Escolar Documentos
Profissional Documentos
Cultura Documentos
OF
OPGC LIMITED, BHUBANESWAR
SUBMITTED BY
Priyanka Pradhan
Regd. No.: 1406356031
MASTER OF BUSINESS ADMINISTRATION
OPGC Ltd.
OBJECTIVES:
To sort out the prospective leads from the data I have collected
through the survey.
To build the relationship with the employees of OPGC Ltd. & data
collected from them.
To win over the employee's trust and belief by giving them clear
picture of working capital statement.
LIMITATIONS:
ACHIEVEMENTS:,
CHAPTER 1
INTRODUCTION
CHAPTER 2
Detailed Profile
Vision, Mission & Values
Financial performance
CHAPTER 3
WORKING CAPITAL MANAGEMENT
Conceptual Studies
Management of account receivables
CHAPTER 4
INTRODUCTION
MEANING AND CONCEPT OF WORKING CAPITAL
SCOPE OF THE STUDY
SIGNIFICANCE OF THE STUDY
OBJECTIVE OF THE STUDY
RESEARCH METHODOLOGY
INTRODUCTION:-
It is the era of business every organization wants to cut another from the
market. So it is a very challenging job for the management people to serve
the organization in the present competitive situation.
In practice a firm needs short term assets and run sort sources of financing.
The management of such assets is known as WORKING CAPITAL
MANAGEMENT OR CURRENT ASSETS.
If the firm finds problem and it do not give proper attention to manage the
working capital the firm might have liquidation problem which is harmful to
the organization. Technically, working capital management is an integral
part of financial management. It plays a vital role in any business enterprise.
The study of working capital helps us to know the current assets and current
liability of an organization. It gives a clear picture or idea about the
organizations working capital that how much amount they have kept in
advance to meet their day to day expenses.
It the working capital is in excess then the excess amount of working capital
is idle. If the working capital is not sufficient to meet the day to day expenses
then it creates a problem.
The present study has been taken up with the following objectives:
To know the various academic aspects of the Working Capital
Management in reality.
To study the practice of Working Capital Management in detail in
OPGC Limited.
To study the cash management, receivable management at OPGC
Limited.
To know the short term solvency of OPGC Limited.
i. The first and for most constraint was the time factor with in a limited
period of time it was not possible to study various aspects of OPGC in
detail.
ii. As the executives were busy with their work, they could not afford much
time for discussion.
iii. The limitation of the project in due to short time sauna was not
sufficient to collect accurate data.
METHODOLOGY OF THE STUDY
The information for the study has been obtained from two resources:
Primary data
Secondary data
Primary data:
The primary data is collected from the discussion with the concerned officer
and the staff of OPGC Limited, Bhubaneswar.
Secondary data:
The calculation part is done on the basis of the secondary data by using the
quarterly reports and Annual Reports of the OPGC Limited.
CHAPTER 2
Founded 1984
Website www.opgc.co.in
OPGC Expansion Project
The power plant will depend on coal from its captive mine and associated
railway line for transportation, for commissioning and operation thereafter.
Based on the anticipated receipt of forest and environment clearance from
MoEF, progress on land acquisition for both coal mine and railway line, and
sanction of tapered linkage from Ministry of Coal, GoI, the project is expected
to be commissioned in the 12th Five Year Plan.
In addition to Units 3&4, based on the coal reserves available from the
captive mines, OPGC is in a position to pursue Units 5&6 of 2x660 MW (1320
MW) at the same location, which is proposed to be pursued after award for
commencement of construction is placed for units 3&4.
OPGC is also exploring allocation of another captive coal block in Talcher
area under Govt. dispensation route, in order to support capacity addition of
2x660 MW in that area.
PRESENT BUSINESS
It has also undertaken the construction of seven Mini Hydel stations having
a total capacity of 5075 kW as a technological demonstration.
Mission
Core Values
Foster Teamwork
Strength of OPGC
Long term PPA with the State Power Transmission utility i.e. GRIDCO for
100% off-take.
CONCEPTUAL STUDIES
(Khan and Jain) In the present day modern industrial world the term
Working Capital refers to the short term funds required for financing the
entire duration of the operating cycle of a business known as "Accounting
Year". It is a trading capital not retained in the business in a particular form
for more than a year. This is used for carrying out the routine or regular
business operations consisting of purchase of raw materials, payment of
direct and indirect expenses, carrying out production, investment in stock,
etc. In short it represents the fund by which the day-to-day business is
carried on.
Working Capital refers to that part of the firm's capital, which is required for
financing short-term business requirements or Current Assets (CAs) such
as Cash, marketable securities, debtors and inventories. Funds so invested in
Current Assets keep revolving fast and are being constantly converted into
Cash and this Cash turns out again in exchange for other Current Assets.
Hence, it is also known as revolving or circulating or short-term capital.
"Working Capital is the amount of funds necessary to cover the cost of
operating enterprise". Circulating capital means Current Assets of a company
that are changed in the ordinary course of business from one form to
another, Eg, from Cash to inventories; inventories to receivables, to cash.
There are two interpretations of Working Capital under the BSA, viz.,
In the broad sense, the term Working Capital refers to the Gross Working
Current Assets are those assets which, in the ordinary course of business, can
be converted into Current Assets within a short period of time, say, one
year. The constituents of Current Assets are: -
Net Working Capital refers to the difference between Current Assets and
Current Liabilities. Current Liabilities are those claims of outsiders that are
expected to mature for payment within an accounting year and include the
following:
Bills Payables
Sundry Creditors
Accrued or outstanding expenses
Short-term loans, advances and deposits
Dividends payable
Bank overdraft, and
Provision for taxation, if it does not amount to appropriation of profits.
The Net Working Capital may be positive or negative. A positive Net Working
Capital will arise when Current Assets exceed Current Liabilities. Negative
Net Working Capital occurs when Current Liabilities are in excess of Current
Assets. The Current Liabilities that amounted to 24 per cent unrepresented
by Current Assets, which, in turn, drastically affected turnover levels of heavy
engineering. The Gross Working Capital is financial or going concern
concept while Net Working Capital is an accounting concept of Working
Capital. These two concepts of Working Capital are not exclusive. The Net
Working Capital may be suitable only for proprietary form of organizations
such as sole-trader or partnership firms. The gross concept of Working
Capital, on the other hand, is suitable to the company form of organization
where there is diverse between ownership, management and control.
III.2.2 Operating Cycle Approach
Operating cycle is the time duration required to convert sales, after the
conversion of resources into inventories and that into Current Assets. The
operating cycle of a manufacturing company involves three phases.
These phases affect Cash flows, which are neither synchronized nor certain.
They are not synchronized because Cash outflows usually occur before Cash
inflows. Cash outflows are relatively certain whereas the Cash inflows are
difficult to be forecast due to the time gap between sales and collections. This
requires the firm to invest in Current Assets for uninterrupted operations.
Liquidity has to be maintained to purchase raw materials and pay expenses,
as there is hardly a matching between Cash inflows and outflows. Cash is also
held to meet any future obligations. Stock of raw materials and work-in-
progress are kept to ensure smooth production and to guard against non-
availability of raw materials and other components. The firm holds stock of
finished goods to meet the demands of customers on continuous basis and
sudden demand from some other customers. Debtors are created because
goods are sold on credit for marketing and competitive reasons. Thus, a
firm makes adequate investment in materials, and debtors, for smooth,
uninterrupted production and sales to operate its business more efficiently
as there is no delay in obtaining materials due to credit difficulties, to
withstand in periods of depression smoothly, there can be operating losses or
decreased rate. The length of the operating cycle of a manufacturing firm can
be defined as the sum of inventory conversion period (ICP) and debtor's
conversion period (DCP). The operating cycle ranges from 96 days to 158
days in Case of Lupin Laboratories Ltd.
It is the total time needed for producing and selling the product which
includes raw materials conversion period (RMCP), work-in-progress
conversion period (WIPCP) and finished goods conversion period (FGCP).
Raw Material Conversion Period refers to the period in which the raw
materials are generally kept in stores before they are issued for
manufacturing to production department. Work-in-Progress Conversion
Period refers to the period for which the raw material remains in the
manufacturing process before it is taken out as finished product.
Finished Goods Conversion Period refers to the period for which finished
products remain in stores before being sold to a customer.
Debtors Conversion Period (DCP)
Thus,
Where,
Average Payments
PDP =
Net Credit Purchases per day
III.2.3 Classification of Working Capital on the basis of time
It is a situation where the production facilities could not be utilized fully for
want of Working Capital. This results in the following dangers.
It refers to a situation of idle funds, which earn no profits for the firm. The
evils of excessive Working Capital are:
It emphasizes the different sources of finance and each source has a different
cost of capital. The cost of capital moves inversely with risk. As such
additional risk capital results in the decline in the cost of capital.
A firm should make every attempt to relate maturities of payments to its flow
of internally created funds. The failure to meet such a match of generation
to outside demand would accentuate the risk.
CHAPTER-4
Using Ratios:
Current Ratio
Quick Ratio
Inventory Turnover Ratio
CA (In lakhs)
=105018.20=2013-14
=102439.26=2012-13
=96260.24=2011-12
CL (In lakhs)
=9771.20=2013-14
=4899.74=2012-13
=5186.90=2011-12
2013-14=95247
2012-13=97539.52
2011-12=91073.34
DIAGRAM OF CURRENT ASSET
CURRENT ASSET
106000
104000
102000
100000
96000
94000
92000
90000
2011-12 2012-13 2013-14
Interpretation
10000
9000
8000
7000
6000
3000
2000
1000
0
2011-12 2012-13 2013-14
Interpretation
WORKING CAPITAL
100000
98000
96000
94000
WORKING CAPITAL
92000
90000
88000
86000
2011-12 2012-13 2013-14
Interpretation
6000
5000
4000
3000
Inventories
2000
1000
0
2011-12 2012-13 2013-14
Interpretation
56000
54000
52000
50000
48000
Sales
46000
44000
42000
40000
2011-12 2012-13 2013-14
Interpretation
120000
100000
80000
sales
60000
inventories
working capital
40000
20000
0
2011-12 2012-13 2013-14
Interpretation
The above diagram shows that inventories & working capital of OPGC is very
low as compare to sales. It shows that the management is very good that for
the organisations get more & more profit and profit is increase year by year.
RATIO ANALYSIS ACCORDING TO THE WORKING CAPITAL
MANAGEMENT-
Important Terms-
Ratio analysis
Gearing
Liquidity
Overtrading
Ratio Analysis
Ratio analysis is the first step in assessing an entity. It removes some of the
mystique surrounding the financial statements and makes it easier to the pin
point items which it would be interesting to investigate further.
These ratios can ably be classified according to the target group of the
stakeholders.
TYPES OF RATIOS
1. Current ratio
2. Quick ratio
3. Inventory turnover ratio
Current Ratio:
This compares assets which will become liquid within approximately twelve
months with liabilities which will be due for payment in the same period and
is intended to indicate whether there are sufficient short term assets to meet
the short term liabilities. Recommended current ratio is 6:1. Any ratio below
indicates that the entity may never face liquidity problem but the above ratio
indicates under trading, that is the entity is over utilizing its current assets.
The following are the statistical of last three years current ratios data.
Interpretation
This ratio indicates that creditor and debtors are paid at approximately the
same time, a view might be made as to whether the business has sufficient
liquid resources to meet it current liabilities.
This ratio should ideally be 1 for companies with a slow inventory turnover.
For companies with a faster inventory turnover, a quick ratio can be less
than 1 without suggesting that the company should be in cash flow trouble.
Both current and quick ratio offer an indication of the company is liquidity
position, but the absolute figures should not be interpreted too literally. It is
often theorized that an acceptable figure should be 2:1 for current ratio and
1:1 for quick ratio but these should only be used as a guide, different
business operate in very different ways. A super market group for example
might have a current ratio of .5 quick ratio of .17 supermarkets have low
receivables (as sale are usually made on credit), low cash, medium
inventories (high inventories but quick turnover). While as in a
manufacturing company these ratios may be regarded as showing solvency
problems.
Interpretation
The quick ratio is very useful in measuring the liquidity position of a firm. It
measures the firms capacity to pay off current obligation. As rule of thumb
a quick ratio of 1:1 is considered satisfactory. I have calculated the three
years quick ratio of OPGC Limited, and it concludes that the company has
attained the healthy &satisfactory quick ratio.
The ratio is aimed at checking how vigorous the entity is trading. It measures
approximately the number of times on entity is able to acquire the
inventories and convert them into sales. A lengthening inventory turnover
period from one accounting year to the next indicates:-
1. A slowdown in trading; or
2. A build in inventory levels, perhaps suggesting that the investment in
inventories is becoming excessive
The higher turnover ratio is good for the firm, but several aspects of
inventory holding policy have to be balanced.
Lead times
Seasonal fluctuations in orders.
Alternative use of warehouse space
Bulk discounts
Inventory
11.35 : 1.00 10.21 : 1.00 11.09 : 1.00
Turnover Ratio
Interpretation
SUMMARY
SUGGESTIONS
CONCLUSION
SUMMARY:
Working capital is the life blood and controlling nerve centre of any industry
and no business can survive for prosper without an appropriate amount of
it is components and a good managerial skill to manage it. Excessive working
capital results in unnecessary blockage of resources and low profitability.
Inadequate working capital on the other hand results in lower capital
utilization and hindrance to development measures therefore, there should
be appropriate amount of working of capital to run the business and only
large body of fixed asset is not enough. In OPGC Limited. The working capital
of the organization is properly managed. In our comparison of 2012-13 and
2013-14 it observed that the working capital of the organization has
decreased. This decrease of working capital is due to proper management.
After analysis of current asset & current liabilities it is bring to the notice
that the current liabilities of various aspects such as: short term borrowings,
trade payables are decreased.
SUGGESTIONS
The size of working capital required by a firm has a much closed linkage with
its capacity utilization. The capacity of business enterprises to earn profits
depends largely on its ability to manage efficiently its working capital. In a
period of rising capital costs and scare funds, the working capital is one of
the more important areas requiring management review.
The transmutation of a company working capital into income and profits and
back into working capital is one of the most vital aspects of business
operations. And a proper relationship must be maintained between the
working capital and fixed capital of an enterprise if operations are to run
smoothly. We will hardly find a business firm, which doesnt require an
amount of working capital.
BIBLIOGRAPHY
Books:
Financial Management - Text and Cases Khan & Jain, TMH Publication.
Financial Management - I M Pandey - Vikas Publication House.
Management Accounting (Principles and Practice) - Shashi K Gupta & R
K Sharma
Websites:
www.opgc.com
www.mapsofindia.com
www.google.com
Others Sources: