6

CHAPTER
I.



7

FINANCIAL MANAGEMENT
INTRODUCTION: -

Financial management is the life of every business enterprise. A business under
taking at a given point time can be viewed as a pool of funds raised from various sources
like inventory and the source of internal financing. The funds raised from these sources
are utilized for.
1. Acquiring fixed Assets needs for the production of goods and services.
2. Inventories that facilitate production and sales accountants receivables owned by
customers.
3. Cash and marketable securities used for liquidity purpose and business
transactions.

MEANING: -
The pool of funds at a given point of time is static. But over a period it changes.
The change in the funds positions of a company is known as funds flow. In an ongoing
business enterprise, the funds flow throughout the enterprise, continually. The object of
the subject financial management is to direct the flow of these funds as per a given plan.
Thus the financial management concerns itself with the management of funds of an
enterprise.

NATURE OF FINANCIAL MANAGEMENT: -
The term financial management can be defined as the management of flow
of funds in a firm and it deals with the financial decision making of the firm. . I.e. it is
concerned with overall managerial decision making in general and with the management
of economic resources in particular.
8

Finance has emerged as a distinct area of study during second half of the
twentieth century. Initially it was a part of economics .the evolution of finance function
and the changes in its scope appeared due to two factors namely
1. The continuous growth and diversity in business
2. The gradual appearance of new financial analytical tools.
The subject of financial management is of immense interest to both
academicians and practicing managers. It is of great interest to academicians because the
subject is still developing and there are still certain areas where controversies exist for
which no unanimous solutions have been reaching as yet. Practicing managers are
interested in this subject because among the most crucial decisions of the firms are those
which relate to finance and an understanding of the theory of financial management
provides them with conceptual and analytical insights to make those decisions skillfully.
SCOPE OF FINANCIAL MANAGEMENT

Initially the finance manager function was limited to raising funds as and when the
need arise. Once the funds are procured his function was over. However, over a period of
time the scope of his function has tremendously widened. His presence is required at
every moment whenever any decision having involvement of funds is to be taken. Now a
days, the financial manager, is required to look in to the financial implications of any
decision in the firm. Since every activity in a business organizations, be it purchase,
production, marketing or capital expenditures has a financial implications, the financial
function is inter linked with all other areas. In particular the finance manager has to focus
his attention on
1. Procuring the required quantum of funds as and when necessary, at the lowest cost
2. Investing these funds in various assets in the most profitable way, and
9

3. Distributing returns to shareholders in order to satisfy their expectations from the
firm.
These three functions of the finance manager encompasses most the financial
events in any firm, thus, the functions of finance manager may be summarized to include
the following
1. Overall financial planning and control
2. Raising funds from different sources
3. Selection of fixed assets
4. Management of working capital, and
5. Any other individual financial event.
The financial manager is usually faced with following distinct scenarios.
What should be the size of firm and how fast should it grow?
What are the various types of assets to be acquired?
What should be the pattern of raising funds from various sources?

Depending up on the nature and size of the firm the financial manager is
required to perform all or some of these functions from time to time. While performing
these functions he is required to take different decisions, which can be broadly classified
in to three groups. Those
1. Relating to resource allocation. (Investment decision)
2. Those covering the financing of these investments. (The financing or capital
structure decision)
3. And those determining how much cash be taken out and how much re-
invested. (The dividend decision)

10

Investment Decisions:

This comprises decisions relating to investments in both capital and current assets. The
finance manager has to evaluate different capital investment proposals and select the best
keeping in view the overall objective of the enterprise.
The investment in current assets will depend on the credit and inventory
policies pursued by the enterprise. The credit policy is determined keeping in view the
need of growth in sales and the availability of finance. Similarly, the inventory policy
will be set up taking in to account the requirements of production, the market trend to the
price of raw materials and the availability of funds.
Financing Decision: -

Financing decision is the second important function to be performed by the
financial manager. Broadly, he must decide when, where and how to acquire funds to
meet the firms investment needs. The financial manager is concerned with determining
the best financial mix on capital structure for his firm. Once the financial manager is able
to determine the best combination of debt and equity he must raise the appropriate
amount through best available sources.
Dividend Decision: -

Dividend decision is the third major financial decision. The financial manager
must decide whether the firm should distribute all profits, or retain them or distribute a
portion and retain the balance. The optimum dividend policy is one, which maximizes the
market value of the firms shares. Thus, if shareholders are not in different to firms
dividend policy, the financial manager must determine the optimum dividend payout ratio
11

OBJECTIVES OF FINANCIAL MANAGEMENT

Efficient financial management requires the existence of some objectives or goals
because judgment as to whether or not a financial decision is efficient must be made in
the light of some objective. Although various objectives are possible we assume two
objectives of financial management.
These are:
1. Profit maximization:

It is traditionally been argued that the objective of a company is to earn profit;
hence the objective of financial management is also profit maximization. This implies
that the finance manager has to make his decisions in a manner so that the profits of the
concern are maximized. Each alternative, therefore, is to be seen as to whether or not it
gives maximum profit.

However, profit maximization cannot be the sole objective of company. It is at best a
limited objective. If profit is given undue importance, a number of problems can arise.
Some these have been discussed below:

1. The term profit is vague. It does not clarify what exactly it mean. It conveys
different meaning to different people. For example, profit may be in short term or
long term period, it may be total profit are rate of profit etc.
2. Profit maximization has to be attempted with a realization of risks involved.
There is a direct relation between risk and profit. Many risky propositions yield
high profit. Higher the risk, higher is the possibility of profits. If profit
maximization is the only goal, then risk factor is altogether ignored. This implies
that finance manager will accept highly risky proposals also, if they give high
12

profits. In practice, however, risk is very important consideration and has to be
balanced with the profit objective.
3. Profit maximization, as an objective does not take in to account the time pattern
of returns. Proposal A may give a higher amount of profits as compared to
proposal B. yet if the returns began to flow say 09 years later, proposal B may be
preferred which may have lower overall profits but the returns flow is more early
and quick.
4. Profit maximization, as an objective is too narrow. It fails to take into account the
social considerations as also the obligations to various interests of workers,
consumers, society, as well as ethical trade practices. if these factors are ignored,
a company cannot survive for long. Profit maximization at the cost of social and
moral obligations is a shortsighted policy.
2. Wealth maximization:

A company, which has profit maximization as its objective, may adopt policies yielding
exorbitant profits in the short run which are unhealthy for the growth, survival and
overall interest of the business. A company may not undertake planned and prescribed
shutdowns of the plan for maintenance, etc. for simply to maximize its profit in the short
run. If this reduces the life of a plant say by 5 years, the company is ignoring
maintenance only at its own peril although it may have greater profits in the short run.
Hence, it is commonly agreed that the objective of a firm should be to maximize its value
or wealth.

How do we measure the value/wealth of a firm? According to van Horne, value
of a firm is represented by the market price of the companys common stock. the
market price of a firms stock represents the focal judgement of all market participants as
to what the value of the particular firm is. It takes in to account present and prospective
future earnings per share, the timing and risk of these earning, the dividend policy of the
13

firm and many other factors that bear up on the market price of the stock. The market
price serves as a performance index or report card of the firms progress. It indicates how
well management is doing on behalf of stockholders.

There is no doubt that prices in the share market, at a given point of time, are the
result of a curious mixture of many factors like general economic outlook, particular
outlook of the companies under consideration, technical factors and even mass
psychology. However taken on a long-term basis, the market prices of a companys
shares do reflect the value, which the various parties put on a company. Normally, this
value is a function of two factors:

(a) The likely rate of earnings per share of the company; and

(b) The capitalization rate.

The likely rate of earnings per share (EPS) depends up on the assessment as to
how a profitability of a company is going to operate in the future or what it is likely to
earn against each of its ordinary shares. Thus, if a company is likely to earn annually Rs 5
on its share of rs09, its share will have a higher market value than a company which earns
Rs 4 for its Rs 09 share each year, of course, presuming that other factors remaining
same. A likely earnings per share is an important factor considered by the shareholders in
valuing a company.

The capitalization rate also reflects the linking of the various investors of the
company. If a company earns a high rate of earnings per share through risky operations or
risky financing pattern, the investors will not look up on its share with favor. To that
extent, the market value of the shares of such a company will be low. An easy way to
determine the capitalization rate is to start with fixed deposit interest rates of banks.
Suppose an investor gets a return of Rs 09 percent from a bank on a one year fixed
14

deposit. However, if he has to invest in shares, he may want a higher return in view of the
risks involved. How much higher would his expectation be, would depend upon the risks
involved in the particular share which in turn depends on companys policies, past record,
the type of business and the confidence which the management can command. Thus,
capitalization rate is the cumulative result of the assessment of the various shareholders
regarding the risky ventures; the investors will put in their money if they get higher return
as compared to that from a low risk rate.

The market value of share thus a function of the earnings per share and the
capitalization rate.

Since the profit maximization criteria cannot be applied in real world situations
because of its technical limitation the finance manager has to ensure that his decisions are
such that the market value of the shares of the company is maximum in the long run. This
implies that the financial policy has to be such that it optimizes the earnings per share,
keeping in view the risk and other factors in mind. Wealth maximization is, therefore, a
better objective for a commercial undertaking since it represents both return and risk.

There is now a growing emphasis on social and other obligations of an enterprise.
It cannot be denied that in the case of undertakings, especially those in the public sector,
the question of maximization of wealth has to be seen in the contest of social and other
obligations of an enterprise.

It must be clearly understood that financial decision-making is related to the
objective of the business. The finance manager has to ensure that there is a positive
impact of each financial decision on the furtherance of the business objectives. One of the
main objective of an undertaking may be to progressively build up the capability to
undertake the design and development of air-craft engines, helicopters, etc. a finance
15

manager in such an undertaking will allocate funds in a manner so that this objective is
fulfilled although such an allocation may not necessarily maximize wealth.
The Changing Scenario of Financial Management In India: -

Modern financial management has come a long way from the traditional corporate
finance. The finance manager is working in a challenging environment, which changes
continuously. As the economy is opening up and global resources are being tapped, the
opportunities available to finance managers virtually have no limits.
At the same time he must understand the risks entailing all his decisions
very well. Financial management is passing through an era of experimentation and
excitements as a large part of the finance activities carried out today were unheard a few
years ago. A few instances of this can be mentioned as: --
1. Interest rates have been freed from regulation. Treasury operations therefore have
to be more sophisticated as the interest rates are fluctuating. Minimum cost of
capital necessitates anticipating interest movements.
2. The rupee has become fully convertible on current account.
3. Optimum debt equity mix is possible. The firms have to take the advantage of the
financial leverage to increase the shareholders wealth. However using financial
leverage necessarily makes a business vulnerable to financial risk. Finding a
correct tradeoff between the risk and the improved return to shareholders is a
challenging task for a financial manager.
4. With free pricing of issues, the optimum price determination of new issues is a
daunting task as over pricing results in under subscription and loss of investor
confidence. While under pricing leads to unwarranted increase in number of shares
there by reducing the earnings per share.
16

5. Maintaining share price is crucial. In the liberalized scenario the capital market is
the important avenue of funds for business. The dividend and bonus polices
framed by finance managers has a direct bearing on share prices.
6. Ensuring management control is vital especially in the light of foreign
participation in the equity, which is backed by huge resources making the firm an
easy takeover target. Existing management may lose control in the eventuality of
being unable to take up the share entitlements. Financial strategies to prevent this
are vital to the present management.
Purpose of Financial Statements: -

Financial statement analysis is the meaningful interpretation of financial statements for
parties demanding financial information. It is not necessary for the proprietors alone.
Following are examples of the purposes of financial statement analysis
The government may be interested in knowing the comparative energy
consumption of some private sector and public sector companies.
A nationalized bank may be keen to know the possible debt coverage out of
profit at the time of lending.
Prospective investors may be desirous to know the actual and forecasted yield
date. Customers want to know the business viability before entering in to a long-term
contract.

This list is not exhaustive for obvious reasons. In general, the purpose of
financial statement analysis is to aid decision making by the users of
17

Steps To Be Taken For Financial Statement Analysis Are: -

Identifying the users purpose
Identification of the data sources. (Which part of the annual report or other
information is required to be analyzed to suit the purpose)
Selecting the technique to be used for such analysis.
Thus financial statement analysis is purposive and not necessarily
comprehensive to cover all possible uses. Since it is purposive, analysis may be restricted
to any particular portion of the available financial statement, taking care to ensure
objectivity and unbiased ness.

Financial statement analysis covers study of relationships with a set of financial
statements at a point of time and with trends in these relations over time. This means that
it may be a study of some comparable firms at a particular time, say a financial year
2005-2005, or it may be a study of particular firm over a period of time says 1994-2005
or it may cover both.








18

OBJECTIVES OF THE STUDY

This study the identify whether the Working capital is efficiently utilized or not.
To know the overall operational efficiently and performance of the Bharat Sanchar
Nigam Limited.
To find out the extend of the need and adequacy of the Working capital of the
firm.
This study will help to know whether the current assets and current liabilities are
properly managed.
To see the liquidity position of the company.
To see the components of Working capital are properly managed.
To determined the requirement of Working capital.





19

NEED FOR THE STUDY

During the post-liberalization are the worlds assail as Economic Indias scenario has
shown a great progress and is growing with increased phase this has necessitated the
complex and efficient ways of management. Thinking practically the main concern is of
the influence of external environment on business, providing a modern dimension to
business management. They find solution for many problems in the aspect of financial
analysis. Financial analysis establishes inter relationship that exists among. The different
items appeared in the financial statements, which are effectively helpful to describe the
companys statues, control of sound liquidity and leverage position. The company should
monitor key indication of operating performance and wherever possible must compare,
itself with the competitors in the industry.

A systematic financial analysis of accounting figure helps to analyses the probable
caused relationship among different items after analyzing and scrutinizing the past results
which helps the management to prepare budgets, to formulate companys policy and to
prepare future plan of action. It focuses on companys relative performance in sales
growth margins and assets management. It is a simple tool where by a company can make
its internal audit to evaluate internal strengths and weaknesses of the integral part of the
strategic planning.





20

RESEARCH METHODOLOGY

The present study covers from its inception to assess and analyze the elements of
working capital analysis in Bharat Sanchar Nigam Limited; the study is based on the
data collected from the primary and secondary sources.

Primary Data:

It was collected on the basis of personal observation and interview method. I
gathered data from Bharat Sanchar Nigam Limited and Finance Manager &
Accountant who explain about the accounting system, internal audit system and
budgetary system in Bharat Sanchar Nigam Limited.

Secondary Data:

The secondary Data was collected from various published reports such as
company manuals, yearbooks various published articles and hand books.









21

LIMITATIONS OF THE STUDY

The study has been conducted is a systematic and comprehensive way so as
to make the project work and enviable one. However the topic under my study may
not be free firm limitations due to the factors

The major limitation of the project under study was time. Since it was to be
completed within a short period of time. This is not sufficient to undertaking
comprehensive study.

Non-availability of completed information. Limitation in information about
cash sales and credit sales out of total sales is not available. One more limitation is
depreciation on assets individually is not available.

In the height of the above, it is not possible for an analysis to calculate the
exact working capital ratios.

The study covers a period of five years form 2005-2009.The information is
mostly depends upon the secondary data As it is not possible to cover all the
supervisors, so the student trainee selected the supervisors of working capital analysis.
Time constraint is another limitation for the study because the project trainee has to
study the whole work within 2 months. A study of risk coverage could not make as no
records are available in organization to the student trainee.








22




CHAPTER
II. INDUSTRY PROFILE










23

INDUSTRY PROFILE

Background:-

The Indian Telecommunications network with 203 million connections is the third
Largest in the world and the second largest among the emerging economies of Asia.
Today, it is the fastest growing market in the world. The telecommunication sector
Continued to register significant success during the year and has emerged as one of the
key sectors responsible for Indias resurgent Indias economic growth.
Telecom sector accounts for 1 percent of Indias GDP. Likely to double in 2-
3 years.
Telecom services contribute 30 percent to Indias total service tax revenue
The Indian telecom sector gives direct employment to more than 4,00,000
People, compared to about 6,00,000 people in China.
Not just the enabler of software, BPO and ITeS companies, it is also the
Lifeline of a fast growing E-commerce space.
State-of-the-art telecom infrastructure has led to the rise of cities like Mysore,
Mangalore, Jaipur, Ahmadabad, Kochi on the software services map.
This has helped spread the benefits of a booming Indian economy to beyond
metros and large cities, and wealth creation is happening in tier-2 cities.

Growth:-

The sector, which was growing in the range of 20 to 25 per cent up to the year 2002-03,
has moved to a higher growth path of an average rate of 40-45 per cent during the last
two years.

24


This rapid growth has been possible due to various proactive and positive decisions of
the Government and contribution of both by the public and the private sector. The
rapid strides in the telecom sector have been facilitated by liberal policies of the
Government that provide easy market access for telecom equipment and a fair regulatory
framework for offering telecom services to the Indian consumers at affordable prices.
Teldensity:-

The telecom sector has shown robust growth during the past few years. From a
teledensity of mere 0.5 per cent in the year 1989, it has grown to double digit in the
year 2005.
15
17
18
22 22
24.7
25.2
21.9
24.7
27.7
24
21.2
40
29
42.4
0
5
10
15
20
25
30
35
40
45
Indian Telecom Subscriber Annual Growth Rate
25



Buoyed by the better-than-expected teledensity in 2005 (11.4 per cent against 8.6 percent
in 2004) due to the mobile boom in India, Department of Telecommunications
(Dot) has revised the upwards the target of 22 per cent tele density by 2007.
Internet Services:-

Internet services were launched in India on August 15, 1995. In November 1998 the
Government opened up the sector to private operators. A liberal licensing regime was put
in place to increase Internet penetration across the country. Though a large number of
Internet Service Providers (ISPs) has been licensed (389) to operate Internet service
Today, just the top 20 ISPs service 98 per cent of subscribers.
Similarly, while internet telephony is permitted to 128 ISPs, only 32 actually provide the
service. The slow growth of internet and broadband will make the target of 18 million
Internet subscribers and 9 million broadband connections by 2007 tough to achieve.
The growth of IP telephony or grey market is also a serious concern. Government
loses
0.5 0.6
0.8
1.1
1.6
2.3
3.6
5.1
11.4
22
0
5
10
15
20
25
89-91 91-93 93-95 95-97 97-99 99-01 01-003 03-005 05-007 07-009
India's Growing Teledensity
26

Revenue, while unlicensed operation by certain operators violates the law and depletes
Licensed operators market share.
New services like IP-TV and IP-Telephony are becoming popular with the demand likely
to increase in coming years. The scope of services under existing ISP license conditions
are unclear.



Internet subscribers stood at 8.6 million for the quarter ending 31st
December 2006,
registering an increase of 6.00 per cent. The growth trend during the quarter is positive
as compared with last quarter where it was 5.02 per cent. The total Internet subscribers
increased from 6.7 million at the end of December 2005 to 8.6 million at the end of
December 2006 registering a growth of 28.03 per cent.
Bharat Sanchar Nigam Ltd (BSNL) has retained its top position and reported a
subscriber base of 38.12 Lakhs Internet subscribers against 3.55 million during the last
quarter. Mahanagar Telephone Nigam Limited (MTNL) has retained second position
with a subscribers base of 1.66 million. Sify Limited is third with a base of 8,06,000
subscriber.
45%
19%
9%
7%
6%
5%
2%
1%
6%
Internet Subscriber Base In Per cent
BSNL
MTNL
Sify
Bharti Airtel
Reliance
VSNL
You Telecom
Hath Way Cable & Data
Others
27

Major Players:-

There are three types of players in telecom services:
State owned companies (BSNL and MTNL)
Private Indian owned companies (Reliance Infocomm, Tata Teleservices,)
Foreign invested companies (Hutchison-Essar, Bharti Tele-Ventures, Escotel, Idea
Cellular, BPL Mobile, Spice Communications)
















28




CHAPTER
III. COMPANY PROFILE





29

COMPANY PROFILE

Bharat Sanchar Nigam Ltd. formed in October, 2000, is Worlds 7th largest
Telecommunications Company providing comprehensive range of telecom services in
India: Wireline, CDMA mobile, GSM Mobile, Internet, Broadband, Carrier service,
MPLS-VPN, VSAT, VoIP services, IN Services etc. Presently it is one of the largest &
leading public sector unit in India.

BSNL has installed Quality Telecom Network in the country and now focusing
on improving it, expanding the network, introducing new telecom services with ICT
applications in villages and wining customers confidence. Today, it has about 47.3
million line basic telephone capacity, 4 million WLL capacity, 49.76 Million GSM
Capacity, more than 37382 fixed exchanges, 46565 BTS, 3895 Node B ( 3G BTS), 287
Satellite Stations, 480196 Rkm of OFC Cable, 63730 Rkm of Microwave Network
connecting 602 Districts, 7330 cities/towns and 5.5 Lakhs villages.

BSNL is the only service provider, making focused efforts and planned
initiatives to bridge the Rural-Urban Digital Divide ICT sector. In fact there is no telecom
operator in the country to beat its reach with its wide network giving services in every
nook & corner of country and operates across India except Delhi & Mumbai. Whether it
is inaccessible areas of Siachen glacier and North-eastern region of the country. BSNL
serves its customers with its wide bouquet of telecom services.

BSNL is numero uno operator of India in all services in its license area. The
company offers vide ranging & most transparent tariff schemes designed to suite every
customer.
BSNL cellular service, Cell One, has more than 52.09 million cellular customers,
garnering 16.96 percent of all mobile users in its area of operation as its subscribers. In
basic services, BSNL is miles ahead of its rivals, with 35.1 million Basic Phone
30

subscribers i.e. 85 per cent share of the subscriber base and 92 percent share in revenue
terms.

BSNL has more than 2.5 million WLL subscribers and 2.5 million Internet
Customers who access Internet through various modes viz. Dial-up, Leased Line, DIAS,
Account Less Internet (CLI). BSNL has been adjudged as the NUMBER ONE ISP in the
country.

BSNL has set up a world class multi-gigabit, multi-protocol convergent IP
infrastructure that provides convergent services like voice, data and video through the
same Backbone and Broadband Access Network. At present there are 0.6 million
DataOne broadband customers.
The company has vast experience in Planning, Installation, network integration and
Maintenance of Switching &Transmission Networks and also has a world class ISO 9000
certified Telecom Training Institute.

Scaling new heights of success, the present turnover of BSNL is more than
Rs.351,820 million (US $ 8 billion) with net profit to the tune of Rs.99,390 million (US $
2.26 billion) for last financial year. The infrastructure asset on telephone alone is worth
about Rs.630, 000 million (US $ 14.37 billion).

BSNL plans to expand its customer base from present 47 million lines to 125
million lines by December 2014 and infrastructure investment plan to the tune of Rs. 733
crores(US$ 16.67 million) in the next three years.

The turnover, nationwide coverage, reach, comprehensive range of telecom services and
the desire to excel has made BSNL the No. 1 Telecom Company of India.


31

Interesting Facts:-

There are 2 million BSNL mobile connections in rural India (a record, no other
connection is as famous as bsnl in rural areas).

BSNL supplies phone lines to all other network such as Airtel, Vodafone etc.
BSNL is the only network which offers broadband connections.
More than 50% of the international calls coming to India,
Use Reliance network.
Largest pan India coverage-over 11000 towns & 3 lakh villages.
Indias No. 1 wireless service provider with more than 50 Million customers.
An incredible speed of 2mbps is only offered by BSNL.
The only Mobile service available throughout the country including Jammu and
Kashmir and North Eastern states like Arunachal Pradesh, Nagaland, Mizoram etc.

ASPIRATION:-
Be the leading Telecom Service Provider in India with global presence.
Create a customer focused organisation with excellence in sales, marketting and
customer care.
Leverage technology to provide affordable and innovative products/services across
customer segments
Provide a conducive work environment with strong focus on performance
Establish efficient business processes enabled by IT
Nature of the business carried:-


BSNL is basically a telecom(land line) service provider. But now a days apart from these
services, the operations of the company has been diversified into several arenas such as
3G,customercare,call centres, mobile services,etc.
32

Vision of BSNL:-

To become the largest telecom Service Provider in Asia.

Mission of BSNL:-

To provide world class State-of-art technology telecom services to its
customers
on demand at competitive prices.
To Provide world class telecom infrastructure in its area of operation and to
Contribute to the growth of the country's economy.

Quality Policy:-
BSNL Telecom Factory Mumbai is committed to continually improve through excellence
and customer satisfaction with employees participation.

Products / Services Profile:-

1. Products of BSNL:-

BSNL LANDLINE

BSNL MOBILE
POSTPAID
PREPAID
UNIFIED MESSAGING
GPRS/WAP/MMS
DEMOs
TARIFF

BSNL WLL

33

INTERNET SERVICES
NETWORK
BROADBAND
WI- F I
CO-LOCATION SERVICE
BSNL WEB HOSTING
DIAL UP INTERNET
SMS& BULK SMS

BSNL BROADBAND

BSNL MANAGED NETWORK SERVICES

BSNL MPLS-VPN

ISDN

LEASED LINE

INTELLIGENT NETWORK
FREE PHONE SERVICE
PREMIUM RATE SERVICE
INDIA TELEPHONE CARD
VIRTUAL PRIVATE NETWORK (VPN)
VOICE VPN
UNIVERSAL NUMBER
UNIVERSAL PERSONAL NUMBER
TELE VOTING

VIDEO CONFERENCING

AUDIO CONFERENCING

TELEX/ TELEGRAPH

EPABX
EPABX
FREE EPABX
CENTREX
34


HVNET

INMARSAT

TRANSPONDER

Services of BSNL:-
When it comes to connecting the four corners of the nation, and much beyond, one
solitary name lies embedded at the pinnacle - BSNL. A company that has gone past the
number games and the quest to attain the position of a leader . It is working round the
clock to take India into the future by providing world class telecom services for people
of India. BSNL is India's no. 1 Telecom Service provider and most trusted Telecom
brand of the Nation.
Driven by the very best of telecom technology from chosen global leaders, it connects
each inch of the nation to the infinite corners of the globe, to enable you to step into
tomorrow.
Here is an overview of the World Class services offered by the BSNL:-
Basic Telephone Services:-
The Plain old, Countrywide telephone Service through 32,000 electronic exchanges.
Digitalized Public Switched Telephone Network (PSTN) with a host of Phone Plus value
additions.
BSNL launched DataOne broadband service in January 2005 which shall be extended
to 198 cities very shortly. The service is being provided on existing copper infrastructure
on ADSL2 technology. The minimum speed offered to the customer is 256 Kbps at Rs.
250/- per month only. Subsequently, other services such as VPN, Multicasting, Video
35

Conferencing, Video-on-Demand, Broadcast application etc will be added.

Intelligent Network:-
Intelligent Network Service (In Service) offers value-added services, such as:
Free Phone Service (FPH)
India Telephone Card (Prepaid card)
Account Card Calling (ACC)
Virtual Private Network (VPN)
Tele-voting
Premium Rae Service (PRM)
Universal Access Number (UAN) and more.
I-Net:-
India s x.25 based packet Switched Public Data Network is operational in 104 cities of
the country. It offers x.25 x.28 leased, x.28 Dial up (PSTN) Connection) and frame
relay services.
Leased Lines &Datacom:-
BSNL provides leased lines for voice and data communication for various application on point to
point basis. It offers a choice of high, medium and low speed leased data circuits as well as dial-
up lines. Bandwidth is available on demand in most cities. Managed Leased Line Network
(MLLN) offers flexibility of providing circuits with speeds of nx64 kbps upto 2mbps, useful for
Internet leased lines and International Principle Leased Circuits (IPLCs).

Cellular Mobile Service :-

36

Wireless in Local Loop:-
This is a communication system that connects customers to the Public Switched
Telephone Network (PSTN) using radio frequency signals as a substitute for
conventional wires for all or part of the connection between the subscribers and the
telephone exchange.

Countrywide WLL is being offered in areas that are non-feasible for the normal
network.

Helping relieve congestion of connections in the normal cable/wire based network in
urban areas.

Connecting the remote and scattered rural areas.

Limited mobility without any air-time charge.

Infrastructure facilities:-

Our Corporate Office, R&D and Factory are situated at the heart of the Trivandrum city.
Our infrastructure is spread across 6000 SQ FEET with Four Building. The main office
constitutes of the Accounts, Administration, Marketing and Directors offices. There are
separate buildings for R&D centre, that houses the Software and Quality departments,
Production building where the entire assemble is done, and a another separate building
for the Customer Support departments. Our advanced infrastructural setup gives us high
production capacity of more than 5000 machines per month.




37

Achievement and Award of BSNL:-

BSNL National Awards 2006 distribution ceremony was held on the occasion of World
Telecom Day on 17th May 2006 at New Delhi.
Awards were given by Hon'ble Minister of State for Communications & IT Dr.Shakeel
Ahmed. Also present on the occasion were Secretary DoT Dr. J.S. Sarma, CMD BSNL
Sh. A.K. Sinha, Director Operations BSNL Sh. J.R. Gupta and other dignitaries.
Awards such as Bharat Sanchar Doot, AtiVishist Sanchar SevaPadak, Best Maintained
Telecom System, Best Improved Telecom System and, Telegraph award were given on
this occasion.



38

KEY PERSONS

DESIGNATION NAME PHOTOGRAPH

Chairman & managing director

Mr.RakeshKumar
upadhyay


Dir. Consumer Fixed Access(CFA)

Mr. Rajesh Wadhwa


Dir Consumer Mobility & Enterprise
(CM & E)

Mr. R. K. Agarwal


Director(HR)

Mr. A.K.Garg


Director(Enterprise)

Mr. A. N. Rai


Govt.Director

Mr. S. R. Rao

Govt.Director
Mr. Maruthi P.Tangirala


Director

Mr. Ashish Guha



39

BSNL AP CIRCLE STRUCTURE
The AP Circle of BSNL is headed by a CGM. Under him there are PGMs and GMs .
The AP Circle is divided in to 22 SSAs .
Diagrammatically we can represent in the following manner:






















CGM, AP Circle
PGM, HD
PGM(O), CO
GM (P)
GM(S)
GM(N)
GM(W)
GM(BD) CO
GM(P) CO
GM(NC) CO
GM(MKTG)
CO
GMTD,ADB
GMTD,ATP
GMTD,CTR
GMTD,CDP
GMTD,MDK
GMTD,NGD
GMTD,NL
GMTD,NZB
GM (F)
PCE (ELEC)
CE (CIVIL)
CHIEF ATCHT
DGM (VIG)
40
























ADB-Adilabad
ATP-Ananthapur
MBN-Mahabubnagar
MDK-Medak
GM(C )
GM(F)
GM(TT) CO
GM CELLONE
(OP)
GM CELLONE
(MKTG)
GMTD,EG
GMTD,GTR
GMTD,KAA
GMTD,KHM
GMTD,KRI
GMTD,KNL
GMTD,MBN
GMTD,PKM
GMTD,SKL
GMTD,WG
GMTD,VZM
GMTD,VM
41

CTR-Chittoor
CDP-Cuddapah
EG-East Godavari
GTR-Guntur
HD-Hyderabad
KAA-Karimnagar
KHM-Khammam
KRI-Krishna
KNL-Kurnool
NGD-Nalgonda
NL-Nellore
NZB-Nizamabad
PKM-Prakasham
SKL-Srikakulam
VM-Vishakhapatnam
VZM-Vizianagaram
WL-Warangal
WG-West Godavari


KEY PERSONS (AT AP CIRCLE)
DESIGNATION NAME (Shri/Smt)
CGM
PGM Rajeev Agrawal
AGM (Vig.) K.Gangajala Rao
GM (HR/MIS) A.Ganapati Ram
DGM (Admn/HR) G.Raja Rammohan
AGM(A) I.V.Krishna Rao
GM (Central & West) B.Jagadesh Kumar
GM (NW P) CFA D S. Narendra
GM (South) CFA P.V.Satyanarayana
42

GM PV.Muralidhar
GM (North) CFA K.Manohar
GM (CM) C N. Rao
GM (Fin) V. Srinivasulu
GM MA.Siddiqui
GM NWP CFA DS. Narendra
DGM (Plg & MM) N.Sujatha
DGM (TP) C.Ramachandran
DGM (PP) N.Sujatha
AGM (TP) Brahma Reddy
GM (South) P.V.Satyanarayana
AM (CHMR) V.Sridhar
AM (GWD) M.Chandrasekhar
DGM NWO(LGP+AR) RVSS.Rama Anjaneyulu
AM (Lingampally) DR.Rajeswari
GM-North K.Manohar
AM (SD) U.Srinivas
43

DGM (Tirumalagiri) G.Nagewsara Rao
GM-Mktg C N .Rao
DGM (OP) K.Ramesh
AGM (Op.) G. Rama Krishna
AGM (CS) M.Venkateswara Rao
AGM (PR) J.V.Viswanath
DGM (Mktg) K.Sathya Murthy
GM(Fin) V. Srinivasulu
DGM (TR-I) GTVS.Krishnamacharyulu


44

BSNL SSA LEVEL STRUCTURE (Rajahmundry)

The basic accounting unit in BSNL is SSA. as of now most of these SSAs are headed by
an officer of telecom engineering service in the rank of PGM/GM. In addition to the other
engineering officers he is supported by a finance officer of the rank of GM/DGM finance
as the case may be who is designated as IFA.
Diagrammatically we can represent in the following manner:
45






























GM
CAO(PLG)

CAO(TR-
KKD)
CAO(Do
t soft )
IFA ( At a
level of
DGM)
CAO(TR-
Rmy)
CAO(Finance)
AO(PLG)

AO(TR-I)
AO(TR-
RURAL)





AO(DOT
SOFT)
AO(OPC)
AO(TR-I)
AO(TR-II)
AO(TR-III)

AO(Cash)
AO(Pay)
AO(TA& D)
46












JAO(PLG)
JAO (ASSETS)

JAO(TR)
JAO(TR-R)
JAO(OPC)


JAO(DOT
SOFT)
JAO(Task
force)
JAO(OPC)-I
JAO(OPC)-II

JAO(TR-I)
JAO(TR-II)
JAO(TR-III)

JAO(TA& CASH)
JAO(Pay-I)
JAO(Pay-II)
JAO(Claims)

47


KEY PERSONS (AT RAJAHMUNDRY SSA)
DESIGNATION NAME OF THE OFFICER
GENERAL MANAGER SRI.G.RAGHAVENDRA RAO
IFA AT DGM LEVEL SRI G.V.RAMAKRISHNA
CAO PLANNING SRI K.M.MANILAL
CAO FINANCE SRI.B.K.VENKATESWARULU
CAO TR- RAJAHMUNDRY SRI K.M. MANI LAL
CAO DOT SOFT SRI.ACHARYULU
CAO TR- KAKINADA SRI.BHAGEERADHA RAO
AO(PLANNING ) SRI T.NAGA RAJU
AO(CASH) SMT. GIRIJA
AO ( CASH RECEIPTS) SRI. Y. VENKATESWARA RAO
AO(PAY ) SRI K.B.KRISHNA
AO(TA & CLAIMS ) SRI P.B.G.TILAK
AO(DOT SOFT) SRI RAJU
AO(OPC ) SRI.G.V.S.R.K.MURTHY
AO(TR-I ) SRI ASHRAFF
AO(TR-II ) SRI M.SATYANARAYANA
AO(TR-III ) SMT.N.V.B. SRIDEVI
AO(TR-I )KAKINADA SRI.SVSV.PRASAD
48

AO(TR-II )KAKINADA SRI A. LAXMINARAYANA
AO(OPC ) KAKINADA SRI D ACHA RAO
JAO(ASSETS ) SRI B.AJAY BABU
JAO(PLANNING) SRI G.A.K. PRASAD
JAO(CASH ) SMT K.MADHAVI
JAO(CASH RECEIPTS) SRI. E.V.RAMANA MURTHY
JAO(PAY-I ) SRI K.V.JAYARAM CHANDRUDU
JAO(PAY-II ) SRI T.S. SRINIVASA RAO
JAO(CLAIMS ) SRI.S.RADHA KRISHNA
JAO(TR-I ) SMT.G.RATNAVATHI
JAO(TR-II ) SRI B.SUNDAR RAO
JAO(TR-III ) SRI JAGAN
JAO(TR-I )KAKINADA SRI.K.SATYANARAYANA
JAO(TR-II ) KAKINADA SRI.V.V.S.NAGESWARA RAO
JAO(DOT SOFT ) SRI M.SRINIVASA RAO
JAO(TASK FORCE ) SRI N.B.G.S.PRASAD
JAO(OPC-I ) SRI D.RAMAKRISHNA
JAO(OPC-II ) SRI.V.V.R.SATYANARAYANA
JAO (OPC-III) SRI K.S.N.MURTHY


49

SCOPE OF WORK
1. SERVICE:

The bidder is required to provide light commercial vehicles fully confirming to
RTA/RTO Regulation along with fuel and with licensed drivers with working mobile
telephone etc and carry out periodical maintenance and execute the work through their
supervisor on hiring basis for running within within the jurisdiction of Andhra Pradesh.
The essence of the contract is to provide service to senior level executives for official
visits and conveyance from home to office and back.
2. PERIOD OF CONTRACT:

Under normal circumstances the contract shall be valid for a period of one year from the
date of issue of work order. However contract may be extended unilaterally by bsnl for a
further period up to one year on the same rate, terms & conditions.
3. QUANTITY:

Estimated numbers of vehicles to be hired are 5 vehicles shall be hired from the
successful bidder. However it should be clearly noted that the requirements may increase
or decrease from time to time and BSNL shall place the order only as per the actual
requirement.
4. Duty hrs:

The vehicles are normally required for ten hours per day an all days of month. However
actual duty hours shall be specified by actual users of vehicle.
50



5. REPORTING PLACE:

Any place within the jurisdiction of Andhra Pradesh. Actual place of reporting shall be
specified by transport in charge / users of vehicles.
6. COUNTING OF DISTANCE:

From garage to garage but chargeable distance in this respect shall not be more than 5
kms.in each way.
7. ACCURACY OF METERS:

The meter reading should tally with the actual distance of run at any instant and
authorized officer shall have full power to get the meter calibrated or check up the meter
for its correctness at bidders cost at any time during the currency of contract and in the
event of any error/fault in the meter being noticed , the bill for the journey under taken
(including those taken earlier) would be adjusted, besides any other penal action as
decided by bsnl, which may even lead to termination of contract.






51

PREPARATION OF TERMS & CONDITIONS:

Eligibility conditions:

1. The vendor should have current experience of minimum 5 years. they should have
good track record with respect to the transport field.
2. Vehicle should not be older than 2 years as on the date of hiring. All the
documents pertaining to the vehicle should be made available to the bsnl whenever
is required.
3. The vendor should have a capacity of operating not less than 20 vehicles of the
same class and kind in the same locality.











52




CHAPTER
IV. THEORETICAL FRAME WORK






53


(a)Functional Areas:-


FINANCE DEPARTMENT:-

Bharath Sanchar Nigam Limitted , the largest public sector undertaking of the nation, is
certainly on a financial ground thats sound. The corporation has a networth of Rs.78757
crores (US $ 17.71 billion), authorized equity capital of Rs.10,000crores (US $ 2.25
billion), paid up equity capital of Rs 5,000 crores (US $ 1.12 billion)and Revenue is
Rs.40,177 crores (US $ 9.04 billion) in 2005-06. (Note: INR 1 = USD0.02249 as on 31-
03-2006)

Corporate Assets

Bharath Sanchar Nigam Limitted has got fixed assets valuing more thanRs.62862 crores
(US $ 14.29 billion), which are in the form of Land, Buildings, Cablesand Apparatus and
Plants etc. BSNL had gross fixed asset of over Rs1,11,692crores(US $ 25.12 billion) as
on 31-03-2006.
Annual Capital Investment :-

AnnualCapital Investment in the network has increased from Rs.785 crores(US $ 0.18
billion) in 1986-87 to over Rs.6383 crores (US $ 1.53 billion) in 2005-06.This
investment has been financed mainly by the internal accruals. The annual
capitalinvestment of BSNL can shown graphically as below with the current year in X
axis andamount or capital investment required to be invested for that particular year in
the Y axis.
54

Revenue :-

BSNL has shown sustained growth in past five years. The growth rate in2005-06 was 11.32%.
Revenue earned by BSNL during last five years:-




Gross Investment in Fixed Assets:-

The BSNL is making substantial investment year to year for its network expansion and
modernization. During the current financial year BSNL has made the gross investment of
Rs. 28,227 crore( US $ 6.28 billion) in Fixed Assets.
55


Cumulative Capital Outlay:-
BSNL has Gross Fixed Assets of over Rs. 132243 Crores (US $ 25.96 billion) as on 31.03.2009.


56

Investment in Telecom Sector :-

Both public players and private players are investing huge sums to expandtheir network
and provide more coverage in fixed line telephony as well as mobiletelephony. Facing
stiff competition from private sector, public players are taking upmeasures to increase
their customer base to fixed lines and internet services. MTNL andBSNL are investing in
internet infrastructure to provide much reliable network.
Private players are striving hard to capture more and more customers. Theyare
introducing low cost tariff plans and discount schemes in fixed line telephony andinternet
services to increase their customer base. They are also in the process of enlargingtheir
network area providing more coverage in urben as well as rural areas. Finance
department is the key department which maintain and over allcontrol of finance over each
SSA in Kerala. The revenue generated from all the servicesis accounted through
cash/bank books and other records. In providing the services, lot of expenditure is
involved under capital and revenue.
MARKETING DEPARTMENT:-

Marketing is as old man kind. Now marketing has become a broadterm in BSNL.
Marketing department is associated with the exchange of goods, serviceand ideas. Goods
it is a physical entity eg. CD-ROM, shirt etc. service: human effortclubbed with
mechanical effort to provide intangible benefits to the customers. Eg.Telecom, Banking
and Transport etc. Ideas provide intellectual or spiritual benefits to thecustomers. Eg.The
blue print of a business plan, computer software. Marketing aims atmeeting needs
profitable.
BSNL is marketing their services. There are four characteristics uniquely allied with
services. This department is adopting these strategies.
57

Intangibility:-

In services customer is unable to experience the product prior topurchase. To over
come this difficult BSNL is thinking of converting the intangibles tothe tangibles by
providing suitable physical evidence among prospective customers.Eg. The telephone
house wiring, the instrument, the behaviour, the BSNL identity carddisplay by
employees, the attitude, the road side cabinet, logo display, advertisementseverything
matters.
Perishability:-

Service cant be stored. Once lost means lost forever. For example just think of an airline
service flying with 50% vacant seats. The ticket charges for that 50% seatswere lost
forever. Give suitable offers to the customers to attract them, even if they arecollecting
one rupee per seat that would have been vacant other wise is additionalrevenue to the
organization. Night unlimited down load in Broad band is an example totackle the
perishability nature








58

MEANING AND CONCEPT OF FLOW OF FUNDS:

The term flow means movement and includes both inflow and outflow the term
flow of funds means transfer of economic values from one asset of equity to another
flow of funds is said to have taken place when any transaction makes changes in the
amount of funds available before happening of the transaction. If the effect of
transaction results in the increase of funds. It is called a source of funds and if it
results in the decrease of funds, it is known as an application of funds. Further , in
case the transaction does not change funds. It is said to have not resulted in the flow
of funds. According to the working capital concept of funds, the term flow of funds
refers to the movement of funds in the working capital. If any transaction results in
the increase in working capital it is said to be a source to be a source or inflow of
funds.

And it results in decrease of working capital,it is said to be application or outflow
funds.
In simple language funds move when a transaction effects.
i. A current assets and a fixed assets, or
ii. A fixed and a current liability.
iii. A current assets and a fixed liability.
iv. A fixed liability and current liability.
And funds do not move when the transaction affects fixed assets and fixed liability
or current assets and current liabilities.
Kenneth medley and Ronald Gibers define the term funds as one used in the
sense of spending power, it refers to the value embedded in assets. According to
Bonneville and Dewey funds constitute the prime importance in sharing and operating
59

any business enterprise. In the ordinary parlance. Funds mean cash only, but it has got
several different concepts as mentioned below.
Funds May Mean:


a. Cash only
b. Net working capital i.e., current assets less current liabilities.
c. Total resources or total funds.
d. Internal resources only.
e. Net worth i.e., owners equity capital plus reserves.











60


Importance of funds flow Analysis:

Thus funds flow statement in a statement which indicates various means by which the
funds have been obtained during a certain period and the ways to which these funds
have been used during that period. The term funds used here means working Capital
i.e., the excess of current assets over current liabilities.

Funds flow statement is called by various names such as sources and application of
funds; statement of changes in financial position, sources and uses of duns; summary
of financial operation , where came in and where gone out statement, where got,
where gone statement, movement of working capital statement, movement of funds
statement, funds received and disbursed statement; sources of increase and
application of decrease; funds statement etc.

The funds statement provides an insight into financial operations of a
business firm, it is immensely valuable to a finance manager in analyzing the past and
future expansion plans of the company and the impact of these plans on the liquidity.
He can find out imbalance in the use of funds and undertake remedial actions. For
example, an analysis of funds flow position for the past several years might disclose
that inventories have expanded at sharper rate than the growth of other assets and
sales. And based on detailed analysis, the finance manager might find that the
inefficient inventory management of the enterprise was the root cause of the problem.
As such,the funds statement draws the attention of finance manager to problems
which call for detailed analysis and immediate action.

The funds flow statement can also make an analyst to evaluate the financing
pattern of the enterprise. An analysis of the major sources of funds in the past reveals
what portion of the growth was financed internally and what portion externally. The
statement is also meaningful in deciding whether the firm has grown at a faster rate
and vice versa. For instance, we can determine if trade credit has increased out of
proportion to expansion in current assets and sales. And if trade credit has increased
61

at relatively higher rate, we can evaluate the consequences of slowness in trade
payments on the credit standing of the company.

The funds flow statement acts as a third eye to the finance manager in deciding
the make-up of capitalization. Estimated uses of funds for new fixed assets, working
capital dividends and for the repayment of debt are made for each of several years.
Forecasts are made of the funds to be provided by operations and the balance must be
obtained by debt or the shares. If the required amount of new funds is greater than the
possible amount to raise, then the plans for new fixed assets and the dividend policies
are to be re-examined, so that the uses of funds can be brought into balance with
anticipated sources of financing them. In particular, funds flow statements are very
useful in planning intermediate and long-term financing.

The statement also serves as control measure in that the statement compared with
budgeted figures will show extent the funds were put to use according to plan. It
enables the finance manager to find out the deviations from the planned course of
action and take remedial courses to rectify the deviations.

Hence, funds flow statement is becoming prominent with the corporate
management. As a result, many bank managers request borrowers to furnish a funds
statement along with their annual balance sheet and a few Indian companies publish
this statement in their reports although they are not obliged to do so under the
companies Act.






62

Objectives of Funds Flow:

Funds flow statement is an analytical tool in the hands of financial manager. The
basic purpose of this statement is to indicate on historical basis the changes in the
working capital i.e., where funds came from and where there are used during a given
period.

The utility of this statement can be measured on the basis of its contributions to
the financial management. It generally serves the following purposes:
(1)Analysis of Financial Position:

The basic purpose of preparing the statement is to have a rich into the financial
operations of the concern. It analyses how the funds were obtained and used in the
past. In this sense, it is a valuable tool for the finance manager for analyzing the past
and future plans of the firm and their impact on the liquidity. He can deduce the
reasons for the imbalances in uses of funds in the past a take necessary corrective
Actions. In analyzing the financial position of the firm, the funds flow statement
answers to such questions as:
1. Why was the net current asset of the firm down, though the net income was up or
vice versa?
2. How was it possible to distribute dividends in absence of or in excess of current
income for the period?
3. How was the sale proceeds of plant and machinery used?
4. How was the sale proceeds of plant and machinery used?
5. How were the debts retired?
6. What became to the proceeds of share issue or debenture issue?
7. How was the increase in working capital financed?
8. Where did the profits go?
Though it is not an easy job to find the definite answer to such questions because
funds derived from a particular source rarely used for a particular purpose. However,
certain assumptions can often be made and reasonable conclusions are usually not
difficult to arrive at.
63

(2) Evaluation of the Firms financing:

One important use of the statement is that it evaluates the firm financing capacity. The
analysis of sources of funds reveals how the firms financed its development projects in
the past i.e., from internal sources or from external sources. It also reveals the rate of
growth of the firm.

(3) An Instrument for Allocation of Resources:

In modern large business, available funds are always short for expansion programmes
and there is always a problem of allocation of resources. It is, therefore, a need of
evolving an order of priorities for putting through their expansion programmes Which are
phased accordingly, and funds have to be arranged as different phases of programmes get
into their stride. The amount of funds to be available for these projects shall be estimated
by the finance with the help of funds flow statement. This prevents the business from
becoming a helpless victim of unplanned action.

(4) A Tool of Communication of Outside World:

Funds Flow statement helps in gathering the financial states of business. It gives an
insight into the evaluation of the present financial position and gives answer to the
problem where have our resources been moving? In the present world of credit
financing, it provides a useful information and government etc. regarding amount of loan
required, its purposes, the terms of repayment an sources for repayment of loan etc. The
financial manager gains a confidence born out of a study of Funds Flow Statement. In
fact, it Carries information regarding firms financial policies to the outside world.
64

(5)Future Guide:

An analysis of funds flow statements of several years certain valuable information for
the financial manager for planning the future financial requirements of the firm and their
nature too i.e. short term, long-term or midterm. The management can formulate its
financial policies based on information gathered from the rearrange the firms financing
more effectively on the basis of such information along with the expected changes in
trade payable and the various accruals. In this way, it guides the management in
arranging its finance.
Determinants of Funds Flow Statements:

Due to differences in financial sophistication and agency relationships, we
deposit that investors use different criteria to select portfolio managers in The
retail mutual fund and fiduciary pension fund industry segments. We provide
evidence on investors manager selection criteria by estimating the relation
between managers asset flow and performance. We find that pension fund clients
use quantitatively sophisticated measures like Jensens alpha, tracking error, and
outperformance of a market benchmark. Pension clients also punish poorly
performing managers by withdrawing assets under management. In contrast,
mutual fund investors use raw return performance and flock disproportionately to
recent winners but do not withdraw assets from recent losers. Mutual fund
manager flow is significantly positively related to Jensens alpha, a seemingly
anomalous result in light of a relatively unsophisticated mutual fund client base.
We provide preliminary evidence, however, that this relation is driven by a high
correlation summary performance measures, such as Morningstars star rating. By
documenting differences in the flow-performance relation, we contribute to the
growing literature linking fund manager behavior to the implicit incentives to
65

increase assets under management. We show that several forces combine to
weaken the incentive for pension fund managers to engage in the type of risk-
shifting behavior identified in the mutual fund literature.

CURRENT AND NON-CURRENT ACCOUNTS:

To understand flow of funds it is essential to classify various accounts and balance sheet
items current and non-current categories.

Current accounts can either be current assets of current liabilities. Current assets
are those assets which in the ordinary course of business can be or will be converted into
cash within a short period of normally one accounting year.

Current liabilities are those liabilities which are intended to be paid in the ordinary
course of business with in the short period of normally one accounting year out of the
current assets or the income of the business.






66






CHAPTER
V. DATA ANALYSIS AND INTERPRETATION













67

FUNDS FLOW STATEMENT
The following are the list of current or working capital accounts:
LIST OF CURRENT OR WORKING CAPITAL ACCOUNTS
CURRENT LIABILITIES CURRENT ASSETS
Bill payable Cash in hand
Sundry creditors or accounts payable 2. Cash at bank
Accrued or outstanding expenses 3. Bills receivable

4. Dividends payable 4. Sundry debtors or accounts receivable
5. Bank overdraft 5. Short term loans or advance
6. Short term loans advances and deposits 6. Temporary or marketable investments
7. Provision against current assets 7. Investors or stocks such as
A. Raw materials
B. Work in progress
C. Stores and spares
D. Finished goods
8. Provision for taxation, if it does not amount
to appropriation of profits.
8. Prepared expenses
9. Proposed dividends (may be a current non-
current liability)
9. Accrued incomes.
68

LIST OF NON-CURRENT (OR) PERMANENT CAPITAL ACCOUNTS:
Non-current or
permanent liabilities
Non-current or
Permanent assets
1. Equity share capital 1. Good will
2. Preference share capital 2. Land
3. Redeemable Preference share capital 3.Building

4. Debentures 4. Plant and machinery
5. Long term loans 5. Furniture and fittings
6. Share premium account 6. Trade marks
7. Share forfeited shares 7. Patent Rights
8. Profit and loss account (balance of profit
i.e. credit balance)
8. Long term investment
9. Capital Reserve 9. Debit balance of profit and loss account.
10. Capital redemption reserve 10. Discount on issue of shares
11. Provision for depreciation against fixed
assets
11. Discount on issue of debentures

12. Appropriation of profits 12. Other deferred expenses
A. General reserve
B. Dividend equalization fund
C. Insurance fund
D. Compensation fund
E. Sinking fund
F. Investment fluctuation fund
G. Provision for taxation
H. Proposed dividend



69

Funds flow statement

Funds flow statement is the statement of sources and application of funds.
It is also called as funds where got and where gone statement Almond Coleman
Observed. the funds statement in the statement summarizing the significant financial
charges which have occurred between the between the beginning and the end of
companys accounting period.

There are 4 steps involving in preparation of funds flow statement:
Ascertain the funds from operations.
Preparation of statement of charges.
Computation of any missing figures as to profit or loss on sale of fixed assets
purchases or sale of fixed assets purchases or sale of fixed assets etc. finally
preparation of funds flow statement.
Foulke defines this statement as:

A statement of sources and appreciation of funds in technical device designed to analyze
the changes in the financial condition of a business enterprise between two dates
I n the words of Anthony the funds flow statement describe the sources from which
additional funds were derived and the use to which these sources were put.
F.C.W.A in glossary of management accounting terms defined funds flow
statement as a statement either prospectus or retrospects, setting out the sources and
applications of the funds of an enterprise. The purpose of the statement is to indicate
clearly the requirement of funds and how they are proposed to be raised and the efficient
utilization and application of the same.
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Thus funds flow statement in a statement which indicates various means by which
the funds have been obtained during a certain period and the ways to which these funds
have been used during that period. The term funds used here means working capital i.e.,
the excess of current assets over current liabilities.
Funds flow statement is called by various names such as sources and application
of funds; statement of charges in financial position, sources and uses of duns; summary
of financial operation, where came in and where gone out statement, where got, where
gone statement, movement of working capital statement, movement of funds statement,
funds received and disbursed statement; funds generated and expended statement; sources
of increase and application of decrease; funds statement etc.












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Difference between funds flow statement and income statement

Funds flow statement

Income statement
1. It highlights the changes in the financial
position of a business and indicates the
various means by which funds were
obtained during a particular period and the
ways to which these funds were employed.
1. It does not reveal the inflows and
outflows of funds but depicts the items of
expenses and incomes to arrive all the
figure of profit or loss.
2. It is complementary to income statement
helps the preparation of funds flow
statement.
2. Income statement is not prepared from
funds flow statement.
3.While preparing funds flow statement
both capital and revenue items are
considered.
3. Only revenue items are considered.

4. There is no prescribed format for
preparing a funds flow statement.
4. It is prepared in a prescribed format.










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Difference between funds flow statement and balance sheet:

FUNDS FLOW STATEMENT

INCOME STATEMENT
1. It is a statement of changes financial
position and hence in dynamic in nature.
1. It is a statement of financial position on a
particular date and here is static in nature.
2. It shows the sources and uses of funds in
a particular of time
2. It depicts the assets and liabilities at
particular point of time.
3. It is tool of management for financial
analysis and helps in making decisions.
3. It is not of much help to management in
making decision.
4. Usually schedule of changes in working
capital has to be prepared before prepare
funds flow statement.
4. No such schedule of changes is required
rather profit and loss account is prepared.










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USES, SIGNIFICANCE AND IMPORTANCE OF FUNDS FLOW STATEMENT

A funds flow statement is an essential tool for the financial analysis and is of
primary importance to financial management. Now days, it is being widely used by the
financial analysis, credit granting institutions and financial managers. The basic purpose
of a funds flow statement is to reveal the changes in working capital on the two balance
sheets dates.

It also describes the sources from which additional working capital has been
applied such a statement is particularly useful in assessing the growth of the firm its
resulting financing these needs. By making use of projected funds flow statement, the
management can come to know the adequacy. One can plan the intermediate and long-
term debts, expansion of the business, and allocation of resources, etc., the significance
can be were followed from its various uses given below:








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IT HELPS IN THE ANALYSIS OF FINANCIAL OPERATIONS

The financial statements reveal the net effect of various transactions on the
operational and financial position of a concern. The balance sheet gives a static view of
the resources of a business and the uses to which these resources of a business and the
uses to which these resources have been put at a certain point of time. But it does not
disclose the causes for changes in assets and liabilities between two different points of
time. The funds flow statement explains causes for such changes and also the effect of
these changes on the liquidity position of the company. Sometimes a concern may
operate profitably and yet its cash position may become more and more course. The
funds flow statement gives a clear answer to such a situation explaining what has
happened to the profit of the firm.
It throws light on many perplexing questions of general interest:
Which otherwise may be diffcult to be answered, such as:

Why were the net current assets lesser inspite of higher profits and vice-verse.
Why more dividends could not be declared inspite of available profit?
How was it possible to distribute more dividends than the present earning?
What happened to the net profit? Where did they go?
What happened to the proceeds of sale of fixed assets or reissue of shares, debentures
etc?



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IT HELPS IN THE FORMATION OF REALISTIC DIVIDEND POLICY:

Sometime a firm has sufficient profit available for distribution as dividend but yet it may
not be advisable to distribute dividend for lack of liquid or cash resources. In such causes,
a funds flow statement helps in the formation of a realistic dividend policy.
IT HELPS IN THE PROPER ALLOCATION OF RESOURCES:

The resources of a concern are always limited and it works to make the best use of these
resources. A projected funds flow statement constructed for the future help in making
managerial decision. The firm can plan the deployment of its resources and allocation
them among various application.

IT ACTS AS A FUTURE GUIDE:

A project funds flow statement also acts as a guide for future to the management. The
management can come to know the various problems it is going to funds can be projected
well in advance and also the timing of these needs. The firm can arrange to finance these
needs more effectively and avoid future problem.





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IT HEPS IN APPRAISING THE USE OF WORKING CAPITAL:

A funds flow statement helps in explaining how efficiently the
management has used its working capital and also suggests way to improve working
capital position of the firm.
IT HELPS KNOWING THE OVERALL CREDIT WORTHILESS OF A FIRM:

The financial institutions and banks such as state financial institutions, industrial
development corporation, industrial finance corporation of India, industrial development
bank of India etc., all ask for funds flow statement constructed for a number of years
before granting loans to know the credit worthiness and paying capacity of the firm.
Hence, a firm seeking financial assistance from these institutions has no alternative but to
prepare funds flow statements.








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LIMITATIONS OF FUNDS FLOW STATEMENT:

The funds flow statement has a number of uses; however, it has certain limitations also,
which are listed below:
A. It should be remembered that a funds flow statement is not a substitute of an
income statement or a balance sheet. It provides only some additional information
as regards changes in working capital.
B. It cannot reveal continues changes.
C. It is not a original statement but simply a re-arrangement of data given in the
financial statement.
D. It is essential historic in nature and projected funds flow statement cannot prepared
with much accuracy.
E. Changes in cash are more important and relevant for financial management than
the working capital.








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Procedure for preparing a funds flow statement

Funds flow statement is method by which are study changes in financial position of
a business enterprise between beginning and end financial statement dates. Hence, the
funds flow statement is prepared by comparing two balance sheets and with the help of
such other information derived from the accounts as may be needed. Broadly speaking
the preparation of a funds flow statement consists of two parts.
I. Statement of schedule of changes in working capital.
II. Statement of sources and application of fund.

Statement of schedule of changes in working capital:

Working capital means the excess of current assets over current liabilities.
Statement of changes in working capital between the two balance sheet dates. This
statement is prepared with the help of current assets and current liabilities derived from
the two balance sheets.
As working capital=current assets-current liabilities.
i. An increase in current assets and increase working capital.
ii. A decrease in current assets and decrease in working capital.
iii. An increase in current liabilities and decrease in working capital.
iv. A decrease in current liabilities increases the working capital.



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CHAPTER VI

FINDINGS
SUGGESITIONS
CONCLUSION
BIBLIOGRAPHY


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FINDINGS

The current assets are decreased in the year 2009 as compared to the year 2008.
BSNL has raised their sources of funds during the year 2011-2012.
Increase in working capital in 2006-2007.
The company is using more sources from secured loans.
BSNL has increased they Credit worthiness in the recent years.
By analyzing the BSNL funds flow statement we find that working capital had
effectively used.
By observing the funds flow statement we find that BSNL has losing their profit
percentage from year to year.
BSNL had lost their profit from 19.65 to -5.68 in 5 years of span.






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SUGGESTIONS

Maximum reserves should maintain by the organization.
The company may use modern inventory techniques to manage inventories
effectively.
Better to increase the finance to working capital.
We find that there are several changes in working capital requirements. They need
reduce their requirements capital.
In deficit years the company should pay in dividends to maintain working capital
requirements.
It is suggested that company should raise the funds to the extent required or it
should invest all available long-term funds at a higher rate of returns in long term
investments and advances.
It is advisable to maintain more owned funds.
Reduce the Credit period to cover the bad debts.
Provide the discount policies to debtors to avail the funds for working capital.



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CONCLUSION

The study was undertaken to examine the financial performance of BSNL
Rajahmundry
By observing the Annexure of BSNL we find that the company had utilizing their
funds to maximum extent.
This company has several competitors in the market which leads to fluctuations in
sources and application of funds.
The debt equity ratio is at good mark.
There are losing their Net Profit Over the series of year.
BSNL has Good sources of Funds and Grater Application of Funds which leads to
net loss.
In financial year 2010-2011 the Working Capital had increased slightly to
638.02(lakhs).






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BIBLIOGRAPHY

BSNL RAJAHMUNDRY
www.bsnl.co.in
www.cellone.co.in
www.bharatsancharnigam.com
www.wikipedia.com
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ANNEXURES