working capital management (rafi) (1)

INDUSTRY PROFILE

POWER SECTOR REFORMS IN INDIA

Introduction :

The power sector has transited to an era or controlled competition giving a

meaningful role for the private sector and the market to play in the nation’s

infrastructure building. Reform in the power sector was officially kicked off in

September 1991 with the passing of the electricity laws (amendment) act, allowing

the private sector in power generation. This was followed by the center’s resolution in

October 1991 that opened up electricity generation, supply and distribution to the

private sector. These came soon after the assumption of office by the Narasimha Rao

Government.

REFORMS IN THE STATE ELECTRICITY BOARD

The reforms process turned active only in late 1996 with the adoption of the

“common minimum nation action plan for power” at the Chief Minister’s conference.

The action plan, which laid the foundation for reforms, is the state electricity boards

[SEB’s] have the following salient features.

Formulation of national energy policy.

Setting up of the central and state electricity regulatory commissions.

Rationalization of retail tariffs.

Private sector participation in private distribution.

Streaming the role of central agencies concerned with project approvals.

Autonomy and improvement in the management and physical parameters of

SEB’s.

It took another 18 months before the reforms process got into implementation

mode with the promulgation of the electricity regulatory commissions ordinance by

the precedence of India April 25, 1998. This ordinance primarily gave legal shape to

the two cardinal features of the common minimum action plan establishment of

regulatory commission and rationalization of retail tariff. This provision invited

considerable flak from the prefer power lobby and was unceremoniously shelved

when the ordinance was passed in to, an I act of parliament of July 2, 1998, reducing

SERCs to toothless tigers as far as rationalization of retail tariff was concerned.

However, the clause requiring the State Government to compensate the person

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affected by the grant of subsidy in the manner state commission may direct was

retained, there by giving some vestige of authority to the regulators.

Andhra Pradesh Power Generation Corporation Limited is one of the pivotal

organizations of Andhra Pradesh, engaged in the business of Power generation. Apart

from operation & Maintenance of the power plants it has undertaken the execution of

the ongoing & new power projects scheduled under capacity addition programmed

and is taking up renovation & modernization works of the old power stations.

When APSEB came into existence in 1959, APSEB started functioning with

the objectives of maintaining the power sector efficiently and economically

simultaneously ensuring demand meets the supply.

During the last decade inadequate capacity addition and low system frequency

operation of less than 48.5 Hz for more than half a decade considerably reduced the

power supply reliability.

The consumer have grown up from two and half lakhs to over one crore, the

energy handled per annum from 686 MV to over 40,000 MV. The annual revenue has

increased from mere Rs.65 crore to Rs.48000 crore. In the after reforms process is

taken up in a big way and APGENCO could complete 2X250MU KTPS V – stage

and Srisailam left bank Power House. International agencies have are now interested

in taking part in VTPS stage – IV.

HISTROY OF APGENCO

APGENCO came into existence on 28.12.1998 and commenced operations

from 01.02.1999. This was a sequel to Government’s reforms in Power Sector to

unbundle the activities relating to Generation, Transmission and Distribution of

Power. All the Generating Stations owned by erstwhile APSEB were transferred to

the control of APGENCO.

The installed capacity of APGENCO as on 31.03.2007 is 6760.9 MW

comprising 3172.50 MW Thermal, 3586.4 MW Hydro and 2 MW Wing power

stations, and contributes about half the total Energy Requirement of Andhra Pradesh.

APGENCO is third largest power generating utility in the Country next NTPC and

Maharashtra. Its installed Hydro capacity of 3586.4 MW is the highest among the

Country.

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APGENCO has an equity base of Rs.2107 crore with 10804 dedicated

employees as on 31.12.2006. The company has an asset base of approximately Rs.

12000 crores.

Power Sector Status in India :

Generation during 2007-08 (April).

Daily reservoir levels.

Daily generation report.

Generation during 2006-07 (April – March).

OUR POWER PLANTS

Our Power Plants meet half the total Energy Requirement of Andhra Pradesh.

As on 31-03-2005 APGENCO Owns, Operates and Maintains Five Thermal Plants

with an installed capacity of 3882.50 MW, 18 Hydel Plants (including 4 Mini Hydel

Plants) with an installed capacity of 3703.4MW, among them, Tungabadhra HES is

joint project (80:20) with Govt. of Karnataka and Machkund Power Utility (70:30)

with Orissa Government, and 2 MW Ramagiri Wind Power Plant.

APGENCO has also under taken Operation and Maintenance of Gas Power

Plant at Vijjeswaram owned by APGPCL.

1) Thermal Plants.2) Hydel Plants. 3) Wind Plants

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ORGANISATION STRUCTURE

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Sri.A.K.Goyal I.A.SChairmanSri.A.K.Goyal I.A.SChairman

Sri Ajay Jain I.A.SManaging DirectorSri Ajay Jain I.A.SManaging Director

Sri C. RadhakrishnaAdl.Charge - Director (Thermal)

Sri C. RadhakrishnaAdl.Charge - Director (Thermal)

Sri.G.AdisheshuDirector (Hydel)

Sri.G.AdisheshuDirector (Hydel)

Sri.U.G.Krishna MurthyDirector (Technical)

Sri.U.G.Krishna MurthyDirector (Technical)

Sri. C. Radha KrishnaDirector (Projects)

Sri. C. Radha KrishnaDirector (Projects)

Sri.D.Prabhakar RaoDirector (Finance)

Sri.D.Prabhakar RaoDirector (Finance)

G.Vaman RaoDirector (HR)

G.Vaman RaoDirector (HR)

Sri A. Rama RaoE.D (Information Systems)Sri A. Rama RaoE.D (Information Systems)

Sri A.Sunder Kumar Das,IPS Chief of Vigilance & SecuritySri A.Sunder Kumar Das,IPS Chief of Vigilance & Security

C.E (Civil / Environment)C.E (Civil / Environment)

G.M (Training)G.M (Training)

C.E (O & M / Srisailam)C.E (O & M / Srisailam)

C.ETraining Inst (VTPS)C.ETraining Inst (VTPS)

C.E (TPC)C.E (TPC)

S.E (O & M / NSHES)S.E (O & M / NSHES)C.E (Projects)C.E (Projects)

C.E (O & M / Sileru Complex)C.E (O & M / Sileru Complex)

C.E (Generation)C.E (Generation)

C.E (O & M / RTPP)C.E (O & M / RTPP)

C.E (O & M / KTPS)C.E (O & M / KTPS)C.E (R & M / KTPS)C.E (R & M / KTPS)

S.E (O & M / RTS-B)S.E (O & M / RTS-B)

FA & CCA (Accounts)FA & CCA (Accounts) FA & CCA (Resources)FA & CCA (Resources)

C.E (O & M / KTPS-V)C.E (O & M / KTPS-V)

Chief Engineer (Commercial)Chief Engineer (Commercial)

Dy.CCA (Audit)Dy.CCA (Audit)C.E (Civil / Hydro)C.E (Civil / Hydro)

COMPANY PROFILE

HISTORICAL BACKGROUND OF RTPP, KADAPA (Dist), A.P

A BEGINNING

Almost a century after the invention of electricity it was introduced in India

for commercial use in a humble way. Fr the first time in the year 1889 a mini

hydroelectric power house with a capacity of 15KW was constructed on a small

rivulet in Darjeeling district and electric power was supplied n its vicinity. Within,

two decades, in 1909 a 10KW diesel set was installed in Hyderabad for supply of

electricity to the king’s palaces. This was the first step in the development of electric

power in Andhra Pradesh (HYDERABAD).

GENERAL

Rayalaseema Thermal Power Project is one of the major Powers generating

facilities in Andhra Pradesh to meet the growing demand for power in the Southern

part of the state. The Project envisaged the installation of 2X210 MW of Thermal

Generation units under Stage – 1.

LOCATION

The Project Is located at a distance of 8 KM from Muddanur Railway station

of South Central Railway on the Chennai – Mumbai Railway line. The site selected is

at an adequate distance from populous Town and land belonged to the government

and was not in use. It is quiet near to the existing Railway line and Transmission lines

of AP TRANSCO.

The water requirement for the Project from Mylavaram Reservoir, which is at

20 KM from the Project through two dedicated pipelines.

COAL LINKAGE

The main Coal Linkage to RTPP is M/s SCCL and is transported through

rail. Occasionally RTPP gets the coal requirements from M/s MCL, Orissa and this is

transported through ‘Rail-Sea-Rail’ Method.

OBJECTIVE OF THE PROJECT

The Rayalaseema region is in the Southern part of the state and most of the

generation facilities are in the Northern part of the state, except for two major Hydel

stations in the Central part of the state. The Rayalaseema region thus used to get

power through long EHT line and frequently it is used to face the low voltage

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problem particularly during the summer when the Hydel stations generations goes

down. The region is a drought prone area and has to depend on Industrial growth for

its economic development power bring basic need, RTPP has ensured the proper and

quality supply the objective also improved the base load Thermal generating capacity

of the AP Grid.

PROJECT COST

The original cost of the Project as approved by the Planning

Commissioner is Rs. 503.71 crores and the revised cost of the Project based on actual

expenditure is Rs. 860.30 crores and the increase over general cost is 70%.

About APGENCO

LANDMARKS $ Achievements

Unit 3 (210 MW) of Vijayawada Thermal Power Station

has established a National Record of continuous service for

441 days from 14.12.2004 to 28.02.2006

APGENCO is the third Largest Power utility in the country

in terms of Installed Capacity - 7587.9 MW

Our Hydro Installed Capacity 3703.4 MW is highest in the

country.

Thermal plants are consistently winning the Gold and

silver medals for Meritorious Productivity Award

Availability of thermal plants has been (over a decade) well

above the national average

Recently Srisailam Left Bank Power House, a unique

complete under ground powerhouse is successfully

commissioned and being operated. This is the first such

one in southern region.

Thermal generation during 2004-05 - 23360 MU - is

highest ever achieved by APGENCO

AMRP LIFT IRRIGATION Scheme is taken up and

completed well below the stipulated time & budget .In that,

the pumping station commissioned (18 MW) is first such

one in India where water is lifted to an height of 100Mts.

Srisailam complex is the largest hydro power station with

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installed capacity 1670 MW in the country.

Nagarjuna Sagar Left canal Power House is the first hydro

station in the country to use SCDCA for operation of the

units from control room besides enhancing the Excitation

and Governor systems with microprocessor controls.

Pochampad Hydro electric Scheme is the first hydro power

station to use microprocessor controls in the powerhouse

Thermal generation during 2004-05 - 23360 MU - is

highest ever achieved by APGENCO

APGENCO – RTPP ITS VISION, MISSION AND CORE VALUES

OUR VISION:

♥ To be the best power utility in the country and one of the best in the world.

OUR MISSION:

To generate adequate and reliable power most economically, efficiently and

eco-friendly.

To spearhead accelerated power development by planning and implementing

new power projects.

To implement Renovation and Modernization of all existing units and enhance

their performance.

CORE VALUES:

To proactively manage change to the liberalized environment and global

trends.

To build leadership through professional excellence and quality.

To build a team based organization by sharing knowledge and empowering

employees.

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To treat everyone with personal attention, openness, honesty and respect they

deserve.

To break down all departmental barriers for working together.

To have concern for ecology and environment.

CORPORATE OBJECTIVES:1. To operate and maintain Power Stations availability ensuring minimum cost of

generation.

2. To add generating capacity with in prescribed time and cost.

3. To maintain the financial soundness of the Company by managing financial operations.

4. In accordance with good commercial utility practices.

5. To adopt appropriate Human Resources development policy leading to creation of team of motivated and competent power professional.

Quotations Regarding Power

“Save Energy Today Avoid Crisis Tomorrow”.

“A Thing Which Burns Never Returns”.

“Save One Unit A Day Keep Power WT A Way”.

“When it is Bright Switch of the Light”.

ESSENTIAL INPUTS TO PROJECTS

LAND : An extent of 2621.587 acres of government land has been acquired for the

main plant, colony, and ash pond and marshalling yard areas. In addition to that 52.59

acres of patta land was also acquired.

WATER SUPPLY :

The water required for running of the power station is being drawn from the

Mylavaram reservoir through a 21Mm long steel pipeline. The water flows from

Myalavaram to RTPP through gravity. Government of A.P irrigation department has

allocated 20 cusecs of water per day and 1.3 TMC per year from the reservoir for the

project.

COAL SUPPLY :

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The power station requires about 2.5 million tones of coal every year, which is

being supplied from SINGARENI COLLIRIES under long-term coal linkage

arrangements. The coal is being transported to powerhouse site by rail over a distance

of about 800Km by one of the routes, Vijayawada-Guntur-Reniguntla. An approach

railway line is formed from Muddanur Railway Station to the project site as a part of

the project.

EVACUATION OF POWER :

The power generated at the project is evacuated through six number 220KV

transmission lines to Yerraguntla, Kadapa, and Anantapur.

STATE OF CLEARENCE:

All the clearances required for the construction of the project like “NO

OBJECTION” from Airports Authority, “NO OBJECTION” from state Pollution

control Board and clearance of India wide letter dated 09-03-1998 accorded

investment approval for the project at an estimated cost of Rs.503.71 crores for the

power station based on 1987 prices.

ELECTRICITY PROGRESS IN A.P (1911-1922)

The electricity department was established in 1911 under the Government

Mint. Later Hussain Sugar Bund was electrified on Saturday 25th October, 1913 A.D

and street electrification work was started within and outside the Municipal limits of

Hyderabad and electricity was provided on the residency roads. In Hederabad 10

substations were erected for the distribution of power in the city. The tariff was 6

annas (Osmania sikka) per unit with a minimum of Rs.5/- O.S. per month.

Programmes of expansion to cover other town if the Nizams State was take up. Under

this programme steps were taken to generate electric power at Aurangabad, Raichur,

Warangal and Gulbarga etc.

The Government of India Framed Electricity rules in 1910 so as to ensure fair

distribution and supply of power as well as take all necessary precaution for the use of

power by the consumers and concerned departments.

POWER DEVELOPMENT IN A.P AN OPPORTUNITY KNOWKING

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We are standing at the entrance of 21st century and opportunity is knocking at

its door. The end of the century offers us the opportunity to assure India’s and in

particular out state’s electricity needs for decades to come.

Electricity demand in A.P is estimated to grow at an annual compound growth

rate of around 10% as against the National growth rage of 6.8%. The installed

capacity of A.P state Electricity Board has grown from 213 MW in 1960-61 to 6124

MW at present (Excluding central share).

The available capacity in A.P is 6135.5 MW, which includes 897 MW from

central generating stations. As the capacity addition could not keep pace with the

growth in demand, a shortage of 2000MW in the installed capacity exists now. The

growth in demand has been mainly due to extensive Rural Electrification Programme

and energisation of agricultural pump sets at one – lakhs pump sets per year since

1985-86 besides increase in domestic loads.

A.P.S.E.B has long been a trendsetter in breaking new paths and adopting the

STATE-OF-THEATRE technology in its power plants. The technology adopted in the

power station has been continuously upgraded both in the Hydro and Thermal station

and also in transmission distribution and general management to enhance the

productivity and improve the operations.

RAYALASEEMA THERMAL POWER PROJECT STAGE – I

Rayalaseema comprises of four districts Kadapa, Kurnool, Anantapur and

Chittoor which are considered to be in backward region and the area lags behind in all

respects such as Agriculture, Industry and education prior to the Industrial

development, Agriculture is purely dependent on rainfall. People used to live on

Agriculture sector owing to the advancement of Science and Technology some of

barites and Mine Industries were started subsequently and more industries were

established in this region. Added to this, the region is considered to be hottest region

and temperature often goes up to 50 degrees centigrade in summer. Therefore the

need for Electricity to meet the necessity of the inhabitants and the Industrial belt of

this region was felt, as the supply that was generated by the Agencies was found

insufficient. Hence the Government established Rayalaseema Thermal Power Project

in 1994. Rayalaseema Thermal Power Project is one of the major power generation

facilities began developed in Andhra Pradesh to meet the growing demand for power.

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The project envisages the installation of 210 MW power generation units under Stages

- I.

The first 210 MW under commissioned on 31-3-1994 and second unit on 25-

2-1995. Rayalaseema region is in the Southern part of the state and most of generating

facilities are in the Northern part of the state except two major Hydel stations in the

Central part. The Rayalaseema region therefore gets in power, therefore gets power

during summer when the Hydo stations generations goes down. Priority is therefore

given for Industrial development and power being the basic infrastructure; it is

necessary to ensure proper power supplies. In this context the RTPP is taken up not

only to improve the base load capacity of the Grid but also to ensure proper voltage

profile in the area under all conditions.

RAYALASEEMA THERMAL POWER PROJECT STAGE – II

Salient Features:

Installed Capacity 420 MW (2 X 210 MW)

Estimated Cost Rs. 1640 Cr

Location V V Reddy Nagar-516 312, Kadapa (Dt)

Coal Source Singareni Coal Collieries Limited

Water Source Mailavaram Dam

Units Commissioning Unit-III : January, 2007

Schedule Unit-IV : July, 2007

Financial Assistance Power Finance Corporation, Rural Electrification

Corporation, Central Bank & Indian Overseas Bank.

STATUS AS ON 04.06.2007

All Statutory Clearances/Approvals obtained.

Total Project cost including IDC is about Rs. 1640 Crores (Rs. 3.90 Cr per

MW).

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Contract of Main Plant and balance of plant except coal & ash plants and civil

works was awarded to BHEL on 27.12.2003 at Rs. 1125 Cr.

Contract for major civil works like Foundations, Structures, Cooling Towers,

Chimney,

C.W. Pump House and Railway siding were also awarded and civil works are

under brisk progress.

Financial Closure achieved through PFC, REC, Central Bank and Indian

Overseas Bank

SALIENT FEATURES OF THE PROJECT

Single tower type boilers on concrete pylons with a capacity of 690 T/HR at a

pressure of 155Kg/cm2 and at 540oc for each unit are installed.

MILLING PLANT:

Three horizontal tube mills each having capacity of 105 T/HR are provided for

each of the boilers.

ELECTROSTATIC PRECIPITATORS:

In order to achieve total pollution control 6 field electrostatic precipitators

having capacity of 13, 82,000 M/s and 99.89% efficiency are installed.

CHIMNEY:

A 220mts tall chimney with two flues conforming to the latest requirement of

“Emission Regulators” is installed.

TURBO GENERATORS:

German designed steam turbines with lowest heat rate with 3 cylinders

reaction type were commissioned. Microprocessors based automatic Turbine runs up

systems are installed.

PERFORMANCE SINCE INSPECTION

YEAR

ACHIEVED

PLANT LOAD

FACTOR (%)

AWARDS

WON RANK

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1995-1996 70.9 --- ---

1996-1997 66.2 --- ---

1997-1998 81.1 Silver Medal

1998-1999 91.5 Gold Medal First in Country

1999-2000 94.9 Gold Medal Second in Country

2001-2002 92.4 Gold Medal Second in Country

2002-2003 94.8 Gold Medal First in Country

2003-2004 92.2 Second in APGENCO

2004-2005 91.16 Bronze Medal Third in Country

2005-2006 64.44 --- ---

2006-2007 89.52 --- ---

2007-08 85.62 --- ---

2008-09 91.99 Energy conservation ---

2009-2010 84.44 --- Fourth in Country

WORKING CAPITAL

If a firm wants to increase its profitability, it must also increase its risk. If it is

to decrease risk, it must decrease its profitability. The trade off between these

variables is that regardless of how the firm increases its profitability through the

manipulation of working capital. The consequence is a corresponding increase in risk

as measured by the level of working capital.

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Working capital in simple terms is the amount of funds which business

concerns have to finance its day-to-day operations. It can also be regarded as that

proportion of company’s total capital which is employed in short-term operations.

Concepts of working capital:

Working capital can be defined through its two concepts, namely:

(a) Gross working capital (b) Net working capital.

Gross working capital:

Gross working capital refers to the firm’s investment in current assets. Current

assets are the assets which can be converted into cash within an accounting year and

include cash, short term securities, debtors, (accounts receivable or book debts) bills

receivable and stock (inventory).

Net working capital:

Net working capital refers to the difference between current assets and current

liabilities are those claims of outsiders which are expected to mature for payment within an

accounting year and include creditors (accounts payable), bills payable, and outstanding

expenses. Net working capital can be positive or negative. A positive net working capital

will arise when current assets exceed current liabilities.

A negative net working capital occurs when current liabilities are in excess of

current assets.

Importance of Working Capital:

Investment is fixed assets only is not sufficient to run the business. Therefore

working capital or investment in current assets is a must for the purchase of raw

materials and for meeting the day-to-day expenditure on salaries, wages, rents etc.

The main advantages of adequate working capital are as follows:

If proper cash balance is maintained a Company can avail the advantage of

cash discounts by paying cash for the purchase of raw materials in the

discount period, which results in reducing the cost of production.

Adequate working capital creates a sense of security, confidence and loyalty

not only through out the business itself but also its customers, creditors and

business associates.

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A firm can raise funds from the market, purchase of goods on credit and

borrow short-term funds from banks etc. If investors and borrowers are

confident that they will get their due interest and payment of principle in time.

Certain contingencies like financial crises due to heavy losses; business

oscillation etc. can be easily overcome, if the company maintains adequate

working capital.

A continuous supply of raw material, research programs, innovation and

technical developments and expansion programs can successfully be carried

out if working capital is maintained in the business. It will increase the

production efficiency, which in turn increase the efficiency and morale of the

employees, lower the cost and create image in the community.

Determinants of Working Capital:

A large number of factors, each having a different importance, influence

working capital needs of firms. Also, the importance of factors changes for a firm

over time. Therefore, an analysis of relevant factors should be made in order to

determine total investment in working capital. The following are the factors which

generally influence the working capital requirements of the firm.

Nature of the Business

Sales and Demand Conditions

Technology and Manufacturing Policy

Credit Policy

Availability of Credit

Operating Efficiency

Price Level Changes

Operating cycle

Operating cycle is the time duration required to convert sales, after the

conversion of resources into inventories, into cash. The operating cycle of a

manufacturing company involves three phases.

Acquisition of resources such as raw material, labour, power and fuel etc.

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Manufacture of the product which includes conversion of raw material into

work-in-progress into finished goods

Sale of the product either for cash or on credit. Credit sales create account

receivable for collection.

The firm is required to invest in current assets for smooth, uninterrupted

functioning. It needs to maintain liquidity to purchase raw materials and pay expenses

such as wages, salaries and other manufacturing, administrating and selling expenses

as there is hardly a matching between cash inflows and outflows.

Stocks of raw material and work-in-process are kept to ensure smooth

production and to guard against non-availability of raw material and other

components. The firm holds stock of finished goods to meet the demands of

customers on continuous basis and sudden demand from some customers. Debtors are

crated because goods are sold on credit for marketing and competitive reasons.

The operating cycle can be measured as follows:

RMCP – Raw material Conversion Period

WIPCP – Work-in-progress Conversion Period

FGP – Finished Goods Conversion Period

SDCP= Sundry Debtors Conversion Period

SCCP= Sundry Creditors Conversion Period

Operating Cycle=RMCP+WIPCP+FGCP+SDCP-SCPP

Purchases Payment Credit Sale Collection

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RMCP+WIPCP+FGCP

Inventory Conversion Period Receivable Conversion Period

Payables Net Operating Cycle

Gross Operation Cycle

Permanent and Variable Working Capital:

The minimum level of current assets which is continuously required by the

firm to carry on its business operations is referred to as permanent or fixed working

capital. Depending upon the changes in production and sales, the need for working

capital over and above permanent working capital will fluctuate.

The extra working capital needed to support the changing production and sales

activities is called fluctuating, or variable working capital. Both are necessary to

facilitate production and sale through operating cycle, but temporary working capital

is created by the firm to meet liquidity requirements that will last only temporarily.

Amount of

Working

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Capital Temporary

Fixed

Time

Amount of

Working

Capital Temporary

Fixed

Time

From the above two graphs it is shown that permanent working capital is

stable over time, while temporary working capital is fluctuating. The permanent

working capital is increasing over a period if the firm’s requirement for working

capital is increasing.

Operating cycle:

Operating cycle=RMCP+WIPCP+FGCP+SDCP-SCPP

RMCP=Raw Material Conversion Period

WIPCP=Work-in-progress Conversion Period

FGCP=Finished Goods Conversion Period

SDCP=Sundry Debtors Conversion Period

SCCP=Sundry Creditors Conversion Period

Working capital cycle/operating cycle

Raw Material Working progress

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Cash

Finished

Goods

Accounts receivables Sales

Debtors Management

Receivables occupy the second place among the various components of

working capital in any manufacturing concern. Effective management of the

receivable investments is a required characteristic of successful and growing

enterprise.

The main purpose of maintaining receivables is to push up the sales and also

profit by giving credit to the customers who find it difficult to purchase on cash. This

process involves so much risk, which is called credit risk. While giving credit to any

customer, credit manager has to consider the five Cs of credit: Character, Capacity,

Capital, Collateral and Conditions, otherwise loss of bad debts will increase. The

receivable improve the liquidity position of an enterprise as it is a near cash item, and

the receivables should be at the satisfactory level.

The receivable in the strict accounting sense, arise out delivery of goods or

rendering of services on credit. According to this, receivables mean only a trade

debtor. But in the present context, the term receivable has been in its broader sense,

i.e., to include trade debts, loans and advances in this preview.

The sale of the products against cash would be an ideal situation to eliminate a

stage in the working capital cycle thus achieving the objective of drastic reduction in

its length and the requirement of Working Capital. The existence of numerous

competitors in the era of globalization and liberalized economy, such sales on cash

could only be next to impossibility if growth of the organization is any aspiration. In

the present complex market scenario one leads the other, in offering more value for

money to their customers and extending credit has been one such major step. This

encounters the organization with substantial blockage of Working capital.

Indiscriminant extension of credits in the name of growth could erase the entire

profitability and as stated above non-extending of credit would keep the organization

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out of business. A great deal of planning and efficiency is warranted to keep the

receivables at optimum level. A little elaboration is needed in this level. There are two

measures in this regard.

a. Collection period:

The collection period would be in terms of number of days average credit sale. Such a

calculation area wise, marketing personnel wise at frequent intervals would provide

information’s for selective credit control. An application of incentive for faster

collection in certain selective areas also would render possible, the collection faster.

b. Aging of book debts:

The collection efforts could be intensified on greater analysis of receivables

from the point of view of the number of days it is outstanding. Higher the number of

days the debt is outstanding, the probability of it becoming doubtful of recovery is

higher. Earlier detection of such outstanding from customers would facilitate taking

hard decisions of stoppage of further sales, in order to minimize bad debts. Collection

of book debts just as per credit policy would enable the organization to achieve

planned profitability.It would be an art and efficiency of marketing personnel in an

organization, which enables overall monitoring of receivables effective and to keep at

an optimum level.

Cash Management:

One of the main tasks of financial management is to hold and maintain an

adequate but not excessive cash balance. Cash is just another commodity required in

the process of production. A company should work hard to keep its inventory of cash

down to the minimum as it does to hold down the lock up in merchandise, inventory

and receivables. Cash is also the major and much awaited output or result of the

company’s operations and there is the need for the effective plan to deploy the liquid

resource to utmost productive use. Cash is also the idlest of all current assets. The

objective of any firm cash management is therefore to improve the cash turnover by

reducing the operating cycle period. Therefore its efficient management is crucial to

the solvency of the business.Cash is the starting point and the ending point of the

Working Capital cycle. The management necessarily means, ways and means of

maintaining as low level in each stage possible, without hampering the laid down

objectives of the organization of growth and profitability. While explaining these, the

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efforts were only to reduce the conversion period at each stage and to reach to the

cash stage as early as possible, process Management, and Receivables Management

etc.

Cash Management as such, of course, depends on the nature of the

Organization, market conditions for the products dealt with by the organization

policies pursued, other external factors affecting etc.

The Management of cash mainly should serve the following objectives:

The cost of capital being a major component in the determinants of

profitability, the optimum level of its maintenance is so essential that any

shortage even temporarily would disrupt the whole activity of the

Organization. It would fail to meet its commitments to employees statutory

authorities etc. the suppliers would loose confidence in the Organization and

there could be lack of competitiveness in supplying the materials.

Ultimately leading to substantial higher in-out costs. On the other hand of

indiscriminate holding of cash, higher than necessary, would result in the loss

of interest apart from stagnation in growth and profitability. It would be the

endeavor of the Organization to rotate cash as fast as possibility maintaining

cash in its form at the minimum.

The inflow and the outflow of cash could be nearly matched in order to enable

the company meeting of all its commitments on time at minimum cost.

The cash should available even at the time of an unexpected deviation in the

plan of production and sales.

Efficient Debt Collection System:

While dealing with monitoring receivables it have touched upon the need for

reducing book debts and also control of book debts through Aging analysis. In

addition, the system could build in the following for accelerating debt collection even

within the overall credit policy of the Organization.

21

Extending cash discounts for early payments by the customers. As long as

margin on the products sold is higher than the cost of borrowed capital, faster

collection by this system resulting in quicker rotation of cash could result in

higher profitability.

Collection through demand drafts in the place of cheques, particularly that

from outstations.

Temporary Investment in Marketable Securities:

There cannot be a perfect match between inflow and outflow of cash. In view

of necessity to provide for contingencies, temporary surplus cash situation might

exist.

It would be desirable to invest such funds in readily marketable securities

like treasury bills, certificates of deposits etc., so as to earn an income even in the

short run and convert those securities just when the cash is required.

SCOPE OF THE STUDY:

The basis scope of the study is to understand & determine working

Capital management adopted by the department. The study also includes an

observation of different year’s working capital of APGENCO & its financial position.

NEED FOR THE STUDY:

Working capital is referred to be the lifeblood and nerve center of a business the

need for working capital is to run day to day activities can’t be over emphasized.

Firms aim at maximizing the wealth and should earn sufficient return from its

operations. The working capital is having the great influence on the development and

progress of any organization. The efficient management of working capital is as

essential to maintain the smooth functioning of day to day operations .Hence there is a

need to study the importance of working capital management in “RAYALASEMA

THARMAL POWER PROJECT

SIGNIFICANCE OF THE STUDY :

The working capital reflects the financial position and operation strengths and

weakness of the concern. These statements are useful to management investors,

creditors, bankers, Government and public at large. It served as a basis to decide the

wise dividend declaration by company.

22

OBJECTIVES OF THE STUDY:

• To know the efficiency of the company in investing the funds in the current

assets to perform the day –today operations smoothly.

• To study the changes in Net working capital position..

• To evaluate the working capital position and its management in the company

through computing and analyzing the financial ratios.

LIMITATIONS OF THE STUDY:

Time is one of the limiting factor of the study the duration of training was two

months which was too short period to study the whole organization.

Second limiting factor is the busy schedule of the executives. As a result of this

it is very difficult to get minute information about the organization.

Some aspects of financial information were not available because of the

confidentiality of APGENCO.

METHODOLOGY OF THE STUDY:

The data that was obtained for the study can be classified into the following types.

PRIMARY DATA

SECONDARY DATA

Primary data comprises of information obtained during discussions with the officers

and staff in the finance department.

Secondary data comprises of information obtained from ratio analysis and ratio

analysis estimates of other financial statements files and some other important documents

maintained by the organization are also the helpful. The administration report published by

APGENCO is another source of data.

RESEARCH METHODOLOGY

Research Design : Analytical

Analytical Tools : Ratio analysis, statement Showing

Changes in working capital.

Data Sources : The secondary data has been

23

Collected from Company records, Annual reports.

Period of the Study : 5 years i.e. from 2006 to 2010.

For analyzing data simple mathematical ratios, percentages etc., have been used.

The ratios relating to working capital have been selected and computed for the

study are as follows:

RESEARCH TOOLS

Current Ratio

Quick Ratio

Net Working Capital Ratio

Debtors Turn Over Ratio

Inventory Stock Turnover Ratio

Gross Profit Ratio

Net Profit Ratio

Working Capital Turnover Ratio

Average collection period

Working Capital Ratio

LIQUID RATIOS

1. C urrent ratio:

The current ratio compares the total current asset with the total current

liabilities. A relative high ratio is an indication that the company is having high

liquidity position and has the ability to pay its current obligation in time as and when

they became due.The current assets include cash, stock, work in progress, marketable

24

securities and accounts receivable. On other hand current liabilities includes account

payable, sundry creditors, accrued income taxes, proposed dividends and borrowings

from financial institutions.

Current assetsCurrent ratio =

Current liabilities

Current ratio Table: V.1.1 (Rs. In Lakhs)

Year Current assets Current liabilities Current Ratio

2006 272451.78 115710.51 2.352007 260668.92 150181.58 1.732008 289357.15 202529.67 1.422009 347341.01 274725.41 1.232010 413088.46 302356.99 1.362011 409947.10 404399.46 1.01

INTERPRETATION: Generally 2:1 is considered ideal for the concern ratio. Current assets should

be two times the current liabilities. But this was not ideal for port trust because A.P

GENCO is a service oriented organization. From the above table and Chart, it can be

known that the current ratio is constantly decreasing from 2006-09. The current ratio

increased in the year 2010 and then decreased in 2011.

2 QUICK RATIOS:The quick ratio is calculated by deducting inventories from current

assets and dividing the remainder by current liabilities. Inventories are typically the

least liquid of a firm’s current assets and assets on which losses are most likely to

occur in the event of liquidation. Therefore, this measure of the firm’s ability to

payoff short-term obligations without relying on the scale of inventories is important.

25

The term quick assets refer to current assets, which can be converted into cash

immediately or at a short notice without diminution in value. Included in this category

of current assets are

Current Assets - InventoriesQuick Ratio =

Current Liabilities

Quick ratio Table: V.1.2 (Rs. In Lakhs.)

Year Quick Assets Current Liabilities Quick Ratio

2006 241139.56 115710.51 2.1012007 233892.88 150181.58 1.562008 249039.63 202529.67 1.236

2009 304246.66 274725.41 1.072010 355371.21 302356.99 1.172011 353628.27 404399.46 0.87

INTERPRETATION:

The exclusion of inventory is based on the reasoning that it is not Eastland

readily convertible into cash. Prepaid expenses by their very nature are not available

to pay off current debts. From the above table and Chart, it can be known that the

current ratio is increased in the year 2010 compared to year 2009 and then decreased

in 2011..

3. ABSOLUTE LIQUID RATIO :

The absolute liquid ratio explains about the firm’s liquidity position

now. A relative high ratio is an indication that the company is having high liquidity

26

position and has the ability to pay its current obligation in time as and when they

became due.

Cash+ Marketable securitiesAbsolute liquid ratio =

Current liabilities.

Absolute liquid ratio Table: V.1.3 (Rs. In Lakhs]

Year Current assets Current liabilities Current Ratio

2006 7072.47 115710.51 0.06

2007 3708.39 150181.58 0.02

2008 3982.41 202529.67 0.01

2009 6974.45 274725.41 0.02

2010 11932.49 302356.99 0.0392011 15248.69 404399.46 0.037

CHART: V.1.1.A

INTERPRETATION: From the above table and Chart, it can be known that from 2006 Absolute

liquid ratio started falling up to 2008 due to increase in current liabilities.In 2009 the

ratio increased as in increase in cash and bank balances is more than the increase in

the current liabilities. The Absolute liquid ratio in the year 2011 is 0.037 which is

decreased compared to the last year.

4 NET WORKING CAPITAL RATIOS:

27

The difference between current assets and current liabilities is called

networking capital. The net working capital ratio is calculated by dividing net

working capital with net assets or capital employed. Current asserts include cash and

bank balances, investment, raw materials, advance payments, consumable stores and

spares, finished goods, stock in process semi finished goods,

Working Capital Net Working Capital Ratio =

Net sales

Net working Capital ratio Table: 4.1.4 (Rs .in lakhs)

years Working capital

sales Net working capital Ratio

2006 157726.36 388868.06 0.405

2007 117872.81 419999.51 0.2802008 89046.17 461370.22 0.193

2009 75282.09 622998.96 0.1202010 124148.16 643421.85 0.1922011

INTERPRETATION:

The ratio is used as a measure of firm’s liquidity. The ratio measures the firm’s

potential reservoir of funds. From the above table and Chart, it can be known that the

current ratio is decreased from the year 2005-06 to 2008-09. But there after the

current ratio is increased up to the year 2009-10.

2. ACTIVITY RATIO

28

1. DEBTORS TURN OVER RATIO:

The major activity ratio receivables of debtor’s turnover ratio. Allied and

closely related to this is the average collection period. The debtor’s turnover ratio is

test of the liquidity of the debtors of a firm. The liquidity of a firm’s receivable can be

examined in two types of debtor’s turnover ratio. Debtors/receivables turnover ratio.

Average collection period.

Sales = operating income.

Sales Debtors turn over ratio =

Avg debtor

Average debtors = opening debtors + closing debtors

2Debtors turn over ratio (Rs.in lakhs)

Years Sales/operating income

Avg debtors Debtors turn over Ratio

2005-06 388868.06 200553.01 1.9382006-07 419999.51 181800.14 2.3102007-08 461730.22 157286.83 2.9352008-09 622998.96 159372.48 3.9092009-10 643421.85 213843.71 3.008

INTERPRETATION:

The debtor’s turnover shows the relationship between sales and debtors of

firm. Debtor’s turnover indicated the number of times on the average the debtor’s

turnover each year. From the above table and Chart, it can be known that the current

ratio is 3.009 in the year 2009-10. The current ratio is 3.008 in the year 2008-09. The

ratio was decreased compared with last year.

2. AVERAGE COLLECTION PERIOD:

29

The second type of ratio of measuring the liquidity of a firm’s debtors is the

average collection period. This ratio is fact interrelated with the dependent upon, the

receivables turnover ratio.

No. of days in a yearAvg. Collection period = Avg. Debtors ratio

Avg. Collection period Table: V.2.2 (Rs. In Lakhs.)

Years No. of days in a year

Avg. debtors ratio

Avg. Collection period

2005-06 365 1.938 188

2006-07 365 2.310 158

2007-08 366 2.935 125

2008-09 365 3.909 93

2009-10 365 3.008 121

CHART: V.2.2.A

INTERPRETATION:

The shorter the average collection period, the better the quality debtors, as a

short collection period implies the prompt payment by debtors. From the above table

and Chart, it can be known that the current ratio is 188 highest days in the year 2005-

06. The average collection period ratio is 93 days in the year 2008-09.The average

collection period ratio is 121 days in 2009-10. The ratio was increased compared with

last year.

3. INVENTORY STOCK TURNOVER RATIO:

30

It indicates the number of times the average stock has turned over during period.

It indicates the efficiency of the firm’s inventory management. The cost of goods is an

expenditure including operating, administration, project establishment, interest on

loans, and depreciation on fixed assets, provision, for bad debts. The average

inventory used in the determination, in the average of opening and closing

inventories. It is calculated by dividing the cost of goods sold by average inventory.

Cost of goods soldInventory stock turnover ratio =

Average Inventory

Year Average Inventory Cost of goods sold Inventory turnover Ratio2005-06 25858.585 205641.06 7.952 Times

2006-07 27562.465 220216.54 7.989 Times

2007-08 32813.97 249104.81 7.591 Times

2008-09 41241.42 373091.07 9.046 Times

2009-10 50405.8 372079.99 7.381 Times

Inventory Stock Turnover Ratio Table: V.2.3 (Rs. in Lakhs)

INTERPRETATION:

Generally a high inventory turnovers indicative of good inventory

management and a low inventory turnover suggests an inefficient inventory

management. Therefore a balance should be maintained between too high and too low

inventory turnovers. From the above table and Chart, it can be known that the

Inventory stock turnover ratio is 9.046 in the year 2008-09. The average collection

period ratio is 7.381 in the year 2009-10. The ratio was decreased compared with last

year.

PROFIT ABILITY RATIOS:

1. GROSS PROFIT RATIO:

31

Gross profit is sales minus cost of sales. The cost of production means cost of

raw materials consumed, direct labour, power, and fuel, repairs and maintenance,

other manufacturing etc. Gross profit is the contribution available to meet other

expenses such as selling, general, and administrative and interest expenses.

(Sales – Cost of Goods sold)*100

Gross Profit Ratio =

Sales

Sales = Operating Income; cost of goods sold = Operating expenditure

Gross Profit ratio Table: V.4.1 (Rs. In

Lakhs.)

Years Gross Profit Sales Gross profit Ratio

2005-06 183227 388868.06 47.10

2006-07 199782.97 419999.51 47.50

2007-08 212625.41 461730.22 46.00

2008-09 249907.89 622998.96 40.11

2009-10 271341.86 643421.85 42.17

INTERPRETATION:

. The gross profit ratio is generally low, if the value added in the production is

low. From the above table and Chart, it can be known that the gross profit Ratio is

40.11.0 in the year 2008-09. The gross profit Ratio is 42.17 in the year 2009-10. The

ratio was Increased compared with last year.

2. NET PROFIT RATIOS:

32

This ratio indicated the earnings out of every 100 rupees of sales and the unit

make a direct measure of the annual profit. Here, the net profit is taken as net profit

after tax.

(Profit after Tax)*100

Net Profit Ratio = Sales

Net Profit ratio table: V.4.2 (Rs. In

Lakhs.)

Years Profit after Tax Sales Net profit Ratio

2005-06 6303.94 388868.06 1.621

2006-07 15100.62 419999.51 3.595

2007-08 19763.59 461730.22 4.280

2008-09 24645.87 622998.96 3.956

2009-10 28866.02 643421.85 4.486

CHART : V.4.2.A

INTERPRETATION:

From the above table and Chart, it can be known that the Net profit Ratio is

3.956 in the year 2008-09. The Net profit Ratio is 4.486 in the year 2009-10. The ratio

was increased compared with last year.

33

3.WORKING CAPITAL TURNS OVER RATIO:

The difference between current assets and current liabilities is called net

working capital. The net working capital ratio is calculated by dividing net working

capital with net assets or capital employed. Current assets include cash and bank

balances, investment, raw materials, advance payments, consumable stores and

spares, finished goods, stock in process/ semi finished goods

Sales /operating incomeWorking Capital Turns Over Ratio =

Net Current Assets

Working Capital Turn Over Ratio (Rs in Lakhs)

years Sales Net Current assets Working capital turn over ratio

2005-06 388868.06 157726.36 2.465

2006-07 419999.51 117872.81 3.563

2007-08 461730.22 89046.17 5.185

2008-09 622998.96 72615.60 8.579

2009-10 643421.85 110731.47 5.810

INTERPRETATION :

The ratio is used as a measure of firm’s liquidity. The ratio measures the firm’s

potential reservoir of funds. From the above table and Chart, it can be known that the

Working capital turn over ratio is 8.579 in the year 2008-09. The Working capital turn

over ratio is 5.810 in the year 2009-10. The ratio was decreased compared with last

year.

34

SCHEDULE OF CHANGES IN WORKING CAPITALAS ON 31 ST MARCH 2006

(Rs. In lakhs)Particulars Amount

2005Amount 2006

Changes in working capital

Increase

Changes in working capital decrease

Current assets:Inventories 22831.69 28885.48 6053.79 --Sundry debtors 203161.62 197944.41 -- 5217.21Sundry receivables 10242.06 29846.01 19603.95 --Cash and bank balance 1681.45 7072.47 5391.02 --Loans and advances 9722.43 8703.41 -- 1019.02Total Current Assets(A) 247639.25 272451.78Current liabilities:Sundry creditors 49046.67 39994.47 9052.20 --Deposits and retentions 17691.49 19860.08 -- 2168.59Provision for taxation 650.56 1311.16 -- 660.60Interest accrued but not due

8289.46 8724.02 -- 434.56

Other current liabilities 43097.76 45820.78 -- 2722.82Total Current Liabilities(B) 118776.14 115710.51Working capital (A-B) 128863.11 156741.27

27878.16Net increase in W.C 27878.16Total net W.C 156741.27 156741.27 40100.96 40100.96

INTERPRETATION:

Current Assets like Inventories, Cash& Bank balance, Other Current asset has

increased in 2006 than in 2005. Current Liabilities has decreased in 2006 than in

2005. So, it is the Asset to the Company. The overall Performance of the company is

progressive than in 2003. The working capital of 2006 has also increased to the extent

of Rs.27878.16 than in 2006.

SCHEDULE OF CHANGES IN WORKING CAPITAL

35

AS ON 31 ST MARCH 2007 (Rs. In lakhs)

Particulars Amount 2006

Amount 2007


Increase


Current assets:Inventories 28885.48 26239.45 2646.03Sundry debtors 197944.41 165665.88

32278.53 Sundry receivables 29846.01 49400.06

19554.05

Cash and bank balance 7072.47 3708.39 3364.08 Loans and advances 8703.41 15655.14

6951.73 Total Current Assets(A)

272451.78 260668.92

Current liabilities:Sundry creditors 39994.47 62687.38 22692.91 Deposits and retentions 19860.08 25563.52 5703.44Provision for taxation 1311.16 7385.47 6074.31Interest accrued but not due

8724.02 9853.22 1129.20

Other current liabilities 45820.78 44691.99 1128.79

Total Current Liabilities(B) 115710.51 150181.58Working capital (A-B) 156741.27 110487.34 46253.93 Net decrease in W.C 46253.93Total net W.C 156741.27 156741.27 73888.50 73888.50

INTERPRETATION :

Current Assets like Inventories, Debtors, Cash& Bank balance has increased in

2007 than in 2006. Current Liabilities has decreased in 2007 than in 2006.So, it is the

Asset to the Company. The overall Performance of the company is progressive than

in 2006. The working capital of 2007 has also Decreased to the extent of Rs.46,253.96

than in 2006.


36



Amount 2008


Increase


Current assets:Inventories 26239.45 39388.49 13149.04 Sundry debtors 165665.88 148917.78 16748.10Sundry receivables 49400.06 93617.55 44217.49 Cash and bank balance 3708.39 3982.41 274.02 Loans and advances 15655.14 3450.92 12204.22Total Current Assets(A)

260668.92 289357.15

Current liabilities:Sundry creditors 62687.38 61718.05 969.33 Deposits and retentions 25563.52 44903.20 19339.68Provision for taxation 7385.47 13381.69 5996.22Interest accrued but not due

9853.22 7107.69 2745.53

Other current liabilities 44691.99 75419.04 30727.05 Total Current Liabilities(B) 150181.58

202529.67

Working capital (A-B) 110487.34 86827.46 23659.86 Net decrease in W.C 23659.86Total net W.C 110487.34 110487.34 85015.27 85015.27

INTERPRETATION :



Asset to the Company. The overall Performance of the company is progressive than in

2007. The working capital of 2008 has also decreased to the extent of Rs 23,659.86

than in 2007.


37



Amount 2009


Increase


Current assets:Inventories 39388.49 43094.35 3705.86Sundry debtors 148917.78 169827.19 20909.41Sundry receivables 93617.55 123851.19 30233.95Cash and bank balance

3982.41 6974.45 2992.04

Loans and advances 3450.92 3593.52 142.58Total Current Assets(A)

289357.15 347341.01

Current liabilities:Sundry creditors 61718.05 96573.95 34855.9Deposits and retentions

44903.20 64820.37 19917.17

Provision for taxation

13381.69 12666.49 715.2

Interest accrued but not due

7107.69 8399.07 1291.38

Other current liabilities

75419.04 92265.53 16846.49

Total Current Liabilities(B)

202529.67

274725.41

Working capital (A-B)

86827.46 72615.60 14211.86

Net increase in W.C 14211.86Total net W.C 86827.46 86827.46 72910.9 72910.9

INTERPRETATION :



Asset to the Company. The overall Performance of the company is progressive than in

2009. The working capital of 2010 has also decreased to the extent of Rs 14211.86

than in 2009.


38


ParticularsAmount 2009

Amount2010

Changes in working capitalIncrease

Changes in working capitalDecrease

Current assets:

Inventories 43094.35 57717.25 14622.9

Sundry debtors 169827.19 257860.24 88033.05

Sundry receivables 123851.5 82677.91 41173.59

Cash and bank balance

6974.45 11932.49 4958.04

Loans and advances 3593.52 2900.57 692.95

Total Current Assets(A)

347341.01 413088.46

Current liabilities:

Sundry creditors 96573.95 84198.85 12375.1

Deposits and retentions

64820.37 80815.43 15995.06

Provision for taxation 12666.49 13416.69 750.2

Interest accrued but not due

8399.07 10056.04 1656.97

Other current liabilities

92265.53 113869.98 21604.45

Total Current Liabilities(B)

274725.41 302356.99

Working capital (A-B)

72615.60 110731.47 38115.87

Net decrease in working capital

38115.87

Total net W.C 110731.47 110731.47 119989.09 119989.09

INTERPRETATION:

Current Assets like Inventories, Cash& Bank balance, Loans and Advances has

Increased in 2009 than 2010. Current Liabilities has Decreased in 2010 than in 2009.

So, it is the Asset to the Company. Debtors have increased in20010 than in 2009.The

overall Performance of the company is progressive in 2010. The working capital of

2010 has also decreased to the extent of Rs.38115.87 than in 2009.

39

FINDINGS

Net working capital ratio has decreased from 0.405 to 0.120 from the year

2006 to 2009 respectively and later in 2009 and 2010 the ratio has increased

to 0.120 and 0.192. All the years of Net Working Capital show in the

following table.

YEARS 2006 2007 2008 2009 2010

RATIO 0.405 0.280 0.193 0.120 0.192

Current ratio has increased from 2.37 to 1.28 .From 2006 to 2007, 2008 and

2009 the current ratio has been decreased. The ideal ratio of current ratio 2 :1

All the years of Current ratio show in the following table.

YEARS 2006 2007 2008 2009 2010

RATIO 2.37 1.82 1.44 1.28 1.43

The quick ratio has decreased from 2.10 to 1.12, from 2006 to 2009. From

2009 and 2010 the quick ratio has been increased. All the years of Quick ratio

show in the following table.

YEARS 2006 2007 2008 2009 2010

RATIO 2.10 1.64 1.24 1.12 1.23

The debtor’s turnover ratio has increased from 2006 to 2009. It increased.

All the years of debtor s turnover ratio show in the following table.

YEARS 2006 2007 2008 2009 2010

RATIO 1.91 2.31 2.94 3.91 3.01

Inventory stock turnover ratio has increased from 7.95 to 9.05 in the year

2006 to 2009. next year 2009 to 2010 it is decreased. All the years of

inventory stock turnover ratio show in the following table.

YEARS 2006 2007 2008 2009 2010

RATIO 7.95 7.99 7.59 9.05 7.38

40

Average collection period from 2006 to 2009, decreased. All the years of

Average collection period show in the following table.

YEARS 2006 2007 2008 2009 2010

RATIO 188 158 125 93 121

The Net profit Ratio is 3.959 in the year 2009. The nest year 4.486 in the year

2010. All the years of Nest profit ratio show in the following table.

YEARS 2006 2007 2008 2009 2010

RATIO 1.621 3.595 4.280 3.959 4.486

The gross profit ratio has decreased from 2006 to 2009. All the years of

gross profit ratio show in the following table.

YEARS 2006 2007 2008 2009 2010RATIO 47.1

0

47.5

0

46.0

0

40.1

0

42.2

Working capital turnover ratio has increased from 2.465 to 8.579 from the

year 2006 to 2009, the working capital turnover ratio has been decreased2009

to 2010. All the years of Working capital turnover ratio show in the following

table.

YEARS 2006 2007 2008 2009 2010

RATIO 2.465 3.563 5.185 8.579 5.810

There is a fluctuation in cash ratio of RTPP from 2006 to 2010 continuously.

All the years of cash ratio shown in the following table.

YEARS 2006 2007 2008 2009 2010RATIO 0.0559 0.0059 0.0025 0.0021 0.0019

41

SUGGESTIONS

it is suggested to the company to maintain stable working capital. Because the

profitability of the organization is on sound working capital.

It is suggested to company to proper utilization of funds in current assets.

It is suggested to company to maintain required in hand and bank. Otherwise it

difficult to meet short term obligations.

CONCLUSION

The working capital management system followed by *RTPP* shows

“adequate working capital” in last three financial years, the study also under

takes to establish a cause and effect, relationship between variables to aid the

management in making effective forecasts, various crucial areas that need

attention were identified and practical suggestions were given to improve

performance.

42

BIBLIOGRAPHY

I.M.PANDAY, Financial management,7th edition, Vikas publishing house

Pvt ltd, New Delhi.1995.

S. N.MAHESWARY, Financial management, 4th edition, sultan chand & sons,

New Delhi,1997.

PRASANNA CHANDRA, Financial management, 3rd edition, Tata mc.

GrawHill publishing co.ltd, New Delhi.1984.

M.Y.KHAN & P.K.JAIN, Financial management, 2nd edition, Tata mc.

GrawHill publishing co.ltd, New Delhi.

WEBSITE: www. Apgenco. gov. in.

MAGZINES:

Charted financial analysis: ICFAI.

43

ANDHRA PRADESH POWER GENERATION CORPORATION LIMITEDPROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH 2006

( Rupees in lakhs)

PARTICULARS Schedule Current Year Previous Year

INCOME

Revenue 16 388868.06 417255.56

Other Income 17 12076.07 400944.13 12046.38 429301.94

EXPENDITURE Cost of Generation and

Purchase of Power 18 205641.06 215658.24 Operation ,Maintenance, Adm, and General Expenses 19 38335.65 48844.80

Sub-total 243976.71 264503.04 Interest and Finance Charges 20 72194.07 316170.78 81947.83 346450.87

Depreciation 71414.34 74291.78

TOTAL 387585.12 420742.65 Profit before prior period items 13359.01 8559.29

Prior Period Items 21 (74.98) (380.20)

Extar Ordinary Items 37.83

Profit before tax 13396.16 8939.49

Current tax 1237.85 700.97

Deferred Tax 5659.55 3074.72

Fringe Benefit Tax 72.39

Tax for previous years 122.43

Net Profit after Tax 6303.94 5163.80

Add: Brought forward loss (20385.71) (25549.51) Balance Carried to Balance Sheet (14081.77) (20385.71)

Earnings per Share (Basic & Diluted) 2.99 2.45 (Face value of Rs.100 per Share)

44

ANDHRA PRADESH POWER GENERATION CORPORATION LIMITEDBALANCE SHEET AS AT 31st March 2006

( Rupees in lakhs)

Particulars ScheduleAs at 31-3-2006 As at 31-3-2005Current Year Previous Year

I. SOURCES OF FUNDS Shareholders funds Share Capital 1 210680.01 210680.01

Reserves and Surplus 2 0.00 210680.01 0.00 210680.01 Loan Funds Secured Loans 3 240454.95 203552.90 Unsecured Loans 4 321062.57 343062.93

Employee Related funds 5 448683.79 1010201.31 448670.85 995286.68

Total 1220881.32 1205966.69 II. APPLICATION OF

FUNDS Fixed Assets 6 Gross Block 1407623.38 1403970.78 Less: Depreciation 587979.89 516851.96 819643.49 887118.82

Capital work in progress 7 149300.13 968943.62 63108.33 950227.15

Investments 8 76634.41 96231.91 Current Assets, Loans & Advances

Inventories 9 28885.48 22831.69 Sundry Debtors 10 197944.41 203161.62 Cash and Bank balances 11 7072.47 1681.45 Other Current Assets 12 29846.01 10242.06

Loans and Advances 13 8703.41 9722.43 272451.78 247639.25 Less: Current Liabilities and

Provisions 14 115710.51 118776.14 Net Current Assets 156741.27 128863.11 Deferred Tax Asset 163186.36 188963.86

Less: Deffered Tax Liability 158944.17 4242.19 179062.13 9901.73 Miscellaneous Expenditure 15 to the extent not written off Or Adjusted 238.06 357.08 Profit and loss account 14081.77 20385.71

Total 1220881.32 1205966.69

ANDHRA PRADESH POWER GENERATION CORPORATION LIMITED

45

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH 2007 (Rupees in lakhs)


INCOME

Revenue 16 419999.51 388868.06

Other Income 17 12475.91 432475.42 12076.07 400944.13

EXPENDITURE Cost of Generation and Purchase of

Power 18 220216.54 205641.06 Operation, Maintenance, Adm, and

General Expenses 19 54548.07 38335.65

Sub-total 274764.61 243976.71

Interest and Finance Charges 20 58071.49 72194.07

Depreciation 70838.52 403674.62 71414.34 387585.12

Profit before prior period items 28800.80 13359.01

Prior Period Items 21 114.44 (74.98)

Extar Ordinary Items 0.00 37.83


Current tax 3291.78 1237.85

Deferred Tax 10214.91 5659.55

Fringe Benefit Tax 74.07 72.39

Tax for previous years 4.98 122.43

Net Profit 15100.62 6303.94

Add: Brought forward Profit (loss) (14081.77) (20385.71)

Balance Carried to Balance Sheet 1018.85 (14081.77) Earnings per Share (Basic & Diluted) 7.17 2.99

(Face value of Rs.100 per Share)


(Rupees in lakhs)

46




Employee Related funds 5 430429.63 1030178.37 448683.79 1010201.31 Deffered Tax Liability 151369.62

Less: Deffered Tax Asset 145396.90 5972.72

Total 1247849.95 1220881.32 II. APPLICATION OF FUNDS Fixed Assets 6 Gross Block 1416821.09 1407623.38 Less: Depreciation 656555.42 587979.89 760265.67 819643.49


Investments 8 59402.50 76634.41 Current Assets, Loans & Advances Inventories 9 26239.45 28885.48 Sundry Debtors 10 165665.88 197944.41 Cash and Bank balances 11 3708.39 7072.47 Other Current Assets 12 49400.06 29846.01

Loans and Advances 13 15655.14 8703.41 260668.92 272451.78 Less: Current Liabilities and Provisions 14 150181.58 115710.51 Net Current Assets 110487.34 156741.27 Deferred Tax Asset 163186.36 Less: Deffered Tax Liability 158944.17 4242.19 Miscellaneous Expenditure 15 to the extent not written off or Adjusted 119.03 238.06 Profit and loss account 14081.77

Total 1247849.95 1220881.32


(Ru

47

pees in lakhs)


INCOME

Revenue 16 461730.22 419999.51

Other Income 17 57824.67 519554.89 12475.91 432475.42


Purchase of Power 18 249104.81 220216.54 Operation, Maintenance,

Adm, and General Expenses 19 102452.06 54548.07

Sub-total 351556.87 274764.61 Interest and Finance Charges 20 65751.92 58071.49

Depreciation 69095.73 486404.52 70838.52 403674.62 Profit before prior period items 33150.37 28800.80

Prior Period Items 21 (1373.85) 114.44



Current tax 3908.42 3291.78

Deferred Tax 10739.43 10214.91


Tax for previous years 4.98

Net Profit 19763.59 15100.62 Add: Brought forward Profit (loss) 1018.5 (14081.77) Balance Carried to Balance Sheet 5191.15 1018.85

Earnings per Share (Basic & Diluted) 9.38 7.17



(Rupees in lakhs)Particulars Schedule As at 31-3-2008 As at 31-3-2007

48

Current Year Previous Year



Employee Related funds 5 416433.02 1130117.59 430429.63 1030178.37 Deffered Tax Liability 151369.62

Less: Deffered Tax Asset 16712.16 145396.90 5972.72




Loans and Advances 13 3450.92 15655.14 289357.15 260668.92 Less: Current Liabilities and Provisions 14 202529.67 150181.58 Net Current Assets 86827.48 110487.34 Deferred Tax Asset

Less: Deffered Tax Liability Miscellaneous Expenditure 15 to the extent not written off or Adjusted 119.03 Profit and loss account

Total 1377273.35 1247849.95


(Rupees in lakhs)

49


INCOME

Revenue 16 622998.96 461730.22

Other Income 17 13884.53 636883.49 57824.67 519554.89




Sub-total 442530.70 351556.87 Interest and Finance Charges 20 67165.20 65751.92





Current tax 5806.59 3908.42

Deferred Tax 20711.30 10739.43


Tax for previous years (49.27)

Net Profit 24645.87 19763.59 Add: Brought forward Profit (loss) 5191.15 1018.5 Balance Carried to Balance Sheet 15908.08 5191.15




(Rupees in lakhs)


I. SOURCES OF FUNDS

50

Shareholders funds Share Capital 1 210680.01 210680.01


Employee Related funds 5 398442.97 1316579.50 416433.02 1130117.59 Deffered Tax Liability





Loans and Advances 13 3593.52 3450.92 339041.01 289357.15 Less: Current Liabilities and Provisions 14 274725.41 202529.67 Net Current Assets 64315.60 86827.48 Deferred Tax Asset Less: Deffered Tax Liability Miscellaneous Expenditure 15 to the extent not written off or Adjusted

Profit and loss account

Total 1609092.43 1377273.35


(Rup

51

ees in lakhs)


INCOME

Revenue 16 643421.85 622998.96

Other Income 17 15348.06 658769.91 13884.53 636883.49




Sub-total 446901.64 442530.70

Interest and Finance Charges 20 80170.12 67165.20





Current tax 8238.27 5806.59

Deferred Tax 11370.36 20711.30

Fringe Benefit Tax 135.22

Tax for previous years (49.27)

Net Profit 28866.02 24645.87 Add: Brought forward Profit (loss) 15908.08 5191.15 Balance Carried to Balance Sheet 40024.38 15908.08




(Rupees in lakhs)


I. SOURCES OF FUNDS Shareholders funds

52

Share Capital 1 210680.01 210680.01


Employee Related funds 5 388766.96 1463989.38 398442.97 1316579.50 Deffered Tax Liability





Loans and Advances 13 2900.57 3593.52 413088.46 339041.01 Less: Current Liabilities and Provisions 14 302356.99 274725.41 Net Current Assets 110731.47 64315.60 Deferred Tax Asset

Less: Deffered Tax Liability Miscellaneous Expenditure 15 to the extent not written off or Adjusted

Profit and loss account

Total 1797515.49 1609092.43

53

working capital management (rafi) (1)

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