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BHARAT PUMP AND COMPRESSORS LIMITED

(A GOVT. OF INDIA UNDERTAKING ENTERPRISRE)

NAINI- ALLAHABAD

A PROJECT REPORT OF SUMMER TRAINING ON

WORKING CAPITAL MANAGEMENT

MASTER OF BUSINESS ADMINISTRATON

(2011-2012)

TRAINING DURATION (12/06/2012 To 26/07/2012)

SUPERVISED BY:- SUBMITTED BY:-

Mr. Dr. Vishnu P. Mishra VIPIN KUMAR MISHR

MBA 3RD SEM

l.D. No-11110115

Roll No. 1101170115

UNITED INSTITUTESOF MANAGEMENT

NAINI, ALLAHABAD


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CERTIFICATE

This is certified that Mr.VIPIN KUMAR MISHRA MBA student,UIM naini,

Allahabad session 2011-2012 has successfully completed the project work entitled-

WORKING CAPITAL MANAGEMENT .

Under my guidance and supervision. Their work is genuine and original an has not

submitted so far any other MBA student.

Date:- Mr. N.A. Khan

Finance Manager

BPCL Naini Allahabad


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DECLARATION

I, solemnly declare that project work entitled:- Working Capital Management in

BPCL is bona fide project work carried out by me, under guidance of Mr. N. A.

Khan ( finance manager) BPCL

I further declare that the best of my knowledge that the work presented in this

project report is original and genuine.

Date:- Vipin kumar mishra

MBA 3RD SEM

Roll No. 1101170115

ACKNOWLEDGEMENT

I am glad to express my extreme thank and feeling of deep gratitude,

indebtedness and reverence to my esteemed supervisor Mr. R.H.M.John , who has

always show exemplary keenness and interest in the process of project work. His


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valuable guidance, timely suggestion and constant fatherly information made it possible

for me to complete present shape and at due date.

I express my sincere thank to Dr. Vishnu P. Mishra for providing me valuable

help in accomplishment of this project work.

Also I pay my heartiest thank to Mr. O. P. Shukla, U.C. Sharma and V.S. Singh

(training incharge) for valuable suggestion to me at time to time.

At last but not least I am thank full to all employee of BPCL, Naini- Alld, who

provided their full support and co-ordination during my training by giving me sufficient

knowledge related to my topic and organizational environment.

The completion of this project is the result of valuable guidance, constructive

suggestion,

keen interest and eminent supervision of all the training officer and every experienced

employee of BPCL

Vipin kumar mishra

MBA 3RD SEM

Roll No.-1101170115

EXECUTIVE SUMMARY

The objective of my project is the Working Capital Management in BPCL.

Objective of the report is to analyze and understand the Impact of leverage on

profitability of the firm. This report investigate the relationship between

leverage( operating, financial and combined) and earning per share. it aims to describe

how the earning capacity of the firm is influenced by the fixed operating costs and the

fixed financial charges.

Other tools like skew ness and kurtosis are applied to examine Lack of

symmetry used to understand the distribution of data and Flatness or peaked ness.

The results suggest that the leverage and profitability and growth are related and the

leverage is having impact on


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the profitability of the firm.

Financial ratio analysis is the selection, evaluation and interpretation of

financial data, along with the other pertinent information, to assist in investment and

financial decision-making. Financial ratio analysis may be used internally to evaluate

employees performance, the efficiency of operation and credit policies, and externally

to evaluate potential investment, credit worthiness of borrower among other things.

TABLE OF CONTENT

ACKNOWLEDGEMENT

EXECUTIVE SUMMARY

CERTIFICATE

CHAPTER PAGE NO.

1. HISTORY OF COMPANY

2. VISSION,MISSION AND OBJECTIVE

3. THE GROUP

4. ISO CERTIFICATION

5. ISO CERTIFICATE6. PROFILE

7. CAPABILITIES

8. MANAGEMENT STRUCTURE

9. TYPE OF POST

10. ORGANIZATON CHART

11. PRODUCT & SERVICES

12. OFFICES AND CONTACT ADDRESSES

13. IMPORTANT CLIENT


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14. WORKING CAPITAL

15. WORKING CAPITAL MANAGEMENT

16. INVENTORY MANAGEMENT

17. CORPORATE FINANCE

18. CAPITAL INVESTMENT DECISION

19. FINANCIAL RISK AND MANAGEMENT

20. PERSONAL AND PUBLIC FINANCE

21. COMPETENCY

22. CUSTOMER STISFACTON

23. MANUFACTURING UNIT

24. MANAGEMENT INFORMATION SYETEM

25. BALABNCE SHEET

26. PROFIT AND LOSS ACCOUNT

27. GRAPHICAL PRESENTATION OF TURNOVER,VALUE ADDED PER

EMPLOYEE,NET PROFIT BEFORE TAX,NET WORTH

28. TEN YEAR DIGEST

29. STATEMENT COST OF GOODS SOLD

30. DATA ANALYSIS

31. CONCLUSION

32. BIBLIOGRAPHY


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HISTORY OF THE COMPANY

HISTORY OF COMPANY


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Bharat pumps and compressors limited incorporated in 1-jan-1970 in Naini at trans of yamuna area of

Allahabad and commercial activities started in 1973 with the objective to design, manufacture and

supply of capital goods in the fluid handling field including provision of services connected there with.

BPC which caters to the need of core sectors of economy such as oil exploitation and exploration,

refineries, petro-chemicals and fertilizers process industries, nuclear and thermal power plants, had in

its earlier phases entered in to technical collaboration with world renowned manufactures to

indigenously design and manufacture heavy duty centrifugal and reciprocating pump, reciprocating

compressors and high pressure gas cylinders and other hi-tech oil field equipment such as cementing

units, sucker rod pumps etc.

In a very short span, the company absorbed the technology and established itself as a world renowned

manufacturer of wide range of hi-tech products. BPC has supplied its products to the total satisfaction

of customers in almost all national projects of companies like ONGC, OIL, BPCL, IOCL, HOC, RCF,

Nuclear power corporation, Dept. Atomic Energy, IPCLETC.

THE GROUP

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THE GROUP


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Like many others impart substitution oriented public sector undertakings BPCL also

have to face various constrains because of long gestation period of profitability. By the

time company could start showing result ,the growing international competition

effectively.

Group of six premier sector engineering undertaking namely are :

Bharat pumps and compressors limited, Allahabad

Bharat heavy plates & Vessels Ltd, Vizag

Richardson and Cruddas Ltd, Kolkata

Bridge and Roof Co. (INDIA) Ltd, Kolkata

Triveni structureal Ltd, Allahabad

Tungbhadra Steel Product Ltd, Hospet (Karnatka)

Was formed in year 1987 under the holding company Bharat Yantra Nigam Ltd.

Having its head office at Allahabad , the collective and integrated strength of the

group augur well for its future roll as a strong and viable engineering group.

ISO CERTIFICATION


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ISO CERTIFICATION

Bharat pumps and compressors limited, naini- Allahabad is a certified integrated

management systems company having ISO 9001/2000,ISO 14001/2004, OHSAS


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18001/1999 includes environment, occupational health and safety management

systems, with the objective to design , manufacture and supply capital goods in the fluid

handling field including provision of services connected there with, BPC catters to the

need of core sector of the economy such as oil exploration and exploitation,

refineries,petro chemicals, chemicals and fertilizer process industries and power plant

and indigenously designs and manufacture heavy duty centrifugal pumps, reciprocating

pumps, reciprocating compressors and high pressure seamless gas cylinders and other

high tech oil field equipment such as cementing units, sucker rod pumps etc

ISO CERTIFICATE


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BPCL-NAINI (An Overview)


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LOCATION- NAINI

Naini is a satellite township of the city of allahabad, located on the banks of river

yamuna and developed into an industrial centre. Some other manufacturing

organizations located in Naini are ITI, TSL, AREVA, SAIL, etc.

About:

Bharat pump & compressor ltd.,, Naini , allahabad is a certified integrated management

systems company having ISO 9001:2000, ISO 14001:2004, OHSAS 118001:1999

Includes Environment, occupational health & safety Management systems, with the

objective to design, manufacture and supply capital goods in the fluid handling field

including provision of services connected therewith. BPC caters to the need of core

sector of the economy such as oil exploration and exploitation, refineries, petro-

chemical, chemicals and fertilizers, process industries and power plants and

indigenously designs and manufactures heavy duty centrifugal pumps, reciprocating

pumps, reciprocating compressors and high pressure seamless gas cylinders and other

hi-tech oil field equipments such as cementing units, sucker rod pumps etc.

BPC : VISION

To become an Indian MNC in the field of fluid handling, gas compression, gas

storage equipment, services and project management.

BPC : MISSION

To provide quality products and services to core sector industries with special

thrust on oil and natural gas, petro chemicals, refineries, nuclear and thermal

power plants, fertilisers and public transport services complying to health and

safety requirements.


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BPC : OBJECTIVES

To increase market share of their products and services.

To maximise customers satisfaction by providing quality product and services

within stipulated delivery.

To increase the business of spares and rendering prompt after sales service

including refurbishment.


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PORFILE


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PROFILE

Bharat pumps and compressors ltd, the public sector corporate enterprise, was

incorporated in 1970 with manufacturing facility at naini , Allahabad, India

Mission and objective of the company is to research, design and develop,

manufacture and supply capital goods in the fluid handling field including provision of

services connected there-with, to cater the need of Oil exploration and exploitation,

refineries, petro-chemicals, chemicals and fertilizer, power sectors and process and

down stream industries.

The corporate philosophy also involves approach for total quality

management (TQM) and total productive maintenance (TPM) in order to achieve and

sustain a reputation for quality at a competitive cost, in national and international

markets for our products and services through collective involvement of all.

BPC is the only company in Asia to manufacture a wide range of hi-tech

products, heavy duty pumps and compressors and high pressure seamless and welded

gas cylinders, under one roof.

Such high valued hi-tech products are functioning to the total satisfaction

of the customers with least maintenance cost and optimum energy conservation.


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CAPABILITIES


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CAPABILITIES

BPC, the ISO 9001:2000,ISO 14001:2004, OHAS 18001:1999

Company, manufacture highly technically sophisticated and environmentally

friendly products, equaling international standards of quality and performance with the

help of most modern and sophisticated machining cater having latest CMC machines,

assembly, testing,heat treatment and fabrication workshops.

TEST FACILITIES

The factory is equipped for full load testing of various parameter for complete

product rang up to 2000 KVA.

QUALITY ASSURANCE

Quality assurance department ensure that the products ( pumps and compressors)

meet the specification of international codes such as API and are fully guaranteed for

performance on the basis of proven and the most updated designs. Gas cylinder are

manufactured as per specification of international standard such as DOT, BS, BIS, ISO

etc. and usage approval from recognized national/international agencies.


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BOARD OF DIRECTORS


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TYPE OF POST


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MD

CGM GM

DGM

SR.MANAGER

MANAGER

SR. ENGINEER/OFFICER

OFFICER/ ENGINEER

SUPERVISIORS

ASSISTANT ENGINEER 15

FOREMAN/OFFICE SUPRINTEDENT 01

CHARGEMAN 18

NON-EXECUTIVES (WORKERS)

CHIEF FOREMAN 151

SR. FOREMAN 284

FOREMAN (W.) 143

SR. TECHNICIAN 51

HIGH SKILLED WORKER 31

SKILLED WORKER (GRADE 3) 26



SEMI SKILLED WORKER 21

UNSKILLED WORKER 05

TOTAL

01

02

03

13

14

45

60

13

48

965


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ORGANIZATINAL CHART

PRODUCT


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PRODUCT

Gas cylinder

1 High pressure seamless industrial gas

cylinders.

2 Welded cylinders.

3 Cylinders in Cascade for storage of

compressed natural gas (CNG)

Pump and

compressors

1 Centrifugal Pumps

2 Pumps for application in power plants.

3 Reciprocating piston and plunger pumps4 Cementing units.

5 Sucker rod pumping unit.

6 Reciprocating compressors.


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Rang of products

Maximum

power

2500 KW

Maximum

pressure

140 kg/cm2

Maximum

capacity

12,000 M3/Hr

Fluids

handled

Dematerialized water, sea water,

hydrocarbon, neptha, LPG, carbonate

solution, boiler feed water, benefield

solution, alkaline and acidic solution,

ammonia liquor and slurry

Maximum

power

1700 KW

Maximum

pressure

675 kg/cm2

Maximum

capacity

315 M3/Hr

Fluids

handled

Drilling mud, cementing slurry, crude

oil steam, condensate, heavy water,

fatty acids, ammonia carbonate, liquid

ammonia, water injection

Centrifugal pumps

Reciprocating pumps

Maximum

power

25,000 KW

Maximum

pressure

450 kg/cm2

Maximum

capacity

70,000 nm3/Hr

Air, nitrogen, oxygen, carbon di-oxide,

hydrocarbon, ammonia, synthesis gas,

hydrogen sulphate, coal gas etc.

Reciprocating compressors


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Gas cylinder

Maximumpressure

400 kg/cm2

Maximum

capacity

110 liters.

Gas handled Oxygen, nitrogen, hydrogen, argon, air,

helium, carbon di-oxide, nitrous oxide,

acetylene, ammonia, chlorine, Freon,

LPG, compressed natural gas (CNG)


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OFFICES AND CONTACT ADDRESSES


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IMPORTANT CLIENT

COMPETENCY


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COMPETENCY:

Quality Assurance Programmes conform to International specifications and

requirements.

Research and Development efforts are supported by test facilities for model

testing in the centrifugal pumps, reciprocating pumps and compressors area and

also carry out live testing of expendables etc.

Fully groomed Installation, Commissioning and Spare Parts Division renders

Product Support, Technical Assistance and advice besides providing quick and

effective after sales service

A strong Design Department has been established which houses Computer

aided Design Centre. Highly qualified, trained, experienced and competent

engineers are involved in application engineering, thermodynamic calculations,

hydraulic calculations and systems design in the area of piping, instrumentation,

electrical, operational control etc.

The company undertakes long term maintenance contract of the equipments

installed and commissioned at customers' plants, with the objective to maximise

their profits and minimise their risks.

WORKING CAPITAL


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Working capital also known as "WC", is a financial metric which represent

soperating liquidity available to a business. Along with fixedassets such as plant and

equipment, working capital is considered a part of operating capital. It is calculated

ascurrent assetsminuscurrentliabilities. If current assets are less than current liabilities,

an entity has a working capital deficiency , also called a working capital deficit .

Networking capital is working capital minus cash (which is a current asset)and minus

interest bearing liabilities (i.e. short term debt). It is aderivation of working capital, that

is commonly used in valuationtechniques such as DCFs (Discounted cash flows).

Working Capital = Current Assets Current Liabilities

A company can be endowed with assets and profitabilitybut short of liquidity

if its assets cannot readily be converted into cash. Positive working capital is required to

ensure that a firm is able to continue its operations and that it has sufficient funds to

satisfy both maturing short-term debt and upcoming operational expenses. The

management of working capital involves managing inventories, accounts receivable

and payable and cash

WORKING CAPITAL MANAGEMENT

Decisions relating to working capital and short term financing are referred to as

working capital management. These involve managing the relationship between

afirm'sshort-term assets and its short-term liabilities. The goal of working capital

management is to ensure that the firm is able to continue its operations and that it has

sufficient cash flow to satisfy both maturing short-term debt and upcoming operational

expenses.

By definition, working capital management entails short term decisions

- generally, relating to the next one year period - which are "reversible". These

decisions are therefore not taken on the same basis as Capital Investment Decisions

(NPV or related, as above) rather they will be based on cash flows and / or profitability

One measure of cash flow is provided by the cash conversion cycle- the net number of

days from the outlay of cash forraw material to receiving payment from the customer.

As a management tool, this metric makes explicit the inter-relatedness of decisions

relating to inventories, accounts receivable and payable, and cash. Because this number

effectively corresponds to the time that the firm' scash is tied up in operations and
http://en.wikipedia.org/wiki/Accounting_liquidityhttp://en.wikipedia.org/wiki/Current_assetshttp://en.wikipedia.org/wiki/Current_liabilitieshttp://en.wikipedia.org/wiki/Current_liabilitieshttp://en.wikipedia.org/wiki/Assetshttp://en.wikipedia.org/wiki/Profit_(accounting)http://en.wikipedia.org/wiki/Current_liabilityhttp://en.wikipedia.org/wiki/Operations_managementhttp://en.wikipedia.org/wiki/Cash_conversion_cyclehttp://en.wikipedia.org/wiki/Materialhttp://en.wikipedia.org/wiki/Current_assetshttp://en.wikipedia.org/wiki/Current_liabilitieshttp://en.wikipedia.org/wiki/Current_liabilitieshttp://en.wikipedia.org/wiki/Assetshttp://en.wikipedia.org/wiki/Profit_(accounting)http://en.wikipedia.org/wiki/Current_liabilityhttp://en.wikipedia.org/wiki/Operations_managementhttp://en.wikipedia.org/wiki/Cash_conversion_cyclehttp://en.wikipedia.org/wiki/Materialhttp://en.wikipedia.org/wiki/Accounting_liquidity


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unavailable for other activities, management generally aims at a low net count In this

context, the most useful measure of profitability isReturn on capital (ROC). The result

is shown as a percentage, determined by dividing relevantincome for the 12 months

bycapital employed;Return on equity(ROE) shows this result for the firm's

shareholders. Firm value is enhanced when,and if, the return on capital, which results

from working capitalmanagement, exceeds thecost of capital, which results from

capitalinvestment decisions as above. ROC measures are therefore useful as

amanagement tool, in that they link short-term policy with long-term decisionmaking.

SeeEconomic value added(EVA).Guided by the above criteria, management will use a

combination of policies andtechniques for the management of working capital. These

policies aim at managingthe current assets (generallycashandcash

equivalents,inventoriesanddebtors) and the short term financing, such that cash flows

and returns are acceptable.

Cash management. Identify the cash balance which allows for the business to meet day

to day expenses, but reduces cash holding costs.

Inventory management

. Identify the level of inventory which allows for uninterrupted production but reduces

the investment in raw materials and Short term financing. Identify the appropriate source

of financing, giventhe cash conversion cycle: the inventory is ideally financed by credit

granted by the supplier; however, it may be necessary to utilize a

bankloan(or overdraft), or to "convert debtors to cash" through "factoring".

CSH CONVERSION CYCLE

management accounting, the WORKING CAPITAL

Cash Conversion Cycle(CCC) measures how long a firm will be deprived of cash if it

increases itsinvestment in resources in order to expand customer sales. It is thus

ameasure of theliquidity riskentailed by growth. However, shorteningthe CCC creates

its own risks: while a firm could even achieve anegative CCC by collecting from

customers before paying suppliers, a policy of strict collections and lax payments is not

always sustainable
http://en.wikipedia.org/wiki/Return_on_capitalhttp://en.wikipedia.org/wiki/Capital_employedhttp://en.wikipedia.org/wiki/Cost_of_capitalhttp://en.wikipedia.org/wiki/Economic_value_addedhttp://en.wikipedia.org/wiki/Cashhttp://en.wikipedia.org/wiki/Cash_and_cash_equivalentshttp://en.wikipedia.org/wiki/Cash_and_cash_equivalentshttp://en.wikipedia.org/wiki/Debtorhttp://en.wikipedia.org/wiki/Cash_managementhttp://en.wikipedia.org/wiki/Loanhttp://en.wikipedia.org/wiki/Factoring_(finance)http://en.wikipedia.org/wiki/Management_accountinghttp://en.wikipedia.org/wiki/Liquidity_riskhttp://en.wikipedia.org/wiki/Return_on_capitalhttp://en.wikipedia.org/wiki/Capital_employedhttp://en.wikipedia.org/wiki/Cost_of_capitalhttp://en.wikipedia.org/wiki/Economic_value_addedhttp://en.wikipedia.org/wiki/Cashhttp://en.wikipedia.org/wiki/Cash_and_cash_equivalentshttp://en.wikipedia.org/wiki/Cash_and_cash_equivalentshttp://en.wikipedia.org/wiki/Debtorhttp://en.wikipedia.org/wiki/Cash_managementhttp://en.wikipedia.org/wiki/Loanhttp://en.wikipedia.org/wiki/Factoring_(finance)http://en.wikipedia.org/wiki/Management_accountinghttp://en.wikipedia.org/wiki/Liquidity_risk


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Definition CCC days between disbursing cash and collecting cash in connection

withundertaking a discrete unit of operations.

Inventory conversionperiod+ Receivables conversionperiod Payables conversionperiod

Avg. Inventory COGS / 365+Avg.

Accounts Receivable Revenue / 365 Avg.

Accounts Payable COGS / 365

CORPORATE FINANCE

Corporate financeis an area of financedealing with financial decisions business

enterprisesmake and the tools and analysis used to make these decisions. The primary

goal of corporate finance is to maximize corporate value . whilemanaging the firm's

financialrisks. Although it is in principle different frommanagerial financewhich studies

the financial decisions of all firms, rather thancorporations alone, the main concepts in

the study of corporate finance areapplicable to the financial problems of all kinds of

firms.The discipline can be divided into long-term and short-term decisions

andtechniques.Capital investmentdecisions are long-term choices about which projects

receive investment, whether to finance that investment withequityordebt, and when or

whether to paydividendstoshareholders. On the other hand, the short term decisions can

be grouped under the heading "Working capital management".This subject deals with

the short-term balance ofcurrent assets and current liabilities; the focus here is on

managing cash,inventories, and short-term borrowing and lending (such as the terms

on credit extended to customers).The terms corporate finance and corporate financier

are also associated withinvestment banking . The typical role of aninvestment bankis to

evaluate the company's financial needs and raise the appropriate type of capital that best

fitsthose needs.

liabilities; the focus here is on managing cash, inventories, and short-term borrowing

and lending (such as the terms on credit extended to customers).The terms corporate

finance and corporate financier are also associated with investment banking. The
http://en.wikipedia.org/wiki/Cost_of_goods_soldhttp://en.wikipedia.org/wiki/Receivableshttp://en.wikipedia.org/wiki/Accounts_Payablehttp://en.wikipedia.org/wiki/Accounts_Payablehttp://en.wikipedia.org/wiki/Cost_of_goods_soldhttp://en.wikipedia.org/wiki/Businesshttp://en.wikipedia.org/wiki/Businesshttp://en.wikipedia.org/wiki/Maximizationhttp://en.wikipedia.org/wiki/Valuation_(finance)http://en.wikipedia.org/wiki/Riskshttp://en.wikipedia.org/wiki/Managerial_financehttp://en.wikipedia.org/wiki/Capital_investmenthttp://en.wikipedia.org/wiki/Ownership_equityhttp://en.wikipedia.org/wiki/Debthttp://en.wikipedia.org/wiki/Dividendshttp://en.wikipedia.org/wiki/Shareholdershttp://en.wikipedia.org/wiki/Working_capital_managementhttp://en.wikipedia.org/wiki/Assetshttp://en.wikipedia.org/wiki/Liabilitieshttp://en.wikipedia.org/wiki/Liabilitieshttp://en.wikipedia.org/wiki/Inventoryhttp://en.wikipedia.org/wiki/Investment_bankinghttp://en.wikipedia.org/wiki/Investment_bankhttp://en.wikipedia.org/wiki/Liabilitieshttp://en.wikipedia.org/wiki/Inventoryhttp://en.wikipedia.org/wiki/Investment_bankinghttp://en.wikipedia.org/wiki/Cost_of_goods_soldhttp://en.wikipedia.org/wiki/Receivableshttp://en.wikipedia.org/wiki/Accounts_Payablehttp://en.wikipedia.org/wiki/Accounts_Payablehttp://en.wikipedia.org/wiki/Cost_of_goods_soldhttp://en.wikipedia.org/wiki/Businesshttp://en.wikipedia.org/wiki/Businesshttp://en.wikipedia.org/wiki/Maximizationhttp://en.wikipedia.org/wiki/Valuation_(finance)http://en.wikipedia.org/wiki/Riskshttp://en.wikipedia.org/wiki/Managerial_financehttp://en.wikipedia.org/wiki/Capital_investmenthttp://en.wikipedia.org/wiki/Ownership_equityhttp://en.wikipedia.org/wiki/Debthttp://en.wikipedia.org/wiki/Dividendshttp://en.wikipedia.org/wiki/Shareholdershttp://en.wikipedia.org/wiki/Working_capital_managementhttp://en.wikipedia.org/wiki/Assetshttp://en.wikipedia.org/wiki/Liabilitieshttp://en.wikipedia.org/wiki/Liabilitieshttp://en.wikipedia.org/wiki/Inventoryhttp://en.wikipedia.org/wiki/Investment_bankinghttp://en.wikipedia.org/wiki/Investment_bankhttp://en.wikipedia.org/wiki/Liabilitieshttp://en.wikipedia.org/wiki/Inventoryhttp://en.wikipedia.org/wiki/Investment_banking


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typical role of aninvestment bankis to evaluate the company's financial needs and raise

the appropriate type of capital that best fitsthose needs

CAPITAL INVESTMENT DECISION

Capital investment decisions are long-term corporate finance decisions

relatingtofixed assetsandcapital structure . Decisions are based on several inter-related

criteria. (1) Corporate management seeks to maximize the value of the firm byinvesting

in projectswhich yield a positivenet present valuewhenvaluedusing an

appropriatediscount rate. (2) These projects must also befinancedappropriately. (3) If no

such opportunities exist, maximizing shareholder value dictates thatmanagement must

return excess cash to shareholders (i.e., distribution viadividends). Capital investment

decisions thus comprise an investment decision, afinancing decision, and a dividend

decision. The investment decision Management must allocate limited resources

between competing opportunities(projects) in a process known ascapital budgeting

Making this capital allocationdecision requires estimating the value of each opportunity

or project, which is afunction of the size, timing and predictability of future Project

valuation each project's value will be estimated using a discounted cash

flow(DCF)valuation, and the opportunity with the highest value, as measured by the

resultantnet present value(NPV) will be selected (applied to Corporate Finance

byJoel Deanin 1951; see alsoFisher separation theorem,John Burr Williams: theory).

This requires estimating the size and timing of all of the incremental cash

flowsresulting from the project. Such future cash flows are thendiscountedto

determinetheir present value (seeTime value of money). These present values are

thensummed, and this sum net of the initial investment outlay is the NPV. SeeFinancial

modeling.The NPV is greatly affected by thediscount rate. Thus, identifying the proper

discount rate - often termed, the project "hurdle rate" is critical to making anappropriate

decision. The hurdle rate is the minimum acceptablereturnon aninvestmenti.e.

the project appropriate discount rate. The hurdle rate shouldreflect the riskiness of the

investment, typically measured byvolatilityof cashflows, and must take into account the

financing mix. Managers use models such astheCAPMor theAPTto estimate a discount

rate appropriate for a particular project, and use theweighted average cost of

capital( WACC ) to reflect thefinancing mix selected. (A common error in choosing a

discount rate for a projectis to apply a WACC that applies to the entire firm. Such an
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approach may not beappropriate where the risk of a particular project differs markedly

from that of thefirm's existing portfolio of assets.)In conjunction with NPV, there are

several other measures used as (secondary)selection criteriain corporate finance. These

are visible from the DCF and includediscounted payback period,IRR,Modified

IRR,equivalent annuity, capital efficiency, andROI. Alternatives (complements).

FINANCIAL RISK MANAGEMENT

Financial Risk Management the process of measuring riskand then developing

and implementing strategies tomanage that risk.Financial risk management focuses on

risks that can be managed("hedged") using tradedfinancial instruments (typically

changes in commodity prices,interest rates,foreign exchange ratesandstock prices).

Financial risk management will also play an important role incashmanagement. This

area isrelated to corporate finance in two ways. Firstly, firm exposure to business risk is

adirect result of previous Investment and Financing decisions. Secondly,

bothdisciplines share the goal of enhancing, or preserving, firmvalue.

All citation needed large corporations have risk management teams, and small

firms practice informal,if not formal, risk management. There is a fundamental debate

on the value of "Risk Management" and shareholder value that questions a

shareholder's desire tooptimize risk versus taking exposure to pure risk. The debate

links value of risk management in a market to the cost of bankruptcy in that

market.Derivativesare the instruments most citation needed commonly used in financial

risk management. Because unique derivativecontractstend to be costly to create

andmonitor, the most cost-effective financial risk management methods usuallyinvolve

derivatives that trade on well-establishedfinancial marketsorexchanges. These standard

derivative instruments includeoptions,futures contracts,forward contracts, andswaps.More customized and second generation derivatives known asexoticstradeover the

counterakaOTC.

Relationship with other areas in finance Investment bankingUse of the term

corporate finance varies considerably across the world. In theUnited Statesit is used,

as above, to describe activities, decisions and techniquesthat deal with many aspects of

a companys finances and capital. In the United Kingdom and Commonwealth

countries, the terms corporate finance and corporate financier tend to be associated
http://en.wikipedia.org/wiki/Net_present_valuehttp://en.wikipedia.org/wiki/Discounted_payback_periodhttp://en.wikipedia.org/wiki/Internal_rate_of_returnhttp://en.wikipedia.org/wiki/Modified_Internal_Rate_of_Returnhttp://en.wikipedia.org/wiki/Modified_Internal_Rate_of_Returnhttp://en.wikipedia.org/wiki/Equivalent_Annual_Costhttp://en.wikipedia.org/wiki/Return_on_investmenthttp://en.wikipedia.org/wiki/Financial_risk_managementhttp://en.wikipedia.org/wiki/Riskhttp://en.wikipedia.org/wiki/Financial_risk_managementhttp://en.wikipedia.org/wiki/Hedge_(finance)http://en.wikipedia.org/wiki/Financial_instrumentshttp://en.wikipedia.org/wiki/Commodityhttp://en.wikipedia.org/wiki/Commodityhttp://en.wikipedia.org/wiki/Interest_ratehttp://en.wikipedia.org/wiki/Exchange_ratehttp://en.wikipedia.org/wiki/Stockhttp://en.wikipedia.org/wiki/Cashhttp://en.wikipedia.org/wiki/Value_(economics)http://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Derivative_(finance)http://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Contracthttp://en.wikipedia.org/wiki/Financial_marketshttp://en.wikipedia.org/wiki/Exchange_(organized_market)http://en.wikipedia.org/wiki/Option_(finance)http://en.wikipedia.org/wiki/Forward_contracthttp://en.wikipedia.org/wiki/Forward_contracthttp://en.wikipedia.org/wiki/Swap_(finance)http://en.wikipedia.org/wiki/Exoticshttp://en.wikipedia.org/wiki/Over_the_counterhttp://en.wikipedia.org/wiki/Over_the_counterhttp://en.wikipedia.org/wiki/OTChttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/Commonwealth_of_Nationshttp://en.wikipedia.org/wiki/Net_present_valuehttp://en.wikipedia.org/wiki/Discounted_payback_periodhttp://en.wikipedia.org/wiki/Internal_rate_of_returnhttp://en.wikipedia.org/wiki/Modified_Internal_Rate_of_Returnhttp://en.wikipedia.org/wiki/Modified_Internal_Rate_of_Returnhttp://en.wikipedia.org/wiki/Equivalent_Annual_Costhttp://en.wikipedia.org/wiki/Return_on_investmenthttp://en.wikipedia.org/wiki/Financial_risk_managementhttp://en.wikipedia.org/wiki/Riskhttp://en.wikipedia.org/wiki/Financial_risk_managementhttp://en.wikipedia.org/wiki/Hedge_(finance)http://en.wikipedia.org/wiki/Financial_instrumentshttp://en.wikipedia.org/wiki/Commodityhttp://en.wikipedia.org/wiki/Commodityhttp://en.wikipedia.org/wiki/Interest_ratehttp://en.wikipedia.org/wiki/Exchange_ratehttp://en.wikipedia.org/wiki/Stockhttp://en.wikipedia.org/wiki/Cashhttp://en.wikipedia.org/wiki/Value_(economics)http://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Derivative_(finance)http://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Contracthttp://en.wikipedia.org/wiki/Financial_marketshttp://en.wikipedia.org/wiki/Exchange_(organized_market)http://en.wikipedia.org/wiki/Option_(finance)http://en.wikipedia.org/wiki/Forward_contracthttp://en.wikipedia.org/wiki/Forward_contracthttp://en.wikipedia.org/wiki/Swap_(finance)http://en.wikipedia.org/wiki/Exoticshttp://en.wikipedia.org/wiki/Over_the_counterhttp://en.wikipedia.org/wiki/Over_the_counterhttp://en.wikipedia.org/wiki/OTChttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/Commonwealth_of_Nations


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with investment banking- i.e. withtransactions in which capital is raised for the

corporation.

PERSONAL AND PUBLIC FINANCE

Corporate finance utilizes tools from almost all areas of finance. Some of the

toolsdeveloped by and for corporations have broad application to entities other

thancorporations, for example, to partnerships, sole proprietorships, not-for-

profitorganizations, governments, mutual funds, and personal wealth management.

WORKING CAPITAL WORKS

What Is Working Capital?

WORKING CAPITAL refers to the cash a business requires for day-to-day

operations, or, morespecifically, for financing the conversion of raw materials into

finished goods, which thecompany sells for payment. Among the most important items

of working capital arelevels of inventory, accounts receivable, and accounts payable.

Analysts look at theseitems for signs of a company's efficiency and financial

strength.Take a simplistic case: a spaghetti sauce company uses $100 to build up its

inventoryof tomatoes, onions, garlic, spices, etc. A week later, the company assembles

theingredients into sauce and ships it out. A week after that, the checks arrive

fromcustomers. That $100, which has been tied up for two weeks, is the company'sworkingcapital. The quicker the company sells the spaghetti sauce, the sooner the

companycan go out and buy new ingredients, which will be made into more sauce sold

at a profit.If the ingredients sit in inventory for a month, company cash is tied-up and

can't be usedto grow the spaghetti business. Even worse, the company can be left

strapped for cashwhen it needs to pay its bills and make investments. Working capital

also gets trappedwhen customers do not pay their invoices on time or suppliers get paid

too quickly or not fast enough.The better a company manages its working capital, the

less the company needs toborrow. Even companies with cash surpluses need to manage
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working capital to ensurethat those surpluses are invested in ways that will generate

suitable returns for investors.

Not All Companies Are the Same Some companies are inherently better placed than

others. Insurance companies, for instance, receive premium payments up front before

having to make any payments;however, insurance companies do have unpredictable

cash outflow as claims come in.Normally, a big retailer like Wal-Mart (NYSE:WMT)

has little to worry about when itcomes to accounts receivable: customers pay for goods

on the spot. Inventoriesrepresent the biggest problem for retailers; as such, they must

perform rigorousinventory forecasting or they risk being out of business in a short

time.Timing and lumpiness of payments can pose serious troubles.

Manufacturingcompanies, for example, incur substantial upfront costs for materials and

labor beforereceiving payment. Much of the time they eat more cash than they generate.

EVALUATING COMPANIES

Investors should favor companies that place emphasis on supply-chain management

toensure that trade terms are optimized. Days-sales outstanding or DSO for short, is a

goodindication of working capital management practices. DSO provides a rough guide

to thenumber of days that a company takes to collect payment after making a sale

longer to collect its payments. It suggests that the company is not going tohave enough

cash to fund short-term obligations because the cash cycle islengthening. A spike in DSO is even more

worrisome, especially for companies that are already low on cash.The inventory turnover

ratio offers another good instrument for assessingthe effectiveness of WCM. The inventory

ratio shows how fast/oftencompanies are able to get their goods completely off the shelves.

Theinventory ratio looks like this:

COST OF GOODS SOLD (COGS)/INVENTORY
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Broadly speaking, a high inventory turnover ratio is good for business.Products

that sit on the shelf are not making money. Granted, an increasein the ratio can be a

positive sign, indicating that management, expectingsales to increase, is building up

inventory ahead of time.For investors, a company's inventory turnover ratio is best seen

in light of its competitors. In a given sector where, say, it is normal for a company

tocompletely sell out and restock six times a year, a company that achieves aturnover

ratio of four is an underperformer.Computer giant and stock market champion, Dell

(Nasdaq:DELL),recognized early that a good way to bolster shareholder value was to

notchup working capital management. The company's world-class supply-

chainmanagement system ensures that DSO stays low. Improvements ininventory

turnover increase cash flow, all but eliminating liquidity risk,leaving Dell with more

cash on the balance sheet to distribute toshareholders or fund growth plans.Dell's

exceptional WCM certainly exceeds those of the top executives whodo not worry

enough about the nitty-gritty of working capital management.Some CEOs frequently

see borrowing and raising equity as the only way toboost cash flow. Other times, when

faced with a cash crunch, instead of setting straight inventory turnover levels and

reducing DSO longer to collect its payments. It suggests that the company is not going

tohave enough cash to fund short-term obligations because the cash cycle islengthening.

A spike in DSO is even more worrisome, especially for companies that are already low

on cash.Theinventory turnover ratiooffers another good instrument for assessingthe

effectiveness of WCM. The inventory ratio shows how fast/oftencompanies are able to

get their goods completely off the shelves. Theinventory ratio looks like this:

SECTIONS OF FINANCE DEPARTMENT

STORE BILL SECTION & FOREIGN PAYMENT MR.C.N MISHRA

SALES- MR. G.P SINGH

PROVIDEND FUND MS. GAURI

SALARY MR. M.N TRIPATHI

MISCELLANEOUS MR. B.V SINGH
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INCOME TAX- MR. RANJEET SINGH

COSTING-MR. WAHIDI JI

BOOK SECTION- MR. S.B GUPTA

BANK SECTION-MR SANJAY GUPTA

MEDICAL SECTION -MR. R.C PANDEY

STORE BILL SECTION

Base of placing the Purchase Order (PO)- Design Department raised indent

forprocurement of material for various products the main product of BPCL

are:1.Reciprocating Compressor2.Reciprocating Pumps3.Centrifugal Pumps4.Gas

Cylinder (excluding LPG)After receipt of indent Purchase Department offer quotation

from different suppliersthrough tenders. There are 4 types of tenders-

1. Single tender (for only one reputed supplier).

2. Limited tender (Some regular suppliers are said to be providing quotation after

receipt of quotation comparative statement is prepared in which price quality,

past performances of the supplier are maintained. The comparative statement

send to finance department for concurrence and final decision are given by

finance department.

3. Global tender (These are given in newspaper and international supplier submits

their quotations through this tender).

4. Open-tender (quotation calls for international).Purchase order (PO)- This is an

arrangement between buyers and suppliers & suppliersand suppliers is bound to

deliver the materials as mentioned in PO-

Items name

Quantity

Unit rate


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Packing & forwarding [0.5% to 5% of material value (mv)]

excise dutyUp to 29-02-2008-16.48%Up to march 2008-14.42%Up to o7-12-

2008-10.03%Up to 24-02-2009-8.24%Up to 27-02-2010-10.03%

VAT [MV+P&F+Excise duty] 5 %(19-02-2010) or [13.5% applicable in 5%

cases].

Service tax (10.3%is applicable on machinery work or labour job).

Central Sales Tax (CST)- Presently 2% on [MV+P&F+ED].

Government taxes like VAT, CST, Service Tax %age is not given in PO

.Payment to the supplier When supplier supplies the material, he provide

bills invoice/bill, taxable invoice [for moderate credit- credit taken which

excise duty are paid byBPC to suppliers. BPC takes excise credit on the basis

of taxable invoice.]

According to PO supplier invoice/ bill the same or past as per PO rate terms&

conditions.Late delivery inventory - 0.5% per week subject to maximum of 5% of

delayed supply isdeducted from the bill. If supply is delayed beyond delivery period (asper PO deliveryperiod is 4 weeks from the date of PO), all payments are released

through cheques /RTGS.Note-; ED, VAT, ST or refunded/credited by sales tax

department & excise department.Contractor transport payment- Annual contract is

awarded for transportation of materials from BPCL to any place within India & all over

India to BPCL. Presentlythere are 3 transporters. e.g.- ETO (Economic Transport

Organisation), ARC(Associated Road Organisation), Indo Aryan Organisation.For

different jobs, construction of roads, building, foundation of machinerytanks the

contract is awarded on the basis of tender Income tax - @ 2.06% of labour job amount.

Machinery is deducted from the suppliersbill. Finally store department provide Store

Receipt Voucher (SRV) to finance forvaluation.Purchase of imported materials- On the

basis of PO, materials are imported by 2 ways-;(1) through letter of credit (LC) -

90%(2) On collection basis-10%Establishment of LC-

1.Banker- SBI Naini

2.Consignee- overseas supplier, foreign vendors (supplier) beneficiaries.


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3.Consignee- SBI Naini a/c, BPCL Naini (receiver)Foreign payment -:After placement

of the PO purchase department sent request letter to financedepartment.Foreign

payment section along with 2 copies of PO and suppliers consent letter

forestablishing LC. Finance department on the basis of PO prepare the

followingdocuments:

1.Letter addressed to SBI Naini (chief manager) in which PO no., date, value inforeign

currency, freight forwarders, name and address are mentioned.

2.Shipping documents. In this document the following points are indicated:

i.Airway bill / Bill of lading

ii.Invoice/Bill

iii.Packing list

iv.Country or origin

v.Test Inspection Certificatevi.Certificate of utilities

vii.Specification of Goals

viii.Certificate of completion of supply

ix.Warranty/ GuaranteeTotal LC value in FC suppliers name, name of freight

forwarders, latedelivery penalty if applicable, PBC (Performance Bank Guarantee)

if applicable, requirement of advance set of documents for shipping of materials.3.

Guarantee LC form ( 2) suppliers name, FC value, price term [free on boat]

All charges from suppliers workshops to sea/ airport like handling charges,

documentation charges, warehousing charges, paid by suppliers and finally charges in

his invoice.4. Foreign exchange control .

Name of supplier


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Material cost The LC is established by the buyer through his banker (SBI, Naini) with

a primebank located in the country of supplier. Confirmation of LC is confirmed by

thebuyers banker only.Terms of dispatch/ shipment (fob)- in this case supplier is

responsible fortransportation of material upto port, documentation charge, warehouse

chargewill be paid by the supplier and finally charged in this bill.Ex-works: The

supplier is only responsible on his work place. The freightforwarder of buyer is

responsible for material handling upto port and allexpenses at port.Cost insurance and

freight of air/ship- will be born by the supplier.Port of Loading- The supplier shipped

the material with the consultant of freightforwarder in his country.Port of Discharge-

Material discharge of Mumbai port and the clearing agent of buyershall provide all

expense of the port along with freight bill.Releasing of material from port- after

payment freight port trust expenses custom duty andreceipt of original documents like

bill/invoice, packing list, country of origin and AWB/ BL.Invoice/bill and AWB/ BL

must be signed by chief manager SBI Naini. In some casesoriginal documents are not

received in SBI Naini and material reached and Mumbai portthen in case of air release

order duly addressed to freight forwarder and signed by chief manager SBI Naini. In

case of sea indemnity bond is issued and also signed by SBI is sentto freight forwarder

for increasing the material from the port. After releasing the materialsthrough our

transporters, materials are send ton BPCL Naini

MICSCELLANEOUS PAYMENT SECTION

.Function of miscellaneous payment section

1.Payment of transport bills

2.Payment of mobiles and telephones

3.Miscellaneous advance and adjustment

4.AMC (annual maintenance contracts)

5.Publication and advertisemen

t6.Payment of leased houses


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7.Security/earnest money deposits and payment

8.Reduction of income tax &payment

9.Training and seminar

10.Power payment11.Miscellaneous payments

DEDUCTION AND PENALTY IN CASE OF PENALTY

Deduction on late arrival (for all types of vehicles)=Contract amount +diesel hike /

252*1%Extra mileage rate rs.5.60 per km Penaltycase

Contract amount +diesel hikeDays in a month or 25 days/25 hrs *hrs indicated in the

bill 4 or 3

LANDLINES36 landlines connection DGM (60000/-)90 Mobiles are issued to the

officer diff.department

IMPEREST

Imperest is an advance being paid to each and every department to meet out

theexpenses of emergent and petty nature.

MISCELLANEOUS ADVANCE AND ADJUSTMENT

it includes material handling ,localcash purchase ,repair handling ,welfare /press and

publication expenses etc.AMC-annual maintenance contractsAMC for computersAMC

for crane servicesAMC for weighing machinesAMC for electronic punching

machinesAMC for electronic data processing(EDP)

PUBLICATION AND ADVERTISEMENT

Advertisement for tender notice Advertisement for recruitmentAdvertisement for

goodwill and sales promotion

SECURITY/EARNEST MONEY DEPOSITS AND PAYMENT

Earnest money it is being deposited at the time of issuing tender form .it isrefundable

just after the party is failure to obtain contract.Security money-it is being deposited


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after finalization of contract and securitydeposits is refundable after termination of

contracts.

REDUCTION OF INCOME TAX &PAYMENT

TDS is being deducted from the parties payment under two section1st

-sec 194(c)2nd

-sec 194 (j)Sec194(c)-ths sec. covers the payments of parties who are rendering their

serviceswith their own means and cost .e.g. transporters bill.(A) rate of TDS-2.06%(B)

Rate of TDS-1.03% is being deducted from the bill of the parties who do the work of

mediator or broker.\e.g satya advertising agencies sec 194(j)

TDS at the rate of-10.30%This rate is applicable on the payment of professional,

retainers and serviceconsultants. Tax will be deposited on before the 7thof the coming

month.SALARY SECTIONAs per the government rules and regulations the salary

section calculates the salaryof employees by involving-:DA (IDA)-industrial dearness

allowanceDA is changed according to the survey made by consumer forum in several

citiesto know the prices of various products.Presently DA is 127.5% of

basicHRA( house rent allowance )Classification of cities HRAA-1(population>50 lac)

30% of basic payA,B-1,B-2(population between 20-50 lac) 15% of basic payC

(population between 10-20 lac) 7.5% of basic payUnclassified (below 10 lac) 5% of

basic payCCA(city compensatory allowance)Washing allowance Rs 60/- per

monthCanteen allowance Rs 400/-per monthChildren education allowanceAttendance

award Rs55 for 100% attendance

PROVIDEND FUND SECTION

UP/4882/2612 code given by PF Commissioner to BPCL.P.F no up/4882/261212%

is cut down from individual salary same amount is added to a/c which is provided by

company.Contribution involved in the separate a/c of employee:(1)Employee

contribution(2)Employer contribution(3)Voluntary provident fundVPF is a/c to the will

of employee which is provided by companyRandomly .maximum limit that can be cut

down 6000/- or 72000 per year.


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In last two month Feb. &mar individual can exceed the amount 6000/- tomaintain

72000/- in that year

8.33% or Rs 541/- whichever is lower one is cut from the 12% of the salarythen we get

the amount.Types of loan Non refundableCondition 1- 90% of the amount is

providedCondition2-(basic+DA)*36RefundableCondition 1- 90% of the amount is

provided after 10 year of service if taken75%provided only refundableCondition 2-

(basic + DA)*6DeductionProvident fund -12% of basic +DA8.5% interest on

PFVoluntary provident fundMax 6000/- can be deducted as VPF

Income tax deduction

Bus charge

GLIC/LIC Deduction

MEDICAL SECTION

Medical section of finance department provides financial help for medical facilitiesto

the employee and their dependents.In the month of April 95% of the basic payment is

provided to the employee for normal disease.For each month=95%of thebasic12Following are the hospital in which financial help is provided

:(1)Srijan vatsalya hospital pvt.ltd

(2) Akshay vat and trama hospital.

(3) saraswati heart care

(4)Nazareth hospital.

(5) government hospitals


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CUSTOMER SATISFACTION

CSTOMER STISFACTION

In Time Delivery,

Installation

Commissioning of

Products


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Common Objective

To Maximise Profits

And Minimise Cost

Of The Customer

Just In Time

Spare Parts

Management-

Low Downtime

Long Term Preventive

Maintenance Contract -

Low Cost,

Low Downtime

Continuous

And Rapid

Technological

Upgradation

On The Job Training

Programme For Customer

Operational & Maintenance

Personnel


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MANUFACTURING UNIT

ACHIVEMENT 2010-2011


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MANAGEMENT INFORMATION SYSTEM

BALANCE SHEET


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PROFIT AND LOSS ACCOUNT


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GRAPHICAL PRESENTATION OF

TURNOVER, VALUE ADDED PER EMPLOYEE, NET PROFIT BEFORE

TAX, NET WORTH


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Turnover (in cr.) -:

0

50

100

150

200

250

300

2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

Value added per employee (in lacks)-:

0

2

4

6

8

10

12

2006-2007 2007-2008 2008-2009 2009-2010 2010-2011


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Net profit before tax

0

5

10

15

20

25

30

35

2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

Net worth (in cr.)-:


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0

20

40

60

80

100

120

140

2006-2007 2007-2008 2008-2009 2009-2010 2010-2011


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TEN YEAR DIGEST


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particular

2010-

2011

2009-

2010

2008-

2009

2007-

2008

2006-

2007

2005-

2006

2004-

2005

2003-

2004

2002-

2003

20

20

value of

production 20908.6 28193.8 23998.9 19177.3 14983.1 10317.9 7000 4749.8 6441 66sales 21021.3 27111.8 23636.4 19459.5 14371.6 9442.1 7008 5139.9 6422.1 72gross profit/

(loss) pbdit 2867 4993.7 5968.6 4327.9 3167.4 2188.9 875.8 -290.9 -203.9 -4Depreciation/dre 439 266.1 214 304.5 365.3 387.1 388 390.9 270.2 1interest 525.9 674 868.5 462.2 271.4 1585 1469.2 1009.6 736.3 6(a) p/l before tax

on cu. Ope. 1902.1 4053.5 4886.1 3561.3 2530.8 216.8 -981.4

-

1691.3

-

1210.3 12

(b)1- provisions 0 2.6 1021.4 364.3 791.1 0 67.4 390.4 3.12- net profit

period adj. -1.1 71.2 130.3 -146.6 174.6 -32.3 -36.8 -412.4 -78.43- extra ordinary

item 475.5 1012.7 2031.4 0 0 0 0 0 0

p/l before tax 1425.5 3109.4 1963.6 3050.5 1914.3 184.5 1085.5

-

2494.1

-

1291.8 12provision for tax 472.6 544.4 107.1 3.9 2.8 2.4 0 0 0net profit after

tax 952.9 2565 1856.5 3046.6 1911.4 182.1 1085.5

-

2494.1

-

1291.8 12


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RATIO ANALYSIS

RATIO ANALYSIS

Ratio analysis is power tool of financial analysis. A ratio is defined as the indicated

quotient of mathematical expression and as a relationship between

two or more things. Ratio quantitative relationship helps to form a qualitative

judgement


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STANDARD OF COMPARISION

The ratio involve comparison for a useful interpretation of the financial statement.

Standard of comparison may consist of :

Past ratio

Competitors ratio

Industry ratio Projected ratio

TYPES OF RATOS

Ratios are classified into four categories;

Liquidity ratio measure the firms ability to meet its current obligation.

1- (current ratio = current assets/currents liability)

2-

Leverage ratio show the proportion of debt and equity in financing the firms

assets

Activity ratio reflect the firms efficiency in utilizing its assets

Profitability ratio measure overall performance and effectiveness of the firm

DATA ANALYSIS


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DEFINITION

Theprocess of evaluating datausing analytical and logical reasoning to examine

each component of the data provided. This form of analysis is just one of the many

steps that must be completed when conducting a research experiment. Data from

various sources is gathered, reviewed, and then analyzed to form some sort of finding

or conclusion. There are a variety of specific data analysis method, some of which

include data mining, text analytics, business intelligence, and data visualizations.

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OVERVIEW

Once you have developed your study idea, developed your study plan, and

executed your study successfully, the fun part begins! Now is the time to discover the

truth behind your study questions. Is treatment A better than treatment B? Does it

depend on what group of patients received the treatment (eg, young versus old)? Are

patients really better off receiving this new plate or surgical technique? Is it possible

that the old way is the best way? Is it possible that it doesnt matter what technique you

use? Finding out these answers is the motivating force behind performing a clinical

study. If you paid attention to detail in your study planning and worked hard in ensuring

the quality and validity of your data collection methods, there is no reason these

questions cannot be answered, at least in your study population.

Many investigators reach this point in the study so exhausted that they put the

data aside and forget about it for a while. Its not uncommon to leave such a

tremendous effort behind by not getting to the data analysis. Discipline in sticking to

the effort until the end is paramount for this phase of your study. Unfortunately, we

cannot just push a button and all our results, tables, and figures pop up on our computer

screen. Performing the data analysis takes a combination of expertise, discipline, and

patience in carefully handling the data in accordance with the data analysis plan you set

forth in the study protocol This goes back to assembling a complete research team.

Though resources may limit you, it pays to get an epidemiologist or biostatistician

involved in this phase of your study, if even as a consultant. Ideally, this person was

involved in helping you develop the analysis plan in the protocol. They can help you

with basic elements of the data analysis to be sure you are handling your data in an
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efficient and effective manner. Furthermore, if available to you, they can perform the

whole analysis in a complete and robust manner which will get the best out of your hard

efforts up to this point. On the other hand, some investigators enjoy analyzing their own

data and have the expertise to do it. If so, go for it! If not, you can learn a lot by

working along side a person who does the analysis for or with you.

Like we did in Part 2 of this module where we discussed study design principles

following the outline of a protocol , we will discuss data analysis and reporting

principles following the outline of a study report or manuscript for publication, Table

11.1. Keep in mind that each sponsor (if applicable) and journal may have different

requirements and therefore the outline may change slightly; however, these basic

elements should be included in any study report or manuscript for publication.

11.2 INTRODUCTION

You can borrow from your Background and Significance section of your

protocol when you write this section. It will be important to be relatively brief, likely

far fewer characters than your protocol. The key is to inform the reader as to why your

topic is important. It is not necessary to spend a tremendous amount of effort reiterating

what others have already discussed in previous studies on your topic. Try to make it

novel and to the point. The introduction should end with a clear and concise description

of your study purpose. If you had more than one purpose or a secondary purpose, list

them separately. For example, you can state something like this:

There is a tendency to change your objectives based on findings you have

become aware of since the study. Be careful with this. It is ok to report secondary

findings that you did not anticipate, but it is important that they are reported in their

context and not as primary objectives. Bottom line - list the objectives you set out to

answer. They should be consistent with the specific aims from your protocol

Statistically non-significant findings are still significant!

11.3 METHODS

This is where you tell your reader what study design you chose to use to answer

your primary and secondary objectives. It also gives you the opportunity to describe the

institution(s) in which you recruited your subjects. You get to tell your story of how

you identified and recruited subjects, the characteristics of these subjects, how manyparticipated and how many you lost to follow-up.


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11.3.1 Study design

This section is short and to the point. Here you tell the reader whether your

study was a randomized or quasi-randomized controlled trial, cohort study, case-control

study, case-series and whether you used additional methods such as matching, blockrandomization, stratified randomization, etc. ].

11.3.2 Subjects

It is very important to clearly and thoroughly describe your study populations.

Readers need to know if your results and conclusions may be generalized to their

population. Additionally, it is important to place your study in time. Technological

advances, changes in patient care procedures, and differences in reporting practices at

different times can affect the outcomes and interpretation of your study1. The following

items should be included in this section:

Explanation of inclusion and exclusion criteria.

Institutions in which you identified and recruited your patients.

Time period in which you collected your data.

For retrospective studies, give the dates during which the data were originally

collected as opposed to when you abstracted them from the study.

11.3.3 Data collection

It is important in this section to describe clearly and concisely the process by which

you identified and recruited subjects and whether they finished the study. Full

accountability of every subject should be attempted. When possible, provide a

schematic summary of the study showing the number and disposition of participants at

each stage, Figure 11.1. The schematic summary should include:

The total number of subjects approached.

The total number of subjects found eligible and ineligible.

The number of subjects who agreed to participate and signed informed consent.

The number of subjects who did not complete the study (eg, lost to follow-up,

withdrew, died).


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The number of subjects who completed the study and whose data are included

in the final analysis.

Make every attempt to describe the following subjects:

Those evaluated who did not meet the study criteria.

Those subjects who were approached but declined to participate.

Those subjects who were enrolled but were withdrawn or dropped out.

Those subjects who were enrolled but were lost to follow-up.

Thos subjects who were enrolled and completed the study.

Subjects who agree to participate may differ in important ways than those who

decline to participate. For example, they may be more likely to take risks or more

motivated to get better and comply with the treatment protocol. Patients may be

withdrawn or drop out willingly for various reasons, some of which may bias the

interpretation of the results. Subjects who are lost to follow-up may be those subjects

who are least satisfied with the results of their treatment or may be doing so well they

do not feel they need to be evaluated any longer. Either scenario could bias the results.

Studies with low follow-up rates (ie,


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Finally, describe the baseline prognostic factors and outcome measures that were

collected. If special instruments were used to define these, identify them, provide any

background info as to their validity, reliability, and responsiveness, and if possible

provide a copy of the instrument in the paper. A clear description of the instruments

content, scale, and interpretation with appropriate references should be included

whether you provide an actual copy of the instrument or not.

Figure 11.1. Example of a cohort study schematic summary.

11.3.4 Data analysis

The Uniform Requirements for Manuscripts Submitted to Biomedical Journals

summarizes the overall intent of statistical reporting: Describe statistical methods with

enough detail to enable a knowledgeable reader with access to the original data to

verify the reported results2.

The statistical comparisons you make here are the same as the ones you

specified in your protocol before any data were collected1. Therefore, this section

should restate what that plan was. Assuming you followed that plan, this section can be

a mirror image of the protocols section with some slight edits as needed. It is

understandable that the choice of specific statistical tests may depend on the quality of

the data in the end (eg, whether continuous data were normally distributed or not), so


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the specific test often cannot be stated in advance. In the end, this section should

provide a clear and concise description of how you analyzed your data so that someone

could repeat it. If you performed a randomized controlled trial, you should be clear as to

whether the statistical analysis was on the basis of intent-to-treat] . Furthermore, it is a

good idea to reiterate you power calculations so as to validate whether or not you

achieved the necessary number of patients in your study that you had planned for.

Finally, identify the statistical package or program (with its corresponding reference)

used to analyze the data. Results may very slightly from package to package due to

discrepancies in validation and updating.

11.4 RESULTS

The results section should be quick and to the point. In other words, there

should not be too much explaining or justifying the findings. This is left for the

discussion. The flow of the results section should begin with descriptive statistics of

study groups, findings with respect to measured risk factors or outcomes (analytical

statistics) and accompanying tables and figures as necessary.

11.4.1 Descriptive statistics

The presentation of descriptive data on the study population is important for thefollowing reasons:

It enables you to determine the comparability of study groups at baseline and

evaluate the likelihood of any selection bias [Using didactic] or confounding

The baseline characteristics of the study population can help in determining the

generalizability [Using, External Validity] of the results of study population to

other study populations.

This is typically the first table in your report or manuscript,

Table 11.2. Baseline data for hip fracture patients treated with a Dynamic Hip Screw (DHS) or Per

Compression Plating (PCCP)

DHS PCCP

No. or mean % or range No. or mean % or r

Age (years) 83 64-98 82 65-96

AO Classification
https://www.aofoundation.org/Structure/research/clinical-research/step-guide-clinical-research/using/Pages/using.aspxhttps://www.aofoundation.org/Structure/research/clinical-research/step-guide-clinical-research/doing/step-by-step/4-data-analysis/Pages/data-analysis.aspxhttps://www.aofoundation.org/Structure/research/clinical-research/step-guide-clinical-research/using/Pages/using.aspxhttps://www.aofoundation.org/Structure/research/clinical-research/step-guide-clinical-research/doing/step-by-step/4-data-analysis/Pages/data-analysis.aspx


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A11 stable 5 11 9 23

A12 stable 15 34 6 15

A13 stable 5 11 1 3

A22 unstable 6 14 2 5

A22 unstable 10 23 14 36

A23 unstable 3 7 7 18

From this table, we note that both groups are relatively equal with respect to

age; however, if we combine fracture classifications into stable versus unstable

fractures, we find that 44% of those treated with the DHS were unstable fracturescompared with 59% of those treated with the PCCP. This may put the PCCP group at

an unfair disadvantage if unstable fractures are more likely to give rise to a poorer

outcome. An unequal distribution between treatment groups of an independent factor

that is also associated (negatively or positively) with the outcome constitutes a potential

confounding variable . Potentially confounding variables should be dealt with in the

analytical analysis. [see example below].

11.4.2 Analytical statistics

A thorough description of the purpose of analytical studies and hypothesis

testing is outlined in the Developing the Study Plan part of this moduleThis section will

focus on reporting your results.

Your outcomes will either be categorical or continuous or a combination of

This section will discuss how to present both types of outcomes. Statistics can be as

much of an art as it is a science. Furthermore, there are myriads of ways to display

your data. Going through all these options is beyond the scope of this module; however,

we will present some important evidence-based medicine concepts ways in which

data reporting should have a significant impact on your audience and allow them to

apply your findings clinically. As some say, the p-value is overrated!.

Categorical outcomes

Often surgeons want to know the proportion of patients who experience a

certain outcome, either negative (e.g. non-union) or positive (e.g. those who have an


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excellent clinical outcome). In many studies, the authors simply report these

dichotomous outcomes as proportions for the treatment and control groups and a p-

value to tell us if the results are significant. A common way of reporting these

outcomes is presented in Table 11.3.

Table 11.3 Hypothetical outcomes comparing the LCP to the standard plate

Treatment group

LCP

(N=119)

Standard plate

(N=112)P-value*

Outcome n % n %

Union 107 90 90 80.0 0.04

Nonunion 12 10 22 80.0 0.04

Complications 12 10 11 10 0.92

*Hypothesis testing using the chi-square test.

RR is simply the proportion of patients with the outcome in the treatment group

divided by the proportion of patients with the outcome in the control group. In

this case, 0.10/0.20 = 0.50

The RRR is |1-RR| x 100, or in our case, (1-0.5) x 100 = 50%. A relative risk

reduction of 50% means that the LCP reduced the risk of non-union by 50%

compared with the control (standard plate) treatment. If the treatment increases

the risk of a bad event, we call that relative risk increase (RRI). Furthermore,

when a treatment increases the probability of a good event, the term we use is

relative benefit increase (RBI) (Table 11.4).

The RD is the absolute difference between the proportions, 0.20-0.10 = 0.10 or

10%.

The NNT represents the number of patients one would need to treat in order to

prevent a negative outcome (or allow a positive outcome, depending on which

outcome is being evaluated). The formula is 1/RD. In our example, 1/.10 = 10;

therefore, for every 10 patients treated with the LCP, one non-union can be

prevented compared with a standard plate (Table 11.5).

Table 11.4. The relationship among relative and absolulte risk reduction, risk increase and benefit


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increase

Relative

1-|T/C|

Absolute

|T-C|

Treatment reduces the risk ofbad eventvs.control Relative risk reduction

(RRR)

Absolute risk reduction

(ARR)

Treatment increases the risk ofbad eventvs.controlRelative risk increase

(RRI)

Absolute risk increase

(ARI)

Treatment increases the probability of a good

eventvs. control

Relative benefit

increase

(RBI)

Absolute benefit

increase

(ABI)

Table 11.5. Summary of the ways to report non-unions for fictional data comparing the LCP with a

standard plate.

Treatment (T) (n=30) Control (C) (n=30) RR RRR RD NNT

No. (%) No. (%) T/C 1-(T/C) C-T 1/(C-T)

3(10) 6(20) 0.50 0.50 0.10 10

As discussed in , rates can also be reported and a statistical test like the chi-square test performed which will provide a p-value. While the p-value may be

statistically significant (p


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When evaluating LCP versus a standard plate, one may want to adjust for

smoking status (a potential confounder) in this way (Table 11.6):

Table 11.6. Fracture non-union among smokers and non-smokers for fictitious data.

LCP (N=100) Standard (N=100)

n % n % PR

Smokers 11/15 (73.3) 31/42 (73.8) 0.94

Non-smokers 3/85 (3.4) 2/58 (3.3) 1.02

Total 14/100 (14.0) 33/100 (33.0) 0.42

RR = relative risk (cast/ORIF)

In this example, the proportion of patients treated with an LCP who end up with

a non-union is 14% compared with 33% receiving a standard plate; a relative risk of

0.42, which translates to a 58% reduction in risk. However, there happen to be far less

smokers in the LCP group than the cast group, and smokers have a higher non-union

rate no matter what treatment they receive, whether LCP or a standard plate (73% non-

union). When the data are stratified, one can quickly see that there really is no

difference in non-union between the LCP and standard plate groups in either smokers or

non-smokers (73% nonunion in each group among smokers, and about 3% in each

group among non-smokers). The difference is that more smokers ended up in the

standard plate group. When we adjust for smoking, the relative risk of nonunion among

those receiving an LCP is 0.99 compared with a standard plate.

CONTINUOUS OUTCOMES

Continuous outcomes are very common in orthopedic research. Examples

include operative time, blood loss, range of motion, visual analog pain scales, and

various outcome scores that often fall on a 0 to 100 point . As discussed in Part 2

(section 6.2) these outcomes are typically presented as a mean with a standard

deviation, Table 11.7. Hypothesis testing is performed using Students t-test or the

Pearsons product moment-correlation coefficient.

Table 11.7. Hypothetica Foot and Ankle Outcome Scores*.

Treatment N Mean SD Min Max P-value

LCP 119 88 17.5 41 98 P


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Standard Plate 112 76 10.2 34 91

*Scores normalized to a total possible of 100 points.

Two-sample t-test.

If there are potential confounding variables that need to be controlled for such

as age, fracture severity, smoking status, etc. you can use linear regression or analysis

of variance. These are discussed superficially in but a thorough discussion of

multivariate methods is beyond the scope of this module.

11.5 DISCUSSION

Since the results section is intended to report your finding without

interpretation, the discussion section allows you to put your findings in context.

However, the discussion section has a tendency to take on a life of its own. It is very

common for this section to become long and difficult to read. It is also common for this

section to serve as a platform for one to give their opinions with respect to the treatment

intervention being evaluated. Some go as far as to discuss public policy changes in their

discussion. There are no standard guidelines for this section which is probably why

authors take the liberty to write everything they were not able to write in the previous

three sections of the manuscript. Be careful with this approach. It is very refreshing toread a discussion that is clear and concise. If you present your methods and results in an

effective way, then the discussion allows you to interpret those results in such a way as

to allow the reader to make up his/her own mind in the end. In light of this background,

here are some guidelines to consider when writing the discussion section which will

prevent you from falling into the trap of writing too much with too little substance.

Consider addressing these issues in the order presented below:

1. Discuss the implications of the primary analyses first.

Secondary analyses should be discussed later and described as explanatory.

2. Distinguish between statistical and clinical significance.

Statistical significance relates to how likely the observed effect is due to chance

(ie, sampling variation).

Clinical significance relates to the magnitude of the observed effect.


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Lets look a little closer at these concepts. Statistical significance depends

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