ITI LIMITED

EXECUTIVE SUMMARY
Indian telecom industry was set up in 1948, in technology capital Bangalore. ITI limited is the countrys premier public sector unit with state-of-the-art manufacturing facilities at six locations; Bangalore in Karnataka, Naini, Rae Bareli, Mankapur in Uttar Pradesh, Srinagar in J&K and Palakkad in Kerala. The company has in-house R&D centers and its extensive marketing-cum-service outlets are spread across the length and breadth of the country.

This is a report about the training conducted in Indian Telecom Industry Ltd. Its Registered and corporate office is situated in Doorvaninagar, Bangalore on the title Effectiveness Of Working Capital Management .

Working capital management ensures a company has sufficient cash flow in order to meet its short-term debt obligations and operating expenses. Any company whatever the business it carries the profitability is by management of working capital. Through management of working capital at Indian Telecom Industry, it assures the availability of funds to meet the required working capital or day to day operations of the firm. Implementing an effective working capital management system is an excellent way for many companies to improve their earnings. It consists of information on the industries, its features, role, various domains, and growth of industries in India. An introduction on Telecom industry has also been given. It consists of general introduction on Working Capital Management and various other theory aspects under it. The study includes statement of the problem, objectives, the research methodology adopted and the limitations. It includes the analysis and data interpretation done by using various relevant ratios with the help of tables and graphs. It gives the details on the findings, suggestions and conclusion based on the analysis done.

New horizon leadership institute, Bangalore

Page 1

ITI LIMITED
1.INTRODUCTION
Working capital is the life blood and nerve centre of a business. Just as circulation of blood is essential in the human body for maintaining life, working capital is very essential to maintain the smooth running of a business. No business can run successfully without an adequate amount. Working capital refers to that part of firms capital which is required for financing short term or current assets such as cash, marketable securities, debtors, and inventories. In other words working capital is the amount of funds necessary to cover the cost of operating the enterprise.

Working capital means the funds (i.e.; capital) available and used for day to day operations (i.e.; working) of an enterprise. It consists broadly of that portion of assets of a business which are used in or related to its current operations. It refers to funds which are used during an accounting period to generate a current income type for the major purpose of firm. . A firm must have adequate working capital, i.e.; as much as needed the firm. It should be neither excessive nor inadequate. Both situations are dangerous. Excessive working capital means the firm has idle funds which earn no profits for the firm. Inadequate working capital means the firm does not have sufficient funds for running its operations. It will be interesting to understand the relationship between working capital, risk and return. The basic objective of working capital management is to manage firms current assets and current liabilities in such a way that the satisfactory level of working capital is maintained, i.e.; neither inadequate nor excessive. Working capital some times is referred to as circulating capital. Operating cycle can be said to be t the heart of the need for working capital. The flow begins with conversion of cash into raw materials which are, in turn transformed into work-inprogress and then to finished goods. With the sale finished goods turn into accounts receivable, presuming goods are sold as credit. Collection of receivables brings back the cash.

New horizon leadership institute, Bangalore

Page 2

ITI LIMITED

The company has been effective in carrying working capital cycle with low working capital limits. It may also be observed that the PBT in absolute terms has been increasing as a year to year basis as could be seen from the above table although profit percentage turnover may be lower but in absolute terms it is increasing. In order to further increase profit margins, SSL can increase their margins by extending credit to good customers and also by paying the creditors in advance to get better rates. assets in total should not less than requirements. So, every firm should maintain the adequate quantity of current assets. But during the situations of peak demand, should employ more current assets and vice-versa. Particularly in case of production organizations, there is heavy importance to the current assets than fixed assets. This kind of analysis will enable the managers to understand the working capital position of firm.

MEANING OF WORKING CAPITAL Working capital refers to that part of the firms capital which is required for financing short term or current assets such as cash, marketable securities, debtors and inventories.

Working capital refers to the difference between current assets and current liabilities. It is also known as circulating capital as the funds invested in working capital keeps revolving fast and are being constantly converted into cash and this cash flows out again in exchange for other current assets.

Working capital management is an important part of business decision. as a manufacturing concern is required to maintain adequate amount of working capital to carry on the

production and other activities smoothly . Every business needs funds for its establishment and to carry on day to-day operation i.e. long term funds and short term funds. Long term funds are required to create production facility through purchase of fixed assets. Short term funds are required for the purpose of raw New horizon leadership institute, Bangalore Page 3

ITI LIMITED

materials, payment of wages and other day-to-day expenses, etc. these funds are known as working capital.

WORKING CAPITAL CONCEPTS. There are two concepts of working capital: 1. gross working capital 2. net working capital 1. Gross working capital :

Gross working capital represents the amount of funds invested in current assets .current assets are those assets which can be converted into cash within a short period within an accounting year. The constituents of current assets are cash in hand and bank balance, bills receivables, sundry debtors, short term loans and advances, inventories, prepaid expenses, accrued incomes. The importance of gross working capital is:

It enables the enterprise to provide correct amount of working capital at right time. The gross concept takes into consideration the fact that every increase in the funds of the enterprise would increase its working capital This concept is more useful in determining the rate of return on investments in working capital.

2. Net working capital: Net working capital is the net current assets, i.e. the excess of current assets over current liabilities. The importance of net working capital is: It is qualitative concept ,which indicates the firms ability to meet its operating Page 4

New horizon leadership institute, Bangalore

ITI LIMITED

Expenses and short term liabilities It indicates the margin of protection available to the short term creditors i.e. the excess of current assets over current liabilities It is the indicator of the financial soundness of an enterprise.

This it may be said that both gross and net working capital concepts are important aspects of the working capital management.

NEED FOR WORKING CAPITAL Working capital is generally required to meet the day to day requirements like purchase of raw materials, payment of wages and meeting other expenses. The need for working capital to run the day to day business activities is a must. We will hardly find the business firms, which do not require any amount of working capital. There fore every firm requires a certain amount of working capital to meet its obligation. In other words a firm needs working capital because the production, sales, cash flows (payment and realization) 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 cash outflows. Therefore working capital is most significant aspect as every firms day to day activities is concerned with it and it is very important that the working capital is managed efficiently and effectively. Investment in working capital is influenced by four key events in the production and sales cycle of the firm, they are Purchase of raw materials Payments of raw materials purchased Sale of finished goods Collection of cash from customers

New horizon leadership institute, Bangalore

Page 5

ITI LIMITED

The working capital is also needed for various other factors like: To pay wages and salaries. To incur day-to-day expenses and overhead costs such as fuel, power and office Expenses, etc. To meet the selling costs as packing, advertising etc. To provide credit facilities to the customers. To maintain the inventories of raw materials, work in progress, stores

OPERATING CYCLE Operating cycle indicates the length of time between firms paying for materials entering into stock and receiving the cash from sale of finished goods. In other words, the duration of the required time to complete the sequence of events is called operating cycle. The operating cycle may take the following sequence: 1. In a Manufacturing concern The following figure shows the operating cycle of a manufacturing concern. Conversion of cash into raw materials. Conversion of raw materials into work in progress. Conversion of work in progress into finished goods. Conversion of finished goods into debtors.

New horizon leadership institute, Bangalore

Page 6

ITI LIMITED

TYPES OF WORKING CAPITAL

1. Permanent Working Capital

It refers to the minimum amount of investment in all the current assets, which is required at all, time to carry on minimum level of business activities. The operating cycle is a continues process and therefore there is a need for current assets. The magnitude of current assets increases or decreases over time. Thus there is always a need for minimum level of current assets. The characteristics of permanent working capital are:

The amount of working capital remains in one form or other. it is fixed over a period of time the size of permanent working capital varies with the size of the business as it is permanently needed , it is required to be financed out of long term funds

2. Temporary Working Capital This is also referred as fluctuating or variable working capital .the amount of temporary working capital is directly proportional to the changes in the production and sales. The extra working capital required to support the changing production and sales activities is known as temporary working capital.

The main characteristics of temporary working capital are: it is varying or fluctuating in nature it is financed out of short term funds

New horizon leadership institute, Bangalore

Page 7

ITI LIMITED

APPROCHES FOR DETERMINIG AN APPROPRIATE WORKING CAPITAL FINANCING Hedging approaches or matching approach Conservative approach Aggressive approach

Hedging or matching approach The term hedging refers to a process of matching maturities of debt with the maturities of financial needs. According to this approach, the maturity of sources of funds should match the nature of assets to be financed. This approach classifies the requirements of total working capital into two categories: Permanent working capital does not vary over time and it is financed through long term sources. Temporary or seasonal working capital fluctuates over time and it is financed through short term sources. Conservative approach This approach suggest that the entire estimated investments in current assets should be financed from long term sources and short term sources should be used only for emergency or contingent requirement .the distinct features of this approach are: Greater liquidity Risk is minimized and The cost of financing is relatively more

New horizon leadership institute, Bangalore

Page 8

ITI LIMITED

Aggressive approach

This approach suggest that the entire estimated requirements of current asset should be financed from short term sources and even a part of fixed assets investments be financed from short term sources .this approach makes the finance mix more risky ,less costly and more profitable .

SOURCES OF WORKING CAPITAL

A financial manager is always interested in obtaining the correct amount of working capital at the right time at a reasonable cost and at the possible terms. To adopt the right sources it is very necessary for him to have a thorough understanding of the firms short term and long term needs of the funds. The financial manager can choose the best available source from the following sources of working capital.

Sources of Working Capital

Permanent or fixed Shares Debentures Public deposits Sale of fixed assets Loans from financial institutions Sales of intangible fixed assets tangible

Temporary or variable Commercial banks Indigenous bankers Trade creditors Installment credit Advances Account receivables Commercial papers

New horizon leadership institute, Bangalore

Page 9

ITI LIMITED

IMPORTANCE OF WORKING CAPITAL

Working capital is the life blood of a business. It is essential for smooth running of a business. The main advantage of maintaining adequate amount of working capital is as follows

Solvency of the business : adequate working capital helps in maintaining solvency of the business by providing uninterrupted flow of production Goodwill ; sufficient working capital enables a business concern to make prompt payment and hence it helps in creating and maintaining goodwill Easy loans : a concern having adequate working capital ,high solvency and good credit standing can get loans and advances easily from banks and financial institutions Cash discount: it helps to avail cash discounts on the purchase and hence it reduces cost. Regular supply of raw material :it enables to get regular supply of raw material Regular payment of salaries ,wages and other day-to-day commitments : a company which has ample working capital can make regular payment of salaries ,wages and other day-to-day commitments which raise the morale of its employees ,increases their efficiency ,reduces costs and enhance continues production .

FACTORS DETERMNING THE WORKING CAPITAL REQUIREMENT

Nature and size of the business The working capital requirement of a firm basically depends upon the nature of its

business. Public sector undertakings like railways, electricity companys needs limited working capital as they offer cash sales where as manufacturing, trading and financial firms require large amount of investments in working capital.

New horizon leadership institute, Bangalore

Page 10

ITI LIMITED

It is also influenced by size of the business which may be measured in terms of scale of operation. Greater the size of the business larger will be the working capital.

Production policy

If the production is kept steady by accumulating inventories during slack periods to meet the high demand during the peak season, then the firm will require higher working capital.

Working capital cycle

The speed with which working capital completes one cycle determines the requirement of working capital. Longer the cycle larger is the requirement of working capital

Manufacturing process /length of production cycle

In the manufacturing business, the requirement of working capital increases in direct proportion to length of manufacturing process .Longer the process period of manufacture, larger is the amount of working capital required.

Credit policy

The credit policy of a concern in its dealings with debtors and creditors influence the working capital requirement .a concern that purchases its requirements on credit and sells its products /services on cash requires lesser amount of working capital and vice versa

Rate of stock turnover There is a co-relation between the quantum of working capital and the speed with which

the sales are effected .a firm having a high rate of stock turnover will need lower amount of working capital as compared to a firm having a low rate of turnover.

New horizon leadership institute, Bangalore

Page 11

ITI LIMITED

Other factors

Certain other factors such as operating efficiency, management ability, import policy ,asset structure ,banking facility, business cycle ,earning capacity and dividend policy ,etc., also influence the requirement of working capital.

Working capital analysis or measuring the working capital:

Working capital is very essential to maintain the smooth running of a business. No business can run successfully without an adequate amount of working capital. A study of changes in the sources or working capital is necessary to evaluate the efficiency with which the working capital is employed in a business. This involves the need of working capital analysis. The analysis of working capital can be conducted through a number of ways, such as: Ratio Analysis Fund Flow Analysis Budgeting

The Management of the three most important components of Working Capital is cash management, receivables management and inventory management. They are explained as follows: CASH MANAGEMENT:

Cash management has assumed importance because it is the most significant of all the current assets. It is required to meet business obligations and it is unproductive when not used. Cash management deals with the following: Cash inflow and outflows Cash flow within the firm Cash balance held by the firm at a point of time.

New horizon leadership institute, Bangalore

Page 12

ITI LIMITED

Motives for Holding Cash: The firms need for cash may be attributed to the following needs: 1. Transaction Motive: A firm needs cash for making transactions in the day-to-day operations. The cash is needed to make purchase, pay expenses, taxes, dividend etc. The cash needs arise due to the fact that there is no complete synchronization between cash receipts and payments. Sometimes cash receipts excess cash payments or vice versa.

2. Pre-cautionary Motive: A firm is required to keep cash for meeting various contingencies. Though cash inflows and cash outflows are anticipated but there may be variations in these estimates. A firm should keep some cash for such contingencies.

3. Speculative Motive:

The speculative motive related to holding of cash for investing in profitable opportunities as and when they arise. Such opportunities do not come in a regular manner. These opportunities cannot be scientifically predicated but only conjectures can be made about their occurrence.

ANALYSIS OF ACCOUNTS RECEIVABLE

Account receivable is a permanent investment and is an ever rolling account. The finance manager has to determine the level of the account suitably so that there will be an easy flow of working capital. The management should see that debtors turn fast. If the debtors turnover velocity, is high then the firm can minimize borrowings for working capital. All this, viz., maintenance of debtors at optimum level the degree of credit sales to be made making the debtors turn fail involves the Account Receivables Management.

New horizon leadership institute, Bangalore

Page 13

ITI LIMITED

ANALYSIS OF INVENTORY MANAGEMENT

The investment in inventory is very high in most of the undertaking engaged in manufacturing, wholesale and retail trade. The amount of investment is sometimes more in

inventory than in other assets. A proper planning of purchasing, handling, storing and accounting should form a part of inventory management.

OVERALL WORKING CAPITAL MANAGEMENT

After analysis of different components of working capital management, the next step is to analyze the overall working capital management at Wipro Infotech. This is done through various important ratios more relatively applicable in working management studies.

New horizon leadership institute, Bangalore

Page 14

ITI LIMITED

2.INDUSTRY PROFILE
Telecommunication is so vital to our lives, to our ability to compete in business. The telecommunications industry is a system of switches & lines that interconnected to provide communication between multiple parties. The concept of universal service has thus far only been applied to basic telephone service. Today homeowners expect their homes to accommodate: Multiples phone lines Internet service Video distribution, & other entertainment services Data & security services Fax machines & the list goes on.

Thus, telephones play a major role in communication in this era. The telephones are of multipurpose & are not restricted to just communication anymore. Alexander graham bell patented the telephone in 1876, & formed bell telephone which licensed local telephone exchange in major US cities. AT & T was formed in 1885 to connect the local bell companies. When the telephone was first invented, not everyone appreciated its importance. In fact, western union was at first offered the patent to this invention but they refused it.

It is expensive to maintain local telephone services with all the wiring & plant that must be maintained. Long distance services with all the wiring & plant that must be maintained. Long distance services, on the other hand, are must less expensive to provide. Most of it is now carried by microwave & other technologies which are less expensive to operate. So, a number of public policy issues emerge with regard to subsidization, supposed competition, & telephone rates.

New horizon leadership institute, Bangalore

Page 15

ITI LIMITED

The Asian telecom market is of large scale and great investment potential. Four markets are developing fastest in Asia. They are China, Indonesia, India and Vietnam. Meanwhile, in the markets of Japan, South Korea, Hong Kong and Singapore, handsets have a high market penetration. India has a mere 1.2 telephones for every 100 of its people. This is way below international standards and is not becoming of a country aspiring to be a major player in the global economy of the 21st century.

The telecom industry is developing the faster among all sectors in India. Meanwhile, GSM mobile communication is in the leading position in the development of telecom market. In the next few years, handset subscribers will be expanding dramatically with an expected growth rate of more than 50 percent. The figure will add up to 200 million in 2008, accounting for 75 percent of all telecom subscribers. In the past five years, the number of GSM handset users increases ten times. In virtue of great market potentials, it will take a shorter time than expected for consumers to exceed 100 million.

New horizon leadership institute, Bangalore

Page 16

ITI LIMITED

3. COMPANY PROFILE
3.1 BACK GROUND AND INCEPTION OF THE COMPANY ITI Limited is Indias pioneering venture in the field of telecommunications. Born in 1948, this premier PSU has contributed to 50% of the present national telecom network. Its a multiunit telecom unit.

With state-of-the-art manufacturing facilities spread across six locations and a countrywide network of marketing/service outlets, the company offers a complete range of telecom products and total solutions covering the whole spectrum of Switching, Transmission, Access and Subscriber Premises equipment. In tune with the technology trend, it has embarked on manufacture of mobile infrastructure equipment based on both GSM (Global System for mobile) and CDMA (Code Division Multiple Access) technologies. ITI has also acquired the technology for manufacture of broadband infra equipment, NGN (New Generation Network) equipment based on IP technology and SDH (Synchronous Digital Hierarchy) products.

ITI has a dedicated Network Systems unit for carrying out installation and communication of equipment as well as for undertaking turnkey jobs and providing valueadded services. The successful completion of the mammoth strategic communication network ASCON for Indian Army underlines ITIs ability in standing up to the challenge of enhancing the reach of communication and information seamlessly over diverse media.

ITI joined the league of world class vendors of GSM technology with the inauguration of mobile equipment manufacturing facilities at its Mankapur and Rae Bareli Plants which opened a new era of indigenous mobile equipment production in the country.

New horizon leadership institute, Bangalore

Page 17

ITI LIMITED

These two lines will augment the capacity to more than nine million lines for catering to both domestic as well as export markets.

The success of technology induction and up gradation is visible across all units of ITI which fully conform to ISO-9001:2000 Quality Management System. By taking rapid strides in new technology, ITI has geared itself up to meet the requirements of emerging markets with turnkey solutions for GSM networks, WLL-CDMA, CDMA-IFWT (Integrated Fixed Wireless Terminals) and Defense projects. On the anvil are projects such as broadband networks with ADSL-DSLAM(Asymmetric Digital Subscriber Line Digital Subscriber line Access Multiplexer), NGN known as soft-switch, WIMAX (Worldwide Interoperability of Microwave Access), Antenna and microwave equipment for GSM, GPON (Gigabit Passive Optical Networks), e-governance for which technologies have already been acquired. These also include smart cards.

New horizon leadership institute, Bangalore

Page 18

ITI LIMITED
3.2 PICTURE OVERVIEW

BASIC INFORMATION ABOUT ITI NAME ESTABLISHED CORPORATE OFFICE MANUFACTURING PLANTS CORE R&D INSTALLATION & MAINTENANCE REGIONAL OFFICES AREA OFFICES QUALITY SYSTEM JOINT VENTURE : ITI LIMITED : 1948 : Dooravani Nagar, Bangalore : Four : Bangalore : Bangalore : Six (6) : Forty Two (42) : ISO 9000 :Three (Indian Silcon Ltd,ITI comm. Pvt.Ltd, Fibon Ltd.) ISO ACCREDITATION COMPANY WEB SITE : 10 Divisions : www.itiltd-india.com

New horizon leadership institute, Bangalore

Page 19

ITI LIMITED

3.3 VISION To be the leader in the domestic market and an important global player in Voice, Data and Image communications by providing total solutions to customers, To build on core competencies to enter new business areas. ITI will be perceived by their customers as the leading business partner for providing total network solutions. It will offer innovative solutions using leading technologies in a cost competitive manner, to help customer achieve their business objectives. It will pursue new opportunities arising from the convergence of Information, Communications and It will enhance shareholder value and will move up the value chain by expanding knowledge-based and service based businesses while

simultaneously leveraging over manufacturing business. It will leverage our telecom domain knowledge to build a telecom software business in India catering to global requirements. It will apply R&D efforts in focused areas. It target customers will primarily be large organizations (both Government and private sector) in India and overseas markets.. It will build a customer-focused organization and will invest in regular training and development of our manpower for achieving the same.

New horizon leadership institute, Bangalore

Page 20

ITI LIMITED

MISSION: To establish leadership in manufacturing and supply of new technology telecom products and also to retain status of top turnkey solution provider. To be the leader in the domestic market and an important global players in voice, data and Image communication by providing total solutions to customers, on core competencies to enter new business areas.

New horizon leadership institute, Bangalore

Page 21

ITI LIMITED

4. LITERATURE REVIEW
Working capital is the funding that a company needs to support its accounts receivable and inventory, and is offset by the amount of funding it obtains from its suppliers through accounts payable. Working capital can have a much greater impact on a companys cash flows than the results of its operations. One of the best ways to positively impact the amount of cash flow that a company spins off is to take tight control of its working capital and eliminate much of the investment in this area In intention to discover the relationship between efficient working capital management and firms profitability(Shin & Soenen, 1998) used net-trade cycle (NTC) as a measure of working capital management. NTC is basically equal to the CCC whereby all three components are expressed as a percentage of sales. The reason by using NTC because it can be an easy device to estimate for additional financing needs with regard to working capital expressed as a function of the projected sales growth. This relationship is examined using correlation and regression analysis, by industry and working capital intensity. Using a Compustat sample of 58,985 firm years covering the period 1975-1994, in all cases, they found, a strong negative relation between the length of the firm's net-trade cycle and its profitability. In addition, shorter NTC are associated with higher risk-adjusted stock returns. In other word, (Shin & Soenen, 1998) suggest that one possible way the firm to create shareholder value is by reducing firms NTC.

The study of (Shin & Soenen, 1998) consistent with later study on the same objective that done by (Deloof, 2003) by using sample of 1009 large Belgian non-financial firms for the period of 1992-1996. However, (Deloof, 2003) used trade credit policy and inventory policy are measured by number of days accounts receivable, accounts payable and inventories, and the cash conversion cycle as a comprehensive measure of working capital management. He founds a significant negative relation between gross operating income and the number of

New horizon leadership institute, Bangalore

Page 22

ITI LIMITED

days accounts receivable, inventories and accounts payable. Thus, he suggests that managers can create value for their shareholders by reducing the number of days accounts receivable and inventories to a reasonable minimum. He also suggests that less profitable firms wait longer to pay their bills.

In other study, (Lyroudi & Lazaridis, 2000) use food industry Greek to examined the cash conversion cycle (CCC) as a liquidity indicator of the firms and tries to determine its relationship with the current and the quick ratios, with its component variables, and investigates the implications of the CCC in terms of profitability, indebtness and firm size. The results of their study indicate that there is a significant positive relationship between the cash conversion cycle and the traditional liquidity measures of current and quick ratios. The cash conversion cycle also positively related to the return on assets and the net profit margin but had no linear relationship with the leverage ratios. Conversely, the current and quick ratios had negative relationship with the debt to equity ratio, and a positive one with the times interest earned ratio. Finally, there is no difference between the liquidity ratios of large and small firms.

New horizon leadership institute, Bangalore

Page 23

ITI LIMITED

5.RESEARCH DESIGN

5.1 TITLE OF THE STUDY A report on Effectiveness Of Working Capital Management .At Indian Telephone Industry Ltd., Bangalore

5.2 Statement of the problem

The problem selected for the study is Analysis of Effectiveness of Working Capital Management at Indian Telephone Industry. This study will help to identify the problem areas and give suggestion to solve the problem. In ITI, the length of manufacturing process varies from one production division to another. As the manufacturing process is bit longer, it has its own influence on ITIs working capital requirements. An attempt to study the effectiveness of working capital management: cash management, inventory management and receivables management, the sources of working capital financing.

5.3 Objective of the study

To study the efficiency of working capital management. To study the solvency and liquidity position To make recommendations if any based on the findings of the study To analyze the performance of the working capital management in ITI To examine the changes in working capital. To suggest improvements ,wherever necessary on the basis of the study

New horizon leadership institute, Bangalore

Page 24

ITI LIMITED

5.4 Scope of the study

The study mainly deals with the working capital management of ITI. Decisions regarding working capital its nature of operation. The scope of the study is to identify the areas of control over various components of working capital .the attempt is to identify the financial performance of the company from 2005-2006 to 2009-2010, company growth and profit earned.

To the organization It will help in paying more specific attention to inventory management, receivables

management, and cash management in the company. It will enable the company to properly able the operating cycle approach in estimating the working capital requirements to support the forecasted level of sales.

To the Employees Due to the better capital management, company profit may increase by getting

benefits employees and enhance of the organization. To the Regulatory Authorities Regulatory authorities would like to ensure that the financial statements prepared are as per the specified laws and rules and are to safeguard the interest of various concerned agencies. For example, the taxation authorities would be interested in ensuring proper assessment of tax, liability of enterprise as per the laws.

New horizon leadership institute, Bangalore

Page 25

ITI LIMITED

5.5 Research Methodology

Research Design as the name suggest, is the design that will help the process of making decisions in anticipation of probable situation that may arise. Adding design to research will help in achieving the objectives in a systematic manner. The research design helps to collect the information that will result in decision making that is both valid and reliable. A symbolic construction that would help information to be retained and also to understand the inter relationships can be defined as research design.

Managers need to occasionally collect data in order to verify certain developments. Before he ventures to do this, he needs to systematically knockdown his apprehensions by asking questions like what the study should be all about, why the study being made, who would be the responsible for the desired action, where will the study be carried out, what type of data is required, where can the data be accessed, what periods of time will the study include. Research design adopted in this study is historical research design and statistical design.

Sources of data There are two type of sources, i.e., primary and secondary

Primary data Primary data is collected directly from the field of enquiry and thus original in nature. It was collected through telephonic interview and personal interview the information pertaining to receivables, cash, inventory and creditors was collected from the respective departments in the units.

New horizon leadership institute, Bangalore

Page 26

ITI LIMITED

Secondary data Secondary data are that information which has been collected by others for a specific purpose. Secondary data was collected from the audited balance sheet published reports of the company and internal records like manuals, brochures, sales records.

5.6 Limitation of the study

Efforts have been made to perform a detailed study regarding working capital management in Indian Telecom Industry; however the following limitation were found: The study is restricted to corporate office ITI Blore The information is availed from the statements, annual reports and records of the company Certain financial functions were carried out in the factory office. Detailed information regarding such activities was not studied in depth. This is limited to the information gathered through the interview and discussion with the company officials and executives As each company treats confidential status pertaining to some information and the information which was needed could not be made public. A detailed analysis of all the items was not possible

New horizon leadership institute, Bangalore

Page 27

ITI LIMITED

6. DATA ANALYSIS AND INTERPRETATION

The ratios used in this are as follows: A. Liquidity Ratios B. Current Asset Movement / Activity Ratios C. Leverage ratios or long term solvency ratios

A. LIQUIDITY RATIOS 1. Current Ratio: It is a measure of general liquidity and is most widely used to make the analysis for short term financial position or liquidity of a firm. It is calculated by dividing the total of the current assets by total of the current liabilities. The standard ratio is 2 : 1 Current Ratios = Current Assets/Current Liabilities

Table showing current ratios for 5 years Years Current Assets Current Liabilities

(Rs. In Crores) Ratios

2005-2006

2293.71

1665.09

1.37

2006-2007

2170.11

2189.76

0.99

2007-2008

2210.07

2151.10

1.02

2008-2009

2690.55

3290.40

0.81

2009-2010

5502.73

5774.75

0.98 Page 28

New horizon leadership institute, Bangalore

ITI LIMITED

Graph showing the current ratios

Ratio
2005-2006

2006-2007

2007-2008

2008-2009

Source: Secondary data, Companys Balance Sheet

INTERPRETATION: Going through the above facts, the companys current ratio is not satisfactory as compared to the standard one,i:e 2:1,this was because of the company could not meet its current liabilities and also it was left with less working capital because of the fact that the rate of growth of current liabilities are more than the rate of growth of current assets in these years.

2. Liquid / Quick / Acid Test Ratio: It is the ratio of liquid assets to current liabilities. The true liquidity refers to the ability of a firm to pay its short term obligations as and when they become due. The standard ratio for this is 1 : 1 Liquid Ratios = Quick Assets/Current Liabilities Quick Assets = Cash + Sundry Debtors

New horizon leadership institute, Bangalore

Page 29

ITI LIMITED

Table showing liquid ratios for 5 years Years Quick Assets Current Liabilities

(Rs. In Crores) Ratios

2005-2006

1881.48

1665.09

1.12

2006-2007

1744.63

2189.76

0.79

2007-2008

1839.46

2151.10

0.85

2008-2009

2287.20

3290.40

0.69

2009-2010

5218.51

5774.75

0.90

Graph showing the Liquid ratios:

Ratios
2005-2006

2006-2007

2007-2008

2008-2009

Source: Secondary data, Companys Balance Sheet

New horizon leadership institute, Bangalore

Page 30

ITI LIMITED

INTERPRETATION: The satisfactory level of quick ratio 1:1, in the year 2005-06 the quick ratio is more than satisfactory level, the reason for this is the quick assets are more than the current liabilities as compared to the following years. But in the following years the quick ratio is less than the satisfactory level. The reason for this is in these years the quick assets and current liabilities are more or less equal.

3. Absolute Liquid Ratios:

The acceptable norm for this ratio is 0.5:1 or 1:2 i.e., Re.1 worth absolute liquid assets are considered to pay Rs. 2 worth current liabilities in time as all the creditors are not expected to demand cash at the same time and then cash may also be realized from debtors and inventories. Cash ratio is not given much importance unless a firm is in deep financial trouble. Absolute Liquid Ratio = Cash in hand, Cash at bank + Marketable Securities/ Current Liabilities

Table showing liquid ratios for 5 years Years Absolute Assets 2005-2006 219.02 Liquid Current Liabilities 1665.09 0.13

(Rs. In Crores) Ratios

2006-2007

37.00

2189.76

0.01

2007-2008

14.22

2151.10

0.06

2008-2009

19.03

3290.40

0.05

2009-2010

297.24

5774.75

0.05 Page 31

New horizon leadership institute, Bangalore

ITI LIMITED

Graph showing the Absolute Liquid Assets ratios:

Ratios
2005-2006

2006-2007

2007-2008

2008-2009

Source: Secondary data, Companys Balance Sheet

INTERPRETATION:

The ideal ratio is 0.5:1. In the years 2008 to 2010, the absolute liquid ratio is tremendously good when compared to the year 07-08. But in the years 05-06 the ratios is increase which is above the ideal ratios, and 06-07, the ratios shows a larger decrease which is below the ideal ratio.

B. CURRENT ASSET MOVEMENT / ACTIVITY RATIOS: 1. Stock Turnover Ratio: Inventory turnover ratio indicates whether inventory has been efficiently used or not. The purpose is to see whether only the required minimum funds have been locked up in inventory. This ratio indicates the number of times the stock has been turned over during the period and evaluates the efficiency with which a firm is able to manage the inventory.

New horizon leadership institute, Bangalore

Page 32

ITI LIMITED

Stock Turnover Ratios = Cost of Goods Sold/ Current Liabilities Average Stock = Opening stock + Closing stock /2 Table showing the Stock Turnover Ratios for 5 years:

(Rs. In Crores) Years Cost of Goods Sold Current Liabilities Times

2005-2006

2224.69

1665.09

1.33

2006-2007

2299.99

2189.76

1.05

2007-2008

1874.45

2151.10

0.87

2008-2009

2522.82

3290.40

0.76

2009-2010

5421.90

5774.75

0.93

Graph showing the Stock Turnover Ratios:

Times
2005-2006

2006-2007

2007-2008

2008-2009

Source: Secondary data, Companys Balance Sheet New horizon leadership institute, Bangalore Page 33

ITI LIMITED

INTERPRETATION: According to the above data it is found that companys inventory turnover is not consistent. In the years 2006 to 2009 the inventory turnover was decrease and in the year 2009-2010 there slowly increase in inventory turnover.

2. Debtors Turnover Ratio

This ratio indicates the velocity of debt collection of a firm. In simple words it indicates the number of times average debtors are turned over during a year. Debtors Turnover Ratios = Net sales/ Debtors Table showing the Debtors Turnover Ratios for 5 years:

(Rs. In Crores) Years Net Sales Debtors Times

2005-2006

1511.49

1662.46

0.9

2006-2007

1624.45

1707.63

0.95

2007-2008

1039.29

1835.24

0.56

2008-2009

1578.02

2268.17

0.69

2009-2010

4494.32

4921.27

0.91

New horizon leadership institute, Bangalore

Page 34

ITI LIMITED

Graph showing the Debtors Turnover Ratios:

Times
2005-2006

2006-2007

2007-2008

2008-2009

Source: Secondary data, Companys Balance Sheet

INTERPRETATION:

In the year 06-07, the debtor turnover ratio shows an increase over the other years. The higher the turnover, more efficient is the management of the receivables. But in the years 0708 and 08-09, the ratios are falling on the same line which is 0.56 and 0.69 respectively. During the year 09-10, the ratio has come up to which is 0.91.

3. Debtors Turnover Period Debtors Turnover Period = Average Debtors/ Net Sales *12

New horizon leadership institute, Bangalore

Page 35

ITI LIMITED

Table (Rs. In Crores) Years

showing

the

Debtors

Turnover

Period

Average Debtors

Net Sales

Debtors

Turnover

Ratios (Months) 2005-2006 1541.34 1511.49 12

2006-2007

1685.04

1624.45

12

2007-2008

1766.43

1039.29

20

2008-2009

2046.70

1578.02

16

2009-2010

3594.72

4494.32

10

Graph showing the Debtors Turnover Period:

Debtors Turnover period (Months)

2005-2006

2006-2007

2007-2008

2008-2009

Source: Secondary data, Companys Balance Sheet

New horizon leadership institute, Bangalore

Page 36

ITI LIMITED

INTERPRETATION:

Debtors turnover period of 2 months is considered to be ideal. From the above table it can be seen that debtors turnover period is more than 10 months for the last 5 years. The debtors turnover period is increased in the year 07-08 to 20 months and in the years 08-09 its of 16 months and in year 09-10 its of 10 months, slowly debtors turnover period is getting down.

4. Inventory Turnover Period

Inventory Turnover Period = Average Inventory/ Cost of Sales*12 Table (Rs. In Crores) Years Average Inventory Cost of Sales Inventory Turnover Ratios (Months) 2005-2006 482.53 2224.69 2.6 showing the Inventory Turnover Period

2006-2007

418.85

2299.99

2.1

2007-2008

398.04

1874.45

2.5

2008-2009

386.98

2522.82

1.8

2009-2010

343.78

5421.90

0.7

New horizon leadership institute, Bangalore

Page 37

ITI LIMITED

Graph showing the Inventory Turnover Period:

Inventory Turnover Period (Months)

2005-2006

2006-2007

2007-2008

2008-2009

Source: Secondary data, Companys Balance Sheet

INTERPRETATION:

An inventory turnover of 6 times a year is considered to be ideal. The above table reflects the low inventory ratio, which reflects dull investment in inventories and accumulation of inventory exist

5. Current Asset Turnover Ratio:

This is the ratio, which shows relationship between current assets and sales. This shows the efficiency of management to generate sales out of current assets. A firm should manage its current assets efficiently to maximize sales. The firm may wish to know its efficiency of utilizing current assets separately. The current asset turnover ratio can be calculated by dividing the sales by current assets.

New horizon leadership institute, Bangalore

Page 38

ITI LIMITED

Current Assets Turnover Ratios = Net Sales/ Current Assets Table showing current assets turnover ratios for 5 years Years Net Sales Current Assets (Rs. In Crores) Ratios

2005-2006

1511.49

2293.71

0.65

2006-2007

1624.45

2170.11

0.74

2007-2008

1039.29

2210.07

0.47

2008-2009

1578.02

2690.55

0.58

2009-2010

4494.32

5502.73

0.81

Graph showing the current assets Turnover ratios:

Ratios
2005-2006

2006-2007

2007-2008

2008-2009

Source: Secondary data, Companys Balance Sheet New horizon leadership institute, Bangalore Page 39

ITI LIMITED

INTERPRETATION:

In the year 2009-2010, the current asset turnover ratio was 0.81, much higher when compared with other years. The current assets turnover ratios is not consistent its changing from one year to another.

6.

Fixed Asset Turnover Ratio:

Fixed assets turnover ratio is also known as sales to fixed assets ratio. This ratio measures the efficiency and profit earning capacity of the concern. Higher the ratio, greater is the intensive utilization of fixed assets. Lower ratio means under-utilization of fixed assets. Fixed Assets Turnover Ratios = Net Sales/ Net Fixed Assets

Table showing fixed assets turnover ratios for 5 years Years Net Sales Net Fixed Assets

(Rs. In Crores) Ratios

2005-2006

1511.49

2868.27

0.52

2006-2007

1624.45

2713.10

0.59

2007-2008

1039.29

2671.06

0.38

2008-2009

1578.02

2640.79

0.59

2009-2010

4494.32

2593.14

1.73

New horizon leadership institute, Bangalore

Page 40

ITI LIMITED

Graph showing the fixed assets Turnover ratios:

Ratios
2005-2006

2006-2007

2007-2008

2008-2009

Source: Secondary data, Companys Balance Sheet

INTERPRETATION: From the above graph, it clearly shows that the ratios are not consistent. In the year 20092010, the ratio was much higher when compared to other years. This indicates the inefficient utilization of fixed assets.

7. Total Asset Turnover Ratio:

This ratio measures how efficiently assets are employed over all. It measures sales per rupee of investment in total assets .It is supposed to measure the efficiency with which the total assets are employed. A high ratio indicates high degree of efficiency in asset utilization and vice versa. Total Assets Turnover Ratios = Net Sales/ Total Assets

New horizon leadership institute, Bangalore

Page 41

ITI LIMITED

Table showing total assets turnover ratios for 5 years Years Net Sales Total Assets

(Rs. In Crores) Ratios

2005-2006

1511.49

5161.98

0.29

2006-2007

1624.45

4883.21

0.33

2007-2008

1039.29

4881.13

0.21

2008-2009

1578.02

5331.34

0.29

2009-2010

4494.32

8095.87

0.55

Graph showing the total assets Turnover ratios:

Ratios
2005-2006

2006-2007

2007-2008

2008-2009

Source: Secondary data, Companys Balance Sheet

New horizon leadership institute, Bangalore

Page 42

ITI LIMITED

INTERPRETATION:

In the year 09-010, the total asset turnover ratio was 0.55 which is higher when compared to other years.

8. Working Capital Ratio:

This ratio indicates the velocity of the utilization of the net working capital. This ratio indicates the number of times the working capital is turned over in the course of the year. This ratio measures the efficiency with which the working capital is being used by the firm. Working Capital Ratio = Net Sales/ Working Capital

Table showing working capital turnover ratios for 5 years Years Net Sales Working Capital

(Rs. In Crores) Ratios

2005-2006

1511.49

750.21

2.01

2006-2007

1624.45

106.37

15.2

2007-2008

1039.29

245.52

4.2

2008-2009

1578.02

(501.34)

-3.14

2009-2010

4494.32

(300.37)

-14.9

New horizon leadership institute, Bangalore

Page 43

ITI LIMITED

Graph showing the working capital Turnover ratios:

Ratios
2005-2006

2006-2007

2007-2008

2008-2009

Source: Secondary data, Companys Balance Sheet

INTERPRETATION:

From the above table the working capital turnover ratios was higher in the year 2006-2007 and later the company growth was not up to the good and there was shortage in working capital in the years from 2008 to 2010 and still moving on.

9. Cash Turnover Ratios Measures how effective a company is utilizing its cash, for the day-to-day business activity.

Cash Turnover Ratios = Net Sales/ Cash

New horizon leadership institute, Bangalore

Page 44

ITI LIMITED

Table showing cash turnover ratios for 5 years Years Net Sales Cash

(Rs. In Crores) Ratios

2005-2006

1511.49

219.02

6.9

2006-2007

1624.45

37.00

43.9

2007-2008

1039.29

14.22

73.0

2008-2009

1578.02

19.03

82.9

2009-2010

4494.32

297.24

15.12

Graph showing the cash Turnover ratios

Ratios
2005-2006

2006-2007

2007-2008

2008-2009

Source: Secondary data, Companys Balance Sheet

New horizon leadership institute, Bangalore

Page 45

ITI LIMITED

INTERPRETATION:

From the above table the cash turnover ratio is low in years 2005-2006 and in year 20092010,and in years 2006-07, 07-08 the cash turnover ratio is good and in 08-09 the cash turnover ratio is higher.
C.

LEVERAGE RATIOS OR LONG TERM SOLVENCY RATIOS

1. Proprietary / Equity ratio This ratio relates the shareholder's funds to total assets, indicates the long-term or future solvency position of the business. Proprietary or Equity Ratio = Shareholders funds / Total Assets Table showing Proprietary/equity ratios for 5 years Years Shareholders funds Total Assets (Rs. In Crores) Ratios

2005-2006

1646.39

5161.98

0.31

2006-2007

1077.90

4883.21

0.22

2007-2008

686.22

4881.13

0.14

2008-2009

(-4.06)

5331.34

0.00

2009-2010

2014.97

8095.87

0.24

New horizon leadership institute, Bangalore

Page 46

ITI LIMITED

Graph showing the Proprietary/equity ratios

Ratios
2005-2006

2006-2007

2007-2008

2008-2009

Source: Secondary data, Companys Balance Sheet

INTERPRETATION:

From the above table in the year 2005-2006 shareholders contribution is about 31%. And Accordingly, the creditors contribution would be the remaining 69 % respectively. and its keep on reducing yearly and in the year 2008-09 the net shareholders funds was zero. 2. Current Assets to Shareholders Funds Ratio It establishes the relationship between current assets and shareholder's funds. The purpose of this ratio is to calculate the percentage of shareholders funds invested in current assets Current Assets to shareholders Funds = Current Assets / shareholders Funds

New horizon leadership institute, Bangalore

Page 47

ITI LIMITED

Table

showing

current

assets

to

shareholders

funds

ratios

for

years

(Rs. In Crores) Years Current Assets Shareholders funds Ratios

2005-2006

2293.71

1646.39

1.39

2006-2007

2170.11

1077.90

2.01

2007-2008

2210.07

686.22

3.22

2008-2009

2690.55

(-4.06)

0.00

2009-2010

5502.73

2014.97

2.73

Graph showing the current assets to shareholders funds ratios

Ratios
2005-2006

2006-2007

2007-2008

2008-2009

Source: Secondary data, Companys Balance Sheet

New horizon leadership institute, Bangalore

Page 48

ITI LIMITED

INTERPRETATION: From the above table in the year 2005 to 2007 there was incresesly of shareholders funds are invested in current assets and In the year 2008-2009 there was no investment and in 20092010 there is investment of 2.73 of shareholders funds are invested in current assets. 3. Fixed assets to proprietor's fund ratio It establishes the relationship between fixed assets and shareholders funds The purpose of this ratio is to indicate the percentage of the owner's funds invested in fixed assets. Fixed Assets to Shareholders Fund = Fixed Assets / shareholders Fund Table showing fixed assets to shareholders funds ratios for 5 years

(Rs. In Crores) Shareholders funds

Years

Fixed Assets

Ratios

2005-2006

2868.27

1646.39

1.74

2006-2007

2713.10

1077.90

2.51

2007-2008

2671.06

686.22

3.89

2008-2009

2640.79

(-4.06)

0.00

2009-2010

2593.14

2014.97

1.28

New horizon leadership institute, Bangalore

Page 49

ITI LIMITED

Graph showing the fixed assets to shareholders funds ratios

2005-2006

2006-2007

2007-2008

2008-2009

2009-2010

Source: Secondary data, Companys Balance Sheet

INTERPRETATION: The ideal ratios of the fixed assets to shareholders funds ratios is 0.75:1 ,where in the years 2005 to 2008 the fixed asset to shareholders ratio was increasing and in the year 2009-2010 there was a 1.28. .

New horizon leadership institute, Bangalore

Page 50

ITI LIMITED

7. FINDINGS AND SUGGESTIONS 7.1 Findings

The above data and ratios indicates that the financial position of the company is gradually declining from 2005-06 to 2009-2010. The financial position of the company could have been improved by proper management of working capital. Working capital turnover ratio is more in 2007-08 as compared to the previous years. The working capital turnover ratio in the year 2008-09 is -3.14 times, where as it is only 2.01 times in the year 2005-06. The current ratio of the company is not constant its keeping on fluchating yearly, 1.37 times in the year 2005-06, 0.99 times in the year 2006-07, and 1.02 2007-08 times in the year and 0.81 times in the year 2008-09 and 0.98 in the year 2009=2010 The current ratios are not satisfactory with the standard ratio i.e, 2:1 from this we can find the week financial position of the company.

The has an internal audit system needs to be strengthened and enlarged in

scope and coverage to be commensurate with its size and nature of business

New horizon leadership institute, Bangalore

Page 51

ITI LIMITED

7.2 Suggestions
After analyzing the overall performance of the present and past years working and knowing the short comings of the same, I feel that unless an organization has a proper pre-plan for everything it does, there is bound to be some wastage and disorders in hampering its working activities. All expenditure must be compared with the planned one. Periodically all work and action regarding the future must be work out in to money terms.

The following suggestions are quoted for ITI.

Production schedules should be strictly adhered to, so that the performance targets are achieved and slack in production may be eliminated so as to achieve the company goals.

Adequate working capital ensures uninterrupted business operations.

It must follow all its working capital norms. So that it might not face any difficulty in its working and performances.

Continuous effort must be made to tap its working capital sources, which in turn helps in expanding their business activities.

It should plan for proper utilization of raw materials when compared to early level

It is better to have a periodical in turnover and profit the company has to utilize the capacity of the resources such as men, materials and money.

New horizon leadership institute, Bangalore

Page 52

ITI LIMITED

The company can negotiate with the government over the measure and thus acquire the funds (Revival package) to over come the crises.

The present financial situation is critical. Accumulated losses need to be funded so as to reduce interest bearing liabilities.

Margin can be improved with a higher level of in house manufacturing.

The company has to reduce high interest cost. Manpower and other overheads, if otherwise which can have adverse impact of production cost.

It can take soft loans from the government and invest it in expansion and for technological improvements.

Last but not least, a part of should be spent towards R&D programs to introduce new products in electronic field to fulfill the need of its potential buyers. Because of weak R&D the company is lead to the down fall.

New horizon leadership institute, Bangalore

Page 53

ITI LIMITED

8.Conclusion
A good way to judge a companys cash flow prospects is to look at its working capital management. The company must have adequate working capital as much as needed by the company. It should neither be excessive nor inadequate. Excessive working capital means idle funds lying with the company without earning profits. Inadequate working capital shows the company doesnt have sufficient funds for financing its daily needs.

From the analysis done on the liquidity, turnover and profitability ratios, the overall liquidity position of the company is not satisfactory and helps in overcoming the liabilities with the help of the assets during the year. As of March 31, 2010 the company had cash and bank balances of Rs.287.24 (in crores) , investments in liquid and short term mutual funds and certificate of deposits of Rs.0.41(in crores) . The overall profitability position of the company can be improved by increasing its sales volume and thereby helps to earn more profits. But the recent report as on March 31, 2010 is that the company has a loss of Rs.(458.76)

To conclude, a healthy working capital position is the sign of a successful business. The short-term solvency of the firm depends upon proper and efficient management of working capital. Efficient working capital management will not only increase the profitability of the firm but also in the long run create value to the stakeholders of the firm.

New horizon leadership institute, Bangalore

Page 54

ITI LIMITED
9.1Consolidated Balance Sheet for March 31st 2006 SOURCES OF FUNDS; Shareholders funds Share capital Reserves and Surplus Grant-in-Aid Loan Funds Secured loans Unsecured loans TOTAL APPLICATION OF FUNDS; Fixed Assets Gross block Less: depreciation to date Net block Capital work-in-progress and machinery in transit Investments Current assets, loans and advances inventories Sundry debtors Cash and bank balances Loans and advances Less ; current liabilities and provisions Current liabilities provisions NET CURRENT ASSETS

9.ANNEXURE
(Rs. In crores) 2007 2008 2009 2010

588.00 2718.26 127.21 1180.72 800.00 5414.19

588.00 2951.15 90.89 1051.98 690.00 5012.02

588.00 2563.04 85.70 1335.35 895.42 5467.51

588.00 2546.10 80.54 1349.94 793.98 5358.56

588.00 4974.61 74.81 258.21 19.69 5915.63

3631.54 768.25 2863.29 4.98

3644.06 933.12 2710.94 2.16

3657.09 987.32 2669.77 1.29

3678.61 1039.60 2639.01 1.78

3681.16 1089.35 2591.81 1.33

412.23 1662.46 219.02 302.93

425.48 1701.63 37.00 361.18

370.61 1825.24 14.22 340.42

403.35 2268.17 19.03 331.33

284.22 4921.27 297.24 333.13

1665.09 181.34 750.21

2189.76 235.16 106.37 0.00

2151.10 153.87 245.52 0.00

3290.40 232.82 501.34 0.00

5774.75 361.48 300.37 0.00

Miscellaneous Expenditure to 8.42 the extent not written off or adjusted Profit and Loss Account 1786.88

2192.14

2550.52

3218.70

3622.45

New horizon leadership institute, Bangalore

Page 55

ITI LIMITED

9.2Consolidated Profit and Loss Account for March 31st

2006 2007 2008 INCOME Sales 1511.48 1624.45 1039.21 Services 237.90 193.88 170.83 Total sales and services 1749.38 1818.33 1210.04 Less ; Excise duty 88.64 55.70 57.53 Interest earned 7.82 2.08 1.81 Other income 102.90 109.27 67.07 Transfers from grant-in-aid 27.87 61.32 357.20 TOTAL 1799.33 1935.30 1578.59 EXPENDITURE Consumption of raw materials and 920.56 470.61 424.93 production stores Purchase for direct sales 518.80 920.42 459.43 Charges on installation & maintenance 74.75 78.17 60.50 of exchanges Salaries, wages & bonus 253.32 250.43 258.48 Companys contribution to provident 117.55 103.13 111.61 fund and other funds Workmen and staff welfare expenses 11.43 11.37 12.54 Voluntary retirement payments 23.09 31.29 0.32 depreciation 35.88 165.05 57.38 Financing expanses 224.76 223.24 280.68 Deferred revenue expenditure written 24.63 8.42 0.00 off Manufacturing expenses 94.84 81.61 53.18 Administration expenses 59.05 41.35 171.92 Selling expenses 24.00 20.76 7.37 Less; Transfer to capital account 0.15 0.03 0.10 Work-in-process 53.51 16.22 22.32 Manufactured components 0.55 0.39 1.31 Stock-in-trade 89.22 5.45 16.69 Miscellaneous expenditure not written 0.00 0.00 0.00 off Cost of sales for the year 2224.69 2299.99 1874.55 Profit before tax for the year 425.36 364.69 295.86 Prior period adjustments (net) 2.19 40.01 61.37 Profit before tax 427.55 404.70 357.23 Less ; provision for taxation Fringe benefit tax 1.21 0.56 1.15 Profit after tax (428.76) (405.26) (358.38) *includes expenditure on research & development under various heads

(Rs. In crores)
2009 1578.02 163.30 1741.32 40.52 0.72 45.43 130.16 1877.11 553.50 922.55 75.54 271.83 115.87 13.21 0.42 53.03 292.02 0.00 182.22 81.68 8.55 0.19 16.25 0.35 37.61 0.00 2522.82 645.71 22.11 667.82 0.36 (668.18) 2010 4494.32 166.00 4660.32 64.20 13.60 64.43 316.73 4990.88 839.85 3370.04 46.92 285.63 248.30 23.77 0.98 49.65 119.24 0.00 259.73 164.66 8.38 0.01 11.53 17.09 1.48 0.00 5421.90 431.02 27.74 458.76 0.00 (458.76)

New horizon leadership institute, Bangalore

Page 56

ITI LIMITED

BIBLIOGRAPHY
BOOKS:
Title book of the Name Author of the Edition of the book

1.

Financial Prasanna Chandra

2005

Management

2. Elements of S.N. Management Accounting 3. Financial Shashi.K. Gupta Maheshwari

2003

2006

Management

Annual Reports of the Company:- Five years annual reports of the company.

Websites:

www.itiltd-india.com www.google.com www.wikepedia.com www.levarageratios.com www.investpedia.com

New horizon leadership institute, Bangalore

Page 57