIL



Bharath Aluminum Corporation Limited

Indian Iron and Steel Corporation Limited

BEML bagged the Number of Awards:-

In pursuit of excellence, BEML is recipient of Corporate

Excellence Award from the Government of India apart from

recognition on Safety, Quality and Import Substitution.

1. Export Performance Award for achieving highest performance

in export

2. National Award for being the outstanding employer of the

Physically Handicapped.

3. Safety Awards

a. Bangalore Complex 14th time

b. Mysore 6th time

c. Engine Division 1st time

4. And employees received number of suggestions award.

BEML Future Plans:-

During coming year BEML is planning for diversify activities

in the allied and non allied areas of present line business.



In this connection effort have been made to introduce hydraulic

components and aggregates, rail vehicles and special machinery for

railways in a phased manner. Depending upon the secretarial needs

and demand for earth moving equipment is scheduled to grow. This

will benefit the company in the year to come. The policies are being

preserved by the government and also help the growth of the

company.

The order book position of earth moving equipment segments

in encouraging and keeping in future prospects. The company is

introducing new products. The company is also increasing its market

share of market to the defence sector.

GOALS OF BEML:-

i. To achieve and retain dominant position in earth moving and

heavy construction industry by establishing high standards of

quality, capability and reliability

ii. To pursue state of art and environmental – friendly technologies

as well as to develop cost effective and value added products.

iii. To be competitive, responsive and to continuously improve

service so as to achieve customer satisfaction



iv. To grow into a global company and a keen sense of vision and

business ethics as well as to earn maximum profits.

v. To conserve resources and eliminate waste through optimum

utilization of men, money, materials and machinery



Research Design:-

According to Daire and others “A research design is the

arrangement of conditions for collection and analysis of data in a

manner that aims to combine relevance to the research purpose with

economy in procedure.

The research design is the conceptual structure with in which

research is conducted.

Methodology:-

This project is an analytical research where in the research has

to use the available facts as information and analyse these to make a

critical evaluation of the materials this is also an applied research with

an aim to find a solution for an immediate problems facing by

industry or business organisation. The control aim of applied research

is to discover a solution for some processing problem.

This involves the following steps:

Type of research – Analytical

Tool – working capital and financial statements, like comparative,

common size and fund flow.



Collected data – company annual reports and e-mail at

www.beml.india.com

Method of analysis – analysis of ratio’s and fund flows and working

capital statements.

Data collection:

The required data was collected from the annual report of the

company and direct person interview with the office of the company

and also through company website.

Reference period:

The period in this case study is for five financial years that is

for 1997-1998 to 2001-2002.

Sampling scheme:

No specific sampling methodology was involves. The latest 6

years data and annual reports were considered in other words it was

convenience sampling.

Definition of concepts:

For the purpose of this study, following concepts were funds

relevant and are defined under:

Solvency = Reflected through current ratio’s


http://www.beml.india.com/


Total current assets in RupeesCurrent ratio =

Total current liabilities in Rupees

Current assets = those that cab be converted into cash with in one

year or less.

Current liabilities= those which have to be settled in one year or less.

Net working capital= total current assets less current liabilities.

Gross working capital= equals to total amount of current assets.

Long term source= are shares and debentures reserves.

Short term source= are trade credit, commercial papers fixed

deposits from public inter corporate deposits etc.,

Short term investments= are raw materials, labour short term

advances.

Long term investments= are buildings, vehicles, plant and machinery

and office equipment etc.,

Liquidity= it is used in a limited sense in the study to means short –

term debt repaying capacity of the enterprise and can be issued by

investing money short term securities including short term fixed

deposits which banks.

Profitability= this means ability of the company in marketing profits

in relation to capital employed and sales.



Over view of chapter scheme:-

General back ground of the study introduction of the problem:

This chapter will cover title of the project, statement of the problem,

purpose of the study, objectives of the study, scope for study.

Company profile:-

The details about the company form it’s arising in this chapter,

complete, information about the BEML from its history to present

days status will be given.

Methodology:-

This chapter derails with the research design, methodology,

data collection, reference period, sampling scheme, definition of

concepts, over view of chapter scheme.

Data Analysis and interpretation:-

This is the important part of this project and involves analysis

of data, calculation of ratio’s interpretation.

Findings:-

This chapter deals with the summary of the findings.

Limitation:-

This chapter deals with instructions given at last.



Suggestion & Conclusions:-

This is concluding chapter and contains salient conclusions and

recommendation.

This is followed by Bibliography and annexure fund flow

statement, profit and loss account, balance sheet for the last five years.

Limitation of the study:-

The study only one company and for a period of 5 terms that is

from 1997-98 to 2001-02. Expensive (in terms transport costs)



INTRODUTION:-

Financial statements are prepared primarily for decision making. They

play dominate role in setting the frame work of management

decisions. But the information provided in the financial statements is

not an end, it itself as no meaningful conclusions can be drawn from

these statements alone. However the information provided in the

financial statements is of immense use in making decisions through

analysis and the interpretation of financial statements.

Financial analysis is the process of identification the financial

strengths and weaknesses of the firm by properly established

relationship between the items of the balance sheet and profit and loss

account.

MEANING:-

In the words of “METCALF ANDTITARD financial analysis is

a process of evaluating the understanding of the firms position and

performance.” In the words of “MYERS,” “financial statement

analysis is largely a study of relationship among the various financial

factors in a business as disclosed by a single set of statements, and a



study of the trend of these factors.” The analysis of financial statement

is an important aid to overall financial analysis.

TYPES OF FINANCIAL ANALYSIS:-

i. External analysis

ii. Internal analysis

iii. Vertical analysis

iv. Horizontal analysis

External analysis:-

This is analysis done by external parties that is outside of the

business. They include shareholders, tenders, inventories, creditors

etc.

They have no access to the books of accounts and the internal

records of the concern.

Internal analysis:-

This is analysis done by internal parties they include persons

who have access to the books of accounts and internal records of the

concern. Executives and employees of the concern also do it, officers

appointed for the purpose by the government, personnel of the finance

and accounting departments of the concern.



Vertical or structural analysis:-

It is a type of analysis used study through ratios, the

quantitative relationship of items in the financial statements on a

particular date or for accounting year.

Horizontal or trend analysis:-

It is a type of analysis in which there is a comparison of the

trend of each item in the financial statements over a number of years.

STEPS INVOLVED IN THE ANALYSIS OR FINANCIAL

STATEMENTS:-

Analysis of financial statements involves three steps.

1. Analysis

2. Comparison

3. Interpretation

Analysis:-

This means methodical classification of data given in financial

statement into homogeneous and comparable parts that is inter related

parts. In short re-classification and re-arrangement of the data found

in the financial statement into groups of a few principal elements

accounting to their resemblances and close connections and presenting

them in the form most convenient for interpretation.



Comparison:-

Mere splitting up or re-grouping of the figures found in the

financial statements into the desired component parts is not sufficient

for judging the profitability and financial status of an enterprise. After

the figures contained in the financial statements are dissected or split

into the required comparable component parts, the comparable

component part (the interconnected figures) must be compared with

each other and their relative magnitudes (their relationship) must be

measured.

Interpretation:-

After the financial statements are analyzed or dissected into

comparable component parts and the relative magnitudes of the

comparable components parts is measured through comparison, the

results must be interpreted.

TECHNIQUES OF FINANCIAL ANALYSIS:-

a. Comparative statements

b. Trend analysis

c. Common-size statements

d. Fund flow statements

e. Cash flow statements

f. Ratio analysis



Comparative statements:-

The comparative financial statements are statements of the

financial statements, at different periods of time, the elements of the

financial position are shown in comparative form so as to give an idea

of financial position of two or more periods. A comparative statement

of BEML financial statements i.e., balance sheet and profit and loss

account for the period of five years from 1997-1998 to2001-2002.

Trend analysis:-

The financial statement may be analyzed by computing trend of

series of information. This method determines the direction up words

of down words and involves the computation of the percentage

relationship that each statement item bears to the same item in basis

years.

Common-size statement:-

The common-size statement balance sheet and income

statement are shown in analytical percentages. The figures are shown

in percentages of total assets, total liabilities and total sales.



Fund flow statement:-

Fund flow statement is a statement of sources and uses of fund

of net wording capital. In other words it is a statement which shows

how the net working fund or technical device designed to high light

the changes in the financial condition of a business enterprise between

tow balance sheet dates. The fund flow statement and statement of

changes in working capital of BEML for the period of five years from

1997-1998 to 2001-2002.

Cash flow statement:-

Cash flow statement is prepared by acquiring cash from

different sources and the application of the same for different

payments throughout the year. It is prepared from the analysis of cash

transaction. It shows the changes in cash both at the beginning and 1st

the end of a period.

Ratio analysis:-

A ratio is a simple arithmetical expression of the relationship of

one number to another. It may be defined as the indicated quotient of

two mathematical expressions. Ratio analysis is a process of

establishing and interpreting various ratios for helping in making



certain decisions. It is used as an index for evaluating financial

position and performance of the firm.

LIMITATIONS OF FINANCIAL ANALYSIS:-

i. It is only a study of interim reports.

ii. Financial analysis is based upon only monitory information and

non monitory factors are ignored.

iii. It does not consider changes in price levels.

iv. As the financial statements are prepared on the basis of ongoing

concern which does not give exact position.

v. Changes in accounting procedure by the firm may often make

financial analysis misleading.

vi. Analysis is the only means and not an end in itself.



“ANALYSIS AND INTERPRETATION OF RATIO’S”

Ratios: -

A ratio is a simple arithmetical expression of the relationship of

one number to another. It may be defined as the indicated quotient of

two mathematical expressions.

According to accountant’s Handbook by Wixan, Kell and

Bedford, A ratio “is an expression of the quantitative relationship

between two numbers”.

Type’s of ratios:-

They are mainly classified into 5 types viz,

1. Profitability ratios

2. Coverage ratios

3. Turn over ratios

4. Financial ratios

5. Leverage ratios

1. Profitability ratios:-

This ratios measure the results of business operations or over all

performance and effectiveness of the firm.



2. Coverage ratios:-

These ratios show the safety of the fixed interest bearing

security holders. Like debenture holders preference holders.

3. Turn over ratios:-

These will indicate the company’s assets i.e., usage of

resources at its disposal, greater the ratio more will be efficiency of

assets usages and overall efficiency of the management.

4. Financial ratios:-

Financial ratio is mainly two kinds they are;

A. Liquidity ratios

B. Stability ratios

A. Liquidity ratios:-

Ascertained to measure the liquidity position as solvency

position towards the payment of short term obligations.

B. Stability ratios:-

Ascertained to measure the long term solvency.



Current ratio:-

It is a ratio which express the relationship between total current

assets to total current liabilities. It is a measurement of firm’s short

term solvency. It indicates the availability of current assets in rupees

for every one rupee of current liability.

Current assetsCurrent ratio: Current liabilities

Table No.1 Year Current assets Current liability % of current ratio

1997-98 152653.64 46143.46 3.31

1998-99 164745.70 56090.75 2.94

1999-2k 139782.12 52943.68 2.64

2000-01 147890.12 80377.69 1.84

2001-02 157416.31 88226.44 1.78

Interpretation:-

The normal current ratio is considered as 2:1. The company has

maintained the current ratio favourable for the year 1997-98 to 1999-

2k but has dropped to 1.84 in the year 2000-01 and further reduced to

1.78 the year 2001-02.



Quick ratio:-



Quick ratio also known as Acid Test or liquid ratio. This ratio

expresses the relationship between liquid assets and liquid liabilities.

It reveals the firm’s position to meet the current liability through

quick assets

Quick assets we have considered as sundry debtors, cash and

bank balances, other current assets and loans and advances.

Quick assetsQuick ratio: Current liabilitiesTable No.2Year Quick assets Current liabilities % of quick ratio

1997-98 86921.28 46143.36 1.88

1998-99 96784.32 56090.75 1.73

1999-2k 78705.76 52943.68 1.49

2000-01 84021.80 80377.69 1.05

2001-02 93530.06 88226.44 1.06

Interpretation:-

The normal quick ratio is considered as 1:1. The company has

maintained the quick ratio favourable for the past five years even

though it is declining from 1.88 in the year 1997-98 to 1.06 in the year

2001-02.



Debt-equity ratio:-



The debt-equity ratio expresses the relationship between total

debt and net worth or equity of the company or the relationship

between borrowed capital & owner’s capital. The ratio of debt varies

according to the nature of the business and availability of cash flows.

Long term debts we have calculated as secured loans and un

secured loans. Share holders funds we have to considered as share

capital & reserves and surplus.

Long term debtDebt equity ratio= Share holders fundsTable No.3

Year Long term debts Share holders funds D.E.R %

1997-98 129802.48 56564.18 2.22

1998-99 130320.54 58423.93 2.22

1999-2k 107576.23 59184.30 1.82

2000-01 89135.02 59376.28 1.50

2001-02 89697.91 59664.84 1.50

Interpretation:-

The normal debt equity ratio is considered as 2:1. The company

has maintained the debt equity ratio favorable for the year 1997-98

and 1998-99 but has dropped to 1.82 in the year 1999-2k and further

reduced to 1.50 for the year 2000-01 and 2001-02.



Net profit ratio:-



This ratio indicates net margin earned on sales, it help to know

the operational efficiency of the business. It indicates the amount of

sales left for share holder after all costs and expenses have been met.

Net operating profitNet profit ratio= Net sales

Table No.4

Year Net operating profit Net sales Net profit ratio

1997-98 1626.93 115335.00 1.41

1998-99 371.47 113181.00 0.33

1999-2k 2481.69 124212.00 2.00

2000-01 1031.09 125132.00 0.82

2001-02 1284.51 133245.00 0.96

Interpretation:-

The ratio show that the company has very low profit in the year

1998-99 has improved over the year from 371.47 lakhs to 1284.51 in

the year 2001-02. The company has to further strive towards

achieving the high net profit ratio.



Return on total assets:-



This profitability ratio is measured in terms of relationship

between profit and total assets. It also indicates whether the total

assets of the business have been properly used or not

PBITReturn on total assets= x 100 Total assets

Table No.5

Year PBIT Total assets Ratio

1997-98 1605.09 174033.58 0.92

1998-99 271.66 185276.89 0.15

1999-2K 2359.75 158847.45 1.49

2000-01 1064.71 165077.68 0.64

2001-02 1301.00 172702.19 0.75

Interpretation:-

The ratio shows that the company has very low return on total

asset in the year 1998-99 and has improved over the years it indicates

that the total assets of the business have not been properly utilized.



Inventory turn over ratio:-



The inventory turn over ratio indicates the number of times of

the inventory of a company rotates with an accounting cycle. It

indicates the number of times the average stock is turned during a

year. The stock turnover ratio depends upon the type of the company

or type of industry. The formula for ascertaining this ratio is

Cost of goods soldInventory turn over ratio:- Inventory

Where the figure as cost of goods sold is not available in the

published annual statements, this formula may be used.

SalesInventory Turnover Ratio =

Inventory

Table No.6



Year Sales Inventory I.T.R

1997-98 125971.14 65732.36 1.92

1998-99 121261.90 67961.38 1.78

1999-2k 13170.84 61076.36 2.16

2000-01 134740.03 63868.32 2.11

2001-02 142414.89 63886.25 2.23

Interpretation:-

It can be seen that from the year 1998-1999 the turnover ratio has

been improved from 1.78 to 2.23 times in the year 2001-2002. while

the normal of this ratio may be taken as 5 to 6 times, considering the

types of goods as capital goods the normal may be considered as 3 to

4 times. Hence the company may strive towards achieving better

utilization of inventory and reducing the inventory holding.



Debtors Turnover ratio:



Debtors turnover ratio indicates the numbers of times the

detours turnover every year generally the higher the value of debtors

turnover the more efficient is the management of credit Debtors

turnover ratio can be calculated by dividing the total sales by the

debtors outstanding

Debtors turnover ratio=

Particulars 1997-98 1998-99 1999-2000 2000-01 2001-02

Sales 125971.14 121261.90 131708.84 134740.03 142414.89

Debtors 61881.99 60664.54 52016.17 52066.62 56729.55

DTR 2.04 2.00 2.53 2.59 2.51

Interpretation :

The debtors turnover ratio is improved in the period of five

years from 2.04 in the year 1997-98 to 2.51 in 2001-02. Considering

the nature market of the company which is of capital equipments the

efficiency of credit management is good.


Sales Debtors


Debits collection period:



The collection period measures quality of debtors as it indicates

the speed of collection of approximate numbers of days taken by the

company to collect the debtors after making sales.

Higher the turnover ratio, shorter the debits collection period &

better the credit management, better the liquidity of debtors and vice –

Versa.

Collection period sales

Sales Collection period = x 365

DebtorsRs in lakhs

Particulars 1997-98 1998-99 1999-2000 2000-01 2001-02

No. of days 365 365 365 365 365

DTR 2.04 2.00 2.53 2.59 2.51

DCP 179 183 144 141 145

Interpretation:

The company's debits collection period is favourable &

showing improvements over the period of time since the company is

decling with capital goods the debits collection period is considered to

be good.



Working capital turnover ratio:

This ratio states whether investments in net current assets as

been properly utilized, it determines how efficient the company is a

converting raw materials to finished the products.

The working capital is taken as: Current assets – Current liabilities

SalesWorking capital turnover ratio =

Working Capital

Working capitals turnover ratio:

Year Net sales Working capital WCTR

1997-1998 115335.00 106510.18 1.08

1998-1999 113181.00 108654.95 1.04

1999-2000 124212.00 86838.44 1.43

2000-2001 125132.00 67512.43 1.85

2001-2002 133245.00 69189.87 1.93

Interpretation:

The working capital turnover ratio is improving over the year.

The non being the 5 – 6 times considering the nature of product as

capital items. The none can be taken as 3 – 4 times, the company as

to still improve the working turnover ratio.



Cash ratio:



It is the ratio cash & Cash equivalent balance, to current

liability it can be calculated as follows

Cash Cash ratio =

Current Liabilities

Particulars 1997-98 1998 - 99 1999 - 00 2000 - 01 2001-02

Cash & Bank bal

16017.33 25456.03 11505.39 18839.21 25895.64

Current liabilities

46143.36 56090.75 52943.68 80377.69 88226.44

% of cash to C.L 0.35 0.45 0.22 0.23 0.29

Interpretation:

The cash ratio in the year 1998-99 is high & the company as

maintained the cash ratio around 25% for the past three years which is

good sign.



Current liabilities to working capital:



Current LiabilitiesCurrent liabilities to working capital =

Working Capital

Year Current liabilities Working capital CL / WC

1997-1998 46143.36 106510.18 0.43

1998-1999 56090.75 108654.95 0.52

1999-2000 52943.68 86838.44 0.61

2000-2001 80377.69 67512.43 1.28

2001-2002 88226.44 69189.87 1.28

Interpretation:

The ratio show that the company as very low current liabilities

to working capital in the years 1998 0.43 as increased in the year

2001-2001 at 1.28.



Share holders fund to working capital:

SHF



Share holder fund to working liabilities = Working Capital

Year Share holder fund Working capital SHF / WC

1997-1998 585,64,18 106510.18 0.55

1998-1999 586,23,93 108654.95 0.54

1999-2000 591,84,30 86838.44 0.68

2000-2001 593,76,28 67512.43 0.88

2001-2002 596,64,84 69189.87 0.86

Interpretation:

The ratio show that the company as low share holder fund to

working capital in the year 1998 at 0.55 & 1999 they have decreased

0.54 in 2000 they have improved to 0.68 & 2001-2002 in 0.86.



Current assets to fixed assets:

Current Assets



Current assets to fixed assets = Fixed Assets

Year Current assets Fixed assets CA / FA

1997-1998 1,56,653,64 21,650,50 7.24

1998-1999 1,64,745,70 20,79,384 7.92

1999-2000 1,39,782,12 19,32,798 7.23

2000-2001 1,47,890,12 17,94,598 8.24

2001-2002 1,57,416,31 16,07,030 9.80

Interpretation:

The ratio show that the company as higher current assets to

fixed assets in the year 7.24 & improved in the year 2001 – 2002 at

9.80.



Fixed Assets to Working Capital:



Fixed AssetsFixed Assets to Working Capital =

Working Capital

Year Fixed assets Working capital FA / WC

1997-1998 21650,50 106510,18 0.20

1998-1999 20793,84 108654,95 0.19

1999-2000 19327,98 86838,44 0.22

2000-2001 17945,98 67512,43 0.27

2001-2002 1607030 69189,87 0.23

Interpretation:

The ratio show that the company as low fixed assets to working

capital in the year 1998 at 0.20 & 1999 they have decreased 0.19 2000

they have improved to 0.22 & 2001 0.27 again in 2002 have decreased

0.23.



Current assets to Working capital:



Current AssetsCurrent assets to Working Capital =

Working capital

Year Current assets Working capital C A / W C

1997-1998 1,56,653,64 106510,18 1.47

1998-1999 1,64745,70 108654,95 1.52

1999-2000 1,39,782,12 86838,44 1.61

2000-2001 1,47,890,12 67512,43 2.19

2001-2002 1,57,416,31 69189,87 2.28

Interpretation:

The ratio show that the company has low current assets to

working capital



a. BEML is a defence oriented undertaking enjoying monopolistic

market in earth moving heavy equipments over a period of time

.The present market for earth moving equipment is becoming

increasingly competitive. The number of manufacturers with in

the country is increasing. The company is also facing

competitions from abroad due to globalization.

b. The prolonged economic slow down in the country adversely

affected the entire earth moving equipment as also rail way

segment resulting in a sharp drop in demand for the products.

This had a telling effect on the operation of the company which

is visible in the profitability position.

c. While the sales to defence segment is showing considerable

increase the sales in rail coaches segment has dropped sharply.

This is due to lack of orders for rail coaches from railway

board.

d. The current ratio of the company is very high during the year

1997-98, 1998-99and 1999-2000.Even though the company’s

liquidity or short term solvency position is good. Due to high

current ratio, the high current ratio is not desirable. Since it

results in less efficient use of funds or lucking up of funds in



current assets. This will result in considerably lowering down

the profitability.

e. The net profit ratio is very low especially in the year 1998-99.

The company has almost a nil profit when compared to the

turnover and the indication also shows no improvement over

the years. The profitability ratio show that shows no

improvement over the years. The profitability ratio show that

the company is unable to make sufficient profit. The company

is experiencing the problem of reduced order position and under

utilization of manpower unlike other major companies.

f. The turnover to working capital ratio reveals that the company

is able to make only 1.08 times of turnover to working capital

in the year 1997-98 and improved to 1.93 times in the year

2000-01. This is a steady improvement even though not up to

the required level when compared to other major companies.

g. The activity ratio shows that the company is not utilizing the

fixed assets at optimum level.

h. The earnings per share is very low, it was Rs. 0.17 in the year

1998-99 and Rs.1.45 in the year 2001-02.



i. The sales have been heavily affected during the last few years

necessitating the company to maintain high level of FGI/WIP

affecting the financial position of the company.



i. The time allowed by the collection of the information is very

less. I could not gather full and genuine information about the

topic because of limited time allowed to do the project. The

time allowed by the collage was also limited.

ii. As the industry is very large-scale, the officers are very busy

with their working schedules. So it was very difficult to have

direct interaction with the company officers for the collection of

the information.

iii. Lot of time is required to collect the right information from the

right person.

iv. The study is completely based on the information given by the

personnel and also the information collected from company’s

documents.

v. From this study generalization can not be drawn.



SUGGESTIONS:-

i. Over all, the financial position of the company is satisfactory.

The long term solvency of the company and its liquidity

position is good. The company has to improve net profit ratio

by increasing sales and concentrating on more profitable

products.

ii. Reducing cost of raw materials, effective utilization of labour,

cut in administrative expenditure and increase in sales, should

increase the over all profitability.

iii. The company shout utilize the available large marketing

network and improve the customer relation through the constant

customer support and after sales services.

iv. The current and quick ratios are almost up to the standard

requirement for the past two years. The working capital of the

company is satisfactory and has to be maintained further.

v. The company should focus on cost control measures for

ensuring competitive pricing of the equipment.



vi. The inventory turnover ratio is very less when compared to

standard for 5 to 6 times. The company is holding the inventory

for almost 170 days for the past three years. This can be

brought down to 75 to 90 days by better management of

inventory.



CONCLUSIONS:-

In a competitive environment we cannot demand a price what

we want. What the customer can afford can afford can only be

determined as a sale price. If the cost is taken as a sale price to capture

the market, if the profitability on the product is the sale concentration,

which can be achieved by, cost reduction.

To conclude, the main objective is to have a balance liquidity

position and track off between risk and profitability. The greater, the

amount of working capital level maintained, the less risk of running

out of cash but profitability will be less. The lower, the level of

working capital, the profitability will be greater but the more will be

risk of running out of capital to meet day-to-day requirements. The

firm is in highly liquidity position because the optimum level of

current ratio is 2:1. This shows the efficient liquidity position of the

company. The financial position for running day-to-day business is

sound.



Particulars 1997-98 1998-99 1999-2000 2000-2001 2001-2002SOURCES OF FUNDS1. PROFIT OF TAX2. DEPRECIATION3. INCREASE IN SHARE CAPITAL4. SHARE PREMIUM5. INCREASE IN BORROWINGS6. DECREASE IN W.CAPITAL7. OTHERS

1065.002346.00

0.006.000.00

788.000.00

62.002445.00

0.001.00

459.000.00

774.00

1460.002451.00

0.000.000.00

22103.000.00

600.002296.00

0.000.000.00

19039.000.00

535.001843.00

0.000.00

274.000.000.00

TOTAL 4205.00 3741.00 26014.00 21935.00 2652.00UTILISATION OF FUNDS 1. FIXED ASSETS2. DECREASE IN BORROWINGS3. INCREASE IN W.CAPITAL4. DIVIDENDS AND TAXES5. INVESTMENTS6. OTHERS

2634.000.00

621.00811.00

0.00139.00

1596.002145.00

0.000.000.000.00

986.000.00

23305.00897.00287.00539.00

419.000.00

18634.00405.00210.00

2267.00

-58.001677.00

0.00441.0026.00

566.00

TOTAL 4205.00 3741.00 26014.00 21935.00 2652.00

STATEMENT OF CHANGES IN WORKING CAPITAL

Particulars 1997-98 1998-99 1999-2000 2000-2001 2001-2002

CURRENT ASSETS

1. INVENTORIES2. SUNDRY DEBTORS3. CASH & BANK BALANCE4. OTHER CURRENT ASSETS5. LOAN & ADVANCES

657.32618.82160.17

9.3380.89

679.61606.65254.56

4.22102.41

610.76520.16115.05

2.46149.39

638.68520.66188.39

4.12127.04

638.86567.29258.96

4.41104.64

TOTAL 1526.53 1647.45 1397.82 1478.89 1574.16CURRENT LIABILITIESCURRENT LIABILITIES 461.43 560.91 529.44 803.77 882.26NET WORKING CAPITAL 1065.10 1086.54 868.38 675.12 691.90



TABLE SHOWING THE WORKING RESULTS OF THE

COMPANY FOR THE PERIOD OF FIVE YEARS

SL.NO.

PARTICULARS 1997-98 1998-99 1999-00 2000-01 2001-02

1

2

3

4

5

6

7

8

9

10

Turnover

Excise Duty

Net Sales

Other income

Prior period

Adjustment

profit before tax

Tax provisions

Profit after tax

Proposed Dividend

Net Sales Profit

1259.71

106.36

1153.35

21.02

0.22

16.05

5.40

10.65

08.11

1626.93

1212.62

80.81

1131.81

28.28

0.99

2.72

2.10

0.62

Nil

371.47

1317.09

74.97

1242.12

31.06

1.22

23.60

9.00

14.60

8.97

2481.69

1347.40

96.08

1251.32

25.25

-0.34

10.65

4.65

6.00

4.05

1284.51

1424.15

91.70

1332.45

16.81

-0.16

13.01

7.66

5.35

Nil

1031.09



BIBLIOGRAPHY

Bussiness Finance Reedy & Appanaiah

Financial Management Shashi, K, Gupta & Kappor

Management of Working Capital

Praveen Kumar Jain

Financial Management & Policy

Prasanna Chandra

Managerial Accounting B.S Raman

Annual ReportPrinted annual reports of the company for the year 1997 –98 to 2001-02

Web Site WWW. Bemlindia.com

Cost Accounts Manual B E M L

Material Accounts Manual B E M L



UTILIZATION OF FUNDS

1.FIXED ASSETS 2.DECREASED IN BORROWINGS3.INCREASING W. CAPITAL 4.DIVIDENDS AND TAXES 5.INVESTMENTS 6.OTHERS

2634.000.00

621.00811.00

0.00139.00

1596.002145.00

0.000.000.000.00

986.000.00

23305.00897.00287.00539.00

419.000.00

18634.00405.00210.002267.00

-58.001677.00

0.00441.0026.00566.00

TOTAL 4205.00

3741.00 26014.00 219935.00 2652.00


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