summer taraing wc & com of bsnl
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History of BSNL
The foundation of Telecom Network in India was laid by the British sometime in 19th century.
The history of BSNL is linked with the beginning of Telecom in India. In 19th century and for
almost entire 20th century, the Telecom in India was operated as a Government of India wing.
Earlier it was part of erstwhile Post & Telegraph Department (P&T). In 1975 the Department of
Telecom (DoT) was separated from P&T. The first reforms in Indian telecommunications sector
began in 1980s when the private sector was allowed in telecommunications equipment
manufacturing. In 1985, Department of Telecommunications (DOT) was established.
After 1991s liberalization in Governments policies, the telecom sector has allowed various
private players to enter into the Indian market. Earlier, sector was operating under public sector
giants like Bharat Sanchar Nigam Limited (BSNL), Mahanagar Telephone Nigam Limited
(MTNL) and Videsh Sanchar Nigam Limited (VSNL) but after the National Telecom Policy
(NTP) by Government in 1994 many private players entered in India telecommunication market.
But this market is regulated by Telecommunication Regulatory Authority of India (TRAI). It acts
as an independent regulator of the business of telecommunications in the country which was set
up in 1997 by the government of India.
On October 1, 2000 the Department of Telecom Operations, Government of India became a
corporation and was renamed Bharat Sanchar Nigam Limited (BSNL). BSNL is now Indias
leading Telecommunication Company and the largest public sector undertaking. It has a network
of over 45 million lines covering 5000 towns with over 35 million telephone connections.
Despite several hiccups along the way, the Telecom Regulatory Authority of India (TRAI), the
independent regulator, has earned a reputation for transparency and competence. With the recent
resolution of a major dispute between cellular and fixed operators, Indian telecommunications
already among the most competitive markets in the world appears set to continue growing
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rapidly. While telecom liberalization is usually associated with the post-1991 era, the seeds of
reform were actually planted in the 1980s. At that time, Rajiv Gandhi proclaimed his intention of
leading India into the 21st century, and carved the Department of Telecommunications (DOT)
out of the Department of Posts and Telegraph. For a time he also even considered corporatizing
the DOT, before succumbing to union pressure. In a compromise, Gandhi created two DOT-
owned corporations: Mahanagar Telephone Nigam Limited (MTNL), to serve Delhi and
Bombay, and Videsh Sanchar Nigam Limited (VSNL), to operate international telecom services.
Objectives
1. To be the Lead Telecom Services Provider.
2. To provide quality and reliable fixed telecom service to our customer and there by
increase customer's confidence.
3. To provide mobile telephone service of high quality and become no. 1 GSM operator in
its area of operation.
4. To provide point of interconnection to other service provider as per their requirement
promptly.
5. To facilitate R & D activity in the country.
6. Contribute towards:
I. National Plan Target of 500 million subscriber base for India by 2010.
II. Broadband customers base of 20 million in India by 2010 as per Broadband
Policy 2004.
III. Providing telephone connection in villages as per government policy.
IV. Implementation of Triple play as a regular commercial proposition.
Mission
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Financial Performance
Bharat Sanchar Nigam Limited, the largest Public Sector Undertaking of the Nation, is certainly
on a financial ground that's sound. The Company has a net worth of Rs. 84,948 crores (US$
19.49 billion), authorized equity capital of Rs. 10,000 crores (US $ 2.29 billion), Paid up Equity
Share Capital of Rs. 5,000 crores (US $ 1.15 billion) and Revenues is Rs. 39,715 crores (US $
9.11 billion) in 2006-07.
BSNL's estimated total capital outlay for 2008/09 will rise to 185.91 billion rupees ($4.7 billion)
from 140.65 billion rupees in 2007/08.Recently, BSNL has done a very good business in last
quarter of 2008 i.e. at the end of the March-2008; it has left behind all other telecom service
providers. It had sales of Rs. 10747.79 crores.
BSNL has total turnover of Rs 3,235,953 lacs, profit after tax Rs300,939, and have earning per
share of Rs 4.44.and Indias No.1 telecom companies in terms of sales revenue.
It is evident that there is a declining trend in basic services and there is stagnation in cellular
revenues. Revenue maximization strategies will have two components, one internal to the
organization and the other external. The internal aspect would involve an initiative for change ofprocess, technology, organizational structure etc. In this context, revenue assurance is the key to
improving the bottom line for BSNL. This is proactive strategy to capture all revenues due for
the services provided. Presently, BSNL generates bills through different softwares across the
zones of operation, which are disintegrated and provide only basic solutions. The industry
standard for revenue leakage is about 3 to 7% percent of revenue, which in money terms
translates to about Rs.2100 crores for BSNL. the focus should be on immediate implementation
of CDR based billing. This would require huge investment but the return would more than
commensurate. The software should be scalable and be able to incorporate all the next generation
value added services.
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FINANCE POLICY OF BSNL
Standards of Financial Proprieties
Ever officer incurring or authorizing expenditure from public funds should be guided by high
standards of financial propriety. Every officer should also enforce financial order and strict
economy at every step and see that all relevant financial rules and regulations are observed, by
his own officer and by subordinates disbursing officers.
Among the principles on which emphasis is generally laid are the following:
1. Every officer is expected to exercise the same vigilance in respect of expenditure incurred
from public moneys as a person of ordinary prudence would exercise in respect of expenditure of
his own money.
2. The expenditure should be prima-facie more that the occasion demands.
3. No authority should exercise its powers of sanctioning expenditure to pass an order which be
directly or indirectly to its own advantages.
4. Expenditure from public moneys should not be incurred for benefit of a person or section of
the people unless.
1. a claim for the amount could be enforce in a Court of Law, or
2. b. the expenditure is in pursuance of a recognised policy or custom.
5. The amount of allowances granted to meet expenditure of a particular type should be so
regulated that the allowances are not on the whole a source of profit to the recipients.
6. The responsibility and accountability of every authority delegated with financial powers to
procure any item or service on Government account is total and indivisible. Government expects
that the authority a concerned will have the public interest uppermost in its mind while making a
Procurement decision. The responsibility is not discharged merely by the selection of the
cheapest offer.
7. Whenever called for, the concerned authority must place on record in precise terms, the
considerations which weighed with it while talking the procurement decision.
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OperationsGone are the days when basic telephones were used only to make and receive calls. With the aid
of state-of-the-art digital exchanges, BSNL offers you a host of phone plus services, converting
your old basic telephones to a sophisticated tool which can be used for a variety of applications.
Basic Telephone Services
The Plain old, Countrywide telephone Service through 32,000 electronic exchanges. Digitalized
Public Switched Telephone Network (PSTN) with a host of Phone Plus value additions.
BSNL launched DataOne broadband service in January 2005 which shall be extended to 198
cities very shortly. The service is being provided on existing copper infrastructure on ADSL2
technology. The minimum speed offered to the customer is 256 Kbps at Rs. 500/- per month
only. Subsequently, other services such as VPN, Multicasting, Video Conferencing, Video-on-
Demand, Broadcast application etc will be added.
Internet
Keeping the global network of Networks networked, the countrywide Internet Services of BSNL
under the brand name includes Internet dial up/ Leased line access, CLI based
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access (no account is required) and DIAS service, for web browsing and E-mail applications.
You can use your dialup sancharnet account from any place in India using the same access no
'172233' , the facility which no other ISP has. BSNL has customer base of more than 1.7 million
for sancharnet.
Internet Telephony service is also started under the brand name , using this you can
make calls to a person in UK, USA, Canada and many more countries for as cheap as Rs. 4.50/-
per minute only. BSNL also offers Web hosting and co-location services at very cheap rates.
ISDN
Integrated Service Digital Network Service of BSNL utilizes a unique digital network providing
high speed and high quality voice, data and image transfer over the same line. It can also
facilitate both desktop video and high quality video conferencing
Intelligent Network
Intelligent Network Service (In Service) offers value-added services.
I-Net
Indias x.25 based packet Switched Public Data Network is operational in104 cities of the
country. It offers x.25 x.28 leased, x.28 Dial up (PSTN) Connection) and frame relay services.
Leased Lines & Datacom
BSNL provides leased lines for voice and data communication for various application on point to
point basis. It offers a choice of high, medium and low speed leased data circuits as well as dial-
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up lines. Bandwidth is available on demand in most cities. Managed Leased Line Network
(MLLN) offers flexibility of providing circuits with speeds of nx64 kbps up to 2mbps, useful for
Internet leased lines and International Principle Leased Circuits (IPLCs).
Cellular Mobile Service
BSNLs GSM cellular mobile service Cellone has a customer base of over 5.2 million. CellOne
provides all the services like MMS, GPRS, Voice Mail, E-mail, Short Message Service (SMS)
both national and international, unified messaging service (send and receive e-mails) etc. You
can use CellOne in over 160 countries worldwide and in 270 cellular networks and over 1000
cities/towns across India. It has got coverage in all National and State Highways and train routes.
Wireless in Local Loop
This is a communication system that connects customers to the Public Switched Telephone
Network (PSTN) using radio frequency signals as a substitute for conventional wires for all or
part of the connection between the subscribers and the telephone exchange.
Direct to Home
DTH is another technology that could be used forproviding broadband services. At present, it is
being used for TV transmission only; however, it can be utilized as the downlink path for
providing broadband connections. Uplink (connectivity to the ISPequipment/node) shall have to
be through independent connections,may be, through dial up/GPRS/EDGE, but the cost of the
uplink is the main issue to determine success and popularity of this option.
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Marketing
BSNL has been the largest operator and we must strive not only to maintain but enhance it. We
need to act fast. Timely action is an essence. There is stiff competition in this sector there are
more than 15 players in this stream and yet many more yet to cone in this field some of them we
discussed in below.
Private provider:
RELIANCE INFOCOMM: Reliance Infocomm is now known as Reliance Communications
(RCom). Reliance Communications Limited founded by the late Shri Dhirubhai H Ambani
(1932-2002) is the flagship company of the Reliance Anil Dhirubhai Ambani Group. The
Reliance Anil Dhirubhai Ambani Group currently has net worth in excess of Rs. 55,000 crores.
Reliance Communications corporate clientele includes 1,850 Indian and multinational
corporations, and over 250 global carriers. It is also an integrated telecom service provider with
licenses for mobile, fixed, domestic long distance and international services. Reliance
Communications offers a complete range of telecom services, covering mobile and fixed line
telephony including broadband, national and international long distance services, data services
and a wide range of value added services and applications. Reliance IndiaMobile, the first of
Rcoms initiatives was launched on December 28, 2002. This marked the beginning of Reliance's
vision of ushering in a digital revolution in India by becoming a major catalyst in improving
quality of life and changing the face of India. Reliance Infocomm plans to extend its efforts
beyond the traditional value chain to develop and deploy telecosolutions for India's farmers,
businesses, hospitals, government and public sector organizations.
2. Tata Teleservices : Tata Teleservices is part of the INR 54,000/- crore (US$11.2 billion) Tata
Group, that has over 90 companies, over 210,000 employees and more than 2.16 million
shareholders. With an investment of over INR 9,000 crore in Telecom, the Group has a
formidable presence across the telecom value chain. The Tata Group plans an additional
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investment of around INR 9000/- crore (US$ 2 billion) in this sector in the next two years.Tata
Teleservices spearheads the Group's presence in the telecom sector. Incorporated in 1996, Tata
Teleservices was the first to launch CDMA mobile services in India with the Andhra Pradesh
circle. According to the study of this field, I can say that consumers are very keen to observe the
every opportunity provided by the various players in the field of landline telephones
BHARTI AIRTEL: Established in 1985, Bharti has been a pioneering force in the telecom
sector with many firsts and innovations to its credit, ranging from being the first mobile service
in Delhi, first private basic telephone service provider in the country, first Indian company to
provide comprehensive telecom services outside India in Seychelles and first private sector
service provider to launch National Long Distance Services in India. Bharti Tele-Ventures
Limited was incorporated on July 7, 1995 for promoting investments in telecommunications
services. Its subsidiaries operate telecom services across India. Bhartis operations are broadly
handled by two companies: the Mobility group, which handles the mobile services in 16 circles
out of a total 23circles across the country; and the Infotel group, which handles the National
Long Distance (NLD), International Long Distance (ILD), fixed line, broadband, data, and
satellite-based services. Together they have so far deployed around 23,000 km of optical fiber
cables across the country, coupled with approximately 1,500 nodes, and presence in around200
locations. The group has a total customer base of 6.45 million, of which 5.86 million are mobile
and 588,000fixed line customers, as of January 31, 2004. In mobile, Bhartis footprint extends
across 15 circles.
VODAFONE: Vodafone is basically the biggest telecom service provider of the U.K which has
a market value of 75 billion by June, 2008. Vodafone currently has equity interests in 25
countries and Partner Networks (networks in which it has no equity stake) in a further 42
countries. The name Vodafone comes fromVo
iceDa
taFone
, chosen by the company to reflectthe provision of voice and data services over mobile phones. It had agreed to acquire a
controlling interest of 67% in Hutchison Essar Limited (Hutch) for US$11.1 billion. At the same
time, it agrees to sell back 5.6% of Airtel stake back to the Mittals. Vodafone retained 4.4%
stake in Airtel. Vodafone is the world's leading international mobile communications company.
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It now has operations in 25 countries across 5 continents and 40 partner networks with over 200
million customers worldwide. Vodafone has also tied up with Apples i-phone.
Vodafones revenues have been increased by 50% during the year driven by rapid expansion of
the customer base with an average of 1.5 million net additions per month since acquisition.
As on 31st March, 2008, Vodafones customer base was 260 millions. Its turnover was 35478
millions with a profit of 6756 millions. Vodafone has also tied up with Apples i-phone which
was launched in India by June-2008. i-phones 3G version will be launched with a 50% rate of
what it was earlier.
IDEA: Indian regional operator IDEA Cellular Ltd. has a new ownership structure and grand
designs to become a national player, but in doing so is likely tobecome a thorn in the side of
Reliance Communications Ltd. Idea operates in eight telecom circles or regions in Western
India, and has received additional GSM licenses to expand its network into three circles in
EasternIndia -- the first phase of a major expansion plan that it intends to fund through an IPO.
Idea has become fifth largest company with a subscriberbase of 3.1 crores customers.
Recently, Idea has decided to take over Spice telecom. It has decided to buy 40.8% share in
Spice telecom at Rs. 2176 crores. Apart from that, Idea is going to merge with Telecom
Malaysian International (TMI) and going to give 15% share to TMI out of 20% open offer. Idea
will get $1.7 billion out of that. TMI has 4.4 crores customers in 10 countries. Idea is also
planning to invest Rs. 10000 crores for its growth strategy and will start in other parts of the
country like Bombay, Bihar, Orissa and Tamilnadu.
Market Share of BSNL
BSNL is a largest player in Indian market and his share in different operations as per TRAI
report of year 2008.
Operator-wise Market Share of GSM service providersas on 30th September 2007
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Operator-wise Market Share of CDMA Wireless as on 30September 2007
Wireless-including WLL for October-07
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Total (Urban+ Rural) wire line market share
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PROMOTION STRATEGIES
The promotional strategies used by BSNL are giving advertisement through every means of
media giving offer and concessional coupons at the time of festivals. That helps him to retain our
customers.
The brand ambassador of BSNL is Actress Deepika Padokone BSNL sign the contract with him
in 2007.
PERSONNEL POLICES:
SOWT ANALYSIS OF BSNL
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STRENGTHS:
Pan-India reach
Experienced telecom service provider
Total telecom service provider
Huge Resources (financial & technical pool)
Huge customer base
Most trusted telecom brand
Transparency in billing
Easy deployment of new services
Copper in last mile can be used for easy broadband deployment
Huge Optical Fibre network and associated bandwidth
WEAKNESSES:
Non-optimization of network capabilities
Poor marketing strategy
Bureaucratic organizational set up
Inflexibility in mindset (DOT period legacies)
Limited number of value added services
Poor franchisee network
Legacy of poor service image
Huge and aged manpower
Procedural delays
Lack of strategic alliances
Problems associated with incumbency like outdated technologies,
unproductive rural assets, social obligations, political interference,
Poor IT penetration within organization
Poor knowledge Management
OPPORTUNITIES
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Tremendous market growing at 20 lac customers per month
Untapped broadband services
Untouched international market
Can capitalize on public sector image to grab governments ICT initiatives
ITEB service markets
Diversification of business to turn-key projects
Leveraging the brand image to source funds
Almost un-invaded VSAT market
Fuller utilization of slack resources
Can make a kill through deep penetration and low cost advantage
Broaden market expected from convergence of broadcasting, telecom and entertainmentindustry.
THREATS
Competition from private operators
Keeping pace with fast technological changes
Market maturity in basic telephone segment
Manpower churning
Multinational eyeing Indian telecom market
Private operators demand for sharing last mile
Decreasing per line revenues due to competitive pricing
Private operators demand to do away with ADC can seriously effect revenues
Populist policies of government like OneIndia rates
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2.1 Statement of Problem:
The research is carried on in a proper planned and systematic manner.
The research was particularly based departmental research. We have to move to various
department and meet people which include their names and contact numbers given by BSNL
training and Planning department.
During the department we have to know about to departmental works by explaining the working
process of a particular department.
Each department presences section supervisors (SS) this SS will provide various data of relative
department and give opportunity to handling the working process and resolve our doubts.
2.2 Research Design & Methodology:
Research
The research design of this project is exploratory. Though each research study has its own
specific purpose but the research design of this project on BSNL is exploratory in nature as the
objective is the development of the hypothesis rather than their testing.
The research designs methods of financial analysis. Through of comparative balance sheet in
comparative statement, I am studying on balance sheet of BSNL of five year. So taking
comparative statement, I am going to analyzed of five years balance sheet of BSNL.
Methodology
Every project work is based on certain methodology, which is a way to systematically solve the
problem or attain its objectives. It is a very important guideline and lead to completion of any
project work through observation, data collection and data analysis.
Research Methodology comprises of defining & redefining problems, collecting, organizing &
evaluating data, making deductions & researching to conclusions.
According to Clifford Woody,
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Accordingly, the methodology used in the project is as follows: -
Sampling Technique Used:
This research has used convenience sampling technique.
Sampling technique:
Convenience sampling is used in exploratory research where the researcher is interested in
getting an inexpensive approximation of the truth. As the name implies, the sample is selected
because they are convenient
2.5 Selection of Sample Size:
Survey of each department.2.6 Sources of Data Collection:
Secondary Data:
Secondary data will consist of different literatures like books which are published, articles,
internet, the company manuals and websites of company- www.bsnl.com. In order to reach
relevant conclusion, research work needed to be designed in a proper way.
This research methodology also includes:-
Familiarization with the concept of finance and its various merits, demerits.
Thorough study of the information collected.
Conclusions based on findings.
2.6 Statistical Tools Used
The main statistical tools used for the collection and analyses of data in this
project are:
Bar Diagrams
Pie Charts
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CONCEPT OF WORKING CAPITAL
Working Capital Management is the process of planning and controlling the level and mix of
current assets of the firm as well as financing these assets.
Specifically, Working Capital Management requires financial managers to decide what quantities
of cash, other liquid assets, accounts receivables and inventories the firm will hold at any point
of time.
Working capital is the capital you require for the working i.e. functioning of your business in the
short run.
Gross working capital refers to the firms investment in the current assets and includes cash,short term securities, debtors, bills receivables and inventories. It is necessary to concentrate on
the fact that the investment in the current assets should be neither excessive nor inadequate. WC
requirement of a firm keeps changing with the change in the business activity and hence the firm
must be in a position to strike a balance between them. The financial manager should know
where to source the funds from, in case the need arise and where to invest in case of excess
funds.
The dangers of excessive working capital are as follows:
1. It results in unnecessary accumulation of inventories. Thus the chances of inventory
mishandling, waste, theft and losses increase.
2. It is an indication of defective credit policy and slack collection period. Consequently higher
incidences of bad debts occur which adversely affects the profits.
3. It makes the management complacent which degenerates into managerial inefficiency
4. Tendencies of accumulating inventories to make speculative profits grow.
This may tend to make the dividend policy liberal and difficult to copes with in future when the
firm is unable to make speculative profits.
The dangers of inadequate working capital are as follows:
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1. It stagnates growth .It becomes difficult for the firms to undertake profitable projects for non-
availability of the WC funds.
2. It becomes difficult to implement operating plans and achieve the firms profit targets.
3. Operating inefficiencies creep in when it becomes difficult even to meet day-to-day
commitments.
4. Fixed assets are not efficiently utilized. Thus the rate of return on investment slumps.
5. It renders the firm unable to avail attractive credit opportunities etc.
6. The firm loses its reputation when it is not in position to honor its short-term obligations. As a
result the firm faces a tight credit terms.
Net working capital refers to the difference between the current assets and the current liabilities.Current liabilities are those claims of outsiders, which are expected to mature for payment within
an accounting year and include creditors, bills payable, bank overdraft and outstanding expenses.
When current assets exceed current liabilities it is called Positive WC and when current liabilities
exceed current assets it is called Negative WC. The Net WC being the difference between the
current assets and current liabilities is a qualitative concept. It indicates:
The liquidity position of the firm
Suggests the extent to which the WC needs may be financed by permanent sources of funds.
It is a normal practice to maintain a current ratio of 2:1. Also, the quality of current assets is to be
considered while determining the current ratio. On the other hand a weak liquidity position poses
a threat to the solvency of the company and implies that it is unsafe and unsound. The Net WC
concept also covers the question of judicious mix of long term and short-term funds for financing
the current assets.
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Permanent and variable working capital:
The minimum level of current assets required is referred to as permanent working capital and the
extra working capital needed to adapt to changing production and sales activity is called
temporary working capital.
NEED AND IMPORTANCE OF WORKING CAPITAL MANAGEMENT
The importance of working capital management stems from the following reasons:
1. Investment in current assets represents a substantial portion of the total investment.
2. Investments in current asset and the level of current liabilities have to be geared quickly to
change in sales, which helps to expand volume of business.
3. Gives a company the ability to meet its current liabilities
4. Take advantage of financial opportunities as they arise.
A firm needs WC because the production, sales and cash flows are not instantaneous. The firm
needs cash to purchase raw materials and pay expenses, as there may not be perfect matching
between cash inflows and outflows. Cash may also be held up to meet future exigencies. The
stocks of raw materials are kept in order to ensure smooth production and to protect against the
risk of non-availability of raw materials. Also stock of finished goods has to be maintained to
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meet the demand of customers on continuous basis and sudden demand of some customers.
Businessmen today try to
keep minimum possible stock as it leads to blockage of capital. Goods are sold on credit for
competitive reasons. Thus, an adequate amount of funds has to be invested in current assets for a
smooth and uninterrupted production and sales process. Because of the circulating nature of
current assets it is sometimes called circulating capital.
FACTORS INFLUENCING THE WORKING CAPITAL REQUIREMENT
All firms do not have the same WC needs .The following are the factors that affect the WC
needs:1. Nature and size of business: The WC requirement of a firm is closely related to the nature of
the business. We can say that trading and financial firms have very less investment in fixed
assets but require a large sum of money to be invested in WC. On the other hand Retail stores,
for example, have to carry large stock of variety of goods little investment in the fixed assets.
2. Manufacturing cycle: It starts with the purchase and use of raw materials and completes with
the production of finished goods. Longer the manufacturing cycle larger will be the WC
requirement; this is seen mostly in the industrial products.
3. Business fluctuation: When there is an upward swing in the economy, sales will increase also
the firms investment in inventories and book debts will also increase, thus it will increase the
WC requirement of the firm and vice-versa.
4. Production policy: To maintain an efficient level of production the firms may resort to normal
production even during the slack season. This will lead to excess production and hence the funds
will be blocked in form of inventories for a long time, hence provisions should be made
accordingly.
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Since the cost and risk of maintaining a constant production is high during the slack season some
firms may resort to producing various products to solve their capital problems. If they do not,
then they require high WC.
5. Firms Credit Policy: If the firm has a liberal credit policy its funds will remain blocked for a
long time in form of debtors and vice-versa. Normally industrial goods manufacturing will have
a liberal credit policy, whereas dealers of consumer goods will a tight credit policy.
6. Availability of Credit: If the firm gets credit on liberal terms it will require less WC since it
can always pay its creditors later and vice-versa.
7. Growth and Expansion Activities: It is difficult precisely to determine the relationship
between volume of sales and need for WC. The need for WC does not follow the growth but
precedes it. Hence, if the firm is planning to increase its business activities, it needs to plan its
WC requirements during the growth period.
8. Conditions of Supply of Raw Material: If the supply of RM is scarce the firm may need to
stock it in advance and hence need more WC and vice versa.
9. Profit Margin and Profit Appropriation: A high net profit margin contributes towards the WC
pool. Also, tax liability is unavoidable and hence provision for its payment must be made in the
WC plan, otherwise it may impose a strain on the WC.
Also if the firms policy is to retain the profits it will increase their WC, and if they decide to pay
their dividends it will weaken their WC position, as the cash will flow out. However this can be
avoided by declaring bonus shares out of past profits. This will help the firm to maintain a good
image and also not part with the money immediately, thus not affecting the WC position.
Depreciation policy of the firm, through its effect on tax liability and retained earning, has an
influence on the WC. The firm may charge a high rate of depreciation, which will reduce the tax
payable and also retain more cash, as the cash does not flow out. If the dividend policy is linked
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with net profits, the firm can pay fewer dividends by providing more depreciation. Thus
depreciation is an indirect way of retaining profits and preserving the firms WC position
.
CASH REQUIRED FOR WORKING CAPITAL
For estimating the actual cash requirement you may follow the following two-step procedure:
1. Estimate the cash cost of various current assets requirement: The cash cost of a current asset
is:
Value of current asset
(-) Profit element, if any, included in the value.
(-) Non-cash charges like depreciation, if any, included in the value.
2. Deduct the spontaneous current liabilities from the cash cost of current assets: A portion of thecash cost of current assets is supported by trade credit and accruals of wages on expense, which
may be referred to as spontaneous current liabilities. The balance left after such deduction has to
be arranged from other sources In 1997, the RBI permitted banks to evolve their own norms for
assessment of the Working Capital requirements of their clients.
CASH FLOW BASED COMPUTATION OF WORKING CAPITAL
Drawing up cash flow statements (monthly or quarterly) for the past few years clearly
indicate the seasonal and secular trend in utilization of working capital.
The projections drawn up by the entrepreneur may then be jointly discussed with the
banker as modified in light of the past performance and the bankers opinions.
The peak cash deficit is ascertained from the cash budgets.
The promoters share for such requirement maybe mutually arrived at by the banker and
the borrower with the balance requirement forming the Bank financed part of Working
Capital.
Cash flow based computation of working capital requirement has been recommended by the RBI
for assessment of working capital requirement permitting the banks to evolve their own norms
for such assessment However the reluctance to provide the cash budgets thereby revealing
additional information to the banks, has led to even larger companies shying away from Cash
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Budget method of assessing Working Capital. Consequently Cash Budget method is currently
prevalent mainly in case of seasonal industries, construction sector as well as other entities
whose operations are linked to projects.
WHY DOES A FIRM NEED CASH?
i. Transaction motive: firm needs cash for transaction purpose.
ii. Precautionary motive: The magnitude and time of cash inflows and outflows is always
uncertain and hence the firms need to have some cash balances as a buffer.
iii. Speculative motive: All firms want to make profits from fluctuations in commodity prices,
security prices, interest rates and foreign exchange rates .A cash rich firm is in a better positionto exploit such bargains. Hence, the firm with such speculative leanings may carry additional
liquidity.
The firm must decide the quantum of transactions and precautionary balances to be held, which
depends upon the following factors:
The expected cash inflows and outflows based on the cash budget and forecasts,
encompassing long/short range cash needs of the firm.
The degree of deviation between the expected and actual net cash flow.
The maturity structure of the firms liabilities.
The firms ability to borrow at a short notice, in case of emergency.
The philosophy of management regarding liquidity and risk of insolvency
The efficient planning and control of cash.
OPTIMAL CASH BALANCE
Cash balance is maintained for transaction purposes and an additional amount may be
maintained as a buffer or safety stock. It involves a tradeoff between the costs and the risk.
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If a firm maintains a small cash balance, it has to sell its marketable securities and probably buy
them later more often, than if it holds a large cash balance. More the number of transactions
more will be the trading cost and vice-versa; also, lesser the cash balance, less will be the
number of transaction and vice-versa. However the opportunity cost of maintaining the cash
rises, as the cash balance increases.
KEY OF WORKING CAPITAL
Working capital may be classified in two ways:
(a) On the basis of Concept
(b) On the basis of time
(A) On the basis of Concept
There are two concept of working capital
(i) Balance sheet Concept
(ii) Operating Cycle
(i) Balance Concept
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There are two interpretation of working capital under the balance sheet concept.
(a) Gross Working Capital
(b) Net Working Capital
(a) Gross Working Capital : The gross working capital is the capital invested in total current
assets of the enterprises
(b) Net Working Capital : The term working capital to the next working capital. Net working the
excess of current assets over current assets.
Net working capital = current assets current liabilities
(ii) Operating cycle Concept
The gross operating cycle of a firm is equal to the length of the inventories and receivables
conversion period.
(c) Gross Operating Cycle: = RMCP + WIPCP+ FGCP+ RCP
Where RMCP = Raw material conversion period
WIPC = work in -progress conversion period
FGCP = Finished Goods conversion period
RCP = Receivables conversion period
RMCP = Avg. stock of RM / RM Consumption per day
WIPC = Avg. Stock of WIP / Total cost of production per day
FGCP = Avg. Stock of finished Goods / total cost of sales per day
RCP = Avg. Account Receivables / Net Credit sales per day
(d) Net Operating Cycle : Gross operating Cycle Period Payables Deferral
Period Payable Deferral Period =Avg. payables / Net credit purchases per day
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CALCULATION OF WORKING CAPITAL OF BSNL
Calculation of Working Capital in four years On the Basis of Gross Working Capital
Particular
(Current Assets)
2008 2007 2006 2005
Building
materials
344 466 534 400
Lines and Wires 14,696 16,354 15,500 12,300
Cables 132,359 106,839 103,125 104,564
Apparatus and
Plants
120,566 83,342 130,333 65,548
Telephone andTelex Instruments 19,257 19,268 19,272 19,365
Telegraph and
Telex Spares
150 149 155 153
Broad Band
Equipments
10,218 1,168 1,652 1,109
Satellite BasedBroadbandEquipments
414 227 235 365
Raw material (atFactory)
12,572 11,108 10,985 10,562
Finished goods
(at Factory)
952 1,078 1,258 1,365
Finished Stock (atvarious Circles)
15,348 15,932 15,658 15,369
Stores 20,189 13,016 16,015 19,489
Excess/(Short) inInventory
Account
150 2,186 1,264 1,856
Sundry Debtors 546,551 558,066 630,205 663,703
Cash And Bank
Balances
4,055,158 3,745,296 3,057,948 2,193,113
Loans AndAdvances
744,441 714,431 923,207 752,160
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Inventories 322,006 242,847 278,922 224,535
Gross WC / Total 6015371 5531773 5206268 4085956
0
4000000
8000000
2008 2007 2006 2005
workingcapital
INTERPRETATION
Above calculation shown in the year of 2008 the gross working capital (WC) is Rs. 60,15,371
and the WC of the year 2005 Rs. 40,85,956. This statement says the WC is increase in every
year.
ON THE BASIS OF NET WORKING CAPITAL
Particular
(Current Assets)
2008 2007 2006 2005
Building materials 344 466 534 400
Lines and Wires 14,696 16,354 15,500 12,300
Cables 132,359 106,839 103,125 104,564
Apparatus and
Plants
120,566 83,342 130,333 65,548
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Telephone andTelex Instruments
19,257 19,268 19,272 19,365
Telegraph and
Telex Spares
150 149 155 153
Broad Band
Equipments
10,218 1,168 1,652 1,109
Satellite BasedBroadbandEquipments
414 227 235 365
Raw material (at
Factory)
12,572 11,108 10,985 10,562
Finished goods (at
Factory)
952 1,078 1,258 1,365
Finished Stock (atvarious Circles)
15,348 15,932 15,658 15,369
Stores 20,189 13,016 16,015 19,489
Excess/(Short) inInventory Account
150 2,186 1,264 1,856
Sundry Debtors 546,551 558,066 630,205 663,703
Cash And Bank
Balances
4,055,158 3,745,296 3,057,948 2,193,113
Loans AndAdvances
744,441 714,431 923,207 752,160
Inventories 322,006 242,847 278,922 224,535
Total Current
Assets (A)
6015371 5531773 5206268 4085956
Sundry Creditors 606,327 597,419 498,365 564,235
Advances receivedfrom Customersand others
32,802 24,176 27,256 65,258
Deposits fromCustomers andothers
582,676 613,555 525,864 586,565
Income received in 48,569 39,027 47,589 48,489
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advance againstservices
Claims payable to
DoT
37,610 48,521 54,961 48,753
Claims
payable to
departments
of Govt. of
India
19,176 12,469 15,864 17,654
Claims payable to
Government
companies
79,094 68,584 65,864 63,654
Licence Fee andTranspondercharges payable
4,662 40,644 45,846 42,696
Payable for revised
wages
121,318 18,930 19,631 20,984
Salary & Incentive
payable to
employees
83,679 84,692 85,693 82,981
Payable to SAARC
Countries
251 569 465 512
Liabilities for
services
63,730 62,649 59,894 61,854
Liabilities for Constructionaccount
1,128 NIL NIL NIL
Claims Payable forUSOTower
80 NIL NIL NIL
Other Provision for
expenses
41,780 37,154 38,658 40,458
Other liabilities 13,524 16,252 15,856 14,489
Interest accrued butnot due onDeposits
3,241 3,275 3,846 3,964
Total of liabilities 1,739,647 1,667,916 1,507,442 1,660,756
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(B)
Net Working
Capital A B
4,275,724 3,863,857 3,698,826 2,425,200
1000000
1500000
2000000
2500000
3000000
3500000
4000000
4500000
2005 2006 2007 2008
Net W C
INTERPRETATION
Above calculation shown in the year of 2008 the net working capital (WC) is Rs. 42,75,724 and
the net WC of the year 2005 Rs. 24,25,200. This statement says the Net WC is also increase in
every year.
ANALYSIS OF CASH FLOW STATEMENT
INVESTING ACTIVITIES
Investing activities include the purchase and sale of long term assets not held for resale. Cash
flow from the investing activities discloses the expenditure incurred for resources intended to
generate future income and cash flows. These activities have been increasing year by year.
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OPERATING ACTIVITIES
Operating activitiesare the main revenue generating activities of the enterprise, as they include
cash flows from those transactions and events which enter into the ascertainment of net profit or
loss of the enterprise.
Operating activities are decreasing year by year.
FINANCING ACTIVITIES
Financing activities are the activities that result in change in capital and borrowings of the
enterprise. In 2006 these activities have increased to a large extent then, it decreased by some
amount in 2007 after that in 2008 it has improved a little bit.
According to my survey and calculating the important points are:
Financial position of BSNL is not much good.
The comparative Graph of BSNL reveals that after year 2005, increase the working
capital in year 2006 and same capital continue to year 2008 yet.
Financial position of BSNL was much better in 2005 compression to all year.
There is not good coordination in departments of BSNL.
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Working process of BSNL take long time.
Handwriting work is more than computerizing work.
Qualification of employees is not match his posts.
Salary of employees is much better.
At present time, investment of BSNL is less than compression year 2004.
4.2 ANALYSIS:
From the calculation it was found that amongst year 2005 to 2008,
In year 2005, financial position of BSNL is good based on year 2008.
In year 2006, financial condition of BSNL is improved based on year 2005.
4.3 CONCLUSION:
After overhauling the Four years balance sheet of BSNL and all condition, I have to
reached this conclusion that;
There was much good financial position of BSNL in year 2008 comparison 2005 and
present year.
Working process of BSNL is take very long time because of which, BSNL is not being
able to progress. So improved the working process.
BSNL are facing the capital problem because of which financial position of BSNL are
affected.
BSNL are paying more taxes. Because of paying more taxes, financial position of BSNL
are affected.
There was earned more profit in year 2005 but year by year BSNL is on loss.
4.4 SUGGESTION:
The study has provided with the useful data from the respondents. There has a lot to be
recommended. Following are the recommendations:
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There should be improved the working process of BSNL. Because working process of
BSNL is take more time.
Departments of BSNL do not have good coordination. So there should be good
coordination in departments of BSNL. If coordination will have good in departments,
than there will not has to face any problem in proper work.
There should be good communication between each departments of BSNL.
There should be computerized work in BSNL. But also at this time, paper work are
continue to see in many department.
There should be increase in investment of BSNL. So that could be earned more profit.
Because, if investment will be high than profit will be earnedhigh.